POLAND TODAY magazine #13

Are businesses in Poland ready to take advantage of the Internet of Things? page 48

The day Muhammed Ali beat a Pole to gold at the 1960 Rome Olympics page 72

PRICE: 25 PLN / 7 EUR

photo: Bet Noire

Politics and business go hand in hand. Where is the economy headed under PiS? page 22

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

H2 2016 issue No. 13

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The Real Estate Beach Volleyball Charity Annual Tournament Sand between their toes for a greater cause

Each year the fitter members of Poland’s real-estate community gather on the eastern bank of the Vistula River in the mid-summer heat to take part in an ever-expanding volleyball tournament to raise money for a children’s charity.

This year the tournament, organised by JLL, featured 44 teams totalling 308 players and raised PLN 360,100 for The Children’s Memorial Health Institute (Instytut PomnikCentrum Zdrowia Dziecka). The Institute is the largest and most-modern paediatric hospital in Poland. It was founded in 1977 in remembrance of all children around the world who died or suffered in the Second World War. To find out more about the hospital, go to www.czd.pl.

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table of contents

editorial

12

in focus

14-21

politics & economy

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Poland is in state of flux

Polityka Insight's Wawrzyniec Smoczyński talks about the possible economic impact of social and political decisions by the governing Law and Justice (PiS) party and assesses whether Deputy Prime Minister Mateusz Morawiecki will increase his influence in the government.

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Will Poland slow down in 2017?

Five Polityka Insight analysts look at separate sectors of the Polish economy, including finance, infrastructure, energy and defence, and evaluate how they could be affected over the coming year.

Leader

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Polska goes global

Poland has lofty ambitions of becoming a force to be reckoned with both in terms of foreign trade and attractiveness to investors from overseas.

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Promoting Polish businesses abroad

Bartłomiej Pawlak, the last head of PAIiIZ, lays out the groundwork for a new agency set up to promote Polish businesses overseas and sets out the ways the government is encouraging foreign investment which will not harm local companies and will regenerate places less touched by foreign investment to date.

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Wind of change

Moves are afoot to build a network of Polish chambers of commerce around the world. We talk to a lady who is helping to drive this forward.

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When life gives you apples The humble apple shows how Poland's exports can adapt to the unexpected turns of international trade.

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Time for Polska

The whole is greater than the sum of its parts. Polish companies frequently get it wrong when it comes to expansion abroad as they don’t realize the importance of adapting the product or service, and their business approach, to the different foreign markets. Now is the time for them to adapt to succeed. Plus, we profile a select group of dynamic Polish companies launching themselves on the world.

opinion

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Enter the dragon

Warsaw is closely watching the rise of Beijing on the international stage, and tries to find its place in the global puzzle.

business

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Poland 2.0

As the Internet of Things (IoT) craze takes the world by storm, are Polish businesses and consumers shrugging it off?

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Confident, independent and tough

Making a successful sale to Poland's Mittelstand means, above all else, understanding them.

Table of contents

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International university enrolment on the rise

Monica Zielinski speaks to foreign students and lecturers in Warsaw, understanding what attracted them to Poland in the first place.

It’s not always size that counts. page 68

Poland is in state of flux. page 22

Poland’s Indiana Jones. page 76

urban issues

55-70

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travel

76

table of contents

Special Poland’s property Indiana Jones supplement for Expo Real & MAPIC 2016 He has walked across the Sahara, ridden a sled through ice and snow to the coldest place on Earth, and discovered the source of the Amazon. Jacek Pałkiewicz spoke to Poland Today about what drives him to do these things.

‘Dynamic’ is an oft-used word, but it does appear to apply perfectly to much of the Polish real estate market today.

history

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Eyewitness: Muhammad Ali vs Zbigniew Pietrzykowski

Cassius Clay (later Muhammed Ali) rose to fame after beating a Polish boxer at the 1960 Rome Olympics. Zbigniew Pietrzykowski's widow speaks about her husband.

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conferences review

78-88

Talking & networking

A round up of conferences either organised or supported by Poland Today

impressions

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From Lebanon with Love

Sandra Massoud moved to Warsaw in 2004, and quickly decided to open a restaurant in the city serving the very food she craved

It happened in... September

Żwirko and Wigura were two intrepid pilots in the golden age of flying. Tragically, a crash killed them at the peak of their fame.

Enter the dragon. page 44

International university enrolment on the rise. page 52

When life gives you apples. page 32

12

editorial

Many Polish businesses are no longer satisfied with confining themselves to Poland’s borders and they’re raring to put their products and services to the acid test of international demand.

The change in emphasis has

Richard Stephens

Editor’s Note

Founder & Editor, Poland Today

been barely perceptible, but suddenly it’s out in the open. Many Polish businesses are no longer satisfied with confining themselves to Poland’s borders and they’re raring to put their products and services to the acid test of international demand.

Whether this is because the country is now just too small, or Polish companies are bigger in their boots – in other words, a lot more confident – it’s the new state of affairs. And where once the Polish establishment talked almost exclusively of attracting foreign investment into Poland, the new government is emphasizing the potential for the expansion of Polish companies abroad. To this end, it is setting up a new agency to see through the practical steps of this change in direction. In this issue we take a look at what lies behind this new attitude, talk to some key figures playing an instrumental role in its rise, and profile a selection of Polish companies which are active abroad or soon will be.

While Poles are increasingly looking outside their borders, others are taking a closer interest in Poland. To date, China has not been a major source of capital inflow into the country. This looks set to change, however, as the global superpower has identified Poland as a place of significant long-term interest as it moves to consolidate its trade routes.

Poland lies at the heart of its strategic objectives, and Poland Today looks at why this is the case.

This year saw the passing of arguably the most famous man of the 20th century, boxing legend Muhammad Ali. The first time that most Americans ever heard of him was when he won gold at the Rome Olympics in 1960, and we take take a glimpse at the man who took silver medal at his expense and went on to become a friend and loyal supporter.

I hope you enjoy this latest issue of Poland Today magazine.

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

Founder & Editor Creative Director

Richard Stephens Bartosz Stefaniak

Financial Director Business Development Director New Business Consultant International Client Director Business Strategist

Arkadiusz Jamski James Anderson-Hanney Tomasz Andryszczyk Toby Hancock Ana Hermoso

Marketing & Communications Director

Sylwia Ziemacka

Contributing Journalists

Adam Czerniak Wiktor Doktor Liam Frahm Patrick Ney Wawrzyniec Smoczyński Dominik Sipiński Piotr Sobolewski Bartosz Stefaniak Richard Stephens Marek Świerczyński Robert Tomaszewski Monica Zielinski Sylwia Ziemacka

Photographs

Polska Agencja Fotografów Forum

Magazine layout

Bartosz Stefaniak (www.madeinPolska.eu)

Printing house

ArtDruk Zakład Poligraficzny ul. Napoleona 4, 05-230 Kobyłka Poland Today Magazine is printed on Munken Print Cream ecological paper © 2016 Poland Today Magazine reproduction without permission is prohibited

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nazwa działu

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DW News (Germany) Warsaw given constitutional crisis deadline

in focus

Time for Polska

photos: Andrzej Strzałkowski, URSUS, Wojciech Pacewicz (Forum), Zbigniew Komorowski (Forum)

For decades, Polish businesspeople have worked steadily behind the scenes to arrive to a point where it is their time to shine on the main stage of international stage. With a little nudge and some much-needed team spirit, this nation is destined to succeed, whatever comes its way. see page 26

Global news review

Reuters (UK) PGE invests to meet emission reduction regulations

Europe:

In order to meet EU emission reduction targets, PGE, Poland’s biggest power producer, has estimated that upgrades to its power stations will cost up to 1.8 billion złoty ($471.96 million) by 2020. Poland’s power stations have to be upgraded in order to meet the requirements set by the Industrial Emissions Directive (IED), which come into effect in 2021. One lobby group focused on power companies has estimated that the total cost of improving Poland’s power stations could be up to 12 billion złoty ($3.03 bn).

Following alleged democratic breaches made after the ruling Law and Justice (PiS) government came to power last October, the European Commission has set a three-month deadline for Poland to reverse changes made to its Constitutional Tribunal. Such a procedure is unprecedented within the EU, and as such, the penalties and the EU’s willingness to implement them remain unclear. One potential fate that Warsaw may face is the suspension of its voting rights in the EU’s central decision-making body, the European Council of Ministers.

Kallanish Energy (UK) Ministry of Energy announces plans for Poland’s first nuclear power plant

“Currently, the Energy Ministry is preparing a programme for the construction of the first nuclear power unit with a capacity of roughly 1,000 MW, which will be built in the next 10 years,” Krzysztof Tchórzewski, energy minister, said in a statement. The Polish government said that “modern, high-efficiency and lowemission coal-fired power plants” remain the basis for Poland’s energy security. However, it appears that nuclear energy may also help to meet the country’s growing electricity demand with two locations, Lubiatowo-Kopalino in Choczewo and Żarnowiec in Gniewino and Krokowa (both in the north of the country), currently being considered. In addition to five coal-fired power plant projects planned or currently underway, Poland needs three additional coal-fuelled plants to meet present energy demand, according to the ministry.

