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    Report Conference – Summary of the Rebuild Together Programme

    Posted on by Weronika Marzec

    Warsaw, 13 December 2022

     

    Report Conference – Summary of the Rebuild Together Programme

     

    On 13 December, a conference summarising the project of the ZPP (the Union of Entrepreneurs and Employers), “Europe – Poland – Ukraine. Rebuild Together” took place. This was another initiative of the ZPP, following the social campaign “We help Ukraine”, the purpose of which was to create and strengthen the relationship between European, Polish and Ukrainian business communities and to prepare a framework for cooperation in the future reconstruction of the Ukrainian state and economy.

    As Marcin Nowacki, the Vice President of the Union of Entrepreneurs and Employers, pointed out: “The essence of the project is to support Ukrainian business in the process of entering the Polish market and cooperating with Polish companies. Based on this, we want to establish an agreement, so that the Polish business will play a major role in the reconstruction of Ukraine in the future”.

    The first stage of the project was the organisation of a series of meetings – five meetings in a form of round table talks – the goal of which was to establish a dialogue, discuss expectations and priorities related to the reconstruction of Ukraine and to identify industries and companies ready to cooperate to strengthen the Ukrainian economy. As part of that initiative, face-to-face meetings were held with Polish and Ukrainian representatives of industries crucial to the maintenance and reconstruction of the Ukrainian economy. Additionally, two main events were organised within the scope of the Rebuild Together programme – in Warsaw, on 6 October, and in Kyiv, on 28 November.

    The reconstruction of Ukraine will be a multinational action of the EU, G7 countries. Nonetheless, the  funds for the reconstruction of Ukraine from individual countries will be allocated based on the preferences of business – noticed the Vice President of the ZPP.

    The Vice President of the ZPP was supported by other participants of the conference. As Bartosz Marczuk stated, “The reconstruction of Ukraine is an opportunity for cooperation and building our position in the long term perspective – the fact that we are talking about that now is of great importance, as the process of rebuilding Ukraine has already begun.

    There should be as many micro-level relationships as possible. It is necessary to network and use the capital of Polish business”-  emphasised the Vice President of the Management Board of the Polish Development Fund.

    Energy security will undoubtedly play a key role in the reconstruction of Ukraine and its economic activity. Mateusz Domian spoke in that context.

    The lack of electricity affects all industries, the whole business” –  said the acting Director of the Representative Office of PKN ORLEN in Ukraine, “The lack of electricity can be compensated with the use of other raw materials, especially diesel oil; however, the situation in Ukraine is also difficult in that respect. It is extremely important for Ukraine to maintain, after the war, its independence from Russia and Belarus in terms of raw materials and continue its cooperation with Poland and the European Union in that respect.

    With regard to the opportunities and possibilities for the development of Polish business in the present situation, the last speaker at the conference agreed with the previous speech makers saying: “Geographically, Poland is in a privileged position when it comes to the possibility of expanding economic activity in the process of rebuilding Ukraine and cooperation with Ukrainian business. Polish logistics is definitely attractive for Ukrainian companies”.

    All conference participants emphasised the need for further action in terms of implementation of the objective of the programme ,,Europe – Poland – Ukraine. Rebuild Together”. The Vice President of the ZPP stated that the activities to establish and strengthen the relations between the European, Polish and Ukrainian business communities have only just started and added that the ZPP wanted to continue to take an active part in them.

    The summary of all the activities under the “Rebuild Together” project, which has been implemented for more than six months, is the report which contains the conclusions and a description of individual actions undertaken as the result of the meetings of the representatives of economic sectors in the form of round table talks and conferences.

     

    See: 13.12.2022 Report: Summary of the project “Poland-Europe-Ukraine. Rebuild Together”

    Commentary by the Union of Entrepreneurs and Employers: economic regulations should come into force once a year, after at least 12 months – a recipe for regulatory instability

    Posted on by Weronika Marzec

    Warsaw, 24 November 2022 

     

    Commentary by the Union of Entrepreneurs and Employers: economic regulations should come into force once a year, after at least 12 months – a recipe for regulatory instability

     

    • According to a Grant Thornton study, in the period from January to September 2022, the average vacatio legis period for laws and regulations governing business in Poland was 31.9 and 6.9 days respectively.
    • Year on year, the tendency to reduce the length of the vacatio legis period increases, forcing businesses to implement new regulations immediately, which becomes particularly difficult with the start of each new calendar year, when the accumulation of the introduction of new regulations is observed.
    • Too short vacatio legis period is a real barrier to the development of Polish business, with particular emphasis on micro, small and medium-sized enterprises, which account for 99.8 per cent of businesses in Poland.
    • For years, the Union of Entrepreneurs and Employers has been calling for the introduction of a principle whereby all economic regulations come into force only on 1 January of a given year and are preceded by at least 12 months of vacatio legis.


    The stability and predictability of the legal and regulatory environment is one of the basic elements necessary for the continuous development of domestic enterprises. Meanwhile, the law in Poland changes too often and entrepreneurs have far too little time to adapt to new regulations. Companies’ confidence in the state therefore remains limited, and this translates into a decline in investment potential.

    The Union of Entrepreneurs and Employers has long taken the view that all new economic regulations should come into force simultaneously on the first day of January with a 12-month vacatio legis. This will give businesses a year to adapt to the changes in the law and reduce the amount of time needed to implement new procedures and requirements. This bold move would definitely change entrepreneurs’ perception of Poland as – in many cases – a business-hostile environment in terms of the quality and pace of legislative change. Such a pro-business refocusing would also help officials, who, with more time to refine documents, could improve the quality of legal acts, which today are often drafted in haste and enacted in the same way – many times with numerous errors.

    As calculated by Grant Thornton analysts in the study Zwolnij, szkoda firm! Vacatio legis w polskim prawie gospodarczym as recently as 2011, the average vacatio legis of legal acts regulating the rules of conducting business activity in Poland was 53.2 days for acts and 19.8 days for regulations. At the time – from today’s perspective – it was a relatively comfortable situation. In 2022, in the period from January to September, as the referenced report reads, this time has decreased to 31.9 days for acts and 6.9 days for regulations. At a time of rising business costs, these figures cannot instil optimism – especially when one considers the continuing trend of reducing “response times” to new legislation.

    Data provided by Grant Thornton also shows that as many as 44 of the 78 laws that came into force in 2021 had a vacatio legis of between 0 and 14 days. Similarly, as many as 178 of the 355 regulations that came into force in 2021 were implemented “on the fly”. Of the 78 laws that came into force last year, only 4 were subject to a minimum six-month vacatio legis. Similarly, only 4 out of 355 regulations received a vacatio legis of minimum three months. Statistics show the abuse of Art. 4 of the Act on promulgation of normative acts and certain other legal acts, and the use of provisions on “important state interest requiring immediate entry into force of a normative act”.

    The tendency to abruptly shorten the vacatio legis in the context of laws entering into force with the arrival of the new year is also worrying. Here, the average vacatio legis for laws is 25.8 days, and for regulations 5.9 days. This only demonstrates an unnecessary haste in the creation and implementation of laws, which entrepreneurs often cannot keep up with. However, once they manage to implement the new regulations in their business, it often turns out that – while the vacatio legis is still in effect or immediately afterwards – numerous amendments are introduced, destroying the new order that has just been established.

    Meanwhile, while in 2021 the average vacatio legis of the Polish law was 33 days, in the Czech Republic it was 98.7 days, and while in the same year the average vacatio legis for regulations was 7.2 days, in Sweden it was 76.6 days. Both countries compared with Poland are members of the European Union, so they are bound by similar procedures to our country. 

    The problem is relevant for all businesses operating under Polish law, but it is most acutely felt by representatives of the SME sector, which often does not have specialised units responsible for thorough analysis of legislative acts. It is worth mentioning that SMEs account for as much as 99.8 per cent of domestic enterprises, while employing 67.4 per cent of those working in the business sector. Therefore, the “problematic” vacatio legis particularly affects companies generating every second zloty (49.6% of GDP according to PARP data), which are the flywheel of the Polish economy.

    It should be remembered that the creation of a business-friendly legal and regulatory environment should be one of the main objectives pursued by the state. This is particularly important at a time of economic turbulence and general uncertainty about the development of the macroeconomic situation. Today, however, the legislative environment forces companies to adapt immediately to new regulations, which is time-consuming and costly – often companies in the SME sector have to use the services of specialised external entities in order to implement new regulations immediately. The lack of order in the issue of vacatio legis – bearing in mind also the tendency to reduce it every year – already makes companies take a close look at the issue of planning investments in Poland, which should be treated as a priority in the current economic situation. The uncertain legislative environment disturbs continuous economic development.

