Competitiveness of the Polish Manufacturing Sector: Does Government Policy Matter?

This paper investigates an impact of the government policies aimed at the enterprise sector on competitiveness of this sector. The analysis was based on an example of the Polish manufacturing sector and the eight-year period from 1996 to 2003. Section 1 presents different notions and measures of competitiveness and defines the one adopted for the purpose of the present analysis - the trade measure. Section 2 presents an assessment of the competitiveness of the Polish manufacturing sector on both the internal (domestic) and external market, in particular the EU-15 market. Subsequently, the authors compare domestic and external competitiveness of individual manufacturing industries and present conclusions on the competitive and noncompetitive branches. Section 3 describes a size of government interventions affecting manufacturing enterprises in the years 1996-2003. These interventions took the following forms: income (corporate and personal) taxes imposed on enterprises, excise taxes, VAT, depreciation rates, subsidies, and social security contributions. A size of the state ownership in the manufacturing sector was examined in the analysis, too. Section 4 presents results of the econometric analysis of factors influencing the competitiveness of the Polish manufacturing sector on both the internal (Polish) and external (EU-15) market. Moreover, an impact of different government policy instruments on competitiveness is assessed by means of the linear regressions. Section 5 contains conclusions. The general recommendation is that the competitiveness of the Polish manufacturing sector could be increased by relaxing fiscal burden, further privatization and restructuring of state owned companies. The state aid in a form of subsidies seems to harm both internal and external competitiveness rather than to support them.