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    1992-2022. Best period in Poland’s history The Union of Entrepreneurs and Employers publishes new report

    Posted on by Weronika Marzec

    Warsaw, 14th July 2023


    1992-2022. Best period in Poland’s history
    The Union of Entrepreneurs and Employers publishes new report

    Poland has come a long way since the systemic transformation that begun in 1989. As a result, it has managed to make up part of the losses in terms of development and the country is now closer than ever to the level of the world’s largest economies. From the position of one of the poorest countries in Europe, a modest representative of the Eastern Bloc, we have become a significant producer and exporter of goods, a country with the lowest unemployment rate in the EU, with a GDP far away from the European bottom.

    Political changes turned out to be the driving force behind the economic transformation: we cut ourselves off from a communist legacy, chose democracy instead, and joined the European Union and NATO. Poland implemented several major reforms which helped liberalise economic law, and subsequently became a place to invest capital, reflected in an increase in GDP, a continuous decrease in unemployment, an increase in the average salary, and further changed to a number of other economic indicators.

    However, there is still much room for improvement in Poland. Our objective today should be to create a legal and regulatory environment that favours the development of entrepreneurship. On the one hand, it will fully unleash the potential of the SME sector while, on the other, it will attract more foreign investors. The investment rate at the level of 16.8% is one of the most severe shortcomings of the country’s present economy. We are definitely below the EU average, ahead only of Bulgaria and Greece.

    Nevertheless, the Polish economy made a leap that has changed our economic reality. Systemic transformation brought about progress in terms of the standard of living of citizens:

    • the number of places in kindergartens in cities increased from 680,000 in 1989 to 881,000 in 2017,
    • the number of tertiary education institutions increased from 98 in 1989 to 394 in 2019,
    • the number of students increased from 378,000 to in 1989 to 1.2 million in 2017,
    • the percentage of PhDs awarded to women increased from 29% in 1989 to 53% in 2017,
    • the number of cases of chickenpox fell from 220,000 in 1990 to 16,000 in 2016.

    These data show on how many levels the lives of Poles have changed. It is hard to undermine the argument that appears increasingly frequently in public debate that the last 30 years have been the best period in the history of Poland.

    The Union of Entrepreneurs and Employers has initiated the “1992-2022. Najlepszy czas Polski” campaign which can be translated to “1992-2022. Best period in Poland’s history”. It summarises the achievements of our country in the field of socioeconomics over the last three decades. As part of the project, a report was published which constitutes an analysis of the main macroeconomic indicators illustrating the changes that had taken place in Poland. It discusses the advances in the scope and structure of Polish exports, analyses the complicated situation on the Polish labour market, changes in the structure of tax revenues and a number of other important macroeconomic data. The authors of the report also attempted to outline the impact of the last three decades on the situation of the so-called average Joe or plain Jane.

    While the past three decades were a time of titanic work and spectacular challenges, the next few years – considering such factors as the consequences of the COVID-19 pandemic or the war in Ukraine – will be crucial for solidifying the position of Poland and Polish enterprises internationally.

    ***

    Organiser: Union of Entrepreneurs and Employers

    Main Partners: Bank Gospodarstwa Krajowego, ORLEN S.A.

    Partners: Agencja Rozwoju Przemysłu S.A. (Industrial Development Agency JSC), Polski Fundusz Rozwoju (Polish Development Fund)

    Supporting Partner: Kompania Piwowarska

    Institutional Partner: Akademia Leona Koźmińskiego (Kozminski University)

    Media Partner: “Dziennik Gazeta Prawna”

    Content Partners: Browary Polskie (Union of Brewing Industry Employers – Polish Breweries), Cyfrowa Polska (Association of Importers and Producers of Electrical and Electronic Equipment – ZIPSEE “Digital Poland”), Fundacja Republikańska (Republican Foundation), Instytut Jagielloński, Klub Jagielloński, Krajowi Producenci Leków, Ogólnopolski Związek Pracodawców Transportu Drogowego, Ośrodek Myśli Politycznej (Center for Political Thought), Ośrodek Studiów Wschodnich (Centre for Eastern Studies ), Polska Federacja Producentów Żywności Związek Pracodawców (Polish Federation of Food Industry Union of Employers), Polskie Stowarzyszenie Przemysłu Kosmetycznego i Detergentowego (Polish Association of Cosmetic and Detergent Industry), Stowarzyszenie Dystrybutorów i Producentów Części Motoryzacyjnych (Association of Automotive Parts Distributors and Producers), Warsaw Enterprise Institute, WiseEuropa

     

    View report: 14.07.2023 Report by the Union of Entrepreneurs and Employers: “1992-2022. Najlepszy czas Polski”

    “The time is now”. This is the conclusion from the “Europe–Poland–Ukraine. Rebuild Together ‘23” conference and advice for all those wondering whether to already invest in Ukraine

    Posted on by Weronika Marzec

    Warsaw, 27th July 2023

    “The time is now”. This is the conclusion from the “Europe–Poland–Ukraine. Rebuild Together ‘23” conference and advice for all those wondering whether to already invest in Ukraine

    On Thursday 20th July in Warsaw, the 2nd edition of the international conference “Europe–Poland–Ukraine. Rebuild Together” took place. Almost as many as 1000 participants, a lot more than a year before, came to the Hilton Hotel in Warsaw to listen to 59 experts who voiced their opinions during the event. “Let’s hope that when they go back to their offices, they will pass on the positive conclusions of the conference and will become motivated to get involved on the Ukrainian market,” said Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers ZPP who summarised the entire event.

    Last year’s edition of the “Europe–Poland–Ukraine. Rebuild Together” conference answered the question “Should we invest in Ukraine during the conflict?”. In 2023, the question posed by the organisers and participants evolved towards “When should we invest?”. The answer to this question, a simple sentence that summed up all the opinions voiced last Thursday at the Hilton Hotel, came from Andrzej Kopyrski, Vice-President of the Management Board of PKO Bank Polski: “The time is Now”.

    During five plenary sessions, invited guests discussed such issues as: Polish-Ukrainian relations in the context of the Western world’s plans for the reconstruction of Ukraine, investment prospects, financing and guarantees for entrepreneurs.

    During the first session, Minister Michał Dworczyk emphasised that research on the attitude of Ukrainians towards other countries shows that Poland is an unrivalled winner with a positive attitude among 86% of the society. “This proves how good the relations between our countries have become. Such positive perception of Poles as well as Polish enterprises and products in this context is certainly the most important capital from which we can draw,” he added.

    Serhiy Pylypenko, ICG Kovalska CEO, pointed out during the debate how receptive the Ukrainian market was. He noted, among other things, the lack of a manufacturer of plasterboard products in Ukraine, for which there is a huge demand during reconstruction. He even stated that whoever builds their factory in Ukraine first will likely monopolise the market.

    Serhiy Tsivkach, Executive Director at UkraineInvest, mentioned that large Polish companies from the construction industry already had their facilities in Ukraine. However, how prospective this market is, indicates the fact that financial support for projects related to the reconstruction of Ukraine worth USD 400 million had already been declared – and these are not military projects, but infrastructural ones.

    The Conference was also attended by a group of officials from Kharkiv, the second largest city in Ukraine, headed by Mayor Ihor Terekhov, who presented plans to rebuild the city’s infrastructure and described the potential of Kharkiv as a city with a strong IT industry and abundant scientific and teaching facilities. During his speech, he also guaranteed favour for Polish companies and transparency of investment processes. He assured that his city’s authorities were at the disposal of Polish entrepreneurs at every investment stage.

    Going back to Andrzej Kopyrski whom we quoted above, one should mention that KredoBank (belonging to the PKO Bank Polski Capital Group) has been operating in Ukraine continuously since the outbreak of the war. Currently, together with Bank Gospodarstwa Krajowego, the Polish Development Fund PFR and KUKE, KredoBank is involved in the guarantee system for investors on the Ukrainian market. Kopyrski pointed out that the project of rebuilding Ukraine may be an opportunity of the century for the Polish economy.

    One of the plenary sessions touched upon the prospects of Ukraine joining the structures of the European Community, as well as the country’s integration with Western markets. Horst Heitz, chairman of the Brussels-based Steering Committee of SME Connect, stated that EU institutions, as well as individual Member States, should encourage Ukraine to implement reforms so that Ukrainian law complies with EU legislation. The country’s rapid reconstruction of its infrastructure is the key to its further development.

    Yaroslav Demchenkov, Deputy Minister for European Integration at the Ukrainian Ministry of Energy outlined the energy strategy for Ukraine until 2050. The objective of this strategy is to full integrate with the EU energy market, whereas integration with the Polish energy market is to take place within the next 5 years. He assured that Ukraine wanted to be in the EU’s avantgarde of green energy. The topic of energy was also elaborated on during one of the industry discussion panels.

    Piotr Sabat, Member of the Management Board for Development at ORLEN, stressed the fact that ORLEN had already been involved on the Ukrainian market prior to the war, mainly in the fuel sector. He then emphasised that this market was a big challenge due to the legislation in force and the normalisation of the energy market. A factor that affects the Ukrainian market is also the shadow economy in fuel trading. Nevertheless, ORLEN on an ongoing basis analyses both the situation in Ukraine and the prospects for expanding its operations there.

    Jan Sarnowski, Member of the Management Board at KUKE S.A., said that rebuilding supply chains remained a challenge. “Nonetheless, it is noteworthy that banning imports of products from Russia made it possible to replace them with Polish ones, especially in the food industry. It should also be emphasised that KUKE, as the only foreign insurer, remained on the Ukrainian market after the outbreak of the conflict and provides surety bonds on pre-war terms,” he stressed. He also commented on the fact that the number of entities exporting from Ukraine decreased by 1/3, yet those that remained on the market increased their market share by 40%.

    Luca Ponzellini, Deputy Head EU Neighbourhood Banking Division, European Investment Bank, described the enormity of funds that had been mobilised for the reconstruction of Ukraine. A few weeks before the Conference, the EIB and the European Commission signed an agreement on financial support in the amount of EUR 375 million for the SME sector. Individual Member States’ programmes amounted to date to EUR 600 million. This means that funds amounting to almost EUR 1 billion will be at the disposal of potential investors.

    The guests gathered at plenary sessions debated on an extensive range of topics, while Polish and foreign guests focused during industry sessions on 4 markets: energy, digital, health and labour.

    Major conclusions of Rebuild’23 Industry Sessions:

    The role of new technologies in the reconstruction and development of the Ukrainian economy

    The digital industry responded immediately to the Russian aggression in Ukraine, trying to maintain or even develop its activities within the country to the highest degree possible, as well as providing direct financial and humanitarian assistance.

