POLAND TODAY magazine #09 by Poland Today

MIPIM 2015: Extended in-depth real estate coverage for the fair in Urban Issues. pages 68-84

Canada in focus: Canadians want to share their experience in spurring innovation. pages 37-48

Expert level: Polish video games are being recognised for their quality worldwide. page 98

Door to the future

Q2 2015 issue No. 09

Uniting business and academia will unlock Poland’s potential

PRICE: 25 PLN / 7 EUR

illustration: Erhui 1979

page 26

Magazine • Portal • Conferences • find out more at www.poland-today.pl

MIPIM 2015: we look forward to seeing you at our stand no. R8. D1

Our Partners at MIPIM 2015: BBI Development, Ghelamco, Golub GetHouse, HB Reavis, Kulczyk Silverstein Properties, Okam Capital, Poczta Polska, XCity Investment MedIa Partner: Poland Today

WarsaW: a city to invest in, a city to live in

Warsaw, as the capital of Poland, remains the country’s main economic and business hub and the leader among CEE countries. Warsaw’s strong position and its promising prospects for further dynamic development encourage investors to continue or initiate operations in this region. The 2015 forecasts for the countries of Central and Eastern Europe are promising. GDP in this region will grow by 2.5%, i.e. twice as fast as in the Euro zone, and for the fifth year in a row Poland should remain the fastest growing economy in the region[1]. In the report, "Emerging Trends in Real Estate Europe 2015" Warsaw was ranked 14th in Europe, making it the dominant location of commercial real estate in Central and Eastern Europe[2]. The city’s economic potential can be seen in a number of key indicators that guide investors in their decision making process. Mention should be made of the region’s large and receptive market, land and property offers that are attractive both in terms of price and location, a labour market providing access to highly educated employees, access to scientific research centres, a concentration of business environment institutions, and an appropriate city management policy, including systematic efforts to strengthen the city’s metropolitan functions. All this contributes to the increased interest in the Warsaw market shown by investors and developers. In 2014 alone, more than 276,000 sqm of new office space came onto the market, and the total area of modern office space now exceeds 4.4 million square metres[3]. Warsaw occupies 6th place in the global Investment Intensity Index, investment intensity being the ratio of the volume of investment transactions in commercial real

estate to the size and economic potential of a given city. In this index, Warsaw was only outranked by London, Oslo, Munich, Stockholm and Copenhagen, ranking it higher than such cities as Paris, New York and Tokyo[4]. The city’s effective use of EU funds and its commitment to integrated territorial investments, whose aim is economic and social development for the municipalities of the metropolitan area, gives an additional boost to its investment potential. Even through the hard times of the recent economic crisis, the city’s authorities have carried out strategic investments while maintaining the investment budget at the highest level. In the years 2007-2014, over PLN 8 billion EUR were spent on investments, including 2.2 billion in EU Funds. The city’s strength lies not only in its business advantages but also the satisfaction of those who work and live here. In terms of quality of life, the city figures exceptionally well. Its well-developed roads, sports and cultural infrastructure, green spaces, research facilities and the interest shown in the population and their needs, ensure convenience and functionality on a daily basis. A good example is the Veturilo urban bike rental system, considered one of the best in the world - better than the systems found in London, New York or Washington. In turn, Warsaw’s beaches on the Vistula River last year proved to be one of the top 25 places in the world most often visited by Facebook users. According to the Lafarge "Happy city" study, conducted in collaboration with IPSOS, some 81% of those living in the capital do so by choice and feel good here!

[1] The Erste Group’s "EmergingEurope" report [2] Report by PwC and the Urban Land Institute (ULI): "Emerging Trends in Real Estate® Europe 2015" [3] The WRF report: Warsaw Research Forum (WRF) consists of seven real estate service firms: CBRE, Colliers International, Cushman & Wakefield, DTZ, JLL, Knight Frank and Savills. The representatives of these companies aim to standardize indices published through collection and comparison of quarterly data. [4] report by Jones Lang LaSalle conducted between the second quarter of 2011 and the first quarter of 2014.

The city’s strength lies not only in its business advantages but also the satisfaction of those who work and live here.

table of contents

editorial

in focus

BUSINESS

Business review

A round-up of the top business and economic stories in Poland

16-25

Leader

Poland’s miners are fighting to keep their state-funded benefits in a sinking industry

Building momentum

Over the past 25 years Poland has built up several advantages that will help it continue its economic development into the next quarter century

The learning curve

Poland’s universities will have to make some difficult but essential changes for the country’s economy to move forward

international

Kiev calls on Balcerowicz

Digging a hole 56

A hub of entrepreneurship

Much is made of Poland being an economic hub of the region. One non-profit now wants to make it a regional centre for start-ups

Create optimal conditions

Poland Today speaks with Bartosz Krzemiński, vice president of rail vehicle firm Newag, about the challenges facing Poland’s business environment

AUTOMOTIVE IN FOCUS

61-67

After a downturn caused Poland’s automotive industry to shrink, the industry has now got back on the road toward growth. But there are potential potholes in the road ahead. Poland Today takes a look at the state of the auto industry and the challenges it faces

Table of contents

Ukraine’s nascent government has asked Poland’s most famous economic reformer for advice and advocacy

URBAN ISSUES MIPIM 2015 EDITION

68-84

In this expanded edition of our propertyfocused section Urban Issues for the MIPIM real estate show in Cannes, France, Adam Zdrodowski writes on the latest developments in the investment market, Poland’s booming logistics sector and rising interest in modern office space from public entities

KATOWICE IN FOCUS

85-93

Katowice has long been known as the heart of Poland’s industrial and mining heartland – but the city is reinventing itself and touting its attractiveness for business service sector investments. We take a look at the city’s economic profile and cultural offer, and interview newly elected Mayor Marcin Krupa

HISTORY

It happened in ... April April 7, 1995. The first line of the Warsaw Metro opens

Eyewitness: 100 years of history

As real estate business giant David Mitzner approaches his 100th birthday, Poland Today looks back at some of the events he has witnessed

CANADA IN FOCUS

37-48

Poland Today takes a look at Polish-Canadian relations with a review of economic cooperation, an interview with the CEO of Orlen about his firm’s investments in Canada and an interview with Canadian Ambassador to Poland Alexandra Bugailiskis

The road ahead for the auto sector pages 61-67

Balcerowicz advises Kiev on reforms page 34

Katowice transforming pages 85-93

Pressing the right buttons

Though it began in the 1980s with bootlegs and bargain games, Poland’s video game industry is now producing world-class titles

BOOKS & ARTS

100

Climbing for freedom For 20 glorious years Poles dominated Himalayan mountain climbing, though at a terrible cost

101

table of contents

Winning ways

Poland’s men’s national handball team took third place in a thrilling performance at the World Championship, Agnieszka Radwańska and Jerzy Janowicz won tennis’ Hopman Cup, while Kamil Stoch ski-jumped to victory on home soil

event review

103-112

In this edition of Poland Today’s event review, we look at conferences that focused on the investment attractiveness of Wrocław, Opole and Gliwice. We also look at Dąbrowa Górnicza’s efforts to attract the automotive industry and a Netherlands-Polish Chamber of Commerce event that raised tens of thousands of złoty for a very worthy charity

impressions

114

Bringing out the entrepreneur Parry Sondhi, originally from India, talks about his personal experience as a foreigner living in Poland

Poland’s Oscar page 24

Digging a hole page 54

Sport

Poland’s game developers hit a new high score: page 98

When you read through the pages of this issue of the magazine, you will see that Poland Today is becoming increasingly busy and well-established. Starting with the hosting and organisation of our ‘Primetime Poland’ lunch & conference at the world’s leading real estate fair in Cannes, MIPIM, and ending with our new ‘Transforming the Future’ initiative, Poland Today is leading the way in fostering ties between Polish and international business, as well as in providing a platform for foreigners to do business in Poland. And those are just our plans for the first half of this year. Our ‘Transforming the Future’ initiative, which takes place in Warsaw on June 11, will continue where we started last year with our ‘Poland Transformed’ conference by bringing leading journalists from major titles around the world to Poland to see the country’s best side. We’ll be looking at the future of business in Poland in nine key sectors and we’ll be bringing in the heads of the companies on which this future will be built – in other words, those companies which have been the most successful in their sector to date. We’ll also be discussing how these companies can best maximize their opportunities in global markets. Further emphasizing our credentials as a company that ‘brings Poland to the world and the world to Poland’, the Polish Ministry of Foreign Affairs asked us to renew the project we conceived and produced for them last year – Discover Polska – to be used by all Polish embassies around the world to promote the country. We’re very proud of this project and if you haven’t yet seen it, please check it out at poland-today.pl These are exciting times for Poland, both in the ‘Chinese’ sense of the word (witness the situation in Ukraine across Poland’s border) and in the ‘Western’ sense. As is pointed out clearly in these pages, Poland needs to seize the opportunities available in order for the country to reach its full potential. Businesses can no longer copy in order to catch up. They must create the change themselves. By covering new ground and opening up new areas of discussion, Poland Today will continue to punch above its weight and do its part.

Richard Stephens

Publisher Poland Today

Publisher’s note

SCIENCE & TECHNOLOGY

editorial

‘Polish universities need to cooperate more with the private sector to conduct research that will produce marketable innovations’ Poland Today Sp. z o. o.

ul. Złota 61 lok. 100, 00–819 Warsaw, Poland tel/fax: +48 224648269 mobile: +48 694922898, +48 602214603 www.poland-today.pl

Andrew Kureth

Editor’s note

is editor of Poland Today. Originally from the United States, Andrew has been living in Poland since 2001 and has covered the major political, economic, business and social stories in the country for over a decade. He has written for numerous global media, including the Financial Times. Andrew graduated from Kenyon College in Ohio.

It is time for academia in Poland to step up. This is the message we have heard over and over again from decision makers – both in business and government – who want Poland to increase innovation. Businesses are becoming more knowledge-intensive and the government has the funding at its disposal, but Polish universities need to cooperate more with the private sector to conduct research that will produce marketable innovations and to train students for the jobs that employers are hiring for. People are clearly Poland’s biggest advantage: Business leaders say Poles are more hard-working than their Western European peers, more open to travel and change, and, yes, very well-educated (see page 26). But while Poles are receiving the instruction in basic subjects and foreign languages that investors find valuable, Poland’s universities still lag far behind their European peers in international rankings, mostly because of a tendency to cling to tradition and a penchant for teaching theory rather than practice (see page 30). Canada is one country that has cracked this nut – innovations from the telephone to the space arm have come from the country, and now it wants to share its know-how with Poland. In our special focus on the country (see pages 37-48), we look at the Canadian model, which involves not just spending lots on education, but also putting the academic and business communities together. Ambassador Alexandra Bugailiskis is excited about the potential for cooperation in this arena, which she explains in our interview with her (see page 42). When Poles do innovate, the results are world-class. Witness the rise of Polish video games (see page 98). When they don’t though, industries struggle: one of Poland’s most recalcitrant sectors – mining – is fighting to survive (see page 54). The automotive industry, our sector focus for this issue, is trying to avoid that fate by understanding the technology needed to meet the needs of customers of the future (see pages 61-67). For the MIPIM global real estate fair in Cannes, France, we have also included an extended edition of our propertyfocused section, Urban Issues (see pages 68-84). Developers, for one, are adding more innovative solutions to their buildings as international capital flows into the country looking for prime properties to snap up. So Poland looks to be on a good footing as it faces a future where its economy will have to be more flexible and knowledge-based. If the country’s schools can improve and open up to change, Poland’s future will be bright indeed.

Founder & Editor in Chief Financial Director Business Development Director Creative Director New Business Consultant International Client Director Business Strategist

Richard Stephens Arkadiusz Jamski James Anderson-Hanney Bartosz Stefaniak Tomasz Andryszczyk Toby Hancock Ana Hermoso

Editor Marketing & Communications Director New Business Partner

Andrew Kureth Sylwia Ziemacka Aneta Kłodaś

Senior Writer Business Editor Real Estate Editor Editorial project manager

Jan Cienski Lech Kaczanowski Adam Zdrodowski1 Cynthia Naugher-Sklodowski Magda Gawlikowska Maja Sorochtej

Key Account Manager Event Coordinator Contributing Journalists

Wojciech Brzeziński Annabelle Chapman Piotr Narel Giuseppe Sedia

Interns

Gabriel Rom Yoni Wilkenfeld

DTP Operator

Tomasz Wróblewski

Photographs

Polska Agencja Fotografów Forum Piotr Dziubak

Magazine layout Bartosz Stefaniak

Printing house

ArtDruk Zakład Poligraficzny ul. Napoleona 4, 05-230 Kobyłka Poland Today Magazine is printed on Munken Print Cream ecological paper © 2015 Poland Today Magazine reproduction without permission is prohibited

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IN FOCUS

compiled by Yoni Wilkenfeld

AMERICAS

EUROPE

Washington Times Russia, Poland battle over conflicting World War II Victory Day celebrations

The Guardian Polish nationalists launch petition against Oscarwinning film ‘Ida’

Tensions are increasing between Poland and Russia over a series of milestones commemorating 70 years since the end of World War II. Polish President Bronisław Komorowski referenced the possibility of inviting European leaders to celebrate the 70th anniversary of the end of the war in Gdańsk this May, which would compete with a similar event planned by the Kremlin in Moscow. Komorowski also me tioned that the end of the war “did not bring freedom to all the peoples of Europe,” a reference to the Soviet Union’s post-war domination of Eastern Europe. In January, Poland faced criticism from Russia after President Vladimir Putin was not invited to a ceremony marking 70 years since the liberation of the AuschwitzBirkenau concentration camps by the Soviet army. At the time, Kremlin Chief of Staff Sergei Ivanov called it an attempt to “rewrite history”.

The Polish Anti-Defamation League has created a petition against ‘Ida’, director Paweł Pawlikowski’s film about a nun in 1960s Poland who discovers her Jewish roots, for being “anti-Polish” and misleading viewers about the role of Poland during the Holocaust. The Polish-Danish production, which recently won the award for best ‘Film Not in the English Language’ at the British Academy Film Awards, also won the Best Foreign Language Film Oscar at the Academy Awards in February.

Toronto Star Roman Polański extradition request sent to Polish court

Polish prosecutors have moved another step towards extraditing Roman Polański (pictured above) to the United States, where he is sought in connection with a 1977 sex crime. The 81-year-old film director was preparing for a new film in Poland, and was questioned in Kraków in January by local prosecutors. If a regional court recommends extradition in response to prosecutors’ request, it will move to the justice minister for further review.

ASIA & PACIFIC

Global news review

Associated Press Poland will not send lethal weapons to Ukraine

Poland will not send lethal weapons to Ukraine to aid its fight against Russian-backed separatists, according to Defence Minister Tomasz Siemoniak (pictured above). “I want it to be clear,” Siemoniak said. “It is out of the question to send heavy weaponry to Ukraine, including missiles, tanks or similar weaponry. Poland did not have and has no such plans.” Previously, Siemoniak had left open the possibility, should the United States change its position and begin defensively arming the Ukrainian military, as had recently been discussed by senior US officials. Poland has already supplied Ukraine with some PLN 17m worth of food, clothing and blankets, and is preparing to send further non-lethal aid.

Wall Street Journal Poland receives its highest ever Economic Freedom Index score

In a yearly survey of economic freedom published jointly by the Wall Street Journal and the conservative US think thank The Heritage Foundation, Poland received its highest-ever score, ranking 42nd among 178 countries. Poland moved up eight places from last year in the index, which the Heritage Foundation says is based on rule of law, limited government, regulatory efficiency, and open markets. Poland also placed 19th among the 43 European countries ranked, and received a score above the global average, which rose slightly since last year’s survey.

Xinhua Chinese Spring Festival’s gala performance staged in Poland

Before an audience of two thousand, the Shanghai Cultural Troupe welcomed the Chinese new year at Warsaw’s National Theatre. With acrobatics and song and dance, the performance continued a series of events aimed at introducing Chinese culture to Poles, organised by the Chinese Ministry of Culture and the Chinese Embassy of Poland. Chinese Ambassador to Poland Xu Jian was in attendance to wish Poles a happy Chinese new year, and was joined by Jacek Olbrycht, director general of the Polish Ministry of Culture.

Times of India Poland seeks new partnerships in India

During a visit to the eastern Indian city of Vadodara, Polish ambassador to India Tomasz Lukaszuk announced intentions to increase partnerships between Poland and India’s industrial corridors and so-called ‘smart cities’. Lukaszuk expressed Poland’s desire to grow bilateral trade volume between the two countries from $2bn to $20bn over the next few years. Agriculture, mining, and the renewable energy sector are a few possible targets for investment.

EUObserver Poland attacks ‘Russophile’ France in sanctions talks

Polish agriculture minister Marek Sawicki blasted French counterparts over their country’s relations with Russia, claiming that France is putting economic interests over European solidarity during the ongoing Russian-Ukranian conflict. France recently made an agreement in principle to resume pork sales to Russia, which last year instituted an EU-wide ban on pork and other food imports. The EU has been considering levying additional sanctions on Russia for its backing of separatists in eastern Ukraine.

Deutsche Welle NATO due to more than double ‘rapid response’ force in reaction to Ukraine

NATO Secretary-General Jens Stoltenberg announced, as expected, that the alliance will expand its rapid response units to 30,000 troops, from 13,000. “This is something we do as a response to the aggressive actions we have seen from Russia, violating international law and annexing Crimea,” he told reporters. The growing threat of ISIS was also cited as a cause for the increase. Six regional command and control centres would be set up to facilitate the forces, and an existing headquarters for the alliance in Szczecin would be expanded.

MIDDLE EAST

Israel Hayom Hitler Youth band drum made out of Torah scrolls found in Poland

An estate sale in Łódź turned up a drum from a wartime Hitler Youth band made from a orah scroll, a handwritten copy of the Pentateuch used in Jewish services. A volunteer from the association From the Depths, a Holocaust memorial and preservation group, heard about the estate sale of a former member of the Nazi party. The group sent a representative to purchase the drum, and plans to bring it on a lecture tour through Poland, Europe, and the US.

‘[Increasing the size of NATO rapid reaction forces] is something we do as a response to the aggressive actions we have seen from Russia’

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in focus

Education and R&D in Poland While Poland lags behind its European peers in research and development, momentum is building

research by Bartosz Stefaniak

Global companies that have located their R&D centers in Poland: – ABB – Bosch Siemens – Capgemini – Delphi – GE Aircraft Engine – GlaxoSmithKline – Google – IBM

Learning curve:

Businesspeople often praise Poland’s labour pool for being full of well-educated workers. And while Polish primary and secondary schools score well when compared to their OECD counterparts, Polish universities are ranked far lower. For Poland to move forward as a knowledgebased economy, universities will have to make some tough but necessary reforms (see page 30).

– Intel – Lockheed Martin – Microsoft – Oracle – Samsung – United Technologies Corporation – Volvo

In 2013, Poland’s total expenditure on R&D amounted to 0.87% of GDP (public & private expenditure)

In 2011, public expenditure on education,

from primary to tertiary, amounted to $25.69bn ($6,420 per student) which was equal to 4.9% of GDP and 11.4% of total public expenditure.

Polish students’ performance in mathematics: 518 pts.

OECD average: 494 pts (2012 PISA study).

Polish students’ performance in science: 526 pts.

Poland ranked 25th in Bloomberg’s

Global Innovation Index 2015. (24th in 2014, 30th in 2013 and 34th in 2012).

There were 73 science and technology parks

operating in Poland as of the end of 2014.

OECD average: 501 pts (2012 PISA study).

41% of Poles aged 25-34 have attained some tertiary education, compared with an OECD average of 39% (as of 2012).

53% of students in tertiary education

graduated, compared with an OECD average of 39%. This is the second highest result within the OECD (as of 2012).

Aviation valley Aviation Valley is an aerospace R&D

cluster located in south-eastern Poland around the city of Rzeszów. The Aviation Valley Association currently comprises over 100 aerospace companies cooperating with Polish universities of technology and public institutions.

So far investors include: Sikorsky Aircraft,

AgustaWestland, Siemens, Goodrich, Pratt & Whitney, Hispano Suiza, MTU Aero Engines, Carl Zeiss.

23,000 is the current employment in

the cluster. The figure is forecast to increase to 28,000 by the end of 2018.

$2bn worth of exports annually come

from the companies grouped in the cluster.

By the end of 2013, 145,600 people were employed in the R&D sector in Poland

Recent discoveries by scientists from Warsaw may revolutionize the computer market. Graphene, an ultra-thin allotrope of carbon with extraordinary conducting and mechanical properties, has so far been too expensive in production to be applied commercially. This barrier was recently overcome by Polish scientists who hold the patent for a production method cheap enough to enable mass industrial application.

photo: Michael Staudt (Visum)

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in focus

Leaders gather in Poland for 70th anniversary of Auschwitz liberation

Swiss franc soars, along with Polish mortgages

O Canada!

Polish-Canadian cooperation has a long history, but now the countries want to work together on innovating for the future. That looks all the more likely, seeing as a new comprehensive trade agreement between Canada and theEuropean Union was signed last year. Read more on the PolishCanadian partnership in our Canada in Focus section. see pages 37-48

In a highly unexpected turn, the Swiss National Bank (SNB) dropped a cap on the franc against the euro in January, dramatically dropping interest rates and sending the Swiss currency soaring. While the surprise move shook markets worldwide, worry was palpable in Poland, where about 14.6% of loans and 37% of household debt are denominated in Swiss francs. The złoty fell 22% against the franc after the decision, and the Polish stock exchange dropped steeply. In the years before the global economic crisis (and for some thereafter), it was common in Poland and other Central European countries for banks to lend in foreign currencies, which typically offered a lower interest rate. Over half a million Polish families now face higher payments on those loans. The SNB first pegged the franc to the euro in 2011, but the euro has depreciated considerably since then, creating some imbalances in the Swiss economy. By press time, the Swiss franc had cooled down from its highs immediately after the SNB’s decision, but still remained well above comfortable levels for some mortgage payers, at about 3.90 złoty per Swiss franc. Some holders of franc-denominated mortgages staged protests in cities throughout Poland. Poland’s banking association and some members of the government have proposed plans to aid those with mortgages in francs. However, economists don’t expect a huge rise in defaults, and say the stability of Poland’s banking system is not threatened.

by Yoni Wilkenfeld

Scores of Polish families evacuated from eastern Ukraine After several weeks of delay, 178 Polish citizens were evacuated from the war-torn Donbas region of Ukraine on January 13. In early December, Polish Prime Minister Ewa Kopacz had announced a plan to bring dozens of Polish families from in and around the city of Donetsk, a flashpoint in the conflict between Ukraine and Russian-backed separatists. While Kopacz promised to bring the families to Poland by Christmas, the plan fell through over the holidays. Ultimately, the Polish consulate in Kharkiv drew up a list of those needing evacuation, and Deputy Foreign Minister Konrad Pawlik travelled to eastern Ukraine to advise. The refugees were transported from the Donbas region to Kharkiv through various meeting points, and finally flown to Poland’s military airport in Malbork, about 50 km south of Gdańsk. They have been offered temporary housing, assistance in finding homes and employment, and social security benefits. According to a 2001 census, the Polish minority in Ukraine numbers some 150,000, of whom over 20,000 primarily speak Polish.

Seventy years after the liberation of the Auschwitz-Birkenau concentration camps by Soviet troops, thousands gathered at the Auschwitz memorial in Oświęcim in February to commemorate the anniversary. Leaders from the global Jewish community, Poland, and from dozens of other countries honoured the victims of the Holocaust and the several hundred survivors among them. Polish President Bronisław Komorowski, one of several international heads of state in attendance, opened the commemoration. Komorowski called the survivors “guardians of the memories of Auschwitz,” and their words and voices were indeed the focus of the ceremony. Roman Kent, a Łódz native who survived several camps, spoke to the purpose of the event. Interrupted by applause and nearly overcome with emotion, he repeated his central message: “We do not want our past to be our children’s future.” In between remarks by other survivors and the director of the Auschwitz Museum, the ceremony premiered a 15-minute documentary on the history of Auschwitz produced by the American director Steven Spielberg, who was in attendance. The ceremony took place amid growing concerns over a rise in European anti-Semitism, and just weeks after four Jews were killed during a hostage crisis in a Paris Kosher supermarket. Near the end of the ceremony, before survivors and dignitaries laid candles to commemorate the dead, Chief Rabbi of Poland Michael Schudrich joined other Jewish leaders for a moment of prayer. They recited the mourner’s kaddish, a pillar of Jewish liturgy typically recited by grieving children and parents. Its closing lines, words uttered daily by Jews for a millennium, gave voice to a hopeful future: “He who makes peace in his heights, may he make peace upon us, and on all of Israel.”

photos: Krystian Maj (Forum), Łukasz Dejnarowicz (Forum)

22 photos: forumgwiazd (Forum), Kelley L Cox (thepolishambassador.com), Krzysztof Żuczkowski (Forum), Darek Golik (Forum)

in focus

David Sugalski, ‘The Polish Ambassador’

Aleksander Doba

Bronze boys

Considered an underdog, Poland’s national men's handball team held their own at the 24th IHF Men’s Handball World Championship in Qatar, taking third place and the bronze medal in a thrilling match against Spain. see page 101

In October 2013, Aleksander Doba left Lisbon, Portugal on a seven-metre kayak to spend the next seven months paddling through the Atlantic Ocean. Doba completed his improbable journey last April at a sleepy marina in New Smyrna Beach, Florida. The retired engineer had paddled 7,716 miles in open water, setting a world record and becoming an overnight Polish celebrity. National Geographic magazine named Doba its 2015 People’s Choice Adventurer of the Year. Speaking to National Geographic, Doba recalled riding through nine-metre waves, dispersing sharks with the butt of his paddle, and after an equipment failure, spending 47 days in uncharted waters without radio contact. Doba is not a professional kayaker, nor did he prepare physically for the trip. His outlook on his adventure – and his life – is as simple as it is inspiring: “I am not old, I am only 67 years young!” he told National Geographic. In February Doba was awarded the Order of Polonia Restituta by Polish President Bronisław Komorowski. “I want to congratulate, but also to thank you for a remarkable feat that brought fame to Poland, in the name of our country, around the world,” he said.

Fans of California-based electronic musician and disc jockey David Sugalski don’t just come together to hear his music. They also gather to plant ‘public food forests’, create community gardens or clean up public space. On the recent tour to promote his new album ‘Pushing through the Pavement’ (officially called a ‘Permaculture Action Tour’), such activities were held in each of the 33 US cities the musician visited, engaging “tens of thousands” of people, according to his website. Sugalski is better known as ‘The Polish Ambassador’, a stage name under which he records and performs startlingly rich electronic music. Active since 2005, this unofficial diplomat has released 12 albums as The Polish Ambassador, and another as ‘Ample Mammal’ – a nom de plume he uses when creating a different style of music. What are this ambassador’s political goals? He has none, insists his website. “The Ambassador is not a political partisan. Rather, he is a diplomat for a new paradigm rooted in creative joy, radical self-expression, and ecological principles.” Regardless, the fusion of high-quality music and social activism has proved potent enough for the Ambassador to gain a significant following of fans and a well-regarded reputation in the electronic music community. No word yet on when he is coming to Poland, but as of press time, all of his music was available for download free on his website at: http://thepolishambassador. com/free-music.

Józef Oleksy Known for his gravelly voice, former Prime Minister Józef Oleksy, a fixture of Poland’s political left for decades, died in January after a long battle with cancer. He was 68. Oleksy’s political activity dates back to 1968, when he became a member of the Polish United Workers’ Party – Poland’s communist party. He rose up the ranks, taking part in the 1989 Round Table Talks that led to Poland’s first partially democratic elections later that year. Oleksy became a member of the Democratic Left Alliance party, or SLD, in 1990. He held the post of Speaker of the Sejm, Poland’s lower house of parliament, from 1993 to 1995 and again from 2004 to 2005. He served as prime minister from 1995 to 1996, resigning amidst a scandal over his connections to a KGB agent. After a rift with the party, he left SLD in 2007. His funeral was attended by President Bronisław Komorowski and Prime Minister Ewa Kopacz, as well as his colleagues from the political left, former Prime Minister Leszek Miller and former President Aleksander Kwaśniewski.

by Gabriel Rom, Piotr Narel and Andrew Kureth

24 IN FOCUS

Cinematic masterpiece: Critics were

especially effusive in their praise of the cinematography of ‘Ida’, with some saying each frame is a work of art in itself. ‘Ida’ was also nominated for an Oscar in the cinemato graphy category, but lost out to ‘Birdman’, which also won Best Picture.

Snapshot

Poland’s Oscar Poland’s film community rejoiced in February when ‘Ida’, a black-and-white production by director Paweł Pawlikowski, won in the category of Best Foreign Language Film at the 87th Academy Awards in Hollywood. The win capped a spectacular run of nominations and awards for the film, which won ‘Best Film’ honours at festivals in Bydgoszcz, Gdynia, Gijón, Kraków, London, Minsk, Warsaw and Wiesbaden. It also won Best Film Not in the English Language at the 68th BAFTA awards. A. O. Scott of the New York Times wrote, “Mr. Pawlikowski has made one of the finest European films (and one of most insightful films about Europe, past and present) in recent memory.” The film centres around a young novice nun about to take her vows who learns of her Jewish background. Polish films have been nominated 10 times for Oscars, but ‘Ida’ is the first to win – perhaps surprising considering the historic list of acclaimed directors to come out of Poland, including Agnieszka Holland, Andrzej Wajda, Krzysztof Kieślowski and Roman Polański. Polański’s ‘Knife in the Water’ was the first Polish film to be nomina ted for an Oscar, back in 1963.

In his acceptance speech, director

Paweł Pawlikowski thanked his film crew, saying, “You are what I love about Poland: resilient, courageous, brave and funny.”

photos: Lucy Nicholson (Reuters)

26 Building Momentum leader

Over the past 25 years Poland has built up several advantages that will help it continue its economic development into the next quarter century

Last year, Poland basked in the glow

Andrew Kureth

of 25 years of successful economic transformation, marking an unprecedented turnaround from a nearly bankrupt, centrally planned basket-case to the twenty-third biggest economy in the world with more than 20 years of uninterrupted growth. But now Poland must look to face the challenges of the future, and there are many. There is a war at Poland’s doorstep, in Ukraine, while Europe, Poland’s largest trading partner, is mired in slow growth. The European Union, membership of which has been such a boon to Poland’s economy, seems to be pulling apart, with doubts about Greece and the UK remaining in the bloc. Energy prices are falling, but no one knows for how long. There is worry of a new currency war, as countries in Europe trip over each other to cut interest rates and stave off deflation. All this as the global competition for investment has become fiercer than ever. As globalisation rushes inexorably forward, more countries are able to compete on labour costs, where Poland has traditionally had an advantage. Living standards in Poland are now higher than ever, but higher wages have brought with them the need for Poland to find other competitive advantages. The country will have to compete on the strength of its brainpower – something it has already begun to do. Witness the influx of outsourcing and business service centres that have mushroomed throughout the country. The BPO/BSC industry now employs more than 200,000 in Poland, making it the second biggest sector in the country. Foreign firms are finding the right mix of young, motivated, well-educated workers in Poland, now considered one of the best locations in the world for such investments.

Innovation is on the lips of every development opportunities than many government minister, so at least the of their Western European counterparts. authorities recognise what they have “The people we employ, they still to concentrate on. Over the next six remember communism,” said Rob Helle, years, Poland will receive some €10bn owner of Objectivity Bespoke Software in EU funding to spur innovation, and Specialists, a Wrocław-based IT solunone too soon. Economists agree that tions firm. “Everyone works hard to Poland has squeezed all it can out of make their lives better.” Over and over recycling Western business models again, the businesspeople we spoke and adopting well-worn technologies. with said that such attitudes were far Poland has to transform into a value- rarer in Western Europe – some even add economy – one that can create went so far as to call Western Europeans global brands and intellectual property, “lazy” in comparison to Poles. “Polish people are easy to work with,” and not just assemble cars and furniture for international firms to sell on. said Anders Lönn, country manager Doing that will put Poland on a good for Poland at Descom, a Finland-based footing toward meeting its goals marketing and customer-experience of reaching the living standards of its company. “Poles are international Western European peers and creating a – many have worked or lived outside supple economy able to withstand the of Poland, so they have a high level various shocks that are bound to come of knowledge about other countries, with the volatility in global markets. and their English is very good.” He But if not labour costs, then what does added: “Poles see working abroad as the country have to build on? Poland an opportunity, but people from other Today spoke with dozens of business- countries are much more reluctant to people to find the answer. To get a view leave their home country. They don’t of the future, we went to firms that are have the eagerness to move forward in high-tech or knowledge-based that the Poles have.” industries. We also went to companies Not only are Poles hard-working, with an international profile: either for- but there are a lot of them – about eign companies who have set up shop 38 million, making Poland the sixthin Poland and have made a long-term largest EU member state. The huge commitment to the country, or Polish labour pool is a big advantage that firms whose client base consists mainly Poland can build on, especially when of foreign firms. We chose them for it comes to the business services and their unique perspective – they are in outsourcing sectors, said the busia position to compare Poland’s businesspeople Poland Today spoke with. ness environment to those they come “Poland’s strength is its depth of talent,” from or do business in. said Scott Newman, managing director and at the Poland branch of State Industrious and numerous Street, a US-based financial services No matter the industry, one thing that firm that employs over 2,200 people stood out among the answers of those in the country. “It’s got a unique pool interviewed for this article was strong of well-educated graduates.” praise for the Polish work ethic. Poles, But despite the large well of talent, they said, simply tend to work harder the demand for people – especially IT and are more open to change and engineers, software developers and

Work ethic: Interviewees for this report re-

peatedly contrasted Poles’ work ethic with that of their counterparts in Western Europe, saying Polish workers were more willing to work hard to advance or take on new challenges. Some went as far as to call Western Europeans “lazy”. Poles, however, are much more likely to give their best effort, employers said.

