The legal framework for private sector development in a transitional economy: the case of Poland

Cheryl W. Gray, Rebecca J. Hanson, Michael A. Heller, Peter Ianachkov, Daniel T. Ostas and Youssef Djehane

No 800, Policy Research Working Paper Series from The World Bank

Abstract: The economies of Central and Eastern Europe are in the midst of a historic transition from central planning and state ownership to development of a market-driven private sector. This transition requires comprehensive changes in"rules of the game"- including the legal framework for economic activity. A market economy presupposes a set of property rights and a system of laws or customs that allow the exchange of those rights. The legal framework in a market economy has at least three basic functions: defining the universe of property rights; setting the rules for entry into and exit from productive activities; and setting the rules of market exchange. These legal tasks are accomplished by areas of law such as: company, foreign investment, bankruptcy, contract and competition law. Poland has a rich legal tradition dating from pre-socialist times, which was suppressed but not eliminated during its forty years of socialism. This tradition is being revised as the country moves toward a private market economy. The current legal framework in Poland closely follows other continental jurisdictions and has a clear and reasonable internal logic. Many of the laws are old, but most are flexible enough to permit a wide range of modern, market-oriented activity. Property law, however, remains a"jungle". The wide discretion and general lack of precedent create tremendous legal uncertainty that is sure to hamper private sector development.

Keywords: Environmental Economics&Policies; Banks&Banking Reform; Municipal Housing and Land; Legal Products; Land and Real Estate Development (search for similar items in EconPapers)
Date: 1991-11-30
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