Poland 2015-2019

How Poland’s position in the rankings changed

Poland 2015-2019 2019-08-12
Under PiS, Poland’s position in economic and social rankings did not change much, as opposed to freedom and democracy rankings, which fell drastically.

Poland 2015-2019

Poland falls behind in openness to business. In the World Bank’s Doing Business (DB) ranking in 2016, which reflected legal status as of June 2015 (before PiS came into power), Poland ranked 25th among 189 countries. In the DB ranking in 2019 (which reflected the legal situation from May 2018), Poland sunk to 33rd place (190 countries were evaluated). For the first time, the synthetic indicator that measured openness to conducting business in Poland dropped year-on-year from 77.3 to 76.95 points. This does not mean that the PiS government failed to facilitate business for companies – as a result of an initiative led by the MinTech, a business constitution was created. However, one of the government’s goals was to seal the tax system, which increased budget revenue but forced the government to introduce new regulations. Poland’s position might improve in subsequent editions of the DB that include abolishing the need to file VAT declarations and dealing with payment backlogs.

High investment attractiveness. Poland still ranks high in the "EY Attractiveness Survey Europe," which ranks the European countries that are most often chosen by foreign investors. In the 2016 ranking, which reflected the situation in the previous year, Poland accumulated 211 new direct foreign investments and ranked seventh in Europe. In the latest summary, which includes 2018, Poland ranked sixth (with 272 projects). Last year, the PiS government introduced major changes for investors – the legislation introduced tax reliefs not only in special economic zones but also across all of Poland. For several years now, Poland has attracted more and more investments in the automotive sector, mainly in e-mobility (for instance, factories for electric car batteries built by LG Chem and Daimler).

Slow progress in social development. Eurostat data shows that in 2015, Poland’s per capita GDP (which includes purchasing power parity) stood at 69 per cent of the EU average, while in 2018 in amounted to 71 per cent. During that time, income inequality in Poland decreased, in part as a result of the 500+ programme. However, Poland did not record a significant rise in social development rankings. In the 2016 edition of the UN Human Development Index, Poland ranked 36th, scoring 0.855 (1 is the maximum level); two years later, it ranked 33rd and scored 0.865. On the other hand, Poland faltered in the Social Progress Index ranking created by The Social Progress Imperative, despite improving its score. In 2015, it was awarded 77.98 points (out of 100) and ranked 27th out of 133 countries. In 2018, it ranked 32nd among 146 countries (with 81.21 points). Poland was overtaken by Korea, Italy, Cyprus, Greece and Lithuania. This ranking takes into account many more variables than just the HDI; factors include environmental quality, personal freedom and social inclusion.

Innovation remains among the lowest in the EU. In the EurCom’s latest ranking "European Innovation Scoreboard 2019," Poland came at the bottom of the list, ahead of Romania, Bulgaria and Croatia. In 2015, the innovation index for Poland was 0.248 (the EU average was 0.490), while in 2018, it amounted to 0.295 (the EU average was 0.525). According to Eurostat, in 2017 expenditure on research and development (R&D) accounted for 1.03 per cent of the country’s GDP, two times less than the EU average (2.06 per cent). However, Poland wants to increase it to 1.7 per cent of GDP in 2020. The government has already made it possible, for instance, to deduct up to 100 per cent of tax-deductible costs incurred for R&D activities from the tax base (150 per cent in the case of R&D centres). On the other hand, IP Box (Innovation Box), which launched in 2019, introduced tax incentives for companies that generate income from intellectual property rights acquired through R&D.

Moderate level of corruption. During PiS’s rule, Poland's position deteriorated in the Corruption Perception Index created by Transparency International, which means that the estimated risk of corruption increased. In the last ranking for 2018, Poland ranked 36th out of 180 countries (the higher the position, the lower the risk of corruption) with a score of 60 points out of 100 possible (100 indicates minimal risk of corruption). In Portugal and Estonia, the risk of corruption is lower than in Poland, but it remains higher in the Czech Republic, Italy and Slovakia. To put it into perspective, in 2015, Poland ranked 29th among 167 countries (scoring 63 points). The Corruption Perception Index is based on the assessments provided by experts and business representatives as well as data collected from several different institutions. Poland’s deteriorating position may be related to changes in the financing of NGOs. In 2018, a high-profile corruption case was reported that involved the former head of the Polish Financial Supervision Authority (KNF).

