Economic and Commercial Section

Economic and Commercial Section
Jakarta, 2002.10.02
Embassy of Poland

Kiri-kanan - bendera kedua negara

Poland - A Trade Partner for Indonesia

The last decade of the previous millennium has seen Poland
emerge as the best example of dynamic and successful economic and
political transformation and, at the same time, as the fastest
growing economy of Central and Eastern Europe.

Few countries in the world have experienced such a steady
growth during this period. According to the economic report on
Poland published by OECD last year: "The success of Poland's
economic transformation comes from a well-orchestrated
combination of sound financial policies and perseverance with
structural reforms."

The present transformation of the Polish economy is aimed at
strengthening of the market mechanisms and institutions. The
nation's economy has been opened to all forms of economic
cooperation with foreign partners. As the result, Polish
companies are becoming increasingly profitable and foreign trade
is booming.

These factors, together with the stability of the Polish
currency (zloty) in relation to Euro and the US Dollar, have led
to creation of many attractive investment opportunities for
foreign capital. The end of the first and most important stage in
the process of transformation - begun in 1989 - will be marked by
an entrance to the European Union, which is widely expected to
take place in 2004.

During the period of transition, real GDP annual growth rate
averaged 5 percent. In the year 2000 it amounted to 4.1 percent,
slowing to 1.0 percent in 2001, mainly as an effect of economic
slowdown in Poland's major export markets. GDP per capita has in
2001 reached approximately US$4,600, or US$9,600, if an
adjustment for purchasing power parity is made. Total value of
GDP in 2001 amounted to US$176.3 billion. Inflation was brought
down to single figures (1.2 percent August '02-to-August '01) and
strong consolidated private sector was created.

Prospects for the future are good as well. Inclusion into the
European Union will likely provide an additional impetus to
Polish economy, accelerate a process of integration into the
largest homogenous market in the world and enforce a faster rise
in productivity in the competitive Union environment.

The political and economic integration with the European Union
is one of the strategic goals of Polish policy. To become a
fully-fledged member, Poland must not only continue to develop
and transform its economy but also make its legal and economic
framework compatible with the rules of the EU.

Creating favorable conditions for attracting foreign direct
investment to Poland has been of paramount importance to Polish
government. During the course of the last decade, total foreign
investment and investment commitments in Poland have already
accumulated to US$56.8 billion. The record year was 2000 which
alone has contributed FDI valued at US$10.6 billion. The largest
value of investment was placed in the manufacturing sector,
particularly in the automotive industry, food-processing,
production of non-metal goods and electrical and optical sector.

Financial services, transport and communication, trade and
construction have also attracted large amounts of foreign
capital.

Inflow of foreign capital helped to accelerate the
transformation of the economy, speed up the privatization
process, stimulate economic growth and modernization of economic
structures, especially in industry and trade, inspire development
of new technologies, increase productivity and develop modern
management as well as better organization of production.

Looking from another perspective, foreign capital is willingly
flowing to Poland because of its reputation as a booming and
stable market, with a good record of macroeconomic management,
highly educated workforce, good industrial infrastructure,
dynamic demand and comparative advantage in relative labor costs.
In view of these factors Poland is likely to remain for some time
the regional leader in attracting FDI transfers.

Contemporary Poland has a very strong private sector - its
share in the country's economy is constantly rising, owing both
to the privatization of state-owned enterprises and to creation
of new private companies. So far, since 1990, more than 10,000
state enterprises have been transferred into private hands. By
the end of 2000 private sector has accounted for 70 percent of
the GDP and it is estimated that by 2005 this share will further
increase to 85 percent. The number of companies participating in
the international market has dramatically risen from less than a
hundred foreign trade operators in late eighties to over one
hundred thousand business entities today. It is estimated, that
more that over 84 percent of total import and almost 84 percent
of export is already being handled by the private sector (data
for the year 2000).

Foreign trade is an important factor in Poland's economic
growth. The share of trade exchange in the GDP has grown from 35
percent in 1990 to 52 percent in 2000. Last year total exports
were valued at US$36.1 billion and imports reached US$50.3
billion.

This year exports have continued to grow, while value of
imports remained stable. European Union countries are the main
partners of Poland in foreign trade. Their share in total Polish
international commerce accounts for about 65 percent. Germany is
the main single trade partner - it is the destination of 33
percent of Poland's overall exports and the source of 24 percent
of Polish imports - followed by Italy, Russia and France. The
above figures prove the high quality of "MADE IN POLAND" products
and their competitiveness.

The commodity structure of Polish export offer underwent
profound changes in recent years, marked by the shift from
agricultural and primary exports to labor-intensive manufactures.

