Looking at the Baltic from Chinese Heights

Interview with Jacek Piechota, former Polish Minister of Economy and the President of the Baltic Business Forum Association. Interviewer: Adrian Reiter.

ADRIAN REITER: Polish politicians and opinion leaders would like for our country to be perceived as a bridge in relations between the West and the East. But do we have enough potential to integrate these two European regions economically?

JACEK PIECHOTA: Poland has a vast potential, more and more often noticed and highly valued by western investors. It turns out, for example, that we have an excellent workforce that is employed by foreign concerns investing in Ukraine. It is Polish managers, directors and CEOs who are more and more often commissioned by such companies in their eastern branches instead of their compatriots. For there is less cultural and social difference between us, Ukrainians and Belarusians, and we feel perfectly at ease within western corporate systems as well.

That is the view of the West. But how does eastern business see us?

Poland has been called “a green island of Europe” for several reasons. I was not aware it could actually be such good promotion for the Polish economy abroad. When GDP in Ukraine decreased by 15 per cent year-on-year, and Poland registered economic growth, politicians and investors in Kyiv started to ponder over the reasons for such a good condition of the Polish economy. And that paved the way for transferring many solutions already proved successful in Poland to the East.

For years Poland has been developing a strategic partnership with Ukraine. However, the recent anti-democratic proceedings of Viktor Yanukovych’s cabinet have cast a shadow over our relations with Kyiv. Has Ukraine turned politically and economically towards Russia?

Above all, Yanukovych is a pragmatist. In the election campaign he sought the support of voters from the eastern part of the country, so he promoted some anti-western points. But Ukraine has been in the sphere of western European influences for years and the president cannot fail to take this into account in his calculations. Yanukovych delivered his first address in Russian just after the elections, but a year ago in Warsaw he had already given a speech in Ukrainian. Many opinions made throughout the EU are utterly simplistic, since western standards are applied to them.

What are eastern standards, then?

Eastern standards are best represented by the example of changes in the corporate taxation system which the Ukrainian authorities decided to introduce in 2010. The idea met with widespread social protest, and there were even talks about the second phase of the Orange Revolution. We were then invited to Kyiv to present Polish tax regulations. The businessmen who were protesting came with a simple mindset: Poland is “a green island of Europe” because it supports the development of small and middle-sized companies by not overburdening them with excessive taxes. They thought we would be their allies. However, our system proved to be similar to the regulations proposed by the Ukrainian government. The businessmen could not understand the reasons for abandoning the sales tax that has functioned in Ukraine so far and was accounted for in this manner: you hide sales under the table and pay as much to the national coffers, because you often negotiate with a corrupt tax inspector. It might seem that we supported the arguments of the authorities. But, as it turned out, we only did this to some degree. For when we started talking about what obligations our fiscal system impose on the treasury authorities with respect to tax interpretation, register of benefits and anti-corruption regulations, we became enemies of the bureaucratic army right away.

In relations with Ukraine we are economic realists. But we probably do not present the same approach to Russia, do we?

It is a special case indeed. We have created such a severe anti-Russian climate in Polish politics and the media that in Moscow there persists a fear of thinking about economic cooperation with Poles today. And this has not changed for years – almost every Polish politician is afraid to say anything good about Russian investments or capital, so as not to be considered a Russophile, because that label compromises him in the eyes of voters. I believe that we have never undertaken a rational evaluation of Polish-Russian economic cooperation.

We are afraid of Russian capital, however we do not fear the Chinese capital that is dynamically colonising the world today.

China lies further away and our mutual relations are not troubled by the past. That is good, because Chinese investments have stabilized our situation, diversifying the array of investors on our market. What is disturbing is the fact we do nothing to take an important place in this race for Chinese assets.

How so? It is said that Bronisław Komorowski’s visit to Beijing contributed to significant advancement of Chinese investments.

Before President Komorowski, the only other visit to Beijing at such a high level was undertaken by Aleksander Kwaśniewski many years ago. Since then, China has been intensively penetrated by heads of others states. We did nothing and wasted that time! The truth is that Polish politicians did not notice Chinese potential until a few years ago. In 2002, as the Minister of Economy, I flew in an official capacity to China. My agenda included meetings with the Deputy Prime Minister and heads of intergovernmental committees. The visit was interrupted by the Prime Minister Leszek Miller, who urgently summoned me to a cabinet meeting, explaining the necessity of my return by the social unrest in Silesia. I remember that Ksawery Burski, the Polish ambassador to Beijing at the time, told me then: “The Chinese won’t forget us for that for the next two thousand years.” If there is no cataclysm, revolution or civil war in Poland and a minister cuts short an official visit, the Chinese consider it an insult.

What strategy should we adopt in economic relations with China today?

We must prove to the Chinese authorities and business that we are a good base to conduct business operations in this part of Europe. The Hungarians proposed “The Strategy of the Black Sea for China”, in which they explained that it is best to invest in this part of the world through Budapest. The document was very well received in Beijing. During sessions of the Baltic Business Forum 2012 we seek to spark a serious discussion on how to include China in the development strategies of the Baltic Sea region, and what role Poland should play in this process. In a way, we are in a better position to become a base for Chinese investments in this region than Hungary is in the Black Sea region, which it is not even located in! Unfortunately, there is an attitude persisting among Polish elites that we should not contact the Chinese with other countries, because we will somehow get lost in the mosaic. I believe that thanks to our economic, business and personal relations we can safely introduce Chinese investors to Eastern European markets. Then we will avoid the perspective spreading from Chinese heights: Northern Europe, Central Europe and Eastern Europe are all in view, but Poland itself is not.

Jacek Piechota is the former Polish Minister of Economy and the President of the Baltic Business Forum Association.

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The Baltic Business Forum 2012 is held between April 25th to 27th in Świnoujście, Poland. The invited businessmen, politicians and experts will discuss conditions and barriers in exchange of goods, services and capital between the countries of Western and Northern Europe and the East. Separate panels are dedicated to e.g. power industry, logistics, banking and finance, telecommunications, computer studies, ecology, foodstuff trade and the media. The Forum’s participants will also debate economic strategies for the Baltic region; the forum begins with a session entitled “Baltic – Poland – China”. The Baltic Business Forum 2012 is held under the honorary patronage of the Minister of Economy, Waldemar Pawlak.