Aid to Poland Both a Solution and a Problem : East Bloc: Assistance is pouring into the country. But the economy may have trouble absorbing it all.

Peering across the snow-spattered unloading area, dock supervisor Marcin Wittke surveys the dozens of heavily laden boxcars that are lined up next to the high-riding foreign cargo ship. His crews have just unloaded another shipment of Western food aid--14,000 metric tons of barley from France--and Wittke seems especially satisfied.

“This cargo is important,” he tells a visitor.

Important cargoes are pouring into Poland regularly as the United States and other Western governments try to prop up the Solidarity government, which supplanted the communists last summer. In addition to perhaps 2 million metric tons of food, the West plans to send massive financial support--loans, grants and credits--to help Poland make the transition from a communist to a market-oriented economy.

But questions loom on the bleak, gray Polish horizon:

Can the West successfully coordinate such an effort without an excess of snafus and nationalistic one-upmanship?

And even if it can, will Poland--whose thin layer of decision makers in the new Solidarity government preside over an inflexible, corrupt bureaucracy and an inadequate distribution and handling system--be able to absorb the aid, estimated at up to $5 billion in all?

Or will there be a repeat of the late 1970s, when the West poured massive amounts of credit into Poland, only to see the government fritter the money away by boosting consumption and sustaining bloated state-run enterprises?

“Over half of what was borrowed then went straight into people’s stomachs” rather than into long-term investment, said Jan Vanous, research director of Plan-Econ, a Washington-based consulting firm.

Western inspection teams insist that there has been relatively little fraud and waste this time. But there has been no shortage of other problems: ill-timed shipments that have depressed prices for local farmers and logistical bottlenecks caused by Poland’s monopoly-controlled distribution network.

The Polish government welcomes the food aid, which is what Western governments are sending first. Janusz Kaczurba, undersecretary of state for foreign economic relations, asserted that the aid has helped Poland avert the kind of widespread food shortages that some analysts had feared might jeopardize the new Solidarity government before it had a fair chance to take hold.

The shipments of Western meat arrived “exactly at the right time” to help offset domestic shortages and enable Polish authorities to persuade farmers to stop withholding their cattle and pigs from the market in hopes of obtaining higher prices later, he said. Likewise, he added, U.S. corn and rice shipments played “a very important role.”

But Jacek Szymanderski, head of the fledgling Solidarity Polish Peasants’ Party, said American shipments did not always coincide with what Poland needed at the moment. About 14,000 tons of U.S. butter, for example, began arriving only in late November, several weeks after demand here abated somewhat and Poland’s domestic butter supply had been replenished.

Market Impact

Although the food has been shipped to regional storehouses, the state-operated food processing and distribution monopolies that are still run by communist-trained bureaucrats have flooded the market with their reserves and refused to buy crops from peasants, arguing that the state’s warehouses are too full. That, in turn, has created a surplus in the domestic market.

Janusz Rutkowski, a butcher in one of the stalls at Warsaw’s central Hala Mirowska market, said the meat shortages that Poland was experiencing a few weeks ago have disappeared and have been replaced by “a glut.”

“Sometimes, strange things are going on in Poland,” Rutkowski said with a shrug.

Gregory Vaut, director of the Foundation for the Development of Polish Agriculture, a Warsaw-based group seeking to modernize the country’s crippled agricultural base, worries that the aid may inadvertently have depressed prices paid to farmers, raising the possibility that they may not increase their already inadequate crop acreage when planting season begins next April.

If that happens, Vaut warned, it could mean that “Poland will be faced with similar prospects of potential shortages in 1990 and 1991 as well.”

Miroslaw Konski, a farmer in Rogow, said that is already happening and that he may quit raising pigs because foreign meat shipments have so depressed Polish hog prices. “If prices don’t rise, we’ll give up entirely,” he said.

Polish officials want future shipments to concentrate on feed grains and fertilizer, which can help farmers increase their output of food next year.

“That is really what we need the most now, not food,” said Andrej Stelmachowski, the marshal of the Polish Senate, the counterpart of the U.S. Senate’s majority leader.

Poland has also suffered from overlapping and sometimes conflicting foreign aid. France, for example, wants to build a new institute to train Polish managers, a project similar to those proposed by several other countries. West Germany wants to bring in bankers to help set up a new financial system. And the British have volunteered to send accountants to show the Poles how to keep books Western-style.

Both Poles and Western officials--notably President Bush--have said such efforts might prove even more valuable than monetary aid. But an international official lamented: “Nobody is organizing it. And the Poles also need cash--no matter what anyone else says.”

Top World Bank policy-makers recently sent a cable to European Community officials citing “an urgent need” for better coordination by the West. The donor countries are slated to hold a series of high-level meetings this week to discuss the issue.

The Western powers have agreed to coordinate their aid through the offices of the European Community, whose Brussels headquarters is setting up record-keeping machinery and fielding staff teams to make sure that the money is being spent wisely.

But the EC itself has three directorates with responsibility in the area. Pablo Benavides, the senior EC official in charge of the coordination effort, conceded that the eight packages being put forward by the 24 participating countries keep changing so frequently that the computerized “scoreboard” that he is using to keep a tally “must be updated practically every single hour.”

And even if the multilateral effort were completely in sync, individual countries are still proposing bilateral aid programs that often duplicate or overlap with the efforts of other allies. “There is still a good bit of wandering around on the part of all of us,” a senior U.S. official admitted.

