Polish Free Market Thrives As Communist Relics Fade

IN Warsaw and Gdansk, faded Communist Party emblems are dwarfed by new billboards advertising Western goods. State-run department stores have given way to boutiques. And urban Poles have dumped their low-grade cars for German and Japanese models.

With a stable currency and modern infrastructure, Poland now sports the trappings of a regular European nation.

After 40-plus years of Communist government, it is emerging as a vital trading link between East and West. A signatory of NATO's Partnership for Peace and a European Union (EU) associate member, the nation has recently fulfilled conditions of entry into the World Trade Organization.

''Poland has already made it in the sense that it has become a market economy,'' says Chris Wellisz, editor in chief of Warsaw's English language newspaper Weekly Capital. ''The economy's starting to grow, wages are rising, and unemployment has dropped to around 15 percent.''

President Lech Walesa has bullied Poland from a one-party state to a parliamentary democracy, though he faces an uncertain reelection contest this fall. And the economy appears to have recovered from ''shock therapy'' reforms of 1990; industrial output has risen an average 9 percent a year since 1991. Polish analysts estimate small-business growth is rising at 10 to 15 percent a year.

Nevertheless, the government has warned Polish entrepreneurs they must do more to prepare for international competition.

''Capitalist life is quite violent for small companies,'' says Jan Rogala, privatization ministry spokesman. ''They must have some time to prepare themselves so as to avoid high unemployment. We have declared 1997 a ... boundary to allow our industries to catch up with the West.''

Mr. Wellisz agrees: ''Poland still has a long way to go. The [gross domestic product] is only $80 billion and growing by around 5 percent a year, which is good ... but it could be faster. At that rate, it would take 50 years to catch up with Spain, let alone Germany.''

Government spokesmen say Poland's agriculture must be reformed before the nation achieves full EU membership. Poland's Communist government never collectivized land in the manner of other Eastern bloc countries, so Polish farmland is divided into tiny, inefficient strip farms.

Rural life has changed little. Villagers ride horse-drawn carts and work with manual plows. Peasants plant potatoes or pick fruit by hand.

Reform won't be easy. ''The Poles' love of land is so strong that it cannot be broken,'' says Marcin Cassino, a privatization ministry official. ''Communism never succeeded in collectivizing the farms. I doubt if capitalism will.''

Small peasant farmers, who oppose agricultural reform, can flex considerable political muscle in the Sejm (parliament), where an alliance of the Polish Peasant Party and the Democratic Left Alliance (former Communists) controls the left-wing government of Premier Jozef Oleksy. Last month, he approved new tariffs of up to 200 percent on farm imports.

In industry, too, the alliance has delayed implementation of several reformist projects. The government still subsidizes energy prices, and it has stalled mass privatization of almost 450 state-owned enterprises worth some $2 billion.

''Mass privatization was a controversial policy, and we had a number of disagreements on how to proceed,'' Mr. Rogala says. ''Now the deadlock is broken, and everything should start in November.''

NEVERTHELESS, Poland holds one advantage over its east European neighbors: a stable currency. Just a few years ago, the fast-declining Polish zloty was a joke to foreign-exchange traders. But reforms, backed by a $1 billion international fund, have forged a new, free-floating zloty more stable than the American dollar. Hard-currency stores have disappeared.

In June, Moody's and Standard & Poor's gave Poland its first sovereign credit rating. The government issued $200 million in Eurobonds, and government officials say they will borrow $500 million more from foreign markets next year.

Foreign investment has also risen. American companies have committed some $2 billion since 1989. The biggest investors include Coca-Cola and McDonald's. This fall, Ford Motor Company will make cars at Plonsk, 40 miles from Warsaw.

Foreign firms committed about $700 million in 1995's first quarter, and officials say the rate is rising. ''Investors have pledged another $5 billion, and it looks like many more foreign companies will come in towards the end of this year,'' says Robert Zakrzewski of the Polish Agency for Foreign Investment.

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