The Impact of Foreign Direct Investments on the Efficiency of Polish Economy. A Sectoral and Regional View

A C T A U N I V E R S I T A T I S L O D Z I E N S I S F O L IA O E C O N O M IC A 1 9 8 ,2 0 0 6

Iw ona Ś w ie c z e w s k a

,

Zofia W ysocka

T H E IM P AC T OF FOR EIGN DIRECT INV ES TM E N TS

ON T H E EFFICIENCY OF POLISH EC O N O M Y .

A S E C T O R A L AND REGI ON AL VI EW

I. I N T R O D U C T I O N

T r a n s i t i o n p r o c e s s e s l a u n c h e d in th e P o lish e c o n o m y in la te 1 9 8 0 s f o c u s e d o n a d j u s t i n g its p o te n tia l - f o r m e d u n d e r th e c e n tr a l c o m m a n d e c o n o m y - to the s t r u c t u r e s ty p ic a l o f m a r k e t e c o n o m i e s . R e s t r u c t u r i n g th a t a f f e c t s a c t u a l l y e v e r y a s p e c t o f e c o n o m i c life a i m s at i m p r o v i n g th e e f f i c i e n c y a n d c o m p e t i t i v e n e s s o f e c o n o m y , w h i c h is e x p e c t e d to r e d u c e th e e c o n o m i c , t e c h n o l o g i c a l a n d c i v i l i s a ­ tion g a p to th e d e v e l o p e d c o u n t ri e s . H o w e v e r , th e s c o p e o f r e s t r u c t u r i n g p r o c ­ e s s e s a n d its p a c e a r e s e c to r - s p e c if i c . T h e la rg e st a d j u s t m e n t s c a n b e o b s e r v e d in p r o d u c t i o n a n d s e r v ic e s , w h e r e a s c h a n g e s in a g r ic u l t u r e , th e m i n i n g a n d q u a r r y ­ in g in d u s t r y a n d th e p o w e r s e c t o r a re lim ite d a n d r e f le c te d in th e m o d i f i e d s t r u c ­ tu r e o f p r o d u c t i o n , its f a c to rs a n d th e ir r e l a t i o n s h i p s '. T h e e f f i c i e n c y o f p r o d u c t i o n p r o c e s s e s in th e P o lis h e c o n o m y m a y i n c r e a s e d u e to a b r o a d t e c h n o l o g i c a l p r o g r e s s 2, w h ic h is o n e o f t h e c r u c i a l , i f n o t the m o s t i m p o r t a n t , f a c t o r o f e c o n o m i c g r o w t h . D e s p i te th is, f o r m a n y y e a r s it h a s b e e n tr e a te d a s e x o g e n o u s . O n l y th e d e v e l o p m e n t o f e n d o g e n o u s g r o w t h t h e o r y h e l p e d id e n tif y th e r o le o f p a r t i c u l a r f a c to rs in th e p r o c e s s o f s t i m u l a t i n g e c o ­ n o m i c g r o w t h . A c c o r d i n g to th a t th e o ry , te c h n o l o g i c a l p r o g r e s s , u n d e r s t o o d as the a c c u m u l a t i o n o f s c ie n t if i c a n d t e c h n ic a l k n o w l e d g e a n d h u m a n c a p ita l u se d

* Chair o f Theory and Analyses o f Economic Systems, University o f Łódź. "* Chair o f Marketing, Acadcmy o f Management, Łódź.

1 The changes are expressed by modified relations between the production factors (the capi- tal-to-labour ratio) and by adjusted relations between production and its factors (changes in the productivity o f labour, productivity o f capital or total factor productivity, TFP).

■ In narrow terms, technological progress involves only changes in production techniques or technologies; quite frequently, however, modified technology o f production generates changes in the organisation o f production. Separation o f these factors at the macroeconomic level is practi­ cally impossible, Hence, when referring to technological progress, we actually mean technological and organisational progress.

e i th e r d i r e c t l y o r in d ir e c tly in the p r o d u c t i o n p r o c e s s e s , r e s u l t s f r o m w e ll - t h o u g h - o u t i n v e s t m e n t d e c i s i o n s ta k e n by ra ti o n a lly b e h a v i n g b u s i n e s s o r g a n i z a ­ tio n s ( T o k a r s k i , 1996). A m o n g th e m a n y f a c to rs th a t g e n e r a t e t e c h n o l o g i c a l p r o g r e s s d o m e s t i c a n d f o re ig n in v e s t m e n t o u t l a y s e n l a r g i n g t h e a m o u n t o f the n a t io n a l p h y s i c a l a n d h u m a n c a p ita l, o u t l a y s o n r e s e a r c h a n d d e v e l o p m e n t ( R + D ) a n d in n o v a t i o n s in e c o n o m y a r e m e n t i o n e d the m o s t f r e q u e n tl y . F o r le s s d e v e l o p e d o r d e v e l o p i n g e c o n o m i e s th e t r a n s f e r o f t e c h n o l o g i e s f ro m a b r o a d is o f s p e c ia l i m p o r t a n c e in the p r o c e s s o f g e n e r a t i n g t e c h n o l o g i c a l p r o g re s s . O n e p o s s i b l e c h a n n e l o f s u c h t r a n s f e r is f o r e ig n d ir e c t i n v e s t m e n t s that in a d d i tio n to o f f e r i n g f lo w s o f fin a n c ia l ca p ita l p r o v i d e a l s o v a r i o u s f o rm s o f k n o w l e d g e , as w e ll as p h y s ic a l a n d h u m a n c a p ita l. T h e r e f o r e , F D l s m a y p r e s e n t a s i g n i f i c a n t d e t e r m i n a n t o f e c o n o m i c g r o w t h in th e r e c ip ie n t c o u n t r y 3.

T h i s s t u d y a t t e m p t s to i n v e s tig a te h o w F D I s c o n t r i b u t e to c h a n g e s in th e e f ­ fic ie n c y o f th e P o lis h e c o n o m y tha t m a y o r i g i n a t e f r o m a b r o a d t e c h n o l o g i c a l p r o g re s s . T h e c h a n g e s a r e a s s u m e d id e n tic a l w ith c h a n g e s in to tal f a c t o r p r o d u c ­ tiv ity ( T F P ) , b e c a u s e th e T F P is o n e o f th e m o s t c o m m o n y a r d s t i c k s u s e d to q u a n t i f y t h e e f f e c t s o f th e t e c h n o l o g i c a l p r o g re ss. T h e a n a l y s i s is fo c u s e d o n tw o are as: s e c t o r s a n d r e g io n s . P a rt 1 o f th e a n a ly s i s e x a m i n e s th e e f f e c t s o f d o m e s ­ tic a n d f o re ig n i n v e s t m e n t s ( th a t P o lis h e c o n o m y r e c e iv e d a s d i r e c t i n v e s t m e n t s ) in T F P c h a n g e s . I'he a n a l y s i s a t te m p ts : I) to id e n tify e m p i r i c a l l y h o w d o m e s t i c a n d fo re ig n i n v e s t m e n t s c o n t r i b u t e to T F P c h a n g e s , a n d 2) to v e r i f y e m p i r i c a l l y th e h y p o t h e s i s th a t f o r e ig n in v e s t m e n t s im p r o v e t h e e f f i c i e n c y o f p r o d u c t i o n p r o c e s s e s m o r e t h a n th e d o m e s t i c in v e s tm e n ts . T h e a n a ly s i s , c o v e r i n g th e y e a r s 1 9 9 2 - 2 0 0 2 , t a r g e ts s e c t i o n s a n d d i v i s i o n s o f in d u stry . P a r t 2 s e e k s to a n s w e r the q u e s t i o n , w h e t h e r th e p a c e o f d e v e l o p m e n t in in d iv i d u a l r e g i o n s 4 is c o r r e la te d w ith f o re ig n i n v e s t o r s ’ a c tiv i tie s in t h o s e r e g io n s an d , i f y e s , to w h a t d e g r e e . T h e a n a ly s i s is l im ite d to y e a r s 1 9 9 8 - 2 0 0 2 b e c a u s e o f th e u n a v a i l a b i l i t y o f sta tistic a l data. E a c h p a r t s h o r tly a n a l y s e s fo re ig n in v e s t m e n t s b y s e c t i o n s a n d d i v i s i o n s o f in d u s t ry , a s w e ll a s r e g io n s . II. F D I S ’ C O N T R I B U T I O N T O I M P R O V E D E F F I C I E N C Y O F T H E P R O D U C T I O N P R O C E S S E S - A T H E O R E T I C A L A P P R O A C H T h e first i m p o r t a n t r e s e a r c h in to F D I s ’ im p a c t s o n th e e f f i c i e n c y o f e c o ­ n o m i c p r o c e s s e s e x a m i n e d w i t h r e s p e c t to p r o d u c t i v i t y g r o w t h , w a s a t t e m p t e d in th e 1970s. Its a u t h o r s s o u g h t to e x p l a in th e se c to ra l l a b o u r p r o d u c t i v i t y d if fe r e n

-3 This thesis seems to be confirmed by the research by Romer (199-3) and Borensztein, G rego­ rio and Lee (1998). Its outcomes indicate a strong correlation between the amount o f FDI and an econom y’s growth rate. Moreover, the results suggest that in developed countries foreign capital contributes to economic growth more than domestic investments.