    While the IT sector is the only one in Ukraine not to be affected by the recession in 2022, a certain slowdown in the industry has been observed this year.

    There is great potential for exchanging experiences between the Polish public sector and its Ukrainian counterpart in the field of digitising services for citizens and businesses. The COVID-19 pandemic accelerated digitisation processes in Poland, while Ukraine is one of the leaders in the field of digital public services. For example, the Diia app offers 14 digital documents and provides 21 online services.

    Both Polish and Ukrainian digital sectors have a number of significant market advantages (access to excellent specialists, absorptive markets, preferential legal solutions), but at the same time key development gaps, for instance, workforce shortages or regulatory barriers.

    The speakers agreed that the sector of new technologies played a critical economic role in both countries and could become a vital driving force in Ukrainian reconstruction. When it comes to the coexistence of the Polish and Ukrainian industries, the target model should probably take the form of friendly competition with the fullest possible use of synergies resulting from the potential of both markets.

    Ukraine’s energy shift towards EU integration: milestones

    Since the beginning of the war, Ukraine’s energy infrastructure has been the main target of Russian attacks. A report by the World Bank dated April 2023 estimated total losses at USD 6.5 billion, with USD 3.9 billion in generation, and USD 1.9 billion in networks – and that covers only the area controlled by the government in Kyiv.

    The modern operational challenges that Ukraine is facing in the field of power infrastructure resemble the problems faced by Polish grids more or less 45-50 years ago. And although the war exacerbated the scale of the challenges, as Russian attacks caused unforeseen infrastructural damages, transregional transmissions had been an obstacle to the proper balancing of the system already prior to the war.

    Before the war, the Ukrainian energy sector was responsible for generating 72% of the particulate matter produced in Europe. The accountable power plants have no raison d’être in the reconstructed energy system.

    Presently, the issue of balancing the Ukrainian system, after merging it with the EU, has become a pan-European affair. In the first year of the synchronised UA-EU market, approx. 800 GWh of energy vanished, which was not regulated as trade flows. Furthermore, within cross-border exchanges, the surplus of energy contracted in trade agreements introduced to the European grid amounted to approx. 6 TWh, and 3 TWh was sent to Hungary, with which Ukraine had not contracted these flows.

    Before Ukraine starts earning significant amounts from cross-border transmission, the issues of regulation of the Ukrainian system need sorting out. That system is based on a steam and gas system while regulation is based on hydropower installations. As a result, it reacts slower than the European system based on turbine generators.

    The example of Poland’s development after accession to the EU is proof that only the enforcement of uniform regulations, a common market, uniform tender procedures and anti-corruption mechanisms had the power necessary for international economic relations to gain momentum. That same scenario is expected in Ukraine, maybe even quicker than in Poland, provided that legislative solutions are urgently adapted.

    Ukraine is already today seeing a slow recovery in demand for energy, but there is lacking infrastructure and room for efficient investments in distributed energy, which seems to be the only direction for Ukraine.

    Despite the enormous efforts in the process of repairing current damages and removing failures, Ukraine is developing plans to build hybrid installations, to develop a storage system, and to initiate hydrogen projects. The challenge lies in finding partners who, in many cases, have suspended their operations out of fear for their employees.

    Everyone present at the session agreed that Ukraine’s energy system following the Russian war should be rebuilt in a new design and have new tasks, such as supplying the EU with surplus green energy. For now, however, there are potential problems with raising funds for this purpose.

    With a huge RES potential estimated at 900 GW along with other emission-free sources, such as nuclear energy, Ukraine has a chance to become an important supplier of green energy not only for the needs of its own transformation, but also of the entire EU.

    The role of economic migration on the Polish and Ukrainian labour market in the nearest future

    The data indicate that 500,000 migrants from Ukraine are responsible for an additional increase of 1% in Poland’s GDP. Although at the beginning of the war Poland was the main direction of migration, today our country is increasingly less attractive for refugees to live and work.

    In 1991, Ukraine had a population of 52 million, and in 2023 its population fell to 29 million. Currently, there are approx. 8 million Ukrainian citizens living abroad. This indicates significant problems for the Ukrainian economy and labour market that may arise after the war, along with the beginning of investments related to the reconstruction of this country.

    Poland is currently one of the countries struggling with the greatest demographic problems in the world. Day to day instability is also not conducive to decisions regarding having a family. While Poland has a fertility rate of 1.26, there are many indications that it has dropped in Ukraine below 1.

    Polish companies are nowadays struggling with a considerable shortage of employees. Undoubtedly, refugees from Ukraine who have been coming to Poland since the beginning of the Russian invasion are of great value to our economy. The problem with lacking workforce, which currently affects Poland, may in the future impact Ukraine. It is crucial for our country to be able to both attract Ukrainians to work here and to retain them after the war.

    The scale of housing problems or the need to provide childcare to single women is of key importance in settling in Poland. The role of learning the local language in enabling migrants to stay permanently in our country is frequently emphasised. It is also imperative to facilitate the recognition of qualifications.

    Many companies and institutions run activation and training programmes for migrants from Ukraine. Some of these initiative are run in cooperation with the Union of Entrepreneurs and Employers.

    The transformation of the Ukrainian economy will be very similar to the Polish transformation. Poland has already gone through this process and has experience with processes related to it. Furthermore, no business culture in the European Union is as close to the one in Ukraine as that of Poland. The Polish transformation from an emigration market to an immigration economy was very rapid. Today, we issue more work permits than Germany, for instance. We can without a doubt share this experience and it can be very valuable for Ukraine.

    The pharmaceutical sector in Poland and Ukraine: the potential for partnership in the context of war and European integration

    Ukraine is the largest country in Europe in terms of area, ranks 6th in terms of population size and 2nd in the number of cancer patients (1.2 million).

    From the healthcare perspective, Ukraine has been struggling with such problems as: the lack of reimbursement or mutual recognition, restrictions on certificates of compliance with EU standards since the COVID-19 pandemic until the current military operations. On the flipside, one can be optimistic due to the openness to cooperation with the Western pharmaceutical industry, the country’s motivation to become as soon as possible an important member of the European Community with a significant place in European health policy. As of now, the Ukrainian Ministry of Health has decided to attach great importance to medical research in the economic strategy for Ukraine until 2030, which is currently under development.

    Even prior to the war, Ukraine had had a highly developed pharmaceutical and scientific sector. This was a legacy that had been growing in recent decades. Our eastern neighbour exports drugs to over 50 countries around the globe, including numerous member of the EU, and medical products manufactured in Ukraine are sold on all continents.

    Presently, the reconstruction of the Ukrainian healthcare requires: continuous development of pharmaceutical companies, cooperation based on dialogue, mutual understanding and trust.

    Secretary of State Marcin Przydacz, Head of the Office of International Policy in the Chancellery of the President of the Republic of Poland, gave the closing speech at the conference. He presented the three advantages Polish companies have in the reconstruction of Ukraine: we are the geographically Ukraine’s closest partner with infrastructure at the ready, we are now on the best terms ever in history, we are culturally and linguistically close, and the largest minority in Poland are now Ukrainians.

    As Cezary Kaźmierczak, President of ZPP, concluded his speech: “(he) who will be the first on the Ukrainian market will have the most time to dominate it”. ZPP is the only Polish association of entrepreneurs that provides assistance in Ukraine through their offices in Kiev, Lviv, Lutsk and Vinnytsia.

    ***

    The conference in its entirety, along with industry sessions, is available on the YouTube channel of the Union of Entrepreneurs and Employers: https://www.youtube.com/@ZPPnetpl.

    The event’s agenda can be found at: https://ukraina.zpp.net.pl/rebuild_together.

    Statement of business community from Poland and Ukraine

    Posted on by Weronika Marzec

    Warsaw, 27 July 2023


    Statement of business community from Poland and Ukraine

     

    Business community calls on Governments of Ukraine and Republic of Poland to improve functioning of checkpoints on Ukrainian-Polish border and sign Joint Border Agreement between countries.

    The business community, united by the American Chamber of Commerce in Ukraine, European Business Association, Ukrainian Chamber of Commerce and Industry, Association of International Road Cargo Carriers, Ukrainian League of Industrialists and Entrepreneurs, Union of Ukrainian Entrepreneurs, All-Polish Union of Road Transport Employers, Polish Union of Entrepreneurs and Employers,  calls on the Governments of Ukraine and Republic of Poland to facilitate the development of existing joint checkpoints and construction of new ones on the Ukrainian-Polish border as well as to ensure the soonest signing of the Joint Border Agreement between the Republic of Poland and Ukraine.

    The full-scale war in Ukraine has immensely affected the supply chains of goods. Due to the closure of Ukraine’s airspace, the blockade of some of Ukraine’s sea and river ports, and significant damage to the country’s railway network and infrastructure, road freight transportation through the western checkpoints became almost the only means of international goods transportation.

    Despite the joint efforts of the Ukrainian and Polish sides and related parties to establish an effective passage of commercial vehicles through the western checkpoints on the border, namely: systematic development of road infrastructure on the Ukrainian and Polish sides of the border, assistance to modernize the Shehyni-Medyka border crossing point, the introduction of an electronic queue at all existing checkpoints, commercial vehicles are forced to stand idle at the border for several days, while the existing arrangements for the electronic queue for all participants require improvements.

    According to the electronic queue data, as of the beginning of July current year, the waiting time in the general queue at the Yahodyn-Dorohusk checkpoint is approximately 7 days, and the waiting time in the queue for veterinary control is over 13 days. Obviously, the waiting time leads to a slowdown in the turnover of goods and financial losses for the carriers due to transport delays and breaches of contracts. According to rough estimates of carriers, a day of idle time for a commercial vehicle costs 300-400 euros.

    In order to stimulate the reduction of queues at the borders, decrease the duration of inspection, reduce financial losses for idle time for commercial vehicles, avoid penalties for late implementation of international contracts, and speed up export-import operations between Ukraine and the EU countries, which is especially crucial in the conditions of complicated logistics and infrastructure restrictions during the war, the business community calls on the Governments of Ukraine and the Republic of Poland to:

    • ensure the soonest signing of the Joint Border Agreement between Ukraine and the Republic of Poland;
    • strengthen the dialogue between the Ukrainian and Polish sides and relevant EU institutions on the improvement of current joint checkpoints and establishment of new ones on the Polish-Ukrainian border by using available tools of intergovernmental cooperation and mechanisms of multilateral diplomacy;
    • contribute to the search for ways to converge customs procedures at the Polish-Ukrainian checkpoints and the development of appropriate recommendations for changing the customs legislation of Ukraine and the practices of the state customs services of both countries;
    • speed up the decision-making process by the State Customs Service of Ukraine on the modernization of border crossing points on the Ukrainian-Polish border.

