Tadeusz Koscinski: Hungary is an attractive place to invest and run business, and not only for Polish entrepreneurs
V4 poised to become ‘EU powerhouse’, says Polish finance minister
– How do you see the near and mid-term future of the Visegrad Group when it comes to economic cooperation?
– I am truly upbeat about the short and mid-term economic cooperation prospects of the Visegrad Group. Despite the ongoing Covid pandemic and the resulting growth contraction, one can already see the light at the end of the tunnel and emerging prospects of economic recovery in our countries. The quick economic rebound of the V4 is very much dependent on our ability to engage in an ever-closer cooperation. Therefore, the Polish Presidency at the Visegrad Group highlights the importance of better synergies in terms of a more effective implementation of the EU Funds, including the new Multiannual Financial Framework 2021-27 and Next Generation EU, strengthened cross-border cooperation and improved trade and investment environment.
– What are the most important steps towards achieving this?
Last autumn, during the meeting of the ministers responsible for the economic affairs of the V4 countries, we reaffirmed our commitment to the single market. However, we also agreed that the issue of taxation, including regarding the digital economy and the debate on global minimum taxation, is pressing and deserves our full attention.
– Will the pandemic provide an incentive for the European countries to unite against tax abuse?
– The fight against tax evasion, tax avoidance and tax criminality is a priority, especially in the matter of income taxes and value-added tax (VAT). Poland is of the view that only efficient cooperation between European countries can tackle VAT fraud and non-compliance. That is why we are building a coalition of countries focused around the idea of tax solidarity, called The European Compact Against VAT Fraud.
– What other areas can have a significant impact on recovery?
– The post-COVID19 recovery will, hopefully, offer us an opportunity to rebuild our economies by focusing on more innovative and increasingly-digitalized business models. Hence, it is crucial to advance economic cooperation between the V4 countries by harnessing developments in Artificial Intelligence (AI), e-commerce, robotics and cyber-security.
– Do you see a chance for the CEE region to become the new driving force of the EU’s economy?
– I think that the CEE region and the V4 in particular are on their way to become one of the most important economic “engines” of the EU. The direction of changes in a global economic environment, reflected by an increased focus on better crisis-management, health-care systems, enhanced interregional cooperation and shortened supply-chains will provide a strong growth impulse for countries in our region.
– What are the actual projects that could jump start growth?
– We are now spearheading the development of important infrastructural projects – the “Solidarność” Central Transport Hub and Via Carpathia route – which will strengthen both air and road transport accessibility across the entire CEE region. The Three Seas Initiative (TSI) will also offer added value in terms of better interconnectivity and support for economic recovery across the CEE and the Visegrad Group. In this respect, I would like to stress in particular the importance of the Three Seas Investment Fund, which will leverage the private investments to complement European and national funds and finance the enormous infrastructural needs of the region – estimated by the Polish Ministry of Foreign Affairs at 500-600 billion EUR.
Both Poland and Hungary are deeply involved in promoting the project as well as making it happen. I appreciate Hungary’s activity and involvement in the Three Seas Initiative since its conception, with special emphasis on supporting its objective of investing in joint energy, infrastructure and IT projects that increase connectivity, security, and further economic growth in the Central European region.
– PM Viktor Orbán, at an event back in October, called on Polish and Hungarian businessmen to work on projects to strengthen the private dimension of Polish-Hungarian economic cooperation. Do you see any developments in this regard?
– Yes, I definitely do. The perfect example of making Polish-Hungarian economic relations stronger is the inauguration of the Polish-Hungarian Chamber of Commerce which took place in mid-October 2020. This is a very useful initiative of our private sectors (who noticed the untapped potential of our economies) and one that helps the growth of our businesses.
We appreciate the pace of our bilateral commodity exchange. In 2019 our mutual turnover amounted to 10,4 billion EUR (7,9 bn EUR in Jan-Oct 2020), of which our exports amounted to 6,5 (4,9) and our imports to 3,8 (2,9) billion EUR. There are favourable trends in investment cooperation, Hungary is the fifth largest recipient of Polish investments abroad, it amounted to 1,3 billion EUR at the end of 2019.
I am delighted to see the commitment of Polish companies to securing firm footholds on the Hungarian market. We believe that Hungary is an attractive place to invest and run business, and not only for Polish entrepreneurs. At the same time, I would like to take the opportunity to underscore that Poland is certainly open to Hungarian investors.
– What will Poland’s focus be in the 2021-2027 budgetary cycle in using the available EU funds?
– The Polish government is currently in the process of elaborating the Partnership Agreement (PA) and National Recovery Plan (the latter to be financed from the EU Recovery and Resilience Facility) to program the key intervention directions. The major spending priorities for the next budgetary cycle will be subject to negotiations with the EU Commission.
The key intervention directions from the EU funds will focus on enhancing the resilience, innovativeness and competitiveness of the Polish economy. In addition, the National Recovery Plan will offer an additional and complementary support for improving the capacity and efficiency of state institutions, especially in the healthcare and crisis-management sectors.
