Rzeczpospolita Daily debates

Not competition, but cooperation

According to experts, the state should first of all fulfil the role of a regulator and guarantor of the rules governing the health care system.

During this year's 21st Economic Forum in Krynica, the leitmotiv of discussion connected with health care will be the role of the state and the market. The organizers assumed that they will not consider this issue in the categories of competition between private and public sector, departing from a false in their view thesis that the more market in health care, the less state and vice versa.

As it was emphasized by Maciej Bogucki, the Chairman of the Programme Council of Health Care Forum, discussion could be related to how cooperation between the state and the market should proceed in individual sectors (primary health care, hospital's and laboratory's treatment), within the scope of financing health care (what should be the share of public and private funds, including insurance), in the pharmaceutical industry, which is owned in majority by private entities, but as a strategic industry requires the state's support.

Efficiency matters

The experts invited by 'Rzeczpospolita' agreed during one of the discussions that the state and the market have different roles to play in the health care system, and tried to specify the share of the state and business in each of these areas.

Deputy Minister of Health, Jakub Szulc, admitted that the market perhaps would be able to function on its own even in such untypical industry as health care. – However, personally I can't imagine a health care system that functions only according to free market principles, since it would be most probably unfriendly to the patient – said Szulc. In his view, the key for discussion should be how to ensure appropriate regulatory mechanisms, which would strengthen efficiency of the entire health care system.

- In health care, alike other industries, there is competition in the area of capital and patients, which is expected to lead to increase in efficiency. Yet the market would not be able to handle that sector on its own, first of all because it is characterized by asymmetry in access to information between the recipient, it is the patient and the doctor as the supplier – said Lukasz Zalicki, Managing Partner at Ernst & Young. According to Zalicki a necessity is a regulator, who prevents distortion of the market and abuse of the role of suppliers by such asymmetry, making sure that efficiency of action goes hand in hand with pursue of the principle of social solidarity. One should emphasize also efficiency through consolidation of the health care system, which does not operate efficiently now, since it is not coherent. One of the elements leading to increase of efficiency would be introduction of competition among payers.

In view of the former Minister of Health, Marek Balicki, weakness of the market can often lead to worse effects for the health care system than weakness of the state. – For instance, restriction of market mechanisms, known to have good effects in the case of distribution of medicines, can be risky – said Balicki. – But when we talk about hospitals, excessive market mechanisms can prove to be critical. Putting more emphasis on productivity than efficiency in the state, which is not wealthy and unable to transfer substantial funds for health care, is a risky step.

Partner in innovations

Maciej Adamkiewicz, President of Adamed, one of the biggest Polish producers of medicines, paid attention to a specific role, which is now expected from the state in relation to the pharmaceutical industry. – The outcome of the trade balance of Poland is that we import more new medical technologies than we export. We have everything what is necessary for development of these technologies: perfectly educated doctors, research centres, and finally companies, but the EU requires proving safety and efficiency of new technologies. Here the state should act as a partner, helping companies in development of their research and development operations and in creating new technologies, which can be exported later – said Adamkiewicz.

Paweł Sztwiertnia, Director General of the Employers' Union of Innovative Pharmaceutical Companies Infarma, said that in the beginning it should be determined whether the market can replace the state at all and if so, where it can be replaced. In his view, it is false to claim that the market comes in where the state is absent. – The majority of centres are still in the public hands, even in such countries as the United States – said the director of Infarma.

According to Paweł Kalbarczyk from the Polish Chamber of Insurance, the state should act first of all as a guarantor of the principles governing the health care system, in the sense of equal rights to public funds. – It requires the state to be strong, since otherwise the elements composing the system become fiction. The state should be responsible for all matters related to planning health needs and long-term forecasts and planning – said Kalbarczyk. In his opinion, a balance in the system can be maintained provided that the state is strong, and the private sector is treated by the strong state as a partner that pursues public goals, specified in a long-term perspective, which are subject to public debate and social arrangements.

Good direction, but slow pace

- The reform of the health care system is heading in a good direction, but it is a difficult road with many obstacles. The system goes slowly, since it is very tired from changes – said Prof. Michał Kulesza from the law firm Domanski, Zakrzewski i Palinka. – Since the very beginning, the reforms, introduced for the last 20 years, have lacked a clear and stable declaration from the state, which direction should be followed and honesty in communication with the market.

