Transforming state enterprises in Poland: macroeconomic evidence on adjustment

Brian Pinto, Marek Belka and Stefan Krajewski

No 1101, Policy Research Working Paper Series from The World Bank

Abstract: Basing their report on repeat visits in late 1992 to 75 large state-owned manufacturing enterprises (which had been earlier surveyed in mid-1991), the authors present optimistic new evidence about the transformation of state-owned enterprises in Poland. This evidence shows state-owned enterprises in a much more favorable light than the stereotype of myopic, decapitalizing companies that dominates discussion of Poland's state manufacturing sector. Success stories are emerging, and the state sector is far from a write-off. Moreover, favorable evidence is drawn from all manufacturing sectors, attesting to thepotential for a diversified manufacturing base. The state-owned enterprises'operations are largely autonomous, so the positive adjustments indicate that decentralized approaches to transformation could work - if bolstered by appropriate managerial incentives. But several problems remain, and many issues have yet to be addressed. The authors examine various adjustment indicators (labor shedding, material and energy costs, bank borrowings, and export performance) and correlate these with firms classified by 1992 financial performance. (By 1992, presumably, the transitional measurement distortions of 1990 and 1991 had disappeared.) They show that significant differences exist between successful and unsuccessful firms. Managers in successful firms have tended to stress a change in product mix, have generally become more efficient in the use of materials and energy, have maintained labor productivity, and have shown restraint in setting wages and in borrowing from banks. The authors discuss key transformation issues: the disappearance of such safety valves as easy bank loans and interfirm credit, hardening of the microeconomic budget constraint, excess-wage tax reform, and, most important, managerial attitudes and incentives. To complete the picture, they correlate the results of manager interviews with the quantitative performance of firms. Essentially, firms have learned a good deal about operating in a market economy in the past three years, and managers have matured. The industrial revival showing up in economywide statistics can be regarded as a sustainable trend borne of genuine microeconomic adjustment.

Keywords: Small Scale Enterprise; Banks&Banking Reform; Environmental Economics&Policies; Economic Theory&Research; Municipal Financial Management (search for similar items in EconPapers)
Date: 1993-02-28
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Citations: View citations in EconPapers (121)

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