Sputnik News International (Russia) Poland maintains Kaliningrad border controls

Temporary restrictions on the PolandKaliningrad border were introduced by Poland because of the NATO summit, hosted in Warsaw on July 8-9, and World Youth Day, held in late July. However, by the beginning of August, the border controls to the Russian exclave had yet to be removed, with the government citing security reasons. Krzysztof Szczerski, adviser for Foreign Affairs in the Presidential Office, said: “As we see it, when the situation is re-evaluated and there are no [security] assumptions, the situation will change.” This position was echoed by Interior Minister Mariusz Blaszczak, who said that movement would be resumed when “the causes that related to the security of the Polish state disappear”.

New Europe (Belgium) Polish government attempts to address foreignexchange loan risks

A special working group has been assembled by the Polish president, including members of the central bank, finance ministry, financial market watchdog and Bank Guarantee Fund. The focus of this group is to draft solutions in order to help banks restructure their FX loan portfolio, through agreements between banks and clients. In early August, Poland offered bank inducements to help more than half a million struggling home owners transfer their costly Swiss-franc mortgages into złoty.

Offshore Wind Journal (Online) Poland's first offshore windfarm given green light

Polenergia has secured a permit for its Baltic Środkowy III offshore windfarm, making Poland's largest privately-owned energy group the first group to secure such a permit. Jacek Glowacki, head of the company, said “Polenergia as an energy group is diversifying its activity in conventional energy and renewable energy.

One pillar of the company's development of renewable energy is windfarm projects in the Baltic. Obtaining the first environmental decision for an offshore windfarm in Poland is a critical milestone in the development of these projects.”

With construction touted to begin in 2019, the windfarm is projected to be one of the largest offshore windfarms in the Baltic Sea with an initial capacity of 600 MW.

Telecompaper International (The Netherlands) Polish internet users hits 25 million

In July, the number of internet users in Poland reached 25.2 million according to a Gemius/ PBI survey, up from 10.6 million in 2005. The report also showed that PCs were used by 22.9 million Poles while mobile devices, including smartphones and tablets, were used by 17.6 million, suggesting that internet users commonly accessed online content from both types of devices. The top 10 domains used by internet users were google.pl, facebook.com, youtube. com, google.com, onet.pl, allegro.pl, wp.pl, wikipedia.org, olx.pl and interia.pl. This comes as an OnAudience report highlights Poland as a European leader in internet users blocking advertising, with 42 percent of total users using advertisement-blocking software. According to Telko.in, Poland is followed by the UK with 38.85 percent and Norway with 38.5 percent of users blocking internet advertising. Some 200 million users are estimated to block advertising in browsers, with AdBlock, the most popular software in the category, used by over 40 million internet users.

The Calvert Journal (UK) World’s first Pokémon GO tournament held in Warsaw

Organised by Vistula University, the Vistula Cup competition was held in Warsaw with a top prize of free tuition at the private university and two runner-up rewards of reduced admission fees for one semester of study at any faculty of their choosing. Pokémon GO was released earlier this year and uses the phone’s GPS capability to locate, capture, train and battle virtual Pokémon. The game has proved to be a massive hit in Poland, with Warsaw alone far outranking Berlin, Lisbon and London in “PokéStops”, places which allow you to collect items in game. According to the contest’s initiators, “the number of app users exceeds even such giants as Facebook, Instagram, Twitter and Snapchat. The game breaks records in Poland”.

Americas:

USA Today (USA) United States to deploy extra battalion in CEE

At the NATO Summit in Warsaw, President Obama announced a movement of troops, saying American soldiers would “serve shoulder to shoulder with Polish soldiers”. A 1,000-strong battalion is being deployed in addition to an armoured brigade, which will be continuously rotated and based out of Poland. “Poland is going to be seeing an increase in NATO and American personnel and the most modern, capable military equipment, because we will meet our Article 5 obligation to our common defence,” President Obama said at the Summit.

The addition of the armoured unit will bring American military presence in the region to three combat brigades, each consisting of roughly 4,200 men.

Asia/pacific:

News.com.au (Australia) Treasure hunters start Nazi gold train dig

Amateur enthusiasts Piotr Koper and Andreas Richter, who unleashed a storm of speculation last year after claiming they had found a lost Nazi armoured train buried in the mountains of Poland, finally began their dig in early August. Despite their initial anonymity, the pair later went public with their alleged find, fuelling speculation that they had found a Nazi train laden with treasures from Jewish gold and Russia’s lost “Amber Room”.

Last August, the pair lodged a claim with Wrocław district government to guarantee a 10 percent cut of any find.

Vietnam.net (Vietnam) Vietnam highlighted as promising market for Poland

compiled by Liam Frahm

As part of a new Polish trade promotion effort, Vietnam has been designated as one of five key markets for Poland. According to Mariusz Boguszewski, Economic Counsellor and Head of Commercial & Development Cooperation at the Embassy of Poland in Hanoi, “this places Vietnam at the centre of a long-term Polish effort to deepen the bilateral trade relationship in the near future.” Although Vietnam remains a net exporter, with over $1.5 bn worth of Vietnamese goods imported in 2015, Poland’s bilateral trade relationship with the country is rapidly developing. As of the first half of 2016, Vietnam is Poland’s primary trading partner in ASEAN and seventh largest among non-European countries, after the US, China, India, Turkey, Japan and South Korea.

Africa:

IOL News (South Africa) Echo Polska Properties to list on Johannesburg Stock Exchange

The retail property fund plans to raise around €100 mn via a private placement before listing on the main board of the JSE next month.

The fund, in which the listed Redefine Properties has a 49.9 percent shareholding, is aiming for a dual listing on the Luxembourg Stock Exchange as well as the JSE. Hadley Dean, chief executive of EPP, said that the main mission of the company was to deliver sustainable double digit annual growth in distributions a share, and that Echo Investment, a 25 percent shareholder in EPP, was a strong partner for the fund. Echo Investment is backed by Griffin Real Estate, which holds a 65.99 percent shareholding in the company.

Barack Obama: ‘Poland is going to be seeing an increase in NATO and American personnel and the most modern, capable military equipment, because we will meet our Article 5 obligation to our common defence.’

The Citizen (Tanzania) Poland to finance Tanzanian tractor factory

According to Dr Adelhelm Meru, Tanzania’s Permanent Secretary in the Ministry of Industry, Trade and Investment, the construction of the factory, expected to be built in Kibaha in the east of the country, would start before the next financial year. “The construction will start soon and we expect to produce about 2,400 tractors annually for local consumption and sell to other East African countries,” he said at the Tanzania-Poland Business Forum. The Tanzanian government confirmed that it had secured a $110 mn soft loan from the Polish government, while Polish firm Ursus S.A. agreed a contract with the Tanzanian National Service economic wing, SUMA-JKT, for the supply of tractors and development of assembly plants.

Above: ready for action – US paratroopers

from the 173rd Airborne Brigade Combat Team disembark a plane while taking part in the Anakonda military exercises on Polish territory in 2016, which saw the participation of more than 30,000 troops, of which 13,000 from the US.

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in focus

Over the moon.

Polish First Lady Agata KornhauserDuda can't contain her excitement at meeting members of the clergy during the opening day of the World Youth Days event in Krakรณw, southern Poland.

WYD attracted hundreds of thousands of Catholics to the country in late July.

The focal point of the event was a five-day visit by Pope Francis.

photo by Krystian Maj

Snapshot

(Forum)

A new best friend?

Poland is reavaluating its strategic position in light of new interest from China in the CEE region.

See page 44

Kraków hosts World Youth Day

Polish athletes win big in Rio

Warsaw announces e-mobility investment plans

The event, a kind of Roman Catholic jamboree, concluded on 31 July with an estimated three million people in attendance. In his address, Pope Francis said: “We have come here from different parts of the world, from different continents, countries, languages, cultures and peoples.” “The suffering and the wars that many young people experience are no longer anonymous, something we read about in the papers.

They have a name, they have a face, they have a story, they are close at hand.

Today the war in Syria has caused pain and suffering for so many people, for so many young people. When we come in contact with people’s lives, we feel the need to get involved,” he concluded.

The pope then led a silent prayer “for the sufferings of all the victims of war and for the many families of beloved Syria and other parts of our world”. The refugee issue, a key concern of the current pontiff, has been an undercurrent to his trip to Poland.

Beata Szydło, Polish PM, defended her government’s refusal to accept refugees from the Middle East. She told Radio Kraków that the country had admitted large numbers of Ukrainian migrants and also sent humanitarian aid to the region. “We also need to keep in mind the security of our citizens.