– Can the ambitious infrastructure development projects continue as planned?
In the new financial perspective, we will also continue to invest in the development of transport, energy-supply and storage infrastructure as well as the low-carbon transition of Polish economy. Completion of the TEN-T network will be one of the key priorities for us. This will allow us to remove existing bottlenecks, improve traffic safety along North-South European transport corridors and benefit the whole CEE region.
In light of the EU’s drive to become carbon-neutral by 2050, we will also focus on supporting the development of environmentally-friendly modes of transport. We will further continue to support the energy transformation of Polish economy by encouraging the development of renewable energy sources and improved energy storage.
– What about the Baltic Pipe?
– We want to quickly complete this strategic energy project, which will benefit not only Poland but also CEE countries and the EU as a whole. The most obvious benefits of this project will come in the form of improved security of supplies and better competitiveness of regional gas markets. The North-South Gas Corridor, of which the Baltic Pipe is a part, is a stepping stone for regional cooperation in the field of energy between the CEE countries, including Hungary. The new infrastructure will boost trading capabilities, strengthen supply security and increase competitiveness of gas in the region. This in turn will contribute to a just energy transition and geopolitical independence. As of today, the project is on track and no delays are expected.
– How do you see Poland’s financial room for manoeuvre in the upcoming years?
– Judging from the latest European Economic Forecast – published by the European Commission in November – Poland is one of very few EU Member States where the fiscal measures to contain the coronavirus outbreak and support the economy will have exceeded an unprecedented 5% of GDP in 2020. However, the extended public support mostly in the form of grants, as well as the loss of tax revenues will push the deficit and the public debt in 2020 to unprecedented levels.
Easing of pandemic-related restrictions, normalization of economic activity in many sectors, the large economic package being implemented by the government, as well as anticipated recovery in key trading partners, are all expected to support the recovery in 2021. However, the course of the pandemic will play a key role in determining the future of economic growth.
– What are the current expectations for this year?
– In 2021, many countries, including ours, may expect a gradual recovery as the pandemic wanes and the negative economic impact of containment measures tapers off. A positive growth rate in 2021 (the real GDP growth is to rebound in Poland to 4.0%) should support tax revenues, and a reduction of the general government deficit as compared to a double-digit number this year (12% of GDP – in line with The Amendment to the budget act for 2020).
– It sounds like you expect Poland’s economy to be among the least affected by the coronavirus pandemic in Europe…
– I do and I would primarily attribute this to strong macroeconomic fundamentals that mitigate the risks arising from the unprecedented shock triggered by COVID-19.
– Practically all EU countries are set to show excessive deficits of over 3% of GDP in 2020. What do you think the right approach should be from the European Commission?
– The European Commission put a decision on the opening of excessive deficit procedures for such countries on hold, due to the unprecedented level of uncertainty. When the signs of recovery become firm, one can expect a declaration from the European Commission as to when they intend to launch the fiscal consolidation, and how long it is going to last. EU funds in the new financial perspective, and the new Recovery and Resilience Facility (RRF), in particular, should play a substantial role in financing growth-supporting reforms and investment in EU countries. They would offer an additional source of fiscal stimulus, while simultaneously pushing forward the green and digital transitions and boosting the growth potential and the economic and social resilience of EU countries. This would be necessary to maintain a sufficiently fast pace of output growth to decrease the debt-to-GDP ratio during the post-pandemic adjustment period
– The economic shock of the pandemic had an asymmetric impact on Eastern and Western economies. Struggling corporations in the EU may be subject to powerful buyout attempts. Is there a way to fend off or mitigate such attempts?
– In June 2020, a special act, the so-called Anti-crisis Shield 4.0, was adopted by the Polish Parliament. The Shield contains a temporary, increased protection of Polish companies – when their valuations have fallen – against takeovers from companies from non-EEA/OECD countries. The new rules for controlling company acquisitions are to be applied for 2 years. Purchase transactions of a significant number of shares of at least 20% in such companies will be subject to the control of the Office of Competition and Consumer Protection. The protection is to be applied to enterprises whose revenue on Polish territory exceeded the equivalent of EUR 10 million, in any of the two fiscal years preceding the intention to take over. The goal of the regulation is to prevent hasty sales happening in a COVID-19-affected market that could impact long-term productivity and competitiveness of Polish enterprises. The regulation also covers entities that are of key importance to maintaining safety, order and public health.
– Don’t you run the risk of potentially scaring investors away?
– I can assure you, that this is the last thing we want. Our intention is to protect Polish companies from hostile takeovers that may occur as a result of the economic situation caused by the COVID-19 pandemic, thatmay cause certain companies’valuation to be particularly low. During a crisis, many companies may experience temporary difficulties and thus become “easy prey” for investors who might not have any long-term, sustainable investment plans. We want to prevent this. To do so and protect domestic companies in the public interest, we decided to introduce these new solutions, modelled after legislation recently adopted e.g., in Germany and on actions taken by other European (such as France or Italy) andnon-European countries.