4 Regions mean provinces, that is units under the administrative division o f the country.

tio n in e c o n o m y , u s i n g F D I s ’ v a l u e s in th e s e c to r s . T h e a n a l y s i s c o n c e n t r a t e d on th e e c o n o m i e s o f A u s t r a l i a ( C a v e s 1974) a n d M e x i c o ( B l o m s t r ö m , P e r s s o n 1983; B l o m s t r ö m 1986). T h e r e s u lts o f th e r e s e a r c h s e e m to p r o v e th e s ta t e m e n t tha t th e i n v o l v e m e n t o f f o r e ig n c a p ita l im p r o v e s th e p r o d u c t i v i t y o f l a b o u r in th e in v e s te e - s e c to r s . F o l l o w i n g s t u d i e s ( m a c r o e c o n o m i c a n d m i c r o e c o n o m i c ) o n th e r e l a tio n s h i p b e t w e e n F D I s a n d th e T F P g r o w t h d o n o t o f f e r s u c h e x p l i c i t c o n c l u s i o n s as t h o s e m e n t i o n e d . E v e n t h o u g h th e r e s e a r c h b y A itk e n a n d H a r r i s o n ( 1 9 9 3 ) c o n ­ f irm e d f a v o u r a b l e e f f e c t s o f f o re ig n i n v e s t m e n t s o n t h e p r o d u c t i v i t y o f i n d iv i d ­ ual s e c t o r s o f in d u s t ry , th e e f f e c ts a re lim ite d to t h e f o r e i g n - o w n e d f irm s. T h a t p r o d u c t i v i t y in o t h e r e n t e r p r i s e s d e c l i n e s s e e m s to s u p p o r t th e h y p o t h e s i s th at m o d e r n t e c h n o l o g i e s a r e a c tu a lly t r a n s f e r r e d b e t w e e n a m o t h e r c o m p a n y a n d its f o r e ig n b r a n c h , w h e r e a s d o m e s t i c f ir m s ta k e a d v a n t a g e o f th e d i f f u s i o n to a lim ­ ited d e g r e e . T h e y r e p e a t e d th e r e s e a r c h in 1996 ( A i t k e n , H a r r i s o n a n d L ip s e y 1996), a n a l y s i n g F D I s ’ p a r t i c i p a t i o n in p r o d u c t i v i t y g r o w t h in t e r m s o f w a g e i n c re a se s. T h e y a s s u m e d th a t i n v e s t m e n t s c o u l d i m p r o v e th e w o r k f o r c e ’s sk ills in b o t h f o r e i g n - o w n e d f ir m s a n d d o m e s t i c firm s, b r i n g i n g a b o u t w a g e r is e s in all s e c t o r s o f e c o n o m y . T h e i r r e s e a r c h c o n c e n t r a t e d o n th e M e x i c a n , V e n e z u e l a n a n d U S e c o n o m i e s . T h e h y p o t h e s i s w a s v a lid for th e U S A o n ly . In th e o t h e r tw o e c o n o m i e s , th e p o s i t i v e in f l u e n c e o f F D I s w a s f o u n d o n ly f o r t h e f o r e i g n - o w n e d firm s. In d o m e s t i c f ir m s w a g e s d id n o t rise. A l s o K o k k o ( 1 9 9 4 a n d 1996) c o n f i r m e d tha t in in d iv i d u a l b r a n c h e s o f in d u s ­ try F D I s m a k e l a b o u r p r o d u c t i v i t y g r o w , b u t o n l y in t h o s e s e c t o r s , w h e r e the te c h n o l o g i c a l g a p b e t w e e n th e f o r e i g n - o w n e d a n d d o m e s t i c f i r m s w a s s m a ll. W h e r e th e t e c h n o l o g i c a l g a p w a s large, th e i m p a c t w a s in s i g n i f i c a n t , a n d s o m e ­ tim e s e v e n u n f a v o u r a b l e . T h e t e c h n o l o g i c a l g a p b e t w e e n d o m e s t i c a n d f o r e i g n - o w n e d l i n n s t u r n e d ou t m e a n i n g f u l a l s o in th e S j ö h o l m r e s e a r c h ( 1 9 9 7 ) w h o e x a m i n e d e n t e r p r i s e s in I n d o n e s ia . In th e f o r e i g n - o w n e d f ir m s th e p r o d u c t i v i t y o f l a b o u r w a s h i g h e r th a n in d o m e s t i c f i r m s - h i g h e r w h e n th e te c h n o l o g i c a l g a p b e t w e e n th e firm r e c e i v ­ in g f o re ig n c a p ita l a n d t h e i n v e s t i n g o r g a n i s a t i o n w a s s m a lle r. A n o t h e r n o t e w o r t h y a t t e m p t w a s th e e x t e n s i v e r e s e a r c h b y H a d d a d a n d H a r ­ r iso n ( 1 9 9 3 ) w h o i n v e s t i g a t e d F D I s p a r ti c ip a tio n in T F P c h a n g e s in th e M o r o c ­ c a n e n t e r p r i s e s . Its o u t c o m e s i n d ic a t e th a t th e f o r e i g n - o w n e d f i r m s h a v e a h i g h e r T F P th a n th o s e w ith e x c l u s i v e l y d o m e s t i c c a p ita l; h o w e v e r , th e T F P g r o w t h r ate is m u c h h i g h e r in th e latter. A s t h e a u t h o r s s u g g e s t t h e s it u a t i o n m a y i n d ic a t e s o m e c o n v e r g e n c e b e t w e e n th e d o m e s t i c e n t e r p r i s e s a n d f o r e i g n - o w n e d e n t e r ­ p rise s . T h e y a l s o p r o v e d th a t i f w e d iv id e d a n y s e c t o r o f e c o n o m y in to s e c to rs h a v i n g m o r e a n d le ss a d v a n c e d te c h n o l o g i e s , th e n th e F D I s w o u l d h a v e m u c h m o r e f a v o u r a b l e im p a c t s o n th e latter.

A n o t h e r r e s e a r c h th a t c o n f i r m e d F D I s ’ p o s it iv e e f f e c t o n th e T F P g r o w t h w a s tha t b y B arre ll a n d P a in ( 1 9 9 7 ) . It w a s f o c u s e d o n th e G e r m a n ( m o r e s p e ­ c i fi c a l ly , th e W e s t G e r m a n ) a n d th e U K e c o n o m i e s . E v e n t h o u g h th e a b o v e r e s u lt s g e n e r a l l y in d ic a t e a p o s i t i v e r e l a t i o n s h i p b e ­ t w e e n th e g r o w t h o f e f f i c i e n c y a n d c o m p e t i t i v e n e s s o f e c o n o m i c p r o c e s s e s , on th e o n e h a n d , a n d t h e i n v o l v e m e n t o f fo re ig n in v e s to r s , o n th e o th e r, p a r ti c u la r l y in d e v e l o p e d e c o n o m i e s , th e c a s e o f less d e v e l o p e d c o u n t r i e s p r o v i d e s m o r e a m b i g u o u s r esu lts. A n i n s i g n i f i c a n t o r e v e n u n f a v o u r a b l e e f f e c t o f f o re ig n in­ v e s t m e n t s o n th e T F P g r o w t h w a s i d e n tif ie d b y K i n o s h i t a a n d A s h o k a ( 1 9 9 7 ) w h o a n a l y s e d t h e C h i n e s e e c o n o m y a n d b y D j a n k o v a n d H o e k m a n ( 2 0 0 0 ) w h o i n v e s t i g a t e d th e C z e c h R e p u b lic . III. FDI IN T H E P O L I S H E C O N O M Y In th e P o lis h e c o n o m y f o r e ig n d ir e c t in v e s t m e n t s a r e a r e l a t i v e l y n e w th ing. T h e y b e g a n in 1977, w h e n th e first t h r e e j o i n t v e n t u r e s w e r e e s t a b l i s h e d . In fact, h o w e v e r , th e P o lis h e c o n o m y w a s o p e n e d m o r e b r o a d l y to f o r e ig n c a p ita l b y the p o litica l c h a n g e s in 1989, but its in f lo w w a s r a th e r s lo w a n d p h a s e d in.

In th e y e a r s 1 9 8 9 - 1 9 9 1 f o re ig n in v e s t m e n t s w e r e m a i n l y lim ite d d u e to for­ m al a n d legal o b s t a c l e s s u c h as c o m p l i c a t e d le g is la tiv e p r o c e d u r e s , r e s tr ic tio n s on th e tr a n s f e r s o f p ro fits , o b l i g a t o r y r e s a le o f f o r e ig n e x c h a n g e at a fix e d rate. T h e m a j o r in c e n t i v e s lu rin g f o r e ig n in v e s to r s w e r e lo w l a b o u r c o s t, th e m a g n i ­ tu d e o f th e d o m e s t i c m a r k e t a n d r e a d y a c c e s s to r a w m a te r ia ls . T e c h n o l o g i e s w e r e tr a n s f e r r e d m a i n l y t h r o u g h th e p u r c h a s e o f lic e n s e s , j o i n t v e n t u r e s a n d o u t s i d e p r o c e s s i n g c o n t ra c ts .

T h i s first p e r i o d e n d e d w h e n th e i n v e s t m e n t la w r e g u l a t i n g f o r e i g n in v e s ­ t o r s ’ a c tiv i tie s w a s re la x e d . All r e s tr ic tio n s r e g u la tin g tr a n s f e r s o f p r o f i t s a n d the level o f c a p ita l to b e in v e s te d w e r e a b o l is h e d . F ro m tha t m o m e n t o n w a r d s , w e h a v e b e e n a b l e to o b s e r v e d y n a m i c a l l y g r o w i n g F D I s , th e m a i n r e a s o n s for w h ic h a r e d e c l i n i n g i n v e s t m e n t risk, h i g h e r c r e d ib ilit y o f P o l a n d a s a n in v e s t­ m e n t ta rg e t a n d h i g h l y a b s o r p t i v e d o m e s t i c m a rk e t. In th e y e a r s 1 9 9 2 - 2 0 0 2 the c u m u l a t e d v a l u e o f in v e s te d c a p ita ls g r e w m o r e th ir ty t i m e s to r e a c h 2 5 0 bn P L N 5 at th e e n d o f 2 0 0 2 . B y the y e a r 1999, th e m a j o r r e c i p i e n t o f th e in v e s te d ca p ita l w a s i n d u s t r y , b u t b e t w e e n 2 0 0 0 a n d 2 0 0 2 its s h a r e d e c l i n e d in f a v o u r o f th e s e r v i c e s e c to r . C o n s t r u c t i o n d id not e x c e e d a 1 0 % s h a r e t h r o u g h o u t th e p e ­ rio d ( C h a r t 1).