My duty is to make sure that Poles are safe in this world increasingly often ruled by terrorism and take utmost care to prevent events here in Poland that could pose a threat to Polish citizens,” she added.

Poland came away from Rio 2016 with The programme, announced by 11 medals – two golds, three silvers, six Development Minister Mateusz bronzes – topping its London 2012 tally Morawiecki and Energy Minister by one and finishing 33rd overall, down Krzysztof Tchórzewski in July, predicts from joint 30th in 2012. A total of 242 one million e-cars on Polish roads over athletes made up the national squad, the next 10 years. Deputy Development representing their country in 23 disci- Minister Jadwiga Emilewicz reported plines and assisted by almost 200 addi- that in Poland – a country of 38 million tional behind-the-scenes support staff. people – only 427 e-cars were sold in The first gold came in the women’s 2015, and that Poland wants to encourdouble sculls with rowers Magdalena age its cities to develop “green credenFularczyk and Natalia Madaj clock- tials”. This could in turn increase bus ing a time of 7.40.1, edging out Great production to 1,000 a year by 2020, Britain by 0.95 seconds. Champion and be followed by citizen subsidies hammer thrower Anita Włodarczyk and tax incentives. smashed her own world record, winning “Are we able to catch up with the gold with an enormous 82.29m throw. western countries that have been Discus thrower Piotr Małachowski won making engines for a hundred years? his second Olympic silver medal throw- Not really,” Morawiecki told a confering 67.55m while mountain biker Maja ence in Warsaw. “However, we’re able Włoszczowska took silver in the cross to join in and surf on the fourth wave country. Canoeist Marta Walczykiewicz of economic revolution that’s ahead of also earned silver in the 200m race. On us. This is our moment, our time.” Such the first day of the competition, cyclist a task will be challenging. In the first Rafał Majka took bronze in the gru- four months of 2016, only 44 electric elling 237.5km road race. Wojciech cars were registered in Poland, 0.03 Nowicki won his first Olympic medal percent of the total registered cars for with bronze in the men’s hammer throw, the country during this period. In 2015, while Monika Michalik came third in the a total of less than 150,000 electric freestyle wrestling for the 63kg class. cars were sold in Europe. Poles may Other bronze medallists included not be interested in e-cars because of Oktawia Nowacka in the modern pen- their high price points, and the lack of tathlon, canoeists Beata Mikolajczyk recharging stations. According to conand Karolina Naja in the K-2 500m sultancy firm Samar, the demand and the women’s Quadruple Sculls. In for regular cars remains strong and the women’s javelin, Maria Andrejczyk imports of used cars may exceed came fourth with a new national record 900,000 this year. of 67.11m, while Piotr Lisek came fourth in a tight pole-vault final. The men’s handball team also had to settle for fourth place after losing to Germany, while the men’s volleyball team lost 3-0 to the USA in the quarter-finals.

by Liam Frahm

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nazwa działu

20 in focus

general statistics

Poland in a nutshell

If you’re interested in further analysis

on a specific business or economic topic please call us on +48 505 029 696.

Geography: Poland, officially the Republic of Poland (Polish: Rzeczpospolita Polska), is a country in Central Europe, bordered

by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian enclave, to the north.

Population:

Total area:

Ethnic groups:

312,685 km2 120,696.41 mi2 69th in the world

Time zone:

CET (UTC+1)

Main river:

Vistula (1047 km) Oder (854 km)

History: The establishment of the Polish

Coat of arms:

The White Eagle symbol appeared for the first time on the coins made during the reign of Bolesław I (9921025), initially as the coat of arms of the Piast dynasty.

The eagle’s graphic form has changed throughout centuries. Its recent shape, accepted in 1927, was designed by professor Zygmunt Kamiński and was based on the eagle’s form from the times of Stefan Batory’s reign (1576-1586).

state is often identified with the adoption of Christianity by its ruler Mieszko I in 966, over territory similar in size to that of present-day Poland. The Kingdom of Poland was formed in 1025, and in 1569 it cemented a long association with the Grand Duchy of Lithuania by signing the Union of Lublin, forming the Polish–Lithuanian Commonwealth. The Commonwealth ceased to exist in 1795 as Polish lands were partitioned between the Kingdom of Prussia, the Russian Empire and the Austrian Empire. Poland regained its independence as the Second Polish Republic in 1918.

Two decades later, in September 1939, World War II started with the Nazi Germany and Soviet Union invasion of Poland (Molotov–Ribbentrop Pact). Over six million Polish citizens died in the war. The People’s Republic was declared in 1952 although Poland was a client state of the Soviet Union from 1944. During the Revolutions of 1989, the communist state was overthrown and democratic rule was re-established in the form of the “Third Polish Republic”.

Despite the vast destruction the country experienced in World War II, Poland managed to preserve much of its cultural wealth. There are currently 14 heritage sites inscribed on the UNESCO World Heritage list in Poland. Since the end of the communist period, Poland has achieved high rankings in terms of human development:

Higher education rate: 26.3% of adult population (2015, Eurostat)

Gini coefficient: 30.8

Life expectancy at birth:

men: 73.7 years women: 81.7 years (2014, Eurostat)

Fertility rate: 1.32 16th most equal in the EU (2014, Eurostat) (2014, Eurostat)

Human Development Index: 0.82

25th in the world (2014, United Nations)

GDP (PPP):

Total: $993 bn 19th in the world Per capita: $26,135 46th in the world (2015, World Bank)

researched and edited by Bartosz Stefaniak

GDP (nominal):

Total: $475 bn 23rd in the world Per capita: $12,494 53rd in the world (2015, World Bank)

Capital city:

Warsaw (1.74 mn pop.)

Main cities:

Kraków (0.76 mn) Łódź (0.71 mn) Wrocław (0,63 mn) Poznań (0.55 mn) Gdańsk (0.46 mn) Szczecin (0.41 mn) Katowice (0.30 mn)

Key dates:

Christianisation: Apr 14, 966 Kingdom of Poland: Apr 18, 1025 Polish-Lithuanian commonwealth: Jul 1, 1569 Partition of Poland: Oct 24, 1795 Duchy of Warsaw: Jul 22, 1807 Congress Poland: Jun 9, 1815 Independent Poland: Nov 11, 1918 Invasion of Poland, WWII: Sep 1, 1939 Communist Poland: Apr 8, 1945 Republic of Poland: Sep 13, 1989

38.5 million 6th in the EU 35th in the world (2011 national census)

Internet: .pl Phone: +48 Drives: on the right

Density:

123/km2 (320/mi2) 83rd in the world (2011 national census)

98.1% Polish 0.6% Ukrainian 0.2% German 0.2% Belarusian 0.1% Lithuanian (2011 national census)

Official language:

Polish

Law: the legal system has been developing

since the first centuries of Polish history, over 1,000 years ago. In 1791 Poland became the first country in Europe (2nd in the world) to adopt a Constitution as supreme law on its territory.

Constitutional Tribunal is the highest jurisdiction in today’s Poland. Court decisions can be appealed to the European Court of Justice in Strasbourg. The Republic of Poland recognizes also the International Court of Justice.

Political system: a parliamentary representative democratic republic, whereby the Prime Minister is the head of government of a multi-party system and the President is the head of state. Executive power is exercised by the Council of Ministers. Legislative power is vested in both the government and the two chambers of parliament, the Sejm and the Senate. The Judiciary is independent of the executive and the legislature.

Administrative order: Poland is a unitary

state. After the 1999 administrative reform, it is now divided into 16 provinces (voivodships), 380 districts (powiat) and 2479 local government communities (gmina).