Making headway The headway Poland has made so far, especially in the BPO sector, will serve the country well, too. Though there are other EU countries – such as Romania – that have a well-educated, low-cost workforce, investors say that Poland has already built up the infrastructure and know-how in the industry to keep it in the country for the long term. “Poland has created momentum in the business services industry,” said Objectivity’s Helle. “It will be very hard for other countries to catch up with that.” Companies may move simpler operations abroad, but the more complex tasks are already being developed in Poland, where proximity, cultural fit, and expertise all work in Poland’s favour. But while the businesspeople we spoke with were generally very positive about the outlook for Poland, there were some clear areas of agreement on the challenges it faces and the issues it could address in the short term. Most often mentioned were the notorious Polish bureaucracy and as-yet underdeveloped infrastructure. Both obstacles have been ameliorated somewhat in recent years, especially in infrastruc-

‘Poland has created momentum in the business services industry. It will be very hard for other countries to catch up with that’

ture. But much more could be done. Businesses still find it too difficult to navigate Poland’s labyrinthine tax code. And while hundreds of kilometres of express roads have been built in the last few years, it still takes too long to get between many cities, such as Wrocław and Warsaw, by train. Especially when it comes to increasing Poland’s potential as a knowledge-based economy, the issue businesspeople mention again and again is the need for business and academia to work together more closely in creating marketable innovations, but also in developing curricula to produce graduates with the skill sets needed for the industries that are hiring. Martin Ring, managing director at the Polish office of BNY Mellon, pointed to this area as one where the government could provide useful support. “There is a role for government in working with businesses and the academic world,” he said. “It needs to help form a strategy around education, to create a framework to ensure that employees are better tailored to those industries that need the labour. The environment is constantly changing. Businesses are at the forefront of that change, and they are in a good position to support such an initiative. But it needs a systematic approach.” That Poland has the tools to overcome these challenges, however, was never questioned by any of the businesspeople interviewed for this article. Stig Waagbø, CEO of Schibsted Tech Polska, a software developer with programming centres in Kraków and Gdańsk, summed it up nicely: “Poland can remain relevant as long as the education system can keep up. There is no reason why Poland could not be in a good position for years to come.”

by Andrew Kureth

Better training:

While businesspeople praise Poland for its well-educated workforce, many of those we interviewed said there could be much more cooperation between academia and the business world, especially when it came to communicating and developing curricula that would provide students with the skill sets they need to land jobs in Poland’s evolving economy.

illustration: Erhui1979

programmers – has pushed wages too high, too fast, especially in the area around Kraków. The overheating IT labour market was an issue that several of the businesspeople we spoke with pointed to as something Poland would need to address in the coming years. Nevertheless, Poland’s ‘Europeanness’ – its location in Europe, its cultural similarities to the countries where many of its investors are coming from and membership in the EU – will continue to keep Poland attractive as an investment location for firms in knowledgebased industries.

LEADER

28 LEADER

Building momentum Over the past 25 years Poland has built up several advantages that will help it continue its economic development into the next quarter century

‘High-tech innovation is happening in Poland, but we need to be patient. You can’t learn everything in two or three years’

Mike McDonald, Managing Director, Brown Brothers Harriman

We are very pleased with our decision to invest in Kraków, and it is one we have committed to for the long term. We have hired over 700 people here in the past three years and expect that number will rise to over 1,000 eventually. Poland’s financial services sector continues to grow, evolving in terms of both discipline and complexity, and we feel it presents great opportunity for the future growth of our business. The calibre of the workforce is a big draw for companies investing in Kraków, and was a critical factor in our decision to establish a centre in the city. We continue to be impressed by the number of graduates and the highly skilled workforce, which will no doubt play a big part in Kraków’s ongoing development as a financial services centre.

Rob Helle, Owner, Objectivity Bespoke Software Specialists

Poland Today interviewed dozens

of business leaders, asking them what they saw as the advantages the country can use to build its future economy and the challenges they expected it would have to face. Because we wanted the views of those who could either talk about high-tech industries or compare Poland with other markets, we spoke with foreigners leading international or technology-related firms, as well as Poles heading up branches of international companies or Polish companies with a strong technology or international profile. We asked those in Poland’s booming business services industry if the country was in danger of losing such investments, since companies can easily move outsourcing centres to other countries. But professionals in the sector were sanguine. Poland has now built up the experience to allow it to move up the business services value chain, they said, adding that the country would still have plenty of labour to supply the industry for decades to come. Technology professionals, on the other hand, said that while wages for IT engineers were overheating somewhat, the quality of their work was still worth the cost. Poland’s universities just need to crank out more of them, they said, and with more industry-specific knowledge. They almost always expressed openness to work with universities to help them design courses of study that would prepare students to fill the gaps in the labour market.

EU accession was the trigger for Objectivity to come to Poland. As a small firm, it was encouraging to know that we would be protected by the EU framework. Once that became reality, a good amount of risk disappeared. We are moving as many of our functions as possible to Poland. If it can be done in Poland, it will be. Poland is the cornerstone of our operations, and it will continue to be going forward. We like the culture – people work hard. And there are some specific advantages: there is little or no time difference with our client base, there are excellent flight connections and the English-language skill level has risen dramatically. Poland has a good education system, and the people have a good attitude. The only challenge is recruitment – Poland is a hotbed for IT services at the moment. But that doesn’t mean we are about to leave. We have been growing at a pace of 40-50% in Poland for the last five years, and we don’t see that coming to an end.

Anders Lönn, Country Manager, Descom

We have had a very good experience working with Polish people. Services, specifically IT services, is definitely the future of business in Poland. Already the country’s IT services are on a very high level, even by European standards. The development since 1989 has been marvellous, but there is still a long way to go before Poland reaches a Western European standard of living. Highly educated Poles are able to move ahead, to reach a higher living standard. For them, salaries are at a fairly good international level. Poland needs to move away from the Special Economic Zone model and begin creating clusters – small firms grouped together and all working with universities. Universities still aren’t particularly supportive of such initiatives. In general, Polish universities need to move from teaching theory to teaching practice. Poland needs some strategic thinking in this area, but it is easy to draw on other countries’ experiences.

Martin Ring, Managing Director, BNY Mellon

Ilkka-Cristian Niemi, Business Development Manager, Barona

Mikael Lemstrom, President, Fortum Power and Heat Polska

Joanna Bensz, Country Manager, CH2M HILL Poland

Scott Newman, Managing Director & Senior Vice President, State Street Bank Poland

Radomir Grucza, Founder & Vice President, REC Global

CH2M HILL has been present in Poland for nearly two decades now, growing our local competencies and bringing new business groups to grow their business here. We currently employ over 340 people in Kraków and Warsaw, mainly engineers. Polish engineers and designers are highly valued by our international colleagues, with whom we do a lot of work-sharing on international design projects. They are increasingly engaged by global companies like ours in flagship international infrastructure and high end industrial projects. They also help our international divisions meet their commercial objectives by delivering some of the design in a lower cost location like Poland at the same or sometimes higher quality standards. Our engineers are embedded in international project delivery teams working in real time on the same 3D models on projects in the most remote locations in the world. We continue to invest in our team as we see multitude of opportunities for Poland to grow and benefit from our experience.

Stig Waagbø, CEO, Schibsted Tech Polska

Poland’s first advantage is that it has a lot of people. It’s much bigger compared to the Nordics, so there are lots of people to select from. Secondly, its educational system in terms of IT is relatively good. The competencies are there. Thirdly, the cost level is attractive. In our business, we need people fast. To recruit in Norway, for example, would take a lot more time that it does here. But certainly the cost advantage is wearing away. Kraków is overheated already. It will be interesting to see if that will spread. That is a big risk for Poland. With all of the competition, though, all of the foreign companies coming in, there is a positive side as well, since it could help stem the brain drain. The education system could churn out even more developers. Polish academia is good at fostering maths and science skills. The government should point to IT as a strategic area.

We chose Poland because of the cost and the ability to service our Nordic and German clients from here. The economic situation in the Nordics is not that good. In Poland, the cost of living is lower, meaning we can bring Nordic employees here and with a slightly smaller salary than they would receive in their home countries, they can afford a better living standard. The outsourcing sector is growing, but Nordic firms still find manufacturing and production investments an attractive prospect in Poland, and that could remain the case for 10 more years. But the market is not easy, especially when it comes to finding IT developers. Salaries will continue to rise, and there are still some challenges on the bureaucracy side.

It’s clear we’re happy with our investment in Poland. Our original goal was to hire around 500 employees. Now, we have 2,200. The quality of the workforce is second to none. They are keen to find solutions and advance. They are ambitious to develop their careers. Other advantages we see here are the sizable talent pool and the time zone. Then, of course, there is the economic and political stability. Among the challenges, I would point to bureaucracy, and a cumbersome tax system. There is more and more recognition around the world of Poland as a great place to be. But Poland needs to be more aware of past lessons learnt, especially when it comes to overheating wages. There are other countries in the region that are strong and will be competitive.

Jakub Lipiński, CEO, Polidea

Am I optimistic? Yes, absolutely. There are some really interesting things going on in technology here. For example, Poland is really ahead in mobile banking compared to the rest of Europe. Also, some big players in e-commerce, like Ebay or Amazon, somehow didn’t manage to dominate here. We have homegrown brands that are holding their own. Hightech innovation is happening in Poland, but we need to be patient. You can’t learn everything in two or three years. The entrepreneurship environment is still in its early stages. But access to capital is not a problem. What we need is success stories – stories of Poles who sold tech firms for millions of dollars. These stories will inspire others to start their own businesses. For the future, our companies have to work on being flexible, agile. You can’t really predict what will happen, so you need to create a lean organisation with little hierarchy. Hire good people who can change, and then find opportunity in the change. “Hack the change” as we say.

LEADER

We have been working in Poland since 1994, and we have had a permanent presence here since 2003. We are very positive about Poland. Its economy continues to show strong growth, a big positive when compared to other European countries. We felt it was a natural choice. In terms of the energy market, there is a lot of electrical and heat capacity built in the 1960s and 1970s that needs to be replaced. And there will be a lot of opportunities for renewables – coal will survive here longer that it will elsewhere. However, Poland may need to change the way it is used, that is, to go for more efficient and environmentally friendly technologies such as combined heat and power production to meet its EU targets. In terms of the general business environment, there is still too much unnecessary bureaucracy, which could well be reduced.

I think that one of Poland’s biggest advantages is its open-minded people. Poles also have the language skills companies need and there are close cultural links with the rest of Europe. But the cost advantage will vanish over time, so it’s about creating skill sets and building specialities. Taxation in Poland isn’t too bad – but it would be good if the system were simplified.

Paweł Patroński, Branch Director, Imagination Technologies

Poland has a healthy supply of good engineers – types that are hard to find in the UK. Proximity is another advantage. It’s two hours from the UK by plane, and you can bring equipment without having to go through customs. Also, the cultural fit is good. Cooperation is easy. Still, competition for engineers is fierce, and there are still not enough of them coming out of universities. The question is whether they can increase quantity while retaining quality. Could Poland become an innovation hub? I believe so. We won’t have any problems producing innovations. Poland’s problem is how to break into global markets. How to go to Apple or Intel to sell them the products, not the whole company. Those big firms sometimes just prefer to acquire entire firms to get hold of their product. But big sales are all about personal connections. You need to know the right people at the right levels. Poles are only now making the right connections.

Size advantage:

While Poland faces some daunting demographic challenges, it will continue to have far more people than any other EU country in the region for some time to come. Business leaders said the deep labour pool gives Poland a distinct advantage.

illustration: Erhui1979

We now have 500 people in Wrocław. We were certain Poland was the best choice, and that’s been confirmed by other companies deciding to invest here. Poles are very hard-working people. They show commitment and dedication. It has been a very positive experience. For the future, Poland needs to continue to concentrate on education, and investment in it. Business services is a rapidly growing market, and there will be demand for people who can fill high-skill roles. Poland needs to keep investing in the development of technical skills, but also personal development, management development and leadership development.

30 The learning curve leader

Poland’s universities will have to make some difficult but essential changes for the country’s economy to move forward

When Prime Minister

Jan Cienski is

illustration: Erhui1979

Poland correspondent for The Economist and editor of the Central European Financial Observer. He is also author of ‘From Comrades to Capitalists: How Poland’s Entrepreneurs Built Europe’s Most Competitive Economy’. He also writes for Business New Europe. Until May 2014, he was the Warsaw bureau chief of the Financial Times. He has a degree in international relations from the University of Toronto.

Tomasz Czechowicz, the founder of MCI, one of Central Ewa Kopacz gave her maiden speech to the Polish parliament in early October, one of the Europe’s leading venture capital funds, remembers headlong list of promises she made was to gifted university stu- ing off to special business education classes to learn how dents: they will be able to get government help to pay tuition to manage his first company, a computer business he founded at foreign schools. “That is fantastic if a young person from in the early 1990s. “There was a case study about a Polish Poland gets the possibility of studying abroad,” Kopacz said. computer company, and the instructor didn’t realise that While the programme is a boon to students contemplating I was sitting in on the class,” he said with a laugh. While businessmen like Czechowicz were brushing up on attending much more expensive foreign universities, it is also a recognition that Poland’s own universities often fall short. their education, millions of other Poles were also caught short Poland’s two best universities, the Jagiellonian University – suddenly a degree was vital in order to succeed in the new in Krakow and the University of Warsaw in the capital, lan- economy. Hundreds of private universities sprang up to fill the gap. Some, like Koźmiński’s school, guish far down the table of the world’s top institutions of higher learning tried to provide a decent education. as compiled by Shanghai Jiao Tong Others became little more than degree University, the most-used ranking. mills, minting thousands of graduates Both fall into the ranking’s fourth cenin useless subjects like marketing and tile, and they are the best Poland has journalism, often taught by overworked to offer. It’s a similar story with busiprofessors lecturing at two or three different schools. The worst of those ness schools. In rankings of the 70 best MBA programmes compiled by the schools are now in trouble. The wave Financial Times, Poland’s private of older people who need degrees has Kozminski University came in 35th, receded, while student numbers overall while the state-run Warsaw School are falling thanks to Poland’s very low of Economics came 68th. “We have birth rate. In 2010, Poland had 1.8 milclosed the gap in management edulion students. Only four years later, that number has fallen to 1.5 million. cation and we’re now no worse than France or Germany in this regard,” Fundamental change said Andrzej Koźmiński, the school’s founder, who named it after his father, Lena Kolarska-Bobińska, the higher a business professor. education minister, expects there will Although his own school has done be a consolidation among the counrelatively well, Koźmiński concedes try’s more than 430 universities. “Some of them will start to fail,” she said in an that Polish higher education has to pay a lot more attention to quality than to interview with the Gazeta Wyborcza simply churning out large numbers of newspaper. “Others, adapting to the graduates. “We are still fairly provincial new conditions, will have to fundamen– we still aren’t able to attract interna- Each year almost 0.5 million tally change.” Kolarska-Bobińska is hurtional students and international faculty,” young people begin their education rying along the revolution. She plans at universities and colleges. to change the way higher education he said from his office in the university’s main campus, a long line of low 53% of tertiary education students is financed. Until now, schools got govbuildings located in a post-indus- graduated, compared with an OECD average ernment money based on the previtrial area on the scrappy east side of 39%. This is the second highest result ous year’s allocations – which meant within the OECD (as of 2012). of the Vistula River. that financing was stable but did nothing to promote innovation. Now, betCaught short ter schools will get more money, which is supposed to encourage universities Poland’s universities are going to towards excellence. “The best will get have to follow in Kozminski University’s the most,” she said. footsteps if they want to keep local talShe also plans to boost spending on research and develent at home and begin to attract a larger number of foreign students. During communist times, universities were meant opment. Poland now spends only 0.9% of its GDP on research, only for the elite. Most jobs did not require a degree, and far below the EU average of 2% and only a fraction of the only about a fifth of school finishers went on to post-sec- spending by the continent’s most advanced economies. ondary education. All of that changed after 1989. The return “We spend a huge amount on social services but R&D is very of a market economy meant that the old communist model low and spending on universities is in a dramatic situation,” favouring big factories, heavy industries and ideologically said Mirosław Gronicki, a former finance minister. correct workers was quickly overturned by capitalism. Poland’s universities have also proved to be reluctant The flood of foreign investors setting up shops and factories to forge closer ties with business. While American professors in Poland, as well as fast-growing local businesses, in subjects like IT and engineering are quick to turn innovaneeded well-educated people. tions into businesses, Polish schools are much more conserv-

90% of Polish adults have finished high school, compared with an OECD average of 75%

31 leader

‘Our youth is the most accomplished in the world. My generation could only dream of that’

That system was scrapped in 1999. Instead of deciding on a child’s future at an early age, Poland brought in a six-year primary system followed by three years of middle school, called gimnazjum. Streaming only happens after gimnazjum and many more children go on to demanding three-year high schools called a liceum to prepare for university admission. The government has also been struggling to lower the school starting age to six. Foreign language instruction, principally English, is now taught throughout the country and from the beginning of school. Finally, salaries for teachers have been rising steadily since 2007, turning it into an attractive profession that is able to lure talented educaative. The way to get ahead in Polish tors. Bonuses are also paid to schools that perform well. faculties is to publish, often in obscure HISTORY LESSON journals unread outside of the counThe new programme has proved After years of neglect under communism, try. Trying to spin off a business only the Polish educational system was transformed to be an enormous success. The OECD causes problems. club of wealthy nations runs a trienin the late 1990s. A new government strategy University authorities worry that focused on raising secondary and higher educa- nial school testing programme called tion qualifications, ensuring equal educational start-ups could give them heartburn. PISA, ranking 65 countries and jurisopportunities and improving the general qualPolish tax rules demand that they place ity of education. According to a recent OECD dictions in reading and mathematan estimated value on the spin-off. report, Poland is now one of Europe’s leaders ics. The first time Polish students sat for the tests in 2000 they came But if the business turns out to be much in school performance. more successful than anticipated, the in well below the OECD average, scorThe number of Poles in higher education is rector can expect a visit for the anti- growing. Over half of 19- to 24-year-olds attend ing 470 points overall. In every subsecorruption police querying why the colleges and universities, while 39% of those quent test the Polish children improved. There are 518 aged 25-34 hold a university-level degree. initial valuation was incorrect. By 2012, the Polish 15-year-olds scored institutions of tertiary education in 518 points, 13th overall and in the top “Unfortunately, Poland has no inforPoland. The highest Poland’s academic traditions go back to 1364, ranks of European pupils. Polish teens rated among them mation flow between education and when King Casimir the Great established the business,” said Marcin Hejka of Intel Jagiellonian University in Kraków, the second came in 14th overall in mathematics, are the Univeristy Capital, the venture capital arm of the in Central Europe, after Charles University in 10th in reading and interpreting and of Warsaw and the Jagiellonian Prague. In 1773 Poland established what is now US tech giant. “Polish education is not ninth in science. In Europe, Polish chilUniversity considered the first-ever ministry of education, geared towards commercialisation. when the Commission of National Education dren were behind only Liechtenstein, in Kraków. US universities are encrusted with start- (Komisja Edukacji Narodowej) was created. Switzerland, the Netherlands, Estonia ups, I don’t see that in Poland.” and Finland. “We have reason to be proud and satisfied,” former prime While higher education as a whole minister Donald Tusk said when tends to be lacklustre, there are areas of excellence. Poland stands out in In 2011, public By 2011, public the results were announced in late 2013. Ranking spending on mathematics, building on a tradition expenditure on “Our youth is the most accomplished of 70 best MBA education amounted educational services programmes in the world. My generation could that dates back to well before the war. to $25.69bn, which was worth $6,420 in Europe: It was Polish mathematicians who was equal to 4.9% only dream of that.” per student (from helped break German Enigma cipher of GDP and 11.4% primary to tertiary Prime Minister Kopacz and Higher – Kozminski education). University: 35th machines, giving the allies a crucial of total public Education Minister Kolarska-Bobińska expenditure. edge in the war. Today Poles, along with are going to have to push through the – W arsaw School of Economics: 68th same kinds of financial incentives that other Central and Eastern Europeans, dominate contests like TopCoder, a proworked so well in schools into univergramming competition. sities. There is already strong resistance from faculties worried about Grammar-school lesson losing crucial government funding, and While Polish universities face an enormous challenge in rising professors upset over the possibility of merit pay. But the higher in international rankings, they can take solace from task of improving universities is a crucial one. Poland has the fact that another part of the Polish education system had one of the best growth records in Europe over the last has already managed the same feat. Polish schools were quarter century as it took with gusto to capitalism. But easy stolid during communism. The country had one of the latest sources of growth are starting to run out; Poland is going to starting ages in Europe, with formal schooling only begin- have to shift from being a copycat economy to one based ning at age 7. By 15, students were already being streamed. on innovation. And in such an economy, schools and uniA small academically promising minority was geared for universities play a crucial role. “Over the next 20 years we will versity. The least accomplished were sent to two-year voca- have to learn, learn learn,” said Tomasz Glowacki, a principal tional schools, often tied to specific industries, while middling at Riverside, a private equity fund. “Our children will have to be inventive.” by Jan Cienski pupils went on to technical high schools.

32 LEADER

Transforming the Future What are the drivers that will change Poland’s business landscape and global position in the next 10 years?

In 2014, to celebrate

Leading foreign journalists will take part in the discussions.

25 years on informal discussion as opposed to of economic transformation, Poland structured panels or presentations. The Today brought 50 leading journalists sessions will be in English, thereby makfrom major titles around the world ing them accessible to the international to Poland, to tell them the story of the market. Leading foreign journalists repcountry’s success. In 2015 we will con- resenting major international publicatinue this mission through our ‘Trans- tions and influential sector press titles forming the Future’ event. This business will take part in the discussions. initiative will involve the most successful and influential companies operating Poland Today Business Awards in Poland, companies which will influ- The Poland Today Business Awards ence the country’s economic future will recognize and celebrate the sucand its global image. Once again, cess of the companies on whom the Poland Today will bring leading future Polish economy is already being journalists from around the world to built: the companies that have transPoland for the event. formed the Polish market so far. The The initiative is composed of two award categories are the nine sectors events which take place on the that will be analysed during the Forum, same day: the Transforming the as well as one extra category: Brand Future Forum and the Poland Today Polska. The award in the Brand Polska Business Awards. category will go to the firm that has most contributed to a positive image Transforming the Future Forum of Poland abroad. The winners of each category will be The Forum will bring together Polish and international business leaders from chosen by separate sector juries which the most successful and fastest-grow- will be made up of industry experts ing companies in Poland to share their and professionals, as well as renowned insights and experience, and to forecast economists, thought leaders and what lies ahead for the Polish market. It business people. will consist of plenary sessions, opened Confirmed jury members include: by a major keynote speaker, and break- Poland correspondent for The out sessions, where the future of busi- Economist Jan Cienski, Financial Times ness in the economy’s major sectors will Central Europe correspondent Henry Foy, renowned economist Professor be discussed in greater detail. The sectors that the forum will focus Witold Orłowski, renowned economist on are: Automotive & Locomotive, Ryszard Petru, and former Treasury Energy & Utilities, Financial Services, Minister Jacek Socha. Healthcare & Pharmaceuticals, IndusThe winners will be announced at the trial Machinery & Equipment, Raw & awards ceremony following the Forum Basic Materials, Real Estate Develop- and published in all Poland Today’s ment, Transport & Logistics and Tech- media platforms: Poland Today maganology & Telecommunications zine, website and newsletters. The breakout sessions will be led by Transforming the Future provides an experts in these sectors, and will include unrivalled opportunity to reach high senior representatives of the compa- level Polish & international business nies nominated for the Poland Today leaders and opinion formers from your business awards. The emphasis will be sector and others.

Poland Today Business Awards Categories – Automotive & Locomotive – Energy & Utilities – Financial Services – Healthcare & Pharmaceuticals – Industrial Machinery & Equipment – Raw & Basic Materials – Real Estate Development – Technology & Telecommunications – Transport & Logistics – Brand Polska

Brand Polska Poland Today believes that part of its mission of ‘bringing Poland to the world and the world to Poland’ is to tell the story of Poland’s triumphs and successes. But we are not alone. Polish companies operating abroad act as ambassadors for Poland’s image around the world. Through our ‘Brand Polska’ category, we want to celebrate Polish enterprises that have shone positive light on Poland through their business success, social engagement or uplifting story.

CONFERENCE & AWARdS iNtERNAtiONAl pRESS tOuR

Transforming the Future 11 June 2015, Hotel Sofitel Warsaw Victoria

Bringing together Polish and international business leaders from the most successful and fastest-growing companies in Poland to share their insights and experience and to forecast what lies ahead for the Polish market www.poland-today.pl

34 Kiev calls INTERNATIONAL

on Balcerowicz

Ukraine’s nascent government has asked Poland’s most famous economic reformer for advice and advocacy

As Ukraine grapples with war,

Annabelle Chapman is a Warsaw-

based journalist. Her articles from Poland and Ukraine have featured in The Eco nomist, Foreign Policy, Newsweek and Foreign Affairs, among others. In Warsaw, she is also English-language editor at Polityka Insight, a think-tank. She has a degree in Politics, Philosophy and Economics and a masters in Russian and East European Studies, both from Oxford University.

“Ukraine has already made the transiLeszek Balcerowicz, the father of FIRST TO REFORM tion from socialism to political capitalPoland’s post-communist economic ism, but the latter is not much better The Balcerowicz Plan, named after former reforms, has been summoned to help Finance Minister Leszek Balcerowicz, was than the previous order, where eveKiev reform its economy. The 68-year- the first ever attempt to switch an economy rything was completely controlled old economist, who has served as dep- from a communist system to a free market. by politicians and built on informal Success was by no means guaranteed. Although ties,” he told the Ukrainian governuty prime minister, finance minister and the immediate social costs were huge, today head of the National Bank of Poland, Poland has emerged as the most successful ment’s news service in an interview. visited Ukraine at the end of January, of the European post-communist economies. Like in Poland, the economy ought to be beyond politics, he added. where he met with top politicians includUkraine needs to act “quickly, deciing President Petro Poroshenko. Apart from his economic advice, Balcerowicz sively and completely,” Balcerowicz told has been speaking out about the con- Ukraine’s GDP Polish television channel TVN24 Biznes Poland’s GDP per capita: flict in Ukraine – and what he views as per capita: i Świat upon his return to Warsaw. the inadequate Western response. Priorities include stabilising Ukraine’s PPP, current prices: PPP, current prices: The current coalition government 1990: $6,806 budget, which struggles under a huge 1990: $5,976 headed by Arseniy Yatsenyuk was 2013: $8,788 deficit, and deregulation since, in his 2013: $23,275 +289% change view, excessive regulations foster the elected in October 2014 on a pro-West- +29% change ern, pro-reform platform. But with the use of bribes. Other tasks include privanominal, nominal, conflict in the Donbas region showing current prices: tising state-owned companies, breakcurrent prices: little sign of ending, despite a second 1990: $1,570 ing up monopolies, reforming Ukraine’s 1990: $1,694 2013: $13,432 ceasefire agreement signed in Minsk 2013: $3,900 national gas company Naftogaz and +148% change +692% change in February, the country’s economic raising the retirement age, he said. prospects remain bleak. GDP contracted Although Balcerowicz is associated by 7.5% in 2014 and is set to decline by 5% this year, with Poland’s ‘shock therapy’ reforms of the early 1990s, he according to the latest forecast by the European Bank dislikes the term and claims he never used it himself. Reforms of Reconstruction and Development. involve healing problems, he told BBC Ukrainian. Experience War has a double impact on reform, Poroshenko said in – not just in medicine – shows that serious problems should a February speech to Ukraine’s National Council of Reforms, be treated quickly, before they get worse, he said, drawing the body set up last summer to coordinate the reform pro- parallels with the economic situation in Ukraine. cess. On the one hand, it slows down reform, stealing away Still, Kiev’s situation is better now than Warsaw’s was time, energy and money. On the other hand, the war requires in 1989, Balcerowicz has said. The Ukrainian government quick and decisive changes in order to strengthen the can draw on the experience, and learn from the mistakes Ukrainian state against its aggressors – not only on the front of Poland and other former communist countries that are lines. “I think that Poland’s experience and Mr Balcerowicz now members of the EU. At the same time, Kiev should show joining our team will be very beneficial to us,” he added. that it is not only capable of asking for money from abroad, but carrying out radical reforms, he added. “Show [them] Quick, decisive action that you’re not Greece!” he said. Balcerowicz, who is chairman and founder of the Warsawbased Civil Development Forum foundation, visited Kiev Foreign influence in late January. (A Polish delegation led by Prime Minister Balcerowicz is not the first foreigner Kiev has called on Ewa Kopacz visited Kiev earlier that month, also discuss- in its quest to reform. Natalie Jaresko, a Harvard-educated ing reforms.) He returned pleased with the team he had American from Chicago, was appointed finance minister met there. “I am impressed by the members of Ukraine’s in late 2014. The minister of the economy is Lithuanianleadership I spoke to,” he wrote on Twitter in late born Aivaras Abromavicius, while the health portfolio January. “The best people I’ve had the opportunity to meet went to Alexander Kvitashvili, a Georgian. And in February, in Ukrainian politics since 1991.” Poroshenko appointed Mikheil Saakashvili, the president of

INTERNATIONAL

Georgia from 2004 to 2013, head of a newly created Advisory International Council of Reforms, which aims to involve foreign experts in the reform of the Ukrainian legislation. “We are confident that it is Mikheil who will establish a bilateral communication between Ukraine and the world on the issue of reforms,” Poroshenko commented, according to a statement on his official website. No Poles have been hired so far, though there was previously speculation in the Ukrainian media that Aleksander Kwaśniewski, Poland’s president from 1995 to 2005, would somehow be involved. Balcerowicz will not be taking a government post either. The Polish economist is “ready to offer advice, examine various ideas or projects, provide comments,” announced Dmytro Shymkiv, deputy head of Ukraine’s presidential administration, but declined to take accept an official post. “A minister is a political post; I would not make foreigners ministers,” Balcerowicz told the same Ukrainian government news service, adding that he would be coming to Kiev twice a year to advise the government.

Leszek Balcerowicz

is considered one of Poland’s greatest economic minds. The architect of Poland’s post-communist economic reforms, he has pledged to come to Kiev twice a year to advise on reform efforts.

‘The West gave military support to Afghans when they were fighting against Soviets. What about Ukraine fighting against Putin?’

Meanwhile, Balcerowicz’s interest in the situation in Ukraine is not limited to the economy. He has joined in the ongoing debate about whether the West should arm Ukraine, drawing parallels with the Soviet invasion of Afghanistan in 1978. “The West gave military support to Afghans when they were fighting against Soviets. What about Ukraine fighting against Putin? Double standards?” he tweeted in English (unusually) on the first day of his visit to Kiev. He has also voiced his opinion on the West’s involvement in the recent peace talks with Ukraine and Russia, accusing Germany and France of “monopolising” them. The role Berlin and Paris shows “what an exaggeration it is calling the head of the European Council the president of Europe,” he tweeted, referring to Donald Tusk, Poland’s former prime minister, who started his new job in Brussels in December 2014. Balcerowicz has taken a sceptical view of the emphasis the EU and US have put on finding a diplomatic solution. “The more Western countries speak of diplomatic solutions in Ukraine, the more Putin uses the military solution,” he warned ahead of the talks. Balcerowicz’s message is that, in addition to pressing economic reforms, the government in Kiev needs broader Western support. As he said in the interview with TVN24 Biznes i Świat interview: “Ukraine should not be left all alone, as it is now.” by Annabelle Chapman

photos: Rafał Siderski (Forum)

Critical of the West’s response

Canada in focus

CANADA IN FOCUS

Innovation in their nature:

Canada is as innovative as it is beautiful, and now it wants to share its experience with Poland. Business ties are strengthening too: trade has Â increÂ ased rapidly between these two close NATO allies. Now the hope is that a new CanadaEU trade agreement will bring much more business activity and investment

Economic and business ties page 38

Ambassador interview page 42

Innovation: the Canadian example page 44

Polish investor interview: PKN Orlen page 46

Polish video game maker in Canada page 48

38 CANADA IN FOCUS

North star As Canada begins a new era of trade relations with the European Union, Poland is an unusual bright spot on the continent

From 2003-2013, Canada’s exports to Poland grew at an average annual rate of nearly 10%, almost double Canada’s export growth rate to the EU as a whole. Long a reliable partner in diplomatic and military affairs, and historically a source of emigration to Canada, Poland has matured into an attractive source of investment for Canadian firms, and continues to send capital the other way.

