Surrounding the 17^th century Wilanow Palace in Warsaw, the 108-acre Palace garden is a splendid example of the gardening style of the period. The Wilanow Palace, known as the “Polish Versailles", has been home to numerous Polish kings, and is a perfect fusion of European and traditional Polish  architecture.

These first four lines of the Polish national anthem adequately embody this ever so spirited country situated in the heart of Europe. They also reflect the tumultuous past and struggles of a country which has survived a legacy of violence, dominance, and aggression, interspersed with periods of freedom. The geometric center of the European continent, Poland enjoys a strategic location, well connected with cities like London, Paris, Vienna, and Berlin. The boundary between the eastern and western European continental masses also runs through Poland.

This diminutive country occupies 1.4% of the area of the European continent, with a population size 12% of the U.S. Yet, like the long-lived oaks that it has nurtured for several centuries, Poland has always harbored towering ambitions. Home to 11 Nobel Prize winners including the revered Pope John Paul II, brilliant astronomer Copernicus, musical maestro Chopin, and renowned physicist Maria Curie, the country prides itself on its eclectic contributions to the world. Poland also symbolizes one of the most remarkable transitions from communism to a market-based economy in the modern world.

History

Turbulent yet triumphant

The genesis of Poland, a country that has endured a past replete with strife, can be traced back to the 10th century. Poland has suffered aggression, division and partition of its territory on numerous occasions by Austrians, Prussians, Russians, and Germans. For around a century since 1795, it completely lost its existence as an independent entity. However, the indomitable Poles fought resolutely against foreign dominance throughout the 19th century. Poland literally emerged from obscurity, regaining its identity as a separate country in 1918. Yet, World War II and German occupation proved to be the harbinger of fresh turmoil and violence in Poland in 1941. The ensuing struggle culminated in 1945 with the Soviet capture of Poland and a subsequent treaty between the USSR and Poland delimiting the Soviet-Polish frontier.

A Soviet-backed communist regime came to power in Poland after World War II. Successive agitations by the Poles for greater freedom were throttled by the communist hardliners wielding power. However, winds of change harbored a workers’ movement in 1980, resulting in the formation of the Solidarity trade union. The government tried to suppress the movement, but eventually succumbed to the people’s will. Partially free elections were held in 1989, which led to the formation of the first non-communist coalition government in Eastern Europe. Widespread success for Solidarity catapulted Lech Walesa, the trade union leader of humble origins, to the position of the first popularly elected President of Poland. Under the Polish constitution, as it stands currently, the President has fewer powers than the Prime Minister, but has a significant say in foreign policy. In the elections held in October 2007, the pro-Europe, Civic Platform party emerged triumphant with Donald Tusk assuming the Prime Minister’s position.

Built in 1980, the Monument to the Shipyard Workers, is the only memorial to the victims of communist oppression to be erected in a communist country. The structure stands tall in Gdansk, the birthplace of the Solidarity, a movement which led to the establishment of economic and political freedom in Poland.

Culture

Cultural solidarity

Poland’s rich cultural heritage, which has evolved for over 1000 years, is a striking blend of both eastern and western influences. The country’s amicable approach to inspirations from other parts of the world is reflected in the versatile character of its own art and culture. Polish traditions, art, dress, and cuisine span the whole spectrum of diverse European styles. While Polish literature dates back to the 14th century, the country also prides its contributions to avante garde literature and theater in the 20th century. At present, more than 98% of the nation’s people are Poles, with small groups of Ukrainians, Belorussians, Germans, Slovaks and Lithuanians. The Polish population is largely urban centric, with 60% of the population living in cities.

Economy

No longer separated

The ushering of market-based reforms and large-scale privatization in 1990 heralded a new era of integration of Poland with the world economy. Despite being a victim of disorderly and fractious politics, Eastern Europe’s largest democracy has been gradually but surely transformed into a potent force in the European sub-continent. A country with a painfully turbulent past, Poland secured membership in the North Atlantic Treaty Organization (NATO) in 1999, underscoring its commitment to peace and security in Europe. The country is also a member of the Organization of Economic Co-operation and Development (OECD), a body that is focused on strengthening democracy and the market economy. Providing the icing on the cake, Poland was extended membership in the European Union (EU) in 2004. From an isolated existence, this little wonder of Europe has now taken momentous strides towards integrating itself into a globalized world.

The Warsaw Uprising Monument commemorates one of the most courageous attempts by the Poles to challenge the Germans in 1944. Their brave two-month long resistance was eventually quashed  by the Germans, who subsequently executed many civilians and destroyed the old town.

Emerging Europe’s radical reformer

The journey of Poland’s transition to a market economy since 1990 has been fraught with challenges and tribulations. As it embarked on this path, the erstwhile communist country was riddled with difficult macroeconomic conditions like hyperinflation, high unemployment, unsustainable budget deficits, burgeoning external debt, and an inefficient and archaic state sector. The Leszek Balcerowicz Plan of the early 1990s, named after the reformist Polish Finance Minister, ushered in an era of widespread economic reforms both on the domestic, as well as the external fronts of the country. Domestic prices that were earlier administered by the government, gradually became market determined and the Polish economy also opened up to the world. The Polish currency, zloty, became convertible to other currencies and its value was stabilized against the dollar. Currently, the country has a floating exchange rate regime, which is a step towards a goal of adopting the euro and amalgamating with the European Monetary System between 2012-14. This fundamentally radical approach to reform has qualified Poland as the most dynamically developing European country, worthy of the epithet “the flying eagle of Europe”.

