12 minute read
We Simply Have to Endure
Jacek Piechota, president of the Polish-Ukrainian Chamber of Commerce, former minister of the economy (2001-2003) and minister of the economy and labor (2005), talks with Witold Żygulski.
The war in Ukraine is affecting all areas of life
in the CEE region, including economic exchange; what is the biggest problem in this area today for Poland as a direct neighbor of Ukraine, which is fighting the Russian invasion, and probably the country most involved in providing assistance?
In the first place I would mention the problems of Polish companies which have invested and engaged in trade and cooperation with Ukraine. We ended last year with great success in terms of growth of our economic relations. An exchange value of over USD 12.5 billion had seemed hard to achieve not so long before. Today we are having problems with supplies for the Polish machine-building industry, which has been drawing semi-finished products from Ukraine, or with products for Polish steelworks.
Another problem resulting from the war is the outflow of Ukrainian workers from Polish companies. These men have returned home to fight. In Poland, they worked in sectors
such as construction and transport in a broad sense. Polish employers are having lots of problems with this today: some construction sites are deserted, the trucks of some companies have been standing in parking lots for weeks.
The third area is the agricultural and food sector. Ukraine used to be the granary of Europe; grain exports covered a significant part of the needs of many countries. The situation now is very complicated; over 70 percent of Ukrainian agricultural export was carried out by sea, which has become impossible due to the blockade of Ukrainian ports by the Russian fleet. Polish logistics faces a huge challenge: there are now tens of thousands of railroad cars standing on the Ukrainian side of the border; receiving and unloading them exceeds the capacity of Polish railroad terminals. With the continuation of hostilities, these problems will inevitably get worse.
Overcoming the crisis in economic exchange depends on the war ending and some kind of agreement being concluded between Kiev and Moscow; what, in your opinion, are the possible future scenarios?
Looking at the situation of Ukraine and the Ukrainians with a cool eye, I do not foresee, neither today nor in the long
run, the possibility of any agreement that [as the Russians want] would sanction the Russian Federation’s occupation of the currently occupied territories. The Ukrainians are determined in their struggle, and I think that with Western support for Kiev, the conflict will continue until they regain their lost regions. How long this struggle will go on is difficult to predict today.
In the Ukrainian economy, we are now seeing a tactic of relocating manufacturing enterprises to the west of the country, so far a region less industrialized than the eastern part of the country. Locating such enterprises in western Ukraine will definitely foster partnerships with Polish companies. Assuming a positive scenario of a quick end to hostilities and Ukraine’s maintained independence, economic prosperity might quickly follow. What Vladimir Putin has certainly “succeeded” in doing is promoting Ukraine internationally, also in economic circles, and consolidating the West, which for the time being is supporting Ukraine tremendously in its fight, but in a short while will be supporting it just as intensively, I am convinced, in the country’s postwar reconstruction. It will be a great challenge for Western civilization to show Russia and its people that life is better and more profitable under Western conditions. Many Polish companies are already trying to find their place in this and participate in rebuilding Ukraine. This is the positive scenario.
On the other hand, a prolonged conflict and a positional or guerrilla war will pose the task of close cooperation and constant assistance, especially in the defense industry, in whatever will be necessary for the survival and defense of the Ukrainian people. This will require many companies, carriers, logisticians to address completely new realities and situations. There is no one wise enough to predict today how this process will play out.
How can Poland prepare today for a scenario of operating in a frontline economy?
Already in the first days of the conflict, we asked Prime Minister Mateusz Morawiecki to quickly appoint a government plenipotentiary for the situation related to the crisis in Ukraine, not only someone to deal with refugee issues or emergency aid, but all issues, from nurseries, preschools, education, social welfare, healthcare, to the economy. Today there is only a plenipotentiary for refugees, whereas what we need first and foremost is to see full coordination of all of the Polish state’s activities. It is necessary to monitor the situa-
tion of all Ukrainian companies. We have set up a Business Relocation Center at our chamber, with the aim of supporting Ukrainian entrepreneurs who are considering moving their production or other business activity to Poland. Of course, the government in Kiev does not support the relocation of their companies outside of Ukraine, preferring to relocate them to the west of the country, participating in the costs of transporting the means of production to safer areas. But the entire structure of the Ukrainian economy will inevitably change, and Poland must be prepared for this. This requires consistent and coordinated actions. Meanwhile, until recently we did not even have a minister of development and technology; he was only appointed by the prime minister a few days ago. Let’s hope that under the new leadership, the Ministry of Development and Technology will finally take over the role of an institution coordinating support for Polish entrepreneurs affected by the war.
Already on the first day of the war, the Polish Export Credit Insurance Corporation (KUKE) abolished insurance limits to support exports to Ukraine. Government instruments reducing the risk of economic exchange with Ukraine are essential today. This is something that the Ministry of Development should be working on intensively, and I hope that we will see the effects of this work.
What can the private sector do?