Canada in focus

Fuel to grow

TOP 10 CANADIAN EXPORTS TO POLAND

TOP 10 POLISH EXPORTS TO CANADA

1. N uclear reactors, boilers,

1. Nuclear reactors, boilers,

machinery; parts (34.02%) 2. Electric machinery; sound equipment; TV equipment; parts (7.52%) 3. O res, slag and ash (6.43%) 4. Furskins and artificial fur; manufactures thereof (5.61%) 5. O ptic, photo, medical or surgical instruments (4.25%) 6. Plastics and articles thereof (2.78%) 7. Mineral fuel, oil; bitumin subst; mineral wax (2.68%) 8. Vehicles, except railway or tramway, and parts (2.16%) 9. Essential oils; perfumery, cosmetic preps (1.79%) 10. Articles of iron or steel (1.7%)

Poland’s energy sector has dominated headlines of late with respect to foreign investment – for better and worse. Early this year, the American oil giant Chevron became the latest in a string % of total Canadian exports to Poland of major energy companies to pull Source: Statistics Canada out of shale-gas exploration in Poland. But the collapse, for now, of efforts to turn Poland into a significant producer of natural gas might further open up doors for a Canadian energy supply. An LNG import terminal currently company’s presence in the country to under construction in Świnoujście has become a player as the sector matures. been in the works since 2006, with Another forward-looking company, the the hopes of diversifying the coun- Saskatchewan-based electric utility try’s energy supply, which is domi- SaskPower, is building the world’s first nated by Russian oil and gas. As the coal-fired power station with an intefourth-largest producer of natural gas grated carbon capture system. in the world, Canada will eventually be a serious candidate to supply the ter- Resource rich minal, which is expected to feed into On the Polish side of the ledger, some of a new LNG corridor across Poland, country’s largest players have already Slovakia, and Croatia. taken big steps across the Atlantic. PKN The Montreal-based SNC-Lavalin Orlen, Poland’s biggest company, has had an early role in the building of the acquired two Calgary-based oil firms Świnoujście terminal, and has long had in the last two years: TriOil Resources a presence in Poland. The engineering in 2013, and Birchill Exploration in and construction firm opened a Warsaw 2014. Recently, however, plummetoffice in 2004, and started up Poland’s ing oil prices have not been kind to first supercritical coal-fired unit in 2008, these investments, and in January the 460 MW Pątnów II near Kielce. Orlen announced that it took a roughly As Poland continues to look for CAD 110m write-down on its Canadian sources of energy more financially (and assets (see interview, page 46). environmentally) sustainable than its KGHM, one of the largest minnative coal industry, SNC-Lavalin might ing firms in the world and another of yet find another way into the market. Poland’s biggest companies, acquired In 2011, the company established the the Vancouver-based Quadra FNX subsidiary Candu, a Toronto-based Mining for over $3bn in 2012. The deal producer and supplier of nuclear reac- was then the biggest-ever foreign tors, which recently reached a deal to investment made by a Polish combuild reactors in Romania. pany. It brought several major mines Candu is not currently among under KGHM control, including the the top contenders to win the con- Sierra Gorda mine in northern Chile, tract for Poland’s first nuclear reactor, one of the largest copper deposits a PGE project expected to go online in the world. Expected to begin proby 2024, but could use its parent duction at Sierra Gorda this year, KGHM

machinery; parts (32.81%)

2. Furskins and artificial fur;

manufactures thereof (25.59%)

3. Furniture; bedding; lamps etc. (8.32%) 4. Electric machinery; sound equipment; TV equipment; parts (7.86%)

5. Pharmaceutical products (3.67%) 6. Aircraft, spacecraft, and parts thereof (3.22%)

7. Articles of iron or steel (2.05%) 8. Soaps; waxes, polish; candles; dental preps (1.41%)

9. Vehicles, except railway

or tramway, and parts (1.33%)

10. Beverages, spirits and vinegar (1.24%) % of total Polish exports to Canada Source: Statistics Canada

International is currently in negotiations with Chilean miners unions to avoid a potential strike.

High fliers For decades, south-eastern Poland has been growing into a regional aerospace powerhouse. Over a hundred sectorrelated companies are clustered around Rzeszów. The region, known as Aviation Valley, accounts for 90% of Poland’s aerospace industry production. One leader is Pratt & Whitney Kalisz (PWK), owned wholly by Pratt & Whitney Canada. A major manufacturer of parts for aircraft engines, PWK employs about 1,500 in Poland and exports nearly all of its products to Pratt & Whitney Canada. Bombardier, another Canadian aerospace giant, has not fared as well recently. In 2012 the firm signed a contract with Eurolot, a regional carrier formerly owned by LOT Polish Airlines, for an initial round of eight aircraft and an option for another 12. Last month, however, Eurolot announced it was winding up its business after years financial trouble. For the most part, Bombardier has focused its Polish operations closer to the ground, becoming the largest railway investor in Poland and operating in Kraków, Gdańsk, Łódź, and the Mazowieckie voivodship. This January, Bombardier was fined 4.2m złoty by an antitrust watchdog for intentionally

CANADA IN FOCUS

misleading the government on a 2011 application for a rail tender. Public-private partnership (PPP) might also be a source of investment from Canadian companies – the government will need to continue major investments in infrastructure in the coming years. While PPP cooperation between Canadian firms and Polish authorities has been limited, it is an area where Canadian officials believe there is a lot of potential for growth.

photos: wikipedia, KGHM International

Broad agreement The long-awaited game changer is the Comprehensive Economic and Trade Agreement (CETA), a broad free trade agreement between Canada and the EU that has been in negotiations for more than four years. In 2013, Canadian Prime Minister Stephen Harper and then European Commission President Jose Manuel Barroso signed an agreement in principle on CETA, and the two gathered last September for a symbolic meeting to end negotiations. The actual implementation of the treaty, meanwhile, is still some time away, as it will require approval by the European Council and European Parliament, and domestic ratification by each of the EU member states. At this stage, Poland remains just one of the 28 member states awaiting the opportunity to formally consider the treaty, which it is expected to ultimately ratify. But if and when CETA is implemented, the doors to Canadian-Polish trade and investment will swing open further. CETA would eliminate all industrial duties for European exporters, as well as for nearly 92% of EU agriculture and food products. The treaty would also allow EU business to bid on public contracts in Canada, opening up a market of over a CAD 100bn worth of federal and municipal projects. For large companies like KGHM and Orlen, it has not been difficult to cover the expenses and tariffs of investing in Canada, even without a free trade deal. But its effect, experts say, could be more significant for smaller companies. “What’s really important is providing an avenue for small and medium-sized enterprises to do business. When you’re talking about a smaller Polish company, the idea of doing business in Canada seems like a very difficult endeav-

our,” said Roman Iwański, a PolishCanadian lawyer at the firm JSLegal who specialises in CETA. CETA could also prove a boon for Polish companies with eyes on the American market, by making it easier for those businesses to set up a Canadian enterprise. Taking advantage of NAFTA, the free trade agreement between Canada, the United States and Mexico, these firms could then use their Canadian business as a launching pad into the US. By showing proof of concept for a transatlantic trade agreement, the success of CETA could further nudge the US and the EU forward in free trade negotiations of their own. The two are currently in talks over the proposed Transatlantic Trade and Investment Partnership (TTIP), which faces considerable political roadblocks. The state of Polish-Canadian trade is already robust. A diverse array of Canadian firms, like Valeant Pharmaceuticals, McCain Foods, and the software company Redknee, have established presences in the country, while some of the largest Polish companies have recently acquired large assets in Canada. Once CETA finally comes into effect, enterprising Poles and Canadians will have even more opportunity to do business across the pond. by Yoni Wilkenfeld

‘From 2003-2013, Canada’s exports to Poland grew at a rate nearly double its export growth rate to the EU as a whole’

Montreal-based SNC-Lavalin

opened Poland’s first supercritical coalfired unit in 2008, the 460 MW Pątnów II near Kielce (above).

‘What’s really important is providing an avenue for SMEs to do business’

The McCreedy West mine in Ontario,

Canada (left) was purchased by KGHM International from Vale in 2002.The mine extracts ore containing copper, nickel and precious metals.

40 Canada in Focus

Canadian exports to Poland (2013): CAD 456.6m PLN 1.342bn

Polish exports to Canada (2013): CAD 1.25bn PLN 3.68bn

Canada

POLand

Population: 35.16 million Land area: 9,984,670 km2 Capital city: Ottawa Prime Minister: Stephen Harper National anthem: ‘O Canada’ Canadian Ambassador to Poland:

Population: 38.5 million Land area: 312,679 km2 Capital city: Warsaw Prime Minister: Ewa Kopacz National anthem: ‘Poland Is Not Yet Lost’ Polish Ambassador to Canada:

Alexandra Bugailiskis (see interview, page 42)

Canadian GDP (2013): CAD 1,881.42bn Canadian GDP per capita (2013): CAD 53,518.54

Top Canadian exports to Poland:

Machinery, mechanical or electrical products; mineral products; base metal products

Canadian direct investment in Poland (2013):

Canada in focus

CAD 202m / PLN 590m

Canada was the first NATO member to approve

Poland’s entry into the alliance

Poland vs. Canada, all-time football record: 6-0

Marcin Bosacki

Polish GDP (2013): CAD 533.19bn Polish GDP per capita (2013):

CAD 13,788.27

Top Polish exports to Canada:

Machinery, mechanical or electrical products; miscellaneous manufactured articles; leather & fur products

Polish direct investment in Canada (2013):

n/a

Canada-Poland total trade volume (2014): CAD 1.9bn / PLN 5.6bn

Poland vs. Canada, all-time ice hockey record: 0-7

A Pole and a Canadian each won one of the two grand prizes at the Ottawa International Animation festival last September. Number of caves in Ontario’s Warsaw Caves: 7

compiled by Gabriel Rom and Yoni Wilkenfeld

sources: Government of Canada, 2011 Canadian Census, 2011 Polish Census, Canada.com, Canadian Polish Congress, European Wildlife, Canadian Geographic, FIFA, 11v11.com, IIHF, CBC

CANADIAN IN POLAND Poland Today speaks with John

Van Kannel, the chairman of the supervisory board at brewer Perła-Browary Lubelskie SA How did you find yourself in Poland? What are your impressions of the country, its people, and its business culture? – I came to Poland in August 1991, and started working as a journalist and editor, and teaching English on the side. I found the people here to be very warm and welcoming. As a bit of a foreign oddity I was in high demand as party entertainment. It was a great time. I also spent years just soaking up the history and enjoying the nature of the seaside, the mountains, lakes and forests. In terms of business, I found the service element pretty lacking, on just about every level. It seems the most unhelpful, unfriendly types somehow found their way into every service position back then, whether it be in the shops, or the bars, or at the ticket window. All that has changed. Even at the bureaucratic level people are very helpful. What are some of the biggest difference between Poland and Canada? – Apart from language I hardly notice a difference anymore. It seems there are more individual freedoms here. Another noticeable difference are prices. Canada is terribly expensive compared to Poland. What is it like being an expat in Poland? Does it give you any advantages or disadvantages in business? – I’ve been here for 24 years, so I hardly feel like an expat anymore. But I do think what used to be an advantage for foreigners has become more of a disadvantage. Foreign business people are no longer revered just for being foreign. In fact there may even be a bit of national pride at work and a feeling that foreigners aren’t needed in business, that they are taking jobs away from competent Polish managers. What is your view on the business climate in Poland? – There have been a lot of positive steps. But there are still some byzantine procedures that companies face. I think that the climate for small business has generally been good, and an entire class of individuals, representing what would be termed the ‘middle class’ in Canada, has sprung up here in the past 25 years to drive the economy forward.

Canadians with Polish heritage: 1,010,705 Polish organisations in Canada: over 250 Year of first Polish migration to Canada: 1752 Population of Kraków, Poland: 755,546 Population of Krakow, Canada: < 1,000

conference

Spotlight on Kraków and Małopolska 23 March 2015, Krakowski Park Technologiczny, ul. Prof. Michała Życzkowskiego 14

The brain gain

What must Kraków do to attract and retain the very highest level of talent in order to enable businesses to reach their optimal development levels? www.poland-today.pl

Strategic partner

partnerS

www.poland-today.pl

CANADA IN FOCUS

Historic partnership Poland Today editor Andrew Kureth sits down with Canadian Ambassador to Poland Alexandra Bugailiskis to talk about the countries’ growing cooperation in business, defence and innovation

You have been stationed in Poland for nearly two years now. What has most impressed you about Poland and the Canadian-Polish relationship?

During her 30-year career in foreign

Canada in focus

affairs, Ambassador Bugailiskis has served as director general for Latin America and director for Central America and Caribbean Affairs. She also worked in the UN division during Canada’s 19891990 Security Council tenure. She has been posted to Guatemala and El Salvador and to Ghana, Togo, Benin and Liberia. She has a master’s degree from the Norman Paterson School of International Affairs at Carleton University.

cipled position against the Russian aggression but in our support of the Ukrainian people. And we now have a joint programme where we are funnelling Canadian funds through the Solidarity Fund here, based in large part on the former Canadian development assistance programme. We are working with the Polish government to implement joint reform programmes in Ukraine.

What has been most impressive is to realize the depth of the historic relationship and how that has evolved into the current situation. When you come to a country like Poland that you think you know – there is a long tradition in relationships between Canadians and Poles, a millions-strong diaspora – and yet you are still so ultimately sur- Prime Minister Harper has prised by the progress. It’s almost tan- been very outspoken in his supgible, the feeling of dynamism that the port of Ukraine, hasn’t he? Polish economy and the Polish peoYes, when he was at the G20 sumple are really poised to move forward. mit in Australia last November, he It’s palpable on the streets. All the told Russian President Vladimir Putin, businesspeople and students I speak “I guess I’ll shake your hand but I have with are very proud of how far Poland only one thing to say to you: you need has come in such a short period of to get out of Ukraine.” That went viral. time, and in the leadership that they It shouldn’t have been any surprise to are showing not only within Poland President Putin because Prime Minister but increasingly within the EU. Harper has been very open. Canada The second impression that I have is was one of the first and has consistently how strong the people-to-people link- been one of the strongest opponents ages are between Canadians and Poles. of Russian aggression. We have mainI would use last year as an example. 2014 tained very strong sanctions. We’ve was an amazing year for Poland. There supported Poland and the European were so many historical anniversaries. Union in maintaining those sanctions For someone who is a student of history against the Russian aggression. it was nice to get a better appreciation – you understand so much more the Canada and Poland are close challenges that Poles have overcome. NATO partners – Canada was That makes the achievements all the the first NATO country to ratify more incredible. But what I was really Polish accession. What are the impressed with was that with almost most important areas of Polishevery anniversary and commemoration Canadian defence cooperation? there was a strong Canadian linkage. You find Canada and Poland workWe remembered that very much ing together in different spheres – in on June 4 when Prime Minister Harper Afghanistan for instance. I also visited came to celebrate Poland’s 25th anni- Polish troops in the Golan Heights when versary of freedom. There he was, sit- they were under Canadian command. ting beside his friend, (now former) Then, about a year ago the threat of Prime Minister Donald Tusk and on his Russian aggression brought about other side was former President Lech a real raison d’être for the partnership. Wałęsa. He was very touched by his We have really responded to the participation in those events and rec- increasing sense of threat here in ognized the enormous progress that Central and Eastern Europe by posihad taken place in Poland over the last tioning Canadian military assets in the 25 years. He was so pleased that region. We have sent CF-18s as part Canada had been a partner all along of the Baltic Air policing mission, we that very difficult period of time. sent a frigate that is now in the Black And Canada continues to be a part- Sea and, most importantly for me, we ner. The best example is Ukraine. As this had Canadian troops, beginning in May, more modern challenge came to the in northern Poland. forefront again you saw Poland and Poland has been a great friend Canada coming together in partner- to Eastern Europe, so it wasn’t a surship. Not only in our strong and prin- prise that we would want to work with

photos: Michał Misiak

‘Poland has been a great friend to Eastern Europe, so it wasn’t a surprise that we would want to work with Poland against aggression in Ukraine’

Poland against aggression in Ukraine. What the future months will bring is not clear, but Canada and Poland will continue to consult extensively.

The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada was signed last autumn, though it still has to be ratified by EU states. How is the deal expected to change the PolishCanadian trade relationship? Poland is Canada’s key Central European market and trading partner. That said, last year trade between the two countries came to only about 1.9bn Canadian dollars. CETA is great news for trade between our countries. It is an absolutely historic agreement. It is the first between the EU and an economy from the G7 (the Group of 7 – the countries with the seven largest economies in the world). It is also very ambitious, some 97% of tariffs will be eliminated. With CETA, Canada and the EU should see a 20% increase in trade – and it will probably be higher than that when it comes to trade between Canada and Poland. It will bring in billions of dollars, probably about €12bn for the EU. More importantly, it will create jobs. For Poland, some Canadian tariffs are really high, so Poland is going to be a very early winner. The Canadian market will open up to Polish furniture, which is known for its quality – currently the tariff is 15.5%. Chemicals and plastics also have a 15.5% tariff applied. Again, this will be eliminated. Machinery and equipment, another important Polish export sector, will see a tariff of 9% eliminated. But CETA goes well beyond tariffs. It will open up new areas of business, such as government procurement. Canada is opening up this market through CETA on both the national and provincial level. The market comes to some 130bn Canadian dollars, about 10% of our GDP. I think there will be opportunities for Poland to come in and compete and for Canadians to benefit. CETA will also bring many advantages in terms of investment. It contains an agreement on FDI that guarantees both countries equal treatment, predictability, labour mobility and ease of business with regards to standards. It will also reduce many technical barriers; a real effort has been made to recognize each other’s certification and pre-testing. That could be a big benefit for Polish companies that want to invest in Canada.

You have made it a priority to increase engagement between Poland and Canada in the fields of innovation and entrepreneurship. Why?

south-eastern Poland). New Canadian companies are coming in. Heli-One, for example, which does maintenance Ambassador Bugailiskis served as chief and overhaul work on helicopters. negotiator for the recently concluded They went out and hired around 50 Canada-EU Political Framework Agree ment. Here she explains how it might high-class technicians. They hadn’t affect Canadian-Polish relations. even hired the first 50 when they decided to hire more. “This is a Strategic Partnership agreement Then there is sustainable technolo– and that name is very significant. The EU had a number of Political Framework agreements. gies. Canada is a world leader in this But only 10 are ‘strategic’. There is no direct area, and Poland could meet its EU link with CETA, but it demonstrates the depth targets through help from Canadian of the relationship between Canada and the technologies. We have great techEU, and more importantly EU member states. It talks about our common values and interests nology when it comes to waste-toin promoting democracy, freedom and rule of energy. We are also doing great work law, in third countries where there are weakin solar energy, wind energy, bioenergy nesses. It also talks about our determination and fuel cells. to work against terrorism and organized crime. What the Strategic Partnership speaks to is That brings us to energy: Canada the need for us to be vigilant, and to bring our continues to offer real opportunities resources together to stand against terrorism in terms of supply, from liquid natural to ensure that our peoples are able to retain gas, to traditional fossil fuels and shale their rights and freedoms.” gas – but also in terms of technologies. Moreover, Poland is still working on building its first nuclear reactor – Innovation is sometimes a challenge Canada’s CANDU reactor has a great to foster. We know its value intrinsi- safety record and high productivity. cally, but we also know from statistics Then there are clean-coal technolothat it doesn’t pay off immediately. gies, which could be very beneficial That Poland and Canada are looking for Poland. Canada has built the first very hard at how they can cooperate in working carbon capture and sequesthis area demonstrates the long-term tration facility Saskatchewan. We think this will prove that this is a technology view of the relationship. Canada is a leader in innovation. that can be extremely effective, will Innovation takes huge investment, but reduce emissions and open up new also an enabling environment. We have possibilities for clean coal. Infrastructure is another area where created that and it is paying off. You can see it in everything from insulin, to we can work together more. While pacemakers, to the telephone. The tel- Poland has benefited greatly from EU ephone was invented in Canada, and cohesion funds, these will be reduced BlackBerry was founded there. Canada in the future. In Canada, we have found was the third country in the world to that the public-private partnership send a satellite into space. Speaking of (PPP) model has worked. We have put space, Canada developed the ‘space forward the Canadian model. Since 1991, arm’ that was used on the space station we have had over 200 PPP projects in and shuttles. We also have the deepest Canada – worth over €45bn. We we laboratory in the world, where we are think that this is the way to go to leverdoing revolutionary work on neutrinos. age public-private funding. To create that enabling environment, Canada has made huge invest- In what areas do you think Canadianments in education. Canada spends the Polish cooperation could serve as most on education in the Organisation a model or example for the counfor Economic Co-operation and tries’ other bilateral relationships? Development (OECD – a group of develThe biggest lesson in the Canadianoped economies). We have the highest Polish relationship is the fact that you spending on R&D in the G7. There are can’t neglect your friends. After last important tax incentives for developing year’s visits there is no doubt about how R&D facilities in Canada. high Poland is on Canada’s list. There’s the diaspora too. This past year marked What are the areas where you the 70th anniversary of the PolishCanadian Congress. There are over think Canadian-Polish cooperation could improve or be closer? 250 Polish organizations across Canada, We want to strengthen the tradi- from veterans to Polish scouting. They tional areas, but also expand those are keeping alive Polish-Canadian where we can cooperate. There are ties. That also translates into business. some sectors that we need to renew or Each member of the Polish diaspora strengthen further. in Canada has their contacts and netOne of those is aerospace. We have works here in Poland. This provides a a long history of partnership and invest- good basis to move on to the next chapment in aviation in Poland. Canada was ter in the Canadian-Polish relationship. one of the pioneers of Aviation Valley I am extremely positive about the future. (a hub of aerospace businesses in interview by Andrew Kureth

Strategic agreement

CANADA IN FOCUS

Andrew Kureth

44 Canada IN FOCUS

Innovation: the Canadian example Canada offers its know-how in helping to develop Poland’s entrepreneurial ‘ecosystem’

For 25 years,

Canada in focus

up the potential for cooperation between the two countries during Johnston's visit in October.

‘Money is not the game-changer. The game-changer is entrepreneurs with vision’

photos: Szymon Łaszewski

Governor General of Canada David Johnston and President of Poland Bronisław Komorowski talked

Poland has relied he said. “Money is not the gameon low wages, manufacturing and the changer. The game-changer is those fruits of economic liberalisation to entrepreneurs with vision.” drive its growth. But as living standards The theme each of the panelists rise, Poland's future growth depends returned to was the concept of an ‘ecoon fostering its knowledge-based system’ – the interplay between capieconomy. As it quite literally faces tal, talent, ideas and public policy. The these ‘first-world problems’ for the panel discussed how to further encourfirst time, the Polish business commu- age the growing communities of businity is turning to Canada to help crack ness incubators and angel investors, the nut of innovation. and what kinds of regulation and govAt the Warsaw Stock Exchange polit- ernment involvement are needed. ical and media minds gathered to hear To these efforts, Governor General Polish and Canadian experts discuss Johnston said in conclusion, the Poles best practices for creating a successful should add “the essence of entrepreenvironment for innovation. neurship and innovation: an open mind.” President Komorowski framed the by Yoni Wilkenfeld task for Poland’s future as “changing from an imitation-based economy to an innovation-led economy,” and held up Canada’s private sector as a model Poland Today was a media patron of the example. Governor General Johnston event. The panel discussion was moderated led with a breakdown of what’s needed by Poland Today editor Andrew Kureth. to encourage innovation, drawing on his experience at Ontario’s University of Waterloo, a hub of student-driven entrepreneurship. Explaining the success of Silicon Valley and other centres of innovation, Johnston gave five ingredients: elite universities, favourable immigration, climate and livability, a culture of risk-taking and what he called the “Bohemian effect” – a mixture of talent, technology, and tolerance. Asked how Poland was faring on these and other measures, the panelists were soberly optimistic. Innovation in Poland is behind where it should be, said Bożena Lublińska-Kasprzak, president of the Polish Agency for Enterprise Development, but it’s moving in the right direction. “We have to look at where we started,” she said. Wojciech Szapiel, CEO of the Polish Investment Fund, noted that capital per se isn’t the only piece of the puzzle. “We’re trying to bring smart capital,”

46 CANADA IN FOCUS

Exploring new markets Poland Today speaks with Jacek Krawiec, CEO of Polish PKN Orlen, about the company’s investments in Canada and issues facing Poland’s economy

PKN Orlen has made a big splash recently with the acquisition of two Canadian oil producers. What was the reason that the company began looking at the Canadian market?

Jacek Krawiec,

CEO of Polish PKN Orlen, says Poland must change its strategy for economic development from modernization to innovation.

Investments in upstream projects constitutes one of the pillars of Orlen’s long-term strategy. So far our company has been focused on downstream activities and trade: apart from several refineries in three countries we have the largest retail network of gasoline stations in the Central Europe. However, in the long term we want to build a strong upstream component into our activities. Each year we look at numerous investment opportunities and analyse several selected ones closely. North America has always been a very prospective region in terms of exploration and production projects – the market there is mature and safe, while innovation allows for good returns. That is why we have decided to acquire assets in North America as source of both an appropriate rate of return as well as advanced technological know-how. Our ambition is to grow in Canada: we plan to expand the amount of land we have there and/or acquire additional assets or drilling rights.

Canada in focus

How have you found working in the Canadian market? What is easier or more difficult? The Canadian province of Alberta is an area where exploration and production activities have a long history. Also, technologically it is an advanced market. Regarding the procedures we employ in Canada during our operations – such as those which are designed to protect the environment and mitigate risk – they are very similar to those we have in Poland. Some differences result from specific regulatory requirements or oil and gas business practices typical in local upstream sectors. However, it is worth stressing that Poland also enjoys a long oil and gas history. This business has been present in Poland for more than 160 years now and this experience helps us in adjusting our approach to the new markets in which we invest.

As Poland’s largest foreign investor, what lessons do you think other Polish companies can take from your experiences?

‘Poland is a strong country with a strong economy, and we now need to take on the challenges of new markets’

The most important lesson should be: invest according to your strategy. M&A processes cannot result from ad-hoc decisions or a lemming-rush environment. Our business decisions regarding international expansion are always an inherent element of our strategy and are preceded by a careful analysis, since all too often the reality is less rosy than what can be found in various reports and presentations. Also, it is important to be prepared for the worst-case scenario so that one does not act chaotically should something go wrong. It is crucial to present conservative assumptions to shareholders – even if it means that your business idea is rejected. And, last but not least, cultural conditions also must be taken into account. Even in Central Europe, which from outside Europe may seem a rather homogeneous area, there are vast differences in communication methods as well as in attitudes to problem-solving.

What do you consider Poland’s biggest success over the 25 years of its transformation? The Polish economy proved very resilient during the last global crisis. In the last 25 years, the Polish economy and businesses have come a very long way. We built this resilience to outside stress first by coping with a sudden exposure to competition, after over 40 years of a centrally run economy. Then there was the Asian crisis, then the Russian crisis, then the bursting of the dotcom bubble and finally the recent crisis. It was a whole series of very difficult events which have taught Polish entrepreneurs and managers that nothing can be taken for granted and that one has to be flexible. On the other hand, foreign capital and know-how poured in, allowing the economy to modernise very fast. It was a profound change, a total breakthrough. Only a few people realise now that Poland had practically no commercial banking system back in 1989, it all had to be created from scratch. Compare this to the year 2008 when it turned out that Poland’s banking system was among those with the smallest exposure to toxic assets. No public money had to be spent on rescuing Poland’s banking sector despite the global crash.

CANADA IN FOCUS

CANADIAN ACQUISITIONS PKN Orlen has recently sought to increase

profitability by buying oil production assets. In 2013, Orlen bought the Calgary-based oil and natural gas company TriOil Resources Ltd. for CAD 183.7m. Half a year later, acting as a unit of Orlen, TriOil bought Birchill Exploration, another oil company based in Calgary.

I would say the fact that it successfully passed through so many waves of crises in such a short time. That gave Poland the flexibility that other countries still don’t have. I believe we are now well-prepared to cope with the uncertain environment that the modern world presents us with.

What features are most important for Polish companies to be successful in the future?

photos: PKN Orlen

Thanks to deep economic reforms implemented in 1989, Polish industry – first struck by the scale of changes – began to flourish. The biggest breakthroughs were the moments when Poland joined the EU and NATO – something my parents’ generation could not even dream of. In fact, if someone told me in 1989 that in 25 years the Polish economy would be among the top 25 global economies, I would have considered that person a dreamer. The unsung heroes of these changes are Polish entrepreneurs: though not always appreciated, over the last 25 years they have demonstrated flexibility and courage collectively worthy the Nobel Prize in economics.

Firstly, flexibility: the ability to respond to a changing environment. Changes need to be treated as an opportunity, not a threat. Secondly, innovation: Poland has already exhausted the growth model based on relatively low wages. Now we need to invent new products and technologies and make money on selling them to others. Thirdly, courage: we are a strong country with a strong economy, and we now need to take on the challenges of new markets.

What should be the top priority for Poland in the coming years when it comes to economic development?

Macroeconomic stability, certainly – this is a necessary condition for development. But another element – innovation What do you think Poland – is becoming more and more important still needs to improve on? The Polish transformation is not over time. Innovativeness will not come complete. There are plenty of areas unless we manage to develop new attiwhere there is room for improvement. tudes in schoolchildren. Innovation has The most important of these are the a chance to develop only where there general conditions for economic devel- is acceptance for risk and failures and opment and the scope of economic a culture of cooperation. These are two freedom and ease of doing business. In qualities that we lack on a massive scale. the World Economic Forum’s 2014/2015 competitiveness rankings, Poland came What do you consider to be the in 43rd, which is far from what is nec- greatest challenge Poland faces over essary to stay on a fast growth track. the next 25 years and what goals Moreover, in the Wall Street Journal and should the country set for itself? Poland must change its strategy for Heritage Foundation’s 2015 Economic Freedom Index, Poland placed 42nd out economic development from ‘modof 169 countries. Another very impor- ernization’ to ‘innovation’, because tant area is the development of tech- otherwise we’ll be stuck in the midnology and innovation – Poland has dle-income trap. This change may be failed to develop an effective model for more difficult than the transformation investing in innovation and supporting of the political system, because innoknowledge-intensive sectors. Research vation or the ability of the economy and development is a key factor in sus- to create new services and technologies is the highest stage of economic tainable economic growth. development, requiring coordinated action and cooperation between sciWhat parts of Poland’s economic ence, business and state institutions. transformation do you think have

been unique to the country?

interview by Andrew Kureth

PKN Orlen

has made two big takeovers in Canada in recent years.

CANADA IN FOCUS

Expert level:

Canada in focus

Poland’s film industry received a lot of media attention due to the many award nominations for Polish movies, especially ‘Ida’. But Poland’s video game makers have been producing quality titles for years now, and three were nominated for the 2014 Game Awards, the industry’s version of the Oscars (see page 98).

Power boost Investment in Canada has given Polish video game maker Techland a distinct advantage

Paweł Marchewka did not start out with visions of a multinational video game production house. As a high school student in the small Polish city of Ostrów Wielkopolski, Marchewka just wanted to play the games – but he couldn’t find the latest releases in town. He began travelling on Sundays to the game fairs in Wrocław. Soon enough he was a local distributor for stores in the surrounding area. What started as a labour of love for one young gamer became a quickly growing video game distribution and marketing operation. But Marchewka, the founder and CEO of Techland, had grander ambitions. He began to hire local students to expand Techland into creating its own titles, and in 1996 Techland launched its first game, ‘Speedway Manager’. Ten years later, Techland released ‘Call of Juarez’, a first-person shooter that launched a partnership with Ubisoft, the third-largest independent video game publisher in the world. ‘Dead Island’ followed in 2011, and armed players with melee weapons to help them survive an island world overrun with zombies. As its games moved into new territory, its operations followed suit, opening a new office in Vancouver called Digital Scapes Studio. A Canadian office meant greater access to the entire North American market, making distribution and marketing easier. “As one of the largest game development hubs in the country, it seemed like a perfect solution to our needs,” said Marchewka. “After two years, I can say it was the right decision.” The move opened up a wealth of new talent for Techland while it developed its most recent release, ‘Dying Light’. Working from two countries, Techland released ‘Dying Light’ in January 2015 to critical acclaim, delivering a brand new zombie-infested apocalypse to waiting fans. On whichever continent they are, those fans can look forward to Techland’s next release. The company has been secretive about the game, called ‘Hellraid’, but Marchewka hinted that it would mix “medieval combat techniques with dark magic.” For now, it looks as if he has found a winning formula. by Yoni Wilkenfeld

Paweł Marchewka,

founder and CEO of Techland, said that setting up a Canadian office meant greater access to the entire North American market, making distribution and marketing easier.