President:

Prime Minister:

Next presidental election: 2020

Ruling party:

Andrzej Duda

Beata Szydło

Prawo i Sprawiedliwość

National defense:

Next parliamentary election: 2019

Memberships:

National parliament:

Army: 100,000 (professionals) Yearly defense budget: $10.5 bn (2016) Scheduled equipment purchases: $41 bn

UN, United Nations (1945) EU, European Union (2004) NATO, North Atlantic Treaty Organization (1999) WTO, World Trade Organization (1995) IMF, International Monetary Fund (1986) Schengen Agreement (2007) G6, Group of Six (2006) Council of Europe (1991) OECD, Organisation for Economic Co-operation and Development (1996) OSCE, Organization for Security and Co-operation in Europe (1994) Visegrád Group (1991) Weimar Triangle (1991) EEA, European Economic Area (2003) CBSS, Council of the Baltic Sea States (1992) IEA, International Energy Agency (2008) IAEA, International Atomic Energy Agency (1957) ESA, European Space Agency (2012)

Sources: Central Statistical Office (GUS), National Bank of Poland, Min. of Finance, Min. of Economy, Min. of Employment, 2011 national census, Warsaw Stock Exchange, Eurostat, World Bank, United Nations, OECD

460 members (female deputies: 27%)

Political parties:

PiS: 234 seats (50.8%) PO: 134 seats (29.1%) KUKIZ: 36 seats (7.8%) Nowoczesna: 30 seats (6.5%) PSL: 16 seats (3.4%)

Number of Polish deputies in the European Parliament:

51 seats (6.76% of total)

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993 960

857

898

931

in focus

794 688

730

643 577

Currency:

Currency exchange rates:

Polish Złoty (PLN)

EUR: 4.29 (y/y+2.4%) USD: 3.81 (y/y +1.4%) GBP: 4.94 (y/y -14.3%) CHF: 3.93 (y/y +1.8%) (Sept 26, 2016, National Bank of Poland)

Interest rate:

Sept 2016: 1.50% Aug 2016: 1.50% Jul 2016: 1.50% Jun 2016: 1.50% (National Bank of Poland)

usD billions

527

Working time:

Average salary:

Workforce productivity:

Minimal salary:

$29.9/hour (2014, OECD)

1850 PLN gross (Jan 2016, Ministry of Employment)

Nominal GDP (PPP): free float of the national currency helped the country maintain development even in the middle of the global crisis. (World Bank)

Total employment:

Main tax rates:

GDP (PPP) per capita in relation to EU28 average: 2004: 49%; 2015: 69% (Eurostat)

Mar 2016: 6.8% Feb 2016: 6.8% Jan 2016: 6.9% Dec 2015: 7.0% (Eurostat)

498 419

443

av. 1963 hours per year 7th place in OECD 2nd place in EU (2015, OECD)

460

01 02 03 04 05 06 07 08 09 10

National bank governor:

CPI Inflation (y/y):

National bank reserve:

prof. Adam Glapiński

Aug 2016: -0.8% Jul 2016: -0.9% Jun 2016: 0.8% May 2016: -0.9% Apr 2016: -1.1% Mar 2016: -0.9% Feb 2016: -0.6% Jan 2016: -0.5% (Central Statistical Office)

Aug 2016: €99 bn Aug 2015: €88 bn Aug 2014: €77 bn Aug 2013: €83 bn Aug 2012: €82 bn Aug 2011: €74 bn Aug 2010: €73 bn (National Bank of Poland)

International rating:

Fitch: AMoody’s: A2 S&P: BBB+ (Sept 2016)

Foreign direct investment in Poland:

Inward stock: $213 bn Inflow in 2015: $7.5 bn (2015, United Nations)

Polish direct investment abroad:

Outward stock: $28 bn Outflow in 2015: $3 bn (2015, United Nations)

WIG20 blue chip index change:

2015: -20% (1859 pt) 2014: -3% (2315 pt) 2013: -7% (2400 pt) 2012: +20% (2582 pt) 2011: -22% (2144 pt) 2010: +15% (2744 pt) 2009: +33% (2388 pt)

71

81

101

120

142

108 134

153

154

157

168

175

exports (€ billions): 60

71

88

102

116

98

120

137

143

155

166

179

04

05

06

07

08

09

10

11

12

13

14

15

Foreign trade balance: Poland’s economy plays an important role in the chain of supply of many global companies. A significant part of imports are capital goods needed for industrial retooling and for manufacturing inputs, rather than imports for consumption.

Poland is also highly dependable on external fossil fuel suppliers. The current economic slowdown in Europe combined with the free float of Polish currency is exerting a major influence on Poland’s foreign trade.

13

14

15

17.4 million people (2015, OECD)

+337% (World Bank)

Unemployment:

percents (Y/Y)

3.6

Paweł Szałamacha

5.0

5.1 3.5

PIT, personal income: 18% (below zł 85k/y) 32% (above zł 85k/y) CIT, corporate income: 19% (flat tax) VAT, value added: 5%, 8%, 23% (Ministry of Finance)

Minister of finance:

7.2 6.2

3.9

3.7

3.3

10 year government bonds (PLN) interest rate:

3.6

2.6 1.6

1.2 1.4

01 02 03 04 05 06 07 08 09 10

11

12

1.3

13

2.5% (Aug 2015, Ministry of Finance) 14

15

GDP growth rate: Poland’s GDP figures since

Balanced budget amendment:

Warsaw Stock Exchange:

Budget deficit:

the mid-90’s have varied greatly but, crucially, they have never gone into negative growth.

While serious challenges remain, the figures are a testament to those who set the course of the economy during and immediately after the transition from communism to a freemarket economy. (World Bank)

Listed companies: 486 (53 foreign) Total capitalization: €219 bn Capitalization of foreign companies: €104 bn Number of IPOs: 23 (2013), 28 (2014), 30 (2015) Number of investment accounts: 1.5 mn 2015 total stock sales: €48 bn 2015 average stock sale per session: €191 mn (Sept 2016, Warsaw Stock Exchange)

Exports by sector:

imports (€ billions):

12

1990-2015 GDP per capita (PPP) change:

Economical overview: after 25 years

of constant economic growth, Poland with a GDP (PPP) per capita of $26,135 is recognized as a high income economy. It is the biggest economy in Central Europe, the sixth largest in the EU and, according to different sources, 20th to 25th in the world. It is also one of the most dynamic economies on the globe. According to the United Nations Statistics Division, Polish GDP (PPP) rose from $228 bn in 1990 to $993 bn in 2015. During the ongoing crisis, Poland was the only member country of the European Union to have avoided a decline in GDP. In 2015 Poland’s GDP was 36.1% higher than in 2008, a peerless performance among all EU 28 countries.

Poland is also home for the biggest and most dynamic stock exchange in Central Europe.

According to Deloitte’s CE TOP 500 survey, four of the 10 biggest companies in Central Europe are Polish.

11

4244 PLN gross (y/y +5%) (Jul 2016, Central Statistical Office)

Food and beverages: €18.5 bn (11.2% of total) Industrial supplies: €45.2 bn (27.2% of total) Fuels: €6.4 bn (3.9% of total) Capital goods: €27.0 bn (16.3% of total) Transport equipment: €31.3 bn (18.9% of total) Consumer goods: €36.7 bn (22.2% of total) (2014, Central Statistical Office)

Exports by destination:

Developed countries: €139.3 bn (84.1% of total) Developing countries: €14.3 bn (8.6% of total) OECD countries: €133.5 bn (80.6% of total) European Union (28): €128.4 bn (77.5% of total) CEE countries: €12 bn (7.3% of total) Germany: €43.6 bn (26.3% of total) Czech Republic: €10.7 bn (6.5% of total) United Kingdom: €10.5 bn (6.4% of total) France: €9.2 bn (5.6% of total) (2014, Central Statistical Office)

Poland’s constitution (adopted in 1997) caps public debt at 60% of GDP - the government cannot take on any financial obligations that would cause that limit to be exceeded.

To ensure this level is never breached, Poland has a self-imposed debt threshold of 55% of GDP, and the government must take action to balance the budget once this level is exceeded.

2015: 2.6% GDP 2014: 3.3% GDP 2013: 4.0% GDP 2012: 3.7% GDP 2011: 4.9% GDP 2010: 7.5% GDP 2009: 7.3% GDP 2008: 3.6% GDP (Central Statistical Office)

Imports by sector:

Food and beverages: €11.9 bn (7.1% of total) Industrial supplies: €55.1 bn (32.7% of total) Fuels: €20.2 bn (12.0% of total) Capital goods: €36.6 bn (21.7% of total) Transport equipment: €22.0 bn (13.1% of total) Consumer goods: €22.1 bn (13.2% of total) (2014, Central Statistical Office)

Imports by origin:

Developed countries: €110.9 bn (65.9% of total) Developing countries: €37.6 bn (22.3% of total) OECD countries: €112.7 bn (66.9% of total) European Union (28): €99.5 bn (59.0% of total) CEE countries: €19.8 bn (11.8% of total) Germany: €37 bn (22.0% of total) China: €17.5 bn (10.4% of total) Russia: €17.3 bn (10.3% of total) Italy: €9.5 bn (5.6% of total) (2014, Central Statistical Office)

Public debt:

2015: 51.3% GDP 2014: 50.5% GDP 2013: 56.0% GDP 2012: 54.0% GDP 2011: 54.4% GDP 2010: 53.3% GDP 2009: 49.8% GDP 2008: 46.6% GDP (Central Statistical Office)

External debt (public sector):

2014: $145 bn 2013: $154 bn 2012: $152 bn 2011: $117 bn 2010: $112 bn 2009: $87 bn 2008: $67 bn (Central Statistical Office)

Current account balance:

2014: –$11.1 bn 2013: –$6.7 bn 2012: –$18.6 bn 2011: –$27.3 bn (Central Statistical Office)

22 politics & economy

Poland is in state of flux Public takeovers and attempts to void privatisations are hitting Poland’s image abroad and putting some investors in ‘wait and see’ mode, says Wawrzyniec Smoczyński, managing director of Polityka Insight.

