Impact of the EU accession process on Polish regions
Polish economists have no doubts that accession to the EU would have varied impact on thedevelopment of regions. Some of the regions are well prepared to use the benefits and face thechallenges of the EU single market, while others may continuously stay at the periphery. One of themost significant challenges for Polish regions upon accession would be the ability to withstandcompetitive pressure from the EU.
Based on the experience of the EU regional policy, the European Commission defined
several key factors of a region’s success such as the structure of economic activity (concentration of
employment in market services and/or manufacturing); the skills of the work force and its
educational level; regional accessibility and physical infrastructure; extent of innovative activity; andinstitutional capacity (European Commission, 2000a). Additionally, an important indicator for
Poland could be the geography, volume and structure of regional foreign trade. It can be assumed
that a region would be better placed to join the EU single market if it has a relatively big volume ofexports to the EU, most of which is taken by advanced technology products. In this study, thecomparative analysis of Polish regions is based on structure of economy, foreign trade, innovative
activity, and institutional capacity.

Structure of economy
The structure of economic activity in Poland differs from region to region. The eastern
periphery is characterized by a large share of employment in agriculture, forestry and fishing (Table
2).

Table 2. Employment in agriculture, hunting, forestry and fishing in Polish regions in 2001.
Regions

Employment inagriculture, hunting,forestry andfishing, % of total
full-time employed

POLAND

19

DOLNOŚLĄSKIE10

KUJAWSKO-POMORSKIE

19.7

LUBELSKIE

38

LUBUSKIE

10.2ŁÓDZKIE

17.2MAŁOPOLSKIE

24.8

MAZOWIECKIE

20.4

OPOLSKIE

20

PODKARPACKIE

30.3

PODLASKIE

36.4

POMORSKIE

8.6

ŚLĄSKIE

5.3ŚWIĘTOKRZYSKIE

30.3

WARMIŃSKO-MAZURSKIE

14.3

WIELKOPOLSKIE

19.3

ZACHODNIOPOMORSKIE

6.3

Source: Modified from Statistical Yearbook (1)The share of agriculture in total employment is very high indeed. While on average agriculture
accounts for 19% of the labor force in Poland, in Podlaskie it is 36.4%, in Swietokrzyskie 30.3%, inLubelskie 38%, and in Podkarpackie 30.3%. This is one of the reasons why these regions have thelowest value added in Poland: Lubielskie 68.5%. Podkarpackie 71.1%, Podlaskie 74.3% of thePolish average (Horodenski, 2002).
Reform of agriculture in the eastern peripheral regions has been an important aspect ofPolish transformation as this sector has been particularly sensitive in relation to Poland’s accession
to the EU. This sort of region is a typical objective of the EU regional policy. The experience of theCohesion countries shows that it has been extremely difficult, even with the use of the EU policies,
to enhance the mobility of labor and to shift the labor force from agriculture to industry or services(Armstrong, 2000). The same situation is observed in Poland (Sadowska-Snarska, 2002).

Foreign trade
Poland has a free trade regime with the EU that encompasses most industrial products.
Analysis of exports shows that two western regions, Lubuskie and Wielkopolskie, are the mostsuccessful in trade with the EU. These regions have, in general, a rather large volume of exports per
capita above the average in Poland. Most exports go the EU and furthermore exports contain a big
share of high-tech products (Statistical Yearbook (1); Tarkowski, 2003). Pomorskie andMazowieckie are the leaders in exports per capita and are far above the Polish average. These
regions also have a big share of high-tech products in their exports, but most exports go beyond theEU (this indicator is below the Polish average) (Statistical Yearbook (1); Tarkowski, 2003).
The most disadvantaged in terms of exports is the eastern periphery: Podlaskie, Lubielskie,
Podkarpackie, Malopolskie. These regions have the lowest volume of exports per capita in the
country, very little of which goes to the EU (the lowest level in Poland), and the regions also havethe lowest share of high-tech products in their exports (Statistical Yearbook (1); Tarkowski, 2003).

