RESTRICTED
WORLD TRADE WT/WGTI/W/13
3December 1997
ORGANIZATION(97-5266)
Original: English Working Group ontheRelationship
between Trade andInvestment
COMMUNICATION FROM POLAND
Thefollowingcommunication,dated7October1997,wasreceivedfromthePermanentMission
ofPoland, withtherequest thatitbecirculated toMembers.
_______________
Poland welcomes theinitiative toestablish aWorking Group ontheRelationship between Trade
andInvestment adopted anddecided upon bytheWTO Ministerial Conference heldinSingapore in
December 1996. Asstated bytheHead ofthePolish Delegation totheMinisterial Conference in
Singapore, theinterlinkage between trade andinvestment isobvious andgrowing. Globalization of
economyandprogressiveliberalizationoftheworldtradingsystembringsaboutthegrowingsignificance
offoreign investment. Investment andtrade arenowadays theprimary means ofentering foreign
markets. Itisextremely important fornational governments toadopt domestic investment policies
based onthemultilateral principles ofliberalization andequal treatment. Therefore inPoland 'sview
theWTO isanappropriate forum forinternational exercise onthisnewemerging issue. Theinitiative
tosetupaworking group provides uswithagood opportunity tocomplement theexisting WTO
agreements thatalready address theissue ofinvestment aswellascomplement thework undertaken
onthissubject within much smaller circles ofother international organizations.
1. Introduction
Transition fromacentrally-planned economy toafreemarket system hasbrought changes in
thestructure ofPolish foreign trade. Central -Eastern European countries andtheformer USSR states
havebeenreplaced bydeveloped countries asPoland major trading partners. In1995, theturnover
inforeign trade was$US51,900 million, andattheendof1996 stood at$US61,300 million -that
is18.1percenthigher thantheprevious yearandillustrates adynamic growth intrade turnover. It
isworth underlining thattheshare ofprivate sector intotalexports andimports increases every year
andconstitutes amajor partofPolish foreign trade.
ThePolish Government recognizes thatforeign investment, especially foreign direct investment,
isanindispensable element forfurther economic growth andtheentire transformation oftheeconomy
fromthecentrally-planned economy toafreemarket system. Astheresearch studies haveindicated,
there isavisible feedback effect between theflowofFDIandeconomic growth -a1percentgrowth
inGDPisaccompanied byanaverage increase inforeign investment of4.19percent,while a10percent
increase intheflow ofFDIgives a0.54percentgrowth ofGDP. Moreover, there isaclear
interdependence between trade andforeign investment. FDIcomplements andincreases trade -a
riseof$US1 million inFDIresults in$US0.034 million ofexports. Wealsoobserve thatagrowth
inforeign investment isaccompanied byadecrease intheinflation rate. Bearing thisinmind, the
Government aimstocreate alegalenvironment favourable forforeign investors. Theadoption ofthe
principle ofnational treatment hasbecome astrong foundation formaking theinvestment procedures
more transparent, more stable.WT/WGTI/W/13
Page2
Most ofthechanges inthisrespect involve theliberalization oftheFDIregulatory framework
andremoval ofbarriers ingeneral. Forexample, nospecial permit isrequired toform acompany
withforeign shareholding.
Significant changes aretaking place inthefieldofcapital transfer. Forexample, contributions
ofaforeign investor intothecompany capital maybemade inaforeign currency transferred bythe
foreign investor through aforeign bank. Nopermit isnecessary foraforeign company totransfer
itsprofitsabroad.Foreignemployeeshavetherighttopurchasetheequivalentsumoftheirremuneration
inhardcurrency andrepatriate itwithout aseparate foreign exchange permit. Itisalsopossible for
exporters toopenforeign exchange accounts. Foreign loans uptofiveyears duration ormore toPolish
companies aretreated asaform offoreign direct investment anddonotrequire aforeign exchange
permit. Individuals areabletotakeabroad uptoECU 10,000 ayearasagiftforfamily members.
Itispossible toinvest abroad uptoECU 50,000 foreachfamily member inrealestate abroad. Many
restrictions havebeenremoved inthefieldofacquisition ofrealestate byforeigners. Nopermit is
necessary topurchase, forexample, apartments, realestate upto0.4hectare inurban area, 1hectare
inruralareas. Significant progress hasbeenmade inliberalization ofservices. Thescope ofeconomic
activities forwhich apermit isrequired hasbeenreduced -nopermit isnecessary fordealing in
wholesale trading inimported goods, legal services, realestate. Itshould alsobestressed thata
liberalization ofthefinancial sector istaking place. Aforeign bankmayopenupitsbranch byforming
ajoint-venture withanoperating Polish bank. Foreign investors havetherighttoestablish insurance
companies (however, until1999onlyintheformofjoint-ventures). Forthepurpose ofinternational
trade ingoods, interested enterprises maypurchase insurance policies from foreign insurers.
2. Bilateral Investment Treaties (BIT)
Thenumber ofBITs isgrowing steadily -morethan1,300 treaties havebeensigned worldwide.
Poland started tosignBITsin1989, when theprogramme ofeconomic transformation waslaunched.