Are investors worried about Poland?

Wawrzyniec Smoczyński is the

founder and managing director of Polityka Insight which delivers economic and political analysis on Poland to corporates, embassies and international organisations.

A former foreign affairs journalist, Smoczyński is wellnetworked across Warsaw and EU capitals.

They are surprised and confused.

Surprised by the sudden change from a liberal, pro-market government to a conservative, state-oriented one. Many investors who have assets in Poland come to Warsaw to see things for themselves and once they do, they get confused. Things on the ground don’t look as dramatic as reported in the international media, but even in Warsaw you get two narratives: the decision makers will tell you everything is fine, the business community says it isn’t. So in the end many investors come to us for some cool-headed analysis.

And what do you tell them?

That Poland is in flux. Law and Justice (PiS), the ruling party, has launched a wholesale transformation of the country, including the economy, administration, court system, education and many other areas. We are seeing an attempt at exchanging elites not just in politics but in the civil service, among lawyers and journalists. This is accompanied by a highly charged domestic debate, an ongoing conflict with the European Commission and sometimes uninviting comments toward foreign investors.

In economic policy we see a paradigm shift away from classic neoliberalism toward modern statism. PiS is convinced the state should play a major role in the economy. The transformation comes with a raft of new laws and regulations which are not easy to follow. We are telling foreign clients that Poland is still a great place to invest but that they need to account for political risk. This means keeping track of political developments and anticipating their potential impact.

So is Poland becoming a second Hungary?

PiS is definitely borrowing policies from Victor Orban’s handbook. The bank asset tax, the retail tax, the takeover of public media or what is happening to the Constitutional Tribunal – all look similar to what Mr. Orban did a few years back in Hungary. PiS leader Jarosław Kaczyński meets with him regularly and they are forging, at least in public, a political alliance against Brussels, its institutions, immigration policy and what they both perceive

as German hegemony in the EU. But I would be cautious with simple analogies that Poland will go Hungary’s way.

The policies introduced are the same.

But the conditions are different.

Mr. Orban rose to power in times of recession, PiS took over a booming economy. This means Mr. Kaczyński stands to lose much more if his policies backfire on growth. Second, some of those measures, like the retail tax, have been stifled by the European Commission in the case of Hungary, and PiS has a more restricted path in terms of what is permissible under EU law. Thirdly, Poland is a bigger economy and a more important political player than Hungary. PiS has been spending a lot of political capital in recent months, but Poland’s reputation is not an unlimited resource. For all their national pride Poles - including those voting for the ruling party - are attached to their country’s positive image abroad.

So how will Polish politics develop in the coming months?

The political debate will remain charged and policymaking will be volatile. The parliamentary investigation into the Amber Gold financial pyramid will implicate leading PO politicians with former PM Donald Tusk possibly called to testify. We might see Warsaw mayor Hanna Gronkiewicz-Waltz dismissed in a referendum, and early mayoral elections called in the capital. In December 2016 a new president of the Constitutional Tribunal is to be chosen which will reignite the crisis around the court. And there is a lot of talk about ongoing investigations into supposed irregularities at stateowned enterprises under the previous government – opposition politicians fear such inquiries will be used to eliminate them from politics.

On the policy front the PiS government has been hyperactive in the first six months pushing through new laws, imposing taxes and reshuffling boards at state-owned enterprises. But the pace of change, at least in areas related to the economy, is bound to slow down.

First, ministers are having a realitycheck as to the complexity of writing new laws – work on the retail tax has

23

politics & economy

‘PiS is borrowing policies from Victor Orban’s handbook.

They are forging a political alliance against Brussels, its institutions (...) and what they both perceive as German hegemony in the EU.’ been very protracted. Second, party politics starts to weigh down policymaking. With a weak PM, tensions had to emerge within the Cabinet over economic policy and PiS factions are fighting for influence at state-owned firms.

Will Deputy PM and Development Minister Mateusz Morawiecki gain more influence?

Morawiecki is key to the government’s credibility with the financial markets and foreign investors. He is also trusted by the PiS leader for his economic expertise – for Mr. Kaczyński economics is secondary to politics and he clearly delegates economic planning to Mr. Morawiecki. But his position in politics depends ultimately on tangible effects of his plan – if he is able to deliver new jobs, new factories and prospects for additional growth and budget revenue, he will gain. On the other hand, if the economic climate deteriorates before Mr. Morawiecki can show results, the blame might be put on him for not delivering, rather than on PiS for overspending on electoral promises.

Is PiS after foreign capital?

We are asked this frequently and my answer is “no”. There is no intention to chase away foreign investment but there is a concerted effort to change the playing field for foreign capital.

Rising high. The Law and Justice (PiS)

party came to power in the October 2015 general election by winning 37.58 percent of the balllot. That gave PiS 234 seats in the parliament. It means that the government run by Beata Szydło (pictured) has a parliamental support from 50.8% of all MPs.

Banking, retail, energy and media were singled out as those sectors where PiS, for different reasons, wants to see more domestic or even state capital – at the expense of foreign investors.

In banking, Alior has offered to buy Raiffeisen Polbank and PZU might take over Bank Pekao. In the energy sector, EDF assets will probably be taken over by state utilities.

Public takeovers and attempts to void privatisations – like in the case of PKP Energetyka – are hurting Poland’s image on the markets, inviting speculation on the złoty currency and bonds, and putting some investors in “wait and see” mode. But setting aside strategic sectors, highly regulated ones and those with a significant state-owned player, investing in Poland is still very secure and to some extent more attractive than before. Mr. Morawiecki wants to attract capital that fosters innovation and includes production capacities in Poland.

So your outlook is positive?

Our baseline is that 2017 will be a risky year. Domestic politics will become more belligerent and the economy will face headwinds. Poland is at the height of the business cycle which means the economy has to slow down. Spending of EU funds is stalled, and we will probably see reduced foreign investment in 2017. If budget revenue will not grow as expected, the government might be tempted to introduce additional sectoral taxes.

But my biggest concern are external shocks - a financial crisis in Italy spilling over the Eurozone or a security situation in the East. Each would be difficult to manage for Poland given a limited fiscal room and a government alienated in the international community.

interview by Michał Nawarski

24 politics & economy

Will Poland slow down in 2017?

The Polish economy abruptly decelerated in the first quarter of 2016. This was mainly due to a slowdown in investment both public and private.

In the second

Adam Czerniak,

Chief economist at Polityka Insight, where he heads the macroeconomic desk and conducts tailored research on wealth, consumers and the housing market.

Czerniak is also assistant professor at the Warsaw School of Economics (SGH).

half of the year GDP sible consequences of changes in the growth will most probably rebound as government’s economic policy and the newly started child-benefit scheme the anti-business rhetoric of politicians, dubbed “500+” will drive domestic especially regarding foreign-owned demand. The outlook for 2017 is mixed, companies. Entrepreneurs’ fears are however – there are question marks fuelled by legislation such as the bank regarding global sentiment and domes- asset and retail taxes and by bills introtic economic policy with contradictory ducing more bureaucracy in order to trends emerging in Poland’s economy. curb tax avoidance.

The headline expectations for 2017 Foreign investors are on the other point to a stabilisation of growth at hand worried about the anti-EU stance a level slightly above three percent. of the current government and its tense According to Polityka Insight’s in-house relationship with Brussels. International forecasts, Polish GDP will increase by companies are delaying major invest3.3 percent after growing around 3.5 ments waiting for the situation to settle. percent in 2016, boosted mainly by pri- They are worried that growing hostility vate consumption and public invest- between Warsaw and Brussels could ment. The average figure for 2017 does lead to EU funds to be frozen by the EC. not look worrisome, but the decompoIn the last couple of years the Polish sition of growth rates across quarters economy was driven by growing shows a significant slowdown in eco- exports. Today the trend is reversing – nomic activity throughout the year. In in June exports fell at the fastest rate the first three months of 2017 economic since the crisis, orders from Germany growth might even exceed four percent and other eurozone countries being the only to fall to as low as 2.9 percent in the main reasons for the weak data reading. last quarter. Consumption will gradually The outlook for 2017 isn’t any brighter. decrease as the demand stimulating Increased uncertainty after the British effects of the “500+” scheme fade and referendum, softer domestic demand inflation climbs above 1.5 percent dimin- in the biggest EU economies, and probishing the benefits from wage hikes. lems in Italy’s banking sector are makThe 2017 economic conditions ing up for the pessimistic forecasts for would be even worse if it weren’t for an Polish trade. As a result, net exports will expected rebound in public investment most probably be the main factor slowoutlays. As spending of EU structural ing down Polish GDP. funds from the 2014-2020 perspective The only factor that could sustain the take off, central and local government economic growth at the end of 2017 will units should increase spending. This be public spending. Favourable fiscal would help construction companies to conditions – after six years of austerity get out of recession which has troubled – allow for the government to increase the sector since 2015. At the same time the budget deficit. If the government a further increase in residential invest- decides to further increase retirement ment should be expected. Historically outlays and take up other demandlow levels of unemployment and inter- stimulating actions, GDP growth might est rates, optimistic consumer expec- stay above three percent until the end tations, a housing shortage, as well as of the year. This will come at a large cost, stagnant prices will stimulate demand however. The increase in the structural for new residential buildings. public deficit will be a liability in times The outlook for investment growth of global slowdown and it will impose in private companies is much more the need for spending cuts maybe as pessimistic. Already in the first half of early as in the 2019 election year. Such 2016 – despite high capacity utilisa- a scenario will be even more likely, if tion and business profitability – com- the government decides to decrease panies were cutting spending on fixed the retirement age back to the 2012 capital. Furthermore, as indicated by level (65 years for men and 60 years a survey by the Polish central bank, for women). All in all, the economic concompanies are very reluctant to start ditions in the forthcoming years will be new investments. Almost one in three much more dependent on the governcompanies are withholding projects. ment’s fiscal policy than they have been Entrepreneurs are afraid of the pos- for the last decade. by Adam Czerniak