Nowadays, Poland sends abroad not only steadily increasing
quantities of various engineering products, such as motor cars,
ships, boats, civil engineering machines and electrical equipment
but also textiles, furniture (the second largest exporter in
Europe), footwear, packaging machines, as well as rich variety of
food products.

The well-deserved sense of accomplishment should not prevent
us from recognizing many challenges that Poland must still face.
Those include foreign trade imbalance and relatively high level
of unemployment. The only way to meet the former challenge is
through increasing the export capacity of the economy by securing
more investment, even better technology and higher productivity.

The latter is a natural effect of transformation from large,
ineffective state-owned enterprises to economy run by more
efficient private companies and should be resolved eventually
when the workforce undergoes necessary retraining and becomes
absorbed by the fast-developing private sector. However, the
social implications of even temporary unemployment cannot be
overlooked.
Poland - Indonesia economic relations

Indonesia is an important trade partner of Poland in South-
East Asia region. The mutual trade turnover shows steady growth
tendency. In 1998 it reached the value of US$208.0 million, in
1999 - US$209.0 million, in 2000 - US$219 million and in 2001 -
US$195 million (according to Polish statistical data).

Long tradition of commercial relations between the two
countries saw Indonesia exporting to Poland mainly agricultural
products and raw materials, such as natural rubber, coffee, tea
and spices.

This commodity structure has undergone profound changes in
recent years. The share of chemical compounds and
telecommunication equipment in total Indonesian exports to Poland
is rising every year. Man-made yarns, garments, cloths, footwear,
rattan furniture and paper products are also exported to Poland
in large quantities.

On the other hand, Polish companies supplied to Indonesia
various kinds of machinery, civil engineering equipment,
chemicals, steel products, powdered milk and electrical
apparatus. The commodity structure of Polish exports to Indonesia
is rather stable, while Polish purchases from Indonesia become
every year more diversified.

Unfortunately, a considerable part of trade transactions
between Poland and Indonesia is executed by intermediary
companies from other countries.

Polish businessmen consider Indonesia an attractive market
offering great prospect. Producers and exporters alike are
looking for new opportunities to supply mining, electrical,
agricultural and food processing equipment, machine tools,
packaging machinery, power generation equipment, various kinds of
chemicals, including fertilizers, herbicides and insecticides as
well as technology, all of which are in demand in contemporary
Indonesia.

High-quality "MADE IN POLAND" products can still be offered at
very competitive prices, thanks to comparative advantage in labor
costs.

Polish business is keen to acquire new trade partners in
Indonesia and establish more direct relations with individual
companies.

The legal framework provides firm basis for further
development of trade and economic cooperation between Poland and
Indonesia. In 1974 the countries signed the trade agreement, in
1986 an agreement on the development of economic and technical
cooperation, and in 1992 two agreements - on avoidance of double
taxation and on promotion and protection of investments.

Polish customs regulations offer a considerable advantage to
Indonesian exporters entering the Polish market. The present
system of customs duties is in line with GATT and WTO principles,
and provides differentiated customs rates according to the
country of origin. Indonesian products enjoy lower tariffs under
the General System of Preferences (GSP).

In fact, almost all agricultural commodities imported from
Indonesia may enter Polish market without payment of customs duty
(zero tariff). In order to be eligible for such preferences,
commodities must be sold directly to Poland.

Indonesian businessmen interested in starting their activity
on the Polish market will find many attractive opportunities.
They may easily open a representation office or find a partner to
cooperate with. Therefore, Poland is expecting more and more
Indonesian companies to visit Poland in the future, searching for
trade and business opportunities. The best opportunity to get
acquainted with the Polish export offer and also to present
Indonesian products to many potential customers is to participate
in international trade fairs and exhibitions organized in Poland.

Polish companies offer many business and cooperation
opportunities for interested Indonesian partners, especially in
such areas as: steel industry, shipbuilding industry (including
construction of tankers, container ships, LPG and LNG ships, Ro-
Ro and passenger ships, fishing boats, patrol and rescue boats),
underground and open-cast mining equipment, chemical industry,
machine-tool industry, building and construction machinery, food
processing plants and environment protection equipment and know-
how.

The prospective purchases from Poland may also include such
goods as: fertilizers, pharmaceuticals, processed food, powdered
milk, measuring instruments, agricultural machinery, railway
equipment, energy sector equipment and fire-fighting and rescue
aircraft.

In order to explore new areas of bilateral trade and to
strengthen economic cooperation between Poland and Indonesia,
more direct contacts between business circles are required, as
well as becoming more familiar with each other's economies. Then,
no doubt, mutual trade will grow to the benefit of both of our
distant (only geographically) countries.