    We express our gratitude to the responsible Ukrainian and Polish state authorities for all efforts to ensure a smooth cargo flow in both directions between Ukraine and the EU.

     

    See more: Statement of business community from Poland and Ukraine

    Memorandum ZPP: “Ukraine’s Resource Policy – Strategic Resources and Rare Earth Metals”

    Posted on by Weronika Marzec

    Warsaw, 17 July, 2023

     

    Memorandum ZPP: “Ukraine’s Resource Policy – Strategic Resources and Rare Earth Metals”

     

    • Without strategic resources, it will be difficult to achieve the climate goals of EU countries, as they are essential for the production of photovoltaic panels, wind turbines, and electric vehicles.
    • China supplies 98% of rare earth metals.
    • 21 out of the 34 critical elements (identified by the EU) are found in Ukraine, where, simultaneously, 117 out of the 120 globally used materials are being extracted.
    • The World Bank predicts a 500% increase in demand for rare earth metals by 2050.
    • In 2021, the EU and Ukraine entered into an alliance to enhance technological and industrial cooperation in the field of rare earth metal extraction.
    • It is assumed that the rare earth resources were one of the reasons for Russia’s aggression against Ukraine.

    We present a memorandum summarizing the discussion during the IV roundtable of the ZPP Energy and Climate Forum, dedicated to Ukrainian energy, and conducted within the EUROPE-POLAND-UKRAINE REBUILT TOGETHER 2023 project in collaboration with the Embassy of Ukraine in Poland.

    The participants of the debate were:

    Anna Burkowicz, Specialist at the Department of Mineral Resource Management, Raw Materials Policy Laboratory, Polish Academy of Sciences
    Roman Dryps, Chief Operating Officer, Center for Business Consulting, Polish-Ukrainian Chamber of Commerce
    Roman Opimakh, President, State Geological and Subsoil Survey of Ukraine
    Dr. Jarosław Szlugaj, Assistant Professor at the Department of Mineral Resource Management, Raw Materials Policy Laboratory, Polish Academy of Sciences
    Seweryn Szwarocki, Director of Strategy and Sustainable Development, LW Bogdanka SA

    Moderator:

    Dominika Taranko, Director of the ZPP Energy and Climate Forum

    Rare Earth Metal Resources in Ukraine

    Roman Opimakh, President of the State Geological and Subsoil Survey of Ukraine, pointed out that Ukraine signed a memorandum of strategic partnership regarding rare earth metals with the European Union in 2021. At the same time, the EU outlined the EU Critical Raw Material Act until 2030, defining joint actions of the member states and necessary regulations that need to be implemented under EU law. Ukraine is currently a candidate for EU membership, and Ukrainians perceive themselves as Europeans, adhering to the same principles, values, and strategic goals. Therefore, Ukraine’s objectives in the field of rare earth metals align with the goals of the European Union’s policy. Ukrainians intend to remain a reliable and stable trading partner in terms of extraction, processing, and supply of rare earth metals, as well as components for the battery industry, as well as the disposal of used equipment with recovery of raw materials. Consequently, a concept of establishing an entire value chain within Ukraine for supplying the EU is being developed.

    Extraction and production potential of Ukraine regarding critical raw materials is among the highest in the world. Ukraine is among the top 10 global producers of titanium, kaolin, manganese, iron ore, graphite, zirconium, uranium, as well as raw materials essential for modern technologies such as beryllium, aluminum, nickel, and cobalt. Ukraine holds resources for 21 out of the 34 minerals identified by the EU as critical. Therefore, the Ukrainian government has implemented an open-door policy for foreign investments, preparing a list of 100 regions in which licensing and acquisition of exploration and production concessions will be available. Another way to enter the Ukrainian market today could be through acquiring existing concessions through agreements with local companies, thus fostering cooperation within consortia. Cooperation within greenfield and brownfield investment types is being considered. For future investment needs, 1,200 deposits of rare earth minerals have been identified, and conceptual maps have been developed. There are locations where operations can already be conducted.

    Titanium – Ukraine is among the top 10 countries with documented titanium deposits worldwide and provides 7% of global production (data from 2021). Currently, titanium is extracted in Ukraine along with ilmenite, rutile, and zirconium in six deposits, yielding 900,000 tons of concentrate containing 350,000 tons of titanium annually. Currently, the largest producer and processor of titanium in Europe, JSC United Mining & Chemical Company, is being privatized.

    Lithium – Currently not mined in Ukraine, but its resources constitute 1/3 of Europe’s deposits. Three lithium oxide deposits have been identified for future development. One of the deposits is already under the concession of UkrLithiumMining LLC.

    Other metals such as tantalum, niobium, and beryllium – have been identified in six deposits, with tantalum and niobium also occurring as by-products of titanium deposits. Beryllium is found in the Perzhanske deposit, where 15.3 thousand tons of beryllium oxide are located, along with tantalum, niobium, zirconium, tin, molybdenum, lithium, and zinc, among others. The concession for this deposit has been held by BGV Group since 2019.

    Cobalt – It is found in 12 deposits containing 9 thousand tons of this element. Ukraine processes significant amounts of imported cobalt and nickel, which is handled by Pobuzhsky Ferronickel company.

    Graphite – Ukraine possesses some of the world’s five largest graphite deposits, amounting to 19 million tons of ore with concentrations ranging from 5% to 8%. Currently, 5 thousand tons of graphite concentrate are extracted annually from six deposits. The concession for these deposits is currently held by the Australian company Volt Resources.

    Ukraine has favorable geological conditions for the occurrence of rare earth metals. As part of the mentioned strategic partnership with the EU, a Roadmap for 2023-2024 has been defined, which incorporates environmental protection and “green mining” (low emissions in the mining industry) as priorities in the envisioned methods of resource extraction. Ukraine has also been involved in the process of creating EU regulations regarding the use of rare earth metals until 2030. In terms of cooperation, the Ukrainian Geological Survey has developed a geological map highlighting the extraction potential and has devised incentives for investors interested in the mining industry, including the extraction of rare earth metals.

    Abundance of Rare Earth Metals in Poland

    Dr. Eng. Jarosław Szlugaj, Assistant Professor at the Department of Mineral Resource Management in the Laboratory of Raw Materials Policy at the Polish Academy of Sciences, emphasized that his unit has been monitoring the management process of mineral resources for almost 30 years. They oversee all mineral resources located in Poland that are subject to trade and are simultaneously produced or consumed. A thematic publication titled “Balance of Poland’s Mineral Resource Management,” which covers over 100 types of resources, is being issued on the topic. The list of critical resources for the European Union continues to expand. Over the past 10 to 20 years, their utilization has become widespread, and today we are facing a new situation in which Poland, the European Union, and the world consume vast amounts of resources, many times greater than in past decades and centuries.

    Poland consumes significant amounts of rare earth metals imported from abroad. Unfortunately, it does not have its own sources or deposits of rare earth metals, so reliance must be placed solely on imports. However, there is resource potential, especially in terms of resource recovery. With the dismantling of the Wizów Chemical Plants (where phosphoric acid was produced from apatite from the Kola Peninsula, enriched with rare earth elements), there is a repository of post-production waste from which rare earth metals can still be extracted. Currently, no recovery is being carried out because none of the tested technologies allow for it on an industrial scale.

    As a result, Poland imports increasing amounts of rare earth metals (mostly in the form of oxides, not necessarily in separated form). They are mainly used as glass colorants, polishing agents, but also in batteries, electric motors, or permanent magnets. Poland only imports finished products, especially when it comes to permanent magnets.

    The situation is similar with lithium. Thanks to foreign investments, Poland has become a significant producer of lithium-ion batteries, primarily used in the automotive industry. The entire process involves importing raw materials, processed in the source country of imported product. Semi-finished products reach Poland, where they are assembled to create finished batteries. Currently, Poland does not have domestic facilities utilizing these advanced technological processes and production methods. Everything relies on enterprises owned by foreign investors.

    Strategic resources (according to the list of 34 identified by the EU) possessed by Poland.

    Poland essentially possesses only two strategic resources that it independently processes on a larger scale. The first is coking coal, which is used to produce coke, a crucial component in steel production processes. The second is copper, recently added to the list.

    On March 16, 2023, the European Commission published the announced draft regulation on critical and strategic raw materials for the European Union’s economy. The document also includes a new, updated list of critical raw materials (CRM). The CRM Act aims to stimulate the production of strategic resources by intensifying new activities related to extraction and recycling within the European Union. Furthermore, it seeks to increase awareness of potential threats related to raw material supplies, supply chains, and related opportunities among EU countries, enterprises, and investors.

    The published new list of critical raw materials (CRM) in the document COM(2023) 160 final titled “Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a framework for ensuring a secure and sustainable supply of critical raw materials and amending Regulations” expands the list of critical raw materials for the EU (available in Annex II, Section 1).

     Antimony

     Fluorite

     Helium

     Nickel

     Strontium

     Arsenic

     Phosphorites

     Cobalt

     Niobium

     Tantalum

     Bauxite / Aluminum

     Phosphorus

    Silicon metal

     PGM – platinoids

     Titanium

     Barite

     Gallium

     Lithium

     Heavy REE

     Vanadium

     Beryllium

     Germanium

     Magnesium

     Light REE

     Coke coal

     Bismuth

     Graphite

     Manganese

     Spodumene

     Tungsten

     Boron / Borates

     Hafnium

     Copper

     Scandium

     

    Table description: Critical raw materials for the European Union according to the European Commission (2023). New CRMs compared to the 2020 list are marked in red. Strategic raw materials for the European Union are indicated in italics.

    Source of compilation: PIG-BIP.

    In the process of preparing the document, 70 different substances were analyzed, assessing their economic importance and estimating supply risks. Ultimately, the number of identified elements was increased from 30 to 34. Although the document refers to “34 critical raw materials,” there are actually more, as rare earth metals are presented as two resources: HREE (heavy rare earth elements) and LREE (light rare earth elements), aside from which, PGM (platinum group metals) account for an additional 5 noble metals. The highest level of supply risk applies to heavy rare earth metals.

    It is also worth comparing the proposed European list (2023) with the American list, which includes 50 items (2022 – https://www.usgs.gov/news/national-news-release/us-geological-survey-releases-2022-list-critical-minerals ).