5 The analysis is based on data derived from the Polish Information and Foreign Investment Agency (PAIilZ). Because data describe only „large-sized” investors with investm ents exceeding US$ 1 million, they are underestimated. On the other hand, „large” investm ents make up about 85-90% o f all investments and the data on them are published on a regular basis and by various classifications, which is very useful.

70% 60% 50% 40% 30% 20% 10% 0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

□ Industry □ Construction □ Services Chart 1. FD1 structure in Poland, years 1992 -2002 S o u r c e : developed by the authors on the basis o f PAIilZ data.

A n a n a l y s i s o f FD1 a m o u n t s b y s e c ti o n s a n d d i v i s i o n s o f P o lis h in d u s t ry s h o w s th a t p a r t i c u l a r l y in th e first p e r io d th e la rg e s t i n f lo w o f f o re ig n c a p ita l t o o k p l a c e in th e m a n u f a c t u r i n g o f m a c h i n e r y a n d e q u i p m e n t , a n d o f e l e c tric a l m a c h i n e r y a n d o p tic a l i n s t r u m e n t s ( T a b l e 1). T h e r e a s o n c o u l d b e th e n e e d to q u i c k l y d e v e l o p t e c h n o l o g i e s a n d to r e p l a c e th e d e p r e c i a t e d m a c h i n e r y . A t the s a m e t i m e m a n u f a c t u r i n g o f f o o d p r o d u c t s , b e v e r a g e s a n d t o b a c c o p r o d u c t s g r e w d y n a m i c a l l y in r e s p o n s e to th e e s c a l a t i n g d e m a n d f o r c o n s u m e r g o o d s , but t h e i n t e n s if ic a ti o n o f p r o d u c t i o n m a k i n g u p fo r m a r k e t s h o r t a g e s d id n o t r e q u ir e m o d e r n t e c h n o l o g i c a l s o lu t io n s . F o r e i g n - o w n e d firm s f o l l o w e d t h e n t h e s tr a t e g y o f m a n u f a c t u r i n g c o n s u m e r g o o d s fo r th e d o m e s t i c m a r k e t . H o w e v e r , th is a p ­ p r o a c h c h a n g e d s o o n , b e c a u s e o f th e g r o w i n g a m o u n t s o f b e t t e r q u a l i t y im p o r ts a n d m o r e s o p h i s t i c a t e d c o n s u m e r s ’ n e e d s ( K a r a s z e w s k i , W i ś n i e w s k i , 2 0 0 0 , pp. 5 7 8 - 5 7 9 ) . N o s o o n e r d id s o m e o f th e f ir m s s w i t c h to th e s t r a t e g y o f m a n u f a c t u r ­ in g in d u stria l e x p o r t s th a n the d o m e s t i c m a r k e t s a tu r a te d . T h e r e f o r e , it s e e m s j u s t i f i e d to c o n c l u d e th a t in th e first p e r io d i n v e s t m e n t s p r i m a r i l y ta r g e te d b r a n c h e s th a t m a n u f a c t u r e d p r o d u c t s m e e t i n g th e in te r n a l d e m a n d a n d th e in v e s ­ to r s m e a n t to g a i n , to m a i n t a i n a n d to e x p a n d th e ir p o s i t i o n in th is m a r k e t s e g ­ m e n t. L a r g e i n v e s t m e n t s w e r e m a d e in th e p r o - e x p o r t b r a n c h e s o n l y in th e s e c ­ o n d h a l f o f t h e 1 9 9 0 s. In th a t p e r i o d a c tiv i ty o f f o r e i g n - o w n e d e n t e r p r i s e s d i s ­ t in c tly in te n s if ie d

{Działalność gospodarcza spółek...,

1999).

FDI structure (%) by industry’s sections and divisions

oc NJ

Sectors 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

M ining and quarrying 0.0 2.2 1.7 1.3 0.8 0.1 0.1 0.4 0.1 0.4 0.8

M anufacturing 100.0 97.8 98.3 98.7 99.0 99.0 98.4 97.0 94.7 93.3 90.9

M anufacture o f food products, beverages and tobacco

products 17.7 27.6 29.0 31.4 34.3 29.4 27.6 25.9 25.1 23.5 22.0

M anufacture o f textiles, w earing apparel and furriery 2.6 2.5 2.9 1.9 2.1 2.0 1.4 1.4 1.3 l.l 1.2

M anufacture o f wood and wooden products 0.0 0.0 0.0 0.0 0.1 0.1 2.4 1.3 1.2 5.5 4.9

M anufacture o f pulp and paper with publishing and printing 16.5 9.7 9.0 9.7 9.3 10.4 8.4 7.7 7.2 6.7 6.3

M anufacture o f coke, refined petroleum products and

derivatives 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

M anufacture o f chemical and chemical products 9.9 16.8 13.9 10.7 7.4 9.7 7.9 7.3 6.3 5.6 7.1

M anufacture o f rubber and plastic products 0.7 0.5 0.6 4.4 3.6 3.8 2.6 2.5 2.9 2.6 2.4

M anufacture o f other non-m etallic mineral products 4.9 6.7 6.0 10.2 11.1 8.7 12.1 11.7 13.6 13.0 12.4

Manufacture o f basic m etals and metal products 4.0 2.6 3.6 3.3 2.6 3.4 2.2 2.2 2.0 1.9 2.0

M anufacture o f machinery and equipment, electrical

machinery, precision and optical instruments 26.0 18.4 21.1 16.0 11.4 8.0 9.9 10.1 9.2 8.3 8.1

Manufacture o f transport equipment 15.6 11.6 11.4 10.2 16.4 22.5 22.4 24.7 24.1 23.0 22.8

Manufacture o f furniture and other manufacturing 2.1 1.3 0.9 0.8 0.8 0.9 1.5 2.1 1.9 2.0 1.7

Recycling 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Electricity, gas and w ater supply 0.0 0.0 0.0 0.0 0.2 0.9 1.5 2.6 5.2 6.4 8.3

Iw ona Ś w ie c z c w sk u , Z of ia W y s o c k a

In te rm s o f F D I s ’ effec ts o n the Polish e c o n o m y , th e ir m o s t a p p r o p r ia t e location is in se ctors th at m a k e its g r o w th m o r e d y n a m ic . A c a s e in p o in t is th e te c h n o lo g y ­ intensive sectors. U s in g the criterion o f d iv id in g F D Is into s e c to rs w ith different levels o f te c h n o lo g y ( W y s o k iń s k a 1997, p. 131), pa rtic u la r d iv is io n s o f the m a n u f a c ­ turing in dustry w e r e b r o k e n d o w n into the f o llo w in g se ctors: l a b o u r intensive, raw- m a teria ls intensiv e, b a s e d on sta n d ard te chnologies, te c h n o lo g y intensive b a s e d on su p p lies o f c o m p o n e n ts , a n d te c h n o lo g y inte nsive se cto rs b a s e d on in n o v a tiv e te c h ­ n o lo g ie s6. C h a rt 2 p rese n ts F D I s ’ structure by sector.

45% 40% 1992 1993 1994 1995 19% 1997 1998 1999 2000 2001 2002 S la b o u r in te n s iv e s e c to r s □ r a w - m a t e r i a l s in te n s iv e s e c to r s □ s e c to r s b a s e d o n s t a n d a r d te c h n o lo g y □ te c h n o lo g y i n te n s iv e s e c to r s b a s e d o n s u p p lie s o f c o m p o n e n ts □ te c h n o lo g y i n te n s iv e s e c to r s b a s e d o n in n o v a tiv e te c h n o lo g ie s

Chart 2. FDI structure (%) by sectors with various levels o f technological progress S o u r c e : Developed on the basis o f the PAIilZ data.

6 The following sectors have been classified as labour intensive: m anufacture o f food prod­ ucts, beverages and tobacco products, manufacture o f textiles, clothing and furriery, manufacture o f leather and leather products; the raw-materials intensive sectors are: manufacture o f wood and products o f wood, m anufacture o f pulp and paper, manufacture o f coke and refined petroleum products, m anufacture o f furniture and other manufacturing activities; sectors based on standard technologies are. publishing and printing, manufacture o f other non-m etallic mineral products, manufacture o f metals and metal products; technology intensive sectors based on supplies o f com­ ponents: m anufacture o f rubber and plastic products, manufacture o f electrical machinery and apparatus; technology-intensive sectors based on innovative technologies are: m anufacture o f machinery and equipment, office machinery and computers, manufacture o f radio and television equipm ent and apparatus, medical, precision and optical instruments, motor vehicles and other transport equipm ent, manufacture o f chemicals and chemical products.