‘Foreign investors are worried about the anti-EU stance of the current government.’ finances The Polish banking sector has thrived

due to its fragmentation and ensuing competitiveness. Now it’s time for consolidation and repolonisation?

For years Polish banks have been leading

in Europe in terms of profitability. They were lending more than their counterparts abroad, and their deposit portfolios grew rapidly. Innovations helped curb costs and at the same time won Polish banks international awards.

Business was good until 2015, when the sector’s costs soared due to interest rates cuts.

The banks also had to cover for deposits lost at bankrupt credit unions (SKOKs) and the SK Bank, finance the Borrowers’ Support Fund (a fund issuing low-interest loans to indebted homeowners), and on top of that to pay an asset tax. Finally the Polish banking regulator imposed capital buffers on banks which used to issue loans in Swiss francs.

As a result the average return on capital in

the Polish banking sector plunged from 12.5 percent in 2012 to the current seven percent.

Such a drop in profitability pushed some foreign bank owners to leave Poland. This trend was further strengthened by European financial supervisory institutions which required banks to gather more capital. In the end Belgian KBC, Belgo-French Dexia, Greek Polbank and Swedish Nordea have all left Poland.

Currently, at least two banks are for sale:

Raiffeisen Bank, owned by Austrian Raiffeisen Group, and Bank Pekao, owned by Italian UniCredit. A majority of shares in both of them will most likely be bought by Polish state-owned companies, led by lender PKO BP, and insurer PZU. Such a move is backed by the Polish government, which intends to increase the share of Polish ownership in the banking sector. If Raiffeisen and Pekao are sold, the foreign share of capital in the Polish banking sector will drop from the current 57 to 43 percent. Should that happen, Poles would regain a majority share in the sector for the first time since 1998.

Piotr Sobolewski is the financial sector analyst at Polityka Insight. Previously he wrote for Parkiet, Rzeczpospolita and Bloomberg Businessweek Polska. He is a graduate in Finance, Accounting and Insurance from the University of Warsaw.

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

+3.9%

+3.6%

+4.0%

+3.6%

+3.0%

+2.9%

GDP expected change (y/y):

GDP expected change (y/y): :

infrastructure European Union funds should immunise

Polish infrastructure investment against a possible economic downturn, but growing delays and a poor spending record could prove to be a problem.

The steady and foreseeable inflow of

European funds makes it easier for Poland to continue infrastructure investments even in the case of a severe economic crisis. Most major projects, such as new expressways or trunk rail lines, will be heavily financed by the European Union, up to 85 percent. Poland needs to put all the money up front, but these expenses should promptly be reimbursed.

The most urgently needed projects – such

as expressways between Polish regional capitals and upgrading of railways for both passenger and cargo traffic – are unlikely to be cut.

Nationally-funded investments include mostly smaller roadworks, particularly those focused on local roads and safety improvements. These expenses could be scaled down, should an economic slump happen, but most likely will not.

Despite the availability of funds, what worries both the construction sector and the transportation companies (particularly in the railway sector) are delays in spending. Until mid-2016 – two and half years into the EU multi-annual budget which runs until 2020 – not a single large railway tender has been concluded.

It might seem there is plenty of time to catch up but this will be difficult, neither the construction firms nor rail companies can handle investments worth more than around 10 billion złoty per year. The former lack manpower and equipment to build more, while the latter fear that railroads will be closed, causing more delays.

Poland plans to spend 161.4 bln złoty

(€37.2 billion) on new and modernised roads and another 65.7 bln złoty (€15.1 bln) on railways by 2022. Roughly half of these investments will be financed from European Union funds. To this end, Poland will receive 27.4 bln euro from the Infrastructure and Environment programme alone, and more money will come from other programmes on top of that.

The current plans were adopted by the former government in a last-ditch attempt to win back votes before the 2015 elections, but the current Law and Justice (PiS) administration wants to maintain the same level of spending, although particular projects will be amended.

Dominik Sipiński is an infrastructure analyst at Polityka Insight. He also authored a book about airports in Poland. Sipiński holds a MA degree in War & Conflict Journalism from Aarhus University and Swansea University, and a BA degree in European Studies from Maastricht University.

GDP expected change (y/y):

GDP expected change (y/y):

According to forecasts by Polityka

Insight (above), the Polish economy will grow steadily until the first quarter of next year, but then the momentum will slow down in the following months.

GDP expected change (y/y):

GDP expected change (y/y):

defence Poland reduced by almost a quarter the amount of money to be spent on modern weaponry by 2022 - the revised army modernization plan cuts the funds available for priority programmes. These consisted of high-tech, expensive weapon systems to be delivered by foreign suppliers.

25

politics & economy

for more statistics about Polish economy go to page 20.

According to MoD statements, the 19 bln

energy Poland’s biggest utilities are facing the same challenges as the global energy sector.

They are trying to modernise strategies but don’t want to let go of coal.

PGE and Tauron are the two largest energy producers in Poland. Both companies are listed on the Warsaw bourse, but the state holds significant shares and has the conclusive vote in key decisions. In their new strategies, both PGE and Tauron are trying to mimic the transformation which foreign utilities are going through. European concerns are betting on i.a. investment in renewables, smart grids and smart metres, and are upping their spending on innovation. The pace of technological innovation and improvement in services is rapid, so both companies set a short timeframe for their strategies. PGE’s plan lasts until 2020, while Tauron’s extends until 2025.

Both companies plan to shift their focus

on customers. They still want to sell them electric power, but also other goods, such as gas or solar panels. In the long-term both also want to service electric cars and specialize in energy storage. Utilities want to invest in energy distribution. Today, it is the safest part of the energy business when it comes to profitability.

But still, for both companies coal is king and

rules the Polish energy mix. Even though PGE distinguishes three growth paths – development of nuclear energy, lignite or offshore wind farms, hard coal will remain their main fuel.

Tauron’s position is more difficult – the company is heavily indebted and it wants to focus on modernising the existing hard coal power plants. Investment remains the main problem for both firms. Until 2020, Tauron and PGE will spend PLN 54 bln zloty (€12.5 bln), more than twice their current stock market capitalisation.

Most of these funds will be spent on power plants in Opole, Turów and Jaworzno. It is clear that these will not turn a profit, but without them serious power shortages could occur.

Robert Tomaszewski is an energy analyst at Polityka Insight. A graduate of International Relations at the University of Warsaw, North Eastern Illinois University in Chicago and Radboud University Nijmegen in the Netherlands. He completed also postgraduate studies in Functioning of the Energy Market at the Warsaw School of Economics.

reduction in funding by 2022 (from 91 bln to 72 bln) for major defence procurement programmes is a result of lowered budgetary forecasts, inflation and funds moved to build a Territorial Defence Force (TDF). TDF’s cost was initially estimated at ca 2 bln zlotys in the coming years. This was later increased to 4-5 bln, and that's only for the equipment.

The cost of the new service branch is largely unknown, as the pace and scope of the programme depends both on the budget and availability of volunteers. The MoD MinDef plans to form three brigades of the new force in 2017. Rifles, mortars, vehicles, light-guns and personal gear will be delivered by Polish defence sector.

But the ministry does not intend to reduce the overall scale of army upgrades too much.

The needs are vast and some remain urgent.

The number one priority is air and missile defence. Poland will develop the lowest tier on its own, but will require foreign technology inserts. For medium range (lower tier in US terms) air defence, Poland chose to order upgraded Patriot systems, equipped with network-centric IBCS command system and – in the future - a 360 degrees radar. The LoR for that system was sent to Washington and the contract may be signed as early as mid-2017.