    For years, the Union of Entrepreneurs and Employers has been calling for the introduction of a principle whereby all economic regulations come into force only on 1 January of a given year and are preceded by at least 12 months of vacatio legis. We believe that this solution would be a good answer to the problem of an increasingly unstable regulatory environment for companies.

    Opinion of the Chief Energy Expert of ZPP: Worrying conclusions from the Conference of the Parties on the future of Polish renewable energy industry

    Posted on by Weronika Marzec

    Warsaw, 6 December 2022 

     

    Opinion of the Chief Energy Expert of ZPP: Worrying conclusions from the Conference of the Parties on the future of Polish renewable energy industry

     

    At the end of November, the Ministry of Climate organised an event, the Conference of the Parties to the Sectoral Agreements, with the aim of summarising the progress of work in the area of RES development in Poland. The Ministry signed four sectoral agreements on the promotion of investments in renewable energy sources in 2021 and 2022:

    • Sectoral Agreement for the Development of Offshore Wind Energy,
    • Sectoral Agreement for the Development of the Photovoltaic Sector,
    • Sectoral Agreement for the Development of the Biogas and Biomethane Sector,
    • Sectoral Agreement for the Development of the Hydrogen Economy.

    The aim of the sectoral agreements is to remove barriers to the development of this energy sector, and to promote investment in this area.

    Sectoral agreements were signed by both leading Polish companies in the renewable energy sector and representatives of the Ministry, local authorities and the main renewable energy industry associations.

    The absence of the onshore wind sector seems to somewhat distort the view of renewables as a whole and is due to the protracted process of passing an amendment to the law blocking the development of this type of investment.

    It is not a particularly revelatory observation that increasing regulatory pressure from the EU is forcing Poland to take urgent action to decarbonise its industry. Energy prices have risen significantly. Polish companies must keep up with the changes, otherwise they will go under. Meanwhile, the key to saving money and making businesses low-carbon has been sitting in the parliamentary freezer for five months, and there are still no new windturbines.

    I have been following the recent dynamic changes in the Polish energy market with concern, and it is not conducive to the growth and security of Polish entrepreneurs today. One of the key challenges for companies today is the availability and price of electricity, which has increased by almost 500% for some businesses in just two years. The energy price freeze planned for next year is only a temporary measure that does not solve the problem, but rather suspends it for a few months, and only for some entities.

    In the current energy crisis, Polish companies, especially industrial ones, need cheap green electricity to meet the ambitious requirements imposed by EU directives. Onshore wind power, which has been the cheapest source of power generation for years, is crucial for saving money and achieving low carbon emissions. It is high time to combat all barriers to wind technology, but first the so-called distance law, which has been crippling the industry for years, should be liberalised.

    The interests of enterprises, including those that are more or less energy-intensive, are increasingly under threat. Electricity prices strongly affect the economics of companies, including large enterprises, often ruining the monthly budget. The government’s efforts to freeze prices would not have been needed if solutions had been implemented in time to directly inhibit the cause of the electricity price increase. Allowing new wind power plants to be built in Poland will mean that in 2-3 years’ time, when more wind power will be in the system – we will have significantly reduced the risk of large price fluctuations.

    The energy crisis calls for new wind power investments that will give us energy sovereignty. The fact that wind is the cheapest source of electricity is confirmed by energy auctions and, in addition, it permanently lowers the final bill for the consumer by affecting the result of the merit order based mainly on coal in Poland.

    The transition of companies to green energy is also one of the main business trends at the moment. It is driven by the desire to reduce the cost of energy consumed, but also by growing expectations from customers and business partners who expect supply chains with a minimal carbon footprint. Corporations in the transition to green energy are often driven by ambitious targets in their strategies or even pressure from competitors. The surge in corporate interest in green, clean energy in recent years has become widespread across Europe.

    Building a stable legislative and regulatory environment is crucial from the perspective of any industry when making investment decisions.

    The aim of the aforementioned Conference of the Parties was to illustrate the development potential of renewable energy sources against the background of legislative needs, as well as to show the potential of Polish industry in building a new energy system in Poland.

    As Chief Energy Technology Specialist at the Union of Entrepreneurs and Employers, but also because of my other functions, I had the opportunity to lead a panel discussion: Prospects for the development of photovoltaics in Poland – Opportunities and threats. I addressed one of the threads that is an essential piece of the wider puzzle.

    The conference was divided into two parts. The first one discussed the prospects for the development of renewable energy sources in Poland against the background of the country’s security, in the context of Poland’s changing geopolitical situation.  

    The second part of the Conference was devoted to the thematic panels of the Sectoral Agreements, where the challenges associated with each type of renewable source were discussed.

    The conference was attended by the Minister of Climate, Ms Anna Moskwa, the Minister of Economic Development and Technology, Mr Waldemar Buda, the Secretary of State, Mr Ireneusz Zyska and the Head of the Energy Supply Unit from the International Energy Agency, Mr Christophe McGlade.

    The first part of the conference, with a panel on the country’s energy security issues, showed how complicated the whole Polish economy was as a result of the military threat from Russia. I don’t think anyone doubted that the new geopolitical situation is permanent and that energy security is highly vulnerable to hostile acts, as shown by Russia’s actions in Ukraine.

    Distributed power generation therefore takes on a different meaning than we have so far expected. In addition to its role in modernisation, and economic or social importance, it can be a key element of the country’s security. Renewable energy is the primary mechanism for building a distributed energy system in any country.

    It was clear from the statement of the President of the Energy Regulatory Office, Mr Rafał Gawin, that the way the entire Polish transmission and distribution system functions needs to change. Also the President of the Management Board of the Polish Power Transmission and Distribution Association (PTPiREE), Mr Robert Zasina, emphasised the role of DSOs in the future as a key player in the energy market. The Union of Entrepreneurs and Employers has long raised the issue of the commercialisation of low and medium voltage lines and it is a pity that this idea has not been discussed in more depth. The forthcoming law on direct lines fits perfectly into this theme, although the project has encountered a competence dispute between ministries and it is as yet unclear which ministry will continue to work on this regulation.

    Mr Józef Węgrecki, Member of the PKN Orlen’s Management Board, pointed out how important a role investments related to distributed energy, hydrogen policy and renewable energy sources play in the company’s policy. Minister Ireneusz Zyska assured the full support of the Ministry of Climate for all measures to increase the level of investment in the green energy sector.  

    Together, we must do everything possible to create a national supply chain for the industries involved in new energy investments. The administrative regulations currently in place, which block the development of investments in distributed energy, are becoming an extremely serious barrier to development.

    Today, the liberalisation of administrative barriers is becoming a major focus for ministries connected to the energy market, as well as the creation of a friendly investment environment for investments in renewable energy sources. Blocking the development of onshore wind energy sector certainly does not help to create such an environment.

    The panel I moderated, dedicated to photovoltaic sources, illustrated what development potential this source of green energy has. The current slowdown in investment in this sector, too, is solely due to legislative delays. A representative of Bank Ochrony Środowiska (“Bank for Environmental Protection”), Ms Anna Żyła, emphasised that banks are fully prepared to finance investments in photovoltaics.

    The conference was a summary of the activities of the various parties to the sectoral agreements to date, with the exception of the hydrogen agreement whose representatives did not attend. While the attempt to take a holistic view of the future shape of Poland’s energy sector is to be welcomed, the Conference focused on the country’s rather distant energy future.

    Meanwhile, the immediate problems of our energy and heating industry are already starting to be clearly felt by both the Polish economy and society. And these are both supply and cost problems. They are connected with the prices of energy sources and the scarcity of both renewable and conventional energy.

    The Union of Entrepreneurs and Employers sees the need for ad hoc measures to optimise the effects of crisis phenomena in the Polish energy sector and the Polish heating sector by 2030. Only then will we be able to plan for the optimum development of individual distributed energy sectors.

    Such measures, according to the Union of Entrepreneurs and Employers, can include:

    • Liberalisation of the law blocking onshore wind energy sector development
    • Legislative support for direct lines
    • Continuation of the Bloki 200+ (“200+ Blocks”) programme, in its justified part
    • Passing a law to facilitate green investment on brownfield sites.

    As representatives of employers and entrepreneurs from most economic sectors, we would like to call for a significant acceleration of legislative procedures concerning basic laws and regulations enabling investment decisions to be taken quickly in the Polish energy sector to stabilise energy prices and supply in the coming years.

    The future of the entire Polish economy may depend on the pace of these investments.

