Business Arena: 26.05: Poland in Davos, Ukraine to abandon broad-gauge railway

Business Arena examines the latest developments in the global economy from the perspective of the heart of Europe. The focus of Thursday’s programme was Poland’s role at the World Economic Forum in Davos and Ukrainian plans to redevelop the country’s railways system after the war.

Poland at World Economic Forum in Davos

Hoping to consolidate on the solid economic bounceback in the first quarter of 2022, when growth topped 8 percent in comparison to the lockdown performance of last year, Polish Prime Minister Mateusz Morawiecki is meeting investors in Davos. The war has not helped the country’s trade deficit, now standing at over EUR 2 bln despite a rise in exports.

The World Economic Forum in Davos Switzerland brought together 50 heads of government,  international organisations, and businessmen. Poland’s President Andrzej Duda and Prime Minister Mateusz Morawiecki both attended the congress, focussing on the war in Ukraine and its consequences. 

President Duda called for the EU to further support Kyiv and for a tough stance to be taken against the aggressor including severe punishment and war reparations.

With the pandemic and later the war destroying supply chains, Polish Prime Minister Mateusz Morawiecki stated that Poland could be the strongest link in the newly recreated supply chains. 

Interview with Aleksander Siemaszko

Business Arena’s guest was Aleksander Siemaszko, deputy head of the Department for Trade and International Co-operation at the Ministry of Economic Development and Technology. Asked about long and short-term advantages for Poland that may result from the Davos World Economic Forum, he responded that it would be naive to expect to see deals made at such a brief event.

As for the long-term impact, Davos gives Poland a chance to build a positive image for the country and its economy. It is an opportunity to build soft power. According to Mr. Siemaszko, that is not something that one can easily put a price tag on, but he is sure it will provide a handsome return.

Several large international companies were also present in Davos, but the investments they plan to make in Poland are smaller than in other countries. For example, Intel plans to invest EUR 11 bln in the Republic of Ireland, but only EUR 1 bln in Poland. But Mr. Siemaszko says that Intel is present in Poland and its Gdańsk Research and Development centre is one of the best in the World. But Ireland has very good tax incentives for businesses and legal solutions that make it more attractive to investors, not only Intel but also TikTok. He stresses, however, that despite smaller sums being invested in Poland, the country remains very attractive to investors and can compete with other EU states.

Enquired about the possibility of returning to attempts at extracting shale gas in Poland, a promising project which was abandoned in the previous decade, Mr. Siemaszko said that while extraction of Polish shale gas remains a possibility, there are several reasons why it is not a priority at the moment. Firstly, gas is a transition fuel: it has lower emissions than many other fossil fuels, and it will serve to reduce Poland’s emissions while the country builds up its nuclear and renewable energy sectors. Asked why Poland is importing LNG gas from places like the US, which exports its shale gas in LNG form, Mr. Siemaszko responded that Poland has some environmental concerns the US does not need to take into account, and also that the EU environmental legislation is more stringent than in the US. He did, however, say that perhaps in the future more feasible technologies will be developed that will make the extraction of shale gas in Poland both profitable and safe for the environment.

Finally, addressing the issue of Ukraine, Mr. Siemaszko said that Poland intends to play a major role in the redevelopment of Ukraine. The relationship with Ukraine is very strong at present on all conceivable levels. But the reconstruction of the country must be done according to Ukrainian needs. Whatever those needs are, however, Poland will help, either through bilateral agreements or within the framework of international organisations. As he stressed, “Ukrainians want to rebuild [their country] better”.

Ukrainian railways to abandon broad gauge

Anyone who has ever travelled to any of the countries that made up the former Soviet Union will know that trains need to change to a wider gauge on the border, a process that takes hours. For a trade that is a major hurdle. Ukrainian Prime Minister Denys Shmyhal announced, during a government meeting this week, that his country intends to connect its railway system with the rest of Europe.

Nearly 60% of the global rail network is on a standard gauge of 1435 mm including Europe, the United States, China, and Iran, while 1520 mm infrastructure exists on 14% of the global rail network, used in all post-soviet-union countries and Mongolia. 

    Railway exports are deemed a challenge given the Ukrainian rail system operates on a different gauge to its European neighbours including Poland, which means the grain has to be re-loaded to different trains at the country's border. 

According to the European Union, Russia’s invasion of Ukraine poses a threat to global food security as the war-torn nation was the fourth-largest grain exporter in the world for the past two years, with 44.7 million tonnes exported, 90 percent of which usually departs from its Black Sea ports, which are currently blocked by the Russian military forces. Given the current situation, Ukraine’s priority is to find alternative routes for the transportation of goods.