Poland and the Czech Republic: Partners or Rivals?

Despite different economic histories in the 90’s, both states joined the European Union on May 1, 2004 with similar concerns about their competitiveness, scarcity of capital, poor energy and transportation infrastructure, unemployment, low innovation and a banking sector mostly controlled by foreign banks.

Poland had a slight competitive edge at this time because of the size of its internal market, far higher capitalization of the Warsaw Stock Exchange and a number of assets offered on it—yet this was offset by the largely pro-export oriented economy of the Czech Republic and better quality and level of industrial manufacturing connected with it. Czechs Petr Kellner, Zdeněk Bakala or Karel Komárek were actually ranked higher by Forbes than Poles Jan Kulczyk, Zygmunt Solorz or Ryszard Krauze. GDP per capita in Poland constituted 66 % of the EU-27 average, whereas the respective figure for the Czech Republic was 79 % (2012). However, it is Poland that came away unscathed from the 2008/2009 crisis, thanks to substantial EU funding and internal consumption.

Poland has begun its first decade of EU membership with a successful attempt to purchase Unipetrol, a Czech state holding of refinery (Kralupy), petrochemical (Paramo) and distribution assets (Benzina). Hence, the Polish PKN Orlen initiated the establishment of a Central-European refinery, petrochemical and fuel group, and soon acquired a German-based distribution network and refinery, and gas station chain in Lithuania. There is speculation about more acquisitions of gas station chains in the Czech Republic. Other major Polish investors on the Czech market are: Prokom (currently Asseco) in the IT sector, Tauron in the energy sector and mBank in the banking sector. The total value of Polish investments in the Czech Republic in 2012 almost reached 2 billion euros (there are 1010 companies with over 25 % Polish capital operating in the Czech Republic). The Chairman of Polish Information and Foreign Investment Agency Mr. Sławomir Majman stated at a conference in April 2013, “For Polish entrepreneurs the Czech Republic is de facto the second largest investment market in the world.” According to the figures of the Czech National bank for the end of 3rd quarter of 2010, Polish investments made up for 1.3 % of the total Foreign Direct Investments in the Czech Republic. In fact, Poles have invested more in this market than Italians (0.7 %), yet much less than e. g. the French (6.5 %) or Spaniards (3.7 %).

Czech investments in Poland have not achieved this scope. Besides the New World Resources capital group (investments in three development projects in coal mines in the border area) of Zdeněk Bakala and Energy and Industry Holding (Energetický a průmyslový holding) of Daniel Křetínsky, no major private investor has decided to undertake investment activities in Poland yet or to list their shares on the Warsaw Stock Exchange. Still, investments totaling over 390 million euros have been initiated by the state energy giant ČEZ, which acquired 75 % of the shares in the Skavina power plant (post 2009: 100 %) and in the Elcho combined heat and power plant, with an eye to a further investment of over 400 million euros. The Czech and Slovak Penta group invested in retail and pharmacy chains, as well as property development projects. It also intended to participate in the aviation sector but with no success. Generally, the Czech Republic makes up the largest investor among the new EU member states with 480 Czech enterprises registered in Poland as companies or representative offices, whereas on the Warsaw Stock Exchange shares and debt securities of seven Czech companies are offered. The atmosphere for investment is positive. Following a slight crisis in 2008, in the following years it bounced back when Polish investment in the Czech Republic went up by over 83 million euros and Czech investments in Poland went up by 90 million euros, as indicated by the Polish National Bank.

Czech and Polish politicians are considerably optimistic: “9,000 Czech companies take part in economic cooperation with Poland, which shows its scope and size,” commented Martin Kuba, the Czech Minister of Industry and Trade at the Czech Republic-Poland Forum in 2012. From the moment both countries joined the EU, the trade flow of 3.978 billion euros in 2004 went up to 14.452 billion euros in 2012. Polish exports are dominated by electromechanical manufacturing (27 %), metal producing industry (21 %), chemical products (13.4 %) and agricultural and food products (12.3 %). As far as the Czech exports to Poland are concerned, electromechanical manufacturing constitutes 32.3 %, with the share of chemical industry amounting to 18.3 %, and metals to 17.9 %, with a much lower share of agri-food products (8.5 % in 2012). Czech Republic is the third biggest recipient of Polish exports and the seventh biggest exporter of commodities to Poland. In case of the Czech Republic, Poland is third both with respect to export as well as import. Poland has achieved a record trade surplus worth 3.368 billion euros (the EU total is 5.9 billion euros), which in 2012 increased by 18 % compared with 2011 (preliminary data for 1st quarter of 2013 indicate further improvement by 95 million euros; also due to the drop in imports from the Czech Republic by 5.3 %). From this angle, both states are mutually leading trade partners—joining top ten states in this respect, along with Germany, China, United Kingdom, Italy, France and Russia.

During the last year, media in the Czech Republic had a bragging contest about alleged poor quality of Polish consumer products. Polish authorities along with the food sector keep refuting those charges as groundless and sometimes far-fetched; for example pointing out the role played in this campaign by a major investor in the Czech food sector—and recently also in the media sector—Andrej Babiš. Despite the media fuss of 2012, a 6.7 % growth of export of Polish agri-food products to Czech Republic was observed, totaling 1.092 billion euros. In line with declaration of the Polish Ministry of Agriculture from May this year, this trend has been constantly on the rise, since the 1st quarter of 2013.