The U.S. Congress has enacted an $852-million aid package, more than four times the $200 million that Bush initially proposed. The total includes $125 million in emergency food aid, $240 million in grants to stimulate private enterprise, $200 million as the U.S. contribution to stabilizing the zloty and $200 million in federal guarantees for bank loans to finance trade.

Likewise, West German Chancellor Helmut Kohl has several times boosted the assistance that his government is willing to provide. French President Francois Mitterrand recently proposed creating a new East Bloc Development Bank to help underwrite major economic restructuring by former Soviet satellites.

“There’s a very strong political wind in Europe and the United States to be seen to be ‘doing something’--and soon,” a high-level European official said. “Obviously, we have to strike a balance here.”

Food aid came first because Western policy-makers considered it critical to the new Solidarity government’s survival. “The motivation was mainly political--food aid is a piece of economic reform, which in turn is a piece of political reform,” Vaut of the Polish agriculture foundation explained. “Five previous governments here have fallen because there were shortages of food.”

Western experts agree that both the coordination problem and the questions about the ability of the Poles to absorb large amounts of aid will intensify early next year, when the initial stream of food aid begins to abate and Western donors begin pumping in billions of dollars to help Poland restructure its economy.

Economic Aid

“The most essential part of the package,” Undersecretary of State Kaczurba said, “is still to come--incentives for private investment, which Poland badly needs now.”

The food aid has highlighted the need for fertilizer plants and private food processing and market facilities, and the 24 Western donor nations have generated proposals for about 50 such projects. “Our task over the next two months will be to identify which of these should be funded,” a top European official said.

Polish Finance Minister Leszek Balcerowicz has also asked for $500 million to guarantee that Poland will be able to continue buying needed industrial goods during the early stages of its economic restructuring, plus $1 billion for a special stabilization fund to help make the Polish zloty, which is now nearly worthless internationally, convertible to Western currencies.

Whatever else they may disagree on, the Western countries have maintained a united stance on one issue--that Poland must work out an economic restructuring program that is satisfactory to the 152-country International Monetary Fund before any cash and credits will be disbursed.

Negotiations on that are almost complete now, and the Washington-based IMF is expected to approve the Polish economic program--and a $700-million loan to boot--in early January.

Approval of the IMF package in turn will open the spigot for the truly massive aid that Balcerowicz has requested--and that Western economic officials have agreed to put together. Besides the $852 million in U.S. aid, Europe, Japan and some other countries are prepared to kick in some $3.5 billion to $4 billion in loans, credits and other transactions.

And there is the prospect of $1 billion or so from the World Bank, which is poised to approve a series of sizable new loans to help finance energy conservation and agricultural projects. “As soon as the IMF moves, we move,” says Eugenio Lari, the World Bank’s top Poland expert.

The United States and its allies are also expected to move quickly to refinance--on decidedly easier terms--some of the $27 billion in loans that Poland has outstanding to Western governments. That should save the Poles millions of dollars in extra interest payments.

In the meantime, Washington is planning to help arrange a temporary “bridge” loan from governments and international financial organizations to help tide Poland over until the IMF and other Western aid money begins to flow.

For the longer term, top Polish authorities have called for an aid package to Poland patterned after the highly successful Marshall Plan. “Now it is the moment when Eastern Europe awaits an investment of this kind,” Solidarity leader Lech Walesa said during his visit to Washington in mid-November.

New Difficulties

But Bush Administration officials argue that the Marshall Plan, which worked for Western Europe in the late 1940s, does not apply to Poland in 1989.

After World War II, they say, the United States had a virtual monopoly on global wealth, and Western Europe had a long tradition of private entrepreneurship. By contrast, after 40 years of communist rule, Poland has virtually no economy left to jump-start with foreign aid--no banking system, no distribution system and, perhaps most important, no cadre of experienced managers.

“It’s still very difficult to tell what the Poles need first,” a U.S. official said.

Policy-makers also worry whether the new Solidarity government will prove strong enough to carry out the stringent economic reforms that will be needed.

The World Bank’s Lari cautions, for example, that there is no way that Poland will be able to absorb even the current levels of aid until it reduces its runaway inflation rate from the most recent 54% a month to a more sustainable 10% or below--a painful challenge for any government. “The aid would be quickly consumed and wasted,” Lari asserted.

To be sure, there are some signs of progress in the effort to aid Poland and its other East Bloc neighbors. The potentially dangerous “Polish fever” that had threatened to heat up the bidding war among the Western allies has subsided in recent weeks as West Germany has become distracted by the opening of the Berlin Wall. Authorities say the few differences that remain should be far easier to cope with.

The Bush Administration, meanwhile, has installed Deputy Secretary of State Lawrence S. Eagleburger as a high-level “czar” to coordinate U.S. aid to Poland.

And the 24 Western donor nations are scheduled to tighten their own coordination at the ministerial meeting in late December. “We are absolutely determined to make it work,” the European Community’s Benavides asserted.

Here at the port of Gdansk, where about 54,000 metric tons of wheat, corn and other basic farm goods have been unloaded from the United States and the 23 other Western nations, dock supervisor Wittke said Poland needs this kind of help to regain some measure of prosperity. “Everything that we get is appreciated,” he said.

But complexities and uncertainties abound. Said a senior U.S. official who is deeply involved in the Polish aid package: “This is going to be a movable feast for a very, very long time.”