Dead Island, in which players fend off waves of zombies in hand-to-hand combat, has become a popular hit, a critical success and a cultural phenomenon, spawning a forthcoming film.

photos: Bartłomiej Kudowicz (Forum), Techland

Sunny outlook?

Poland’s Sejm, the lower house of parliament, passed a longawaited renewable energy law, updating regulations in the industry after years of delay. The legislation is expected to come into force by mid2015. Energy firms expressed relief.

Business

Energy surge:

Government representatives have announced that Poland will seek to merge its four key power producers into two companies. PGE and Energa would merge, as would Tauron and Enea. (Pictured: Mirosław Bieliński, CEO of Energa).

ENERGY

Poland to merge energy firms

Poland will seek to merge its key power utilities in a bid to make them competitive internationally, government representatives announced in January, raising concerns among the minority shareholders of the listed energy groups PGE, Tauron, Enea and Energa. Poland’s top four energy producers, all state-controlled, face having to carry out more than PLN 100bn in investments over the coming years, despite falling prices. Although details of the plan are yet to be confirmed, it is expected to include a merger between PGE and Energa, with Tauron and Enea forming another entity. The combined market value of the four companies stands at $17bn. In comparison, Czech energy group CEZ is worth $13bn, while Germany’s E.ON has a market value of $30.6bn.

Chevron exits Polish shale

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ECONOMY

GDP growth tops 3.3% in 2014

Poland’s pace of economic growth in 2014 nearly doubled from the prior year, supported by stronger investment and consumer spending as falling prices boosted buying power. The Polish economy grew an estimated 3.3% y/y in 2014 (vs. 1.7% in 2013), in line with expectations, while domestic demand rose 4.6% and investments grew a hefty 9.4%, the Central Statistical Office said, citing preliminary estimates. In 2013 domestic demand and fixed investments increased by a mere 0.2% and 0.9%, respectively.

INVESTMENT

Business review

GE breaks ground on new factory

US industry giant GE has broken ground on a brand new factory in the southern Polish city of Bielsko-Biała. The $54m project will include a 45,000-sqm manufacturing plant and customer experience centre. Developed by industrial property firm Panattoni, the facility will be operational by the end of 2015. Once complete, the new factory will be one of the largest in the region, capable of employing up to 1,200 staff. GE’s current operations in Bielsko-Biała, which are spread across four sites and manufacture electrical distribution and critical power equipment, will be relocated to the new facility. “Our current staff of 800 in Bielsko-Biała will make up the core staff of the new unit and additional placements will be made when necessary,” said GE’s Monika Doroz.

Marsh & McLennan choose Warsaw for shared services

US professional services, risk management and insurance brokerage group Marsh & McLennan Companies has chosen Poland as the location for their first shared services centre, which will handle various back office, administrative and HR functions for most of the group’s companies in continental Europe. The project is expected to create 50 new jobs by 2015, growing to some 200-300 over the next two to three years.

Spring maker to create 150 jobs

German-owned company Brand Springs Poland (BSP) will build a greenfield plant in Siemianowice Śląskie, aiming to launch production at the new site at the beginning of 2016. The company, which has been supplying cold-formed springs and wire parts to customers in the automotive, white goods and door industries across the region, aims to quadruple its Polish workforce over the next year. “The investment in Siemianowice is a huge step forward for BSP, as the new plant will be responsible for the entire production process, supplying a full range of Brand products to our clients in the region. Our Polish workforce will grow from 50 to 200 as a result,” Michał Morcinek, plant director at Brand Springs Polska told Poland Today.

RANKINGS

Poland is world’s 11th best location for services

Poland has moved up an impressive 13 places in A.T. Kearney’s “Global Services Location Index” since the previous version of the report waspublished two years ago, ranking 11th worldwide. The report takes into consideration financial attractiveness, skills and availability of human resources, as well as business environment. The top 10 includes mainly Asian countries (with India, China and Malaysia maintaining their respective top three positions), but also Mexico, Brazil, Bulgaria and Egypt. According to the report, Central Europe offers a mature industry and highly skilled players. Although Poland is relatively expensive compared to offshore locations in other regions, there is still “substantial arbitrage” to be had, it said.

Better score in corruption perceptions index

Poland moved up three places to number 35 in Transparency International’s 2014 Corruption Perceptions Index, which ranked 175 countries and territories based on how corrupt their administrative and political institutions are perceived to be on a scale from 0 (highly corrupt) to 100 (very clean). Poland scored 61 points, ranking ahead of regional peers such as Hungary (47) and the Czech Republic (53).

Sejm passes renewable energy law

Poland’s long-awaited renewable energy law, which lays out details of the transition from the current certificate-based system to auctions, was passed by the lower house of parliament in January, clearing the way for its official adoption in the coming months. The legislation is expected to come into force by mid-2015. Poland has been working on the new regulations for years, leading many renewable energy investors to suspend their projects due to legal uncertainty. “We finally have a framework and the scenario is much clearer. Investors and banks will see this very positively. Stability and clear rules will keep existing investors and bring new ones,” Mikel Garay, managing director at Taiga Mistral, a Spanish wind energy investor, told Poland Today. Turning to renewable power auctions is estimated to allow Poland to save over PLN 7bn (€1.6bn) annually over the coming years. According to government estimates, by moving away from the current subsidy scheme, the country will save up to PLN 20bn by 2020 alone.

Total launches petrol station chain

French giant Total is seeking to open 100 petrol stations in Poland over the coming two years. “We have developed a successful fuel wholesale business in Poland since 2010 and therefore expanding into retail seemed like a natural next step for us. This move is also in line with Total’s global expansion strategy,” Thibaud de Lisle, CEO of Total Polska, told Poland Today. Total, which operates 15,000 stations worldwide and 12,000 in Europe, is seeking franchisees among independent gas station operators.

photos: Łukasz Dejnarowicz (Forum), Marek Wiśniewski (Forum)

Want more?

Chevron has announced it is pulling out of shale exploration in Poland, saying the opportunities here “no longer compete favourably with other opportunities in Chevron’s global portfolio.” At the end of the past decade many saw Poland as a potential game-changer in the European shale gas market. However, revised estimates published in 2011 and a string of disappointing drillings have driven most of the largest foreign players out of the country. The exodus saw France’s Total, Italy’s Eni, Canada’s Talisman, as well as Exxon Mobil and Marathon Oil from the US, exit Poland. That leaves only small, independent exploration firms and state-controlled Polish operators on the market. The number of shale gas exploration licenses in Poland has dropped to 69 from 115 over the past two years.

52 Business

Global giants bid in PLN 10bn helicopter competition

Want more?

The world’s top three helicopter makers – Sikorsky, Airbus and AgustaWestland – have placed bids in Poland’s PLN 10bn utility helicopter competition. The Polish Defence Ministry wants to purchase 70 helicopters: 48 multi-role transport, 16 combat search and rescue, and six anti-submarine machines. Since the choppers will be produced and serviced in Poland, the tender is hugely important for the country’s aerospace industry, regardless of which consortium grabs the contract. Defence Ministry experts are now reviewing the technical specifications of the submitted bids. The Ministry of Economy will assess the accompanying offset packages.

Norway’s Kongsberg signs second missile contract

Poland’s defence ministry has signed a second massive contract with Norway’s Kongsberg Defence & Aerospace for the delivery of its trademark NSM (Naval Strike Missile) coastal artillery system to the Polish military. The deal, worth approximately PLN 600m, follows a PLN 700m contract Poland signed with the Norwegians back in 2008. Both contracts concern squadron-size units.

AIRLINES AND AEROSPACE

Business review

Eurolot airline to wind up business

Eurolot, one of Poland’s two state-controlled passenger airlines, will cease operations from April 2015. The airline serviced mainly domestic routes and mostly operated as a subcontractor for the country’s flagship carrier LOT. Eurolot has been in the red for years, failing to find a profitable niche in Poland’s increasingly competitive aviation market. Eurolot posted a PLN 170m net loss in 2012 and in the following year the figure is said to have remained at a similar level. With no prospects for patching up the gaping hole in Eurolot’s books, the Treasury has decided to wind up the business. The airline’s fleet includes 11 Bombardier Q400 aircraft, one of which will be returned to a leasing company, while the rest will join LOT’s fleet.

Airbus Helicopters opens R&D centre in Łódź

Europe’s leading helicopter maker, Airbus Helicopters, will employ 100 engineers at its first Polish research & design centre in Łódź. Airbus, which is competing with Sikorsky and AgustaWestland in the Polish defence ministry’s PLN 10bn utility helicopter tender, said the Łódź project is independent from the outcome of the bid. Airbus is hoping to sell Poland its medium-heavy EC725 Caracal helicopters.

Acquisition track: Polish rail

freight firm PKP Cargo sealed a deal to purchase an 80% stake in AWT, the Czech Republic’s second-largest rail cargo firm. The €103.2m purchase is PKP Cargo’s first ever acquisition of a rail freight operator outside Poland.

Shooting for security: Poland’s

defence ministry has signed a contract with Norway’s Kongsberg Defence & Aerospace for the delivery of its trademark Naval Strike Missile coastal artillery system, worth approximately PLN 600m.

MERGERS & ACQUISITIONS

PKP Cargo acquires Czech AWT

Business portals change owners

Bonnier Business Polska, a part of the Swedish media group Bonnier AB and publisher of the business daily Pus Biznesu, has acquired a 100% stake in the Bankier.pl Group, which operates some of Poland’s leading business websites. The seller was Poland’s leading online marketplace Allegro, which acquired Bankier.pl back in 2009 for PLN 63m. Allegro, a unit of South Africa’s Naspers, is divesting its non-core businesses in order to focus on e-commerce. The Bankier.pl transaction comes a little more than a month after another top Polish business news portal, Money.pl, changed owners. Money.pl, along with a number of related websites, was acquired by Poland’s number two internet portal WP from its founder Arkadiusz Owsiak and German fund Holtzbrinck Digital.

Polish rail freight giant PKP Cargo sealed a deal to purchase an 80% stake in AWT, the Czech Republic’s second-largest rail cargo firm, from Czech billionaire Zdenek Bakala and the Bakala Trust. The €103.2m purchase is PKP Cargo’s first ever acquisition of a rail freight operator outside Poland and is intended to strengthen the company’s presence in central and eastern Europe, particularly on north-south corridors. AWT has an 8% share of the Czech rail freight market and also operates in Slovakia, Slovenia, Hungary, Poland, Germany, Romania, Bulgaria, and Croatia. The company employs nearly 2,000 staff and operates a fleet of around 160 locomotives and 5,100 wagons. Its 2013 turnover totalled €282m.

At the end of last year private equity company PineBridge entered an agreement to acquire Polish convenience store chain Małpka Express from the Warsaw-listed retail group Czerwona Torebka. PineBridge, which holds a 16% stake in Czerwona Torebka, is seeking to take over a full stake in Małpka Express via its special purpose company Fortream Investments Limited. The value of the transaction will reach PLN 362.3m, and the investor is also ready to inject up to €12m of additional financing into the company, if needed.

Maspex acquires top jam maker

BANKING

Nordic private equity fund IK Investment Partners has agreed to sell part of Agros-Nova, a leading Polish maker of branded fruit and vegetable products to Polish Maspex Group. The transaction, which includes Agros-Nova’s preserves and ready-made food businesses, with two factories and a portfolio of leading brands, boosts Maspex’s position as a top Polish food producer with a turnover of more than PLN 4bn. Based in Wadowice, near Kraków, Maspex is Poland’s number one producer of juice, which generates some 70% of the group’s turnover. The company has been consolidating its position in the juice segment since its 1999 acquisition of Tymbark, which remains Poland’s leading juice brand.

PineBridge buys convenience store chain

Raiffeisen to sell Poland’s 8th largest lender

One of the oldest foreign lenders in Poland, Austria’s Raiffeisen Bank International, has confirmed plans to sell its Polish arm as part of a wider asset sell-off in the CEE region. With PLN 60bn (€13.5bn) in assets, putting it in the eighth position in the market, Raiffeisen Polbank posted net earnings of approximately PLN 200m in Q1-Q3 2014. Despite its size, the Polish business lags far behind Raiffeisen’s other business units, with a return on equity of just 4.2%. Raiffeisen, which recorded a loss of nearly €0.5bn last year, is selling off assets in order to improve its capital position.

photos: awt.eu, kongsberg.com

DEFENCE

54 Digging a hole BUSINESS

Poland’s miners are fighting to keep their state-funded benefits in a sinking industry

Poland has an expensive set of priorities that it needs to

Lech Kaczanowski

is the editor of Poland Today's weekly newsletter, Business Review+. From 2002 to 2013 he covered business and economic news from Poland for Sweden's Bonnier Group and other Nordic media. A former Open Society Institute Fellow at Duke University in North Carolina, Lech has degrees in economics, sociology, and journalism.

tor’s woes. It lost €260m in the first 11 months of 2014, and address to continue its economic development. Innovation has liabilities of almost €1bn. As of late, Kompania Węglowa is one of them – Poland only spends a fraction of 1% of gross has been losing approximately €14 for every tonne of coal it domestic product on R&D while the top European countries mines. The company had to give up a bond issue in November spend closer to 3%. Then there’s demographics: as Poland’s 2014 after investors demanded sky-high yields. population shrinks, the government needs to figure out how The key problem for Polish coal mines are high production it is going to pay a growing number of senior citizens their costs. It cost €75 to produce a tonne of coal in Poland in the pensions while increasing payments at the same time. These first half of 2014, against the global average of approximately problems will cost billions of złoty to solve – but not all of €54 per tonne. At the same time, the price of coal in Poland the funding that the government has at its disposal is going dropped 8% y/y in that period, to around €67. Following to address them. Why? One reason is that an awful lot of it is decades of intensive exploitation, Silesian mines have had being dumped down Silesian coal pits. to dig deeper and deeper for coal, Yes, innovation is on the lips of all which, together with excessive benefits, of the government’s ministers. But is pushing costs beyond affordable levin the first days of her term in office, els. Polish coal mines extracted slightly more than 34m tonnes of coal in the did Poland’s newly appointed Prime Minister Ewa Kopacz meet with scifirst six months of 2014 (down by 2.8m tonnes y/y) with sales reaching 31.8m entists, start-up founders or innovatonnes (down by 4.3m). As of the end of tors? No. Instead, she did what nearly all of her predecessors have had to do November, Polish mines had stockpiles of unsold coal totalling 8.2m tonnes. at one point or another: she rushed Although Poland’s coal reserves are the to appease the miners, who had threatsecond largest in Europe, it is cheaper ened to bring Warsaw to a standstill for Polish power plants (at least the with their protests. She bowed to them then, but just a few months later coal ones not bound by long-term contracts miners once again stole the spotlight. with mines) to import coal from abroad. Clouds have been looming over Digging their heels in Poland’s coal mining sector for years, Polish mineworkers are tough folk. but recently the big state-owned mining With more than 100,000 employees companies have become so unprofitaand powerful trade unions, Poland’s ble and indebted that they have begun coal mining industry has effectively considering the unthinkable: trimming resisted any real change. Fearing strikes employee benefits. This triggered a wave of discontent across Silesia, and civil unrest, no government in the because in line with tradition – albeit past quarter of a century has dared take against all economic sense – Silesian on the miners, who continue to enjoy wage levels and perks that are unheard miners expect to keep producing coal of in any other industry. Despite nobody needs, at prices no-one can Inefficient operations the sector’s miserable financial condiafford, and on employment terms set Annually, Kompania Węglowa produces just tion, trade unions are demanding pay by the employees themselves. 620 tonnes of coal per employee (35m tonnes in total). Globally, the worst-performing comincreases that had been promised when Between a rock and a hard place panies mine about 1,000 tonnes per full-time prospects seemed better. Proposals employee. Britain’s coal mines, slimmed down that miners give up some perks, includPoland’s state-owned coal mines have after the drastic Thatcherite restructuring, been struggling for months to return to produce more than four times as much coal ing double-than-average pensions, profit as they cope with low coal prices, per employee as Polish ones. two annual bonuses, discounts for city transport, free coal allowances and weak demand and high operating costs. school subsidies for children, are being Cheap oil and the impact of the US met with strong resistance on the part shale boom on energy prices reduced of the unions, who believe their memthe cost of coal over the past 18 months to levels that made many of Poland’s mines unviable. Plagued bers deserve what their fathers and grandfathers got. A little by powerful trade unions, which have effectively sabotaged less than a decade ago, the Solidarity union blocked governany real restructuring over the past two decades, they sur- ment plans to raise the retirement age for miners after demvive thanks to politicians, against market forces. In the first onstrations turned into street fights. The memory of those scuffles remains vivid among Polish half of 2014 Polish coal mining companies posted a loss of €173m after tax. Looking at the sector’s core business politicians, which explains why the government had been tip– coal sales – their predicament becomes even more grim. toeing around the issue for months, never failing to emphaHere, the loss exceeded €240m. size that job cuts at Kompania Węglowa were not an option. Europe’s largest coal miner, the ailing state-owned giant However, the latest restructuring plan for the sector, unveiled Kompania Węglowa, was responsible for the bulk of the sec- in January, included a handful of more daring proposals.

‘Silesian miners expect to keep producing coal nobody needs, at prices no-one can afford, and on employment terms set by the employees themselves’

2013 average salaries: – Poland: 3,823.32 – Mining sector*: 8,615.37 *Traditionally, miners are paid 14 monthly salaries per year. Source: Central Statistical Office (GUS)

Spreading the burden One way of maintaining the status quo in the mining sector is by

making other, better performing state-controlled industries pick up the tab. Last year, Tauron, the country’s second-biggest utility, agreed to pay €75m to buy a stake in one of Kompania Węglowa’s businesses, while JSW, the biggest coking coal producer in the EU, paid €357m for another. A few months later JSW itself ended up in dire straits and its management’s cost-cutting plan was violently rejected by the unions in early February. PGE, Poland’s largest utility, revived a €2.8bn coal-fired power plant project and will buy coal from Kompania.

55 BUSINESS

This led some to hope Ewa Kopacz could become Poland’s ‘Iron Lady’. According to the plan, Kompania Węglowa was to be taken apart, its four worst-performing pits shut down and the remaining nine mines to be transferred to a special purpose company owned by Polish coal trader Węglokoks. The ministers had expected the entire rescue package, including generous severance payments for up to 4,800 redundant workers, to cost some €530m. It took little more than a week of largely peaceful protests on the part of miners for the government to backtrack on its plan yet again. Under a unionapproved settlement, the chronically unprofitable mines are to be “restructured” and then sold, with Poland’s state-controlled energy groups being mentioned as potential buyers.

Poland, which relies on coal for 90% of its electricity, has been trying for years to reduce its dependence on this highly polluting form of fuel. However, the government has recently been pushing for stronger ties between Polish energy producers (which are profitable and fully restructured) and coal mines (see box). Time and again the authorities have found creative ways to avoid any drastic measures in Silesia, and with parliamentary and presidential elections all due in the coming months, the current government will be no different. The successful dismantling of the original restructuring plan for Kompania Węglowa by the unions encouraged workers at other coal mining firms to reject any calls for more rational spending. Early February saw employees of Poland’s top coking coal producer JSW orchestrate strikes and street fights, demanding the dismissal of their CEO, who had dared to propose a range of cutting measures in order to keep the company from going under. As long as the decisions with regard to the mines are purely political in nature, it is impossible to properly assess the true potential of the sector. According to a recent report by economic think tank CASE, state subsidies for the mining industry amounted to €5.25bn over the 2010-2013 period alone. Between 1990 and 2012 Poland’s coalmining sector received more than €40bn worth of aid, an amount of money that could finance all of Poland’s universities and state-run run R&D institutions – for more than a decade. The ostrich strategy applied by Poland’s decision makers simply prolongs the sector’s agony and increases the end cost to taxpayers, but as long as citizens are content to watch passively as their tax money continues to disappear down the depths of Silesian mine shafts, politicians will keep their heads in the sand. Thousands of miners have the unions to raise hell on their behalf. Meanwhile, millions of employees in other sectors have yet to find someone to represent them. Scientists, who need funding for research, find it abroad after hearing repeatedly that the state coffers are empty. Entrepreneurs, whose budding businesses creak under the weight of Poland’s many fiscal burdens, quickly lose motivation to innovate. As a country that still has plenty of catching up to do, Poland may one day realize the price it paid for social harmony was too high. Let others have their Apples and Samsungs. Poland will have its coal. by Lech Kaczanowski

photos: Filip Błażejowski (Forum)

Rock bottom?

56 Business

A hub of entrepreneurship Much is made of Poland being an economic hub of the region. One non-profit now wants to make it a regional centre for start-ups

A couple of years

Maciej Sadowski, CEO of Startup Hub Poland, wants to attract talent and ideas to Poland and develop the country’s start-up environment.

ago, Marek The pre-incubation programme is have a chance to incubate in Poland. Borzestowski, founder of internet por- being funded partly through funds from There is some breathing room. For tal Wirtualna Polska, called up a young Giza Polish Ventures, but also through a that reason, and also for some cultural manager he had been working with grant from Poland’s National Centre for and geographic reasons, it’s a really named Maciej Sadowski, and asked Research and Development. Since its good place to start for Ukrainians, him a simple question: “Do you think launch, Startup Hub has already been Russians or Belarusians. Poland is participating in the global flooded with applications, and several competition for talent?” “No,” answered businesses are already in the approval What are your ambitions beyond Sadowski. “We are passive, sitting by process for receiving funding. bringing these companies to Poland? while talent goes elsewhere.” One of these, Virtual Power Plant, We should not be understood solely “I disagree,” said Borzestowski. “We is an ‘internet of huge things’ tech- as an organization that gives money are participating, but we are giving nology that ties large energy-using to attractive projects like an ordinary away our talent. Poland’s best brains systems together in a network and accelerator or seed fund. We want are going to other countries, to make manages the flow of electricity so that to be a regional brand one day; and use of their know-how, infrastructure, energy use is much more efficient. The we want this region to be recognised resources, and so on, where they make technology could be a huge boon to as a highly specialised alternative wonderful things. So we are a great well energy-intensive buildings such as sta- Silicon Valley or London. We also conof supply for venture capital.” The two diums and skyscrapers. sider ourselves part of a network. We Other such projects include a com- want local organisations to refocus decided to do something about it by creating an initiative that would attract pany that aims to produce artificial their attention on this initiative, and this talent to Poland. They brought several blood and one that uses nano-diag- is already happening. other partners into the project, and last nostics to detect cancer cells at the November their dream came to fruition earliest possible stage. Another brings What role does Giza when Startup Hub Poland made the navigable augmented reality to surgi- Polish Ventures play? official launch of its first pre-incubation cal operating rooms. Our efforts to create a common seed programme: StartVenture@Poland “It’s very exciting,” said Sadowski, fund is one thing. But you have to manStartup Hub is a non-profit foun- who is now Startup Hub Poland’s CEO. age the money you bring into the fund dation that brings entrepreneurs and “The interest we have seen proves we intelligently. Giza Polish Ventures is the start-ups to Poland from other coun- are really building something special.” partner that gives us the commercialitries, primarily from Eastern Europe. by Andrew Kureth sation know-how. This was something Countries like Ukraine, Georgia and we really needed, and it comes from a very experienced team of experts Belarus have plenty of talent and ideas, but poorly developed or non-existent and analysts. We provide every project entrepreneurial ecosystems. Startup Poland Today speaks with with a network of technological experts Hub wants start-ups from those coun- Maciej Sadowski, CEO of – people who can say whether the techtries to set up shop in Poland. The Startup Hub Poland nology is feasible and where the risks organisation helps them find office lie. We also have patent lawyers and space and housing, and pairs them Why do you think Poland is the advisors at our disposal. Then there is the business analyst who does the due with mentors and legal experts to han- right country for such a project? dle the nuts and bolts of setting up the Right now Poland has a well of expe- diligence and the legal advisors who tell business. It also invites Polish emigrants rience to share. We have a unique per- us whether a particular technology is back from the West to come and com- spective. We know what it is like to be allowed in the EU. Giza gives us access a maturing market. For example, I feel to all of these experts. mercialise their ideas in Poland. It then offers them start-up fund- a very deep connection with Ukrainian ing and plugs them into the capital citizens, because I understand the ten- What kind of projects are available from sources such as Giza sion. I remember how it was in Poland you interested in? Polish Ventures – an Israeli-Polish ven- in 1990s – with our identity being torn We are searching for projects ture capital firm where Borzestowski is between west and east. that are brave enough to change the a partner. Giza profits from its stake in future. Firstly, these are technologythe project, and Startup Hub fulfils its But isn’t Poland’s entrepreneurial related projects. We are not so internon-profit mission to bring in high-tech, environment underdeveloped itself? ested in internet technologies – though innovative firms to Poland, enriching Compared to the Poland of five years we are open to really good ideas. the start-up environment with fresh tal- ago, the start-up space here is very well But we are more interested in sectors ent, energy and ideas. The firms benefit developed. Compared to the start-up such as hardware, robotics and cleanfrom access to mentoring and funding ecosystem in Berlin and London, for tech. We are interested in projects they couldn’t have found in their home example, it’s much less developed. that take something from those areas countries, and can leverage that to But Berlin and London are like jungles, and combines it with IT. Where IT and springboard into international markets. there’s a lot of competition among start- these sectors meet there is a lot of It’s a win-win-win. ups. That’s why we prefer it here. Firms room for innovation.

photo: Łukasz Dziewic

‘Berlin and London are like jungles, there’s a lot of competition among start-ups. Firms have a chance to incubate in Poland. There is some breathing room’

57 business

58 BUSINESS

Create optimal conditions Poland Today speaks with Bartosz Krzemiński, vice president of rail vehicle firm Newag, about the challenges facing Poland’s business environment

Newag was a partner of Poland Today’s

‘Poland Transformed’ conference.

Bartosz Krzemiński, vice president of Newag, says that

the most important long-term challenge for Poland will be to work to ensure security and peace in Eastern Europe.

What do you consider Poland’s biggest success over the 25 years of its transformation?

‘Polish entrepreneurs have proven that they are capable of responding quickly to emerging opportunities and using them to develop their organisations’

I would say that there are two things that have a fundamental impact on the current shape of Poland. In terms of the socio-political dimension, undoubtedly the biggest success has been to build a strong democracy based on universal access to state functions, Polish sovereignty and universal suffrage. For me and I think for a whole generation of today’s forty-somethings, seeing the ditions, and that they are very capable changes after 1989 was an incredible of responding quickly to emerging experience, a reason for pride and joy. opportunities and using them to develop The second factor that dramatically their organisations. affected Poland was the Balcerowicz Plan, the reforms that led to the start What do you think is the biggest of Western-style free market mecha- challenge that Poland will face nisms in the country. Competition is cru- over the next quarter century? cial for the development of the economy. A year ago, I wouldn’t have thought Polish entrepreneurs have proven that of this, but after the events in the east they feel comfortable in the new con- – Russia’s violation of international law,

the annexation of Crimea and unleashing of war on Ukraine – the most important long-term challenge will be to work to ensure security and peace in Eastern Europe. It turns out that war in Europe in the 21st century is indeed possible. Russians still believe that the West is the enemy, and all the efforts over recent years aimed at rapprochement have been in vain. Today, the situation in Ukraine does not directly affect what

is happening inside Poland, and the risk of a wider conflict appears small and has no significant impact on the Polish economy. However, without consistent action throughout the West, the situation could change sooner or later. Another challenge is to halt Poland’s negative demographic trends. At some point, we will find ourselves in a situation where economic growth will be severely hampered due to lack of manpower.

Where should Poland focus its energy in order to keep it attractive for investment? Poland should focus on creating optimal conditions for the development of enterprises. All of the elements that make conducting business more efficient can increase the attractiveness of a region or the entire country. There are many such factors, but the most

Chugging along The Newag Group is a manufacturer of rail vehicles. According to the company, its main goal is to become a market leader in manufacturing, modernising, and repairing rolling stock in Poland. The firm successfully completed an initial public offering on the Warsaw Stock Exchange in December 2013. Worth roughly 400m złoty, the IPO included 21.8m Newag shares, corresponding to slightly more than 48% of the total equity. Until a few years ago, Newag’s key source of income had been renovation and modernization of old rolling stock, mainly for Polish passenger operators PKP Cargo and PKP Intercity. Recently, however, its focus has shifted towards production and sales of new electric and diesel units, passenger train sets, subway trains and trams, mainly for the domestic market.

important are: taxes, access to qualified personnel, the transportation network, the level of economic development of the region, the size of the market and the proximity of a scientific community that can support the development of the company.

What features will be most important for Polish companies to be successful in the future? There are certain universal features that increase the likelihood of a company achieving sustainable growth. These include innovation, consistency, the ability to develop strategies, the ability to assess risk and high operational efficiency. All of these things work together. It is difficult to say which will be more important for Poland and its entrepreneurs, bearing in mind that they operate in a global environment.

Newag’s 222m:

According to the company, its latest two-section rail bus is “a far cry from the rail multiple units which dominate the rail transit in Poland. It offers a comfor table, partially lowfloor, functional and fully air-conditioned interior adapted to the needs of passen gers with impaired mobility”.

Automotive in focus

Obstacles ahead:

The automotive market globally is changing rapidly. How should Polish producers approach the future, and how can Poland attract more investment?

A fork in the road page 62

Auto industry must switch gears faster page 64

Equipped for the long haul

photo: DNB Nord

page 66

automotive In Focus

A fork in the road Poland’s automotive industry looks to be recovering, but a new set of challenges is appearing on the horizon

The automotive sector is not just a

Production line

workers assemble Opel’s Cascada mo del at its facility in Gliwice, in southern Poland. The automotive sector in Poland employs around 400,000 people and supports around 800,000 jobs in total.

pillar of Poland’s economy, but a barometer. A hub of several important supply and demand chains within the economy, carmakers and the associated businesses will likely be crucial to sustained growth in Poland over the coming years. But the global automotive industry sits at a crossroads: though the 2008 financial crisis is in the rear-view mirror, changing consumer and environmental concerns are visible on the road ahead. For the industry in Poland, the road map for the future is unclear.

Engine of growth According to a comprehensive new report compiled by DNB Bank Polska and Deloitte Business Consulting, the automotive sector and its suppliers account for 7.8% of value added to the entire Polish economy. While that in itself is a considerable chunk, indi-

rectly, the sector’s influence is even remains the most important market for wider, especially when it comes to the the sector, receiving 29%. Along with manufacturing, wholesale & retail and Czech and Slovak production, Polish car transportation markets. The complex parts in Germany are displacing those and large-scale needs of automotive from France, the UK, Italy and Spain. manufacturing mean that several of Italy, once a recipient of over a quarPoland’s major areas of business rely on ter of Polish auto exports, has fallen to the automotive sector, including fabri- the middle of the pack. Meanwhile, the cated metal products, basic metals, and British market is increasing its share, rising over the last 15 years to comrubber and plastic products. The Polish automotive sec- mand 8% of exports, driven mostly tor employs nearly 400,000, while by a growth in exports of passenger related branches employ an additional cars. The Czech Republic and France 400,000 – totalling almost 6% of the are two other EU trade partners who working population. While employment are increasingly absorbing Polish auto levels in the sector have continued to exports. The same has happened in rise since the 2008 financial crisis, as of Russia, but the conflict in Ukraine 2012 the numbers have yet to recover threatens to limit Russian appetite to pre-crisis levels. Labour productivity for Polish cars. in automotive production has improved considerably since 2000, raising rela- Who’s in the driver’s seat? tive earnings for auto sector employees Globally, automotive production has and reducing labour cost drag. been on the rise since the financial criZooming in on the constituent parts sis. The industry is top-heavy, with the of the sector, the report outlines a few 10 biggest car-producing countries repdistinctive features. For one, Poland resenting 78% of global production, and produces auto parts and accesso- with more than half of global output ries more than it produces completed spread across China, the United States, cars, a trend that has been sharpen- Japan and Germany. By contrast, Poland produced 0.7% ing in recent years. What cars the sector does produce are overwhelmingly of the world’s cars in 2013 – making it (78%) sent abroad. As has been the the 24th largest producer, down from case for some time, Poles continue to 20th in 2007. The decline, caused build auto parts for other producers, mostly by shrinking demand in Western and cars for other countries’ drivers. Europe for passenger cars by Fiat and 2013 exports from the automotive sec- Opel, has been mitigated by growth tor amounted to €18.7 billion, some 12% in the production of utility vehicles and of all Polish exports. public transport vehicles. Still, other countries in the region, like Slovakia and Outbound traffic Romania, threaten to further take from Most of these exports (80%) are for Poland’s share of the market. the European Union, but the share has Poland’s car production is dominated fallen off since the financial crisis as by foreign companies, and domestic car expansion continues to non-EU mar- parts makers mainly produce for export kets like Russia and Turkey. Although and foreign companies. Fiat Poland its demand for Polish auto exports in Tychy accounts for 55% of produchas decreased considerably, Germany tion, Volkswagen in Poznań for 25% and Opel in Gliwice for 20%. None are listed on the Warsaw Stock Exchange, but seven auto parts producers are. Five of those are Polish firms. Broadly, these seven WSE-listed firms are doing well financially, compared to the aggregate medians of their respective subgroups. Dębica and Stomil Sanok, for example, are doing better than the entire class of tyre-production and rubber elements. The gas system firm AC is another highlight, a relatively

‘The next decade will be a time of tremendous change for the automotive sector’

automotive In Focus

A worker (left)

MILLENNIAL drive

tightens bolts at a Volkswagen plant in the western Polish city of Poznań. While employment levels in the automotive sector have risen in recent years, the numbers have yet to recover wto pre-crisis levels.