Innovative activity
As mentioned, innovative activity is quite an important indicator to estimate a region’scompetitive ability because the generation and adoption of innovations is one of the major factorsthat stimulate economic growth. In statistical terms, innovative activity may be estimated by two
main indicators: R&D expenditure per capita and the share of employment in the R&D sector in total
employment. Of course, these indicators do not give a full picture of the relative innovative potentialof the regions, but they may give an idea of how different regions treat innovations. According toTarkowski (2003) and Statistical Yearbook (1), the largest R&D expenditure per capita is in
Mazowieckie, the capital region. Relatively high indicators are in Lodzskie, Malopolskie,
Dolnoslaskie, and Pomorskie. The lowest levels of R&D expenditure are in the interior and theeastern periphery: Opolskie, Swietokrzyskie, Podlaskie, Lubelskie and Podkarpackie (Statistical
Yearbook (1); Tarkowski, 2003). The following table shows the relative employment in the R&D
sector by region:

Table 3. Regional R&D employment in 2001 as percentage of total employment

REGIONR&D EMPLOYMENTPOLAND

0.88

DOLNOŚLĄSKIE1.01

KUJAWSKO-POMORSKIE

0.60

LUBELSKIE

0.74

LUBUSKIE

0.39ŁÓDZKIE

0.77MAŁOPOLSKIE

1.16

MAZOWIECKIE

1.69

OPOLSKIE

0.48

PODKARPACKIE

0.53

PODLASKIE

0.51

POMORSKIE

0.83ŚLĄSKIE

0.76ŚWIĘTOKRZYSKIE

0.24

WARMIŃSKO-MAZURSKIE

0.45

WIELKOPOLSKIE

0.92

ZACHODNIOPOMORSKIE

0.62

Source: Statistical Yearbook (1)As can be seen in the table, the eastern regions have very low levels of R&D employment. This
group of regions extends to the western region, Lubuskie, that has one of the lowest indicators in the
country, and the south-central region, Opolskie.

Institutional capacity
Tarkowski (2003) made a synthetic estimation of the institutional capacity of Polish regions.
It has been recognized by academics and policy-makers, supported by EU evidence and economic

theories, that institutional capacity has been one of the most important intangible factors that define
the absorptive capacity of the economy, as well as the efficiency of the Structural Fund allocations ingeneral. For example, the implementation of the EU regional projects in Greece was always
stumbling over an extremely inefficient bureaucratic system within which the money did not target
the most needed areas (Financial Times Surveys, 2000). The highest institutional capacity, according
to Polish scholars, exists in the following regions: Zachodnio-Pomorskie, Lubuskie (western Poland),Opolskie and Slaskie (south-western Poland). The lowest institutional capacity is in the eastern partof the country (Podlaskie, Lubelskie, Warminsko-Mazurskie) and in some central regions (Lodzkie
and Swietokrzyskie).

In addition to the above indicators, attraction of investments may give another picture of
regional performance. In general, FDI has been one of the most important factors of accelerated
economic growth in Polish regions. According to Statistical Yearbook (1), the western regions(Lubuskie, Zachodnio-Pomorskie, Wielkopolskie, Dolnoslaskie and Pomorskie) and central regions(Mazowieckie and Warminsko-Mazurskie) have the biggest share of FDI in the regional economy.
The lowest levels of FDI are in Podlaskie region; the lowest levels of FDI from the EU are again in
the Polish east – Lubielskie and Podkarpackie.
Polish researchers rank the investment attractiveness of the regions as follows:RegionComparative
investment rank

Mazowieckie, Śląskie

A

Wielkopolskie, Pomorskie, Dolnośląskie,

B

Zachodniopomorskie
Małopolskie, Lubuskie, Łódzkie,C

Kujawsko-Pomorskie, Opolskie
Warmińsko-Mazurskie, Podkarpackie,

D

Podlaskie, Lubelskie, Świętokrzyskie
Source: Tarkowski, 2003

The most attractive for FDI in Poland are the capital region and the western regions. Slaskie
has not benefited from significant FDI inflows yet, but may become attractive for investments as it
has a developed (though old) infrastructure, a relatively high concentration of labor, and many old
factory premises. The eastern periphery has the lowest comparative attractiveness for potential
investors.