    In 2023, helium reappeared in the European register after being absent for the past three years, and the newly designated critical raw materials are copper, nickel, spodumene and arsenic. An interesting case is copper and nickel, which, although they do not meet the CRM thresholds, are included in the list according to the Critical Raw Materials Act. Conversely, indium and natural rubber have been removed from this year’s compilation. A novelty is the identification of several strategic raw materials within the critical raw materials (16 out of 34). The list is updated every 3 years. The strategic importance is determined based on the material’s significance for green transformation, digital technologies, defense applications and space exploration.

    Among the newly added CRMs, Poland has mineral deposits and prospects for further documentation for the following resources:

    • Raw spodumene materials (mostly in Lower Silesia, but also in Lesser Poland)
    • Helium (Wielkopolska) – recovery from natural gas
    • Polymetallic deposits, primarily copper (Lower Silesia and Lubusz Land)
    • Arsenic (Lower Silesia and as a co-occurring element in other deposits in Upper Silesia)
    • Nickel (Lower Silesia)

    The CRM Act document should help develop activities in the field of scientific research and innovation, negotiate trade agreements, and implement new projects related to the exploration and exploitation of critical raw materials.

    Unfortunately, Poland does not possess resources for most strategic raw materials necessary for the production of devices related to “new energy,” such as wind turbines or photovoltaics. In the past, crystalline silicon, which is the basis for every photovoltaic cell, was produced in the country. However, production ceased after privatization and foreign acquisition.

    Participation of foreign investors in the mining industry of Ukraine

    In Europe today, the mining industry is no longer common, which is why Ukraine’s focus on the development of this sector has attracted the interest of foreign investors. Ukraine invites foreign investors to increase extraction activities on its territory due to its rich mineral deposits and the industry’s long-standing history. The State Geological Survey conducts concession procedures, concludes cooperation agreements, and possesses other instruments to encourage investors. Several major Polish companies operate in Ukraine, including Cersanit, which mines kaolin and conducts wide-scale market sales of ceramic products. Before the war, there were discussions with KGHM Polska Miedź SA regarding investments, and the Ukrainian authorities are ready to resume these discussions. The Ukrainian government seeks to provide comprehensive assistance to investors by conducting webinars, providing maps, mostly in an online format today. Additionally, a memorandum has been signed with the Polish Geological Institute, which is evidence of the development of a strategic Polish-Ukrainian partnership.

    Ukraine can prove to be an attractive market for LW Bogdanka SA, which is seeking future directions for business diversification. Seweryn Szwarocki, Director of Strategy and Sustainable Development at LW Bogdanka SA, emphasized that Lubelski Węgiel Bogdanka SA is the most efficient coal mine in Poland. In the face of the armed conflict in Ukraine, the demand for coal has increased, but the Management Board of LW Bogdanka SA, aware of the need for energy transformation associated with the new climate goals set by the European Union, has committed to phasing out coal production by 2049. The company is preparing for these plans to ensure the continuity of its operations.

    As a result of conducted analyses regarding the possibility of mining other resources, on May 17th, the company published a new strategy. Its main objectives are to maintain production capacity, sustain high profitability indicators, selectively extract type 34 coal, diversify revenues by expanding the areas of operation, and identify, assess and document new reserves of type 35 coking coal.

    The main goal of LW Bogdanka’s new strategy for the years 2023-2030 is to create an innovative multi-commodity corporation that drives green transformation and secures the economic development of the Lublin region and, more broadly, central-eastern Poland. Through business diversification, LW Bogdanka can potentially engage in the extraction of selected critical resources for the EU, including possibly in the Ukrainian market.

    Given that the mining industry is capital-intensive and involves complex processes, Bogdanka SA has an advantage over its competitors due to its extensive mining experience. While the company’s current activities are focused on the Lublin region, new mining projects are being sought. The western lands of Ukraine stand out as a potential area, considering their rich mineral deposits, especially those utilized in the energy transformation process. However, due to the ongoing armed conflict on Poland’s eastern border, the current opportunities for cooperation are limited. Investments in a war-torn country carry the risk of uncontrolled destruction in the areas where the company operates.

    Nevertheless, Bogdanka SA confirms that it is conducting analyses regarding the extraction of several potential resources, with the criterion being their inclusion on the list of critical raw materials for the European Union. LW Bogdanka also sees the prospect of cooperation with the existing mining industry in Ukraine, given the lower level of digitalization compared to its Ukrainian counterparts. The Polish company is also willing to engage in technological exchange. However, due to the nature of the company as a publicly traded entity, all planned investments have a long-term perspective, and the process of selecting investment locations can be time-consuming.

    Considering the existing legislative difficulties related to the mining  of critical resources, there is a need for legal acceleration of investment processes. Additionally, an important aspect for deciding on the exploration, assessment and mining of a specific resource is the size of the deposit and the estimated level of extraction difficulty.

    Adapting Ukrainian Geological Law for Mining Investments

    Recently, the Ukrainian government has introduced a package of numerous legal changes regarding the regulation of the mining industry. The practices of European countries served as a model for the legislative amendments. The experts knowledgeable in this field were also consulted. Many outdated regulations have been removed from Ukraine’s legal system, which should facilitate business operations. In some cases, it will no longer be necessary to participate in tenders to start activities. The mining process can commence as early as one and a half years after obtaining an environmental impact assessment. Investment opportunities have been increased, among other things, by introducing electronic deposit maps. Upon selecting an area for investment, all necessary information about the area of interest can be obtained both online and in person.

    The State Service of Geology and Subsoil of Ukraine expects increased international cooperation, especially with the EU, regarding planned initiatives. A cooperation agreement has been signed within the framework of a memorandum with the European Bank for Reconstruction and Development regarding a three-year program for the digitalization of services, particularly those related to geological information. Another important task for the project is to adapt Ukrainian counterparts of government portals to the English language version, aiming to professionalize international cooperation (as all information desired by investors is currently available only in Ukrainian).

    Goals of the Industrial Alliance between Ukraine and the European Union

    Anna Burkowicz, an expert from the Department of Mineral Resources Economy at the State Academy of Sciences’ Policy Laboratory, explained that Ukraine’s plans for cooperation with the European Union also involve rare earth metals, which have extensive potential applications. Rare earth metals, also called rare earth elements (REE) are a family of 17 chemical elements, including two scandium group elements (scandium and yttrium) and all lanthanides (lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium). They occur in minerals and possess similar chemical properties. Due to their catalytic properties, they have numerous applications, including the petrochemical industry. Lanthanum and cerium, in particular, are widely used in the refining of crude oil for gasoline production.

    Examples of applications for rare-earth elements (according to Wikipedia):

    Scandium: alloys for aerospace and space industry

    Yttrium: phosphors, ceramics, alloys

    Lanthanum: batteries, X-ray films, catalysts in oil refining processes

    Cerium: catalysts, alloys

    Praseodymium: minor component in alloys used for magnets (corrosion prevention)

    Neodymium: strong neodymium magnets, lasers

    Promethium: beta radiation source

    Samarium: magnets for high-temperature operation, control rods in reactors

    Europium: liquid crystal displays, fluorescent lighting

    Gadolinium: production of green phosphors in CRT screens and scintillators in X-ray imaging

    Terbium: phosphors for lamps and displays

    Dysprosium: strong magnets, lasers

    Holmium: strong magnets

    Erbium: lasers, optical amplifiers

    Thulium: ceramic magnetic materials

    Ytterbium: optical fibers, solar cell plates

    Lutetium: x-ray-luminophores

    In the United States, approximately 60% of lanthanides are used in refining, but REEs are utilized in a wide range of industries. These include ceramics, glazes, metallurgical alloys, rocketry, aviation, modern technologies, the IT sector, screens, lasers, diodes, the energy industry, and permanent magnets. The People’s Republic of China is responsible for 93% of the world’s production of all permanent magnets using rare earth metals, while Japan accounts for 6%, and the European Union for 1%.

    The possibility of ending China’s monopoly for the moment is not realistic. According to participants in the roundtable discussion, unfortunately, the world’s economies themselves are responsible for the current state of the raw material market division, since the Chinese have built their current advantage de facto over the past several years. China naturally also has a huge raw material potential. In this context, the chance to return to European production may be provided by the very beginning of exploration of deposits in Ukraine.

    Polish-Ukrainian Cooperation in the mining industry?

    According to the opinion of Roman Dryps, the Chief Operating Officer of the Business Advisory Center of the Polish-Ukrainian Chamber of Commerce, which has been operating as a bilateral chamber for 30 years, the Polish government or Polish companies are unlikely to be Ukraine’s partners in the mining and processing of rare earth metals. Poland lacks the technology and the deposits themselves. There are only a few domestic enterprises that could be significant players in this area, including the already mentioned KGHM Polska Miedź SA and LW Bogdanka. According to the expert, Polish entrepreneurs working in the mining industry have had success in the field of new technologies, but mainly in the market of coal, liquid fuels, or gas extraction. Two main minerals, that were extracted in Ukraine until 2014 are coal and iron ore. The cycle of operation was simple – they were used for steel production or for energy purposes. At that time, most coal mines operated on a concession basis. The concessionaires of these mines were mostly owners of private machinery industry plants for mining machinery construction. Profit was simply the absolute priority at that time, and new technologies in the mining industry were not developed. The Polish-Ukrainian Chamber of Commerce actively collaborates with the Ukrainian Ministry of Energy, and based on unofficial information from “first-hand sources,” it is known that the coal mining industry will not be restored in the classic sense after the war. Furthermore, based on data presenting the resources on the territory of Ukraine, it can be learned that as of spring 2023, 63% of coal deposits, 11% of oil deposits, 20% of natural gas, 42% of metals, and 33% of rare earth metals were under the occupation of the Russian aggressor. Their overall value, according to geological studies, is estimated at 12.5 trillion US dollars. Therefore, it is difficult to avoid the impression that Ukraine’s natural resources could be a dominant factor that prompted Russia to launch a military attack.

    Sources of financing of mining industry in Ukraine

    The European Union (EU) has only recently begun working on support programs for investors to encourage them to invest capital in the development of advanced extractive and processing industries, particularly in the context of critical raw materials. So far, only recommendations have been issued at the EU level, regarding environmental decision-making related to the assessment of projects and concessions for the mining of rare earth metals. At the same time, it is likely that whether with the participation of EU programs, or even if there were none, or if they were insufficient, (assuming that the demand for these raw materials will grow, and thus, in the absence of supply), the price of these raw materials will increase and the profitability of these projects will also increase exponentially. This opens up the opportunity to obtain bank financing from European institutions in a situation where the elements in question are identified by the EU as key in the green transition and fit in with the requirements of sustainable development, or ESG strategies.