In t h e first p e r i o d o f th e FDI in flo w , its m a j o r r e c i p i e n t s w e r e th e t e c h n o l ­ o g y - i n t e n s i v e d i v i s i o n s u s i n g in n o v a t i v e t e c h n o l o g i e s ( m a i n l y t h o s e m a n u f a c t u r ­ in g m o t o r v e h i c l e s a n d m a c h i n e r y a n d e q u i p m e n t ) , th e l a b o u r - i n t e n s i v e a n d in ­ t e r m e d i a t e g o o d s - i n t e n s i v e d i v i s i o n s h e ld re la tiv e ly sm a ll s h a r e s . It s h o u l d be r e m e m b e r e d , h o w e v e r , tha t t h e a m o u n t s o f f o re ig n c a p ita l in v e s te d at th a t t im e w e r e l i m i t e d 7. A n d e v e n t h o u g h in th e n e x t y e a r s th e t e c h n o l o g i c a l l y - a d v a n c e d d i v i s i o n s c o n t i n u e d to attr a c t f o re ig n i n v e s t o r s ’ in te rest, th e p r o p o r t i o n o f th e l a b o u r - i n t e n s i v e d i v i s i o n s c l e a r ly g re w . T h e s h a re o f th e t e c h n o l o g y - i n t e n s i v e d i v i s i o n s d e p e n d e n t o n th e s u p p l i e s o f c o m p o n e n t s w a s r e l a t i v e l y s t a b l e ( r a n g i n g f ro m 7 to 10% ). T a k i n g into a c c o u n t the a m o u n t s o f the in v e s te d c a p i t a l , w e can c o n c l u d e tha t in th e c a s e o f th e P o lish e c o n o m y m o s t c a p ita l w a s in v e s t e d in the te c h n o l o g y - i n t e n s i v e d i v i s i o n s o f th e m a n u f a c t u r i n g in d u s t r y . T h i s fact c a n be s i g n i f i c a n t for th e d e v e l o p m e n t o f th e P o lis h e c o n o m y . IV. C H A N G E S IN T H E S T R U C T U R E O F P R O D U C T I O N A N D IN IT S F A C T O R S IN T H E P O L I S H I N D U S T R Y , Y E A R S 1 9 9 2 - 2 0 0 2 . T H E T O T A L F A C T O R P R O D U C T I V I T Y R e f o r m s la u n c h e d in th e P o lis h e c o n o m y in late 1 9 8 0 s in it ia t e d th e e x i s t i n g p r o c e s s o f its t r a n s f o r m a t i o n . I f w e look b a c k , the p e r i o d c a n b e d i v i d e d into th r e e s u b p e r i o d s , n a m e ly : - s u b p e r i o d I, s p a n n i n g th e y e a r s 1 9 8 9 - 1 9 9 1 , f r e q u e n tl y c a l l e d th e p e r i o d o f tra n s i tio n a l r e c e s s i o n ; - s u b p e r i o d II, c o v e r i n g y e a r s 1 9 9 2 - 1 9 9 7 , a n d - s u b p e r i o d III, f ro m 1998 to date. T h e m a i n r e a s o n fo r h a v i n g th e t h r e e s u b p e r i o d s is th e i r s p e c i f i c le v e ls o f e c o n o m i c a c tiv ity . S u b p e r i o d I is th e t im e w h e n e c o n o m i c a c t i v i t y d e c l i n e d , m a in ly d u e to the r efo rm -trig g e re d restructuring o f d e m a n d a n d su p p ly . P ro d u c tio n d ro p p e d m e a n in g ly , p rim a rily reduc ed by the sh rin k in g v o l u m e o f industrial and co n s tru c tio n outputs. M a s s u n e m p l o y m e n t a p p e a r e d w h ic h m a d e real w a g e s drop.

In s u b p e r i o d I the first in s titu tio n a l r e f o r m s w e r e in itia te d . T h e i r m a i n goal w a s c h a n g i n g th e o w n e r s h i p s t r u c t u r e in e c o n o m y ( p r i v a t i z a t i o n o f th e real a n d fin a n c ia l s e c to r s ) , s u p p o r t i n g th e d e v e l o p m e n t o f th e f in a n c ia l s e c t o r ( b a n k i n g s y s t e m , in s u r a n c e a n d t h e c a p ita l m a r k e t ) a n d s t i m u l a t i n g e n t r e p r e n e u r s h i p and c o m p e t i t i o n . T h e r e f o r m s c l e a r ly b o o s t e d p r o d u c ti o n , c o n s u m p t i o n , g r o s s ca p ita l f o r m a t i o n , w a g e s (in real a n d n o m i n a l te rm s ), as w e ll a s in c r e a s e d e x p o r t a n d in v e s t m e n t o u tla y s . B e s id e s , t h e s e p o s it iv e te n d e n c i e s c o n t r i b u t e d to h i g h e r e m ­

7 According to the PAIilZ data, gross FDIs in the first years o f the analysed period amounted to USS 1703.1 million (1992), US$ 2827.7 million (1993) and US$ 4320.8 million USD (1994), respectively.

p l o y m e n t a n d l o w e r e d th e r a te o f u n e m p l o y m e n t ( f r o m 1 6 .4 % in 1993 to 1 0 .3 % in 1997). A f t e r 1997, t h e r ate o f e c o n o m i c g r o w t h c l e a r ly d e c e l e r a t e d , m a i n l y b e c a u s e o f fa il u r e s in th e e c o n o m y r e s t r u c t u r i n g p r o c e s s , s o m e t i m e s i n a d e q u a t e s o c i o - e c o n o m i c p o l i c y o f th e g o v e r n m e n t , d o w n t u r n in th e G e r m a n e c o n o m y b e i n g P o l a n d ’s la rg e s t tr a d i n g p a r t n e r a n d th e f i n a n c ia l c r is i s in R u s s ia . A ll t o ­ g e t h e r , th e f a c t o r s m a d e t h e r a te o f e c o n o m i c g r o w t h c l e a rly d e c l i n e , th e s y m p ­ to m s o f w h i c h w e r e t h e s l o w i n g d o w n r ate o f g r o s s o u t p u t a n d o f g r o s s c a p ita l f o r m a t i o n g r o w t h , r e d u c i n g th e n u m b e r o f th e e m p l o y e e s a n d s u b s t a n t i a l l y in ­ c r e a s i n g th e r a te o f u n e m p l o y m e n t . C h a n g e s a f f e c t i n g th e s tr u c t u r e o f p r o d u c ti o n a n d its f a c to rs r e s u lt e d from n e w d e v e l o p m e n t s in p a r t i c u l a r s e c to r s o f e c o n o m y . S e r v i c e s e c t o r s a n d m o s t m a n u f a c t u r i n g d i v i s i o n s e x p a n d e d th e m o s t d y n a m i c a l l y . In th e a n a l y s e d p e r io d , p r o d u c t i o n g r e w i n s i g n i fi c a n t l y , o r e v e n d e c l i n e d in a g r i c u l t u r e , f is h in g a n d f is h e r y , m i n i n g a n d q u a r r y i n g , a s w ell as th e p o w e r s e cto r. T h e e x c l u s i v e p u r p o s e o f t h e b r i e f d e s c r ip tio n o f c h a n g e s a f f e c t i n g th e P o l ­ ish e c o n o m y in t h e t r a n s i tio n p e r io d w a s i d e n tif ic a tio n o f p a r t i c u l a r s ta g e s in its d e v e l o p m e n t . A c c o r d i n g to th e g o a l o f o u r r e s e a r c h , t h e n e x t s e c t i o n s w ill a n a ­ ly se c h a n g e s w i t h i n th e p r o d u c t i o n sp h e re . D a ta in T a b l e 2 s h o w th a t in th e y e a r s in q u e s t i o n th e a v e r a g e r a te o f p r o ­ d u c t i o n g r o w t h in in d u s t r y ( m e a s u r e d u s in g b o th g r o s s o u t p u t a n d v a l u e d a d d e d ) w a s 6 . 2 % ( 5 . 9 % fo r v a l u e a d d e d ) . T h e m a in r e a s o n f o r th is r e s u lt w a s th e h ig h r a te o f g r o w t h in th e m a n u f a c t u r i n g in d u s t r y w h o s e s h a r e in th e e n t i r e in d u s try e x c e e d s 8 0 % . T h e p o w e r s e c t o r e x p a n d e d m u c h m o r e s l o w l y ( a v e r a g e r a te s o f p r o d u c t i o n g r o w t h w e r e 1.3% a n d 3 . 1 % , r e s p e c ti v e ly ) . In th e a n a l y s e d p e r io d , in th e e x t r a c t i v e in d u s t r y g r o s s o u t p u t d r o p p e d o n a v e r a g e 2 . 7 % a y e a r a n d v a l u e a d d e d 3 . 6 % a y e a r , r e s p e c ti v e ly .

C l e a r l y d i f f e r e n t g r o w t h rate s c a n b e f o u n d a lso fo r th e d i v i s i o n s o f the m a n u f a c t u r i n g in d u s t r y . T h e h i g h e s t p r o d u c t i o n g r o w t h r a te s c h a r a c t e r i s e d t e c h ­ n o l o g i c a l l y - a d v a n c e d s e c to r s , n a m e l y : m a n u f a c t u r e o f o f f i c e m a c h i n e r y a n d c o m p u t e r s , m a n u f a c t u r e o f r a d io , t e le v i s io n a n d c o m m u n i c a t i o n e q u i p m e n t a n d a p p a r a t u s , m a n u f a c t u r e o f m e d ic a l, p r e c is io n a n d o p tic a l i n s t r u m e n t s , m a n u f a c ­ t u r e o f m o t o r v e h i c l e s , m a n u f a c t u r e o f c h e m i c a l s a n d c h e m i c a l p r o d u c t s a n d m a n u f a c t u r e o f r u b b e r a n d p la s tic p r o d u c ts . T h e h ig h d y n a m i c s o f p r o d u c t i o n g r o w t h tr a n s l a te d into s h a r e s o f t h e s e d i v i s i o n s in th e m a n u f a c t u r i n g i n d u s t r y ’s o u t p u t e x p a n d i n g b y o v e r 8 p e r c e n t a g e p o i n t s ( f r o m 2 1 . 3 % in 1992 to 2 9 . 6 % in 2 0 0 2 ) . T h i s fact m a y b e c o n d u c i v e to th e d e v e l o p m e n t o f th e P o lis h e c o n o m y . A l s o r a w m a t e r i a l s - i n t e n s i v e d i v i s i o n s ( m a n u f a c t u r e o f w o o d a n d p r o d u c t s o f w o o d , m a n u f a c t u r e o f p u lp a n d p a p e r, m a n u f a c t u r e o f f u r n it u re a n d o t h e r m a n u ­ fa c tu r i n g ) a n d s e c t o r s u s i n g s t a n d a r d t e c h n o l o g i e s ( p u b l i s h i n g a n d p rin tin g , m a n u f a c t u r e o f m e ta l p r o d u c t s a n d m a n u f a c t u r e o f o t h e r n o n - m e t a l l i c m in e r a l p r o d u c t s ) m a i n t a i n e d h ig h r a te s o f p r o d u c t i o n g r o w t h . In th e l a b o u r in te n s iv e

d i v i s i o n s w h o s e s h a r e s in in d u s tria l p r o d u c ti o n c l e a rly d e c l i n e d ( f r o m 3 3 . 5 % in 1992 to 2 6 . 5 % in 2 0 0 2 ) , th e r a te o f p r o d u c t i o n g r o w t h w a s s m a l l , a n d in s o m e o f th e m e v e n n e g a tiv e .

