Poland

Gdansk - Bridge over M. Wisla	Suburban train in Warsaw	Szczecin-Swinoujscie Seaway

Poland is a key transit country between East and West (the Western part of the European Union (EU), and Russia and Commonwealth of Independent States (CIS)) and North and South (Nordic EU members and Southern Europe). Four Pan-European transport corridors cross the country. While Poland's infrastructure has changed substantially over the past decade, it is clear that further infrastructure development, including policies, institutions and investments to support an appropriate modal mix, will be required as an important basis for improved competitiveness, economic growth and environmental benefits. Harmonization with the EU competition policy will require that the prime duty of the Ministry of Infrastructure (MoI)responsible for Transport Sector becomes that of setting and maintaining a level playing field among competing transport modes and among competing operators within a mode. Planning, financing and managing the provision and maintenance of infrastructure remain the responsibility of the MoI.

Roads. Major investments in transport infrastructure, including motorways, are clearly required as Poland's economy continues its rapid growth. However, the cost of the planned motorway program will be very high: nearly $1 billion per year (0.7% of GDP) sustained over some 15 years. Considering the competing demands on the state budget for financing many other investments in social and physical infrastructure, MoI is revisiting the timing and phasing of the motorway program and looking at other alternatives which could still meet Poland's transport needs in the coming years but at lower cost.

Road safety. Road accidents are becoming a leading cause of death. Accident rates are twice higher than in Western Europe; further attention to the analysis of the causes of accidents and the cost-effectiveness of various remedial measures is urgently required. In response, a national road safety program has been prepared; the implementation of the program requires adequate funding and close cooperation between the MoI, the police, and other agencies, under the guidance of the National Road Safety Council. In addition, a strategic alliance has recently been formed between the Dutch programme Partners for Roads
and the World Bank which resulted in the Safe Road Design Manual.

Strengthening roads to handle EU heavy trucks. The EU allows heavier trucks than Poland. The state investment budget will need to double allocations for road rehabilitation (from about 0.5 to 1.0 percent of GDP), if main roads are to be strengthened to accommodate trucks up to the EU weight limits. Priorities for developing policy are to (a) refine estimates of the investment required to strengthen the road network to bring it into line with EU truck weight standards; (b) revise user charges on heavy trucks to make sure they fully cover the "wear and tear" costs they impose on the roads; and (c) review permits for overweight trucks, prescribed routes, enforcement mechanisms, and penalties.

Road user charges and reconciling road transport and the environment. The growing use of clean automotive fuels and the phasing out of vehicles without catalytic converters is expected to be accelerated. The pump price of fuels may have to be further increased due to the need for a substantial increase in taxes to charge for road use and the social costs of emissions. Priorities for policy development are to (a) research and analyze the costs of environmental externalities; (b) review alternative charging mechanisms; and (c) review policy objectives related to fuel prices, to arrive at a target level of fuel tax and to set the pace of increase to get from here to there.

Creating a competitive railway system. Since the beginning of the economic transformation at the turn of the 1990s, the Government has been addressing the need to adapt Polish Railways (PKP) to the demands of a market economy. Based on the Railway Restructuring and Privatization Law enacted in 2000, PKP has been going through a period of fundamental structural reform, in particular in organizational and labor restructuring. The previously monolithic company has been split into a number of separate businesses within a holding company structure, the largest of which being railway infrastructure, cargo, and regional passenger services. Among other reasons, this is to allow open access for any operator of freight trains and international passenger trains, a policy being required by the EU. Total workforce has been reduced from 190,000 at the end of 1999 to 145,000 employees at the end of 2003 improving labor productivity to 460,000 Traffic Units per employee. Despite the above measures, PKP's finances have not improved as expected, due mainly to under-funded non-financially viable social services with large losses and short-term liquidity constraints. In December 2003, the Government approved a reinvigorated Reform Program, setting out a detailed timetable for further restructuring and privatization of PKP companies in 2004-2006. The Bank has agreed to assist in the key railway reforms prescribed in the Program, specifically to fund technical assistance in the following key areas of reform: (i) privatization of PKP Cargo; (ii) restructuring of regional passenger services; (iii) development of rail master plan to be presented to EU; (iv) complete analysis on non-operational real estate assets owned by the railways; and (v) program manager to assist PKP with the implementation of railway reforms.