    The Ukrainian public administration is currently undergoing a period of increased digitization, with a significant portion of public affairs being handled electronically. This will undoubtedly facilitate dialogue regarding potential financing and project cooperation as well.

    Collaboration with the world of science

    Scientists from the Polish Academy of Sciences utilize a wide range of literature in their studies on rare earth metals and stay up to date with the geopolitical situation regarding mineral resource economy worldwide. There is a possibility of assisting entrepreneurs in market research and identifying potential avenues of operation. So far, no Polish company has applied for a concession to operate in the Ukrainian market, which holds immense potential. In Poland, there are universities that educate mining engineers, metallurgists, and technologists.

    By observing the specific nature of the mineral resource market, one can notice a decline in the trade of low-processed raw materials. For example, in the case of iron ore, concentrates are produced, and there are also technological changes occurring, with developed sintering and granulation processes for these ores. It is no longer bulk ore that would be transported over significant distances. With the next generation of resources, processing is increasingly concentrated in one place. In the case of rare earth metals, Chinese companies generate approximately 60% of global production, but their real advantage lies in processing, specifically separation. The ore is complex, consisting of several coexisting elements, usually around 7 to 8 types. China has specialized in individually extracting 7 to 8 minerals, rather than processing them comprehensively. In this situation, China has a monopoly in production, offering separated oxides and specific metals in the form of powders or semi-finished products worldwide. Recognizing the potential associated with deposit extraction in Ukraine, it can be observed that its owner, the State, should endeavor to establish comprehensive processing and ore extraction plants. However, this would not have significant implications due to China’s dominant position in the market. In Europe, at best, a concentrate could be produced, which would still need to be sent to China for further processing. China also holds a monopoly in battery and photovoltaic production due to low production costs. This has been the main reason for relocating facilities from the United States and Western Europe to China. Twenty years ago, the People’s Republic of China specialized in only a few resources. Now there are dozens, including those considered critical. Therefore, Ukraine certainly has potential, but parallel planning for the local processing and production market should be considered. In this context, collaboration with research and development is necessary.

    Would synthetic elements be a solution?

    Synthetic crystals such as silicon, sapphires, or synthetic diamonds are produced using the method developed by the Polish scientist, Professor Jan Czochralski. Synthetic products can serve as substitutes for natural ones. Synthetic diamonds, for example, are widely used in the abrasive and drilling industries. Materials engineering is rapidly advancing, and in this field, there is a vast potential for collaborative research that can contribute to the future reduction in the use of natural resources. Mining production may be minimized in the future. New composite materials are being discovered that have comparable strength to steel, but do not contain metal in their structure. One such example is the indium tin oxide alloy (ITO) used in touch screens. Indium used in production is not sourced from its own deposits. Therefore, if there is a forecasted increase in demand for this material, the mining process will need to be accelerated and expanded from the ore it is derived from. Forecasts related to the implementation of the Fit for 55 program suggest that demand for certain minerals may increase 50-fold. Some deposits will be depleted, making it impossible to meet the demand for certain elements. This opens up opportunities for the development of alternatives.

     

    See more: 17.07.2023 Memorandum ZPP: “Ukraine’s Resource Policy – Strategic Resources and Rare Earth Metals”

     

    Commentary of the Union of Entrepreneurs and Employers on the Cable Pooling Act

    Posted on by Weronika Marzec

    Warsaw, 30th May 2023

     

    Commentary of the Union of Entrepreneurs and Employers on the Cable Pooling Act

     

    While the Cable Pooling Act is a key decision in terms of development with regard to the Polish renewable energy sector, in its current form it remains unattractive:

    • energy from a hybrid installation in cable pooling will be cheaper than from a single RES source,
    • the role to be played by energy storage in cable pooling is significant, provided that energy storage is not treated as a generation source,
    • there is a risk of overregulation of connection sharing rules by generators, which will limit the potential for the emergence of new RES sources.

    Presently, connecting new generation capacities to the National Power System is a considerable problem for the Polish energy sector as its reconstruction is both costly and time-consuming. A quick fix to this dilemma (at least to a certain extent) may be the shared use of a connection by renewable sources with different operating times and dynamics. By sharing such a connection, we get a more stable generation profile, which is desirable for the system. Unfortunately, the idea, without proper consultation, may easily turn into a useless regulation.

    Proposals for amendments to the Energy Law presented by the Ministry of Climate regarding the so-called cable pooling constitute one of three key solutions for RES-related issues, critical for rapid development of RES in Poland, at an optimal investment cost.

    Cable pooling is the possibility of using an already existing connection point, such as a wind farm, by another source, provided that the output power of such a hybrid power plant does not exceed the installed power allocated by the operator in the power connection agreement.

    What does it mean in practice? If we have a wind farm with an installed capacity of 50 MW, this is the exact maximum value of energy that we can introduce energy into the system. Most days of the year, the wind farms operate at half of the installed capacity, in this case 25 MW, which means that there is still a possibility of introducing another 25 MW independently from the wind farm.

    So, if we add 25 MW from a photovoltaic installation to those 25 MW from the windfarm, we will get a much more efficient source of green energy. Furthermore, the operating times of a wind farm and a solar installation usually do not coincide in time, usually the wind blows stronger at night, and the photovoltaic installation works more efficiently during the day.

    If we supplement such a hybrid installation with a gas source with a capacity of about 10 MW and replace it in the future with a hydrogen installation, we will have a local, stable source of energy operating continuously with a fairly steady power for at least 7,500 hours a year.

    Such an installation will generate approx. 250,000 MWh of energy per year, of which about 170,000 MWh will be green.

    At no time will the energy introduced into the grid exceed 50 MW of power, so there will be no need to modernise the connection to add further sources. And this is a significant saving when planning a new investment, thanks to which the energy from such a hybrid system will be significantly cheaper than with a single energy source.

    Proper provisions in the amendment to the Energy Law regarding cable pooling will enable a quick construction of at least 5-7 GW of solar and wind energy sources in Poland without the need for investors to wait for connection decisions, without overloading the power system. On a national scale, this could provide up to 12 TWh of cheap green energy. Some studies indicate that the potential of cable pooling in Poland is much larger, even at the level of 25 GW of new capacity.

    Without focusing on individual provisions of the Act, which still require some fine-tuning, the initiative of the Ministry itself should be evaluated positively.

    It is also a decision that significantly increases the energy security of the country, because one should expect quick investments in new sources that will supplement the existing ones, and at the local level will ensure an adequate supply of green energy for local industry.

    Unfortunately, a fairly clearly identified threat during consultations regarding cable pooling regulations, led by the Ministry of Culture and National Heritage, is the overregulation of the new legal institution.

    Technical and regulatory requirements for each single element of the system (aimed at increasing the control of the Energy Regulatory Office (URE) or Polish Power Grids (PSE) over each generation source), in confrontation with the joint and several liability of a group of entities organised under one cable pooling decision, will cause both problems in controlling the generation capacity of individual energy sources and a lack of freedom to shape relationships within the manufacturing group. Moreover, there is a risk of dilution of responsibility within the group, for example, for exceeding the contractual capacity.

    At the present stage, the Ministry of Culture and National Heritage has not yet indicated what cable pooling really is and what it is intended to be. Such assumptions would allow for self-discipline in drafting regulations and would limit the risk of their excessive detail, which currently makes the new law extremely difficult to enforce. The complexity of regulations may therefore cause cable pooling to be an option selected only by large energy players or investment groups that are not energy companies, but may block the development of cable pooling and try to monopolise connections.

    In order to ensure that the Cable Pooling Act is widely implemented:

    • remove from the act any and all provisions that go beyond metering, power control, and control of line overshoots,
    • leave the broadly understood principle of freedom to conclude contracts between RES producers who are parties to a cable pooling contract,
    • the need to control and the obligation to report generation from each source is rational, but control of each of them should remain the responsibility of business entities, and not state authorities or institutions (in this case, the supervising entity would encroach on the principle of freedom to shape contractual relations),
    • public authorities or institutions should only have at their disposal controllability of a power source as a whole solely at the connection point, and not of each generating device. Otherwise, it will disrupt business relations within the group and may become the source of civil lawsuits both against administrative authorities and between entities within said group,
    • entities other than those licenced should not be allowed to be parties to cable pooling agreements, so that they do not block or monopolise connections, while not being subject to provisions of the Energy Law (due to the energy security of the state and undesirable actions of third parties),
    • parties to the agreements (leaders of a potential joint venture) should only be entities that supply energy at a given connection point or are a licenced applicant for connection to the network,
    • the basis of the operation of cable pooling is the stability and predictability of accumulated energy sources introduced at the connection point. Entities that ensure controllability of the energy introduced in accordance with the power demand should be rewarded, promoted, and exempted from fees – this will encourage people to add energy storage to the pooling cable system (so that power control is more flexible and resembles generation from commercial energy sources),
    • energy storages operating within the cable pooling system should not be separated or treated as power generators, but together with another renewable source as one generation unit – assigned to a specific generating element.

     

    See more: 30.05.2023 Commentary of the Union of Entrepreneurs and Employers on the Cable Pooling Act

    Our report: CIT in Poland – why is it not as it should be?

    Posted on by Weronika Marzec

    Warsaw, 31st May 2023

     

    ZPP report: CIT in Poland – why is it not as it should be?

     

    The Union of Entrepreneurs and Employers has published its latest report “CIT in Poland – why is it not as it should be?” which is an attempt to systematise the knowledge on the functioning of corporate income tax in Poland.

    The year 2022 was exceptional in terms of the share of budget revenues from taxes. For the first time ever in history, CIT revenues (PLN 70.1 billion) exceeded those from PIT (PLN 68.1 billion) from natural persons. The shift in priority in relation to the value of the tax paid is an extraordinary situation resulting from the record-breaking – 33.9 percent y/y – increase in CIT revenues. In recent years, not only the amount of tax paid in nominal terms, but also in relation to GDP, was the highest in history.

    However, the observable increase in CIT revenues did not bridge the gap in relation to this tax. Due to its often-elusive nature from an economic perspective, the size of the CIT gap is largely the result of the collected estimates. The Polish Economic Institute in their “CIT Gap in Poland” (“Luka w CIT”) report states that in 2019-2020 the level of the CIT gap stabilised at approx. 30% of theoretical CIT revenues. This means – recalling the suggestive picture outlined by PIE experts – that out of every PLN 100 of tax that should flow to the state budget and local governments, they receive only about PLN 70. According to estimates, the CIT gap in 2020 was between PLN 20 and 25 billion. Recent years have also been a period of dynamic changes regarding the scale of the phenomenon.