The government of Petr Nečas (2010–2013) claimed that the sale of Unipetrol to ORLEN was a strategic mistake and, in accordance with the new fad for national oil security, it considered establishing a national oil company built on stateowned companies ČEPRO and MERO (pipeline and product base networks). Recent comments by President Miloš Zeman and Prime Minister Petr Nečas published in the press do suggest a search for new solutions. Thus, a joint energy policy might be expected. This could mean merging PKN ORLEN with Unipetrol and MERO and ČEPRO into a Polish-Czech oil and energy holding company), a common approach to the construction of a nuclear power plant in Poland and additional nuclear reactor in Temelín, a joint national project with state energy giant ČEZ and Polish energy companies to modernize and extend coal power plants and expand crossborder grids. Yet, a lot depends on the shape of future coalition government in the Czech Republic, ability of the Polish government to clearly formulate its priorities with regards to energy policy and the will to search for solutions implying shared understanding of European energy policy and security of oil and electricity supplies to both countries.

Cooperation is obviously hindered by disastrous rail and road infrastructure in the border area. The cross border mobility of Poles and Czechs is the lowest among the EU 27 (according to surveys from 2009). Generally, regular access to job markets or retail and service facilities is hardly viable even though they are often created with customers from the other side of the border in mind. People move mainly by car which increases the cost, risk and environmental burden. Additionally, only four road border crossings are not subject to traffic limitations (out of 40 along the 800km borderline). The remaining border crossings are either wholly or partially closed for vehicles weighing over 3, 5, 6 or 9 tons. Despite a number of social initiatives and cross border projects, supported with EU funds, as well as the operation of four Euroregions, the climate for economic activity on both sides of the border leaves much to be desired.

And still, mutual understanding of markets, legislation (including new EU regulations and standards), trade culture and—most importantly— aspects of technology and transport, have enabled increasingly small economic entities to participate in trade and establishment of companies—this however applies mostly to Polish companies active in the Czech market. The Czech-Polish Chamber of Commerce in Ostrava and the Club of Polish Business in the Czech Republic based in Prague, which have been operating for many years, demonstrate considerable potential for small and middle sized enterprises which are active in a multitude of sectors in both markets; those include construction and agri-food industries. In Poland, as part of the annual Economic Forum in Krynica held in September and of the European Economic Congress held in Katowice in May, a number of events and meetings are organized which are targeted exclusively at the business sector in both states, as well as to potential investors from other states and world regions. In the Czech Republic, besides the traditional participation of Polish companies in various events organized as part of the BVV fair in Brno, it is hard to find a permanent point of contact or discussion for businesses from both countries.

A few hundred Polish managers work in international corporations in the Czech Republic (the author of this text has done so twice). Also Czech managers, like the current CEO of T-Mobile Poland Miroslav Rakovski, hold high-level positions in Polish branches of international corporations. This new generation of thirty and forty year-olds is creating new spaces for business around them. Experience gathered by them is highly useful for other emerging private, investment or corporate projects. And this happens due to their efforts, with no governmental or political support—given that Polish and Czech politicians don’t know their counterparts, they do not cooperate or create their own political community despite a number of official declarations and promises, as well as shared or parallel experiences of transformation and the existence of institutional mechanisms such as the Visegrád Group. Due to a lack of programs for student and youth exchange, the process of getting to know each other and activities undertaken by both sides may draw out, but the experience of professional and economic successes and defeats will ultimately give birth to new capital for joint use.

Business people are the ones who make trade and investment decisions. It is their flair for business and inclination to take risks, which are the decisive factors determining whether a particular contract will be concluded and implemented or not. And so it is worth taking a look at the economic cooperation from the perspective of culture and social convention.

Czechs and Poles have a different culture approach to entrepreneurship, which can be seen in micro scale, but also in local markets, media or in stereotypes. “The Czech media keep exposing cases of theft committed by Poles. When a group of bums from the Polish side of the border started pestering Czech households located in the vicinity the Kłodzko Valley, local Czech decision-makers were considering the option of closing the border with Poland again. Yet, when a group of Czech thieves was apprehended in Rybnik, no one even mentioned these kinds of solutions in Poland. Campaigns directed against “Polish dealers” have been taking on alarming proportions. Mayor of the Czech Cieszyn Vít Slováček told me that once a delegation of citizens met with him to demand a ban on Polish companies which cruise around villages in Czech Republic and sell food from buses. The mayor was quick to react that under free market economy there is no option of prohibiting operation of legal entities. “Why haven’t you come up with this idea for business in the first place” he asked the delegates of the Czech trade, which only put them out.”—the story was described in Rzeczpospolita daily dated 4th February 2013 by Rafał Geremek, in a text entitled “Unrequited liking.”

It’s also worth mentioning that the Czech culture of work and the level of technical education are more advanced and self-aware (there is a widespread Czech notion of zlaté české ruce or golden Czech hands), whereas Poles are known for their flair for business, courage or bravado and peculiar slyness in doing business. Poles and Czechs also have a different approach to the European Union and deeper economic integration. It seems that Poland is keen on banking and fiscal union and more eager to enter the eurozone as it aspires to be able to participate in decision making. Czechs, aware of the size of their state and its economic potential, and at the same time living in a country wholly “immersed” in the European Union (the only state in the region whose neighbors are exclusively EU members), see things just like their famous countryman: it will be somehow since “however it used to be, it used to be somehow, it never happened yet that it was no-how.”