Changing consumer preferences will shape demand for the Polish auto sector in the coming years. A survey of South African consumers, as part of the Global Automotive Consumer Survey, gave some insight as to how the next generation of drivers will buy their cars. For example, 80% of Generation Y consumers plan to purchase or lease a vehicle in the next five years. Most millennials cite affordability and high operational and maintenance costs as the top reasons for not buying a vehicle, while more than half are willing to pay more for convenient services and safety technologies. Over 60% would prefer an alternative power train (like hybrid electric, fuel cell, or compressed natural gas) for their next car, and 70% are willing to pay more for it. Millennials are likely to spend extra time researching their choice of a new car – and are more likely to consult independent websites and social media for outside information.

An aerial view

(below) of Volkswagen’s plant in the Antoninek district of Poznań. Poland produces auto parts and accessories more than it produces completed cars, a trend that has been sharpening in recent years. What cars the sector does produce are overwhelmingly sent for export.

small company that is greatly outpacing the sector of electric and electronic equipment producers.

More broadly, aggregate financial indicators for the Polish auto sector as a whole are as good or better than for the largest global producers in the same categories – a promising sign for the future of the industry. However, the report notes that Poland has been passed over in recent years in favour of countries such as Romania, Slovakia, and the Czech Republic in the race to attract investors and investments. Since differences in labour costs are insubstantial (with the exception of Romania), one major factor has been the influence, or not, of government policies for luring foreign investment. Special economic zones have become a staple of Poland’s efforts to attract foreign investors, a goal they have accomplished. But there have been challenges when it comes to attracting automotive sector investors. The strength of demand in the internal market has a particular sway on would-be investors, and here Poland is somewhat of an outlier. Whereas the global trend shows that wealthier countries buy more cars, new car sales in Poland are much lower than

the link would predict. The prevalence of cheap second-hand cars in the Polish market (mostly from Germany) might well be a factor, and policy makers could look to Germany, where new car sales are actively encouraged by the government. What does the future hold for the Polish automotive sector? The rise of markets in China and India, evolving consumer preferences, and the dynamic growth in production of cars with an alternative power supply will make the next decade a time of tremendous change. Numbers from the first half of 2014 indicated a rebound in auto manufacturing after a slow few years. But to fully take off, the industry must draw greater foreign investment, grow domestic purchases of new cars and adapt to the market’s increasing demands for innovation. by Yoni Wilkenfeld

photos: Maciej Jarzębiński (Forum), Piotr Jasiczek (Forum), Wojciech Robakowski (Forum)

In the slow lane

automotive In Focus

Auto industry must switch gears faster Car manufacturing is still the Polish economy’s biggest engine, but it needs to manoeuvre nimbly to adapt to new challenges

Auto show:

photos: Piotr Dziubak

Automotive in focus

This BMW model turned heads at the conference. After the discussions, participants went to a local racetrack and had the chance to drive a Lamborghini, a Lamborghini, a Hummer or a BMW.

Accounting for

more than a tenth of Poland’s industrial sector, the country’s automotive industry has been a key driver of economic growth for years. As new trends shape the future of the market, industry leaders gathered in Kielce last November to discuss what it will all mean. Leading off the conference was Anders Grevstad, executive vice president and head of the international cor-

porate division at the Norwegian DNB economy demands flexibility. “Be aware Bank ASA. Finance is at the heart of – the world is changing, and you have to any industry, and Grevstad explained adapt to it,” he said. Using the example how the political and economic trends of the electric car company Tesla, which that are changing the financial world has achieved great success in Norway will also affect the automotive sector. by capitalising on new consumer prefPointing to a disparate group of influ- erences and favourable tax incentives, ences like ISIS, Russian aggression Grevstad said the sector could turn in Ukraine, and new regulations on the challenges into opportunities. banking sector, Grevstad explained On top of global trends, the Polish how an unstable environment in the auto industry faces particular coun-

automotive In Focus

Rafał Antczak,

of Deloitte (left) showed how the automotive industry has an enormous impact on other sectors of the economy, such as manufacturing, transportation and real estate.

‘Be aware – the world is changing, and you have to adapt to it’ try- and region-specific challenges. DNB president Artur Tomaszewski and Deloitte member of the board Rafał Antczak provided this context in their presentation of a joint report on the Polish automotive market. Antczak showed how the industry has an enormous impact on other sectors of the economy, such as manufacturing, transportation and real estate – in some instances creating added

value of nearly 20%. Tomaszewski went even further: “This is why we are still competitive,” he said, emphasising the Polish economy’s dependence on the auto sector. One issue emerged as a theme for all of the speakers: how can the industry adapt to the new kinds cars that drivers will demand? Krzysztof Hauk of Kongsberg Automotive said the car of tomorrow must be more environmen-

tally friendly, safer, more comfortable and more automated. Increasingly, as the technology becomes viable, consumers may well demand that their cars be as connected to their lives – and as hands-off – as a smartphone. At the conference’s final talk, five panelists brought the audience down to earth. “Everything is connected to innovation,” said Adam Małecki of the Polish Information and Foreign Investment Agency, “but also to external influences – like new contracts and EU regulations.” After all this sober talk of the limits of the Polish auto sector, one final flourish made the conference unforgettable. Sent to the nearby Kielce Racing Track, participants got a chance to drive away their worries in style, with test drives of a Lamborghini, Ferrari, Hummer or BMW around a local racetrack.

by Yoni Wilkenfeld

Artur Tomaszewski of DNB (left), Krzysztof Hauk of

Kongsberg (middle) and Adam Małecki of the Polish Information and Foreign Investment Agency (above) all offered their thoughts on the automotive market at the conference.

AUTOMOTIVE IN FOCUS

Equipped for the long haul Despite some challenges ahead, Poland is ultimately an attractive place for auto investment

According

Roundtable discussion:

Automotive in focus

In February, Poland Today spoke to leading experts on trends in automotive industry investment: Rafał Antczak, member of the board at Deloitte, Marek Sienkiewicz, senior manager at Deloitte, Erik Engstrom, relationship manager at DNB, Marek Foryński, head of Panattoni’s business tax services division and Marzena Tkaczuk, development manager at Panattoni.

to 2013 estimates, the Polish automotive industry employs over 400,000 people and accounts for more than a tenth of Poland’s industrial production. But can that be sustained? How can Poland attract more investment? To answer these and other questions, Poland Today spoke to leading experts on trends in the industry: Rafał Antczak, member of the board at Deloitte, Marek Sienkiewicz, senior manager at Deloitte, Erik Engstrom, relationship manager at DNB, Marek Foryński, head of Panattoni’s business tax services division and Marzena Tkaczuk, development manager at Panattoni.

of car units. Poland’s car production has shrunk from 1.1% of global output in 2007 to 0.7% in 2013. Erik Engstrom, DNB: The growth in sales at the moment is expected to continue. We think companies like Fiat and Opel have a bright future here in Poland.

What are the trends that are driving changes in the industry in Poland?

MF: The dominant trend is that automotive companies continue to search for good quality business environments. When considering a new site, companies focus on a qualified work force, location, and delivery capabilities, among other factors. As long as Polish sites meet these criteria – which they What is the outlook for the almost all do – companies will become more and more active here. automotive sector in Poland, from your company’s perspective? Another big growth determinant Marek Foryński, Panattoni: The fac- is where new automotive clusters are tors for success in Poland are long- going to show up. Poland is a country term factors. The two most important with a very high density in the south and factors for future growth are people shallow density in the north. Upper and and infrastructure – and the quality of lower Silesia can still expand. Poland Polish workers is very high. The infra- has two very important motorways, structure is a bit of a problem though. the A4 and the A2. Density of people is Nevertheless, I follow my clients closely a key factor here, since it guarantees and I can confirm that the market is still that the labour force will be available. growing and will continue to grow over The A4 corridor will help enlarge autothe next three to five years, minimum. motive clusters. We also expect the Marzena Tkaczuk, Panattoni: Most region surrounding the A2 to expand. RA: People will always strive for betof the companies that have decided to locate in Poland are really happy with ter and more comfortable means of their decision and they are planning transport, and electric cars are one of to invest more in Poland. It’s like the most noticeable trends in recent a snowball. Every new investment years. Demand for higher-class cars increases the chance of another one. is growing in emerging markets – at We are really optimistic. the cost of cheaper cars. In the develRafał Antczak, Deloitte: Production oped markets we’re going to see and Polish exports in the automotive an increase in demand for techno sector consists of cars and car parts, logically advanced cars. EE: We see a big potential for autoand the latter segment has been growing faster, resulting in a majority share mated driving, resource utilization, enviin the overall sector. We’re happy to say ronmental impact and better safety. that production of car parts is grow- Growth is coming from emerging maring strongly and has very good pros- kets, though the weak Russian econpects in Western markets. The growth of the automotive sector in Poland is expected to rise by around 6.7%, while profitability on gross turnover returned in 2013 to relatively high levels. We do have our worries though. Our analysis has shown that car production in Poland and its share in global production is shrinking. Over the past six years, Poland has dropped four spots in the global ranking for number

‘The market is still growing and will continue to grow over the next three to five years’

omy and associated geopolitical risks have hurt car sales. Also, increasing levels of inflation hurt car financing due to higher interest rates.

Poland has lost some important automotive investments to nearby countries. What needs to be done to make it more attractive for investment from the industry? MF: In order to be prepared for new investment, the main focus of the government should be infrastructure: working on electricity capacity, water, gas, and having well-prepared land. Poland has a tremendous amount of land that lies in flood plains, and in these areas the infrastructure to protect against floods is very weak. That said, as long as the Polish people work hard and have the capability to accommodate Western corporate culture, discover new solutions and merge what they learn into their Polish reality, we will be fine. We already are an attractive market for automotive companies. It’s not reasonable to expect that all investment in the automotive sector would be located in Poland, but don’t forget that we’re still a big deal. RA: Despite the very positive assessment of how the special economic zones (SEZs) function and of how big they are in Poland compared to other countries in the region, automotive industry investors have recently tended to choose other locations for their investments, despite positive reviews about doing business here. It is possible that the missing stimulus for foreign investment in Poland is weakening domestic demand for new cars, chiefly because of the over-import of used cars. It’s clear that in Poland the instruments of fiscal policy are not effectively used to support the purchase of new cars and to limit the import of old cars. Poland needs to start competing for existing investors and to support new investment. If demand for Polish-built cars cannot be stimulated, then the country will continue to lose car manufacturing share to other countries in the region.

Poland has long been perceived as offering good skill levels at low cost. How long will this be the case? Is the threat that the industry may one day move on? Can this be avoided? How?

AUTOMOTIVE IN FOCUS

Fiat 500s and Fiat Pandas await deliv-

ery to foreign markets (far left). The parking lot at the Volkswagen factory in Antoninek, Poznań (left).

In what way will the EU new rules regarding state aid (it has to be targeted more narrowly at underdeveloped regions) and the extended life of special economic zones affect Poland’s automotive sector? MT: Simply put, these new rules are not good for new investors: These incentives for new investors are important and they are lower than they were before. It’s troubling. Still it’s not a cause for alarm. The current SEZs will last until 2026, which is still 11 years away. Incentives are important at the start, but they aren’t so important from the perspective of long-term projects. Incentives will stop one day, but production will continue. RA: Taking into account comparable production costs in Central and

A Polish employee

works on the production line at the General Motors plant in the southern Polish city of Gliwice (below). The plant makes Opel cars, mainly for export to other EU countries.

‘Competition to attract investors and investments is becoming increasingly tough’ Eastern Europe, investment incentives such as tax exemption available in special economic zones play a major role in the decision-making process in relation to investment locations increasingly often. Marek Sienkiewicz, Deloitte: The new regulations regarding public aid have introduced a highly diversified level of the investment incentives in question, which depends on the region invested in. Currently, the investment cost refund level varies from 10% for Warsaw to even 50% for northern and eastern regions of Poland, whereas previously the spread in most cases did not exceed 10 percentage points. Consequently, for the first time the investments might be redirected within Poland towards the eastern part of the country ‘artificially’ by way of public aid.

interview by Gabriel Rom

photos: Piotr Jasiczek (Forum), Piotr Małecki (Forum), Maciej Jarzębiński (Forum)

MT: Ultimately, there is no reason to worry, at least for the next few years. Poland seems to be a great combination between an attractive – not cheap, but reasonable – labour force, with high-quality workers. We need to remember that Poland is one of the easternmost countries of the EU. The EU gives Poland economic incentives that no country to its east has. As for Ukraine, looking at the political situation I would not expect businesses that want a stable environment would risk relocation for the purpose of cheaper labour force. RA: Since 2003 differences in labour costs among Poland, the Czech Republic and Slovakia have become insignificant, and they were not a decisive factor in location of new car plants south of the Polish border. Competition to attract investors and investments is becoming increasingly tough in the automotive sector, and Poland has been losing this battle over the past several years with other countries in the region.

URBAN ISSUES MiPIM 2015 edition

Eastern appeal The third annual edition of Poland Today’s Primetime Warsaw conference will explore the potential on the Vistula’s right bank

Established brand Primetime Warsaw has already firmly

established itself as the major Warsaw-focused professional event of the year. The first two editions of the conference were a huge success and attracted a number of top-level politicians and business leaders. Speakers during the first two editions of the conference included former Polish Prime Minister and former President of the European Parliament Jerzy Buzek, Warsaw Mayor Hanna Gronkiewicz-Waltz and thenDeputy Prime Minister Elżbieta Bieńkowska.

The half of Warsaw

Conference

Primetime Warsaw III

that lies on the eastern side of the Vistula River has long been neglected and under-invested. But potential for future investment is considerable. With new stops on the Metro, the city’s underground, set to be delivered soon, could the eastern districts soon become serious investment destinations? The prospects for development in Warsaw’s eastern districts will be one of the main issues key figures in Warsaw’s real estate community will examine during the third edition of Poland Today’s Primetime Warsaw conference, which will be held at the National Stadium on April 27.

Eastern potential The Vistula, which divides Warsaw into two unevenly developed halves, has long been a major barrier preventing investors from venturing into what is often collectively referred to as ‘Praga’ and comprises seven districts. Warsaw had already suffered from a shortage of bridges over the Vistula before a fire in mid-February shut down the city’s Łazienkowski bridge for what is expected to be months. With the bulk of the city’s population and business activity concentrated on the other side of the river, Praga has been viewed as less attractive. But much has changed on the right side of the Vistula in recent years. The new National Stadium, built in Praga ahead of the Euro 2012 football championships, has already become a major landmark. A number of new large-scale residential and commercial real estate projects, including the Centrum Praskie Koneser mixed-use scheme, are now under construction and are expected to contribute greatly to the revitalization of the eastern districts. However, it could be the delivery of the central stretch of the second line

of the Metro that will give the development of the right bank a real boost. Praga Północ is located just across the Vistula from the capital’s city centre, and could potentially emerge as a new office destination. The huge Port Praski waterfront site is waiting to be redeveloped, as are a number of other attractive plots across the district. During the conference, developers and real estate market experts will focus on issues including the potential impact of the underground on development and investment activity, as well as land and apartment prices. Warsaw City Hall itself is planning an extensive urban revitalization scheme for Praga Północ. The Primetime Warsaw conference will provide an opportunity for participants to discuss the project with municipal officials and the representatives of various NGOs.

Regional leader If the development prospects of the eastern part of the Polish capital will feature prominently during the Primetime Warsaw conference, a number of other, more general topics including the investment attractiveness and growth prospects of the city as a whole, will also be thoroughly explored. Warsaw has become the undisputed leader in Central and Eastern Europe in terms of real estate investment and development activity. Hardly any other city in Europe has changed as much as the Polish capital in recent years. Real estate market experts say there is still plenty of foreign capital waiting to be deployed in Warsaw. Money has been flocking to the Polish capital from new directions, including Asia and the Middle East. A keynote panel during the conference will aim to assess Warsaw’s claim to regional leadership. Panelists, including former Prime Minister Jan

‘Warsaw has a retail space density ratio less than in some of the regional cities’

Krzysztof Bielecki, now chairman of the partners board at EY Poland, will focus on how Warsaw is perceived internationally and on how the image of the city could be further improved.

Development opportunities Another major topic of discussion at the conference will be the prospects for new commercial real estate projects in Warsaw. We will ask major players to reveal which locations across the city they think are the most promising. The office market in Warsaw has seen a flood of development activity of late, leading some experts to voice concerns about the danger of oversupply. As for the retail sector, several large projects are now in the pipeline. According to Colliers International data, 280,000 sqm of office space was delivered in Warsaw in 2014, while more than 700,000 sqm of office area was under construction in the city at the end of the year. While net office space absorption in Warsaw increased by 14% y/y in 2014, the vacancy rate rose to 13.3% and in central locations it even reached 15.2%. We will ask whether the market is already overheated. In a similar vein, the conference will discuss the development opportunities in the retail property market in Warsaw. The total supply of modern retail space in the city amounted to around 1.4m sqm at the end of last year. Warsaw has a retail space density ratio of 560 sqm per 1,000 inhabitants, less than in some of the largest regional cities in Poland, including Wrocław (765 sqm) and Poznań (759 sqm). Around 66,000 sqm of retail space is now under construction in the city. The last large-scale shopping centre project in Warsaw, Złote Tarasy, was delivered in 2007. However, investors have already announced several new schemes that are expected to be developed in locations including the Białołęka and Wilanów districts. The development of new residential neighbourhoods in Warsaw will also change the map of the city. Guests at Poland Today's Primetime Warsaw III conference will find out where there is room for new shopping centres, other retail formats and new residential projects.

by Adam Zdrodowski

CONFERENCE & COCktAil pARty

Primetime Warsaw III 27 April 2015, National Stadium, Warsaw

The right side of the river?

Too long in the shadow of its dynamic other half, will the capitalâ&#x20AC;&#x2122;s eastern bank live up to its potential? www.poland-today.pl

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Warsaw: room for more With a backlog of foreign capital waiting to be deployed in the Warsaw market, the city still has plenty of room for development, claimed guests at a Poland Today round table discussion

Partners of Primetime Warsaw III include

photos: Jamie Howard

Conference

Primetime Warsaw III

BBI Development, ECE Projektmana足 gement Polska and Skanska Property Poland.

Ahead of Poland

Today’s Primetime Warsaw III conference, which will be held on April 27 at the National Stadium, we sat down with Deputy Mayor of Warsaw Michał Olszewski, Skanska Property Poland managing director Katarzyna Zawodna and BBI Development vice president Rafał Szczepański to talk about the attractiveness of Warsaw for international real estate investors and the development prospects of the city. Leszek Sikora , managing director at ECE Projektmanagement Polska, was unable to attend the discussion, which took place on the 50th floor of the Złota 44 skyscraper in Warsaw, but gave us his thoughts after the discussion took place.

Rafał Szczepański, BBI: When American investors arrive at the Warsaw airport, they see a city that is different than the other cities in this part of Europe. They can see skyscrapers that reflect the ambition and potential of the Polish capital and which remind them of their own cities. Warsaw is beginning to be perceived as the capital of Central and Eastern Europe. On top of this, it is a friendly, dynamic and relatively liberal city that is in the EU and offers stability and safety. Warsaw is now a good substitute for Eastern European cities such as Moscow, which is not a safe market for investment because of the current geopolitical situation. Largely due to the recent improveIs Warsaw the regional leader ments in its transport infrastructure, in terms of the real estate marincluding the modernisation of the airket, and how do international port and the development of the secinvestors perceive the city? ond underground line, Warsaw has Michał Olszewski, City of Warsaw: become a very attractive city for interWarsaw is definitely a growing market; national investors. Perhaps most sigin fact, it is the only city in Europe that nificantly, this is a city where there is is developing at such a fast pace. The still a lot of room for new investments number of tourists in Warsaw is grow- and, as a consequence, a lot of potential ing – the city came in 42nd in a recent for making money. I am sure that the Euromonitor ranking of the most pop- investment made by our American partular travel destinations in the world, ners in the Złota 44 project – Amstar – just behind Madrid and ahead of cities will be a success. Our cooperation will such as Brussels and Dublin. When it be closely watched by other investors comes to investors, Warsaw is in a privi- in the United States and, hopefully, leged position as it is the only large city will help to attract more American in Europe that is currently developing capital to our city. its centre. Large amounts of new office Leszek Sikora, ECE: Warsaw has space are being developed in the very always been the first choice destiheart of the city – this is a unique phe- nation in the CEE region for internanomenon, not only in our region, but tional investors over the last 25 years of transformation of the entire region. also on the European scale. Katarzyna Zawodna, Skanska: This inflow of capital has seen some Despite the dynamic development peaks and lows, whereas now the of the centre of Warsaw, the investor fundamentals seem to be stable, includdemand for property located there ing well-founded economic growth currently exceeds the supply. There and the local population’s increasing is a lot of foreign capital that is wait- purchasing power. ing to be deployed in Warsaw. As for development opportunities, many of the modern office buildings in Warsaw were developed in the 1990s and have already aged. Their tenants will be moving to new buildings. There is thus a lot of potential for the redevelopment and refurbishment of the existing office buildings in Warsaw. In general, the city has a lot of growth potential because its office stock is still relatively small compared to Western European markets.

There has been a lot of talk about the large supply of office space in Warsaw in recent months. Do you see this as a major problem? RS: I would call the oversupply in the office market a temporary, ‘technical’ issue. The prospects for the market as such, and for the economic growth in the upcoming years, are excellent. Warsaw is set to have a dominant position in Poland and in the entire Central and Eastern Europe region. KZ: The amount of modern office space in Warsaw has more than doubled over the last 10 years. When you have such growth dynamics, temporary problems with oversupply are a natural thing. It is worth emphasizing that the quality of the office space that is being developed in Warsaw at the moment is much higher than it was even a few years ago. Also, the quality of the public areas in the city is improving.

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Katarzyna Zawodna (bot-

tom left), managing director of Skanska Property Poland, says that temporary problems with office market oversupply are a natural challenge for a developing city like Warsaw.

‘When it comes to investors, Warsaw is in a privileged position. It is the only large city in Europe that is developing its centre’

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Leszek Sikora

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Primetime Warsaw III

(below right), managing director at ECE Projektmanagement Polska, says that more large retail centres in Poland could be developed, but they must be designed appropriately, optimising functions for the given location. He adds that they also need to respond to the changing transportation habits of the local population.

It is amazing how fast Warsaw has been developing in recent years and how much the quality of life in the city has improved. MO: We are talking about a very large market, as the Polish office market goes, which currently boasts approximately 4.4m sqm of modern office space. By comparison, Kraków, the second largest city in Poland, only has around 600,000 sqm of office space. The recent news that the vacancy rate in Warsaw has increased to 15% has admittedly sent a negative signal to investors, but I would not attach much importance to that. I perceive vacancies as a natural part of a healthy market mechanism. On the one hand, it is good that potential tenants do not have a problem with finding office space in Warsaw. On the other hand, vacancy is always a signal for property owners that perhaps they need to invest in and upgrade their assets. The office map of Warsaw is changing – the intensive development activity in the Wola district probably means that the position of some of the established office locations in the city, including Mokotów, will be reassessed. We are not going to tell developers how much space and where they should build – we believe that the market is the best regulator here. RS: Definitely, the city should not regulate but rather inspire. The role of

‘The office map of Warsaw is changing ... some of the established office locations in the city will be reassessed’

the city should be to enable new development through the delivery of transport infrastructure and public areas, and by consistently building the image of Warsaw abroad, because this will make even more international investors believe in the potential of the city.

A large-scale shopping centre project was last delivered in Warsaw in 2007. Does the Polish capital need more retail space? LS: Benchmarked to other major Polish cities, Warsaw sees some undersupply when modern retail space is considered. Sales figures measured by productivity of retail space and rent levels are the best indicators. This has so much to do with the high purchasing power in Warsaw, as well as with Warsaw’s modern economy and its favourable demographic situation. RS: There is room for interesting retail concepts in the centre of Warsaw, such as the Plac Unii City Shopping scheme, which can play a dominant role on a local scale. Warsaw also suffers from the lack of well-developed high streets, but this is now beginning to change. The rivalry between small and large retail formats should not be an ideological issue – in fact, these two complement each other. KZ: There is certainly room in Warsaw for mixed-use projects that include retail space. After the development of a number of large-scale shopping centre schemes, the retail sector in Warsaw entered a new development phase during which we should focus on improving the quality of life in the particular neighbourhoods through the delivery of small shopping centres that will cater to the needs of the local communities. Our own planned office projects in the Wola district, for example, will include retail space.

MO: The preferences of buyers have the buildings and the street grid are changed a lot since the 1990s when we already there. That said, there is obviadopted the American model of shop- ously room in Praga Północ for new ping in the large shopping mall. People buildings that would complement the now increasingly shop locally and ena- existing buildings. There are still large bling the development of local shop- swathes of land in the district, includping centres is one of the major goals of ing the Port Praski area, that have huge the Warsaw authorities at the moment. development potential. The Pollena site This year we will finish the construc- is expected to be redeveloped in the tion of the new Zieleniak bazaar upcoming years. We hope that more people will choose to live in Praga in the Ochota district. We have recently contracted the Północ. Warsaw City Hall itself is planWarsaw branch of the Association of ning to renovate 21 tenement houses Polish Architects to come up with ideas there and accommodate rental apartfor the development of new local shop- ments in them which would be tarping centres and meeting points across geted at people who cannot afford a the city. Fortunately, the approach of mortgage loan. We do not want to see private investors to the development the process of gentrification in Praga of new retail space has changed in Północ – we simply hope that more recent years – they now pay much more representatives of the middle class attention to the delivery of high-quality will move to the district. public space and cultural areas as part KZ: Praga Północ is definitely not the same place it was several years of their investments. RS: Indeed, our Koneser project in ago when artists were basically the the Praga Północ district is a good only people who dared to move there. example of this trend. Apart from The district has now become a very residential, office and retail space, fashionable location. When it comes the scheme will include a Polish to the development prospects there, vodka museum. We believe that the considering our already fully set investscheme will become what can be ment plans and Skanska policy, we will called a lifestyle centre – a place probably not invest there in the short where people simply like to come term. However, in a longer-term perand spend their free time. spective, we will consider developLS: Still, I would not say that big ing office projects in the district and retail schemes won’t appear in Warsaw other parts of Warsaw. I think that in in the future. The key, however, is that Warsaw the assets of Praga Północ are they must be designed appropriately, already well recognised. Now it is our optimising functions and proportions goal to convince international invesfor the given location. They also need tors that the district is an attractive to respond to the changing transpor- place to do business. RS: Many international investors are tation habits of the local population, especially with public transportation actually already active there. Liebrecht & Wood, with whom we developed the rapidly improving. Plac Unii project, is also our partner in the Koneser scheme. They see a lot of The construction of the second potential in Praga Północ. We are now subway line has already given a boost to new real estate investin the process of negotiating agreements in the Wola district. Will ments with other international investors the same thing happen on the who want to be part of the project. I right side of the Vistula River? am sure that the new underground line, MO: The Praga Północ district, on which will transport millions of peothe eastern bank of the Vistula, has its ple, will create new development and own specific and unique nature. By con- investment opportunities on the right necting Wola with Praga Północ, the side of the Vistula River and will change underground will actually connect two the city for many years. poles of the city – the modern, dynamic LS: It is fascinating to see these major Warsaw where new investments are changes happening as we speak. Even being developed at the moment with now, prior to the second Metro line the authentic, historic Warsaw where opening, it is clearly visible how significant the line is to the further development of the city. We have seen in the past how the major commercial investments, like Stary Browar in Poznań, drastically diverted population flows in the city centres. Now we see the public-hand investment redefine the strategies of the investors and redirecting the development ventures and investment into the new areas of Warsaw.

interview by Adam Zdrodowski

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Rafał Szczepański,

vice president of BBI Development, says that the new line of Warsaw’s underground, the Metro, will create new development and investment opportunities on the right side of the Vistula River.

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Regions on investors’ radars Investors are expected to remain active in Poland, but they will turn toward regional cities

With so many

The sale

photos: archiwum Ghelamco

of T-Mobile Office Park in Warsaw (below), along with two other office buildings, was one of the biggest transactions of 2014. Belgian developer Ghelamco sold the properties to Starwood Capital Group for an estimated €195m.

of Poland’s prime assets having changed hands over the past few years, some observers worry that the country may be running out of attractive investment product. Not so, say market experts. They argue that a new wave of transactions will hit again this year because many investors have already reassessed their investment strategies and are focusing on major regional cities. On top of that, the construction of new landmark office buildings in Warsaw should generate new trophy asset deals.

‘German and American capital’s appetite for Polish real estate remains strong’

Prime assets What defines a real estate asset as a prime asset? In the office property market, the prime assets are – in general – medium-sized and large class-A projects which are leased out to prestigious tenants and are in the best locations. According to Tomasz Trzósło of JLL, a prime office asset should ideally be located in the centre of Warsaw (or in the heart of one of the key sub-markets in the city) or, less ideally, in one of the best locations in the other major cities in Poland.

of the Rondo 1 skyscraper was the larg- In the retail property market, a prime shopping est transaction closed in the real estate centre typically has a dominant character, a strong location, a wide regional catchment investment market in Poland last year. area, a well-balanced offer and, most imporLarge-volume transactions Deutsche Asset & Wealth Management tantly, a strong performance, sustainable in Last year, a number of the best- acquired the building from Blackrock the long-term perspective, Trzósło said. regarded real estate assets in Poland for nearly €300 million. Apart from the Rondo 1, Metropolitan and changed hands, including the Rondo Atwell says the Polish market will Poznań City Center projects, prime assets that 1 and Metropolitan office buildings in continue to see big deals throughout have been traded in recent years include the Warsaw and the Poznań City Center this year. “There is some thought that Plac Unii mixed-use scheme and Senator office shopping mall in Poznań. The combined the ‘trophy’ assets have all traded and building in Warsaw, and the Silesia City Center shopping centre development in Katowice. value of the Rondo 1, Metropolitan therefore we will see a general slowand Poznań City Center transactions down in activity. I believe that is not the As in the office sector, the fact that alone was approximately €700 million, case – at CBRE we are already active on representing 25% of the total invest- numerous transactions that are all due many of the best assets have been to complete in Q1,” he said. ment volume in 2014. traded of late has led investors to look Large-volume deals made up the The volume of these transactions to new markets. According to Atwell, lion’s share of the investment market may not reach the level of Rondo 1, but there has been a move away from in Poland last year. Mike Atwell, head Atwell still foresees numerous transac- Warsaw and other major regional citof Central and Eastern Europe capital tions valued at between €100 million ies, mainly due to the lack of opportunimarkets at CBRE, pointed out that the and €200 million. “I would also expect ties. “We are seeing a growing interest top 10 transactions of 2014 – all of which to see a large portfolio transaction in the small and medium-sized cities for quality retail stock and this interest is exceeded €100 million – accounted for of some kind,” Atwell said. over 50% of the total volume. The sale Tomasz Trzósło, managing direc- coming from all investors, including the tor and head of capital markets at JLL traditional core investors,” he said. in Poland, said that due to the limited availability of prime assets, some inves- More assets coming tors have had to reappraise and soften Soren Rodian Olsen, head of office their investment criteria. This has led, for and industrial investments at the capiexample, to increased investor interest tal markets department of Cushman in the office stock in the major regional & Wakefield in Poland, said there has cities in Poland, notably Kraków and been no slowdown from investors. Wrocław. Trzósło expects the trend will “German and North American capital’s soon also be visible in markets includ- appetite for Polish real estate remains ing Tri-City, Poznań, Katowice and Łódź. strong,” he said. Olsen also pointed to new prime Shopping in the regions assets scheduled to be delivered in When it comes to the retail property Poland soon. “With Warsaw Spire and market, a significant portion of the Q22 under construction, and other prime product is already in the hands landmark office developments to come, of end-investors and is unlikely to be we do not think that Poland lacks prime offered for sale any time soon, said assets,” he said, adding: “The office Trzósło. However, he added that there development pipeline in Warsaw and are still some attractive assets out there Polish regional cities will bring new, that could be offered for sale. “I am premium buildings to the market durpositive that investment activity in the ing 2015-2016, offering a new potenprime end of Poland’s retail sector will tial wave of trophy asset transactions.” continue,” he said. by Adam Zdrodowski

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Active, healthy, strong Poland Today speaks with Jeroen van der Toolen, managing director for CEE at developer Ghelamco, about the state of the Polish real estate market

How would you characterize the Polish market at the moment?

director for CEE at developer Ghelamco, says that the business service sector and public institutions are driving strong tenant demand in Poland.