Today, Poland has57treaties, bothwithdeveloped anddeveloping countries aswellasother European
countries witheconomies intransition. Themain reason forsigning BITs byPoland istofacilitate
andencourage foreign investment onthePolish market andtoprovide better conditions forPolish
investors abroad. BITs, being aninternationally binding instruments, provide legalguarantees and
aformal framework forFDI. BITsconcluded byPoland arebased onageneral ruleofthesymmetry
ofobligations andinclude suchprovisions asnational treatment, expropriation andcompensation rights,
transferofcapital,intellectualprotectionrights,settlementofdisputes.BITsareconcludedinaccordance
withdomestic legislation andinmostcases follow international law.Itshould beunderlined, however,
thatPoland offers thesame guarantees andprotection toallinvestors, regardless oftheexistence of
atreaty withagiven country.
BITsreflect thegeneral stateofrelations between thetwosignatories, stategoodwill andoperate
asapromotional tool, sending asignal thatagiven country isopen toforeign capital andoffers
favourable conditions forforeign investors.
3. Trade andinvestment policy perspectives
Thestable growth ofthePolish economy aswellasafavourable, systematically liberalized
climate forforeign investment resulted inarapid growth oftheinflow ofFDI. According tothedata,
including onlyinvestments over$US1 million gathered bythePolish Agency forForeign Investment
(PAIZ), theaccumulated value ofFDIinPoland attheendof1996 was$US12,027 million. In
December1995,thisvalueamountedto$US6,832million,andattheof1994stoodat$US4,321million.
Themajority ofcapital wasattracted byindustry (62.2 percent), especially food processing,
electro-machinery, followed bythefinancial sector, construction andtelecommunications.WT/WGTI/W/13
Page3
Poland needs further flows offoreign investment asitisregarded asanecessary factor for
strengthening theeconomic reforms andisconducive tofurther macroeconomic stabilization. Foreign
investment, especially transfer oftechnology plays asignificant roleinincreasing thecompetitiveness
ofthePolisheconomythroughrestructurizationandmodernizationofvariousbranchesofPolishindustry,
expanding production ofindividual enterprises, raising atthesame timequality oftheproducts. It
leads totheincrease intrade, especially exports, asthemajority ofthecompanies withforeign capital
sell60percentoftheirproduction abroad. Italsochanges thestructure ofexport -manufacturers
haveagrowingshareintheoverallexport.Foreigninvestmentalsohasanimpactonthecompetitiveness
ofPolish enterprises -itleads tochanges incompanies 'market strategies. Polish firms often imitate
appearance, packaging oftheirproducts offoreign investors which inturnhelps them tocapture a
bigger share ofPolish market.
Theeducational effect isoneofthemostimportant qualitative effects offoreign investment.
Theintroduction ofnewmanagement methods, suchelements offinancial management ascostcontrol
andplanning haveimproved visibly. Moreover, studies alsopoint totheimprovement inpersonnel
management, especially inthesystem ofmotivation, staff selection, delegation ofduties and
responsibilities tolower management levels, aswellastherising general level ofprofessionalism,
knowledge offoreign languages, etc.
4. Conclusions
Having inmindthatglobalization ofeconomy, ingeneral, requires atransparent andpredictable
environment forinvestors andworldwide competition forattracting foreign investment, inparticular,
Poland willcontinue toliberalize itslegalframework tocreate afavourable investment climate topresent
Poland asaprime location forforeign investment. Asaparty totheUruguay Round negotiations,
aMember ofWTO andaneconomy intransition, Poland fullyadheres totherulesofthemultilateral
trading system setupon intheMarrakesh Agreement, finalimplementation ofwhich byPoland is
envisaged bytheendof1997.
ThePolish Government seesthenecessity ofreinforcing trade andinvestment liberalization
taking intoaccount itsinternational commitments inthisfield. Forexample, thePolish delegation
takes anactive partinpreparing theMultilateral Agreement onInvestment (MAI attheOECD). The
Agreement would build ontheachievements ofthepresent OECD instruments, consolidating and
strengthening existing commitments between Poland andmember countries. Theexpected increase
intheflowofforeign investment would facilitate further economic growth, andontheother hand,
theMAI opens upthepossibility forPolish companies toinvest abroad.
TheWorking Group ontheRelationship between Trade andInvestment initswork onthis
issue should takeintoaccount direct andindirect references tothissubject contained innumerous
provisions oftheexisting WTO agreements beginning withthemostprincipal rulesofMFN andnational
treatment. Other WTO regulations withreferences totrade andinvestment include theGeneral
AgreementonTradeinServices,Trade-RelatedInvestmentMeasures,Anti-dumpingandCountervailing
Measures,Subsidies,TechnicalBarrierstoTrade,Trade-RelatedAspectsofIntellectualPropertyRights,
Import Licensing Procedures. Itisofcrucial importance thatthework onthesubject should bea
comprehensive analytical approach thatincorporates alltheareas included inexisting provisions.
Poland recognizes thattheWorking Group 'sprogramme should include especially the
relationship between trade andinvestment fordevelopment andeconomic growth, thedegree of
correlationintheflowbetweentradeandinvestment,theinfluenceofvarioustradepoliciesoninvestment
flows aswellasthesignificance ofinvestment policies ontrade inflows. TheWorking Group should
alsostudy theexisting international instruments referring totrade andinvestment aswellasdifferent
international agreements andinitiatives inthisfield.