Less freedom in Poland. According to Freedom House, which produces an annual report on the state of democracy and freedom in the world, recent years resulted in a deterioration of the situation in Poland, although it is still considered a fully free country (Hungary is only partially free). In the 2016 edition, Poland received 93 points out of 100 possible; a year later, it scored 89 points, in 2018 it scored 85, while in 2019 it accumulated 84 points. The organisation focused on the decrease in the transparency of public institutions in Poland compared to previous years, as well as increasingly more difficult access to information. According to Freedom House, the assessment of freedom in Poland is greatly underestimated by changes in the judiciary carried out by the PiS government. The organisation also awarded Poland 3 out of 4 points in the category of media freedom, which is in part a result of the politicisation of public media.

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PI Alert

EU summit: Member States launch discussion on financing joint defence initiatives

State of play

Leaders approved appointments to top posts. At the EU summit that ended on Thursday night, they nominated Ursula von der Leyen for a second term as head of EurCom, former Portuguese Prime Minister António Costa as head of EurCou and Estonian Prime Minister Kaja Kallas as head of EU diplomacy. Italian Prime Minister Giorgia Meloni abstained from voting for von der Leyen and voted against Costa and Kallas. This means that Meloni is preparing for tough negotiations and may demand a high political price in return for his party's support for von der Leyen in her approval in the EurParl. Prime Minister Viktor Orbán voted against von der Leyen and abstained on Kallas.

They adopted the Union's strategic agenda for 2024-2029. Over the next five years, the Union's goals include a successful digital and green transformation by "pragmatically" pursuing the path to climate neutrality by 2050. Another objective is to strengthen the EU's security and defence capabilities.

Von der Leyen spoke of EUR 500 billion for defence over a decade. This was the EurCom estimate of needed EU investment presented by its head at the EurCou meeting. Poland and France were among the countries that expected the EurCom to present possible options for financing defence investments before the summit, such as EU financing of common expenditure from a common borrowing. This idea was strongly opposed by Germany and the Netherlands, among others. In the end, von der Leyen decided to postpone the debate until after the constitution of the new EurCom, i.e. in the autumn. And the summit - after von der Leyen's oral presentation - only launched a preliminary debate on possible joint financing of defence projects.

Poland has submitted two defence projects. These might be co-financed by EU funds. On the eve of the summit, Poland and Greece presented in writing a detailed concept for an air defence system for the Union (Shield and Spear), which Prime Ministers Donald Tusk and Kyriakos Mitostakis had put forward - in a more general form - in May. In addition, Poland, Lithuania, Latvia and Estonia presented the idea of jointly strengthening the defence infrastructure along the EU's borders with Russia and Belarus. Poland is pushing for the EU to go significantly beyond its current plans to support the defence industry with EU funds and agree to spend money on defence projects similar to the two proposals. But EU states are far from a consensus on the issue.

Zelensky signed a security agreement with the Union. The document, signed by President Volodymyr Zelensky in Brussels, commits all member states and the EU as a whole to "help Ukraine defend itself, resist efforts to destabilise it and deter future acts of aggression". The document recalls the EUR 5 billion the EU intends to allocate for military aid and training in 2024 (in addition to bilateral aid from EU countries to Kyiv). It says that "further comparable annual increases could be envisaged until 2027, based on Ukrainian needs" i.e. it could amount to up to EUR 20 billion. Ukraine's agreement with the EU comes on top of the bilateral security "guarantees" Ukraine has already signed with a dozen countries (including the US, UK, Germany, France, Italy). As Prime Minister Donald Tusk confirmed in Brussels, talks are also underway between Ukraine and Poland on the text of mutual commitments on security issues.

PI Alert

KO wins elections to the European Parliament

KO received 38.2 per cent of the vote and PiS 33.9 per cent, according to an exit poll by IPSOS. Konfederacja came in third with 11.9 per cent, followed by Trzecia Droga with 8.2 per cent, Lewica with 6.6 per cent, Bezpartyjni Samorządowcy with 0.8 per cent and Polexit with 0.3 per cent. According to the exit poll, KO gained 21 seats, PiS 19, Konfederacja 6, Trzecia Droga 4 and Lewica gained 3. The turnout was 39.7 per cent.

According to the European Parliament's first projection, the centre-right European People's Party (EPP), which includes, among others, PO and PSL, will remain the largest force with 181 MEPs in the 720-seat Parliament. The centre-left Socialists and Democrats (S&D), whose members include the Polish Lewica, should have 135 seats, whereas the liberal Renew Europe club (including Polska 2050) will have 82 seats. This gives a total of 398 seats to the coalition of these three centrist factions (EPP, S&D and Renew Europe) on which the European Commission under Ursula von der Leyen has relied on so far. The Green faction wins 53 seats according to the same projection, the European Conservatives and Reformists faction (including PiS) 71 seats and the radical right-wing Identity and Democracy 62 seats.