The EBRD at 25: the Bank played a role in the country’s success, and continues doing so
Poland has been a transition success story from when it received the EBRD’s first ever investment 25 years ago to its development today into an increasingly flourishing economy that is firmly established within the European Union.
“I got politics and economics moving and then others took over,” said Lech Wałęsa, who rose from being leader of the “Solidarność” trade union to become his country’s national president.
Wałęsa’s labour movement not only brought down communism in Poland but also played an essential role in the collapse of the entire Soviet empire.
“Shock therapy” (or Starting Over)
Post-communist countries chose many different paths as they worked to become market economies. None was easy or without pain.
Poland, under Minister of Finance Leszek Balcerowicz, in 1989 introduced a “shock therapy” which freed prices and created room for private enterprise. Despite severe hardship the foundations for a functioning market economy were laid.
Poland was rewarded with rapid growth as the private sector became the engine of the economy. The country also started to attract foreign investors who saw great potential in a country with a large domestic market of almost 40 million people and a strategic location between Germany and Russia.
Banks were the pioneers and it was a bank, the Poznań-based Wielkopolski Bank Kredytowy (WBK), which became the EBRD’s first business partner in May 1991 with a credit line for on-lending to local small businesses. It is a relationship that exists to this day: in 1995 Allied Irish Banks acquired a minority stake in WBK, with the EBRD and International Finance Corporation also becoming shareholders. Today, after a merger with Bank Zachodni, BZ WBK is Poland’s third-largest bank and part of Grupa Santander.
With the Polish economy accelerating over the next decade, the EBRD’s work in the country focused on privatisation and the development of the banking sector. Poland made rapid progress with integration into the global economy and EU membership in 2004 providing a great boost to its development.
Weathering the storm
When in 2008 the global financial crisis reached the EBRD region, growth in Poland slowed, but it was the only country in the European Union that managed to escape recession. Not for one year did the country register a contraction of its economy. This strong resilience was built on robust public finances, a sound banking sector, a well-functioning regulatory regime and a flexible and adaptable economy. For many observers Poland became the poster child of a successful transition process.
Yet, challenges remain. Despite a successful record in utilising EU funds, the country still faces huge infrastructure needs, for instance in its transport and roads network. Poland still has one of the highest energy intensity rates in the EU and needs massive investment to lessen its dependence on coal. Despite the “shock therapy” a largely unreformed state sector consumes resources that are lacking elsewhere.
The EBRD remains active in addressing all these needs of the Polish economy. In recent years the Bank has continued to address specific areas where it still can make a relevant contribution, for instance in the development of the financial sector and capital markets or in providing finance for renewable sources of energy in a difficult regulatory environment.
The EBRD’s Director for Poland, Grzegorz Zieliński, says: “Financing sustainable energy investments is one of the EBRD’s outstanding areas of expertise and we are pleased to widen our activities in this area.”
More to come
Overall, since 1991 the EBRD has invested more than €7.8 billion in Poland and become one of the largest investors in the country. An example of a recent successful project is the DCT Gdańsk container terminal in northern Poland, which is expected to boost the regional economy throughout the Baltics by significantly increasing the port’s handling capacity.
As the Polish revolution started in Gdańsk it is only fitting that the latest EBRD success story is also taking place here.