Fundamental and far-reaching economic reforms have earned Poland the distinction of being one of the fastest growing economies in emerging Europe.  The TPS Tower in Warsaw is one of the many modern offices that represent the dynamically progressive face of Poland.

The structural reforms have slowly but surely borne fruit. The economy, after growing at a reasonable rate of 4% since 1995, has witnessed a remarkable acceleration after accession to the EU. It grew at 5.8% in 2006 and 6.5% in 2007, the fastest pace in a decade. The economy is expected to grow at 5.6% in 2008. Consumer prices, which hovered around 20% in 1996, had dramatically dropped to 1.3% in 2006. Despite global inflationary pressures, inflation continued to remain at a reasonable annual rate of 4.3% in April 2008. The unemployment rate has also substantially declined to around 10% in 2007 compared to 20% in 2005. In addition, the government’s fiscal balance is exhibiting an upward trend.

In addition to robust growth rates, what sets Poland apart from its peers in Central Europe is the sound macroeconomic fundamentals the economy clearly enjoys. The country now boasts of moderate inflation rates, a restrained current account deficit, and fiscal balance. Not surprisingly, Poland has been the recipient of maximum inflows of foreign direct investment (FDI) to the tune of $14 billion in 2006, highest amongst its Central European counterparts.  It has also earned the distinction of being classified as a frontrunner by the World Investment Report 2007, a country with high FDI performance as well as tremendous FDI potential. Moreover, Poland figures amongst the top 10 most attractive destinations for FDI during 2007-09.

A polish-ed destination

An upper middle-income country, which ranks high on human development as well, Poland touts one of the most youthful and best educated societies in Europe. While many European countries are battling the burden of an aging demographic, Poland boasts that half its population falls below 35 years of age. Moreover, a large proportion of this young population has an inclination towards higher education. Augmenting its geographical natural advantage, Poland has successfully created a skilled human resources base, and has devised investor-friendly economic policies.

This busy modern shopping center in Poland represents an upper middle income country which aspires to converge with the developed economies of Europe.

Hence it is not surprising that Poland offers a fertile ground for global corporations to set up their research and development centers, as well as manufacturing units. International corporations also view Poland as an excellent location for transferring non-production functions, resulting in Poland becoming the European center of modern Business Process Offshoring (BPO) services. This has helped Poland tackle the critical problem of unemployment. Given this, the economy is powered by its service sector, which contributes to about 64% of the gross domestic product (GDP).

The bulk of the country’s remaining output is devoted to industry. Located in the southeastern region of the nation, Poland’s Aviation Valley is famous for its aerospace industry and pilot training centers. The Aviation Valley produces 90% of Polish aerospace industry output, and highlights Poland’s 100-year experience in the aviation industry. Exporting to over 11 countries the world over, Poland aspires to transform this southeastern outpost into one of Europe’s leading aerospace regions.

The Polish automotive industry is also playing an increasingly important role in the emerging economy, accounting for 10.2% of industrial production and 16% of total exports in 2006. One of the first sectors to be privatized in the early 1990s, the industry exports around 95% of its output, and specializes in the production of spare parts and accessories. The sector is also a magnet for global auto majors. Poland is luring these auto behemoths with low-cost, highly skilled labor, as well as a comprehensive network of subcontractors, many of them holding the highest certificates of quality.

Poland has also proved to be an excellent location for foreign companies manufacturing domestic household appliances. Foreign investments have been pouring in this sector in the special economic zone (SEZ) at Lodz, the second largest centrally located city in Poland. Lodz has acquired the distinction of the largest white goods production center in Europe.

Polish agricultural as well as dairy products are known in Europe for their competitive prices. With its accession to the European Union and the dismantling of trade barriers, Poland has become a formidable rival  to other European countries specializing in the export of fruits and vegetables.

Coal is the most abundant, as well as the cheapest fossil fuel in Poland, and is used predominantly for power production and energy generation in the country. Though not richly blessed with oil resources, Poland houses a major European oil refiner, as well as a petroleum retailer who has the distinction of being Central Europe’s largest publicly traded company. In the metals and mining sector too, Poland touts the second largest producer of silver and the sixth largest producer of copper in the world, exporting the world over. The country is also a pioneer in organic agriculture and a leading exporter of milk, meat, fruits and vegetables to EU members. In addition, Poland is home to a globally recognized and flourishing yacht building industry, and is a favored destination for health tourism in Europe.

Poland is evolving as a leader in the capital markets, with Warsaw developing as the financial center in central and Eastern Europe. With the onset of the EU accession, the Warsaw Stock Exchange witnessed a spurt in market capitalization, increasing to 44% of GDP in 2006 compared to 31% of GDP in 2005.

Quo Vadis¹: The road ahead

Witness to a troubled economic and political existence, Poland has indeed come a long way since 1990 when it commenced its transition to a democratic and market-based economy. Its growth performance after the EU accession in 2004 has seen a remarkable acceleration, and the process of catch-up with the higher-income countries seems to have gained fresh momentum. Today, Poland enjoys a well-balanced growth and robust demand, with only limited pressures on core inflation and the current account deficit. Yet, this aggressively expanding country is not exempt from challenges. The country has to counter emerging resource constraints, in particular, skilled labor shortages. The record-high capacity utilization rates and the pick-up in labor costs may impede the country’s external competitiveness as well as its price stability. However, for the feisty and unrelenting Poles, this challenge poses an opportunity, propelling them further to fortify their position as a formidable EU player in the globalized world. Clearly, the Polish eagle seems poised to soar higher and conquer even greater heights.

[1]: Quo Vadis, (Latin for ‘Where are you going?’), is a Polish historical novel, written in 1895 by the Nobel Prize winner Henryk Sienkiewicz.