Kulesza emphasized that although the state has been pulling out of the system since 1999, opening free space for other stakeholders, it still wants to have influence. – The question is in which role: as the owner, regulator, planner, controller, judge or perhaps even the executioner, since the penalties imposed by it are draconian in some cases? – asked Kulesza. – On the one hand, the state says: we should have as much market as possible, and, on the other hand, it emphasizes that it is the one to decide what the market is.

Maciej Pirog, a Director of the Children's Memorial Health Institute and social adviser in the area of health care to the President of Poland, emphasized that the Polish health care system has increasingly better conditions for the state to fulfil the role of the regulator, and not the organizer. – It is supported by such events as passing of the bills reforming the Polish health care sector. In respect of law, what we need is only regulation of the payer's role.

According to Pirog, the border line between the state and market should be flexible – the best example are the rules governing public-private partnership. What we need is also cooperation with independent institutions.

Pawel Kalbarczyk from the Polish Chamber of Insurance reminded that proportions between private and public spending in the health care in the recent ten years have not changed in practice. – They fluctuate around 30 percent in relation to private, and 60 percent in respect of public expenditure. However, we have noticed changes in the pool of money, which increased significantly- said Kalbarczyk. – We can ask a question, is it more effectively spent today than in 1990s, when the reforms were started in the industry. So it can be concluded that even though productivity in the health care system has improved, its efficiency has declined. In turn, the dynamic change in expenditure, equal to more than 8 percent in the case of private funds and above 9 percent for public ones, is impressive, and all other sectors of the economy could envy it.

Author: Beata Chomatowska 18-08-2011, "Rzeczpospolita"

 

Government and companies must act together

Can we avoid successive problems at construction of motorways? Who will pay for them and what will be their price?

- The situation at construction of A2, that led to termination of the contract with the contractor, could have been avoided if the company had appraised its offer more precisely and prepared better for realization of the investment. The contractor should have used the time after signature of contract, and before commencement of work, for negotiations with subcontractors and supply of raw materials and equipment – according to Radoslaw Stepien, Deputy Minister of Infrastructure responsible for road transport. A few days ago the decision on termination of the contract with the Chinese company Covec, for construction of two key sections of the A2 motorway, came into force.

Innocent government

- There were no mistakes on the part of the authorities; selection of the winning tender was made in good faith. All bidders had the same conditions; we also informed what were our priorities at selection of the contractors – added minister Stepien. Withdrawal of Chinese Covec from the construction site of the 50 km section of A2 motorway is not an isolated case. In December 2009, a contract for construction of more than 18 kilometres of A1 motorway was terminated, and in the beginning of this year the same happened in the case of 24 km of A4 motorway. – These are only three cases out of the total length of 1430 km of roads under construction in Poland. Problems always occur, but considering the scale of the investment, they are not significant – emphasized minister Stepien.

Jerzy Polaczek, Member of Parliament and former head of the Ministry of Transport in the government of PiS, thinks that in two cases problems appeared at investments realized in the system 'design and build', in which the selected contractor is responsible for both preparing the construction design and carrying out work. – In this type of solution the key risk connected with the investment process is transferred to the contractor. I would convince the government to resign from the promoted model 'design and build' because in our conditions it is the most frequent source of problems – claims Polaczek. Opposing view is presented byLech Witecki, Director General for National Roads and Motorways, who supports this solution.

The price is binding

According to Jerzy Polaczek, the issues that appeared at construction of the three Polish motorways result also from strikingly low offers for realization of work. – If we estimate that the cost of work is 100 points and next sign the contract corresponding to 40 points, we should not be surprised later that something went wrong – convinced Polaczek. According to Konrad Jaskola, President of Polimeks-Mostostal, problems with realization of the contract by the Chinese company resulted not only from low price, but also from systemic solutions.

- We should remember that the winning tender was selected two years ago, when prices were different, in the conditions of strong competition. In the meantime the prices of fuel or aggregates went up considerably, similarly to the money value – said President Jaskola.

As he explained, the Directorate General for National Roads pays for invoices in the time of approximately 50 days from their date of issue. Earlier though, the contractor, after completion of a part of work, must receive so called temporary certificate, which is a complicated and long-term process. – Meanwhile, we must pay the contractors and suppliers immediately. It is the main reason why the Chinese got suffocated – reflected president Jaskola.