As the above analysis shows, Poland has regions that are relatively better prepared for theaccession and would probably obtain bigger benefits from joining the single market, as well as
regions that would probably have more challenges than advantages. The western and southwesternregions along with the capital region have shown the fastest pace of transformation and economic
growth. The eastern periphery, Warminsko-Mazurskie, Podlaskie, Lubelskie, Podkarpackie and thecentral periphery, Swietokrzyskie, may well have difficulties in adapting to the new circumstances ofthe enlarged EU. These regions have relatively high share of employment in agriculture at theexpense of industry and services, the lowest GDP and value added per capita, the lowest levels of
trade with the EU, little direct foreign investment (and the lowest investment attractiveness), thesmallest share of high-tech exports and R&D expenditure, and the lowest institutional capacity.
The old industrial region, Slaskie, is still not well placed to face the competition from theEU. Although the major indicators show a rather favorable position in comparison to the otherregions, serious structural problems still persist. This region has been acquiring the largest amountsof subsidies in Poland, which helped to slightly increase exports, investment and income levels inrecent years (Kozak, 2000). The major exporters are still traditional industries, coal mining and steel
production in particular, which would hardly have any significant growth potential after theaccession. Polish scholars state that many companies are on the brink of bankruptcy and theprivatization process has been very slow (Tarkowski, 2003). It has been a big problem for thegovernment to sell old worn-out factories. A positive trend have nevertheless appeared: a few
machine-making investors established their factories in the region and added modern machinery to
the traditional structure of exports (Kozak, 2000). Only if this trend is strengthened after theaccession, would the region have chances to participate successfully in the EU single market.
In total, the backward regions in Poland comprise around 30% of the country’s territory and34.1% of the population. Widening regional disparities in Poland are an unavoidable consequence ofthe process of transformation and economic growth. Theories of regional development argue thatpolarization of economic activity is an inevitable process and convergence in terms of GDP per
capita, even if it occurs automatically, would be extremely slow. Krugman’s core-periphery concept(Krugman, 1991) and the evidence from the EU member states suggest that inter-regional disparities
within the single market have a strong tendency to grow, and Poland would probably be affected bythis process as well. In general, the EU accession process has been quite beneficial to the wholecountry. Until 2002, economic growth occurred in all Polish regions, although its intensity varied
from region to region. The difference in pace of economic development was the main reason for
widening disparities in the 1990s, although these have not yet become enormous. Accession to the
EU would place a strong competitive pressure on the country’s economy, and peripheral regions
would probably face many more difficulties than before. The competitive capacity of a region would

largely define its future economic growth. Polish scholars and policy-makers agree that joining thesingle market may leave backward regions even more worse off, and a backwash effect is more
likely to happen after accession than a spread effect (Banski, 2002). This means that the peripherywould continue to be drained of the most skilled labor force and capital and would therefore
permanently lag behind. Given these circumstances, it is still admitted that after joining the EU
Poland would have to focus on catching up with the EU member states rather than on combating
regional disparities inside the country.

Potential challenges of the EU regional policy
Membership in the European Union will bring Poland one of the most attractive benefits:
eligibility for the EU regional policy. The policy is expected to combat growing regional disparities.
The structural funds that would be allocated in Poland might amount up to 4% of the country’s GDP.
The EU money has both economic and political weight and needs to be spent wisely in order toproduce positive economic and social effects.
The EU experience shows that the regional policy has been very far from being a perfectweapon against regional inequality. Paradoxically, even though the regional policy by now has ahistory of 26 years, its rationale and efficiency are still not clear and are always questioned byscholars. Only one thing is apparent: the EU regional policy does not bring any radical changes in
the pattern of regional economic growth (Dunford, 2000; Allen, 2000). In addition to ambiguous
economic effects, the policy has a strong political content in relations among the member states,
between the European Commission and the member states, as well as among the regions within themember states (Allen, 2000). As it appears, the Commission does not have enough power to enforce
effective implementation of the regional policy. Latest statistics from the regions shows that two
opposite processes have been happening in the last nine years: convergence in GDP per capita

among the member states and divergence in GDP per capita among the regions in the EU (Dunford,
2000). Therefore, the policy has been continuously questioned by some scholars as to whether itshould be considered as an economic instrument at all. The experience of the Cohesion countries,
Ireland and Greece in particular, shows that the EU structural funds may become merely a catalyst of
domestic macroeconomic policies (Financial Times Surveys, 2000; Barry, 2000).
The basic framework of the regional policy cycle in the EU is quite complicated, but inreality it becomes even more confusing. Gradually the linkages and interlacing between threedifferent levels of policy-making (EU, national and regional) increase. As, for example, the Spanish
experience shows, this leads to two sets of negative consequences. The first one is quite apparent:
non-transparency of decision-making, the resulting lack of political accountability, and corruption.
The second consequence is much less evident but very bitter - the threat of political deadlock(Amodia et al, 2001).
The principle of partnership, which is one of the rules of the EU regional policy, would
bring to the decision-making process the European Commission, the central government, the regions,and municipalities. In these negotiations each group of regions would probably have its own
economic reasoning: the fast-growing regions would support the direction of funds into the mostproductive areas and block allocation of transfers to the ‘lazy’ east (Podlaskie, Lubelskie,
Podkarpackie) or inefficient southeast (Slaskie). The poor regions would obviously strive for funds
for the simple reason that they are poor and need support. These sorts of contradictory arguments
known as the equity-efficiency dilemma exist today, only a few years after the decentralization
reform (Banski, 2002). The multiple negotiations consisting of the Commission, central government,
regions and, possibly, municipalities may cause a “joint decision trap” which might block theefficient allocation of funds when the recipients of the money finally become rich individuals in poor
regions – a phenomenon known in the EU (Amodia et al, 2001). Bringing cities and municipalities tothe negotiation table, according to the partnership principle, improves the quality of the regional
policy because of better targeting. But again, as the EU experience shows, this can make thedecision-making process even more difficult and enhance the threat of a political deadlock.
The Polish regions’ relative autonomy, which is considered to be so positive now, hasalready led to differences in the quality of management, use of regional potential, and general
economic development. As a result, some regions became more influential than others. Currently,
Polish regional policy is not explicitly shaped. It is still a debate on equity-efficiency dilemma; thepolicy is balanced between a liberal approach, i.e. minimum government intervention anddecentralization of responsibility for economic development on the one side, and government
interventions primarily by means of subsidies and state aids on the other (Gorzelak, 2000; Swiatek,
2002).

