- Observatory: EMCC
- Published on: 02 March 2008
Disclaimer: This information is made available as a service to the public but has not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.
This report explores the employment impact of globalisation and reviews the attitudes and responses of national governments and the European social partners to this phenomenon in Poland.
It is extremely hard to write about the negative effects of the relocation in terms of Poland’s case. Firstly, it was Poland that opted for non paper form when there were made attempts to create European regulations on relocation. Secondly, not coincidentally Poland is considered to be one of the main beneficiaries of the relocation processes. It is estimated that out of over 2 million jobs to be created in the countries of relocation all over the world by 2010 several dozen of thousands will have been created in Poland.However, it should be remembered that a great part of foreign investments in Poland exclude relocation (it is estimated that it is as much as one half of them). Moreover, an imminent threat of relocation from Poland is rapidly increasing. According to the figures of the Polish Confederation of Private Employers Lewiatan (PKPP Lewiatan), circa 60% of employers are considering the relocation of the whole or part of their activity outside Poland.
The above seems to be only confirmed by the results of Harvard Business Review Poland, whose authors claim that a growing number of Polish managers have realized that the traditional strategy of international expansion based on export has become insufficient. More often than it was in the past companies resort to developing their own distribution networks on foreign markets as well as to relocating production to a location being in greater proximity to the client or to the countries where the manufacturing costs are considerably lower.
According to the Ministry of Economy data on Polish direct foreign investments, it is the labour-intensive production that constitutes the majority of Polish investments with off-shore location. However, Polish State policy aimed to minimize the negative effects of relocation for public opinion simply does not exist.
Institutional response to the globalization
Government action to prevent or reduce the extent of off shoring/relocation
Are there any recent examples in your country of the government intervening to prevent particular activities from being relocated abroad or to reduce the scale of this?
There is no clear evidence of state prevention in the case of i.e. relocation, however it is worth to mention that the role of the government is quite dubious. It should be borne in mind that Polish government adheres to the Act on freedom of economic activity, which means that the majority of foreign investors have right to undertake and run economic activity under the same regulations as Polish entrepreneurs. The above situation is even further reinforced by a more general principle – minimal State’s interference in economy, which ‘successfully’ reduces the involvement of State administration in the attempts to prevent relocation processes that are bound to take place, sooner or later.
Certainly, the government accepts all relevant European solutions but the response of the government administration does not reach beyond the so-called political correctness, in the broadest sense of the word, or acknowledging the scale and the seriousness of the problem.
Social partner attitudes towards off-shoring/relocation
Have there been cases in the recent past where the possibility – or threat – of relocation of production has featured as a factor in collective bargaining?
Are there any recent cases where trade unions have successfully resisted plans to relocate production abroad or have managed to reduce the extent of this?
Are there any cases where trade unions have accepted the need for the relocation of production – or part of it – abroad as a means of maintaining or improving the viability of companies and so of preserving some jobs and even ultimately expanding them?
No, but one of the unionist magazines carried a claim that’nowadays, the employers more often than before threat to relocate their economic activity in case of unsatisfactory outcome of wage bargaining’
For many reasons, the above attitude only demonizes the impact of relocation on current wage bargaining in Poland.
Of the greatest influence here is the nature of collective bargaining in Poland. For a long time now, the basic principle that applies is: where there is a trade union, there is a collective bargaining too. And according to the research results, trade unions operate mainly in the public sector. In 2004, over three quarters of Polish unionists were employed in the public sector (they constituted circa 40% of all employed in the sector), 17% of all affiliated with trade unions were employed in companies with mixed capital – private/public (they constituted 19% of all employed in this type of enterprises). Only 7% of all affiliated with trade unions were employed in the private sector (they constituted only 4% of all employed in private companies). Over the past three years, the situation in the private sector has slightly improved but still it is too early to speak about any profound or perceptible changes in this respect.
It means that within the sector which can actually deal with relocations there are either no trade unions at all or just a few of them with an infinitesimal influence. Thus, it can be assumed that their impact on the decisions of the management is – using an understatement – somewhat limited.
On the other hand though, it cannot be expected that in the course of wage bargaining the state, cooperative, or municipal institutions, where trade unions have long tradition, will focus on relocation issues which do not constitute the subject of their concern.