However, according to Lech Witecki, the head of the Directorate General for National Roads and Motorways, in 2009 the Supreme Audit Office criticized the road authority for paying invoices worth a few million zlotys before expiry of the 57-day deadline. – Quite rightly. If anyone has to pay, for example, an instalment for a TV set within 14 days, he would pay it in such a way that money arrives on the 14th day. It is a frugal way. In the same time, a number of Members of Parliament stressed that it was scandalous that GDDKiA paid anything earlier. In spite of all, we decided to pay earlier. To make it happen, the other party must anyhow fulfil its obligations. Otherwise we would not pay any invoice to avoid cancellation of EU subsidies – recapitulated Lech Witecki.

- When the government awarded contracts for motorways, many projects turned up, yet without perspectives for orders in the subsequent years. A race started, a number of companies committed mistakes at appraisal of work. Now they have the dilemma what will cost less: completion of the contract or retreat from the construction site – noted Dariusz Blocher, president of Budimeks.

Excessive regulation

Representatives of the industry postulated a greater flexibility in relations between the contractors and the government. – Many problems appear during the construction phase. For example, after arrival to the site, it appears that the designer has not ordered necessary surveys. It is not possible to anticipate everything – noticed president Jaskola. – Quality is the most important thing. At preparing a contract, we inform about type of road we expect, its standard and technology as well as the time of construction. Considering that, the price is a good criterion for selection of the offer – convinced Lech Witecki. – Almost all contractors assumed that GDDKiA would agree to changes in the rules during the game, which is not fair towards others who also applied for the contract – added Witecki.

- Excessive regulation of the investment process is one of its constraints – thinks Dariusz Blocher, president of Budimeks. – The standards that are binding are overregulated. The more of them, the closer cooperation is necessary. Our current problems result from the fact that such cooperation has not materialized – emphasized Blocher. – The position of administration is that contracts should be realized exactly as they were signed. Yet, life is much more complicated. Certain degree of liberty should be envisaged in the relations between the public and private party – added president Jaskola. A part of the motorways, in connection with numerous issues, will be ready later than anticipated. The electronic toll collection system was launched with a delay. The government signalled that it would not loose on these failures. – We will take care to avoid loses  – announced minister Stepien.

- The State Treasury has not lost yet and cannot loose on the two-day delay in the start-up of the system – said Marek Cywinski, a director of Kapsch. – If revenues from the automatic toll collection system would be lower than anticipated due to our delay or a compromised tightness of the system, we will compensate for losses. – We have never concealed that we would enforce penalties. It has been the first system of road construction in Poland that contains its own source of financing – the toll. We cannot afford to loose these revenues – recapped minister Stepien.

The necessity to face additional financial consequences in the case of delays will have to be also considered by companies constructing roads, which will be a part of the toll system. – If someone is guilty of delays in realization of construction contracts, he will be also responsible for decreased receipts of the state. These are lost revenues, which will be enforced by us – announced Lech Witecki. As it was emphasized by Marek Cywinski, delays in construction of toll roads are against the interest of both the State Treasury and Kapsch. – The amount of our remuneration includes construction of the system and its use in a specified network of roads. In eight years, we would like to talk about extension of the contract, but in a network of at least 7.7 thousand km – summed up Cywinski.

Author: Agnieszka Stefańska 06-07-2011, "Rzeczpospolita"

 

Three times „yes" to gas energy

Gas as a fuel is expected to be a chance for Polish power plants, although these projects are exposed to risk

Gas power units can be erected faster and cheaper than coal-fired ones, yet the investors must remember about the dangers such as hard to predict prices of fuel, it is the natural gas, and connected with it potential high costs of producing energy. These are the conclusions from the debate about the future of gas energy in Poland, organized in the editorial office of „Rzeczpospolita".

The plans to construct gas-fired units are known to be devised not only by the four biggest, State Treasury controlled companies, but also foreign investors in our country. Deputy Minister of Treasury, Mikolaj Budzanowski, ensured during the debate that projects connected with gas energy in Poland have full support of the government.

- The government says three times 'yes' to these investment projects in view of their short lead times, low costs and reduced emissions of CO2 to the atmosphere  - he enumerated. – It is also worthwhile to avail oneself of cheaper sources of financing than commercial ones: from the European banks: EIB and EBRD, which are often engaged in strategic energy projects.