    This is particularly important in the area of local distributed energy, where it should be made easier for companies to invest in their own generation sources as well as in local transmission networks.

     

    Włodzimierz Ehrenhalt,
    Chief Energy Expert of ZPP

     

    See: 06.12.2022 Opinion of the Chief Energy Expert of ZPP: Worrying conclusions from the Conference of the Parties on the future of Polish renewable energy industry

    How to support SMEs in the public procurement market? Let us not waste this opportunity!

    Posted on by Weronika Marzec

    Warsaw, 30 November 2022 

     

    How to support SMEs in the public procurement market? Let us not waste this opportunity!

     

    • The domestic public procurement market is characterised by insufficient competitiveness. It is therefore desirable – in terms of the economic conditions – to increase the participation of the SME sector in the use of public procurement. Currently, the participation of SMEs as public procurement contractors is disproportionately low in relation to their role in the domestic economy.
    • There are a number of legal instruments potentially supporting the SME sector in the public procurement market. The most important of these include the possibility of submitting partial tender offers (division of a contract into lots); refraining from the formulation of conditions for participation in the procedure; non-application of optional grounds for exclusion where it is not necessary; flexible application of tender evaluation criteria; appropriate descriptions of the subject matter of the contract; the possibility to waive the requirement for a bid deposit or to set its amount at a reasonable level; creating contractor-friendly contract templates; the possibility for consortia to submit tenders; no artificial aggregation of contracts; application of Art. 30 sec. 4 of the Public Procurement Law; not reserving the obligation of personal performance of a part of the contract; answering all questions regarding the Terms of Reference; extending deadlines for the submission of tenders; using, where possible, cost estimate-based remuneration or not requiring the submission of documents where contractors’ statements are sufficient. The implementation of at least some of these opportunities could reduce the current disparities with regard to the potential of the SME sector and its participation in the public procurement market.
    • Contracting authorities in the public procurement system should use the concept of local content, the essence of which is supporting SMEs (both on a national and regional level). In order to create the right conditions for their increased participation in the system, it is necessary to raise awareness of the existence of the instruments provided for in the Public Procurement Law to facilitate the participation of SMEs in tender procedures.
    • It is possible and desirable for contracting authorities to apply the concept of local content to the public procurement system when it is not the primary and only objective, but a secondary objective that takes into account the specific characteristics of SMEs, such as the pursuit of environmental, innovative or social goals. The concept of local content is part of the evolutionary changes taking place in the public procurement system.
    • The National Procurement Policy makes it possible to put the principle of local content into practice, as it is itself a source of secondary objectives aiming to increase the level of innovation in the national economy in line with the development of solutions of an environmental, social and health-related nature.
    • The concept of local content can be applied to both domestic and EU proceedings. It should then be borne in mind that national contracting authorities must take into account the context of strategic objectives from a state perspective. Since supporting local SMEs is possible at EU level, it is therefore desirable for the domestic public procurement system – provided, however, that the process is carried out in compliance with the principles of EU public procurement law.
    • The Public Procurement Law provides contracting authorities – particularly local authorities – with a number of instruments to put the concept of local content into practice. The crucial point in this respect remains the demonstration of significant correlations between the application of the chosen solution and the actual, objective needs and the goal the contracting authority wishes to achieve.

    The role of SMEs in the national economy in the face of challenges in the public procurement system – untapped potential

    According to European Union figures from 2020, public procurement accounts for around 19 per cent of the Community’s GDP, which translates into an annual figure of around EUR 2.3 trillion. In Poland, their share of GDP is lower, at approximately 10 per cent, which nevertheless accounts for up to PLN 200 billion per year.

    Considering the scale of the functioning of the public procurement sector and its contribution to building key economic indicators, attention should be drawn to the insufficient share of micro, small and medium-sized enterprises in the percentage of bids submitted in tenders both below and above the EU thresholds. The figures for contracts awarded also look unfavourable for SMEs.

    Meanwhile, according to data from Statistics Poland in 2020, of Poland’s 2.3 million non-financial enterprises, 99.8 per cent were in the SME sector. 97 per cent of the pool of said 2.3 million companies are micro-enterprises with up to nine employees – only 3.7 thousand are entities with more than 250 employees. The trend continues – between 2014 and 2020, the number of micro-enterprises in Poland increased by more than half a million according to Statistics Poland. At the same time, the number of small, medium and large companies decreased by more than 10,000. At the same time, it is the SME sector that has been hit the hardest – due to insufficient financial reserves – by the COVID-19 pandemic, causing the need for support for the sector.

    Despite such a significant share of SMEs in the total number of enterprises in Poland, the share of bids submitted by them in public procurement below the EU thresholds in 2020 in Poland was 82 per cent[1]. This is a slightly higher figure than in previous years (82 per cent in 2019, 79 per cent in 2018, 80 per cent in 2017). In 2020, construction contracts were the most sought after by the SME sector (88 per cent). In the case of bids for services and supplies, the SME participation rate was 79 per cent. The most favourable bids from the SME sector were found in 81 per cent of tenders below the EU thresholds in 2020, accounting for 85 per cent of the value of total contracts. 

    The situation looks less favourable when contracts with a value above the EU thresholds are taken into account. This is where the percentage of bids submitted by SMEs amounted to just over 65 per cent of the total, with 60-62 per cent being considered the most favourable, which translated into 48 per cent of the total value of the contracts (approximately PLN 69.2 billion). The participation of SMEs as public procurement contractors is disproportionate in relation to their role in the domestic economy.

    Increasing the competitiveness of the public procurement market

    The Polish public procurement market is characterised by relatively low competitiveness, which is directly attributable to too few bids submitted in public procurement procedures. According to the Public Procurement Office in its Report on the Study on Low Competitiveness in Public Procurement in 2020, an average of just 2.786 bids were submitted for contracts below the EU thresholds.

    The above figure represents a low percentage of companies that choose to take part in the procurement process and translates into a limitation of the possibility for the contracting authority to achieve the expected maximum efficiency in meeting the identified need. This situation also contributes to the public procurement market being dominated by the largest companies accounting for only 0.2 per cent of the Polish business market.

    The reasons for the reluctance to bid for public procurement contracts can primarily be found in the limited knowledge of the instruments that the Public Procurement Law offers to the SME sector, the excessive complexity of the public procurement market and – as emphasised by entrepreneurs themselves – the hostility of the system towards small and medium-sized companies, resulting in the fear of violating public finance discipline.

    There is therefore a pressing need to increase the participation of representatives of the SME sector in the public procurement market, all the more so as, given its size, any disruption to it could translate into a significant slowdown in economic growth. An additional advantage of SMEs is the opportunity to meet the needs of increasing the use of innovative solutions offered by the sector.

    Meanwhile, local authorities – which are also the most important purchasers of services, supplies and construction work provided by contractors (51.8 per cent of all contracts in 2020) – are reluctant to take advantage of new opportunities to ensure that the concept of local content is implemented. The effect of this is particularly evident in the construction sector, where the most important contracts tend to be executed by the largest companies using the SME sector as subcontractors, who often have problems receiving payment for their work on time. The inability of the SME sector to bid on its own (as a result of contracting authorities not using instruments such as advance payments or splitting the contract into lots) results in SME representatives competing unnecessarily in terms of price for subcontracts with the general contractor, which translates into lower earnings and reduced profitability for these companies.

    When drafting the current Public Procurement Law, the legislator recognised the problem, resulting in numerous amendments to the document, which – contrary to popular opinion – do not exclude the application of the local content principle. The current form of the Public Procurement Law gives the contracting authority a number of instruments to support SMEs both on the regional and national level.

    All in the hands of the contracting authorities

    Contracting authorities, particularly local authorities – based on current legislation – have a number of instruments at their disposal that potentially support the concept of local content and, at the same time, do not violate the provisions of the Public Procurement Law.

    A basic instrument that could be used to increase the participation of SMEs in the public procurement market is – here the contracting authority has discretion in the application of the rules – the possibility to divide the contract into lots. The contracting authority also has the right to limit the number of lots to be awarded to one contractor. Both the Classical Public Sector Directive and the Utilities Directive gave Member States a choice regarding the introduction of an obligation to divide a contract into lots, but Poland did not make use of this option.