The above can be confirmed by the results of the research on the purview of bargaining agreements. For a certain time, there can be observed a tendency for bargaining regulations to copy those found in the Labour Code. And though the reports of the National Labour Inspection (Państwowa Inspekcja Pracy, PIP) show that bargaining regulations have recently enhanced the scope of their purview, the problem of relocation is still vague in its nature.
It should be noted here that so far there has been no case of extreme relocation in Poland where a great number of employees would be dismissed merely on the grounds that the company management decided to relocate their activity outside of Poland. It seems that only a situation similar to that presented above could introduce a subject of threats posed by the relocation into a public discourse.
Government Policy on foreign – owned firms controlling significant sections of the economy.
Are there any restrictions on foreign-owned companies setting up branches or subsidiaries in your country either generally or in specific sectors?
Are there any sectors of the economy in which the acquisition of a domestic company has not been allowed in recent years?
Partially yes. Apart from the above mentioned Act on freedom of economic activity, there are two more laws regulating the participation of foreign capital:
- Act on companies with foreign shareholding
- Act on commercialization and privatization.
None of these laws imposes any severe restrictions on the participation of foreign capital in Polish economy.
However, it does not mean that the investors are not subject to any limitations. In 2005, the Act on the special rights of the State Treasury and their exercise in companies of significant importance for public order and security came into force.
The Act stipulates for:
- the special powers of the State Treasury and the principles of their exercise in companies or capital groups of significant importance for public order and security
- the criteria by which a company can be recognized as significant for public order and security as defined by the EU law.
In accordance with the law, as long as the State Treasury remains a direct or indirect shareholder or a partner in a company, the minister proper given his scope of activity for the State Treasury has a right to block any management board’s resolution or any other legal act adopted by the management board which stipulates for the transfer of the company’s assets, fundamental to it in view of its business activity. The objection refers solely to the legal transaction of the company significant for public order and security, only if there is a well-grounded supposition that this transaction threatens public order or national security.
The objection also refers to the resolutions of the general assembly or of the shareholders meeting pertaining to:
- the dissolution of the company,
- the relocation of the company’s seat abroad,
- the alteration of the company’s objects,
- the transfer or lease of the enterprise or of its core business unit and the establishment of limited rights in property.
- Special privileges are granted to the State Treasury exclusively with respect to the companies with their seat on the territory of the Republic of Poland:
- whose activity consists in generating electric energy, if the company’s share in the generated electric energy on the territory of the Republic of Poland exceeds 15%;
- who act as operators or owners of gas or electro-energetic transmission system, if the company owns or exploits over 50% of gas or electro-energetic transmission network on the territory of the Republic of Poland;
- whose activity is the production of petrol or diesel fuel, if the company’s share in the production of such fuels on the territory of the Republic of Poland exceeds 20%;
- who are involved with the pipeline transport of crude oil, petrol or diesel fuel, if the company’s share in general transmission capacity of crude oil, petrol or diesel fuels on the territory of Poland exceeds 50%;
- whose activity is stockpiling and storage of petrol, diesel fuel, natural gas or underground storage of crude oil, if the company’s working capacity of petrol, diesel fuel, natural gas or crude oil storage facilities on the territory of Poland exceeds 30-day fuels consumption in the Republic of Poland;
- whose activity is the trans-shipment of crude oil and its products in seaports, if the company’s share in the trans-shipment capacity of these products on the territory of the Republic of Poland exceeds 50%;
- who are involved with the extraction of hard bituminous coal or natural gas, if the company’s share in the extraction of hard bituminous coal or natural gas in Poland exceeds 50%;
- who deal with the extraction and processing of copper ore, if the company’s share in the extraction and processing of copper ore on the territory of Poland exceeds 70%;
- who are owners of the telecommunication infrastructure enabling the transmission of radio and television signals from a public broadcaster to the network of transmitters spread across the area exceeding 70% of the territory of Poland;
- who are owners of the railway infrastructure constituting at least 50% of this infrastructure on the territory of the Republic of Poland.
Draft directive on the companies of prime importance for public order or public safety lists 16 enterprises.
Social partners responses to the take over of domestic firms by foreign owned ones.
Have there been any recent cases where trade unions have resisted foreign acquisition of domestic companies explicitly because of the nationality of the company concerned?