T a b l e 2 Annual average growth rates (%) for production and its factors, years 1992 -2002, by industry

sections and divisions

Specification OUT VA К L

TOTAL (entire economy) _5.2 4.1 3.2 -0.1

Industry _{6.2 5.9 2.9 -2 .7}

Mining and quarrying -2 .7 -3 .6 -2.8 -7.5

Manufacturing 7.6 11.2 3.8 -2.3

M anufacture o f food products and beverages 6.1 7.4 5.8 -0.4

M anufacture o f tobacco products 1.0 2.3 15.5 4.4

M anufacture oftextiles 2.4 6.1 -3 .7 -7 .8

Manufacture o f wearing apparel and furriery 3.7 4.4 3.3 -3 .4

Manufacture o f leather and leather products -1 .3 -3.8 -1.5 -7 .7

Manufacture o f wood and wood, straw and wicker products _8.3 5.7 8.6 -0.2

Manufacture o f pulp and paper 10.9 11.4 7.8 -0.2

Publishing, printing and reproduction o f recorded media 12.8 13.8 14.8 2.0

M anufacture o f coke, refined petroleum products 3.1 -8 .3 1 1.2 -2.3

Manufacture o f chemicals and chemical products 6.1 5.6 4.0 -3 .2

M anufacture o f rubber and plastic products 15.0 16.3 8.6 3.5

M anufacture o f other non-m etallic mineral products 8.3 9.7 5.3 -2.5

Manufacture o f basic metals 1.4 -2 .4 -0.3 -8 .0

Manufacture o f metal products _{12.3 11.7 3.8 1.1}

Manufacture o f machinery and equipment 6.6 6.5 -2.4 -5.3

Manufacture o f office machinery and computers 22.2 30.0 4.3 -1.2

Manufacture o f electrical machinery and apparatus

M anufacture o f radio, television and communication equipment and

10.3 9.4 6.3 -0 .6

apparatus

M anufacture o f medical, precision and optical instruments, watches

16.2 17.0 0.7 -7.5

and clocks _{10.1 10.7 2.4 -0.5}

Manufacture o f motor vehicles, trailers and semi-trailers _{15.3 13.7 7.6 -3.1}

Manufacture o f other transport equipment 2.5 -2.4 -2 .0 -4.9

M anufacture o f furniture; manufacturing n.e.c. _12.1 8.9 7.7 0.3

Recycling 3.7 0.2 5.0 3.7

Electricity, gas and w ater supply _{1.3 3.1 3.7 -0.7}

OUT - gross output (in comtout prices); Va - value added (in comtout prices); K. - gross value o f fixed assets (in comtout prices); L - number o f employees.

S o u r c e : Calculated by the authors.

T h e d y n a m i c s o f th e b a s ic p r o d u c t i o n f a c to rs , c a p ita l ( m e a s u r e d b y th e g r o s s v a l u e o f f ix e d a s s e ts ) a n d l a b o u r ( m e a s u r e d b y th e n u m b e r o f e c o n o m i c a l l y a c ­ tiv e p e r s o n s ) s h o w e d d is t i n c t v a ria tio n s . A s for th e c a p ita l, a c t u a l l y all s e c ti o n s a n d d i v i s i o n s o f in d u s t r y in c r e a s e d th e ir ca p ita l r e s o u r c e s th e h i g h e s t ra te s b e i n g n o te d in th e m a n u f a c t u r e o f t o b a c c o p r o d u c ts ( a n n u a l a v e r a g e 1 5 .5 % ) , in p u b

-lis h in g a n d p r i n t i n g ( 1 4 . 8 % o n a v e r a g e ) a n d in th e m a n u f a c t u r e o f c o k e a n d r e f in e d p e t r o l e u m p r o d u c t s ( 1 1 . 2 % o n a v e r a g e ) . T h e t e c h n o l o g i c a l l y a d v a n c e d d i v i s i o n s s h o w e d d e f i n i t e l y l o w e r rate s o f ca p ita l g r o w t h ( f r o m 0 . 7 % a y e a r for th e m a n u f a c t u r e o f r a d io , te le v i s io n a n d c o m m u n i c a t i o n e q u i p m e n t to 7 . 6 % for t h e m a n u f a c t u r e o f m o t o r v e h i c le s ). N e g a t i v e ra te s o f th e f ix e d c a p ita l g r o w t h w e r e r e c o r d e d fo r m i n i n g a n d q u a r r y i n g ( - 2 . 8 % ) , t h e m a n u f a c t u r e o f te x tile s ( - 3 . 7 % ) , th e m a n u f a c t u r e o f le a th e r a n d le a th e r p r o d u c t s ( - 1 . 5 % ) , th e m a n u f a c ­ tu r e o f m a c h i n e r y a n d e q u i p m e n t ( - 2 . 4 % ) , the m a n u f a c t u r e o f o t h e r m o t o r v e h i ­ c l e s ( - 2 . 0 % ) a n d th e m a n u f a c t u r e o f m e ta l s ( - 0 . 3 % ) . E m p l o y m e n t s h o w e d d i f ­ f eren t te n d e n c i e s . In m o s t s e c t i o n s a n d d i v i s i o n s o f in d u s t r y th e s i z e o f th e w o r k ­ fo rc e d i s t i n c t l y d e c l i n e d , e s p e c i a l l y t h o s e tr e a te d b y th e c e n tr a l c o m m a n d e c o n ­ o m y as its c r u c i a l c o m p o n e n t s , i.e. m i n i n g a n d q u a r r y i n g ( a n n u a l a v e r a g e - 7 . 5 % ) , th e m a n u f a c t u r e o f te x tile s ( - 7 . 8 % a y e a r ) , th e m a n u f a c t u r e o f m e ta l s ( - 8 % a y e a r ) a n d th e m a n u f a c t u r e o f m a c h i n e r y a n d e q u i p m e n t ( - 7 , 5 % ) . E m ­ p l o y m e n t o n l y g r e w in five d i v i s i o n s o f th e m a n u f a c t u r i n g i n d u s t r y , b u t th e ir s h a r e in to tal e m p l o y m e n t in th a t s e c ti o n d o e s n o t e x c e e d 2 1 % . T h e o b s e r v e d e v o l u t i o n in p r o d u c t i o n an d p r o d u c t i o n f a c to r s a f f e c t e d b o th p r o d u c t i v i t y o f th e f a c to r s ( th e p r o d u c t i v i t y o f c a p ita l, th e p r o d u c t i v i t y o f l a b o u r a n d T F P '') a n d r e la ti o n s h i p s b e t w e e n the f a c to rs ( th e c a p i t a l - t o - l a b o u r ratio). H i g h e r p r o d u c t i v i t y o f th e p r o d u c t i o n fa c to rs i m p r o v e s th e e f f i c i e n c y o f the m a n u f a c t u r i n g p r o c e s s e s tha t a r e f re q u e n tl y d e t e r m i n e d b y a b r o a d t e c h n o l o g i c a l p r o g r e s s ( G r i l i c h e s 1958, 1986; J o r g e n s o n 1984; M a n s f i e l d 1988). T h e c h a n g e s f r e q u e n t l y a r is e fro m m o d i f i e d r e la ti o n s h i p s b e t w e e n th e p r o d u c t i o n fa c to rs , o n e s y m p t o m o f w h i c h is v a r i a t i o n s in the c a p i t a l - t o - l a b o u r r a t i o 9. A c o n s i d e r a b l e g r o w t h in p r o d u c t i o n ( m e a s u r e d b y th e g r o s s o u t p u t a n d v a l u e a d d e d ) a c c o m p a ­ nie d by a s li g h tly s m a l l e r rate s o f ca p ita l g r o w t h a n d o f e m p l o y m e n t d e c l i n e d e n o t e s s i g n i f i c a n t in c r e a s e s in th e p r o d u c t i v i t y o f la b o u r, c a p ita l a n d th e c a p i- t a l - t o - l a b o u r ratio , p r a c t i c a l l y a c r o s s all a n a ly s e d s e c t i o n s a n d d i v i s i o n s o f in d u s ­ try T h e t e n d e n c i e s a r e a l s o re f le c te d in th e T F P c h a n g e s . A p o s i t i v e T F P g r o w t h r a te r e s u lt s f ro m th e g r o w i n g e f f ic i e n c y o f th e m a n u f a c t u r i n g p r o c e s s e s in d u c e d b y a b r o a d te c h n o l o g i c a l a n d o r g a n i s a t i o n a l p r o g r e s s . T h i s rate, h o w ­ eve r, s h o u l d n o t b e d e e m e d th e ra te o f a “ p u r e ” t e c h n o l o g i c a l p r o g r e s s , b e c a u s e

* Total factor productivity (TFP) is an ‘extended’ measure o f productivity, as it involves a whole set o f production factors. It is the value o f production per unit com bination o f production factors. In this paper the indices methods were used to find the TFP rate o f growth and more pre­ cisely the Tornquist chain index being a discrete approximation o f the Divisia continuous time index (Griliches, Jorgenson, 1967; Hulten, 1978; Gullickson, 1995). Estimates o f the TFP growth rates calculated in this w ay are frequently called an effective (observed) TFP.

' The effects o f the technological progress can be seen in the grow ing capital-to-labour ratio, which growth results from the substitution o f the production factors.