    The contracting authority – according to the latest formulation of the Public Procurement Law – has also gained the full right – without violating the provisions of the Law – to decide not to formulate the conditions for participation in the procedure. This gives representatives of the SME sector the chance not to submit full documentation and declarations when it is not necessary. De-bureaucratising this element of the procedure – assuming that contracting authorities make use of this privilege – could have a huge impact on increasing the competitiveness of the public procurement market and the role of SMEs in it. The contracting authority may also choose not to apply the optional grounds for exclusion, provided that this decision does not violate the principles of competitiveness and does not create a risk of inadequate performance of the subject matter of the contract. The use of optional grounds for exclusion must always be associated with a clearly defined objective.

    Some opportunities for implementing the local content concept are also provided by the bid evaluation criteria. In this case, although the contracting authority may not directly promote SMEs, nothing prevents it from using criteria whose implementation will be simpler from the SME’s point of view – such as, for example, the employment by these entities of staff living in close proximity to the place where the subject of the contract is to be performed, which may translate into a higher efficiency of its performance.

    An opportunity for the SME sector to increase its participation in the public procurement market is also provided by the fact that there is no obligation to establish a requirement to pay a bid deposit, regardless of the value of the contract, the type of contract and the mode of the procedure conducted. This is new in relation to the 2004 Public Procurement Law. Given the optional nature of the deposit, any waiver of it by the contracting authority increases the competitiveness of the procedure.

    In financial matters sensu stricto, the provision of Art. 442 of the Public Procurement Law, which provides for the possibility for the contracting authority to make an advance payment – under certain conditions – is also of paramount importance. This is a nod to representatives of the SME sector, who usually have less financial capacity than the country’s largest companies. Advance payments fully comply with EU law and increase the competitiveness of the public procurement market in all cases.

    Contractors also have the option of submitting a bid as a consortium. This has a positive impact on increasing the potential of contractors to meet the conditions imposed by the contracting authority in the procedure. However, the contracting authority has the option of limiting the freedom of contractors in terms of the fulfilment of individual conditions for participation in the procedure. In order to increase the chances of SMEs to submit the most well-prepared bid, contracting authorities may use the privilege of extending the deadline for the submission of bids – but this must then be consistent with the possibility of properly and fully preparing the bid. Extending the deadlines for submitting bids is one way of putting the concept of local content into practice – longer timeframes mean more realistic opportunities for SMEs, which do not usually have specialised units responsible for quickly preparing a full bid and completing the necessary documentation. Contracting authorities – in order to stimulate SMEs in the field of public procurement – may also use the formula of cost estimate-based remuneration, which, unlike lump-sum remuneration, offers relative certainty about receiving a higher remuneration from the contracting authority in a situation in which the contractor incurs additional costs. Cost estimate-based remuneration is a formula that directly encourages SME contractors to increase their participation in the public procurement market.

    Contracting authorities can also implement the local content concept using a number of other instruments provided by the Public Procurement Law. These include the creation of contract templates that are as transparent as possible, the appropriate descriptions of the objects of the contracts, the departure from the popular practice of artificially aggregating contracts, the provision of answers that are as concise as possible regarding the contract specifications or the careful reservation of the obligation for the contractor to perform part of the contract personally.

    Conclusions

    Local authorities and other contracting authorities, in accordance with the Public Procurement Law, have the opportunity to implement the concept of local content when carrying out both national and EU procurement, which effectively increases the chances of the most numerous group of enterprises in Poland, i.e. the SME sector, to participate in the public procurement market. The use of the aforementioned instruments increases the competitiveness of the public procurement sector and wards off the prospect of the market being dominated almost exclusively by the largest companies.

    On the one hand, cooperation between the public and private sectors, based on the principles of partnership and dialogue, can encourage more entrepreneurs – with particular emphasis on entrepreneurs from the SME sector – to participate in procurement procedures. On the other hand, a wider range of companies submitting bids is also an opportunity for contracting authorities to choose the most favourable offer in terms of primary and secondary objectives.

    For this to happen, however, there must be a real change in the mentality of the contracting authorities, which must be followed by the willingness – based on real tangible benefits – of contractors, including representatives of the small and medium-sized enterprise sector.

    ***

    [1] Data based on the Report of the President of the Public Procurement Office on the Functioning of the Public Procurement System in 2020.

    Commentary of the Union of Entrepreneurs and Employers on the Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions…

    Posted on by Weronika Marzec

    Warsaw, 5 December 2022 

     

    Commentary of the Union of Entrepreneurs and Employers on the Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions. Digitalising the energy system – EU action plan

     

    • The European Commission has stepped up its efforts to develop a common European energy data space;
    • with the implementation of an appropriate energy data sharing framework, we could gain more than 580 GW of flexible energy resources by 2050;
    • the implementation of the digitalisation will improve the demand for flexibility in the EU’s electricity grids.

    Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Digitalising the energy system – EU action plan is a long-developed action plan, formulated and recently submitted by the European Commission for consultation, and intended to define actions for the coming years in the area of digitalisation of the European energy system. The Ministry of Climate and Environment is coordinating the preparation of the Polish government’s position on the proposals set out in the communication. Comments on the document had to be submitted by 23 November this year. We hope, however, that these are not the final provisions of the document, and it will be widely consulted with the public.

    According to the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Digitalising the energy system – EU action plan the EU’s overarching goal for the coming years is to become independent from non-EU fossil fuels. According to the Commission, the only way to achieve this goal is

    • to install photovoltaic panels on the roofs of all commercial and public buildings by 2027 and on all new residential buildings by 2029,
    • to install 10 million heat pumps in the next five years,
    • to replace 30 million cars on the road with zero-emission vehicles by 2030,
    • to reduce greenhouse gas emissions by 55% and to achieve a share of renewables in the energy consumed of 45% in 2030, among other things.

    All these objectives can only be achieved if the energy system is ready for it. Energy efficiency, resource efficiency, decarbonisation, electrification, sector integration and decentralisation of the energy system require a massive digitalisation effort. Without digitalising the energy system, it will be difficult, if not impossible, to achieve the goals set by the European Green Deal and the European 2030 programme ”Path to the Digital Decade”.

    Between 2020 and 2030, around EUR 584 billion will need to be invested in the electricity grid, particularly in the distribution system. A substantial part of this investment will have to focus on digitalisation, as digital communication with energy consumers will help avoid the need for USD 270 billion investment in new electricity infrastructure.

    Modern technology will help to visualise our energy consumption in real time and get tailored advice on how to reduce it. Digital tools can automatically control room temperature, charge electric cars and manage appliances so that energy is used at the same time when prices are at their lowest, while maintaining an optimal and healthy environment at home or at work.

    Already 51% of all households and SMEs in the EU use smart electric meters.

    The use of data across the energy value chain and linking this data with weather models, mobility patterns, financial services and geographical location systems through increasingly powerful computing capacity will enable the provision of innovative services at new levels of precision and adequacy and contribute to economic growth and job creation in the EU.

    With the implementation of an appropriate framework for sharing energy data, more than 580 GW of flexible energy resources that take full advantage of digital solutions could participate in wholesale markets by 2050. It is estimated that this would cover more than 90% of the overall demand for flexibility in the EU electricity grids. Enabling smart and bi-directional charging of electric vehicles, the participation of virtual power plants in energy markets, and harnessing the potential of energy communities, smart buildings and smart heating with the use of heat pumps could contribute most to meeting this demand. In addition, car batteries can be used to store surplus energy and make it available when needed. This is achieved by keeping track of when the vehicle is in the garage, predicting periods of non-use and calculating how much spare capacity can be made available.

    The aim of EU actions is to establish a common European energy data space and to ensure its robust governance in the form of a coordinated European framework for sharing and using this data. The preparatory phase is expected to be completed by 2024, with implementation starting immediately afterwards.

    The EU’s research, innovation and digitalisation programmes will continue to play a key role in this context. Therefore, the Commission intends to support – through the “Digital Europe” programme – the implementation of a common European energy data space. Actions in this area will build on the demonstrations made by a number of projects funded by “Horizon Europe”.

    To further support the digitalisation of the energy sector, the Commission will officially re-establish the existing Smart Grid Task Force (SGTF). Under this smart energy expert group, the Commission will set up, by March 2023 at the latest, the “Data for Energy” (D4E) working group. This group will include the Commission, Member States and relevant public and private stakeholders to contribute to the creation of a European framework for energy data sharing.

    The Commission announces in “Digitalising the energy system – EU action plan” that it intends to support EU Transmission System Operators (TSOs) and Distribution System Operators (DSOs) in the creation of a digital twin of the European electricity grid, an advanced virtual model of the grid. The purpose of the digital twin is to make the grid, and with it the energy system as a whole, more efficient and smarter.

    The sustainable design of digital devices and clear information on their environmental footprint and reparability and recyclability can, on the one hand, contribute to reducing the use of raw materials and facilitate a shift towards circularity, but on the other hand, can put an additional burden on fossil fuel-based economies.