The system will become the country's largest defence project, worth 30 to 50 bln zlotys (USD 7.5-10 billion) on estimate. A boost to local defence industry, it will also be the greatest burden - delivery schedule ends in 2026. The remaining part of the military purchase plan is to face reductions and delays, however gaps in existing capabilities will not allow for severe cuts. A big question mark is hanging over the multi-role helicopter procurement, initially granted to Airbus, but contested on political ground by the PiS party, now in power. Also the attack-helicopter project, once deemed as priority, will have to wait until the coffers fill up.

Marek Świerczyński heads Polityka Insight's security desk. He has covered defense tenders and international security issues throughout most of his 20-year career.

Between 1997-2005 he worked at the Polish Section BBC World Service in Warsaw and London, and later in several radio and television newsrooms. He studied law at the Adam Mickiewicz University in Poznań.

Anders IFV is

a series of multirole, tracked combat vehicles being developed by the PGZ Group in Poland. It is intended to replace the existing ex-Soviet fleet of BMP-1 infantry fighting vehicles in the Polish Army.

The army is expected to replace its BMPfleet with about 700 to 1,000 Anders vehicles.

26 Polska goes global leader

2002

Exports: €43 billion

Poland has lofty ambitions of becoming a force to be reckoned with both in terms of foreign trade and attractiveness to investors from overseas.

2003

Exports: €48 billion

2004

Exports: €60 billion

2005

Exports: €71 billion

The country is of course almost unrecognisable

Richard Stephens

founded Poland Today in 2012 to help bring Poland to the world and the world to Poland. He has a degree in Theology and Religious Studies from Bristol University in the UK.

from the place it was in the heady days of the early 1990s, when the free market – back then still very much a new concept – was booming. For decades Poland, wedged tightly behind the Iron Curtain, had been forced to watch as others in the region expanded their economies. For the last few years, however, it’s been Poland's turn to shine – and the country’s businesses now have their sights set firmly on international horizons.

The forecast is good. Polish exports will continue rising steadily over the coming years – by 6.9 percent so far this year, with 2017 and 2018 seeing growth of 9.6 percent and 9.0 percent respectively, according to analysts at Bank Zachodni WBK, the Polish arm of Santander. These figures are especially promising, the bank emphasises, as last year’s figure was 7.8 percent and 2014 saw 7.0 percent.

“All sectors will see a rise in export figures,” Feliks Bentkowski, BZ WBK’s Sectoral Credit Director, wrote in a statement, adding that well-known Polish exports will certainly experience an increase, while “some less obvious” industries will also profit. In first place, according to a growth-potential ranking compiled by the bank, is the furniture and furniture-accessory (such as hinges, locks etc) industry, with 75 points out of a maximum 100. The sector is no newcomer to being a star of Polish exports. “Foreign sales of this industry have been growing rapidly for many years. In 2015, growth in the sector amounted to 9.6 percent year-on-year to a value of 42.2 billion złoty,” the bank said. There is a large global appetite for Polish furniture, with many producers exporting beyond the European Union to the US, Canada and China.

Furniture – sitting on its laurels?

For more information

about the Polish trade balance as well as other statistics covering Polish economy, go to page 20

But is there room for further growth? Ignacy Morawski, an economist at WiseEuropa, says that despite booming sales, what Poland lacks is a design identity for its furniture. “Poland used to have a very established aesthetic for its consumer products in the 1950s and 1960s. What today’s producers could do is take a page out of that book and reinvigorate some of those designs,” he said, explaining that doing so would increase the profits of products sold abroad. “At the moment Polish furniture is selling very well, but the margins are fairly small. Poland could increase its profits by selling trendier, cutting edge designs which appeal to a wealthier clientele,” the economist added. “In Scandinavia, this is established. Poland could learn a thing or two from them.”

The agricultural industry has long been a heavyweight of Polish exports, especially as it has gained heavily from EU

2006

Exports: €88 billion

2007

Exports: €102 billion

2008

Exports: €116 billion

subsidies and grants since Poland joined the European Union in 2004. And the funding is not drying up any time soon.

The inflow of money from the EU to Poland will increase in the 2014-2020 period, says the Polish Development Ministry.

The European Parliament has approved the budget, which will see Poland receive a total of €105.8 billion – the biggest beneficiary of EU funds, according to the ministry. Of this, €28.5 billion will go to Polish agriculture. (See page 32 for an account of how Polish apples have shown their versatility).

Not all that glitters is gold Expansion is a positive thing, but it’s not always easy. Some new destinations might be hard nuts to crack. Experts say that as Poland looks for more markets further afield, risks rise exponentially. Far away markets involve difficulties which are more significant than when selling to EU countries. One of the most obvious problems is cost. The further away a target market is from Poland, the more expensive it will be to ship there, impacting on the bottom line. Different regulations from one country to the next, even between countries in the same region, can be a major headache for exporters, while cultural differences can exacerbate these problems even more. Businesses dipping their toes into the export game can be caught off guard. “Exporters do not always pay enough attention to these issues,” Robert Antczak, from BZ WBK, said. “And it is things like cultural differences which often determine the success, or failure, of attempts to establish or develop international business relationships.”

It often pays to find local experts to help navigate the murky waters of conducting business in a foreign market.

Rudradeb Mitra is a Poland-based consultant who assists companies in setting up shop in his native India. Polish businesses, he says, are keen to expand into such a large market and are often surprised to learn that Indians are quite affluent and the locals can afford top-shelf goods. In Mitra’s opinion, the lack of knowledge could be because of a deficiency of educational materials and conferences in Poland which prepare the groundwork for aspiring exporters.

A new agency set up by the Polish government to replace the Information and Foreign Investment Agency (PAIiIZ) aims not only to assist foreign companies establish a foothold in Poland, but also Polish firms to expand their horizons.

The agency conducts programmes targeting the four corners of the globe – including the Arctic region. PAIiIZ acting president Bartłomiej Pawlak told Poland Today that the agency can help establish first contact, but success largely depends on the tenacity of individual businesspeople, wher-

In 2015, for the first time in its history, Poland saw a trade surplus of €4 bn.

Source: Central Statistical Office

2009

Exports: €98 billion

2010

Exports: €120 billion

ever they find themselves in the world – and tenacity is one thing that Polish companies have in large supply. “It is beyond doubt that if Polish enterprises apply their knowledge worldwide they will prove very successful. Furthermore, companies that place more focus on innovation and research & development, will enjoy a greater comparative advantage in business abroad,” Pawlak said. (go to page 28 to read the full interview).

In and/or out

2011

Exports: €137 billion

2012

Exports: €143 billion

‘Those who have followed Polish affairs over the last decade can attest to the fact that the country has a knack for knowing what it wants and where it wants to go.’

As Poland looks upon the world as its oyster, the world is also eyeing Poland and assessing its profit potential. In recent years the country has made significant inroads in appealing to foreign capital. According to EY’s Europe Attractiveness Survey 2016, Poland and Russia – somewhat counter-intuitively - were the top performers by FDI project growth in Europe overall, with an increase in market share of 61 percent and 60 percent respectively over the previous year. Although this result placed Poland firmly in the top five ranking in terms of growth, it placed 7th in terms of actual number of projects. Concerning manufacturing, Poland saw the creation of 117 projects in 2015, an increase of 34 percent over the year before, putting it in first position above Turkey, which had 105 projects. Foreign direct investment led to 19,651 jobs created in Poland in 2015, and while this figure put it in an impressive 2nd position in Europe after the United Kingdom, in terms of year-on-year growth between 2014 - 2015 it was, at 27 percent, dwarfed by several countries, most notably Hungary on 141 percent and Serbia on 108 percent. To put it into perspective, however, France only managed eight percent growth and Russia came in with -25 percent negative growth.

And FDI could also potentially experience a boost in the short to middle term if the country sees a rise in investments following Britain's decision to exit the EU. However, the United Kingdom comes second behind Germany as a destination for Polish exports, with the country importing a wide range of products, including home appliances, furniture and food. Some experts believe that Brexit will result in a sharp drop in EU exports to the UK, although at present this is only an educated guess. As negotiations continue, EU

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In 2014 exports represented 47%

of Poland's GDP up from 27% in 2000.

Source: OECD

2013

Exports: €155 billion

leader

2014

Exports: €166 billion

and British authorities could introduce changes allowing Poland to still enjoy a profitable cooperation with the country. “The United Kingdom can remain in the European economic area, without a vote, like the Norwegians or the Swiss, but still enjoy the common market,” Piotr Soroczyński, chief economist of the Export Credit Insurance Corporation, recently told Polish Radio.

To whatever degree Britain separates itself from the rest of Europe, Poland could potentially steal some of the limelight from its more developed partner as companies weigh up the possibility of setting up a base outside the UK in another EU member country. Poland has many things going for it: a young and educated workforce, geographical proximity to many of Europe's major hubs as well as steadily developing transport infrastructure. WiseEuropa's Ignacy Morawski, however, doubted that companies will be leaving the United Kingdom in the near future, but agreed that Poland could offer an alternative for those seeking a stable base for growth within the European Union.