The private sector, which I say with great admiration, has been fantastically involved in helping Ukraine, its war-torn inhabitants and Ukrainian refugees in Poland. From the first moments of the Russian invasion, we have seen fundraising and aid convoys.
As far as economic cooperation is concerned, I am optimistic. We already know our Ukrainian partners very well. After years of various problems for Polish business on the Ukrainian market, our turnover started to increase rapidly; we already have well-tested contractors and practiced paths. One would just like to say: “keep it up!” We understand the challenges that Ukrainian entrepreneurs face as a result of the war situation. We will certainly continue to develop cooperation in all possible fields. If, alongside our willingness, knowledge and experience, there will be some instruments of assistance from the Polish government - and I hope this will happen - I do not see any threat to future Polish-Ukrainian economic relations.
Can we risk saying that Poland will be a kind of window on the European Union for Ukraine, an ambassador of its interests and an intermediary in their positive fulfillment?
We already are such a window. Today there are over 20,000 companies with Ukrainian capital registered in Poland, and about 6,000 companies with Polish capital in Ukraine. Ukrainians have discovered that the possibility of operating on our market gives them wide access to EU markets. Long before the war, we became a very important and valued partner for Ukrainian business, and today the belief in our value is even stronger. You can even see it in circles that were critical of the Poles. We are in top place among the Ukrainian economy’s partners. In Ukrainian public opinion surveys many months before the war broke out, we invariably came first on ranking lists of countries and societies friendly to Ukraine and its people. After February 24, this process has only intensified. It would be good if our government started thinking about a strategic partnership, about cooperation between large entities, such as state treasury companies, and Ukrainian partners, about supporting cooperation between companies, and also joint investment projects. Such a partnership strategy has very strong foundations for rapid implementation today. It only needs to be filled with concrete, well-prepared projects.
How do you assess the assistance activities of the Polish financial sector, led by the National Bank of Poland?
Very positively. The National Bank of Poland’s decision to allow the exchange of hryvnias at selected Polish banks was a way for Ukrainians to obtain funds to survive under conditions of emigration in Poland. In turn, the NBP’s SWAP agreement with the National Bank of Ukraine [worth USD 1 billion] strengthened the Ukrainian financial sector in difficult wartime circumstances.
However, another very serious challenge arises: what should we do with the capital that has been brought to Poland by refugees? Ukrainians fleeing the war converted their possessions into cash and brought it with them in an informal way, uncontrolled by any financial institutions or other services. It is mostly in dollars, for years considered the most reliable way to keep savings safe in Ukraine. According to various estimates, it could be several hundred million, perhaps even more than a billion dollars. The question is how to legalize these funds. Banks cannot accept such large sums, due to regulations protecting against money laundering. It would therefore be useful to have some kind of extraordinary, temporary regulation, some kind of abolition that would make it possible to put this money into legal circulation. Otherwise, it will remain in the shadow economy, which would certainly be harmful to and undesirable for economic processes.
Can Poland count on support from international financial institutions or other foreign partners today to help Ukraine rebuild its economy and reconstruct trade relations in the future?
Of course; the recent Stand Up For Ukraine campaign brought in over USD 9 billion. As a matter of fact, the entire Western world with all its institutions has gotten involved in helping, consolidating in a way that is probably unprecedented over the last many decades. At the Euro Chamber of Commerce level, we as the Polish-Ukrainian Chamber of Commerce, in cooperation with the Polish Chamber of Commerce, are intermediaries in many aid operations. Western companies collect funds and donate them to our Aid Fund for Ukraine. Let’s hope that all of us - Ukrainians at home, and we through aid campaigns – will be able to carry on if the armed conflict were to drag on for months.
This is obviously a politically sensitive topic, but does the Polish arms sector stand to gain from the war across our eastern border?
Definitely. Ukrainian demand for armaments is incomparable with what it was in peacetime, and I am sure that talks are being held with Polish armament companies, that we are involved in the process of arming the Ukrainian forces with modern equipment enabling effective defense.
How are economic relations between Poland and Russia and Belarus looking now, and what might they be like in the future?
If the conflict continues and nothing changes on the Russian and Belarusian sides, we will have to continue operating in a situation of European sanctions and restrictions. Fortunately for the Polish economy, we have already successfully reoriented it toward the West. We were Ukraine’s second-largest trading partner, but despite its huge turnover, Ukraine was only the fourth non-EU partner for us. Russia was in a distant position; if it were not for gas and oil, it would have been much further down. The government’s decision to end dependence on imports of these resources from Russia practically closes the topic. If we can manage without Russian hydrocarbon supplies, if we end energy dependence, there will be no problem.
Is such quick independence realistic?
If we manage to complete the gas pipeline connecting us with the Norwegian deposits and the Americans keep their word regarding the offer to export shale gas through the gas port built on the Polish coast, we will manage. As for crude oil, it has long been technically possible to import it by sea through the oil port in Gdańsk. It is just a matter of cost, which of course will be higher than oil from the Druzhba pipeline. But we must bear these costs, because we can no longer pay the “price of blood” by financing the actions of Putin’s Russia.