Partners welcomed

Companies have introduced various solutions to implement their plans related to gas energy, but they willingly seek partners. Vice-president of Polish Oil and Gas, Sławomir Hinc, convinced during the debate that the presence of a partner in such investment makes sense, since it facilitates its realization and has importance for the bank's opinion. He also assured that PGNiG is prepared to join projects prepared by other companies. – We are ready to talk with anyone. We have the potential to co-finance investments – he added.  The Head of the Polska Grupa Energetyczna, Tomasz Zadroga, thinks that the partner helps in reducing the project's risk. So far PGE has decided yet to cooperate only with Pulawy-based nitrogen plant. – Still we want to analyze the situation to see if a new partner can appear there – he assured.

 

In turn Gdansk-based Energa group prepares a project to put up a power plant in Grudziadz together with Irish concern ESB International. – Certainly we observe the rating of Ireland; we care for implementation of the project in Grudziadz and plan to complete it roughly by 2016 – said president of Energa, Miroslaw Bielinski. - The construction itself can last approximately 36 months in a standard way, but investments in gas energy, such as coal energy, require preparations.

Participants in the debate admitted that Polish companies want to erect gas units also due to strategic aspects – to diversify sources of energy production. It was mentioned by Grzegorz Gorski, president of GDF Suez Poland – a concern, which wants to build two gas-fired power units in Poland.

- Analyzes have no longer been as explicit as still half a year ago. We prepare studies about the future of hard coal as well – said Tomasz Zadroga. – However, one cannot decide about development of only one source- gas or renewable energy merely because it is trendy and receives the state's funding. We want to invest in gas, but cautiously. In his opinion the trend to invest in only one type of energy sources ended a long time ago.

According to Miroslaw Bielinski, the matter is not only to diversify production sources. He reminded that gas energy has a significant merit. It can supplement the energy balance, when problems with the balance of power arise in the national system. – It is more flexible from other sources – he added. In his opinion one should not confront gas energy with coal energy.

Tailor-made investment

President Gorski warned Polish companies during the debate by saying that they should try to avoid the mistakes of such countries as Hungary and Spain that have built gas power plants, which are currently used to a minimum degree or unused at all. – I'm concerned not about successful construction of gas power units in Poland, but about the possibility that we can have too many of them – added the head of GDF Suez Poland.

According to Bielinski, decisions of investors in Hungary and Spain were taken rationally and the situation can change in a year, so that the power plants might be used again. – I'm not afraid that we can have too many gas power plants – said Slawomir Hinc. – Especially that so far still the majority of projects are at the planning stage. Deputy Minister Budzanowski convinced in turn that one cannot be guided by the situation of other countries. In his opinion a few gas power units will be erected in Poland by 2016.

Costs are falling

Participants in the debate admitted that it was not easy to assess the profitability of producing energy in gas power plants. – The costs depend on the effectiveness of the EU climate policy; it is difficult to forecast the price of CO2 emission permits – said Tomasz Zadroga. According to the EU climate package, power plants will be obliged to purchase permits since 2013 at auctions, and experts anticipate that their price can range from 20 to more than 40 euros per one ton.

A positive signal for investors is yet the fact that investment costs fell. President Gorski estimates that they were reduced by ca. 10 percent. According to the current estimates, the costs of erecting 1 MW of power correspond to the expense of ca. 600 thousand euros, but depending on local conditions, they can reach even to 800 thousand euros.

Participants in the debate unanimously admitted that the profitability of gas energy in Poland can be considerably improved only by extraction of shale gas. – Thanks to these deposits, we can experience a boom in gas energy – stated vice-president Hinc. Deposits of shale gas can be enormous in Poland, but exploration work is still at the initial stage. According to US experts, these deposits may reach 5.3 trillion cubic meters, while the demand is ca. 14.5 billion cubic meters of gas a year and it can increase even to 18 billion m. – We still have to wait for more or less three years in order to become convinced about the profitability of mining shale gas in Poland at industrial scale – pointed deputy minister Budzanowski.

The role of gas is likely to increase

Increased production of gas-based energy was envisaged by the energy policy until 2030, adopted by the Polish government two years ago. The authorities recognized that it is one of the ways of changing the energy balance of the country and meeting the requirements of the EU climate protection policy. And the latter anticipates, among other things, a considerable reduction of carbon dioxide emissions – by 20 percent until 2020. Currently more than 90 percent of the electric power used in Poland is supplied by brown and hard coal-fired power plants. Coal is still expected to have its share in the balance in 2030.

Author: Agnieszka Lakoma 18-07-2011, "Rzeczpospolita"