Balancing public transport and car use in cities. In urban public transport, Poland made long strides in the early 1990s by sharply increasing cost recovery from fare revenues, introducing service agreements between municipal governments and public-owned operators, and preparing the legislative basis for competitive tendering of services to both public and private-owned operators. The reform has since lost steam, so cost savings and service improvements linked to competition remain out of reach. The role of the private sector is minimal. Cost recovery in major cities is still too low to generate sufficient capital for replacing and modernizing bus and tram fleets. The State has gone too far in decentralizing all public transport responsibilities to the cities and has not faced squarely the complicated issues related to urban roads and traffic issues. If Poland is to synchronize its urban public transport policies and practices with those of the EU, the Ministry of Infrastructure should build its capacity to assist cities in making strategic decisions, in areas such as competitive tendering, subsidy reform, road and public transport investment policies, and road use pricing, as well as getting access to capital in the period before cities reach financial self-sufficiency.

Modernizing Poland's ports to serve globalized industry. With the nature and directions of Polish trade evolving rapidly from year to year, investing in ports has been a risky business. International road transport, railways and pipelines are competing for the same traffic as the Polish ports. There is also strong competition among alternative routes for cargo between major hub ports (Rotterdam, Hamburg) and eastern Baltic destinations. New port infrastructure –breakwaters, channels, and land access-- is lumpy, fixed and costly; the State can ill afford the large minimum investments needed without assurance that the new capacity will be well used. The Ministry of Infrastructure should therefore monitor implementation by the autonomous port authorities of the provisions of the 1996 Ports Law, to ensure appropriate separation of functions between them and the commercially independent port operating companies, with a view to promoting competitive provision of services more responsive to users' needs. The capacity of the Ministry and the regional maritime offices should be strengthened to analyze traffic trends and the economics of competing routes; plan infrastructure investments accordingly on an integrated basis, bringing together the several links needed: port infrastructure, city access roads and land use changes, and interurban highway and rail links; and provide strategic leadership and guidance to the regional and municipal governments who need to be partners in such planning. Fostering facilitation of trade transactions in ports by furthering implementation of electronic data interchange and document harmonization among government agencies, consistent with the border-crossing agenda cited below is also important.

Civil aviation. The EU's policy of open skies between member states has already brought more foreign airlines into Poland, encouraged the start-up of private Polish carriers, and put pressure on LOT to lower fares. Demand will grow for investment in regional airports, making it easier for traffic to bypass Warsaw. Policy priorities are to (a) renegotiate the bilateral air traffic rights to exploit the opportunities created by EU Stage 4 liberalization; (b) pursue privatization of LOT; (c) remove any barriers to exit from loss-making routes, and (d) maintain an effective air safety oversight by the authorities.

Trade facilitation. Border crossing conditions between Poland and Belarus are among the worst in Europe. Lack of a holistic and regional approach to the improvement of border crossing conditions made the Polish borders infamous for delays and rent-seeking. Policy priorities are to (a) accelerate customs reforms; (b) strengthen cooperation with Belarus and harmonize the reform programs; (c) improve inter-agency cooperation at the borders and (d) introduce e-clearance procedures.

WB ongoing projects. The main activities underway include implementation of (i) Szczecin-Swinoujscie Seaway and Port Modernization Project which aims to promote Poland's trade by developing an efficient administrative/managerial structure and improving physical facilities in area of the ports of Szczecin-Swinoujscie; (ii) Second Roads Project which aims to support and speed up the modernization of the road sector according to the policy initiated by Poland under the First Roads Project; (iii) Road Maintenance and Rehabilitation Project which aims to reduce road maintenance backlog and reform the administration in charge of the subsector; and (iv) Second Road Maintenance and Rehabilitation Project which aims at improving the effectiveness of Poland's national road rehabilitation and maintenance systems with emphasis on quality, efficiency, financial viability, and road user satisfaction.

Updated January 3, 2006