Poland’s average annual growth rate was above 4% between 1995 and 2005 and growth of GDP exceeded 6% in 2006 and 2007, the second-best performance among OECD countries. It had a strong drop in unemployment, from 18% in 2005 to less than 10% at the end of 2007. Poland stands out as a relatively successful example of a transition from a partially state-directed economy to a primarily privately owned market economy, with above 75% of total output now produced in the private sector. Over a short period, it has diversified towards services (in particular business services) and more labour-intensive manufacturing. It has retained its position as a world leader in manufacturing and has specialised in rapidly growing sectors such as pharmaceuticals and electronic components. Poland has also become a very attractive location for foreign direct investment (FDI) and is now among the top ten OECD countries in terms of FDI flows as a proportion of GDP. Its FDI rose from 2.9% to 4.1% of GDP between 1996 and 2006. Owing to its geographical position – at the heart of the European continent and surrounded by Belarus, Czech Republic, Germany, Lithuania, Russia, the Slovak Republic and Ukraine – Poland has the potential to play a strategic role between western and eastern Europe, with Russia and Asia and within the Baltic Sea Region.

Poland is one of the fastest growing countries in the OECD: average annual growth rate in Poland was above 4% between 1995 and 2005. However, the growth of GDP is not distributed evenly throughout the country. Poland has one of the OECD area’s greatest territorial disparities in terms of GDP per capita at TL3 level. Moreover, the disparities have increased since 1995, as the growth dynamics have been concentrated in certain locations. Three sets of disparities are visible: i) a persistent gap between eastern and western Poland; ii) a gap between Warsaw and the rest of the country; iii) rising intra-regional disparities, in particular in the regions of Warsaw (Mazowieckie), Poznan (Wielkopolskie) and Cracow (Malopolskie), which are largely due to rising disparities between large urban areas and rural ones. The growth rate in Polish urban areas has been among the OECD leaders for 1998-2003. While some challenges are specific to urban or rural areas, the need to hasten the move to the knowledge economy and to improve the transport infrastructure is common to all regions. This chapter assesses main trends in regional performances and disparities and identifies key challenges for the development of Poland’s regions.

High growth, foreign capital attractiveness as well as support from EU funds (EUR 67 billion from the cohesion policy) give Poland a unique opportunity to tackle the regional development challenge, and focus on the untapped potential of poles of growth and lagging regions. The broad policy-mix for regional development that Poland has developed since 2004 is well balanced – toward infrastructure investment and competitiveness objectives – and targets Lisbon objectives (i.e. growth objectives) as a key priority for 2007-13 (with more than 64% of the EU funding). As in many other OECD countries, regional policy in Poland has increasingly shifted towards boosting regions’ competitiveness by focusing on intangible assets such as human capital. The learning process in Poland has been rapid, as regional policy has mainly developed after the creation of regions in 1999 and the accession to the EU in 2004. Although regional policy in Poland targets the right challenges and has made substantial progress in terms of institutional co-ordination, progress is yet to be made to tailor the policy mix to each region’s specific needs, both at the central and regional levels. Besides, challenges related to prioritisation of public investment, short timeframe to absorb the funds and multi-level governance will be determinant to best implement the policy-mix. Chapter 2 analyses the policy-mix for regional development introduced in Poland and the challenges that remain. Four main policy issues are analysed: i) infrastructure policy, in particular transport policy and spatial planning; ii) human capital and innovation; iii) rural development policy; iv) Eastern Poland development and cross-border policies.

The window of opportunity of EU funding has to be exploited as much as possible, not only for territorial development, but in the perspective of broader public governance and management changes. The impact of European cohesion policy on the Polish multi-level governance system goes well beyond financing. The design and implementation of EU operational programmes – not only regional ones – has led to enhanced decentralisation and collaboration with private actors and civil society. Regional and local actors are engaged in a strong learning process. To further improve the effectiveness of regional development policies, three broad governance challenges are critical to address: i) enhancing co-operation across levels of government and with private actors; ii) strengthening capacities of sub-national governments, to design, implement and monitor development programmes; iii) supporting accountability, at all levels of government and monitoring the performance of regional as well as sectoral policies. Poland also needs to think about longer-term options for better matching competencies and resources in some areas after 2013, when Polish regions may no longer benefit from the same level of external funding, and for further increasing the strategic role of regions. This chapter explores these different cross-cutting governance challenges, and proposes policy recommendations.