    Collective energy schemes that involve a whole community, village or town can allow such consumers to connect and scale-up their potential interaction with the electricity system. Such schemes can enable communities to, for example:

    • better monitor their performance as measured by energy consumption or
    • share photovoltaic panels or otherwise engage in power sharing or peer-to-peer trading of electricity generated by joint investment projects, which can reduce their dependence on high electricity prices set in the wholesale market.

    The proposed framework for an Ecodesign for Sustainable Products Regulation[1] is aimed at:

    • establishing EU regulations to ensure that only “circular” products (i.e. products that are more durable, can be easily reused, repaired and recycled, and are made up of recycled materials as far as possible) are placed on the EU market;
    • creating a framework for digital product passports containing information on energy-related aspects (carbon footprint), among other things; and
    • setting mandatory minimum sustainability requirements on public procurement of products, for a selection of product groups including electronic and ICT products. To address the energy consumption of working ICT devices, the Commission will develop an energy labelling scheme for computers that takes into account the different uses of computers, such as (i) office work, (ii) gaming and (iii) graphic design and video editing, respectively.

    The Commission will aim to establish an EU Code of Conduct by 2025, based on the work done to measure the environmental impact of electronic communications services. The EU’s Code of Conduct for the Sustainability of Telecommunications Networks can help guide investment in energy-efficient infrastructure.

    Bearing in mind the content of the document submitted to the Union of Entrepreneurs and Employers for consultation, on 23 November this year we sent our proposals to the Department of Informatisation of the Ministry of Climate and Environment. We pointed out that such a wide-ranging document setting out policy directions cannot be over-regulated in terms of the energy transition, as the Polish energy market has its own specific characteristics that distinguish it from other countries on the old continent. On the positive side, there is a proposal to involve entrepreneurs in the work of future advisory bodies. We also emphasised the need to develop electricity grids in the context of problems with connecting new power generation installations.

    ***

    [1] Proposal for a regulation establishing a framework for the setting of ecodesign requirements for sustainable products and repealing Directive 2009/125/EC, COM(2022) 142 final.

    https://eur-lex.europa.eu/legal-content/PL/TXT/?uri=CELEX:52022AE0598

    Marcin Nowacki was elected Chairman of the EU-Ukraine Civil Society Platform

    Posted on by Weronika Marzec

    Warsaw, 23 November 2022 


    Marcin Nowacki was elected Chairman of the EU-Ukraine Civil Society Platform


    Marcin Nowacki, Vice President of the Union of Entrepreneurs and Employers, has been elected Chairman of the EU-Ukraine Civil Society Platform within the European Economic and Social Committee. The EU-Ukraine CSP carries out institutional cooperation between the EU and Ukraine in the field of social partner contacts, in particular it monitors the process of Ukraine’s integration into the European Union.

    As a result of its application for membership, which was formally accepted, Ukraine has been granted the status of candidate country for accession to the European Union. However, accession to the Community is a complex and lengthy process, during which Ukraine will have to fulfil many conditions in terms of adapting its economic, legal and political system to the rules in force inside the European Union. This is an area where ongoing cooperation and exchange of experience between European and Ukrainian social partners could prove to be a key element in speeding up and supporting the accession process.

    Opinion of the Chief Energy Technology Specialist at the Union of Entrepreneurs and Employers (ZPP) on the place of oil and natural gas in Europe’s modern hydrogen-renewable economy

    Posted on by Weronika Marzec

    Warsaw, 14 November 2022 

     

    Opinion of the Chief Energy Technology Specialist at the Union of Entrepreneurs and Employers (ZPP) on the place of oil and natural gas in Europe’s modern hydrogen-renewable economy

     

    On Wednesday, 3 November 2022, during the conference Energy security in times of war, co-organised by the Union of Entrepreneurs and Employers (ZPP), we had the opportunity to initiate a discussion aimed at demonstrating the role of conventional energy carriers in the future in which energy sources are expected to be converted into hydrogen and renewables. We attempted to show the future of oil and gas over time in the global and European economy and outline the future of fossil fuels in the Polish energy system.

    The discussion was moderated by Włodzimierz Ehrenhalt, Chief Energy Technology Specialist at ZPP. The invited panellists were experienced practitioners specialising in the sector of renewable energy sources and oil and gas market experts. Maciej Bando, long-standing President of the Energy Regulatory Office and Chairman of the Advisory Board of the OZE POWER Congress, participated in the discussion. The Orlen Group was represented by Mr Tomasz Jarmicki, Director of the Research and Innovation Department of PKN Orlen, Central Branch of PGNiG in Warsaw, and the Polish Wind Energy Association was represented by  Janusz Gajowiecki, President of the Association. Bogdan Pilch, General Director of the Polish Chamber of Power Industry and Environmental Protection, and Tomasz Surma, Regulatory Affairs and Public Relations Director of Veolia Energia Polska S.A., also took part in the panel.

    In the context of predictions of what the future of natural gas and oil will be and whether hydrogen and RESs will be able to replace current energy carriers, all discussants agreed that this would vary around the world depending on the region. The rapid development of renewables in Europe will certainly lead to the gradual elimination of oil and gas as energy resources in the foreseeable future. Based on the statements of the European Commission and past experience, it can be predicted that renewables, together with hydrogen facilities, will replace gas and oil in transport and heating around 2045. In the energy industry, this will probably happen a little sooner. 

    The experience resulting from the war in Ukraine and Russia’s raw material policy has shown that only complete energy autonomy can save Europe from the crisis we are currently facing. Europe will certainly learn from the current extremely complex situation and will probably reduce its demand for gas and oil to the supply level guaranteed by European suppliers. This will, however, mean that both of these raw materials will be back-up and complementary sources for renewables and hydrogen. Of course, they will continue to remain basic raw materials for the purposes of the large-scale chemical industry.

    Europe is likely to remain a leader in the zero-carbon electrification of economic life and industrial processes. Other parts of the world will, of course, develop green energy, but coal, oil and natural gas will play key roles in their economies for a long time to come. It is important to keep in mind that today China is a major investor in green energy; to secure its position as an export leader, it will be forced to move quickly from carbon to zero-emission energy, especially in the supply of energy to its industry.

    During the discussion, the question was raised about the fate of petrochemical companies in the new electric and hydrogen economy in Europe and, in the future, globally. Extensive corporate investment programmes in renewable and hydrogen energy sources can already be observed. The scale of investment made by the largest companies in non-fossil energy sources is enormous and will enable their gradual business reorientation. There are many cases of mergers or equity investments between oil companies
    and entities operating in the green energy sector.

    The development of renewable energy sources and perhaps a return to modern nuclear power is likely to make Europe completely independent of fossil fuels. According to experts, the development of wind power in Poland and Europe is progressing, and it is now an irreversible process, not least because of the need to generate large supplies of green energy for green hydrogen production processes.

    The Polish nuclear power plant is expected to be operational in 2033. The project involves the construction of three units with a capacity of 3 GW, which will reduce coal consumption in the national energy system by at least 15 to 20 per cent. If this happens, it will be a positive signal for the entire energy sector in Europe. Three gigawatts of energy from Poland’s first nuclear power plant equates to more than 25 terawatt-hours of clean energy, which is as much as we are now producing from all renewable sources.

    However, while looking forward to the construction of the first nuclear power plant, we must not forget the current challenges facing the energy industry. As a country, we should focus on the short-term problems of our energy and heating industry. And, according to industry representatives, the situation is becoming dramatic. The blocking of the development of onshore wind energy by the so-called 10H Act has led to a slowdown in investment in the entire renewable energy industry in Poland, which prevents the dynamic growth of RESs, makes it impossible to sufficiently influence the reduction of energy prices and may lead to local power outages, especially in the areas where the existing infrastructure is outdated and overloaded. The speed at which the liberalisation of the “anti-wind” legislation is proceeding does not allow for rapid investment in modern generation sources and slows down the modernisation of transmission lines. Probably, already around 2025, we will be forced to import a lot of energy, especially green energy, for companies exporting products to European markets. And until we get our own offshore wind farms and nuclear power plant up and running, this is unavoidable. Perhaps the launching of the “Bloki 200+” (200+ Units) project, which is a programme of refurbishments to make the 200MW units more flexible and adapt them to work with renewable energy sources, could alleviate the energy shortage, but it has also been put on hold.