    Therefore, the Union of Entrepreneurs and Employers set itself the goal of systematising the latest available analytical knowledge concerning CIT, discussing the key phenomena related to this tax, identifying successes and failures in terms of reducing the scale of the phenomenon of aggressive tax optimisation and considering the reasonableness of alternative concepts – with the entire repository of opportunities and risks correlated with it.

    The “CIT in Poland – why is it not as it should be?” report was created as part of the Business for Poland, Poland for Business project.

     

    Find out more: 31.05.2023 CIT report in Poland. Why is it not as it should be?

    Press conference: Marcin Nowacki elected the EU’s head of the EU-Ukraine Civil Society Platform

    Posted on by Weronika Marzec

    Warsaw, 29th May 2023

     

    Press conference:
    Marcin Nowacki elected the EU’s head of the EU-Ukraine Civil Society Platform

     

    On 29th May 2023 at 1 pm, at the Polish seat of the European Parliament and the European Commission, a press conference was held during which Marcin Nowacki, Vice-President of the Union of Entrepreneurs and Employers, was elected head of EU-Ukraine Civil Society Platform (EU-Ukraine CSP) representing the European Union. The platform operates within the framework of the European Economic and Social Committee (EESC) in Brussels, which is an EU advisory body.

    At the conference, Cezary Kaźmierczak, President of the Union of Entrepreneurs and Employers, pointed out during his opening address that the European Economic and Social Committee is a platform for dialogue between employers, trade unions, NGOs, and politicians: “We are truly happy that a Pole has become the plenipotentiary for Ukrainian affairs, even more so a member of our organisation. Marcin Nowacki took on his new duties already at the beginning of the month.”

    “The EU-Ukraine Civil Society Platform is the foundation of institutional cooperation between social partners from EU member states and Ukraine. I have been elected for a term of 2.5 years, and I hope that we will soon begin the accession negotiation process. This is what will motivate me the most in the months to come. After the negotiations start, the Civil Society Platform will become the EU-Ukraine Joint Consultative Committee,” – said Marcin Nowacki, the Union’s VP.

    The EU-Ukraine CSP integrates social partners from the EU and Ukraine. The body aims to supervise the process of Ukraine’s integration with the EU and to integrate the business community and employees between the parties. As part of the undertaken activities, reviews of the process of adapting Ukraine to EU requirements and support in the field of Ukrainian business entering the EU market are held.

    The EESC is an EU advisory body with a specific role in the EU’s decision-making process. Before being processed by the European Parliament, each regulation is subject to an opinion process at the EESC. It consists of 329 representatives of employers’ organisations, trade unions, and NGOs from all Member States.

    ZPP’s comment: Poland – a good place for Ukrainian entrepreneurship

    Posted on by Weronika Marzec

    Warsaw, June 14, 2023

     

    ZPP’s comment: Poland – a good place for Ukrainian entrepreneurship

     

    • According to data from Info Credit, Ukrainians established 17,457 business activities in Poland in 2022.
    • Only from the beginning of 2023 up to May 29 (inclusive), 13,117 business activities run by Ukrainian citizens were registered in Poland.
    • Since the beginning of Russia’s armed aggression against Ukraine, Ukrainians have established the largest number of business activities in Mazovia and Lower Silesia.
    • As of early 2022, Ukrainians were most likely to locate their companies in Warsaw, Krakow and Wrocław.
    • The number of companies established by Ukrainians in Poland has been significantly influenced by the Special Act on assistance to Ukrainian citizens.

    Border Guard estimates show that 12 million Ukrainian refugees have crossed the border with Poland since the beginning of Russia’s armed aggression against Ukraine. In the period of February 24–28, 2022 alone, it was 355,000 people. Migration peaked in March 2022, when approx. 2 million Ukrainians entered Poland. Between April 2022 and the end of May 2023, Polish-Ukrainian border crossings were crossed by 584,000 people in February 2023 to as many as 781,000 people in August 2022. Obviously, not all of these people remained in Poland, but the vast majority nevertheless decided to settle in our country. A significant group are those who have taken up legal permanent gainful employment in Poland or decided to establish a business activity. According to estimates by the Ministry of the Interior and Administration, approx. 97 percent of Ukrainian refugees are women (most men are banned from crossing the state border).

    Business activity of Ukrainians in Poland in 2022

    The definite influx of Ukrainians into Poland has translated into a huge increase in the dynamics of Ukrainians starting businesses. Data from Info Credit shows that in 2022 Ukrainians established 17,457 business activities in Poland, of which 14,258 companies were active at the end of the calendar year. 1,191 business activities were deleted and 1,781 suspended.

    Ukrainians were most active in the Mazowieckie Voivodeship, where they established 4,256 companies last year. The second place was taken by the Dolnośląskie Voivodeship, where 2,673 Ukrainian businesses were established. The following voivodeships were ranked next: Małopolskie – 2,285 companies, Pomorskie – 1828, Wielkopolskie – 1,361, Zachodniopomorskie – 1,029, Śląskie – 979, Łódzkie – 687, Lubuskie – 520, Kujawsko-Pomorskie – 417, Podkarpackie – 357, Opolskie – 296, Warmińsko-Mazurskie – 118, Świętokrzyskie – 114 and Podlaskie 91.

    Ukrainians registered the largest number of companies in 2022 in Warsaw – 3,289. Many were also established in Krakow – 1,899, Wrocław – 1,873, Poznań – 840, Gdańsk – 835, Szczecin – 655 and Łódź – 484.

    Relatively constant over the years has been the group of major PKD codes indicated by Ukrainians within their business activities. Hairdressing and other beauty treatment led the way in 2022, with 2,144 indicated as the main PKD code. The second most frequently indicated type of activity was computer programming activities (1,995 companies), and the third was other building completion and finishing (1,243 companies). Significantly popular in 2022 were also (in parentheses the number of indications as the main PKD code): construction related to erection of residential and non-residential buildings (764), electrical installation (540), freight transport by road (533), mechanical working of metal elements (420), retail sale via mail order houses or via the Internet (383), restaurants and other eating places (376) and other specialized construction activities not elsewhere classified (372).

    Business activity of Ukrainian citizens in Poland in 2023

    A definite upturn in the establishment of companies by Ukrainian citizens came in 2023. Data from Info Credit shows that 13,117 such businesses were registered between January 1 and May 29, 2023 alone. Active during the indicated period remained 11,694 of them – 421 were suspended and 170 were deleted. There were 51 enterprises operating exclusively in the form of a company, and 3 with the end of the indicated period were waiting to start operations.

    The largest number of new business activities established by Ukrainian citizens between January 2023 and May 29, 2023 were registered in the Mazowieckie Voivodeship – 3,211, Dolnośląskie Voivodeship – 1,941 and Małopolskie Voivodeship – 1,793. The following voivodeships ranked next: Pomorskie – 1,285 companies, Wielkopolskie – 993 companies, Zachodniopomorskie and Śląskie – 772 companies, Lubuskie – 507, Łódzkie- 492, Kujawsko-Pomorskie – 333, Podkarpackie – 305, Lubelskie – 260, Opolskie – 182, Świętokrzyskie – 102, Warmińsko-Mazurskie – 98 and Podlaskie – 61.

    Also in 2023 (up to and including May 29), Ukrainians were eager to register their businesses within Poland’s largest metropolises. 2,500 companies were established in Warsaw, 1,549 in Krakow, 1,386 in Wrocław, 665 in Gdańsk, 591 in Poznań, 472 in Szczecin and 350 in Łódź.

    In the period from the beginning of 2023 to May 29, 2023 inclusive, the main PKD codes most frequently indicated by companies established by Ukrainian citizens were: computer programming activities (2,100 times), hairdressing and other beauty treatment (1,461), other building completion and finishing (817), construction related to erection of residential and non-residential buildings (549), freight transport by road (453), electrical installation (442), mechanical working of metal elements (365), restaurants and other eating places (335), retail sales via mail order houses or via the Internet (315) and other specialized construction activities not elsewhere classified (291).

    Poland is a natural migration destination for citizens from Ukraine plunged into war. Domestic legislation also favors the development of Ukrainian entrepreneurship in the Polish market. Of essential importance in this regard is the Special Act on assistance to Ukrainian citizens, which has contributed to a revival in the registration of sole proprietorships by Ukrainian men and women.

     

    See more: 14.06.2023 ZPP’s comment: Poland – a good place for Ukrainian entrepreneurship

     

    In order to ensure the development of SMR technology in Poland and Europe, we need fleet-oriented investments of regional coverage

    Posted on by Weronika Marzec

    Warsaw, 13 June 2023 

     

    In order to ensure the development of SMR technology in Poland and Europe, we need fleet-oriented investments of regional coverage

     

    That’s the conclusion of a discussion among industry experts, technology providers, investors and researchers who attended the “SMR – Modular Nuclear Energy for Business” conference on Monday, June 12, held in Warsaw by the Energy and Climate Forum of the Union of Entrepreneurs and Employers. PKN ORLEN was the Main Partner of the event, EDF was a Partner, and Honorary Patrons included three ministries – the Ministry of Climate and Environment, the Ministry of Development and Technology and the Ministry of State Assets, as well as the National Atomic Energy Agency, the National Center for Nuclear Research and the National Fund for Environmental Protection and Water Management.

    The event brought together both nuclear lawmakers, the regulator, several US and European SMR manufacturers, recipients declaring interest in small reactors of various capacities and nuclear experts, who sought to take prepare an inventory of the state of the art of modular nuclear reactors to date and outline the outlook for the development of such investments in our country and region.

    In the opinion of Adam Guibourgé-Czetwertyński, Undersecretary of State at the Ministry of Climate and Environment, the Polish nuclear special-purpose act and nuclear law are sufficient for SMR investments to be developed on their basis, with technology neutrality and a desire to streamline the processes involved in obtaining the necessary permits at the core of the national legislation. Nonetheless, seeing the growing interest in small nuclear reactors, work is currently underway at the ministry to detail regulations for smaller modular nuclear reactors. The minister also encouraged a concerted international effort to bring nuclear technologies from a background player to the front lines of energy transition efforts – as complementary solutions to RES and hydrogen investments.

    According to Kamila Król, Undersecretary of State at the Ministry of Development and Technology, small nuclear reactors have the potential to become a lever of the Polish economy in the coming decades. SMRs can be a remedy for the rising cost of CO2 allowances and ensure Poland has the right composition of the low-carbon energy mix on the one hand, and guarantee a stable and secure energy supply on the other.