111 The productivity o f labour and productivity o f capital grew the highest in technologically- advanced sectors, which may reconfirm that the Polish industry fortunately tends tow ards divi­ sions based on modern technologies.

w e u s e d th e rea l, a n d n o t p o te n tia l p r o d u c t i o n g r o w t h r ate to c a l c u l a t e it. S u c h o b t a i n e d r e s u lt s c a n b e b u r d e n e d b y th e e s t i m a t i o n e r r o r s , s u c h as t h e n o n ­ r a n d o m e r r o r s , th a t r e p r e s e n t e f f e c t s o f t h e s u p p l y - a n d d e m a n d - s i d e s h o c k s .

T h e t a b l e b e l o w s h o w s e s t i m a t e s o f th e e f f e c tiv e T F P g r o w t h r a te s b y s e c ­ tion a n d d iv i s i o n o f industry* T h e s e a r e a v e r a g e d rate s o f g r o w t h for t h e e n tire a n a ly s e d p e r i o d ( 1 9 9 2 - 2 0 0 2 ) a n d for tw o s u b p e r i o d s ( 1 9 9 2 - 1 9 9 7 a n d 1998-2 0 0 1998-2 ) " . The T F P w a s e s t i m a t e d u s in g the g r o s s o u t p u t , a n d th e list o f t h e p r i­ m a r y p r o d u c t i o n f a c to r s w a s e x t e n d e d to i n c lu d e m a te r ia l o u tla y s .

T а Ы e 3 Annual average TFP growth rates (%) in the years 1992 2002, by industry section and division

Specification 1992 2002 1992-1997 1998-2002 Industry 2.2 2.9 1.5

Mining and quarrying _{1.6 2.4 0.9}

Manufacturing 2.4 3.2 1.7

M anufacture o f food products and beverages 1.5 1.7 1.4

M anufacture o f tobacco products -0.2 -1.2 0.7

M anufacture o f textiles 2.3 3.9 0.8

M anufacture o f wearing apparel and furriery 2.5 5.1 0.1

M anufacture o f leather and leather products 0.6 3.4 -2.2

Manufacture o f wood and wood, straw and wicker products 0.5 0.1 1.0

Manufacture o f pulp and paper 2.0 2.2 1.7

Publishing, printing and reproduction o f recorded media 1.7 4.5 - l . l

M anufacture o f coke, refined petroleum products 0.5 2.4 -1 .4

M anufacture o f chem icals and chemical products 1.7 2.0 1.5

M anufacture o f rubber and plastic products 3.3 3.8 2.9

M anufacture o f other non-metallic mineral products 3.6 3.7 3.4

Manufacture o f basic metals 1.5 2.5 0.5

Manufacture o f metal products 3.4 4.3 2.5

Manufacture o f machinery and equipment 4.3 5.7 3.0

Manufacture o f office machinery and computers 10.7 15.7 6.0

Manufacture o f electrical machinery and apparatus Manufacture o f radio, television and communication

2.5 3.2 1.9

equipment and apparatus

M anufacture o f medical, precision and optical instruments,

6.9 12.2 1.9

watches and clocks 4.4 8.0 0.9

Manufacture o f m otor vehicles, trailers and semi-trailers 2.8 2.9 2.6

M anufacture o f other transport equipment 2.1 0.6 3.6

M anufacture o f furniture; manufacturing n.e.c. 1.7 3.7 -0.3

Recycling -1 .2 -0 .6 -1 .9

Electricity, gas and w ater supply _{0.3 0.3 0.2}

S o u r c e : Calculated by the authors.

11 The breakdown into subperiods corresponds to the aforementioned stages in the transition o f Polish economy.

T h r o u g h o u t th e a n a l y s e d p e r io d , th e a v e r a g e T F P g r o w t h r a te in in d u s t r y a m o u n t e d to 2 . 2 % a y e a r , b u t in S u b p e r i o d I it w a s m u c h l a r g e r th a t in S u b p e ­ riod II. A s i m i l a r t e n d e n c y c o u l d b e f o u n d in a c tu a lly all s e c t i o n s a n d d i v i s i o n s o f in d u stry . It r e s u l t e d f ro m th e f a v o u r a b l e b u s i n e s s c y c l e at th a t t im e , e x p r e s s e d b y a r e la tiv e ly h ig h p r o d u c t i o n g r o w t h g e n e r a t e d b y th e m o b i l i z a t i o n o f t h e p r e ­ v io u s l y u n d e r u t i l i s e d p r o d u c t i o n c a p a c i t y ( p a r tic u la r ly in t h e b e g i n n i n g o f the p e r io d in q u e s t i o n , i.e. y e a r s 1 9 9 2 - 1 9 9 4 ) in o r d e r to m e e t th e g r o w i n g d e m a n d . A n o t h e r r e a s o n w a s th e s y s t e m a d j u s t m e n t s i m p l e m e n t e d d u r i n g e c o n o m i c r e ­ s tr u c t u r i n g . T h e T F P r a te s o f g r o w t h in p a r t i c u l a r s e c t o r s o f t h e m a n u f a c t u r i n g in d u s t r y w e r e v e t y m u c h d i f f e r e n t. T h e h ig h e s t r a te s w e r e f o u n d in t h e t e c h n o ­ lo g ic a l ly a d v a n c e d s e c t o r s ( th e m a n u f a c t u r e o f o f f i c e m a c h i n e r y a n d c o m p u t e r s , th e m a n u f a c t u r e o f r a d io , t e l e v i s i o n a n d c o m m u n i c a t i o n e q u i p m e n t a n d a p p a r a ­ tus a n d th e m a n u f a c t u r e o f m a c h i n e r y a n d e q u i p m e n t ) . A s r e g a r d s t h e la b o u r - in te n s iv e a n d r a w - m a t e r i a l s i n t e n s i v e s e c to rs , th e T F P g r o w t h r a te s w e r e m u c h l o w e r a n d in s o m e s e c t o r s e v e n n e g a t i v e ( r e c y c lin g , th e m a n u f a c t u r e o f t o b a c c o p r o d u c ts ). V. D O M E S T I C A N D F O R E I G N I N V E S T M E N T S A N D T H E I R E F F E C T O N T F P C H A N G E S IN P O L I S H I N D U S T R Y D o m e s t i c a n d fo re ig n i n v e s t m e n t s a r e - a m o n g t h e m a n y f a c t o r s - th a t c o u l d c o n t r i b u t e to s u c h c o n s i d e r a b l e v a r i a t i o n s in th e T F P g r o w t h ra te s in p a r t i c u l a r s e c t i o n s a n d d i v i s i o n s o f in d u s t ry . T h e y i n c r e a s e t h e a m o u n t o f h u m a n a n d p h y s ic a l c a p ita l a v a i l a b l e in an e c o n o m y a n d c o n t r i b u t e to its m o d e r n i s a t i o n . W h e n d o m e s t i c i n v e s t m e n t s a r e lim ite d , w h i c h is th e c a s e o f le ss d e v e l o p e d e c o n o m i e s , t h e tr a n s f e r o f f o r e ig n c a p ita l sta rts p l a y i n g a s p e c ia l role. O n e o f the m o s t i m p o r t a n t c h a n n e l s utilise d b y s u c h t r a n s f e rs is f o r e ig n d i r e c t in v e s t m e n t s th a t o f f e r f l o w s o f f i n a n c ia l c a p ita l, b u t a lso t r a n s f e r m o d e m k n o w l e d g e a n d t e c h n o l o g y , p h y s i c a l a n d h u m a n c a pita l. W e e s t i m a t e d p a r a m e t e r s o f e q u a t i o n s d e s c r i b i n g t h e T F P c h a n g e s in p a r ­ t ic u la r b r a n c h e s o f i n d u s t r y w ith re s p e c t to th e r a te o f d o m e s t i c a n d f o r e ig n in ­ v e s t m e n t s , to find e m p i r i c a l l y h o w d o m e s t i c a n d f o r e i g n i n v e s t m e n t o u t l a y s a f f e c t th e T F P . I n v e s t m e n t s r a te s w e r e d e f i n e d b y th e s h a r e th a t e a c h t y p e o f i n v e s t m e n t h e l d in th e g r o s s o u t p u t o f a g iv e n s e cto r. A s f o r i n v e s t m e n t o u tla y s , t w o v a r i a n t s w e r e ta k e n in to a c c o u n t , n a m e l y in v e s t m e n t o u t l a y s o n f ix e d a s s e ts a n d i n v e s t m e n t in m a c h i n e r y a n d t e c h n ic a l e q u i p m e n t . T o e l i m i n a t e p o s s i b l e s u p p l y - s i d e a n d d e m a n d - s i d e s h o c k s th a t m i g h t h a v e a f f e c t e d h e v a l u e s o f the T F P g r o w t h rate, w e d e c i d e d to s u b s t i t u t e a n n u a l v a l u e s o f th e T F P g r o w t h rate s w ith v a l u e s c a l c u l a t e d u s i n g th e m o v i n g a v e r a g e ( g e o m e t r i c m e a n ) f o r th re e - y e a r s u b p e r i o d s . In itia lly , th e m o d e l t o o k th e form :

A l n tfpit = a n + a j d i it_s + a 2inv _ domit_s + eit (1) w h e r e : Д1п tfpj, - T F P g r o w t h rate in /-th b r a n c h , p e rio d

t;

fd iit_s - s h a r e o f F D I s re c e iv e d by /-th b r a n c h in p e r io d

(t-.s) in th e g r o s s o u t p u t

o f th e b r a n c h ;

i n v _ d o m ll_3

- s h a r e o f d o m e s t i c in v e s t m e n t o u t l a y s (o r, a l te r n a t i v e l y , in v e s t ­ m e n t o u t l a y s on m a c h i n e r y a n d te c h n ic a l e q u i p m e n t ,

inv doin _ mu

) in /-th b r a n c h in p e r i o d

(t-s) in t h e g r o s s o u t p u t o f th e b r a n c h ;