    The situation of district heating in smaller centres is particularly difficult. We have approx. 400 district heating systems, mainly based on coal technologies. Converting these systems to gas appeared to be the simplest solution so far. But is this sensible in the current situation? Will gas price dynamics return to that observed before 24 February 2022? Although we do not know the answer, Poland seems to be prepared for increased gas needs related to the stabilisation of the operation of renewable energy sources, and in the future, once the gas market in Europe has stabilised, the share of gas in the Polish energy mix is likely to be significant despite the current problems. All the more so as some investors are already working on upgrading their gas systems using hydrogen. In the future, district heating equipment could be powered exclusively by hydrogen. Green combined heat and power plants are the future of the heat market in Europe. The experiences of countries such as Denmark, the Netherlands and Norway in this area are paving the way for other European countries to achieve this goal.

    Conclusions

    It is completely incomprehensible that, in the face of the energy crisis, legislative delays are holding up investments in wind energy of 10 GW, i.e. approx. 30 TWh of cheap green energy production. The wind energy sector is prepared for rapid investments and sees opportunities to reduce the green energy shortage and significantly lower energy prices in the Polish market. In general, in the opinion of the experts, gas and oil are still expected to be used in the energy industry as carriers complementing renewable sources. The use of these raw materials in chemical processes is also undeniable.

    The state of the Polish energy industry and the problems facing the energy and gas market are cause for concern. Investment delays in virtually every sector of the energy industry may result in high prices, as well as insufficient supply of energy and heat. The short-term solution to this problem is import, at prices that are difficult to predict. Although transmission capacity is far from sufficient.

    Only ad-hoc legislative and investment measures can reduce the threat of reduced power supply for industry and households.

    We consider the following issues to be particularly important:

    • Unblocking investment opportunities in onshore wind energy (Bill 10 H),
    • Facilitating investments in renewable sources in post-industrial and post-mining areas,
    • Intensifying investments in offshore wind farms – rational state support in this area,
    • Accelerating works on the Act on Direct Lines,
    • Implementing the programme concerning the regeneration of the most efficient 200 MW units (“Bloki 200+” programme),
    • Launching the business prosumer programme – providing assistance and support to companies building their own energy sources,
    • Commercialising low and medium voltage lines (local transmission grid).

    The proposals presented above do not exhaust the catalogue of needs – the scope of necessary changes in legislation is much greater, and the lack of coordinated work in this area exposes the Polish economy to the loss of attractive export markets for the domestic industry.


    Włodzimierz Ehrenhalt,
     Chief Energy Technology Specialist at ZPP

     

    See: 14.11.2022 Opinion of the Chief Energy Technology Specialist at the Union of Entrepreneurs and Employers (ZPP) on the place of oil and natural gas in Europe’s modern hydrogen-renewable economy

    Commentary of the Union of Entrepreneurs and Employers (ZPP) on the necessary reduction of expenditure on social and welfare programmes in hard economic times

    Posted on by Weronika Marzec

    Warsaw, 10 November 2022 

     

    Commentary of the Union of Entrepreneurs and Employers (ZPP) on the necessary reduction of expenditure on social and welfare programmes in hard economic times

    • Due to the increasingly difficult situation of public finances, the government should aim to redefine the direction of its social policy. The abolition of benefits such as the thirteenth and fourteenth pension, the launching of the “Dobry Start” (Sure Start) programme and the reorganisation of the “Rodzina 500 plus” (Family 500 plus) programme could contribute to a significant reduction in budget spending and constitute a key source of desired savings.
    • Returning to the original form of the “Rodzina 500 plus” programme, excluding the payment of the benefit for every first child without setting an income threshold, could reduce the budget costs of the programme by about PLN 20 billion per year.
    • The abolition of the so-called thirteenth and fourteenth pension can lead to a direct reduction of expenditures related to the pension system by almost PLN 25 billion a year.
    • Moreover, the effectiveness of any other social and welfare programmes should also be thoroughly assessed.

    Rising inflation and the instability of the economic environment caused by the negative economic consequences of the pandemic and Russia’s armed aggression against Ukraine and the related energy crisis should force the government to redefine the direction of its fiscal policy.

    Although the Ministry of Finance reported a budget surplus for the period from January to September 2022 in the amount of PLN 27.5 billion, it should be remembered that a significant proportion of expenditures is charged to non-budgetary funds. And thus, based on Poland’s fiscal notification presented by Eurostat, the general government deficit in 2022 will be approx. PLN 141.4 billion compared to approx. PLN 48.195 billion in 2021. The deficit of the central government subsector will increase from PLN 49 billion in 2021 to PLN 135.9 billion this year. The local government surplus will also be lower – PLN 6.52 billion in 2022 compared to PLN 14.92 billion in 2021. The deficit of the social security funds subsector is expected to be PLN 12.84 billion. The cost of aggregate debt servicing for the public finance sector will also be high and will amount to 1.75% of GDP, i.e. almost PLN 53 billion.

    The government seems to assume that adjustments to fiscal policy should involve instruments that have as little direct impact on the sphere of social benefits as possible. According to reports, the Prime Minister issued a working order for the introduction of a programme of budget cuts in ministries, which is expected to result in savings of about PLN 10-15 billion – it is still a negligible amount with respect to real needs. Reducing expenditures on social programmes seems to be the most natural and desirable response today, which should be reflected in the decisions of state authorities, especially given the fact that the most important social programmes have cost us around PLN 250 billion since 2016.

    In February 2022, even before Russia’s invasion of Ukraine, the Union of Entrepreneurs and Employers (ZPP) urged the decision-makers to adopt a “conservative turn in social and budgetary policy” in the face of potential economic risks that make it much more difficult to stimulate economic growth with consumption, which is misguided in its nature. Already at that time, ZPP warned that, in the near future, high expenditure on social benefits could become cumbersome from a budgetary point of view. Cuts in spending on social programmes are today the surest way to restore the sustainability of the public finance sector. Plans to redefine the policy directions in other areas are subject to considerable risk resulting from uncertain estimates and forecasts, which are made in times of pandemic and war.

    “Rodzina 500 plus” programme

    As far as social spending is concerned, the flagship programme of Zjednoczona Prawica – “Rodzina 500 plus” (Family 500 plus) has been the biggest strain on the budget for years. By the end of 2021 alone, it cost us about PLN 180 billion. As at today, the annual cost of the “Rodzina 500 plus” programme is PLN 41 billion. This is more than twice as much as the cost of the programme in its original version – at the time, the then Ministry of Family, Labour and Social Policy reported that the cost of the programme would be PLN 21 billion.

    In this context, it is worth recalling that in the original version of the “Rodzina 500 plus” programme, benefits were provided with respect to the second and each subsequent child to recipients whose income per household member did not exceed PLN 800 or PLN 1,200 in the case of a child with a disability.  In the second half of 2019, the income threshold was abolished, and the benefit was extended to every child, which led to an increase in expenditure on the programme to PLN 41 billion per year.

    Restoring the original version of the programme, i.e. restoring the income threshold and excluding every first child from the benefit, would result in savings of about PLN 20 billion per year and a more targeted flow of funds under the programme.

    Potential plans to index the benefit in its current form should also be abandoned. The Pollster research institute asked Poles in a survey commissioned by se.pl in October this year whether the government should increase the “Rodzina 500 plus” benefit to PLN 800. Fifty-one per cent of the respondents answered unequivocally “no”, 12 per cent answered “hard to say”, and 37 per cent of the respondents were in favour of an increase in the benefit. The results of the survey show a change in the way Poles think about budget spending. The majority of the respondents are aware of the fact that the costs of indexation of the “Rodzina 500 plus” programme would be borne by everyone, and that any attempt to “catch up with inflation” by indexing social benefits is too costly and counterproductive from the point of view of an already strained state budget. The results of the survey are also a signal for the ruling party, which should not see an increase in this benefit as an opportunity to extend the electorate – this is particularly important in the context of next year’s parliamentary elections.

    Allowance for pensioners

    The desire to maintain the so-called thirteenth and fourteenth pension is an incomprehensible move from the point of view of the difficult economic situation in recent years. It is worth recalling that the second pension was originally intended to be a one-off allowance, but – according to the government’s announcement – it is also to be paid in 2023 at an indexed, higher rate. According to the Ministry of Family, Labour and Social Policy, in 2022 alone, the cost of the fourteenth pension is expected to be PLN 11.4 billion. In 2023, it will be higher, as the minimum pension rate will also be adjusted. The popular thirteenth pension will cost us about PLN 13.1 billion in total in 2022.

