POLAND Competitiveness Report 2012

This is the 27th edition of the economic report published by the World Economy Research Institute assessing Poland's competitiveness as compared with that of other countries.The main aims of this year's edition are the following:

- to determine the competitive position of the Polish economy in 2011 compared with other countries in the world, including other member states of the European Union,

- to assess changes in the competitive position of the Polish economy during the global financial crisis and to identify the key factors determining these changes;

- to evaluate the competitiveness of Polish education, including its future role in shaping the country's competitive capacity;

- to provide tentative scenarios concerning the rate at which Poland will be closing its development gap with some other EU countries in Central and Eastern Europe (EU10) and with the EU15 group of countries;

- to draw conclusions for economic policy and point out policy actions necessary to improve the competitive position of the Polish economy in the next few years.

This report consists of three parts followed by a concluding section. The first part (Chapters 1-2) and the second one (Chapters 3-4) focus on a macroeconomic assessment of Poland's competitiveness and on factors that determined it in 2011.The third part (Chapters 5-6), as in previous years, focuses on evaluating a selected factor influencing the competitiveness of the Polish economy. This year, the focus is on education.The competitiveness of Polish education is examined in depth in the third part of the report, and certain aspects of the issue are also evaluated in other sections.

In assessing the competitive position of the Polish economy in 2011, we use a broad definition of competitiveness, taking as its main measure the level of prosperity of society, which consists of the following components:

- the current macroeconomic situation, described by key indicators of economic development such as GDP growth, inflation, unemployment, balance of public finances, and the ratio of the current-account balance to GDP;

- the standard of living, which is reflected by the size of national income per cap­ita and indicators of socioeconomic development, such as life expectancy, infant mortality, the rate of schooling, the scale of income inequality, and the scope of poverty;

- Poland's position in the international division of labor, defined as the ability to export goods and services to foreign markets and the ability to attract foreign direct investment and other factors of production and use them for development.

In the first two chapters, Poland's economic performance is compared with that of other countries (in particular fellow EU member states), using a broad spectrum of economic and social indicators.Sustainable economic development is the primary sign of competitiveness and therefore in Chapter 1 we examine the current development trends, including economic growth, the degree of convergence of GDP per capita, and income inequality. In Chapter 2, Poland's role in the international division of labor is evaluated. In particular, foreign trade performance and foreign investment flows are analyzed, with a special focus on economic ties with other European Union countries, which are Poland's main economic partners.

Chapters 3 and 4 provide a detailed analysis of the quantitative and qualitative factors that determine the competitive position of the Polish economy.They are grouped into two categories: (1) resources and their productivity, and (2) the effectiveness of economic policy and the quality of institutions. The first group includes human resources and changes in these over the past year, physical capital (including infrastructure), and technological factors, which are reflected in research and development, patents and innovations.The detailed analysis of these issues is supplemented by an assessment of the impact of labor, capital and technology on the competitive position using the growth accounting framework.The results can indicate to what extent economic growth and shifts in the competitive position of the Polish economy can be attributed to either changes in measurable factors of production (capital and labor) or changes in technology.

Chapter 4 discusses the main aspects of the second group of factors determining the competitiveness of the Polish economy, such as economic policies and institutions.The review of Poland's economic policy in 2011 is a starting point for this analysis. It is followed by an assessment of recent developments in the Polish financial system, in which efficiency is essential for competitiveness. The last section of Chapter 4 focuses on an evaluation of the business environment and the quality of national institutions.

Since education is the main topic of this year's report, the macroeconomic assessment of the competitiveness of the Polish economy has been expanded to include certain aspects related to the functioning of Poland's education system.For example, income inequality and differences in wage levels are examined in the context of the level of employee education; the role of education in attracting foreign direct investment to Poland has been evaluated, and the impact of human capital on economic growth in 2011 has been determined.

A broader analysis of education and its competitiveness is presented in the third part of the report.Education in Poland has been chosen as the focus of this year's report because education systems play a crucial role in shaping modern and competitive economies today.Furthermore, ongoing discussion concerning the recent OECD findings about education system in Poland compared with other countries1 requires additional research and assessment of this sensitive issue.Chapter 5 presents the transformation of Poland's education system at the primary, secondary and vocational levels from 1995 to 2011.As lifelong learning and acquiring new skills gain special importance, training activities conducted in Polish companies and their impact on competitiveness have been evaluated. Furthermore, Chapter 6 offers a detailed analysis of Poland's higher education system as it undergoes reform.The main pillar of the reform is a new law that has changed the rules of university governance and academic promotion criteria.Another issue examined in this chapter is the transformation of the higher education sector in terms of graduate profiles. The authors explore whether the number and profiles of Poland's higher education graduates are adapted to the needs of the labor market.The discussion wraps up with three different scenarios showing the possible development paths of Poland's higher education system.

The last section of the report includes a concise summary of research findings and some tentative conclusions for economic policy.

Preface

PART IPOLAND'S COMPARATIVE ECONOMIC PERFORMANCE AND COMPETITIVE POSITION IN 2011

Chapter 1. Economic Development and Real Convergence

1.1. Comparative Economic Perfomance in 2011 (Zbigniew Matkowski, Ryszard Rapacki, Mariusz Próchniak)

1.2. Real Income Convergence (Zbigniew Matkowski, Mariusz Próchniak)

1.3. Income Inequality and Poverty in Poland (Patrycja Graca-Gelert)

Chapter 2. Poland's Competitive Position in External Economic Relations

2.1. Poland's Trade of Goods with Foreign Countries (Elżbieta Czarny, Katarzyna Śledziewska, Patryk Toporowski)

2.2. Poland's Investment Attractiveness (Marzenna Anna Weresa, Tomasz Napiórkowski)

PART IIDETERMINANTS OF POLAND'S COMPETITIVENESS IN 2011

Chapter 3. Assets and Their Productivity

3.1. Human Resources (Mateusz Mokrogulski)

3.2. Investment and Infrastructure (Ireneusz Bil, Piotr Maszczyk)

3.3. Science, Technology, Innovation: Poland Compared with Other Countries (Ziemowit Czajkowski, Marcin Gomułka)

3.4. Total Factor Productivity (Mariusz Próchniak)

Chapter 4. Policies and Institutions and Their Quality

4.1. Economic Reforms and Stabilization Policy (Jan W. Bossak)

4.2. Financial System and Capital Market Development (Oskar Kowalewski)

4.3. Quality of Business Environment (Aleksander Sulejewicz)

PART III EDUCATION AND POLAND'S COMPETITIVENESS

Chapter 5. Poland's Education System in Transition

5.1. The Functioning of Poland's Education System (Stanisław Macioł)

5.2. Vocational Education in Poland in a Competitive Environment: Basic Problems and Directions of Reform (Elżbieta Drogosz-Zabłocka, Barbara Minkiewicz)

5.3. The Impact of Employee Training on the Competitiveness of Polish Enterprises (Joanna Żukowska)

Chapter 6. Changing Poland's Higher Education System: Problems and Challenges

6.1. The Legal and Institutional Framework for the Functioning of Higher Education in Poland-Selected Issues (Jerzy Menkes)

6.2. Education in Poland's Largest Centers of Higher Learning as a Response to the Needs of the Labor (Market Beata Michorowska)

6.3. Development of Higher Education in Poland - Toward Scenario Analysis (Tomasz Szapiro)

Summary and Conclusions: Poland's Competitive Position in 2011 (Marzenna Anna Weresa)