21(116) 2015
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Events Coverage

Which Polish city is best for doing business?

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The BPCC’s Tax and Finance Reform policy group met at the Warsaw offices of the World Bank to hear about the World Bank’s first-ever sub-national Doing Business report on Poland.
For many years, the World Bank examines and ranks economies around the world (189 last year) in terms of ease of doing business. Poland ranks 32nd whilst the UK lies in eighth place. However, this global survey looks at 11 indicators (such as time taken to register a company, obtain planning permission, enforce a contract through the courts) in each country’s main business city.

Report: Doing Business in Poland 2015

This year, at the request of the Polish government, the World Bank, BGK and PKPP Lewiatan, supported by the Ministry of Infrastructure and Development and the Ministry of Justice, conducted research in 18 Polish cities, checking four of the ten indicators from the global Doing Business survey. These cities were the voivodship capitals, including these with shared capitals (Gorzów Wielkopolski and Zielona Góra in Lubuskie, and Toruń and Bydgoszcz in Kujawsko-Pomorskie).

Madalina Papahagi, from the World Bank’s Global Indicators Group, explained the methodology and background to the survey. She said the aim was not to praise the winners and shame the losers, but rather to create the basis for information exchange between cities, between the public and private sector, to foster the promotion of best practice that can lead to more entrepreneurship. “If Poland were to perform overall as well as the best city in each indicator, it would jump up the global ranking from 32nd to 24th place, ahead of countries like France or the Netherlands” she said. However, pointing out that Poland had risen 40 places in just five years, she observed that further progress would be now become harder to achieve.

Nevertheless, there were areas where Poland could do much better. The indicator ‘dealing with construction permits’ showed plenty of room for improvement, with Poland in 137th place globally (this contrasts with 17th place for ‘getting credit’).

The World Bank’s sub-national reports compare local regulations and implementation of national regulations. They uncovers bottlenecks and good practices. “It is easier to spread good practices with neighbours – you’re not comparing, say, Germany and Egypt. We talked to lawyers, notaries, consultants, architects, construction companies and professional associations, data was collected from the public sector we interviewed public officials. The results revealed different efficiency levels, differences in interpretation of national legislation. All cities have something to learn from their neighbours,” said Ms Papahagi.

You can register a company in nine days in Poznań, whilst in Szczecin it takes 42 days. Poznań is best for registering business – there’s online registration faster, it’s half the price. Yet across Poland, the system could be approved. All the company’s founders have to be logged in at the same time to submit an application, you can’t save a draft. Volumes of applications differ, leading to different workloads. Warsaw is overwhelmed – it has the most applications, yet Warsaw’s not the worst city – because there are flexible work schedules for the court registrars (referendarz).

[A question many entrepreneurs from the UK and other common-law jurisdictions ask when trying to set up a business in Poland is ‘why does this have to go through the courts? Why does a judge have to decide? Who’s the other party in this case? Why does a simple administrative process need to be overseen by the Ministry of Justice?]

The complexity of the process is a factor in dealing with construction permits – up to 22 permissions are needed in Poland, compared to seven in Denmark, or eight in Germany. In terms of time – in Opole it takes 37 days, in other cities it can take be two months later. Pre-construction clearance, building permit and occupancy clearance need to be obtained separately. Again workload is a factor. Despite Wrocław having five times as many applications as Gorzów Wielkopolski, it still takes less time to obtain a construction permit in the former than in the latter.

The World Bank reported has observed improvement in Poland. Notaries are charging less because the profession has been deregulated. In cities where cases are assigned on the basis of workload, performance is better. Active case management in Kraków courts shows it is possible to cut the time taken to enforce contracts by half.

“What can be improved?” asked Ms Papahagi. The World Bank is keen for neighbours to look at best practice and for the private sector to lobby for improvements at the local level. “See where the bottlenecks are. Recommend reforms,” she said, giving Mexico as an example. “Four sub-national reports have been carried out, a fifth on way, every two years. Those states that visited other states are doing better. There is convergence in good practices. It’s not just the richest states that are doing well – because best practice is being shared. The results are encouraging; the streamlining of administrative processes has led to a 6% growth in company registration, and 2.6% increase in employment overall,” she said.

The presentation was followed by a lively discussion between BPCC members and representatives of the Polish public sector – both at ministerial and city level. There was agreement that the reforms carried out in Poland have been more beneficial to large companies than to small businesses, and there was a consensus that the Polish government (whoever wins next month’s elections) commissions a follow-up sub-national Doing Business report from the World Bank. At the same time, pledges from the Ministry of Infrastructure and Development that training and sharing of best practice be carried out were welcomed.

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