It is a question how these relations will work when the central government would need to

distribute the money from the EU Structural Funds. Would not this regional autonomy generate
severe bottlenecks and block efficient allocation of the EU transfers? The situation would become
even more tricky because probably all Polish regions would be qualified as Objective 1 status andtherefore be eligible for equal funding regardless of inter-regional disparities.
The money that the country would finally get could be allocated in three main different
ways: it could be equally distributed among the regions (if all of them will qualify for Objective 1
status), it could be directed to poor regions, or it could be invested in the richest, most productive
regions. All of these strategy options have their pluses and minuses, and the definition of an optimal
policy that satisfies all economic, political and social considerations remains a difficult task. The
most difficult decision in this respect would be the balance between the equity and efficiency
principles of the structural funds allocations.
Political and social considerations, as well as the current practice of the EU would be infavor of equity - allocation of funds to the backward regions as a policy of social solidarity. On theother hand, economic rationale, which is backed by theories and the EU evidence, would be in favorof efficiency - allocation of funds to the advanced, most productive regions. In this case, thewell-performing regions may become locomotives of growth and simply continuously pull the
lagging regions behind. The EU evidence suggests that allocation of money to poor regions does notbring any significant catch-up effect and that the money is usually wasted. While academics promote
the efficiency approach, the Polish government would probably try to find a balance between the two
options and the final strategy would not be clear-cut. Analysis of the theory and practice in the EUsuggests that the best policy is the policy of not relying on the structural funds at all. The
government should not strive for the maximum amount of the EU money but rather attract
investments and pursue tight fiscal discipline.
The major lesson for Poland is that any redefinition of regional policy towards greatertargeting could be expected to meet resistance, and would therefore be incremental and difficult.
Whether the Polish government will opt to monitor the whole process of the structural funds
allocations or will leave it to political bargaining depends completely on the country’s choice. But
if the country is simply aware of all major political problems accompanying the EU’s regional policy
and of the fact that the EU’s involvement in combating regional disparities may actually increase
them, the country would treat the Union’s participation very cautiously and provide its own efforts tosolve these problems.

Cross-border cooperation
Apart from the Structural Funds, eastern Polish peripheral regions may obtain EU support
for cross-border activities. Since 1991, Poland has created ten euroregions with the neighboring
countries (Figure 2). Euroregions are defined as transnational formations consisting of bordering
regions of neighboring states. They have been one of the most important instruments of theintegration process in Europe. The European experience shows that euroregions can become an
efficient mechanism to intensify cross-border cooperation. The major task of the euroregions is thecoordination of activities to solve problems of multilateral concern to the participating countries.
Usually euroregions help to facilitate cross-border trade and cultural exchange, prevent
environmental problems, increase tourism, and develop cross-border infrastructure. One of thebiggest motives for regional administrations is the availability of EU funds to co-finance activities
that involve partners within a euroregion.

Figure 2. Map of euroregions on the borders of Poland

Polish cross-border partners in the east are the neighboring regions of Belarus, Lithuania
and the Ukraine. Regional administrations in eastern Poland have been seriously considering theopportunities arising from the euroregions as they helped to attract the EU funds (PHARE CBC inparticular) for various initiatives (Horodzenski, 2002). Analysis done by Polish economists (e.g.,
Komornicki, 2002) shows that the eastern euroregions have not yet helped to increase the volume ofcross-border trade. Nevertheless, the projects carried out in the euroregions helped to improve thetourist potential in some places. Most probably, after accession, the EU would increase the funds forcross-border cooperation since the Polish border would become the border of the EU. This could be
one of the other benefits which the eastern regions may obtain upon accession that may soften theconsequences of the growing interregional gap.