£■„ - m o d e l ’s r a n d o m te rm 5 - t im e lag P a r a m e t e r

a 0 c a n b e in te r p r e t e d as th e T F P g r o w t h ra te in in d u s t r y u n d e r a

z e r o rate o f d o m e s t i c a n d f o re ig n i n v e s t m e n t s , w h e r e a s p a r a m e t e r s

a

, a n d

a 2

s h o w T F P c h a n g e s ( a s p e r c e n t a g e p o in ts ) c a u s e d b y th e r ate o f f o r e ig n a n d d o ­ m e s tic i n v e s t m e n t s g r o w i n g o n e p e r c e n t a g e p o in t. T h i s e q u a t i o n e x p l i c i t l y a s ­ s u m e s th a t for th e s a m e r a le o f d o m e s t i c a n d f o re ig n i n v e s t m e n t s in e a c h b r a n c h o f in d u s t r y t h e to tal p r o d u c t i v i t y g r o w t h ra te w o u l d b e th e s a m e . T o m a k e this a s s u m p t i o n m o r e f le x i b le th e c o n s t a n t is d i v e r s i f i e d 12 (a fixed e f f e c t m o d e l) . T h e n e q u a t i o n (1) ta k e s th e form : 15

A l n tJ'Pi, = a Q+ Y Jß j d j + a J d i il_s+ a 2in v _ d o m ;i. s + £ il

(2)

j= 2 w h e r e :

dj - d u m m y v a r ia b le for n o n - b a s e l i n e

j -

th b r a n c h . In a d d i t i o n , to a l lo w fo r th e c l e a r ly d e c e l e r a t i n g T F P r a te o f g r o w t h in p a r ­ tic u la r d i v i s i o n s , t i m e t r e n d w a s a d d e d to e q u a t i o n (2). E q u a t i o n (2 ) t a k e s the form : 15

Д1п tip;, = a 0 + Y Jß j d l + a tf d i il_s+ a 2in v _ d o m il_s + a i t + £il (3) > = 2

In th is c a s e w e n e e d to r e a d ju s t th e i n te r p re ta t io n o f th e c o n s t a n t t e r m that d e t e r m i n e s th e T F P g r o w t h r a te in in d u s t ry u n d e r a z e r o ra te o f d o m e s t i c a n d f o re ig n i n v e s t m e n t s in th e p e r io d i m m e d i a t e l y p r e c e d i n g th e a n a l y s e d t i m e sp a n . P a r a m e t e r

a y

s h o w s a n a v e r a g e c h a n g e in the T F P g r o w t h r a t e in in d u s t r y in the

'■ Diversification was also applied in the case o f explanatory variables’ parameters. As the re­ sults turned out unsatisfying, they were left out.

p e r io d in q u e s t i o n c a u s e d b y f a c to rs u n r e la te d to d o m e s t i c a n d f o r e ig n i n v e s t ­ m e n ts . In te s t i n g v a r i o u s t im e la g s v a r ia n ts o f t h e e x p l a n a t o r y v a r i a b l e s , th e b e s t r e s u lts w e r e o b t a i n e d f o r t w o - y e a r lags, fo r b o t h d o m e s t i c a n d f o r e ig n in v e s t ­ m e n ts . E s t i m a t e s o f e q u a t i o n (3) p a r a m e t e r s a rc p r e s e n t e d in t a b l e 4. T h e m a n u f a c t u r e o f m a c h i n e r y a n d e q u i p m e n t w a s ta k e n a s th e b a s e l i n e in ­ d u str y . T h e r e s u lt s s u g g e s t that: • F o r e i g n i n v e s t m e n t s w e r e i m p o r t a n t for th e T F P g r o w t h . T h e i r r ate g r o w i n g 1 p e r c e n t a g e p o in t m a k e s T F P g r o w t h r ate in c r e a s e 0 . 2 4 - 0 . 3 4 p e r c e n t ­ a g e p o in t o n a v e r a g e . T h i s e f f e c t is o b s e r v a b l e a f te r t w o y e a r s (.s = 2). T h i s v a r i ­ a b l e is s ta tis t ic a lly s i g n i f i c a n t in b o t h v aria n ts.

T a b l e 4 Estimates o f equation (3) parameters

Specification Parameters

(1 version) t-value

Parameters

(II version) t-value

Constant 0.048 6.977 0.044 6.782

Jdi, ,.i 0.342 3.864 0.240 2.561

\nv_doma 2 0.138 1.232 -

-inv dom w,,_ł - - 0.506 2.763

1 -0.004 -4.463 -0.004 -5.227

Mining and quarrying

M anufacture o f food products, beverages and

-0.017 -2.038 -0.023 -2.913

tobacco products

M anufacture o f textiles, wearing apparel and

-0.036 -5 .4 1 7 -0.035 -5.458

furriery -0.019 -2.754 -0.018 -2.852

M anufacture o f wood and wooden products M anufacture o f pulp and paper with publishing

-0.030 -3 .1 2 0 -0.037 -4.120

and printing

M anufacture o f coke, refined petroleum products

-0.035 -4.910 -0.043 -5.691

and derivatives -0.037 -3.963 -0.042 -4.973

M anufacture o f chemical and chemical products -0.033 -4.379 -0.034 -5.125

M anufacture o f rubber and plastic products Manufacture o fo th e r non-m etallie mineral prod­

-0.012 -1.628 -0.020 -2.585

ucts -0.039 -4.028 -0.044 -4.819

M anufacture o f basic metals and metal products -0.014 -1.937 -0.017 -2.550

M anufacture o f transport equipment

M anufacture o f furniture and other m anufactur­

-0.044 -4.900 -0.039 -4.467

ing -0.026 -3.948 -0.023 -3 .4 8 0

Recycling -0.025 -2.952 -0.027 -3.341

Electricity, gas and w ater supply -0.064 -2.466 -0.062 -5.066

R- 0.796 0.813

R2 (adj.) 0.724 0.747

DW 2.37 2.42

• R e g a r d i n g to tal d o m e s t i c i n v e s t m e n t s th e ir m o r e s i g n i f i c a n t e f f e c t o n the T F P g r o w t h c o u l d n o t b e p r o v e d . D o m e s t i c in v e s t m e n t in m a c h i n e r y a n d e q u i p ­ m e n t r a te i n c r e a s i n g I p e r c e n t a g e p o in t m a k e s th e T F P g r o w 0 . 5 0 6 p e r c e n t a g e p o in ts . A s in th e c a s e o f fo re ig n i n v e s t m e n t s th is e f f e c t is l a g g e d (л- = 2). S u c h r e s u lts s u g g e s t th a t b o th d o m e s t i c a n d f o re ig n in v e s t m e n t s l a r g e l y d e t e r m i n e the T F P g r o w t h in i n d iv i d u a l s e c t i o n s a n d d i v i s i o n s o f in d u s t ry , w i t h th e e f f e c t b e ­ in g m o r e d is t i n c t in th e c a s e o f d o m e s t i c in v e s tm e n ts . • T h r o u g h o u t th e p e r i o d in q u e s t i o n the T F P g r o w t h r a t e in i n d u s t r y w a s c l e a rly d e c e l e r a t i n g , b y c a 0 .4 p e r c e n t a g e p o i n t s o n a v e r a g e (a t h r e e - y e a r a v e r ­ a ge ). In e a c h v a r ia n t, th is v a r i a b l e w a s sta tis t ic a lly s ig n i fic a n t .

• W h a t e v e r t h e v a r ia n t, th e T F P g r o w t h r ate w a s t h e h i g h e s t in th e b a s e ­ line d iv i s i o n ( m a n u f a c t u r e o f m a c h i n e r y a n d e q u i p m e n t ) . D i f f e r e n c e s b e t w e e n t h e T F P g r o w t h r a te in th e b a s e l i n e d iv is io n a n d in th e o t h e r d i v i s i o n s t u r n e d o u t s ta tis t ic a lly s i g n i f i c a n t fo r m o s t d iv is io n s . A n e x c e p t i o n w a s m a n u f a c t u r e o f r u b b e r a n d p la s tic p r o d u c t s , w h e r e th e d if f e r e n c e w a s s t a tis t ic a lly i n s i g n ifi c a n t, b u t o n l y in th e first v aria nt. VI . F D I A N D R E G I O N A L D E V E L O P M E N T . A N A T T E M P T O F A S S E S S M E N T T h e g e o g r a p h i c a l d i s t r i b u t i o n o f F D I s is a lso i m p o r t a n t fo r th e e c o n o m y o f th e r e c e i v i n g c o u n t r y , a s f o r e ig n ca p ita l c a n b e a k e y f a c t o r m a k i n g u p fo r in e ­ q u a l itie s in the d e v e l o p m e n t o f in d iv i d u a l r e g i o n s ( K a r a s z e w s k i , 2 0 0 4 , p. 215). O n th e o t h e r h a n d , h o w e v e r , f o re ig n in v e s to r s p l a n n i n g to la u n c h in v e s t m e n t p r o je c ts t a r g e t r e g i o n s t h e y v i e w th e m o s t attra c tiv e . S i n c e 1 9 9 3 , a r e s e a r c h h a s b e e n c o n d u c t e d in P o l a n d c o n c e r n i n g th e in v e s t m e n t a t tr a c t i v e n e s s o f in d iv i d u a l r e g io n s . It a l l o w s to i d e n t i f y g r o u p s o f fa c to rs tha t d e c i d e a b o u t f o r e ig n ca p ita l lo c a t i o n 13. In g e n e r a l , th e f a c to rs c a n b e d i v i d e d into: • S ti m u l a n t s , th a t is f a c to rs e n c o u r a g i n g i n v e s t m e n t d e c i s i o n s ; • D e s t i m u l a n t s , i.e. f a c t o r s d i s c o u r a g i n g in v e s t m e n t d e c i s i o n s , • N o m i n a n t s , tha t is n e u t r a l facto rs. T h e m a j o r s t i m u l a n t s a t t r a c t i n g in v e s t m e n t s to a g i v e n r e g i o n are ( K a r a s z e w s k i 2 0 0 4 , pp. 2 2 1 - 2 2 2 ) : the e x i s t i n g in d u s t ry , h u m a n r e s o u r c e s a n d th e ir q u a l i f i c a t i o n s , h i g h l y a b s o r p t i v e local m a rk e t, w e l l - d e v e l o p e d m a r k e t a n d t r a n s p o r t i n f ra s tr u c t u r e , f a v o u r a b l e a t titu d e o f th e local a u t h o r i t i e s to f o re ig n in v e s to r s . F o r e i g n i n v e s t o r s a r e d e t e r r e d by: h ig h r ate o f u n e m p l o y m e n t a n d re la te d p a t h o l o g i e s , h a z a r d s r e s u l t i n g f r o m h ig h c r i m e r ate s, d e g r a d a t i o n o f th e