Ghelamco is a partner of Poland Today’s

special edition of Urban Issues for MIPIM 2015.

photos: Przemysław Zacharuk, Piotr Dziubak

Jeroen van der Toolen, managing

A very high level of activity can be observed currently. When we look at the investment market, there is a wave of capital flowing into the country and thus high demand for good quality schemes. However, projects that need to be revamped are also required by investors. Many equity funds and the German institutional funds, which have been in the Polish market for a while now, are also active. Nowadays, market selling is no issue – from the developer’s perspective this is a healthy situation. The main issue at the moment is not the creation of the new product, but responding accurately to the tenant market. And the demand from tenants is strong. The public sector is becoming more active; its share of the take-up in the office market is growing. Secondly, the growth of the BPO sector is continuing, mostly outside Warsaw, but in the city as well. It’s a very positive impulse for the labour market – a good circumstance for the office sector. We observe these trends as a healthy growth and that’s why we’re continuing our investments in the office sector.

You mentioned the public sector. There has been a lot of talk about the public entities looking for more modern space. Do you think the trend can be sustained? Yes, and the positive aspect of this is that some public institutions are moving into office buildings that the large Polish and international companies leave when they upgrade. Instead of these buildings having to compete by dropping rents, there is a natural succession. These public institutions often take up a large surfaces as well, because they are large-scale organisations. They also don’t have excessive demands when it comes to the originality of design, usually occupying the space as-is or with some small adaptations.

Many have expressed worry about the large vacancy rate in Warsaw, with more projects due to come on line. What’s your view? Is there too much office supply in Warsaw? The vacancy rate in Warsaw is relatively high. This factor should be considered not only by developers, but

Plac Europejski

Warsaw’s Mordor?

Ghelamco has proposed naming the area

The southern part of Warsaw’s Mokotów

around its Warsaw Spire development ‘Plac Europejski’ (European Square). “We have announced that we want to create a place that will become a new hub for activity in the Wola district – which we see as the new centre of Warsaw,” said Jeroen van der Toolen, managing director for CEE at Ghelamco. “We will arrange an art passage there with new exhibitions every month, in cooperation with a university to give young artists the possibility to show their art. It will feature fountains that will come straight up from under the pavement, so once they are switched off it’s a flat walking area. When there is nice weather children will be able to run through the fountains. It will be a car-free area. Already tenants have told us that they really appreciate the fact that we are creating such an arrangement around an office facility.”

district has been nicknamed ‘Mordor’ by its detractors, because of its notorious traffic jams. The district is heavily populated with office developments – but is it still attractive for tenants? Jeroen van der Toolen, managing director for CEE at Ghelamco, pointed out that there are still many advantages to locating operations there. “Mokotów is still a very good office location,” said van der Toolen. “There is a lot of talk about the traffic, and to some extent it is true, but if the government finishes two road connections the situation will improve, which I hope will happen within the next three to five years. The number of companies leaving Mokotów for other districts is limited. What is the alternative? It is close to the airport and big residential areas as well. A lot of decision makers live nearby, and most of the international schools are in the area. So, not many tenants move out, despite the traffic.”

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also by the financial institutions. The banks ought to examine each product thoroughly and decide which one has a long-term prospects and is credible for financing. At the moment, the cost of obtaining capital is very low – but that’s not a reason to build. The reason to build is the end users – the tenants. Currently the vacancy rate is not a problem for our company. We have been leasing out our projects at a healthy rate. Also, due to new transport links, especially the new Metro line in Warsaw, certain locations have become more important than others. But there are some projects that have not been designed properly or are less attractive in terms of location. In these schemes, the vacancy is increasing. Also, nowadays a growing number of companies consider not only the quality of a particular office space, but also take into account the area around the building. When we prepared our analysis for Warsaw Spire five years ago, we found that what is missing in Warsaw is a public space closed to vehicle traffic – a quiet area where people can meet and sit around the fountains, with several different types of restaurants to cater for all kinds of tastes, where various events can be organised all the time. We are creating that at Plac Europejski, where Warsaw Spire is being built – nowadays the tenants really appreciate such a conscious approach.

As Warsaw becomes more important on the European map, do you see it becoming a city where companies don’t just site their BPO or their Central Europe headquarters, but their European headquarters? This is uncertain. European companies, for one, will remain in their headquarters, though it is probable that US or Asian firms will set up European headquarters here. But the thing to remember is that the headquarters aren’t always the offices that take up the most space. Companies choose Poland as their main European or global business service and administrative centres, which results in them taking up an increasing amount of office space as they continue to consolidate their functions in Poland. This phenomena is bringing a lot of growth to the market.

In November Ghelamco decided to begin selling bonds to individual investors after several bond issues aimed only at institutional investors. What was the reason for that? We thought it was the natural next step to enlarge our potential market and spread the potential risk as well. Financial markets change quickly, as we have seen especially in the last few years. So we made the natural decision to use the assets of the retail sector as well.

Speaking of Warsaw Spire – how is the leasing going?

Do you see Ghelamco going to the retail market with bonds again?

Well, we signed 10,000 sqm in the first month of this year, so that was a good start. Our target is to have 75% leased when the tower building opens, and I believe we will achieve this. One lower building of the complex is already open and fully leased. The tower building will be ready, with tenants in and operational, by April next year. The other, lower building will open in the third quarter of this year. Plac Europejski will be 80% ready in the third quarter of this year and 100% ready by March next year. We have just signed a letter of intent for a very promising restaurant on the square, which will take up 1,500 sqm of space. There is a lot of interest and we are engaged in negotiations with many potential tenants of the square.

Yes, we made a bond programme that envisions us raising 250m złoty. And since we have only issued 50m złoty so far, there is still an opportunity to offer more bonds to the retail market within this programme.

The Wola district of Warsaw is getting a lot of attention at the moment. Are there other districts of Warsaw that you think could heat up soon? What about Praga and the right bank of the Vistula? I see big potential for Praga to develop as a really attractive residential area. This district is an example of an area, that, as often happens in many other cities, was dismissed by the market. But the creative types will move in, and then a bit later, as the

area gains popularity, larger numbers of people will chose it. Property values in Praga will rise, because it offers living space 10 minutes from the city centre at the same price that some people are paying for residences 45 minutes from the city centre. But I don’t see that there will be a big increase in the office market there. The companies in districts such as Mokotów tend to be in a cluster, because they work with each other. If a company moves to Praga, all of its partners and clients will be on the other bank of the river in Mokotów and in the city centre. However, there is potential for the office market in northern Warsaw, and that is why we signed an agreement with PKP to develop Dworzec Gdański. It is an ideal location, because it’s perfectly linked by trains, trams, buses and the Metro. Soon Warsaw will have a developed business hub in the north of the city, another in a central location on Rondo Daszyńskiego where Warsaw Spire is being developed and one more in southern Mokotów.

What is your outlook for the Polish market? What sectors will heat up and where will there be the most activity over the next five to ten years? In Warsaw, the nearest future will bring growth and development to totally new districts. Wola will become a very modern and pleasant area in Warsaw. I hope that a lot of cultural places will be created around the Palace of Culture and Science. Also, I hope that by that time Praga will reach its residential market potential and that residential prices there will have risen. I believe the office market will continue its steady growth and Warsaw will gain even more importance within Europe. Looking at the other cities, I think the gap will grow between those cities that have good railway links, airports and road connections, and those that don’t. Cities that are well linked with transportation will gain importance, investment and jobs. And from a real estate perspective, they will be more attractive for investment.

Warsaw Spire,

Ghelamco’s flagship project in Poland, is due to be complete by April of next year.

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Special delivery Poland’s logistics sector is booming, but will a lack of product slow investment?

The logistics

property investment market in Poland put up a record performance last year, with several large portfolio transactions involving the sale of a number of assets across the country taking place. According to real estate services firm Savills, the investment volume in Poland’s logistics sector beat that of the retail sector for the first time ever. Investor interest will remain high this year, but the shortage of available product will limit the number of new deals, say analysts. “The logistics investment market enjoyed a record year in 2014 with a total volume of approximately €740m and a market share of around 23%,” said Piotr Mirowski, director of investment services in Poland at Colliers International. A year before, the market share stood at approximately 14%. In 2014, there was a 67% year-on-year growth in industrial investment volume, said Soren Rodian Olsen, head of office and industrial investments in the capital markets group at Cushman & Wakefield in Poland.

Portfolio transactions

The warehouse property market

has continued its strong growth in recent months. The demand for logistics space in Poland increased by over 20% y/y in 2014, according to CBRE data. Due to its favourable geographical location, stable economic situation and developing road infrastructure, Poland is a very attractive market for logistics and industrial investors.

The market was dominated by large transactions involving the sale of a number of logistics assets across Poland. According to Colliers International data, six portfolio transactions were closed last year, three of which were valued at over €100m. “The key driver for growth in the volume of investment in the industrial sector in 2014 can be traced to three substantial portfolio transactions,” Olsen said. The most active investors last year were Blackstone (27%), PZU FIZ (19%), Prologis (14%), SEGRO (14%) and Hillwood (12%). Portfolio transactions and the sale of single-tenant assets leased on a long-term basis (10 years or more) accounted for around 61% and around 10% of the total volume respectively, said Piotr Puchalski, an associate director at the investment department of Savills in Poland. The largest deals closed in the logistics property market in Poland last year included the acquisition of the Panattoni-developed Standard Life Investments portfolio, comprising three logistics parks, by Logicor (Blackstone’s European logistics platform) for €118.2m.

‘Investor interest will remain high this year, but the shortage of available product will limit deals’ Domestic strength The largest investment transaction closed in the logistics property market in Poland last year involved a domestic buyer – PZU FIZ – who bought a total of four Panattonideveloped logistics parks located in Łódź, Wrocław and Gdańsk. The exact value of the transaction was not revealed. According to Savills, however, market speculation puts it at approximately €140m.

buildings will be the main growth driver for Prologis this year, the company will keep looking for attractive sales offers for existing logistics parks that will increase the value of its assets, he added. The main reasons for the growth in the logistics investment volume were the underweighting in the logistics sector, as well as the opportunity to buy into portfolio deals that provide instant exposure to various markets and the required critical mass, said Colliers’ Mirowski. Savills’ Puchalski pointed out that logistics property offers higher yields than other typical asset classes. Some investors also expect the logistics sector to grow due to the rise of e-commerce and retail business in Poland, he said.

Product shortage

The warehouse property market has continued its strong growth in recent Investors are predominantly inter- months. The demand for logistics space ested in portfolio acquisitions of in Poland increased by over 20% y/y standardized blue-chip products in in 2014, according to CBRE data. Due core locations, preferably with a pan- to its favourable geographical locaCEE or a pan-European touch, said tion, stable economic situation and Bożena Krawczyk, investment director developing road infrastructure, Poland for Central Europe at SEGRO. In 2014, is a very attractive market for logisthe company completed two acqui- tics and industrial investors, said Piotr sitions in CEE which included Bzowski, leasing and development the purchase of three logistics assets director at P3 Logistic Parks. “We expect that the interest will be (located in the Warsaw, Łódź and Poznań areas) from Tristan Capital maintained this year, strong evidence Partners for a total of €100m. for which is P3’s recent acquisition of CA Immo assets in Poland and Romania, Higher yields a total of 467,000 sqm of GLA,” Colliers’ Paweł Sapek, senior vice president and Mirowski said. He added that the inflow country manager at Prologis in Poland, of capital would further increase liquidpointed out that the warehouse prop- ity and that it should also have a positive erty market had until recently been per- impact on pricing. “The only limitation ceived by investors as a less important will be the availability of product, which sector. The situation changed in 2013 is diminishing sharply after 14 deals when investor interest in logistics prop- closed last year,” he said. erty increased significantly. The good Olsen also expects a continucondition of the Polish economy and ing strong investor focus on logistics the availability of high-quality product property in Poland this year, with new attracted the attention of a whole range sources of global capital now targeting of institutional investors, Sapek said. this asset class in the country. “That said, Prologis itself last year acquired the main challenge will be the supply a total of 27 warehouse buildings and availability of stock,” claimed Olsen. in Poland, the Czech Republic, Slovakia According to the Savills report, investor and Hungary, with a combined area activity in the warehouse property secexceeding 390,000 sqm. The total tor in Poland will remain at a high level value of those transactions amounted this year but the combined investment to approximately €225m, Sapek volume will probably be lower than last said. While the development of new year. by Adam Zdrodowski

URBAN ISSUES MIPIM 2015 EDITION

Change in store Poland Today sits down with Robert Dobrzycki, managing partner for Europe at logistics space developer Panattoni Europe, to talk about the trends in Poland’s warehouse market

The logistics property market in Poland had a very good performance in 2014. Which sectors were the main drivers of the leasing activity last year? Retail chains and logistics companies generated the most demand for logistics space in Poland last year. However, what is interesting is the growing significance of the e-commerce market, which has continued to develop in the country at the expense of the retail market and at the expense of Western Europe. The recently delivered Amazon warehouses reflect the trend well. Now we can already see other international e-commerce companies looking at Poland and considering expansion here.

Robert Dobrzycki,

managing partner for Europe at Panattoni Europe, says the transaction volume in Poland’s logistics market this year will certainly be lower than it was last year, when it reached a record value of €740m.

Amazon occupies three large warehouse projects in Poland, each of which comprises more than 100,000 sqm of space. Could such large lease transactions happen again in the Polish market? One should not perceive the Amazon transactions as standard transactions and compare them with other lease transactions in the market. The size of those transactions resulted from the specific nature of this particular company, the warehouse format that it prefers and the e-commerce market as such. Other companies prefer different formats. It is possible that Amazon will, in the future, decide to lease more space in Poland, but one has to remember that historically the largest deals in this market involved the lease of approximately 50,000 sqm.

What about manufacturing, which has also generated a lot of demand in recent years?

Panattoni is a partner of Poland

Today’s special edition of Urban Issues for MIPIM 2015.

We continue to witness the trend of the relocation of production facilities from Western Europe to Poland, especially to the south-western part of the country. That region has very good road infrastructure and is located close to Germany, from which much of the production has been moving. Wrocław in particular has been benefiting from this trend. We hope that production will also move further east in Poland. We have recently bought land in Rzeszów which is now well-connected with Germany through a new motorway.

‘There will be more new speculative space in the market’ Which kind of production has been moving to Poland of late? The relocation of production facilities has been very visible in the automotive sector. The decision to open a new Volkswagen factory at Września shows that German car manufacturers perceive western Poland as a very good place to move production. This bodes very well for the demand for logistics space there in the upcoming years. We already have a number of suppliers from the automotive sector, including Faurecia and Lear, in our portfolio of clients.

Will the new supply continue to be dominated by built-tosuit projects this year? The share of built-to-suit space in the total volume of new space should remain at a similar level as last year. When it comes to our portfolio, BTS developments currently account for approximately 50% of the total volume. By contrast, in the years 2008-2009, they accounted for around 80%. There will be more new speculative space in the market, mostly in schemes where part of the space has been pre-leased. However, there are also some purely speculative schemes – we ourselves launched Panattoni Park Poznań IV on a speculative basis.

Investor interest in logistics property in Poland stood at a record-high level last year, with the total transaction volume amounting to some €740m. Can that result be repeated this year? The total transaction volume will certainly be lower this year. Poland is a relatively small market when it comes to the total existing supply of logistics space and the availability of product is limited.

The large investor demand for logistics space was the result of the combination of several factors – the attractiveness of this asset class and the liquidity in the market were combined with the availability of the product that was developed in previous years.

Which logistics markets in Poland are the strongest at the moment? Wrocław is the number one logistics market in Poland when it comes to the growth dynamics, even though it is smaller than the Warsaw market. Wrocław and Poznań continue to gain in significance as markets which service Western Europe. In the future, Łódź and Silesia, which mostly service the domestic market, should also gain more significance. Gdańsk will continue to grow but we think that it will remain a local market. Gdańsk is not going to have as much significance as Hamburg in Germany.

What about the eastern part of Poland? As I mentioned before, we are present in Rzeszów – we are going to launch construction on a new logistics park there in the upcoming months. Lublin also looks interesting. When it comes to Białystok, we are considering that location and will be watching how the market situation there develops. Białystok is a large city and the local business will probably generate some demand for logistics space. On the other hand, the city is located relatively close to Warsaw so the Białystok market can, at least to some extent, also be serviced from Warsaw.

What are your development plans for this year? Apart from the planned Rzeszów development, we will be developing new projects in all or most of the major logistics markets in Poland in which we are already present, including Wrocław, Poznań, Łódź and Gdańsk. We are currently the most active logistics space developer in the country. In most cases, the new schemes will be new phases of the already existing logistics parks. At the same time, we are constantly looking for land for new logistics parks across Poland.

Public sector push Poland’s public sector entities are finally beginning to move into modern office space

New opportunities The fierce competition in Warsaw’s office market is creating exceptional opportunities for public sector institutions interested in moving to modern office buildings in the city. Public sector occupiers are usually ready to accept a slightly lower office space standard than private companies and are thus ideal tenants for older B-class buildings. But public sector entities are also eyeing new office buildings. A large public sector institution, whose name has not been revealed, last year leased almost 6,000 sqm of office space at the Gdański Business Center complex, which is being developed by HB Reavis in the northern part of Warsaw’s city centre. For its part, Immofinanz Group last year signed the General Inspectorate of Road Transport (GITD) for its Equator office project in Warsaw’s Ochota district. GITD The public sector is now playing an leased over 7,000 sqm. increasingly important role in the office Anna Szymańska, an associate direcmarket in Warsaw, helping developers tor in the office department, landlord and property owners fill the growing representation, of Colliers International, amount of modern office space avail- pointed out that the public sector’s able in the city. Public sector entities, growing interest of in modern office which most often occupy outdated space results, to some extent, from the pre-war and communist-era buildings fact that property claims are very comthat don’t meet the needs of present- mon in Warsaw. Also, more and more day tenants, are increasingly deciding public sector occupiers are ready to to move to new offices in established sign lease transactions that are denomoffice locations across the Polish capital. inated in euros, rather than złoty. “Of The public sector's growing inter- course, in the majority of cases the est in modern office space in Warsaw transactions provide for the maximum began about three years ago, said euro exchange rate, but several years Joanna Mroczek, head of research, ago even such a solution was out of the consultancy and marketing at CBRE. question. Lease transactions had to be Mroczek added that last year the pub- denominated in złoty,” Szymańska said. lic sector accounted for approximately 10% of the combined office space take- Attractive tenants up in Warsaw. A number of major relo- Public sector occupiers are a highly cations involving public sector entities attractive group of tenants. They are financially stable and they usuare currently on their way, she said.

ally sign long-term lease transactions. Significantly, public sector institutionsvery often take up large amounts of office space. Many property owners are keen to sign public sector tenants because they offer stable revenues. “It is the State Treasury that is acting as the guarantor of lease here,” Szymańska stressed. “It is also worth mentioning that the presence of some government offices, for instance those responsible for relations with the European Union, increases the prestige of a particular office investment,” said Michał Lis, an associate director at the office department of JLL.

A large public sector institution

leased nearly 6,000 sqm of office space last year at the Gdański Business Center complex (left), which is being developed by HB Reavis in the northern section of Warsaw’s city centre.

Europe-wide trend In Western Europe it has already become standard practice for public sector entities to lease modern office space. The most advanced locations include Brussels and Strasbourg, where a number of EU institutions are headquartered. However, some local administration providers in Paris and Amsterdam also occupy space in new schemes, Mroczek said. According to CBRE data, the share of the public sector in the take-up of modern office space in Brussels amounted to more than 40% in the years 2012-2014. In Poland, the Agency for Restructuring and Modernisation of Agriculture (ARiMR), which took up 16,500 sqm of office space at Poleczki Business Park in southern Warsaw in 2009, was one of the first public sector entities to have leased space in a modern office building. Since then, a number of other major public institutions have followed suit, among them the Civil Aviation Authority, the General Directorate for National Roads and Motorways and the Institute of National Remembrance. While many other public sector entities still occupy space in State Treasuryowned buildings, the number will likely decrease in the coming years. What will happen to those buildings once their current tenants have moved to new buildings? “We think that the office space vacated by public sector entities will be leased to smaller occupiers, including other public sector entities and private companies,” said Lis.

by Adam Zdrodowski

photos: HB Reavis

‘It is the State Treasury that is acting as the guarantor of lease here’

URBAN ISSUES MIPIM 2015 EDITION

Poland needs more budget hotels Poland Today talks to Adam Konieczny, country head for Poland at brokerage and advisory firm Christie + Co, about the current shape and prospects of the Polish hotel market

Was 2014 a good year for the Polish tourism and hotel industries?

Adam Konieczny, country

head for Poland at Christie + Co points out that a large-scale conference facility, able to accommodate several thousand people, would give Warsaw’s hotel and tourism market.

Definitely. On the whole, there was an increase in the number of visits, from both foreign and domestic tourists. Occupancy rates in Poland have actually been on the rise for several years now. Domestic tourists continue to account for the bulk of all hotel stays in the country, but this is now changing fast in the metropolises. In Warsaw, for example, foreigners already account for 42% of all hotel guests.

Which city attracted the most hotel guests in 2014? Kraków had a record year in 2014 – approximately 9.9 million people, including 2.6 million tourists from abroad, visited the city. Tourists spent a total of around 4.5bn złoty in Kraków. The city has been attracting leisure tourists for a long time now, but what is interesting is that the ongoing development of the BPO market in Kraków has recently also led the city to emerge as a major business travel destination.

What about Warsaw and the other major regional cities in Poland?

Christie + Co is a partner of the Poland Today Spotlight Hotel Investment Poland conference, which will take place in Warsaw in June.

Warsaw remains the second most important tourist destination in Poland but its position, compared to that of Kraków, has recently weakened a bit. What would certainly help to further enhance the tourism and hotel industries in the city is the development of a large-scale conference facility, able to accommodate several thousand people. Occupancy rates have been growing in Tri-City, Poznań and Katowice.

Can the effect of the 2012 European football championships still be felt in the Polish tourism and hotel industries? The Euro 2012 football championships which Poland co-hosted with Ukraine had a very positive effect, raising interest in Poland among Western European tourists. However, the effect cannot be compared with the Barcelona effect after the 1992 Olympic Games.

Could the crisis in Ukraine prevent people from visiting and investing in Poland? Nothing like this has happened so far. On the contrary, the crisis in Ukraine

‘The BPO market has led Kraków to emerge as a major business travel destination.’ has, paradoxically, had a positive effect on the Polish hotel property market – investors who had previously planned to invest in Ukraine and Russia are now withdrawing from those markets and moving west, allocating their capital to countries like Poland. When it comes to foreign tourists, I do not think that they view Poland as less safe than before.

Is there still room for new hotel product in the Polish market? The supply of hotel bedrooms in Poland has been growing in recent years by 5.6% per year on average. However, even this increase in the amount of hotel space in the country has not been able to absorb the growth of demand, which has stood at 8% on average. Most notably, what Poland needs now are new budget hotels. But many of the new hotel projects that are currently being developed are upperstandard schemes. To a large extent, this is a mentality issue – investors want to have prestigious assets.

Which kind of hotel projects will be developed in Warsaw in the near future, and in which parts of the city? There is no room for new five-star hotel developments in Warsaw. At current room prices, such investments are simply not justifiable in business terms. A four-star project is the maximum that investors should be focusing on in the Polish capital. As for locations, a number of new hotel products are being planned for the fast-developing Wola district of Warsaw. Christie + Co itself is currently advising an investor on a new hotel project there. It is possible that some of the planned office towers in Wola will include hotel space.

Which hotel chains are now developing the fastest in Poland? Among the fastest-expanding brands are those of Accor/Orbis (currently 64 hotels in Poland), Louvre Hotels (16 hotels) and Hilton (10 hotels). The latter, for example, has recently opened two major hotels in Warsaw: DoubleTree by Hilton Hotel & Conference Centre Warsaw – which offers the largest conference and event area in city – and Europe’s largest Hampton by Hilton, in Warsaw’s city centre.

Will we soon see any new hotel brands enter the Polish market? A number of brands are considering expansion into Poland at the moment. Starwood, for instance, would like to introduce its three-star Aloft brand to Polish cities including Warsaw, Kraków, Wrocław and Gdańsk. Also, several German hotel companies, including Steigenberger (with its three-star InterCity Hotel brand), Leonardo and Meininger are planning to introduce interesting hotel concepts to the Polish market.

How large is the hotel investment market in Poland at the moment? It is still very small compared to many Western European countries. The recent acquisition of the Hampton by Hilton Warsaw City Centre hotel by Union Investment was practically the only transaction of this scale completed in the hotel property market in Poland last year. Additionally, several smaller assets located across the country changed hands in 2014. By contrast, in Germany, Christie + Co participated in a portfolio transaction which involved the sale of 21 hotels last year.

Why is the hotel investment market in Poland so small? While the hotel sector can offer good, long-term income, many investors continue to view the hotel property investment market in Poland as not offering sufficiently good exit options. Nevertheless, this year we should see more investment transactions in the country. Orbis has recently taken over a total of 46 hotels in the Czech Republic, Hungary, Poland and Romania from Accor for an estimated €142.3m.

URBAN ISSUES MIPIM 2015 EDITION

Logistics developer Goodman has

launched construction on the first building in its new Poznań Airport Logistics Centre project (above left) in western Poland. The warehouse will deliver 16,000 sqm of space.

In the centre of Poznań,

developer Skanska Property Poland launched construction on its second office project in the city. Called Maraton, the scheme (above right) will deliver more than 25,000 sqm of leasable space.

Investment market

Office

Residential

CBRE Global Investors pays ¤32m for Warsaw business park

HB Reavis signs huge lease deal with PZU

Residential market breaks record in 2014

A fund managed by CBRE Global Investors has acquired the Ideal Idea Park warehouse and office park in Warsaw from investment fund BPH TFI for approximately €32m. The Ideal Idea Park complex is located on ul. Działkowa in the Włochy district of the Polish capital. It comprises four facilities, offering a total of around 20,200 sqm of warehouse space and approximately 10,400 sqm of office area.

Euro Styl sells BPH Office Park in Gdańsk

Developer EURO STYL has sold its BPH Office Park complex in Gdańsk to Irish investor GNT Gdańsk. The value of the transaction has not been disclosed. The office park is located in the Jasień district of Gdańsk, approximately 10 km west of the centre of the city, and comprises three buildings offering a total of almost 20,000 sqm of leasable space.

Griffin to acquire Qualia Development, PKO Bank Polski assets

Real estate investor Griffin Group has signed a letter of intent with PKO Bank Polski for the acquisition of 100% of shares in developer Qualia Development and some of the bank’s property assets. The transaction, whose value has not been disclosed, will have to be approved by the Polish anti-monopoly watchdog UOKiK and is expected to be finalized by April this year.

Real estate review

BPT Optima sells office assets in Warsaw and Gdynia

Real estate investor BPT Optima has sold the last two office buildings from its Polish portfolio – Obrzeżna in Warsaw and Baltic Business Center in Gdynia – to Octava FIZAN, an investment fund affiliated with Warsaw Stock Exchange-listed real estate company Octava. The value of the transaction has not been disclosed. BPT Optima, which earlier also disposed of the Twarda Tower and Moniuszki Tower office buildings in the Polish capital, remains the owner of the planned Young City waterfront redevelopment project in downtown Gdańsk.

P3 Logistic Parks adding two new assets to its Polish portfolio

Logistics space owner, developer and manager P3 Logistic Parks (P3) has finalised the acquisition of a total of three logistics parks in Poland and Romania from CA Immo. The transaction was first announced in October last year. Two of the parks, which comprise a combined 467,000 sqm of leasable space, are located in Poland – in Błonie in the vicinity of Warsaw and near Piotrków Trybunalski, close to Łódź – and respectively offer 177,000 sqm and 75,000 sqm of GLA.

Slovakian developer HB Reavis has signed one of the largest lease transactions in Poland’s office sector in recent months at its Konstruktorska Business Center, in Warsaw's Mokotów district. The building’s latest tenant is Poland’s leading insurer PZU, which will take up three of the building’s seven floors – a total of 18,000 sqm. PZU will relocate its back office operations to the new premises in May 2015. The company’s headquarters will remain in PZU Tower in the city centre.

A total of more than 43,000 new apartments were sold last year in Poland’s six largest residential markets – Warsaw, Kraków, Wrocław, Tri-City, Poznań and Łódź – according to a recent report by consultancy REAS. The figure was 20% higher than in the previous record years of 2007 and 2013, when 36,000 housing units were transacted, the study found.

Skanska starts ¤23m office scheme in Poznań

Logistics

Developer Skanska Property Poland has launched construction on its second office project in Poznań. Located in the centre of the city and called Maraton, the scheme will deliver more than 25,000 sqm of leasable space. The first phase of the development will comprise over 13,000 sqm of GLA and is scheduled to be completed in the last quarter of next year. The value of the first phase is estimated at around €23m.

Retail

Loan secured for ¤140m Kraków shopping centre

Developers Foncière Euris and Mayland Real Estate have secured €95m in bank financing from Bank Pekao and Bank Zachodni WBK for their planned Serenada shopping centre project in Kraków. total value of the scheme, which will be located in the northern part of the city, is estimated at €140m, with the developers planning to spend €45m of their own money on the development.

Immofinanz announces ¤37m mall in Krosno

Real estate developer and investor Immofinanz Group plans to develop its third VIVO!-branded shopping centre project in Poland, in the south-eastern city of Krosno. The investment, valued at approximately €37m, will be developed in cooperation with Acteeum Group and will comprise around 22,000 sqm of leasable retail space.

Dekada and PKP team up on retail investments

Warsaw-based retail space developer Dekada Realty and Polish State Railways (PKP) subsidiary XCITY have signed a cooperation agreement regarding joint development of two new railway station and convenience shopping centre projects. The schemes will be located in Konin in central Poland and in Mińsk Mazowiecki near Warsaw, and will combine transport and retail functions. The two developments are valued at a total of more than 68m złoty.

PHN gains partner for big logistics project near Warsaw State-owned real estate investor Polski Holding Nieruchomości (PHN) has signed a joint-venture agreement for the development of its 95,000-sqm Parzniew Logistic Hub project near Warsaw. PHN will build the scheme, located in the Pruszków area, in cooperation with Parzniew Partners, a company established by logistics space developers Menard Doswell & Co and Hillwood Europe.

Goodman developing Poznań Airport Logistics Centre

Logistics space developer Goodman has launched construction on the first building in its new Poznań Airport Logistics Centre project in western Poland. The warehouse will deliver 16,000 sqm of space in the second quarter of this year. Goodman has already signed the first tenant, which will occupy a combined 4,500 sqm of warehouse and office space at the facility.

Building land

Griffin acquires prime Warsaw site

Griffin Group has acquired more than 0.8 hectares of land in the Wola district of Warsaw, in a spot considered one of the most attractive investment sites in the city. Griffin plans to develop a major office project on there. The scheme will be developed in cooperation with Skanska Property Poland.

Segro acquires land for warehouse in Tychy

Warehouse and industrial space developer SEGRO has acquired 10 hectares of building land in Tychy, where it plans to develop its second project in the Silesian city. The scheme is expected to deliver a total of more than 40,000 sqm of production and warehouse space. The first units within the development could be completed by the end of this year.

Katowice in focus

KATOWICE IN FOCUS

Reinventing itself:

Katowice, the capital of Poland’s Silesian industrial heartland, is brushing off its image as a mining town and is looking toward the future. The city wants to attract more investment from the business services sector (there are 45 centres in Katowice already), and encourage small business. Mayor Marcin Krupa vows the city will remain engaged with investors, who will find the city’s labour pool “flexible” and “adaptive”.

Katowice: economy & business page 87

Mayor interview page 88

photo: Wojciech Wójcik (Forum)

History, culture, sights page 90

86 KATOWICE IN FOCUS

KATOWICE Katowice is a dynamically developing city of around 300,000 inhabitants, located in

The city of Katowice

is a partner of the Katowice in focus section.

the southern part of Poland. The city is also the heart of the Katowice Agglomeration, with a population of almost 2 million people and is an important educational, cultural and economic centre in Poland and in Central and Eastern Europe. Katowice regularly hosts the European Economic Congress, the biggest business event in this part of Europe. Long known as the centre of Poland’s mining industry, today the city is looking to attract investors from the business services sector.