    In October 2022, inflation in Poland stood at 17.9 per cent and was the highest from December 1996. Despite regular increases, instead of reforming the ossified pension system, the government has only exacerbated its problems in recent years. The introduction of the thirteenth and fourteenth pension and the increase in the retirement age have dramatically increased costs generated by the pension system. It is also difficult to find an economic justification for further transfers. We should still consider them in the context of purely politically motivated actions.

    According to the Union of Entrepreneurs and Employers, the “belt-tightening” policy should largely apply to the pension system. From the outset of the discussion on the introduction of additional allowances in the form of the thirteenth and fourteenth pension, we believe that they unnecessarily strain the budget and are used to achieve political goals with respect to an arbitrarily designated group of the electorate; therefore, once again we emphasise the urgent need to abolish both allowances, namely the thirteenth and fourteenth pension. It should be noted that compared to the group of OECD countries, the Polish pension system is one of the most expensive systems, consuming more than 10% of GDP annually.

    “Dobry Start” programme

    “Dobry Start” (Sure Start) or “wyprawka” (school starter kit) or “300 plus” is another social programme that is excessively costly from the point of view of budgetary burdens. The essence of the programme is the annual payment of a one-off benefit to parents of school-age children up to 20 years of age or up to 24 years of age in case of children with disabilities.

    The annual cost of the programme is almost PLN 1.45 billion, amounting to a total of almost PLN 7.5 billion from the start of the programme until the end of 2022. Based on the latest data on the condition of the public finance sector, it would be reasonable to abandon the programme in subsequent editions, which would give real savings of around PLN 1.45 billion per year.

    Other relevant social and welfare programmes

    The “Rodzinny Kapitał Opiekuńczy” (Family Care Capital) programme, which is a new benefit proposed in the Polish Deal, costs the budget PLN 3.15 billion per year. Moreover, parents of children aged between 12 and 35 months are entitled to a benefit of PLN 12,000 for their second and subsequent child. The allowance is paid in monthly instalments. The aim of the benefit is to encourage parents to return to the labour market, but it is difficult to determine its effectiveness due to the short duration of the programme. However, the introduction of an income threshold should be considered, which could significantly reduce the amounts of the payments and relieve the state budget.

    “Mama 4 plus” (Mother 4 plus), the tourist voucher and other similar programmes represent a relatively small budgetary burden.

    Conclusions

    Abandoning some of the budgetary burdens associated with spending on social programmes or changing the criteria for some of the existing programmes will make it possible to save funds in the short term, which is necessary in light of the current crisis. If we return to the original version of the “Rodzina 500 plus” programme and give up the thirteenth and fourteenth pension, as much as PLN 40 to 50 billion per year will remain in the budget.

    The government should also make every effort to change the tax system in order to give entrepreneurs a sense of stability and ensure an increase in the level of investment. The savings of PLN10-15 billion achieved by the government’s policy of cuts in ministries is a significant value but insufficient in the face of current challenges – after all, the anti-inflation shield alone is worth three times as much.

     

    More: 10.11.2022 Commentary of the Union of Entrepreneurs and Employers (ZPP) on the necessary reduction of expenditure on social and welfare programmes in hard economic times

    Opinion of the Chief Economist of ZPP on the importance of demography for the reconstruction of Ukraine

    Posted on by Weronika Marzec

    Warsaw, 6 October 2022 

     

    OPINION OF THE CHIEF ECONOMIST OF ZPP ON THE IMPORTANCE OF DEMOGRAPHY FOR THE RECONSTRUCTION OF UKRAINE

     

    Ukraine’s military success, the probability of which is as high as never before (although this is only probability, not certainty, and the war still continues), will result in the recovery of some (more likely) or all of the territories lost to Russia after 2014. Those territories are largely depopulated as a result of internal resettlement caused by hostilities, refugeeism, forced relocations deep into Russia and, finally, losses caused by the warfare.

    The military success of Ukraine makes us think with increasing optimism about the upcoming challenge of rebuilding the country after the war. The scale of the damage is severe and the reconstruction will cost billions of dollars. The discussion on the reconstruction of the country, the model of its financing and the way of engaging private enterprises, in particular Polish ones, should be supplemented by considering the great challenges that Ukraine faces in the short and medium term.

    First, the question arises of what to rebuilt and how. Should the transport, transmission and industrial infrastructure or settlement network be restored first? Already before 2014, the eastern regions of Ukraine were struggling with development challenges (somewhat similar to those experienced by the industrial regions of Upper and Lower Silesia in Poland). The infrastructure and material capital inherited from the USSR was consumed rapidly and was restored to a far insufficient degree. The process of depleting the economic potential of the region was further accelerated by the policy of the oligarchs,  who were often looking for ways to maximise their income in the short term.

    Therefore, the project of reconstruction of Ukraine should be a civilisational undertaking on a scale similar to the systemic transformation in Central and Eastern Europe, with the transformation of economic structures, expansion of foreign capital, reduction of the scale of corruption and arbitrary actions of the administration. As part of that project, it is necessary to answer the question of what the economic future of the eastern regions of Ukraine should be. To do so, an assessment of the actual state of the material and human capital of the region is necessary.

    It is important to remember that the initial optimism of the reconstruction period can quickly turn into disappointment and frustration of local communities. Considering the globalised world of open borders, this may result in further waves of migration. At the same time, a rational strategy is of great importance, taking into account the potentially rapid first wave of financial aid. The aid should be well administered, as with equal probability, successive waves of financial support – once the memory of the war and success fade away to some extent, will be smaller and smaller. And the risks associated with the allocation of the aid are considerable. European companies, including Polish and American ones, will be involved in the reconstruction project – and will be interested in achieving short-term benefits (especially as they will be affected by the recession that has just begun). Therefore, the participation in the reconstruction of Ukraine may turn out to be another way of boosting Western economies mired in recession or recovering from it. It is worth reminding that similar goals (apart from those officially declared) were pursued by the Americans during the Marshall Plan, or by the Germans during the reconstruction and integration of FRG-GDR in the 1990s.

    However, a more serious challenge awaits Ukraine in the longer term. For decades, the country has been struggling with a very deep demographic crisis, which is the result of a low birth rate, still low life expectancy, large scale of emigration and territorial losses. The country, which at the beginning of its existence had a population of over 50 million, according to the partial e-census conducted 2 years ago, was inhabited (in government-controlled areas) by approximately 37 million people, including 5.8 million children under the age of 14. According to estimates by the IOM, approximately 7 million people left the country due to the war. Based on the survey conducted by the IOM in July, at least two-thirds of them (i.e., approximately 5 million) are not planning to return, at least not yet.

    Who has emigrated from Ukraine? Mostly women and children. According to PESEL (Polish resident indentification number) data, out of the 1.3 million Ukrainians who have obtained that number, 580 thousand are  children (under the age of 18). Assuming that approximately 400-450 thousand of them are under the age of 14 and that the structure of the Ukrainian population in other countries is similar, 1/3 of the refugees, or 2-2.5 million people, are children of that age. This means that 30 to 40% of children under the age of 14 have left Ukraine! To realise the consequences: this generation will be entering the Ukrainian labour market in 4 years, and there will be 3-3.8 million workers within 14 years (assuming no returns but also no further waves of migration). Let us compare the above to the generation leaving the labour market at that time (let’s say those born between 1961 and 1975). During that period, between 687,000 and 843,000 babies were born each year,  with an average of 740,000.  In total, more than 11 million children were born (let us assume that approximately 9-10 million actually live in Ukraine and are professionally active). The difference (loss of employees) can therefore reach 6-7 million in 14 years! The cohorts entering the labour market will amount to 200-250,000 –  to compare, between 330,000 and 400,000 children were born in Poland in the last decade.

    The demographic crisis may constitute a fundamental barrier to development. That need not be the case – there are countries and regions that have experienced periods of rapid growth under the conditions of both dramatic population decline and long-term unfavourable demographic trends. After World War II, West Germany experienced a period of impressive development despite huge losses due to the war. Reconstruction has also been successful in many other countries, including Poland – although it must be remembered that the aversion towards migrants and refugees “helped” in that case and supported returns after the war. Things are going to be different now. Additionally, at that time, further development was supported by demographics – the post-war baby boom.

    Countries and regions in Central and Eastern Europe struggling with demographic challenges also experienced a period of development after the transition: Hungary and East Germany are good examples. In those cases, however, we are dealing with slow demographic changes rather than a rapid population decline (Hungary), or with internal migrations balanced by the policy of convergence within the country (Germany).

    Thus, while there are considerable hopes for the reconstruction of Ukraine, factors such as demographic conditions raise concern for its future – they may cast a shadow over hopes for rapid reconstruction and convergence with Europe afterwards. The role of politicians is to look for solutions that would reduce the consequence of those processes.