As the research results have shown, Polish unionist elites acquiesce to market economy, the development of great private ownership and the process of the State’s property privatization. However, their acquiescent approach has certain provisions. They call for ethic rivalry, they demand that the private sector employers should be honest in sharing profits with their employees, and that the privatization of the State property should be conditional upon warranted long-term employment and the so-called privatization bonuses for the employees.
The unionists claim that their contribution to the privatization process is quite valuable as they are better than the government agencies at verifying the credibility of contracting parties, due to which they have so far prevented a great number of Polish firms from the hostile take-over by impostors. According to Prof. J. Gardawski, the union leaders at the supra-company level are convinced that social intervention in the privatization process – in particular, in the first half of 1990s – prevented Polish economy from making a number of rash decisions.
A close analysis of the involvement of trade unions in the privatization of enterprises would prove that this regulating role is of key importance to the trade unions. On the one hand, in 2004, the trade unions of the distilling company Polmos Białystok held protests against the foreign investor in the company and demanded that the firm should acquire a status of a national enterprise. On the other hand though, in 2006, the trade unions of the Gdynia Shipyard threatened with a strike, unless the State Treasury – the owner – allowed a foreign investor in the company.
Attitudes to globalization
In 2006, a conference ‘Trade unions – from confrontation to co-operation’ took place, which was attended by the leaders of the three biggest trade unions and employers’ organisations. I asked then the most influential people of the circles defined as ‘social partners’ what measures they took to prevent the negative effects of the relocation that would appear sooner or later. And though my other questions were answered, the issues of relocation remained open (cf. conference materials).
Have there been any recent surveys of public opinion in your country on attitudes towards globalisation or on the various dimensions of this (as listed above)?
The fact that the relocation issue has been neglected so far in Polish socio-economic reality can be proved by the lack of research with this respect.
The majority of projects have focused on the issues of foreign capital in Poland. The analyses have covered two aspects of the above problem: foreign capital as a participant in the privatization process, and foreign capital in view of the ‘green field’ investments.
There is no doubt that the strongest emotions are stirred up by the idea of foreign capital in the context of privatization.
While for a long time the majority of Polish society is in favour of foreign capital (see Table),
Source: Foreign Capital In Poland; Research Report; Social Opinion Research Centre (CBOS) Warsaw May 2006
For years, Social Opinion Research Centre (Centrum Badania Opinii Społecznej, CBOS) has carried out a series of research on ‘Foreign Capital in Poland’, the association of foreign capital with the privatization processes considerably lowers the acquiescence for potential foreign investors.
In 2005, 30 % of Polish society believed that the State enterprises crucial for the economy should not be privatized at all. One in four of the respondents claimed that the State enterprises should be sold solely to Polish companies and citizens, whereas 35 % of the respondents believed that the State enterprises could be transferred to foreign capital, provided that the majority of shares remained with Polish owners.
As the research results showed clearly, the enterprises crucial for Polish economy are:
- power plants
- iron-, steel-, and copper-works
- coal mines.
The respondents raised no objections to foreign capital in automotive industry, clothing and shoe industry, and electronics industry companies.
Finally, it should be emphasized (as did the authors of the report ‘Foreign Capital in Poland 2006’) that at the beginning of the research on foreign capital in Poland people had more sceptical attitude to foreign investors. With time, it has turned out that the majority of Polish society is convinced that foreign investors serve well Polish economy. Simultaneously, a great number of people believe that foreign owners should not exert control over the enterprises in which they have invested. People would like to make the best of their presence without taking the risk. According to the authors of the research, the respondents most probably do not expect that their dreams will come true and they well realize the fact that it is only their wishful thinking.
Have these surveys made an explicit distinction between globalisation and the process of European integration, by, for example, distinguishing between relocation of production to other EU Member States and relocation to countries outside the EU or between the take-over of domestic companies by EU-owned firms and take-over by non-EU companies?
As shown in the CBOS research results from 2006, the Poles perceived the globalization (understood as the growth of economic relations and interdependence) as beneficial for Poland. However, it should be stressed that young people (together with the unemployed) were those who most frequently expressed their anxiety about the negative effect of globalization on the creation of job places in Poland.
So far, European integration has been to an infinitesimal extent associated with the in-flow or out-flow of foreign capital. For the great majority of people, European integration meant opening of borders and enhanced economic migration opportunities. At present, the only thing that has been relocated and that has already visibly influenced Polish economy are the employees themselves.
Rafał Towalski, Institute of Public Affairs