Population: 304,000 (as of December 2013) Area: 165 km² Mayor: Marcin Krupa

Distance from main cities in Poland: – Warsaw 289 km – Kraków 79 km – Gdańsk 523 km – Poznań 372 km – Wrocław 195 km – Bydgoszcz 410 km – Łódź 194 km

International airport: Katowice

International Airport, 30 km north of the centre of Katowice.

Town rights granted: 1865

Katowice is the leading centre of the Upper Silesian Industrial Region,

Katowice in focus

the most densely populated urban agglomeration in Poland.

Major Investors

– PwC – Rockwell Automation – Capgemini – ING Services – IBM – Żywiec Group – Tauron – Unilever – Orange

Katowice awarded:

Katowice was awarded the Prime Property Prize 2013 in the category “Investor-friendly City” for the initiatives undertaken by local authorities to attract foreign investors.

Number of investors

with their own services centres in Katowice Agglomeration: 57

Total office space:

337,000 km²

Maximum CIT exemption for large companies: 25%

Size of labour market: Around

32,000 graduates in the Katowice Agglomeration enter the labour market every year (as of December 2013).

Unemployment Rate: 4.9%

Age structure:

Pre-working age: 14.4% Working age: 63.1% Post-working age: 22.5%

Average age:

42.96 years (as of December 2012)

Distance from majors cities in Europe: – Berlin 521 km – London 1565 km – Paris 1462 km – Rome 1501 km – Madrid 2743 km – Brussels 1224 km – Zurich 1157 km – Stockholm 1621 km

Connections to:

– Warsaw – Düsseldorf – Frankfurt – Dublin – London – Barcelona – Paris – Rome – Naples – Stockholm – Tel Aviv

Special Economic Zone:

Contacts: Strategic Investors Assistance Department Katowice City Hall, Rynek 1, 40-003 Katowice +48 32 25 93 823 pkis@katowice.eu; www.invest.katowice.eu

‘We believe in close and frequent contact with each investor’ –Katowice Mayor Marcin Krupa (see interview, page 88)

The Katowice Special Economic Zone, the largest Polish economic zone in terms of investment and employment. It is the perfect solution for companies that want to benefit from public support in the form of CIT exemptions calculated on the basis of investment expenditures made or created new jobs.

Foreigner in KATOWICE

‘ In Silesia all the major attractions are close at hand’

How do you find the local culture and people in your host city? – People are very welcoming, even more when they see you are trying to speak Polish. Locals are proud to be Silesian. People are hard-working and family remains the pillar of society. It is not by chance there is a city twinning between Katowice and Saint-Étienne, my home city in France. These two cities are bound by a coal-mining industrial past.

–Katowice resident Romain Bastie

What are the positive and negative aspects of living in Katowice? – Katowice is part of an ever-changing urban agglomeration. I have observed its metamorphosis for three years now. Nowadays the architecture of Katowice is really nice mix of old and new. On the other hand, parking in the city centre can sometimes be a strenuous task.

Number of students of higher education in Katowice Agglomeration: 107,000 Number of universities in Katowice Agglomeration: 26 Major universities:

– University of Silesia – Medical University of Silesia in Katowice – University of Economics in Katowice – Karol Szymanowski Academy of Music – Silesian University of Technology

Poland Today talks with Romain Bastie, a Katowice resident and French sourcing consultant.

What are the best things to do in Silesia? – In Silesia all the major attractions are close at hand. During summer I enjoy long strolls in the city parks. The lakes in the surroundings help to make water sports a valid option. Don’t forget to try the trout at the Złoty Potok summer festival in Częstochowa County.

What tips can you give other expats living in Katowice? – Be curious, but find your own way to immerse yourself in Silesian culture. Don’t forget to pay close attention to the routes of public transport: it’s easy to alight in a neighbouring city other than Katowice.

The heart of the new Silesia

KATOWICE IN FOCUS

Katowice is building on its industrial past and reinventing itself as a hub for business services

photo: Radosław Kaźmierczak

Despite not being the city’s major

gestion and offers the advantages of attraction, the market square in being part of a conurbation that relies Katowice, which has existed since the on a single urban labour market. 19th century, is a good point of deparAmong other strong advantages ture to capture the spirit of this metrop- cited by investors and the reports olis. The redevelopment of 150 hectares are the well-developed transporof the city’s central district is expected tation infrastructure, availability of to be the most extensive urban trans- office space, and strong support and formation of its kind ever made assistance from local authorities. in Central Europe. Katowice, the Under leadership of Katowice’s dediheart of the Upper Silesian Industrial cated Strategic Investors Assistance Region, is getting ready to take Department, the city works to create the next big step. the most comprehensive offer for each Renamed Stalinogród after Stalin’s investor, including a combination of death in 1953, Katowice regained incentives and help from the District its original name in 1956 and is Labour Office (workplace internships, now a dynamically developing city intervention works, reimbursement for of approx. 300,000 inhabitants. Each the expenses of equipping a workstayear Katowice hosts the European tion or adding supplementary equipEconomic Congress, the one of the big- ment, personalized training courses). gest business events in Central Europe. An ever-growing number of firms Located on the road between Berlin have established business service cenand Kraków, Katowice and the nearby tres in Katowice and other Silesian citsmaller city of Gliwice have built up a ies, among them PwC, IBM, Capgemini, reputation as the ‘Silesian Tigers’. The ING Services, Unilever and Orange. cities have acted like tow trucks, pulling The research and development secthe region out of an incipient stagnation. tor in advanced technologies is wellThe gap between the Silesian Tigers and represented by overseas stakeholders other major urban areas nearby shows including Rockwell Automation and how not all the cities in the region have Mentor Graphics. managed to convert to a post-industrial “Our company started its business economy in the face of the decline of in Katowice back in 2006. Rockwell the industrial white elephants that were Automation is a global player which built by the communist authorities in makes its investment decisions very the 1970s. Nevertheless, taken as whole, carefully. Locating its biggest CEE the Upper Silesian Industrial Region has manufacturing operations in the heart of Upper Silesia has proven to be very strength in numbers. According to a report by the successful,” said Wojciech Krygowski, Association of Business Service Leaders, director of Rockwell Automation’s an advocacy group for outsourcing global finance operations centre in firms, “Katowice is a city of young Katowice. “We have observed since and educated people with very good then how Katowice has been changing, knowledge of foreign languages that with its infrastructure getting better are ready to face the challenges set and better,” he added. In sum, due to the significant scale for them by employers from the business service sector. More than 107,000 of region’s yet-to-be-tapped investstudents study at universities located ment potential, Katowice is expected in the Katowice Agglomeration. to attract many more projects in the About 32,000 graduates with a vari- business services sector, becoming the ety of first-rate skills enter the labour leader in Poland in the coming years. market every year.” A bulletin published by the Gdańsk Job generator Institute for Market Economics came to In recent years the Katowice Special a similar conclusion. It found that the Economic Zone, which occupies an Katowice region excels in terms of its area of over 2,300 hectares, has suchuman resources pool (the number of ceeded in speeding up the restructurqualified employees and graduates) ing of the local economy. The Katowice and in labour costs. Katowice also con- Special Economic Zone constitutes a tinues to benefit from low traffic con- network of closely connected opera-

tions which has been largely made possible thanks to the contiguity of the 16 urban centres that compose the Upper Silesian Industrial Region. So far, the zone has attracted more than 200 businesses to Silesia. Companies have invested nearly €5.2 billion in the Katowice Special Economic Zone’s four subzones and have generated over 53,300 new jobs. In 2012 the zone took second place in Europe and 11th worldwide in a ranking of best special economic zones by the Financial Times. Tomasz Konik, a partner at Deloitte Central Europe, explained: “The rising percentage of investment projects within the Katowice Special Economic Zone is being driven by businesses already in the zone reinvesting their profits. And there’s no better publicity than a satisfied investor who invests more.” “The Katowice Special Economic Zone is engaged in creating good practises on the ground of ambiguous zoning regulations. It manages to combine the function of a zone manager with advisory and investor support,” explained Agnieszka Tałasiewicz of consultancy EY. The extension of the Katowice Special Economic Zone’s term of operation until the end of 2020 has created an environment that will continue to appeal foreign investors until the end of the decade. The ongoing transformation of Silesia would not have been possible without the contribution of local investors who were the first to believe in its potential back in the 1990s. Teresa Mokrysz, head of the Mokate Group, a coffee and tea producer based in the region, explained: “The Silesian economic boom has been the result of businesspeople who took calculated risks in making investment decisions.” In 2000, Mokrysz was awarded the title of ‘Most Entrepreneurial Woman in the World’ by the International Association of Women Entrepreneurs and Professionals. “Foreign investors that come to our region should be aware that they will have a terrific workforce made of educated and experienced persons at their disposal,” she said. “Investing in Silesia increases a company’s overall chance of success.” by Giuseppe Sedia

Over the last

decade Katowice has put a lot of effort into building a positive image. The ‘City of Gardens’ campaign related to the European Capital of Culture 2016 competition exemplifies how much the city has invested in re-branding itself to increase its appeal. The garden metaphor stresses the need for citizens to take care of Katowice as it shakes off its grim industrial past. The big cosmetic changes are important, but many historic sites have been preserved. The creation of the Industrial Monuments Route in 2006 shows how Silesian cities can look to the future without denying their roots.

88 KATOWICE IN FOCUS

Adaptive, proactive and flexible Newly elected Katowice Mayor Marcin Krupa explains why the capital of Silesia isn’t just for mining anymore

What is the city’s strategy for attracting investment? Why have you decided to focus on the business services sector?

Mayor Marcin Krupa says Kato-

wice offers investors real estate tax exemptions, employment support, training facilities, marketing support, public transportation adjustment and accommodation for the investor’s employees.

The city of Katowice

Katowice in focus

is a partner of the Katowice in focus section.

The city’s strategy focuses on portraying itself as a strong economic centre and an attractive, business-friendly place to do business. We have a proactive attitude – we acquire information for investors, contact them, provide them with our independent market analyses and location-specific data, organise site visits and hold meetings with numerous organisations, including the universities and regional authorities. In addition, we offer numerous incentives. Among others, these include: real estate tax exemptions, employment support, training facilities, marketing support, public transportation adjustment and accommodation for the investor’s employees. Investors can also take advantage of financial help from the Poviat Labour Office and of CIT exemption within the Katowice Special Economic Zone. We believe in close and frequent contact with each investor. Our engagement does not end with the investor’s decision to invest in Katowice, because we believe that our present investors are the best source of growth. Thus the Katowice strategy also includes close cooperation with and long-term support for investors. We have chosen to focus on the business services sector because it provides jobs for highly skilled employees, graduates and students. The entry of this sector has also significantly diversified our economy, making the city even more attractive to investors.

What do you consider to be Katowice’s biggest advantage when it comes to attracting investors? I have no doubt that the professionally skilled labour pool, which is characterized by its high adaptive nature, flexibility and unique work ethic, is Katowice’s biggest advantage. Investors in our city have access to two million people from the entire Katowice Agglomeration. It is also clear that the Katowice Agglomeration has a competitive edge over other Polish cities. There are 26 universities with different educational profiles within the borders of the Katowice Agglomeration.

What do you consider to be the biggest challenges facing Katowice at the moment? These days Katowice and other Silesian cities are confronted with challenges regarding the unprofitability of coal mines. Katowice has been trying for years to change the image of Silesia, for example by diversifying the economy. That’s why we are focusing on the development of the business services sector, as well as supporting small and medium-sized enterprises and the high-tech industry.

You were just recently elected mayor – what are the most gratifying and most challenging things about your new job?

I should also mention Katowice’s other advantages, such as its perfect location and well-developed transportation network. Not only do we have the best road network in Poland, but we also have also access to three international airports located within a short distance.

The most frequently touted cities for the business services sector are Kraków and Wrocław. Why should investors choose Katowice over these cities? Katowice and the Katowice Agglomeration have many c ompetitive advantages. Without denying the investment attractiveness of Kraków and Wrocław, I should underline the uniqueness of Katowice. The strength of Katowice lies in its people and their willingness to adapt to ongoing changes. In addition, the market saturation of the business services sector in Kraków and Wrocław is very high, making it difficult for companies to find new employees. The employers must encourage employees, guaranteeing them higher salaries, and they have to bear in mind that the high staff turnover rate may threaten the continuity and quality of their services. As the business services sector strengthens its position in Katowice, the real estate market is also growing.

Indeed I have been the mayor of Katowice for just a few months, but please remember that not so long ago I had had the honour of being the deputy mayor for four years. Therefore performing the duties of the office is nothing new to a certain extent. I must admit that the most gratifying thing about this job is the possibility of stimulating the development of Katowice, and by the same token, improving the quality of life as people build the city.

What is your favourite site or cultural activity in Katowice? I like visiting a very unique, historic place in Katowice, namely the Nikiszowiec estate – designed and built for miners. The Nikiszowiec estate was included in Poland’s list of historical monuments. The area is vibrant: numerous cafés have opened here, fairs and art exhibitions are organized as well. Concerning my favourite activity in Katowice, I have to admit that music has always been my great passion and that is why I must say that every single event held in the Polish National Radio Symphony Orchestra (NOSPR) is a truly wonderful experience. The new seat of the NOSPR is not only an example of outstanding structural design, but it is also one of the best concert halls in the world. The NOSPR, together with the Silesian Museum and the International Congress Centre, built in the area of the former ‘Katowice’ coal mine, are new symbols of the change in Katowice happening right before our eyes.

nazwa dziaĹ&#x201A;u

neo-gothic DESIGN The Church of St. Peter and Paul was built

katowice IN FOCUS

Katowice in focus

is a partner of the Katowice in focus section.

UTOPIAN PROJECT Inspired by the ideas of British urban

planner Ebenezer Howard, the nearly utopian urban project of Giszowiec took the shape of a garden city in 1907. The coal miners’ settlement still displays many of its cottage-like houses (below) surrounded by green areas. Its main alleys lead to a marketplace where you can find a tiny art gallery devoted the oeuvre of local folk painter Ewald Gawlik.

spodek arena

DISTINGUISHED academy

Spodek: The arena's main hall can accomo-

Located in a neo-Gothic building with a red brick facade, the Karol Szymanowski Academy of Music in Katowice is one of the most prestigious higher education schools in the region. One of its most distinguished graduates is Wojciech Kilar, who worked on the score of Francis Ford Coppola’s ‘Bram Stoker’s Dracula’ (1992). The academy is also home to the Museum of Silesian Organs.

date over 11,000 people. Championships and volleyball, basketball, ice hockey matches, musical concerts, special events, scientific conferences, circus performances, ice shows and trade fairs are held there. Tickets for concerts or sporting events are usually readily available, but if the event you choose is sold out, you can just enjoy the edifice at night, when it undergoes a multicoloured illumination.

art gallery The BWA Contemporary Art Gallery’s

exhibition space is among the largest exhibition halls of its kind in Poland. Founded in 1949, the gallery immediately became one of the major exhibition spaces to display artworks in the Socialist Realist style. Nowadays, BWA has juggled presenting new international trends and promoting the work of local artists. More info: bwa.katowice.pl

photos: Barbara Kubska (archiwum Galerii BWA), Wojciech Wójcik (Forum), Radosław Kaźmierczak, Monika Winkler

The city of Katowice

according to the Latin cross design in the late 19th century as the seat of the second Roman Catholic parish in the city. The building was designed by diocesan architect Joseph Ebers, who lived in Wrocław. The neo-Gothic furnishings have been almost entirely preserved.

NEXT STOP, REDEVELOPMENT Completed in 2013, the new Katowice railway station is more than just a place to catch a train. The facility, built to replace an ageing building that had been in operation since 1972, includes a huge new mall and an underground bus station. The complex fully integrates local, national and international transportation. Streets, sidewalks and public spaces around the station have been revamped as well, and the area now includes shops and entertainment venues.

wooden church Located at the highest point in Kościuszko Park is the Church of St. Michael the Archangel (Kościół św. Michała Archanioła). The wooden building, erected in the early 16th century and moved to this place from another part of Silesia in 1938, is the oldest monument in Katowice, with a 16th century pulpit and an impressive bell tower.

Nikiszowiec estate The historic Nikiszowiec estate was

included in the list of Historical Monuments. This status is awarded to monuments of special historical value and of large significance to the cultural heritage of Poland. Designers of the Nikiszowiec estate, Emil and Georg Zillmann, created an almost self-sufficient city which, apart from residential buildings, also comprised a church, hospital, preschool, schools, stores, an inn, and even an electric laundry and dry cleaner's and a photography studio.

A WALK IN THE Park Kościuszko Park is one of the most frequented parks in Katowice. The flowerbeds, in English-garden style, and gracious pergolas give it an elegant atmosphere. Take a stroll along its paths, some of which are lined with sculptures, and don’t forget to pay a visit at the parachute tower, a 40-metre-high monument that was built in 1937 for training paratroopers.

katowice IN FOCUS

92 katowice IN FOCUS

Katowice in focus

is a partner of the Katowice in focus section.

WORLD-CLASS CONCERT HALL

brew MASTERS The Tyskie Brovarium (formerly the Tyskie Brewing Museum) is located in the town of Tychy, around 10 km south of Katowice. A guide accompanies visitors through the entire brewing process inside the neo-Gothic church that currently functions the museum. During a 2009 plebiscite, the brewery complex was voted as one of the ‘Seven Architectural Wonders of the Silesian Voivodship’. More info: tyskiebrowarium.pl

The new building of the Polish National

Radio Symphony Orchestra, erected on the grounds of a former coal mine, is a world-class, 25,000 square-metre concert hall capable of accommodating around 1,800 people. The square in front of the building was named after Polish composer Wojciech Kilar, who spent most of his life in Katowice. The construction of this edifice began in 2012. Today, we can admire the effects of the work of hundreds of involved people; specialists in construction, architecture, and acoustics, who put a lot of time and heart into making this new seat one of the best in the world. The great concert hall, made of birch wood, is one of the best in terms of acoustics in the entire world. To achieve this effect the main architect, Katowice’s very own Tomasz Konior, teamed up with Japanese company Nagata Acoustics. The facade of NOSPR, through the use of bricks and characteristic colours, refers to Katowice’s historic Nikiszowiec estate. The concept of the new NOSPR seat by the Konior Studio team is a development of a project awarded first prize in an international architectural competition in 2008.

STRIKING SILVER

open-air museum

The Historic Silver Mine in Tarnowskie Góry is listed in the European Route of Industrial Heritage. It was turned into a museum in 1976. The cage descent down the pit is followed by a circular underground tour including a short passage by boat. The pit bank hosts the mining museum as well as a collection of steam driven machinery. Due to ongoing renovations the site will be available for tourists starting in April 2015. More info: kopalniasrebra.pl

(right) is an open-air museum just outside of Katowice in the city of Chorzów. Visitors can take a stroll around a hundred rural buildings, including cottages, granaries and shrines. The Grzawa windmill became the set of Lech Majewski’s art-house film ‘The Mill and the Cross’ (2011), which was inspired by the painting ‘The Procession to Calvary’ by Pieter Bruegel the Elder. More info: muzeumgpe-chorzow.pl

The Upper Silesian Ethnographic Park

photos: Wojciech Traczyk, Marek Skorupski, Marek Maruszak, Wojciech Matusik, Jan Włodarczyk (all Forum)

The city of Katowice

International Congress Centre The building was constructed next to Spodek Arena. This is a multifunctional premium-class facility with a total floor space of 36,000 sqm, well-connected with Spodek Arena. 15,000 people will be able to participate in domestic and international events such as congresses, conferences, concerts, sports events or small banquettes, all in one place and at the same time.

BAROQUE PALACE The Castle of Pszczyna is one of the

architectural gems of Silesia. Built in the 15th century as a Gothic structure in a small town south of Katowice, it was turned into a Renaissance residence before it became a three-wing Baroque palace in the 18th century. Climb the Grand Staircase and don’t miss the sumptuously decorated Chamber of Mirrors and the Royal Apartment where most of the original furnishings have been preserved.

silesian history The Silesian Museum will relocate its huge collection to a new building in 2015, after it was temporarily hosted by the former Hotel Grand in Katowice. Erected near the famous Spodek, the Riegler Riewe Architekten project is a discreet but impressive exhibition space built underground. The interesting history of the region and an assortment of high-quality paintings make it worth a visit. More info: muzeumslaskie.pl

SLICE OF LIFE The Museum of Bread, located in the small

town of Radzionków, just outside of the city of Bytom and not far from Katowice, is the only such museum in Central Europe. Guests have the opportunity to prepare and bake their own dough according to local traditional methods. The museum archive includes a huge collection of postcards, machines, devices and bakery-related artefacts. More info: muzeum-chleba.pl

ARCHITECTURE FOR INFORMATION Built as part of a redesign project for

the University of Silesia and Universtiy of Economics, the Scientific Information Centre and Academic Library (CINiBA) is one of the most architecturally striking buildings in Katowice. The edifice was designed to reference the redbrick buildings nearby. The sandstone panels are separated by narrow windows, which diffuse the inside with light.

94 HISTORY

It happened in ... April April 7, 1995. The first line of the Warsaw Metro opens

Warsaw’s long wait

A crowd gathers

at Wilanowska station for the opening of the first line of the Metro, Warsaw’s underground, on April 7, 1995. The second line of the Metro, which will run east-west under the Vistula River, is due to open sometime this year.

for a subway ended on April 7, 1995 when the first section of the city’s underground Metro system opened. Today, the network has an annual ridership of over 147 million and boasts one of the highest rider-satisfaction rates in the world. It only took 167 years. In 1828, the Polish architect Adam Idżkowski, inspired by a similar project in London, hoped to connect Warsaw’s right and left banks of the Vistula River through a tunnel that went beneath the river. Idżkowski’s project was never carried out. An underground railroad was proposed in 1925, and work started two years later, but the onset of the Great Depression halted the project. During the 1930s, as Warsaw’s population climbed above the one million mark, another underground rail network was proposed. The system, with two lines that intersected and covered over 46 kilometres, was in some ways the blueprint for Warsaw’s modern underground network. Work began around 1938, but was interrupted by the war. What little that had been built was destroyed during the Warsaw Uprising. During the communist era, Warsaw’s Metro was at the mercy of Soviet-style bureaucracy, which is to say there was plenty of talk and almost no action. In 1950, state authorities proposed a deep underground rail network that also included parking lots and military bases. The ambitious plan, which would also cross the Vistula, began in the summer of 1951. It was abandoned two years later, after the death of Stalin. The 700 metres of tunnel that had already been carved out of the ground would not be touched again until the early 1990s. The history of Warsaw’s Metro system, up until the end of the 20th century, was one of grand ideas, numerous attempts and few successes. In 1995, Warsaw finally received the subway system it long deserved. This year, the Metro’s second line is due to open. It will run from the Praga district, in Warsaw’s east, to the Wola district, west of the city centre, connecting both sides of the Vistula and finally realising the dream Idżkowski had nearly 200 years ago.

by Gabriel Rom

photo: Piotr MaĹ&#x201A;ecki (Forum)

96 HISTORY

Eyewitness: 100 years of history As real estate business giant David Mitzner approaches his 100th birthday, Poland Today looks back at some of the events he has witnessed

photo: Apollo Rida

‘I was sure from the beginning that Poland would be an excellent place to do business’

For our full interview with

David Mitzner, visit poland-today.pl

2014 was a year

of commemoration for Poles, who marked several significant anniversaries, from the German invasion of 1939 to the end of the communist regime. But for David Mitzner, a Warsaw native who turns 100 this April, it was a year of memories. The real estate magnate, who founded Rida Development in the United States and Apollo-Rida Poland, lived through it all first hand, a witness to the extremes of Polish history and a business leader during its most recent rebirth. Mitzner was born in 1915 – while World War I was raging – to religious Jewish parents in a modest house on Miła street, in Warsaw’s Jewish neighbourhood. Growing up in a newly independent Poland after the war, Mitzner began a broad education in both religious and secular studies, learning Polish, Yiddish, Hebrew and Aramaic. One of his earliest memories is singing happy birthday to Marshal Józef Piłsudski in Warsaw – he remembers that Piłsudski's daughter Jadwiga accompanied her father that day. Mitzner was drawn to business, and he quit school in the fifth grade to work for his father, who ran a successful hosiery factory. He began spending most of his time in Lwów (now Lviv, Ukraine), which was then part of the Polish state. Business consumed his life, and he took charge of the factory’s distribution.

When the country fell to the Nazi invasion in 1939, Mitzner’s Poland was divided: Warsaw on the German side, and Lwów in Russian hands. To support his parents, Mitzner began smuggling inventory from Warsaw to Lwów, where he could sell it and send the proceeds back home. Bribing accomplices along the way, Mitzner was able to provide for his family for some time. Although Mitzner was able to pass as a non-Jew, the situation worsened, and his operation became more difficult. In 1940 he was arrested by the Russian authorities and sent to a Soviet gulag where, he thought, he would face certain death. The camp guards said as much: “Here you’re gonna live, you’re gonna work, and you’re gonna die!”, they told him, according to a biography of Mitzner by Polish journalist Konstanty Gebert. But as Mitzner would later realize, the arrest probably saved his life; almost all of the Jews who remained in Warsaw were ultimately killed, including his mother and his sister Tosia. Soviet labour camps did not have the explicit function to kill their prisoners, as the Nazi death camps did, but millions died all the same. It was through sheer luck, cunning and perseverance that Mitzner survived. After eight harrowing years – three more than his official sentence – Mitzner was freed,

‘ANYTHING WAS POSSIBLE’ In the decades after he lost his family, his country and his freedom during World War II, David Mitzner built a real estate empire in the United States. “Returning almost half a century later, I knew anything was possible,” Mitzner said. “I found a country brimming with opportunity. I was sure from the beginning that this would be an excellent place to do business, even if many others were much more sceptical. And it turned out I was right.”

and was sent to Alma-Ata, Kazakhstan. When he finally made it back to Warsaw, it was only to find his home town ravaged by war. “After eight years, I was back home, and all around, there were ruins, just ruins ... I could not even find my family graves from before the war. There was nothing for me here.”

American dream Like many Polish Jews who had managed to survive the war, Mitzner left Poland as quickly as possible. When legal emigration proved impossible, he drew on his past life and made up a new occupation for himself: rabbi. With the right papers, he secured passage to New York, by way of Malmö, Sweden and Montreal. With $17 in his pocket and not a word of English, Mitzner had arrived at his new home. By 1951, Mitzner was back in the hosiery business, in New York’s famed Lower East Side garment district. A decade later, in between a marriage and the birth of his two sons, he founded Rida, the firm that would become the multinational company he still leads today. The first years were difficult and the industry was in constant flux, but Mitzner had the wherewithal to ride the tides: the risqué emergence of fishnet stockings in the early 1960s, the counter-trend of opaque stockings a few years later and even the introduction of polyesters in the 1970s. By then, Mitzner had made his first million and began the transition from hosiery to real estate that would define the rest of his career. Mitzner was gradually building an empire, buying, developing, and selling properties in Texas and Florida. Meanwhile, the communist regime in Poland was opening up, and in 1986 Mitzner paid his first visit to the country of his birth in nearly forty years. As the old bureaucracy was slowly torn down and opportunities emerged, Mitzner’s firm became a pioneer of foreign investment in Poland. In the years since, Apollo-Rida Poland has been a major developer of commercial, industrial and retail properties, including the largest real estate acquisition in the history of Central Europe – all of it led by a native son, reaching his second century, who has truly seen it all.

by Yoni Wilkenfeld

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SCIENCE & TECHNOLOGY

Pressing the right buttons Though it began in the 1980s with bootlegs and bargain games, Poland’s video game industry is now producing world-class titles

As usual, the film industry gets

Wojciech Brzeziński is

a journalist with Polsat News, and a proud geek. He’s the creator of ‘Horyzont Zdarzeń’, the first weekly science and technology news show on Polish TV and the author of a number of technology-related articles in weekly newspaper Tygodnik Powszechny and monthly magazine Logo.

all the attention. When three Polish movies and five Polish film professionals were nominated for the Academy Awards this year, the media were only a few breathless commentaries away from announcing a national holiday. Yet when only a month earlier three other products of Polish pop culture were nominated for their industry’s ‘Oscars’, hardly anyone noticed. But then again, the Polish press never really understood video games.

Digital earthquake When you arrive at the birthplace of one of the nominated games, you can’t help admire a certain communist charm to the surroundings. The building’s reception area may have been redecorated, but the cheap tiles do little to disguise the fact that the whole, gloomy prefab office block has been standing here since the 1970s. The only elevator barely fits four people, but once the contraption shudders to a stop and the creaking door opens, you’re in a different world. Or rather a factory of worlds, all there on dozens of computer screens. This floor is the office of 11 Bit Studios, an up-and-coming video game company, with a short resume of well-received if not exactly world-shattering titles. However, their most recent product has caused something of an earthquake in the industry. ‘This War of Mine’ is a war game, but not in the traditional sense. Instead of putting you in the boots of a gung-ho one-man army, the game makes you weak and insignificant. As a civilian in a war-torn city, you have to make sure that you live through the horror. Most of the time you don’t. Sometimes you do, but at a horrendous moral cost: making sure you have enough to eat for one more day could mean someone else doesn’t. The game excels at making you uncomfortable. “We felt that games have matured as a medium,” says Paweł Miechowski, 11 Bit Studios’ head writer. “They’ve been around for 30 years, they’ve been around all our lives. It became obvious to us that video-game storytelling could finally start using tools appropriate for adult audiences.” The reception has been unprecedented. The Washington Post, The New

Top-selling Polish games (globally) 1. ‘Dead Island’

5m copies / producer: Techland

2. ‘Sniper: Ghost Warrior’

3m copies / producer: City Interactive

3. ‘The Witcher 2: Assassins of Kings’

2.6m copies / producer: CD Projekt RED

4. ‘The Witcher’

2.4m copies / producer: CD Projekt RED

5. ‘Bulletstorm’

1.43m copies / producer: People Can Fly

6. ‘Call Of Juarez: Bound in Blood’ 1.37m copies / producer: Techland

7. ‘Two Worlds II’

0.95m copies / producer: Reality Pump Studio

Statesman, The Guardian, Berliner Zeitung – all featured stories about the game, often in sections that deal in subjects far-removed from entertainment. The game wasn’t a particularly expensive production, certainly not by the standards of an industry whose big-budget blockbusters routinely cost more than major Hollywood action films. But for a game so unusual to break even – within 48 hours of its release – is still a major achievement. ‘This War of Mine’ was nominated for The Game Awards as one of the Games for Change. Another quirky Polish title, a supernatural, meditational crime story ‘The Vanishing of Ethan Carter’ from a tiny, eight-man Warsaw studio called The Astronauts, was named one of the five best independent games of the year. And the true juggernaut of the Polish games scene, the third edition of ‘The Witcher’ series, won in the Most Anticipated category, leaving ‘Batman’ in the dust.

Beginner’s level But Poland’s path to this success was so long and difficult it would give Bruce Wayne pause for thought. Polish computer games began showing up in the 1980s, made, as was the case with their Western counterparts, by hobbyists, computer scientists and students with time on their hands. There were some

initial commercial successes: all the way back in 1989, as the Polish People’s Republic was giving way to a capitalist Poland, a company called California Dreams lived up to its name and scored an early success, when its three-dimensional Tetris clone, Blockout, became a minor hit and was released in the United States. But any initial headway was soon lost. The following decade proved to be extremely difficult for the nascent industry. The early 1990s were a time of rampant piracy; every legal copy of a game was outsold by bootleggers at a ratio of several hundred to one. The few companies that attempted to make games at that time soon found themselves fighting for survival. Virtually none of them lasted. It’s telling that the two companies which would become the flagships for the Polish industry spent that period selling other people’s products. CD Projekt, the future makers of the ‘Witcher’ series, and Techland of ‘Dead Island’ fame got their starts in 1994 and 1991 respectively by importing software from abroad. Slowly, things began to change. Partly due to rising incomes and partly thanks to a relentless campaign to convince people of the merits of legal software, the market became viable. In the final years of the 20th century, a number of fresh new studios began popping up around the country. At first their main products were bargain-bin games, usually inspired by bigger, successful and far more expensive Western productions. But as unglamorous as those games were, they proved profitable. Then, an abrupt change: the slow grind to profitability, combined with the rising skill level and confidence of the Polish game makers, resulted in a torrent of high-profile productions. Games like ‘Sniper: Ghost Warrior’, ‘Two Worlds’, ‘Call of Juarez’ and ‘Painkiller’ all achieved international success, proving that Polish games could hack it in English-speaking markets.

By the book But the most surprising success story was also the most unlikely. When CD Projekt, by now an established distributor with a fledgling game production studio, bought rights to the ‘Witcher’

SCIENCE & TECHNOLOGY

by Wojciech Brzeziński

‘The Witcher 3: Wild Hunt’ won in

the Most Anticipated category at the 2014 Game Awards. The ‘Witcher’ series has been a hit for games developer CD Projekt RED: together the first two games have sold over 5m copies worldwide. The franchise is based on a series of books under the same title by author Andrzej Sapkowski.