    Dr hab. Piotr Koryś
    Chief Economist of the ZPP

     

    See: 06.10.2022 Opinion of the Chief Economist of the ZPP on the importance of demography for the reconstruction of Ukraine

    ZPP position on the bill on employment of foreigners (RCL work list no.: 400)

    Posted on by Weronika Marzec

    Warsaw, 10 October 2022 


    ZPP position on the bill on employment of foreigners (RCL work list no.: 400)

     

    Regulations on the employment of foreigners have long been controversial. The regulations were not very clear and the procedures were complicated. This created numerous difficulties for foreigners wishing to take up employment in our country. However, Poland has made significant progress in this regard for some time.

    The standards concerning the employment of foreigners can be found in numerous legal acts, most notably in the Act of 20 April 2004 on employment promotion and labour market institutions, the Act of 15 June 2012 concerning the effect of employing foreigners residing illegally on the territory of the Republic of Poland and the Act of 12 December 2013 on foreigners. In the context of the ongoing armed conflict in Ukraine resulting from the aggression of the Russian Federation, the Act of 12 March 2022 on assistance to citizens of Ukraine in connection with the armed conflict on the territory of that country, which provides for a number of facilitations for Ukrainians wishing to take up employment on the territory of Poland, is also very important.

    Extremely important and expected changes in the employment of foreigners, which the Union of Entrepreneurs and Employers had long been calling for, were introduced by the Act of 17 December 2021 amending the Act on foreigners and certain other acts. The Act in question, among other things, extended the time for which an employer may entrust a foreigner with the performance of work on the basis of a mere declaration up to 24 months (Art. 88z sec. 2 item 3 of the Act on promotion of employment and on labour market institutions). The matter concerning temporary residence and work permits has also been simplified. The new provisions made it possible for a foreigner to perform work on the basis of an existing permit in a situation where, for example, a civil law contract was changed into an employment contract (Art. 119 of the Act on Foreigners). On the other hand, thanks to the new wording given to Art. 120 of the Act on Foreigners, a foreigner working in Poland in the situation of a change of the entity entrusting him/her with work does not need to apply for a new work permit as before, as he/she has the possibility to change the one already held.

    However, in view of the needs of the labour market, where many employers are still having problems finding employees, as well as the relevance of the issue concerning the employment of foreigners in conditions where several million people have emigrated to Poland since the invasion of Ukraine by the Russian Federation, the Ministry of Family and Social Policy has prepared another important amendment to the legislation. This is because the Ministry has published on the website of the Governmental Legislation Centre and submitted for consultation a completely new bill “on employment of foreigners”. This means that this matter is to be taken out of the regulations of the Act on employment promotion and labour market institutions and regulated in a completely separate legal act. The explanatory memorandum of the bill also claims that it has been prepared in order to fulfil the obligations that our country undertook to fulfil within the framework of the National Reconstruction Plan. The issue of employment of foreigners was identified in the “milestone” A51G for the reform called “A4.1 Effective institutions for the labour market” providing for:

    “Entry into force of new laws on public employment services, employment of third country nationals, and on an electronic conclusion of certain job contracts:

    – introducing changes to public employment services and active labour market policies to increase labour force participation

    – lowering the administrative barriers to employment of foreigners,

    – simplifying the process of concluding certain contracts“.

    The proposed legislation contains a number of positive changes in several areas. Certainly, a very important proposal is the electronicisation of procedures related to obtaining a work permit for foreigners. Article 8 stipulates that a work permit shall be granted upon application by the employer, which should be submitted by means of the ICT system at www.praca.gov.pl. An application submitted otherwise shall be left unprocessed. Also, appeals on the work permit shall be submitted in the ICT system. What is more, the obligations of employing entities to inform the authority of certain circumstances under Art. 18 sec. 2 (takeover of the workplace or part of it by another employer) and 19 (failure of the foreigner to start work, interruption of work and termination of work earlier than 3 months before the expiry of the work permit) must be done through the ICT system on the government website. What is important, Art. 59 stipulates that the procedure of submitting a declaration on the employment of a foreigner shall also be carried out through the indicated website. Also, the processing of personal data referred to in Chapter 7 shall be carried out in electronic form using the relevant ICT system. From the perspective of the foreigners themselves, it is very important that they will have constant insight into the ICT system. They will be able to check whether they have a work permit and for how long it has been issued and, e.g., whether they have been registered for social insurance. Another novelty is that the Ministry announces the possibility of verifying whether the remuneration offered to a foreigner is adequate to market conditions based on data taken from the Central Database of Job Offers. The above changes will certainly be important for streamlining the procedures and are a great improvement for employers wishing to employ foreigners.

    The Ministry also declares to increase the role of the Public Employment Services in the process of legalising employment of foreigners. This issue refers primarily to entrusting work to foreigners on the basis of declarations. Importantly, the bill maintains the rule that a foreigner can be employed in this way for up to 24 months and a number of other requirements in this regard. These standards are set out in Art. 59 and 63 of the bill. It is also worth noting the change in terminology. The bill mentions a “declaration on the employment of a foreigner”, while the still in force Act uses the term “declaration on entrusting work to a foreigner”. Although the change is minor, and it is in fact the same institution, nevertheless the new name emphasises that it is the employment of a specific person.

    Another important objective of the Act, which the Ministry emphasises in its justification, is the reduction of administrative barriers and the streamlining of procedures concerning the employment of foreigners. The most important change in this respect is the abandonment of the so-called “labour market test”, which imposes on the entity entrusting employment an obligation to present a declaration from a starost on the employer’s inability to meet its staffing needs in a given market (the current regulation of Art. 88c sec. 1 item 2). This is a change repeatedly advocated by employers, which will not only significantly facilitate the employment of foreigners, but will also increase access to qualified staff for Polish companies.

    An important change is also the waiving of the obligation to carry out the problematic procedure for the renewal of a work permit that has already been issued in a situation where the employer wants to continue working with a specific person. In such a case, new permits shall be issued under more favourable conditions, e.g. the employee shall be able to continue working throughout the process and shall not face the risk of having to give up work for some time due to delays in issuing the work permit. In addition, such applications have priority for consideration. These standards are set out in Art. 21 and 27 of the bill.

    The changes will also apply to situations that are negative grounds for granting a work permit. It will be obligatory to refuse to issue a permit if the employer is in arrears in the payment of social security, health insurance and other contributions indicated in the legislation (Art. 13 sec. 1 item 1 (i)). However, optionally, the authority shll be able to refuse to issue a work permit “if it appears from the circumstances that the foreigner shall not perform work in the territory of the Republic of Poland under the conditions specified in the work permit or that the employer shall not fulfil the obligations related to the employment of the foreigner or other persons or to the conduct of activities […]’. (Art. 14).

    An important change concerning the work permit is also the indication that it will be possible to issue it when the working hours are not less than one quarter of the full working hours in a month (Art. 28 sec. 1 item 4). This is intended to prevent abuse in the issuing of permits for very low working hours.

    Penalties for employing foreigners in contravention of the Act are also to be slightly amended. The new provisions provide for a fine of between PLN 500 and PLN 30,000 (Art. 76 sec. 1). Thus, the lower limit of the fine has been lowered, but at the same time a clear provision has been introduced that the fine “shall be imposed in an amount not lower than PLN 500 per foreigner” (Art. 76 sec. 1 item 9).

    Despite numerous and positive proposals, the legislator (at this stage) did not decide to introduce other expected changes. This is because it was expected that many competences in the area of declarations of employment of foreigners and work permits would be transferred to employment agencies, while starosts and voivodes will still have the decisive voice in this area. There was also no decision to extend the period of “seasonal work”. Solutions that are disadvantageous from the perspective of some entrepreneurs have also been introduced. For example, the period for which a work permit is issued has been shortened when the employer has been active on the market for more than a year, when the working time will be low or when the foreigner will perform employment under a civil law contract (Art. 32). In the latter case, an additional fee shall also be charged.

    The Union of Entrepreneurs and Employers points out that the proposal for a new law on the employment of foreigners presented by the Ministry of Family and Social Policy is a good solution. It is based on the significant and positive changes made in the employment of foreigners in recent months and adds a number of good new solutions to streamline and simplify procedures. It also places all the standards concerning the employment of foreigners in a single legal act, which will certainly increase the transparency of this matter. However, it should be pointed out that in several cases the legislator did not decide to introduce the solutions demanded by the market.

     

    See: 10.10.2022 ZPP position on the bill on employment of foreigners (RCL work list no.: 400)

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