    As noted by Jarosław Dybowski, Executive Director of Energy PKN ORLEN and Vice Chairman of the Board of ORLEN Synthos Green Energy: “We cannot think of nuclear reactors today as classically understood power plants, which in the past were only meant to provide electricity. The use of SMRs in domestic conditions is naturally the replacement of depleted coal-fired units, but the modular reactors will also work in the combined heat and power economy and find application in numerous industrial processes.” District heating and energy-intensive industries are identified as the main beneficiaries of SMR technologies, and the number of entities declaring interest in these solutions is growing.

    The main challenge appears to be not so much the technology of light-water nuclear reactors themselves, of which there are about 150 in operation worldwide and only their power and size need to be scaled up; it is the cost that may be a barrier. Experts agree that two aspects can help investors in this regard. On the one hand, suitable government guarantees and a refined financial model, so that involvement in SMRs for banks entails acceptable risks. On the other, the economies of scale brought about by a fleet-oriented investment campaign of regional range, which will reduce unit costs and build locally the competence, service facilities and structures necessary for the new sector.

    “After listening to the participants of the discussion, several recommendations come to mind, such as the involvement of Polish regulators in work on harmonizing nuclear regulations and standardizing certification of SMRs in Europe, the need to consider establishing a TSO (Technical Support Organization) within the structures of the National Center for Nuclear Research and, finally, opening a debate on the future of the nuclear energy in the EU taxonomy, which assumes support for nuclear investments only until 2045, at the European forum.” – concluded Jakub Bińkowski, Board Member of the Union of Entrepreneurs and Employers.

    The conference also touched upon many other aspects of SMR projects, such as safety considerations and the important role of the PPA, which will evaluate small nuclear on the same basis as full-scale nuclear investments. According to experts – despite the already clear support for nuclear in Poland – an extremely important aspect determining the success of SMR investments will be properly conducted communication due to the particular public perception of risk from nuclear facilities. As experts point out, there is no shortage of ideas for small nuclear reactors in the world today, as there are already about 80 projects at the “early design” stage, including also high-temperature reactors using other types of fuel and cooled by gas, HTRs (including a Polish one!) or nuclear batteries that can operate for 20 years without human intervention and the need for fuel supply. Another thread raised by the participants in the discussion was the possibility of involving Polish companies in the development of the European SMR sector, in which experts see significant potential given the pace of development of SMR projects in our country.

    The event was attended by over 150 participants. The Union of Entrepreneurs and Employers will soon make a full recording of the conference available on its YouTube channel.

    Link to the event page: https://zpp.net.pl/en/events/event/conference-smr-small-reactors-for-business-is-poland-the-smr-technology-incubator-in-europe/

     

    “Network fees” proposed by telecommunications operators – will consumers pay twice for infrastructure maintenance?

    Posted on by Weronika Marzec

    Warsaw, 15 May 2023

     

     

    “Network fees” proposed by telecommunications operators – will consumers pay twice for infrastructure maintenance?

     

    1. Recommendations

    Over the past months there has been an increased discussion regarding ETNO’s (European Telecommunications Network Operators’ Association – representing the biggest telecommunications companies) demands to charge content and application providers for the traffic that is generated by the use of their services. Telecoms believe that because of them they are being forced to bear the costs of infrastructure maintenance, and call content providers “stowaways” who do not contribute to the maintenance of European infrastructure. The truth, however, is quite different, and this is not a fight between telecoms and the big Internet giants, but a fight for the Internet as we know it. The concept of “fairshare payments,” as telecoms call them, is opposed by virtually all circles, except the largest Internet providers. Their introduction will certainly also be felt by Polish digital companies, which employ thousands of people and contribute greatly to the economy. 

    In this paper, we will present where the idea of introducing “fair share payments” came from and how it is argued. We will also present what effects the implementation of this solution will have on consumers and entrepreneurs, and we will present individual national circumstances.

    In view of the ongoing debate on the introduction of “fair share payments” we note the following:

    • Not even the telecoms themselves agree on the cost of handling Internet traffic. The Fédération Française des Télécoms presented an estimate according to which handling network traffic generates €2 billion in costs in France, or €27 for each resident of the country. That’s a third of the amount of €80 per EU resident calculated by ETNO, and it’s still significantly inflated.
    • The research indicates that South Korea is so far the only country that has responded to the concerns of telecoms and introduced the legal billing rule of Spending Party Network Pays (SPNP). Under the rules, Internet content and application providers have been required to pay fees to telecoms. The report’s conclusions are clear. All of these regulations have led to a reduction in the quality and variety of content on the Internet. It is also expected to increase costs for the end user of content and reduce investment in local infrastructure
    • Fair share payments can lead to a deterioration in the quality of online content offered by providers. Additional fees mean a reduction in budgets for creating quality services offered to consumers.
    • The introduction of additional fees will lead to a competitive imbalance in the telecom market itself favoring the largest players. They will lead in practice to the strengthening of oligopolies in the market.
    • Fair share payments are widely criticized by almost all circles except the largest telecoms. Experts point out that among the numerous disadvantages of this solution, the most noteworthy is the violation of the principle of Internet neutrality.
    • In Poland, the expansion of Internet infrastructure is carried out with massive public funding. This means that this purpose is financed by all taxpayers. One can point, among others, to the information contained in the “Broadband Access Plan for Poland,” according to which in the Digital Poland Operational Program for 2014-2020, out of the total funds amounting to 2.57 billion euros, over a billion was allocated to the expansion of broadband networks.

    In view of the above, we urge to reject the idea of introducing “fair share payments” within the European Union.

    1. Proposals to introduce so-called “fair share payments”.

    For nearly a year there has been a discussion on the idea of introducing so-called “fair share payments”. This idea was presented by Commissioner Vestager on May 2, 2022[1]. Unfortunately, all indications are that the European Commission is seriously considering the introduction of fair share payments for Internet content and application providers. The issue is being highlighted as a dispute between two big industries, Internet access providers (telecoms) and big Internet corporations. The issue has come to the fore through ETNO’sactivities , which is extensively lobbying for the introduction of fees for “extraordinary growth in Internet traffic that generates challenges for sustainable investment in the European network.” This position is supported among others by Deutsche Telecom, Orange, Telefonica and Telecom Italia, claiming that the six largest Internet content providers account for more than half of Internet traffic[2]. The argument, in a nutshell, is that large US corporations generate heavy network loads by offering their content, and this leads to the need for large infrastructure expenditures. This traffic is generated by the popularization of streaming, teleconferencing, remote learning, social media, and cloud services. Telecoms assume that since annual network maintenance in 2020 cost €52.5 billion, and service and application providers account for 60-70% of Internet traffic, they should pay €36 billion (€80 per EU resident) to telecoms. Moreover, this amount should increase every year due to the growth of network traffic[3].

    However, the telecoms’ argument is fraught with a number of significant problems. First of all, telecoms charge consumers themselves for internet use. Their demands on service and application providers are nothing more than a demand for a second fee for the same service.

    This relationship is illustrated by the graph below:

    Telecoms make their infrastructure available to consumers. Consumers use internet content offered by service providers and applications, and this generates traffic on the network. As the use of content available on the Internet generates traffic, telecoms have decided to demand an additional fee from service and application providers called “fair share payment.”.

    What is also worth noting is that telecoms argue for their demands with the need to maintain the network due to increased traffic (load). Meanwhile, telecoms’ investments consist of relay stations, fiber optics, modems, and data centers, among other things. A large cost is, for example, the construction of masts and fiber-optic networks. Nevertheless, 70-80% of the total telecom costs are spent precisely on infrastructure, which lasts and can be successfully used for at least 30 years. The remainder relates outdated equipment, which should be upgraded every 5-10 years. The cost of “network maintenance” due to high traffic is therefore not high, and this is explicitly admitted by some telecoms. The Fédération Française des Télécoms presented an estimate according to which handling network traffic generates 2 billion euros in costs in France, or 27 euros for each resident of the country. That’s a third of the amount of €80 per EU resident calculated by ETNO, and it’s still significantly inflated.  In France, you can easily find consumer offers of 10 gigabit-per-second connections along with phone and TV at prices around 30-49 euros per month[4]. These package offers are also a great example of existing interrelations and co-dependencies between telecommunications operators and service providers. In Poland, Orange offers fiber optics with 1 Gbps download speeds for 17.5 euros per month[5]. It is also worth citing an example in which one German student accommodation organization wanted to provide students with Internet access at a speed of at least 1 Gbps at all times in 2020. The offer for such access was made by 8 German telecoms, of which 5 offered the amount of 11 euros per month per student[6]. These examples indicate market prices for Internet access, no Internet provider would bid below its costs. Hence, the calculations of both ETNO and the Fédération Française des Télécoms are clearly inflated.  It is also difficult to argue that internet platforms are “free riders” because they have invested billions in the construction and development of internet infrastructure over the last decade.

    1. Effects of “fair share” fees on citizens and businesses.

    A fee similar to “fair share payments” has been introduced in South Korea, and this is basically the only case where we can find similarities with existing solutions. The Korean example has been studied by BEUC (The European Consumer Organization), among others. It cited a study commissioned by the German Federal Internet Agency. The research indicates that South Korea is so far the only country that has responded to the concerns of telecoms and introduced the legal billing rule of Sending Party Network Pays (SPNP). Under the rules, Internet content and application providers have been required to pay fees to telecoms. The report’s conclusions are clear. All of these regulations have led to a reduction in the quality and variety of content on the Internet. It is also expected to increase costs for the end user of content and reduce investment in local infrastructure[7].

    A similar view is held by the European Internet Exchange Association, which, analyzing, among other things, the situation in South Korea, points out that “fair share payments” are detrimental to the proper functioning of the Internet communications and peering market and distort competition in this market. In addition, they will negatively affect the experience of citizens in basic business operations, data sharing, access to cloud services and the development of research projects[8] .

    Paradoxically, therefore, “fair share” fees in Korea have had exactly the opposite effect of the one that telecoms claim they were intended to serve. It should be pointed out that the introduction of additional fees on Internet content providers could force them to introduce at least partial payment for their services, which were previously free. This could reduce access to online content and lead to digital exclusion of less affluent Internet users. This straightforwardly violates the principle of Internet neutrality, which, however, by definition says that it is the ability of all Internet users to access selected content and applications.