‘The strength of the Polish video games industry doesn’t rely on home sales. Nearly all Polish titles are written in English first, for a global market’

High scores 620%: the rise in 11 Bit Studios’ share price within a month of the release of ‘This War of Mine’

$102.9bn: the projected value

of the global video games market by 2017

1.6bn: the number of people who play

video games and mobile games worldwide.

$280m: the estimated value

of the Polish video games market Sources: Warsaw Stock Exchange, Newzoo.com

photos: CD Projekt Red

series of novels by Andrzej Sapkowski, few industry observers believed they would be quite this successful. The books were extremely popular in Poland, well-known in surrounding countries such as Russia or the Czech Republic, but virtually unheard of in the West. Nevertheless, the game and its sequel proved tremendous successes and even drove sales of the books themselves in the West. The second game got a high-profile boost when then Prime Minister Donald Tusk presented it to Barack Obama during the US president’s visit to Poland as an example of Polish ingenuity. Obama reportedly never played it, though. Acknowledgement of the heights that the Polish company had reached came two years ago, when the ‘Witcher’ team were invited to be keynote speakers during the premiere of Microsoft’s newest gaming console, the XBOX One. The Polish game was to be a driving force behind a multi-billion-dollar flagship product from one of the world’s biggest corporations. That’s as far removed from repackaging other people’s games as it gets. But the future looks brighter still. Poland ranks as the 23rd biggest games market in the world, right behind countries such as Belgium and Russia. But the strength of the Polish industry doesn’t rely on home sales. Nearly all Polish titles are written in English first, for a global market. And the companies are getting braver. CI Games, formerly known for churning out lots of cheap but profitable games, has invested nearly 40m złoty into ‘Lords of the Fallen’, an action-fantasy game. To put that in perspective, the game’s budget makes it the thirdmost expensive Polish entertainment product ever, behind the films ‘Ogniem i Mieczem’ and ‘Bitwa Wiedeńska’, both expensive, historical cinematic epics. The risky move – the game was not based on any well-known franchise – proved overwhelmingly successful, and the game began bringing in a healthy profit within days. So, who knows? Maybe, once his term is up, President Obama will finally give the Polish game in his library a try. Millions of gamers around the world are doing that already.

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Climbing for freedom For 20 glorious years Poles dominated Himalayan mountain climbing, though at a terrible cost

Why do people

‘Climbing gave these doughty Poles a level of freedom that nothing else could’ ‘Freedom Climbers’ is a

review of the most important climbs and biggest characters during Poland’s Golden Age of mountaineering, from the mid-1970s to the mid-1990s. It paints a vivid picture of the enigmatic personalities that risked everything to grasp a special kind of freedom, found only in the world’s tallest peaks.

ABOUT THE AUTHOR Bernadette McDonald has written eight

books on mountaineering and mountain culture. She is the founding vice president of Mountain Culture at The Banff Centre in Canada and was director of the Banff Mountain Festival for 20 years. She has won numerous awards, including Grand Prize at the Banff Mountain Book Festival and the Boardman Tasker Prize for ‘Freedom Climbers’. She has also won Italy’s ITAS Prize for mountain writing and India’s Kekoo Naoroji Award for Mountain Literature (three times). She is a recipient of the Alberta Order of Excellence, the King Albert Award and the Queen’s Golden Jubilee Medal. She lives in Alberta with her husband.

climb mountains? An avalanche on Everest on May Hiking up a large hill for exercise’s sake 27, 1989 killed five Polish climbers. is one thing, but battling icy winds, Kukuczka and Rutkiewicz both died avoiding avalanches and navigating in the Himalaya – on Lhotse (the fourth narrow, slippery ledges thousands of highest mountain in the world) in 1989 metres high is quite another. All for and on Kangchenjunga (the third higha few moments of lonely glory on est) in 1992, respectively. top of a windswept peak. Admittedly, Why did they do it? McDonald makes the views are beautiful and the brag- the case that climbing gave these ging rights are forever – but are they doughty Poles a level of freedom that worth risking one’s life? nothing else could – their successes For a rare few, such climbs are not meant that the communist government only worth the ultimate price – they are was happy to let them travel internatheir reason for living. And so it was tionally. In the Himalaya or the Hindu with a generation of Poles who from Kush, Poland’s oppressive authorities the 1970s to 1990s dominated moun- were not breathing down their necks. tain climbing. Figures such as Andrzej It offered a level of economic freedom Zawada, Wojciech Kurtyka, Jerzy as well – many of the climbers used their Kukuczka, Krzysztof Wielicki, Artur rappelling skills to gain well-paying jobs Hajzer and of course the indefatiga- painting the many chimneys in Poland’s ble Wanda Rutkiewicz, are household Silesian industrial heartland. The expenames in Poland, though internationally ditions also gave them an opportunity to engage in illegal trade: Poles would they are far less well-known. It is good news then that Bernadette often fill up their caravans of trucks McDonald, a Canadian author of sev- to Asia with supplies they didn’t need, eral mountaineering books, has taken selling them off and using the proceeds it upon herself to tell their story to to fund more expeditions. an international audience. Her passionate introduction to the history of Ambitious route Polish alpinism – ‘Freedom Climbers’ – The task McDonald has chosen is an is a must-read for anyone who needs ambitious one: covering the most a primer on Poland’s mountain climb- important climbs and climbers from the ing legacy and the main characters Golden Age of Polish mountaineering. who played a role in it. With so many interweaving stories, the Though it touches on the lives of many narrative can sometimes feel jumbled, of the most important Polish climbers while those unversed in the characters of that period, the book devotes most may have a hard time keeping track of its time to Zawada, Kukuczka, Kurtyka of who is who. Ultimately though, the and especially Rutkiewicz, whom book succeeds in describing Poland’s McDonald knew personally. Among her huge contribution to mountain climbmany other achievements, Rutkiewicz ing, while at the same time painting was the first woman to reach the sum- a colourful picture of the personmit of K2, widely regarded as the most alities of the time through anecdifficult mountain in the world to climb. dotes that are sometimes humorous, Zawada started the Polish trend for win- sometimes tragic. ter climbing, leading a 20-climber winter Poland’s Golden Age of mounascent of Mt Everest in 1980. Kukuczka taineering is over – with democracy was the second person ever to climb and capitalism firmly established in all 14 mountains in the world that are the country now, it seems fewer Poles above 8,000 metres – each time either are willing to take the risks necessary climbing in winter or via a previously to achieve the heights of the climbers unclimbed route. Kurtyka gained an of the previous generation. But the international reputation as Poland’s mark these brave men and women left greatest climbing mind. In Poland, their on the mountaineering world, and on triumphs gave their oppressed country- Poland, is indelible. Ultimately, they reached a new summit of climbing men something to be proud of. But the accolades came at a hor- achievement. Now it is left for others rifying cost. Three Poles died on K2 to follow their trail up the mountain. in 1986 within the span of a month. by Andrew Kureth

101 photos: Goran Stanzl (Pixsell), Irek Dorożański (Forum), Stringer (Reuters)

SPORT

Poland’s handball squad earns bronze at World Championship Though they came into the tournament an underdog, Poland’s national handball team surpassed expectations at the 24th IHF World Championship in Qatar, taking third place and the bronze medal. The Poles began their campaign on a sour note with a nail-biting loss to Germany in the group stage of the tournament. Then the squad hit its stride. The Poles won five of their next six matches, beating Saudi Arabia, Croatia, Argentina, Sweden, and Russia. But in the semi-finals, the Poles lost a heartbreaker to home favourites Qatar. The ‘biało-czerwoni’ (red-whites) moved on to the third-place match, where they edged out Spain 29-28 in a fantastic overtime finish. In a tournament of exciting games and close finishes, the Poles repeatedly squeaked by their opponents at the ends of matches. Against bitter rivals Russia, Adam Wiśniewski scored the go-ahead goal at the very last second. Despite the disappointment of losing in the semi-finals, the Poles’ thrilling third-place finish in Qatar was celebrated by both fans and teammates alike. “Playing a semi-final is not a routine for Poland, it’s routine for teams like France and Spain,” Polish goalkeeper Sławomir Szmal told Doha’s The Peninsula newspaper. France took the gold, winning their fifth title, beating Qatar. In 2016, Poland will host the European Men’s Handball Championship.

by Gabriel Rom

Miner issue:

Poland captures Hopman Cup The Poles made history in Melbourne, Australia at the 2015 Hopman Cup, beating the US in matches, 2-1. It marked the first victory for Poland at the tournament. Polish superstar Agnieszka Radwańska helped the Poles take home the cup after beating American Serena Williams 6-4, 6-7, 6-1 in a threeset slog of a match. “I’m just very happy that I could come Kamil Stoch wins back after that second set and play my big in Zakopane good game in the third set. Wins like this always give a lot of confidence.” Poland native and ski-jumping star Radwańska told the press after her win. Kamil Stoch leapt to a World Cup win In the mixed-doubles match that in front of his home crowd in Zakopane the Poles won to clinch the tournain January. Stoch, a two-time Olympic ment, Radwańska and Jerzy Janowicz gold medal winner, beat out Stefan overcame Americans Williams and Kraft of Austria and Severin Freund John Isner. Williams cracked her racket of Germany for the top honour at in half after the match in frustration, the competition. Stoch had jumps and called the chief umpire a “liar”. of 134 and 133 metres on the slopes In her first victory over Williams of Zakopane, which gave him a total of in nine attempts, Radwańska has rein276.2 points, just 2.3 ahead of Kraft. vigorated her reputation as a force to After his recent victory, the high-flying be reckoned with in women’s tennis Stoch now holds 8th place in the over- and a major contender in future grand all World Cup standings. At the end slam tournaments. of February, Stoch was due to compete in Falun, Sweden, where he won a gold medal in 2014. He looked to continue his rise in the world rankings, trailing seventh-place Noriaki Kasai of Japan by 223 points.

Poland’s mining sector is inefficient and unprofitable. Eventually, some mines will have to be closed and some miners will have to be laid off. But miners have been digging in their heels with protests across the country, and for now it looks like the flood of subsidies and benefits to the industry and its employees will continue. see page 54

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EVENT rEViEw As part of our mission to bring Poland to the world and the world to Poland, Poland Today initiates, organises and grants media patronage to conferences that we believe help us achieve that goal. In this section, we provide a round-up of the conferences we have been a part of, with a view to our providing an international perspective on Poland’s story.

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conference

Putting all the right pieces together Wrocław is one of Poland’s most business-friendly cities, but it needs to continue to foster connections between idea formers, businesses and academia to stay ahead. see page 104

conference

In this issue, we review Poland Today con- Opole gets the green light ferences that discussed what the southern Polish city of Wrocław had to do to With a workforce proficient in German and an advantageous location, keep its business-friendly reputation, the city is putting itself on the business services map. see page 106 as well as events that looked at investment opportunities in Opole and Gliwice. We also look at Dąbrowa Górnicza’s efforts conference to attract automotive industry investment Destination: innovation and a Netherlands-Polish Chamber of Commerce event that raised tens of thou- Poland has gained extra time to attract automotive investment. sands of złoty for a very worthy charity. Now it needs to speed up R&D in the sector. see page 108

conference

Climbing the technology ladder A Poland Today conference in the Silesian city of Gliwice focused on how to increase Poland’s and the region’s high-tech potential. see page 110

Media Patronage

A gala for a good cause The Netherlands-Polish Chamber of Commerce’s ‘Rijsttafel’ event raised 25,000 złoty to help treat children in comas. see page 112

Wrocław has long

had a reputation of being one of the most businessfriendly cities in Poland. But can it hold on to its crown? What more could the city do to encourage business development and investment? How is it working to increase R&D activity in the city? Poland Today’s ‘Primetime Wrocław’ conference aimed to answer these questions. see page 104

The ‘Akogo’ foundation is

Join us for our

upcoming events. For more information, visit poland-today.pl

doing revolutionary work with state-ofthe-art equipment to help wake children from comas. The NetherlandsPolish Chamber of Commerce’s ‘Rijsttafel’ event brought together the Dutch business community to enjoy a night of celebration, Indonesian food, and to raise money for this important charity.

see page 112

Andrew Kureth

writes on the Netherlands-Polish Chamber of Commerce’s ‘Rijsttafel’ charity gala event, where thousands of złoty were raised for the ‘Akogo’ foundation.

Gabriel Rom

writes on the second International Innovation Forum in Gliwice and on Wrocław’s efforts to remain one of the most business-friendly cities in Poland.

Richard Stephens

writes on the second annual ‘Opole: Green light for outsourcing’ conference, where the city promoted itself as a top location for business services investments.

Adam Zdrodowski

writes on the development of the automotive market, efforts to increase R&D in the sector and Dąbrowa Górnicza’s efforts to attract automotive investors.

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conference

Putting all the right pieces together

photos: Piotr Dziubak

Wrocław is one of Poland’s most business-friendly cities, but it needs to continue to foster connections between idea formers, businesses and academia to stay ahead

Bright light: The

Primetime Wrocław conference tookplace in mid-January, when Christmas decorations still lit the city centre (above). After the conference, attendees enjoyed evening cocktails at Brasserie 27, an elegant restaurant situated in the Europeum Hotel – in the heart of Wrocław.

Is Wrocław Poland’s entrepreneurial cap- reliance on the BPO sector were hot topital? Is it innovative? And what should ics at the conference. “While BPO is well it do to focus on sustainability? These developed, it’s just one part of the picwere the questions on the minds of city ture,” said Karol Patynowski, an associate authorities and business leaders at Poland director at JLL Poland. Today’s Primetime Wrocław conference, held in January in the Old Town Hall During a panel discussion led by in the city’s centre. Krzysztof Sachs, partner at EY, there was lively debate as to whether city authoriWrocław City Council Chairman Jacek ties were really concentrating on improvOssowski offered a robust defence of ing the business environment. Joanna the city in a “fireside chat” with The Bensz, head of the American Chamber of Economist’s Poland correspondent and Commerce’s operations in the city, as well frequent contributor to Poland Today, Jan as Radek Kokot, head of advertising operCienski. Ossowski focused on Wrocław’s ations for Central and Eastern Europe at educational assets, as a city that produces Google, praised the city’s progress so far, highly valuable graduates and – crucially – but agreed that more could be done. keeps and employs these graduates within the local economy. Wrocław boasts a number of wellregarded universities, but how can busi“The city has the asset of educating peo- nesses best utilise the brainpower at ple in the sectors that will likely pay well hand? Patrycja Radek, from Wrocławand are in demand by both the Polish and based R&D centre EIT+, offered a blueprint of how universities can fruitfully global economy,” he said. engage with the business community. The picture though, is not all rosy. Fears “We brought in world-class professors of labour flight, a lack of communica- and developed research labs. We call EIT+ tion between Wrocław’s universities and a space for innovation – it’s open to anyits business community and the city’s one with an idea,” she said.

Wrocław is located in south-western Poland, near the German and Czech borders. It is the capital of the Lower Silesian (Dolnośląskie) voivodship. The city has earned a reputation as one of the country's most business friendly investment locations. the Primetime Wrocław conference examined whether this was indeed the case, and what authorities could do to improve the business environment further.

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Jacek Ossowski,

Chairman of the Wrocław City Council, answered questions from Jan Cienski (with microphone) of The Economist, in the conference’s opening ‘fireside chat’.

Dariusz Ostrowski (left), president

of the Wrocław Agglomeration Development Agency, pointed out all of the advantages the city has to offer, and presented attendees with key facts and figures for potential investors.

biggest problem, he said, was not coming up with ideas or finding demand for his WrocłaW breakfast product – a wheelchair that can be con- in WarsaW trolled by its user’s thoughts – but in findToday held a warm-up event for ing the business know-how to help him Poland Primetime Wrocław with a breakfast in develop his enterprise. Warsaw in October. Participants discussed Nicolas Lepage, the senior trade commissioner at the Embassy of Canada in Poland, said that authorities and the entrepreKrzysztof Karolczyk, a plant develop- neurial community simply needed to fosment manager at Fortum Power and Heat ter connections between idea-formers Polska, is also at the forefront of capital- and business mentors. Bringing them ising on the city’s top-notch educational together, he argued, would unleash institutions. His company has initiated the city’s potential. “We live in a gloa programme where students can work at balised world, and we’re part of a sharing the firm helping to develop cutting-edge generation,” Lepage said. technology. “We want to combine the academic world with the world of business in As the conference came to an end, the order to develop innovation,” he said. themes were clear: the city needs to continue to think big and eschew complaOne of the highlights was a discussion cency. “At the end of the day, Wrocław is with Patryk Arłamowski, a young entre- an innovative city,” said Marek Ulanecki, preneur with an infectious enthusi- a leasing manager at Vastint Real Estate. asm for building innovative businesses. Before turning 25, Arłamowski had pat- Drive, passion and intellectual capabilented more than 20 products, one of ity are clearly present in Wrocław, what which was named Polish Invention of remains is for the city to bring it all the Year in 2014 by Telewizja Polska. His together. by Gabriel Rom

the city’s rise to become a model of economic success and the challenges that remain. The conference featured two speakers, Dariusz Ostrowski, president of the Wrocław Agglomeration Development Agency (ARAW), and Jarosław Prawicki, head of sales and marketing at UBM Group Poland. It was attended by an audience of Polish and international business leaders. Ostrowski discussed Wrocław’s successes and challenges as a city administrator, while Prawicki offered a view from the private sector. Initially a locus for call centres and simple business-process outsourcing, Wrocław is now home to a burgeoning high-tech sector, featuring international behemoths like Siemens, HP, and IBM, the speakers pointed out. Thanks to an open and active local government hospitable to investment, the city’s economy is booming. Close to Prague and Berlin, the city is a natural meeting place for firms looking to do regional business. “Geography is a determining factor,” said Ostrowski.

The Great Hall

(above), in Wrocław’s historic Old Town Hall, was the venue for the Primetime Wrocław conference.

EVENT rEViEw

conference

Opole gets the green light With a workforce proficient in German and an advantageous location, the city is putting itself on the business services map

The south-western Polish city of Opole Opole has shown persistence in following is making a name for itself among inves- a business-friendly strategy that impresses tors due to the determination of its author- company executives. City authorities have made supporting investors a priority, attendities to implement a business-friendly ees heard at the ‘Opole: Green light strategy. At the second annual ‘Opole: for outsourcing’ conference, organised Green light for outsourcing’ conference by Poland Today and Bluevine Consulting. organised by Poland Today and Bluevine Consulting, business leaders lauded the city for its openness to business. Some were so impressed that they made the decision to invest in the city right there business – that the city authorities conat the conference. sistently show,” said Paweł Panczyj, managing director of ABSL, an organization “After the event, some companies attend- that represents business service coming the conference decided that they panies in Poland. “The presence of the would invest in Opole because they are main stakeholders was important. The impressed with the persistence and strat- city was present in strength and the main egy of the city, as well as the understand- businesses already in Opole were there, ing of business – and indeed support for so you got a full picture,” he added. Apart

from its well-trained workforce, the city’s two main strengths are its people and its location, conference attendees agreed. “A clearly positive factor is that many people speak German,” said Marcin Nowak, delivery centre director at Capgemini. “Several cities have a well-educated and well-trained workforce, but not so many have a workforce which also speaks German,” he said, pointing out that about 70% of the population of the Opole region is ethnically German. When it comes to location, Panczyj said that what was once the city’s weakness – its location between the bigger cities of Kraków, Katowice and Wrocław – has become its strength. “Companies are looking for a second or third location in Poland

photos: Małgorzata rakowska

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Opole is located in south-western Poland and is the capital of the Opolskie voivodship. The city’s two main strengths are its people and its location, attendees of the ‘Opole: Green light for outsourcing’ conference agreed.

Arkadiusz Wiśniewski

(above), Mayor of Opole, expressed his administration's willingness to support investors.

Marcin Nowak

(above), delivery centre director at Capgemini and regional director of ABSL, speaks with the media at the conference.

now, usually as a back-up location. Opole is ideal for such operations,” he said.

us, but the question is what,” said Katarzyna Hładec from the department of economy and innovation at Opole City Wiktor Doktór, CEO of Pro Progressio, an Council after the conference. “Some sugoutsourcing advisory organization, sug- gestions were made at the conference. gested that the city needs to do more One of them was our unique work ethic,” to understand what makes it unique she said. “The workforce in Opole is very and then to emphasize that. loyal. People think more long-term than perhaps those in larger cities do.” “Opole shouldn’t only focus on IT, finance and business services. It needs to develop One conclusion that came out of the conother strengths. It is well-located, so ference was that Opole needs to actively perhaps logistics, or transport research engage with its bigger neighbours. and development are the areas to extend the interest of local administra- “We can complement Wrocław, Katowice tion,” said Doktór. or Kraków by completing the offer for a business that needs support. We can be The city is listening. “We know that we a kind of satellite for these cities,” she conhave to find something that distinguishes cluded. by Richard Stephens

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conference

Destination: innovation

photos: Małgorzata rakowska

photos: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Poland has gained extra time to attract automotive investment. Now it needs to speed up R&D in the sector

The city of Dąbrowa Górnicza and the Katowice Special Economic Zone

were the organisers of the conference. Bluevine Consulting was an organisational partner, while Poland Today was a media partner.

With growth likely in the automotive secinvestors, and that the country urgently tor globally, Poland has a good chance needs investment in innovation and the to benefit from increased investment if training of skilled employees. The fact it takes advantage of its location and brain- that large international automotive compower, experts said at the “Automotive panies usually already have their own investments – destination: Dąbrowa R&D centres outside Poland is a particuGórnicza” conference in November. lar challenge, admitted Roman Kantorski, chairman of the Polish Chamber of Marek Zuber, an economist and financial Automotive Industry. markets analyst, argued that the global automotive industry’s growth pros- A number of manufacturers from the pects in the coming years are good. Car automotive sector are already active sales in developing countries are on the in Dąbrowa Górnicza. On the day of rise. Poland can and should benefit from the conference, the city officially opened its new Tucznawa investment area, which that boom, he said. it hopes will attract even more automotive While Poland will have to wait for auto- sector investors. motive investments of purely Polish capital, a number of international automotive The Tucznawa investment area measures companies already operate production nearly 260 hectares, all of which is zoned facilities in the country. The participants for investment. The necessary infrain the conference claimed that when it structure is already in place and much of comes to the quality of production, Polish the area is located within the Katowice factories are among the best in the world. Special Economic Zone, said Agata Zając, a land transactions coordinator at JLL. The panelists pointed out that because The location is well-suited to the needs of the ongoing crisis in Ukraine, foreign of the automotive sector, said Zając, notfirms are not likely to move production ing that it can house production and further east in the near future, as had pre- service facilities. viously been expected. “We have gained a few years and have to take advantage of Dąbrowa Górnicza boasts approxi- On the day of the this,” said Piotr Wojaczek, president of the mately 120,000 inhabitants and around conference, the city Katowice Special Economic Zone. 12,000 entrepreneurs, according to city officially opened its new Tucznawa inofficials. “Human capital, good trans- vestment area (top), Much of the discussion focused on what portation links and the presence of the which it hopes will can be done to make Poland more com- Katowice Special Economic Zone are attract even more petitive in the global automotive market. some of our main assets,” said Dąbrowa automotive sector Participants agreed that low labour costs Górnicza Mayor Zbigniew Podraza. investors. are not enough to continue to attract by Adam Zdrodowski

Kazimierz Karolczak (above),

Deputy Marshal of the Silesian voivodship, speaks with media at the event.

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Rally cars: Some

participants had the opportunity to take part in a rally drive (left). Japan Motors was the partner of the rally.

Paweł Tynel

(right), partner at EY, answered questions during a panel about increasing Poland’s competitiveness for automotive sector investments.

Panel discussion: (Below, left to right)

Marek Sienkiewicz of Deloitte, Katowice Special Economic Zone CEO Piotr Wojaczek and Dąbrowa Górnicza Mayor Zbigniew Podraza

Dąbrowa Górnicza is located in the Silesian (Śląskie) voivodship in southern Poland. Katowice, capital of the region, is about 15 kilometres away. The city is an attractive location for automotive sector investments, say experts.

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Climbing the technology ladder A Poland Today conference in the Silesian city of Gliwice focused on how to increase Poland’s and the region’s high-tech potential

in southern Poland, was the location of the International Innovation Forum for the second year in a row.

As part of its ‘New Technologies – New country’s position in international marHorizons’ initiative, Poland Today held the kets. According to American economist second International Innovation Forum Mitchell Orenstein, who was present in the southern Polish city of Gliwice, at the conference, the reasons behind in the Silesia region in late September. Poland’s consistent export growth are the City authorities, Polish and foreign com- country’s quality education system, the panies, as well as renowned academics, high rate of Polish youth in university (the took part in the event. second highest in the OECD), and a thriving technology sector. The conference primarily focused on how to increase Poland’s competitiveness in Scientists and academics such as Professor order to continue to attract foreign inves- Tadeusz Baczko from the Institute tors and how to keep those already pre- of Economics at the Polish Academy of sent in the country. Sciences, Michael Turczyk, director of research & development and governmenDiscussion at the conference featured tal incentives at Deloitte, and Professor leaders from both the private and public Jan Kosmol, CEO of Technopark Gliwice, sector, who spoke on what factors were were all in attendance. necessary to elevate Poland and Silesia into global hubs for innovation. These guests examined the relationship between business and academia in Poland The conference came on the heels of and discussed how Polish cities could help an encouraging innovation report pub- further educate their workforces. lished by Oxford Economics and HSBC. The report points out that while spend- Guests from abroad included Marko ing on R&D in Poland came to only 0.3% Torkkeli from Singapore Management of GDP in 2000, this rose threefold, University, Paul Clarke, owner of Equity to 0.9% in 2013. & Grant and Leonid Chechurin from Lappeenranta University of Technology. Among the 25 countries ranked in the Gliwice Mayor Zygmunt Frankiewicz report, Poland rose from 21st largest and Deputy Mayor Adam Neumann exporter of high-tech goods, to 14th were also present. place. The report forecasts that by 2030, Poland will rank 11th, ahead of both Partners for the event included Britain and France. the Warsaw Stock Exchange, the Silesian Metropolitan Network, the In the context of the report, speak- National Research and Development ers focused on what Poland needed to Centre, InnoCo and Technology Park. by Gabriel Rom do to increase exports and build the

Igor Sokołowski

(above left),a prominent TVN24 journalist, moderated the forum.

Adam Neumann, Deputy Mayor of Gliwice (below), spoke about Gliwice’s investment attractiveness.

photos: Piotr Dziubak

Gliwice,

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EVENT rEViEw

Zygmunt Frankiewicz,

Mayor of Gliwice (left) opened the forum.

Networking (right)

is a key element of every Poland Today conference.

Tadeusz Baczko

(bottom), a professor of economics and member of the Polish Academy of Sciences, talks innovation with other guests of the forum.

Panelists answered questions during the â&#x20AC;&#x153;From idea to profit. Financing investment in new technologiesâ&#x20AC;? discussion (below).

Richard Stephens,

founder and editor in chief of Poland Today (left).

EVENT rEViEw

Media Patronage

A gala for a good cause The Netherlands-Polish Chamber of Commerce’s ‘Rijsttafel’ event raised 25,000 złoty to help treat children in comas

‘Akogo?’ founder and president Ewa

Błaszczyk said that the money raised would be used to buy more equipment for the ‘Budzik’ clinic. Along with treating children in comas, the clinic also provides rehabilitation and helps teach parents and caregivers how to properly take care of such children.

NPCC chairman Geert Embrechts

(right) spoke of his admiration for the work of the ‘Akogo?’ foundation and the ‘Budzik’ clinic.

photos: NPCC

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Over 300 members, partners and friends Indonesian dishes for the guests to enjoy. of the Netherlands-Polish Chamber of The food was prepared by Warsaw’s foreCommerce (NPCC) met at the organisa- most expert on Indonesian cuisine, Rob tion’s sixth annual Rijsttafel charity ball at Regenhardt. Guests were also treated to Warsaw’s InterContinental hotel to enjoy the musical stylings of American soul a night of delicious Indonesian food and crooner Jimmie Wilson and laser-light help one of Poland’s most worthy causes. artists MultiVisual. Media personality Monika Zamachowska hosted the event, The event raised 25,000 złoty for the while NPCC chairman Geert Embrechts ‘Akogo?’ charity, which treats children gave the opening speech and oversaw with traumatic brain injuries that have the raffle prize giveaway. resulted in a coma. In 2013 the foundation established the ‘Budzik’ (‘Alarm Clock’) The president and driving force behind clinic in Warsaw, Poland’s first medical the ‘Akogo?’ foundation, actress Ewa centre for the treatment and rehabilita- Błaszczyk, was in attendance, and tion of children in a coma. explained how the money raised would be used to buy more state-of-the-art equipOne of the highlights of the evening ment for the ‘Budzik’ clinic. Along with was the dozens of colourful, savoury treating children in comas the clinic also

provides rehabilitation and helps teach parents and caregivers how to properly take care of such children. So far, the clinic has helped 12 patients regain consciousness. It works in association with Centrum Zdrowia Dziecka (the Children’s Health Centre) in Warsaw. The Dutch community in Poland came up with the idea for organising the Rijsttafel in the early 1990s, due to their longing for Indonesian delicacies from the former colony. Over time, the Rijsttafel began to play an increasingly vital role in charity events. Translated from Dutch, the word ‘rijsttafel’ literally means ‘rice table’. The main sponsors of this year’s event were Philips and Ghelamco. by Andrew Kureth

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IMPRESSIONS

Bringing out the entrepreneur Poland Today sits down with foreigners living in Poland with a unique perspective

When did you first come to Poland? I came in December of 2007. It was a casual weekend visit to Kraków. But I didn’t realise that it would be the beginning of a new life.

event in Wrocław and since then I have never looked back. Now I am very well integrated into the start-up community not only in Wrocław, but in all of Poland too.

How closely did your preconceptions of Poland match your first impressions?

What was the strangest or most memorable experience from your time in Poland?

I had heard and read earlier that Poland is one of the fastest developing countries in Eastern Europe. Hence, a few places and cities are highly developed, while some are not. That this divide existed was not a surprise at all.

Watching a Bollywood movie on Polish TV during some bank holiday. In general, English and other foreignlanguage films are usually dubbed in a manner in which you can hear the original language in the background with Polish being spoken on top of that – by a single translator. For me personally this just doesn’t make any sense.

Looking back, have those first impressions proved right or wrong?

photo: Karolina Skali Skalska

Yes, they proved right. When you start travelling across the country, you can actually see the difference. However, Wrocław has changed a lot over the last few years, because many international companies are hiring foreigners here. It’s very common now to see many expats in cafes and pubs. Well, that was not case when I moved here.

‘The one thing I would say most expats also don’t expect is this: Poles clap when their plane lands’ Parvinder S. Sondhi (aka Parry) was born

in India. After finishing his studies and gaining acouple of years of work experience, he decided to go to the UK for further study. The first year of studying turned into another seven years in the UK. He had the opportunity to visit Poland in 2007 for the first time and moved to Poland in 2011. Now, he lives with his wife and two sons in Wrocław. He has started his own graphic design studio (absolutekreative.com), online fashion accessories store for men (bowtieswala.com) and online shop for holi colour powders (koloroweholi.com).

What Polish thing do you wish they had in your home country, and vice-versa? Polish cukiernia in India and Indian sweet shops in Poland. I love sweets and have a sweet-tooth. At the same time both countries have a huge variety of sweets.

What are the most striking similarities between Poles and people Both government and private offices from your home country, and what are dominated by women in the work- are the most striking differences?

What about Poland was unexpected?

force; men are there, but there are fewer of them in comparison to women. And the one thing I would say most expats also don’t expect is this: Poles clap when their plane lands.

Was anything surprisingly familiar? Bureaucracy: it is same as in India. It takes time to get things done, especially in government offices – until and unless you know someone there. But when it comes to bureaucracy for foreigners, I think it is more complicated in Poland. I always visit government offices with my wife so I get things done quickly and in the right order. Otherwise, I am sure I would be doing a round-robin at government offices here.

What was the thing that was hardest to adjust to when you moved to Poland? At that time, it was hard for me to find an expat group or a English-speaking community in the same sector – graphics & IT. But after six months, someone invited me to a Startup Weekend

People in both countries are really hard-working. On differences, Poles love vodka, Indians love whisky.

What advice would you give someone from your home country coming to live in Poland? Make it a top priority to learn at least the basics of the language.

What advice would you give a Pole going to live in your home country? The same thing: at the very least, learn the basics of the language.

In what ways has Poland changed you for the better or for the worse? It has changed me in a positive way. Moving to Poland helped me decide to take steps towards entrepreneurship. I started my own graphic design studio, which specialises in infographics and data visualisations. Last year, I started an online fashion accessories store for men. Later, I started another online store for holi colour powders.

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