11 The research is conducted by the Gdańsk Institute for Market Economics and it attempts to assess investment attractiveness o f Polish provinces, i.e. is regions established by the adm inistra­ tive division.

n atu ra l e n v i r o n m e n t , a n d lo cal c o m m u n i t i e s ’ r e l u c t a n c e to f o r e ig n in v e s to r s . A n a n a l y s i s o f th e a b o v e fe a tu re s a l l o w s to a s s e s s th e a t t r a c t i v e n e s s o f p a r t i c u l a r p r o v i n c e s in i n v e s t o r s ’ e y e s. T h e r e s u lts c a n b e f o u n d in C h a r t 3.

F o r f o r e ig n i n v e s t o r s th e m o s t a t tr a c t iv e ( c la s s A ) a m o n g th e 16 p r o v i n c e s s e e m to b e th e p r o v i n c e s o f M a z o w s z e a n d S iles ia. T h e i r e c o n o m i c p o te n tia l is th e la rg e st. T h e i r e x t e n s i v e u r b a n a g g l o m e r a t i o n s o p e n v o l u m i n o u s a n d a b s o r p ­ tiv e m a r k e t s to in v e s to r s . A n a d d i tio n a l a d v a n t a g e o f M a z o w s z e is th e p r o x i m i t y o f th e c e n tr a l o f f i c e s r e s p o n s i b l e fo r m a k i n g e c o n o m i c a n d p o lit ic a l d e c is i o n s . T h e n e x t g r o u p ( c la s s B) is f o u r p r o v in c e s : W i e l k o p o l s k a , P o m e r a n i a , W e s te r n P o m e r a n i a a n d L o w e r S ilesia. T h e s e r e g io n s a r e r e la tiv e ly w e l l - i n d u s t r i a l i s e d a n d th e y a r e f a v o u r e d b y th e ir o n - b o r d e r l o c a t i o n 1'1 o r g o o d a c c e s s i b i l i t y , r e s p e c ­ tiv e ly . T h e th ir d g r o u p is r e p r e s e n t e d b y 5 p r o v i n c e s , n a m e l y : L u b u s k i e , O p o l ­ sk ie , M a ł o p o l s k a , L ó d ź a n d K u j a w s k o - P o m o r s k i e . T h e le ast a t t r a c t i v e p r o v i n c e s c a n b e f o u n d in th e e a s t e r n part o f th e c o u n t r y ( W a r m i a - M a z u r y , P o d la s i e , L u ­ b e l s k ie , Ś w i ę t o k r z y s k i e a n d P o d k a r p a c k ie ) . F o r t h o s e a r e a s m o s t i n d i c a t o r s a s ­ s e s s i n g th e i r i n v e s t m e n t a t t r a c t i v e n e s s ( G D P , m a r k e t a b s o r p t i v i t y , th e v o l u m e o f in d u s tria l o u t p u t , d e g r e e o f u r b a n i s a t i o n , a c c e s s i b i l i t y v ia c o m m u n i c a t i o n s ) are r e la tiv e ly l o w e r th a n in th e o t h e r p ro v in c e s .

Chart 3. Assessment o f investment attractiveness o f Polish provinces

S o u r c e : Developed by the authors on the basis o f Gawlikowska-Hueckel K, and Dutkowski M., (ed.), 2000, Polska regionów, IBnGR, pp.94-95

ы These areas border with Germany being one o f the largest foreign investors in Poland.

It is q u i t e d if f i c u lt t h o u g h , to a n a l y s e F D I s ’ i m p a c t s o n r e g i o n a l d e v e l o p ­ m e n t. A s e r i o u s i m p e d i m e n t in th is p r o c e s s is th e lack o f a d e q u a t e l y lo n g s ta tis ­ tical se rie s. T h i s p r o b l e m is n o t s p e c if ic f o r P o lis h e c o n o m y o r all e c o n o m i e s in t r a n s itio n ; th e d e v e l o p e d c o u n t r i e s p o s e th e s a m e p r o b l e m ( T o m a s z e w i c z , T r ę b - ska , 2 0 0 4 , p . 37). In th e c a s e o f P o la n d , an a d d i tio n a l b a r r i e r s e e m s to b e the n e w a d m i n i s t r a t i v e d iv i s i o n i n t r o d u c e d in 1999 (it r e d u c e d 4 9 p r o v i n c e s to 16). A l ­ beit s ta tistic a l o r g a n i s a t i o n s o p e r a t i n g in the c o u n t r y ( p r i m a r i l y th e C e n t r a l S ta ­ tistical O f f i c e w ith its p r o v i n c i a l b r a n c h e s ) e s t i m a t e s o m e s e l e c t e d e c o n o m i c c a te g o r i e s f o r th e e a r l i e r y e a r s , th is i n f o r m a t i o n is p u b l i s h e d w i t h a s e r i o u s d e ­ l a y 15. A s f o r th e r e g io n a l FDI sta tistic s , the s it u a ti o n is e v e n m o r e c o m p l i c a t e d , as th e a v a i l a b l e in f o r m a t i o n is a c t u a l l y lim ite d to th e n u m b e r o f f o r e i g n - o w n e d firm s, th e c a p ita l in v e s te d b e i n g u n r e p o r te d . In a d d i t i o n , i n f o r m a t i o n d e r i v e d from v a r i o u s s o u r c e s is f r e q u e n t l y i n c o m p a r a b l e 16. T h e P A I i l Z d a t a on th e g e o ­ g r a p h ic a l lo c a ti o n o f f o r e i g n c a p ita l c o v e r th e p erio d from 1998.

T h e P A Ii IZ in f o r m a t i o n ( T a b l e 5) r e v e a l s s t r o n g c o n c e n t r a t i o n o f fo re ig n c a p ita l r e p r e s e n t e d b y th e f o r e i g n - o w n e d firm s in the la rg e s t a n d m o s t i n d u s t r i a l ­ ized p r o v i n c e s , w h e r e th e e c o n o m i c a n d so c ial i n f r a s tr u c t u r e s a r e t h e b e s t d e v e l ­ o p e d , a n d w h o s e lo cal m a r k e t s a r e h ig h ly a b s o r p t i v e m a r k e t s . M a z o w s z e , w h e r e 2 4 % —3 0 % o f all f o r e i g n - o w n e d o r g a n i s a t i o n s h a v e t h e i r h e a d q u a r t e r s , is the u n q u e s t i o n a b l e le ade r. F o r S ile s ia a n d W i e l k o p o l s k a th e c o r r e s p o n d i n g s h a r e is a l m o s t t w i c e as lo w a n d it a m o u n t s to 1 0 - 1 3 % . N e x t a r e p r o v i n c e s o f L o w e r S ilesia a n d P o m e r a n i a ( 6 . 6 % - 8 . 3 ) . F o r o t h e r p r o v i n c e s th e s h a r e d o e s n o t e x c e e d

6

%.

W e s t e r n P o m e r a n i a ’s p o s i t i o n is in te re s ti n g , c o n s i d e r i n g th e fac t tha t the p r o v i n c e ’s i n v e s t m e n t a t t r a c t i v e n e s s w a s a s s e s s e d f a v o u r a b l y . P e r h a p s s m a l l ­ siz e d firm s t h a t a r e e x c l u d e d f ro m th e P A I i l Z s ta tis t ic s p r e v a il in t h is p r o v i n c e or, a l t e r n a t i v e l y , it m a y b e so b e c a u s e G e r m a n y th a t b o r d e r s w ith W e s t e r n P o m ­ e r a n ia in v e s ts o n l y sm a ll a m o u n t s in t h e reg io n . A n o t h e r i n te r e s ti n g fac t is th a t th e r e g io n a l s tr u c t u r e o f f o r e i g n f irm s d o e s n o t c h a n g e v e r y m u c h y e a r by y e a r. T h e r e f o r e , a j u s t i f i e d c o n c l u s i o n is th a t it w a s n o t v e r y m u c h d if f e r e n t in t h e p r e v i o u s y e a r s , e ith e r. W e a s s e s s e d th e e f f i­ c i e n c y o f p a r t i c u l a r p r o v i n c e s b y a n a l y s i n g c h a n g e s in th e level a n d d y n a m i c s o f th e p r o d u c t i v i t y o f l a b o u r ( m e a s u r e d by v a l u e a d d e d p e r w o r k e r ) , in th e c a p ita l- t o l a b o u r r a tio a n d in th e T F P . T h e la tter w a s f o u n d u s i n g t h e n e o c l a s s i c , tw o

-15 Today regional data arc available lor years 1995-2002; data on som e economic categories (total production, GDP, value added) are available for years 1995-2001.

1,1 Several institutions in Poland gather and process data on the amounts o f invested foreign capital. The most important o f them are GUS, NBP and PAIilZ. Each o f them operates a different methodology to calculate FDI values - as a result, the information they provide is considerably different. This paper uses the PAIilZ data.