    Another issue is the reduction in the quality of content available online. Clearly, many companies offering, for example, streaming services, access to online TV or other video content will be affected by such fees. Prices for access to content can be introduced here or raised only up to a certain level, above which consumers will not be able to accept additional fees. In practice, it will be impossible to pass on the entire cost to content consumers. This means a smaller budget for the creation of quality online content. Similar concerns are presented, among others, by the European Association of Commercial Television and VoD Services, which has issued an open letter expressing concern on the introduction of network fees and its’ effects on the European creative industry[9]

    Crucially, the dispute over “fair share payments” should not be viewed as a conflict between big telecom companies and big Internet corporations. These fees have the potential to very seriously undermine competition on the Internet and threaten the smallest entrepreneurs. Such concerns are presented by the French Association of Alternative Telecom Operators, among others, which notes that fees of this kind will be fatal to the survival of small and medium-sized digital companies[10]. Small companies offering content on the Internet will be put in a very difficult position, as on the one hand they will be charged for Internet traffic, and on the other hand it will be difficult for them to pass this cost on to consumers. The introduction of fees to offset the cost of “fair share” fees will make them lose their competitiveness with larger players in the market. 

    What’s more, smaller telecom service companies are also openly criticizing the idea of fees. Such threats are pointed out by both MVNO Europe and the EU Competitive Telecommunications Association (ECTA). They point out that the fees will cause serious damage to competition in the telecom market, will directly affect smaller operators, and will negatively impact both individual consumers and telecom customer companies. The fees will only benefit the largest players in the market by strengthening their oligopolies[11] .

    “Fair share payments” are also criticized by academics. In October 2022, they sent a letter to the European Commission signed by 29 market experts, PhDs and professors who know the market very well. They pointed out that the proposal to charge Internet service providers and applications is not new and has always been rejected as harmful. They point out that for the past decade the idea has been unequivocally criticized by experts, business and NGOs. The experts point out in their letter that in 2015[12], the EU granted internet users the right to freely access information and content, use and deliver applications and services of their choice. EU standards require broadband service providers to treat data in a non-discriminatory manner, regardless of what it contains, what application transmits the data, where it comes from and to whom it is directed. Even if fair share payments were directed only to the largest Internet content providers, this would still directly violate open Internet access standards.

    Experts also point out that broadband networks are an important part of the value chain just as Internet content providers are driving demand from Europeans for access to the Web. Broadband providers gain significant benefits from the fact that service providers generate demand for broadband access. In doing so, telecoms pay nothing for the efforts of Internet content and application providers in creating that demand. Without the demand generated by Internet content providers, telecoms would not have many customers for high-speed Internet access services. Customers who, after all, pay telecoms for that access. Moreover, governments, universities, government offices and other public entities are also Internet content providers. All of these entities are already paying for the development of Internet networks. The researchers also explicitly point out that history and economic theory indicate that similar fees will not increase investment in Internet infrastructure by telecoms[13].

    The European Video on Demand Coalition is also opposed to “fair share payments,” pointing out that the introduction of this fee will harm the development of innovation in Europe and the digitization process. They also express concern that proposals of this kind are being put forward without adequate public consultation and analysis of the impact of such solutions[14]. Germany’s VAUNET argues that fees threaten media pluralism and the quality of content[15], while the Association of Commercial Television points out that Internet access fees for content providers mean less money for content creation. Which will ultimately lead to less or lower quality content[16].

    Finally, it should be noted that on June 8, 2022. 34 social organizations from 17 countries sent an open letter to Commissioners Vestager and Breton pointing out the problems cited above and opposing the introduction of “fair share payments.” The authors of the letter emphasize that the Commissioner’s statement about players generating a lot of Internet traffic who should be charged a fair fee to telecoms shows a fundamental misunderstanding of how the Internet works[17].

    So it turns out that both businesses (including smaller telecoms), social organizations, industry organizations and academia speak with one voice and strongly oppose the idea of “fair share payments” stressing that it is harmful to the entire market. The only entities that will gain from it are the largest telecoms, which are actively lobbying the solution at the European Commission.

    1. Polish market

    The value of the Polish telecommunications market is 40.8 billion Polish zlotys (approximately 8.73 billion euros). Telecommunications investments in 2020 amounted to 8.9 billion Polish zlotys (approximately 1.95 billion euros). As many as 66.6% of broadband internet users have a connection with a bandwidth of at least 100 Mbps, and estimates indicate that by 2026, over 80% of mobile internet users will have access to 5G technology[18].

    According to a survey conducted by the Office of Electronic Communications on a sample of 2011 people aged 15 and over, 97.2% of people in our country use mobile phones, 54.9% use mobile internet, and 54.1% use stationary internet. Any kind of internet access was declared by 79.1% of the respondents. The average monthly bill for stationary internet is 59.17 zlotys (just under 13 euros), while for mobile internet it is 46.43 zlotys (approximately 10 euros)[19]. Poland ranks 30th in the Speedtest Global Index for broadband internet access speed, with an average speed of 106.40 Mbps, and 44th for mobile internet with a speed of 47.86 Mbps[20]. Therefore, the internet in Poland is relatively fast and inexpensive.

    Providing fast internet at a relatively low cost, of course, requires investment in infrastructure. However, in Poland, a number of such tasks are undertaken from public funds and do not cost telecom companies a penny. One can point, among others, to the information contained in the “Broadband Access Plan for Poland,” according to which in the Digital Poland Operational Program for 2014-2020, out of the total funds amounting to 2.57 billion euros, over a billion was allocated to the expansion of broadband networks[21]. Further expenditures are planned in the program for 2021-2027. The entire 2 billion euros is to be allocated, among other things, to ensure access to broadband internet with a speed of at least 100 Mbps in every household and business and with a speed of at least 1 Gbps in every place that is significant in terms of social and economic aspects, such as schools, hospitals, offices, and technological and business centers[22]. In addition, funds for the expansion of internet infrastructure have also been planned in the Broadband Fund, which will finance investment projects worth a total of 20 million zlotys in the first call[23]. Further financing has also been planned in the National Recovery Plan. Formally, 21% of the budget is allocated for digitization-related projects, although Minister Plenipotentiary Paweł Lewandowski suggests that even over 30% of the NRP budget may be allocated to this purpose. By 2026, 931 thousand households are planned to be connected to broadband networks[24].

    Taking into account the scale of public investments in expanding internet infrastructure, it is clear that the largest cost associated with the dissemination of fast internet in Poland has been to a large extent supported by public funding, mainly through funds from the EU. Similarly, in other countries, huge amounts of money from both the EU and national budgets are allocated for digital transformation. Therefore, telecom companies are not bearing these costs, but rather taxpayers. This means that big telecommunication companies are using infrastructure financed by all of us, burdening their customers with the costs of internet access, and now they are demanding “fair share payments” from content and internet application providers, which could result in significant changes to the internet as we know it, unfortunately only for the worse. Telecom companies will gain by receiving enormous amounts of money, while we will all lose.

    In addition, other instruments such as the Broadband Fund are being prepared or already launched, and the development of telecommunications infrastructure is included in the National Recovery Plan.

    Therefore, it is difficult to find rational reasons for additional funding of telecommunication operators’ budgets. Moreover, the adoption of the proposal on network fees may in practice lead to limiting access to certain platforms, which directly contradicts the principle of net neutrality.

    ***

    [1] https://www.reuters.com/business/media-telecom/eus-vestager-assessing-if-tech-giants-should-sharetelecoms-network-costs-2022-05-02/ (accessed April 27, 2023).

    [2] https://www.reuters.com/technology/eu-wants-details-big-tech-telcos-investment-plans-source-2023-01-10/ (accessed April 27, 2023).

    [3] https://www.project-disco.org/european-union/020123-fast-internet-doesnt-cost-eu-telecom-operatorsmuch-at-all/ (accessed April 27, 2023).

    [4] https://www.project-disco.org/european-union/020123-fast-internet-doesnt-cost-eu-telecom-operatorsmuch-at-all/ (accessed April 27, 2023).

    [5] https://oferty.orange.pl/swiatlowod2/ (accessed April 27, 2023).

    [6] https://www.project-disco.org/european-union/020123-fast-internet-doesnt-cost-eu-telecom-operatorsmuch-at-all/ (accessed April 27, 2023).

    [7] WIK-Consult report, Study for the Federal Network Agency Germany, Competitive conditions on transit and peering markets Implications for European digital sovereignty Final report.

    [8] https://www.euro-ix.net/media/filer_public/c7/72/c772acf6-b286-4edb-a3c5042090e513df/spnp_impact_on_ixps_-_signed.pdf (dostęp na dzień 27.04.2023 r.).

    [9] https://www.acte.be/publication/tv-vod-statement-on-network-fees/ (accessed April 27, 2023).

    [10] https://www.project-disco.org/european-union/020723-is-anyone-in-favour-of-taxing-internet-traffic/ (accessed April 27, 2023).

    [11] https://www.project-disco.org/european-union/020723-is-anyone-in-favour-of-taxing-internet-traffic/ (accessed April 27, 2023).

    [12] Regulation (EU) 2015/2120 of the European Parliament and of the Council of November 25, 2015, Official Journal of the European Union L 310.

    [13] https://www.komaitis.org/personal-blog/29-internet-experts-and-academics-send-a-letter-to-thecommission-urging-to-abandon-the-sending-party-network-pays-proposal (accessed April 27, 2023).

    [14] https://www.europeanvodcoalition.com/positions/position-paper-on-net-neutrality/ (accessed April 27, 2023).

    [15] https://www.politico.eu/wp-content/uploads/2022/11/02/VAUNET-positionpaper_NetworkFees.pdf (accessed April 27, 2023).

    [16] https://www.acte.be/publication/tv-vod-statement-on-network-fees/ (accessed April 27, 2023).

    [17] https://epicenter.works/sites/default/files/2022_06-nn-open_letter_cso_0.pdf (accessed April 27, 2023).

    [18]https://www.telepolis.pl/images/2022/06/raport_o_stanie_rynku_telekomunikacyjnego_w_polsce_w_2021_r._30.06..pdf (accessed April 27, 2023).

    [19] Office of Electronic Communications, Analysis of the functioning of the telecommunications services market in Poland and assessment of consumer preferences. 2022. Survey of individual customers.

    [20] https://www.speedtest.net/global-index (accessed April 27, 2023).

    [21] https://digital-strategy.ec.europa.eu/en/policies/broadband-poland (accessed April 27, 2023).

    [22] https://www.gov.pl/web/funds-regional-policy/nearly-2-billion-euros-for-polands-digital-transformation (accessed April 27, 2023).

    [23] https://www.gov.pl/web/cyfryzacja/fundusz-szerokopasmowy–pierwszy-nabor-wnioskow (accessed April 27, 2023).

    [24] https://www.wirtualnemedia.pl/artykul/internet-szerokopasmowy-rozwoj-sieci-budzet-kpo ; https://www.gov.pl/web/planodbudowy/transformacja-cyfrowa (accessed April 27, 2023).

     

    See more: 15.05.2023 “Network fees” proposed by telecommunications – operators will consumers pay twice for infrastructure maintenance?

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