To return to the near-term forecasts, according to analysts at HSBC and Oxford Economics, in the years 2016-2020 Polish exports will increase by a total of 55 percent, at an average of 9.1 percent annually. Such dynamic growth, the authors say, will be possible thanks to the rapid intensification of trade with developing countries, especially in Asia, markets which have yet to be tapped. Those who have followed Polish affairs over the last decade can attest to the fact that the country has a knack for knowing what it wants and where it wants to go - and achieving its aims. It thus makes a mockery of the country's unfounded - but difficult to shake off - reputation during the second world war and into the cold war for romantic hot-headedness. In the 27 years since becoming a free market economy, Poland has developed a sophistication and understanding of the inner workings of the global economy that is nothing if not impressive. It has learnt the finer nuances of international trade through observation and is now ready and willing to become a fully active participant. And once it has set its eyes on the seven continents, the sky is very literally the limit. by Richard Stephens

2015

Exports: €179 billion

Main destinations for Polish exports in 2015:

Germany: 26.3% Czech Republic: 6.5% United Kingdom: 6.4% France: 5.6% Italy: 4.5% Netherlands: 4.2% Russia: 4.2% Sweden: 2.8% Hungary: 2.6% Spain: 2.4% Source: National Statistics Office (GUS)

Cumulative Polish direct investment abroad:

2000: $0.3 bn 2010: $16.4 bn 2015: $27.8 bn Source: United Nations

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Promoting Polish businesses abroad The gov't has recently announced the creation of a new Agency for Trade & Investment to replace PAIiIZ. Poland Today talks to one of the architects of the new agency, the outgoing PAIiIZ head Bartłomiej Pawlak, about the role and priorities of the new agency.

How will the new Agency be different to PAIiIZ?

Bartłomiej Pawlak

The acting president of PAIiIZ, Pawlak took on the role in May 2016. Between 2005-2006 Pawlak was a member of the board of gas monopoly PGNiG. He earlier also worked at Ernst & Young, as well as Polish bank PKO BP.

intending to come to Poland. However we will not create one dedicated strategy for all foreign offices. Each will operate according to the specifics of the local market.

There are two different elements to the issue. Political power is one thing, a one-stop approach is another. We don’t have political power of course, and we are not the decision maker, but we collaborate closely with the government and we can support the investor in its contact with local authorities.

We can facilitate the investment by bringing both parties to the table and help with finding solutions. It doesn’t mean that we can’t be the central institution that resolves all the problems of the investors, but we would rather bring others to the table.

First of all, PAIiIZ or rather the future Polish Trade and Investment Agency (PAHI) will continue in its traditional role of helping foreign investors in Poland. We will, however, take a Will these offices abroad be slightly different approach. For exam- part of the embassy structure? ple, we will favour investors which are In Shanghai it is separate, with its own more attractive for Poland – companies office overseen by the Agency – it’s not which are innovative, technical, invest in part of the embassy structure, although R&D, engage with local universities, use we collaborate with [the departments Polish contractors and subcontractors, of economy at the Polish Embassies] impact positively on their local commu- and diplomatic structures if necessary.

We would like to strengthen the team nity – that sort of thing.

Secondly, we want to support those there and enlarge its scale of activities. that are ready to invest in less devel- The aim is to concentrate on businesses In the past, different ministries oped regions of the country. Some on a micro level. We support Polish were unwilling to give the Agency areas are already saturated with for- exporters looking for local partners, the degree of independence eign investment. We won’t stop any- helping them with certification, paper- necessary to be more effective. one from investing in these places, work, documentation, legalities, consulThis is not a matter of a political but we will show them that there are tation, barriers etc. However, we do not will, but rather it’s a matter of mutual other places to invest in – such as east- do the kind of economic reporting that understanding, the climate in the counern Poland – and provide incentives is expected of the Ministry of Foreign try and the government’s treatment of to invest in: i.e. Lublin, Kielce, Olsztyn, Affairs or the Ministry of Economic business. It’s going in the right direcZielona Góra – cities with big poten- Development of Poland. tion under the influence of deputy PM Morawiecki and his entourage, as they tial, but not so visible on the radar of are former business leaders. I can see investors. Sometimes investors ask us Deputy PM Morawiecki wants they understand the needs of the busifor advice as to where they should relo- to attract only investors that cate, and we point out not only the best bring innovative technologies ness community. In previous adminisknown places, but also try to promote and R&D – highly skilled jobs. trations there was a reluctant approach the rising stars, like Lublin, because it’s But how can this be done in practice? to business – it was rare for Polish polian academic city with good infrastrucFirst of all, we create a profile of ticians to support Polish business, like the company – a record of its activi- what Morawiecki did for [tractor maker] ture, and it’s developing dynamically.

We also want to support Polish entre- ties, its plans and its strategy, plus data Ursus in Germany, which was a clear preneurs, for example, by making spe- on the scale of its investment. This is signal that the government is not afraid cial economic zones accessible to them, part of the process if they work with to communicate with business – that including those which want to export. the Agency. What we want to do from he’s ready to intervene. So there is a If we help them to grow in Poland, they now on is to evaluate the information strong commitment of the Development will be able to expand abroad better. more carefully, to see how it will impact Ministry's leadership that you call “politiFor the last decades Polish entrepre- the local business community and what cal will” to create a new Agency, based neurs have been treated almost like effect it will have on Polish competitors. on strong international network of trade 2nd class citizens. First came foreign Foreign companies somehow cannot offices as well as close relations with the investors, then big state-owned com- be privileged on the local market. Up local investors offices. Last but not least panies – and then Polish entrepreneurs. until recently the impact of foreign – offering “comprehensive solutions” This is going to change. investment was sometimes devastating along with the Polish Development We want to strengthen PAIiIZ (PAHI) for smaller Polish companies. It cannot Fund partners to its clients. abroad and in this we’d like to cooperate go on like this. with Polish companies. We’ll focus on But doesn’t this “intervention” key markets from Poland’s point of view I spoke to some foreign give investors legitimate fears both within the European Union and investors who said that the Agency that the government can medemerging markets in Asia and Africa. doesn’t have political power, meandle in their affairs?

We will create trade offices abroad ing that it lacks teeth, so to speak.

This is only intervention on request of under the supervision of PAIiIZ. There Another criticism was that there is the company in need. That’s why there is already one in Shanghai which works no one single point of contact for is no fear. If you go into numbers, the very well, focusing only on business. It investors. They have to deal with situation is actually the opposite. If you helps Polish businesses in China – and lots of people along the way – the look at our pipeline, we have investors those which want to enter the Chinese ministries, the special economic knocking at our door. We are talking to market – as well as Chinese companies zones, city and regional officials. about 180 foreign companies, which is

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About paiiiz PAIiIZ was set up in 2003 following a merger of two other state institutions. Today it focuses on helping investors to enter the Polish market and find the best ways to utilise the possibilities available to them. They guide investors through all the essential administrative and legal procedures that involve their projects.

about 15 percent more than this time last year. At the end of July there were 36 projects completed, compared to 26 this time last year. The number of jobs is up. There is bigger interest in Poland.

Poland is held in high regard among foreign investors – higher than some politicians and journalists would have us believe.

Which sectors have the biggest chance of succeeding on global markets?

I am confident that Polish companies can be competitive on the global markets, especially those operating in eg. food-processing, furniture, marine and ICT industries. To illustrate this point with a couple of examples, Poland is one of the leading manufacturer of a high quality processed food and very well known for the design and manufacture of yachts across the world. What’s more almost 100 percent of parts and components in automotive and aerospace industry produced in Poland by foreign companies is exported. Those foreign companies are more and more relying on local Polish suppliers helping them to succeed on global markets. It is beyond doubt that if Polish enterprises apply their knowledge worldwide they will prove very successful. Furthermore, companies that place more focus on innovation and research & development will enjoy a greater comparative advantage in business abroad.

Will the Agency look to any other countries for best practices on economic diplomacy, investment support? Which and why these?

‘Poland is held in high regard among foreign investors.

Higher than some politicians and journalists would have us believe.’

Given the broad assistance we offer our investors, we always strive to do it in the most professional way following the best practices in this field.

While Trade & Investment Agencies in other European countries may be a good reference in that respect, we also draw from the practices set by other institutions such as the Japan External Trade Organization (JETRO), Korea Trade-Investment Promotion Agency (KOTRA), UK Trade & Investment or Business France. That’s why I also was very interested listening to a speech by a colleague of mine from Kaznex Invest during the recent Poland-Kazakhstan Business Forum in Warsaw.

PAIIIZ in 2015: – 56 investment decisions – 9,098 new jobs created – Eur 766.9 mn investment outlays

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Interview conducted by Richard Stephens

Founder & Editor, Poland Today

‘Last year PAIiIZ helped 56 investments to choose Poland, which will create over 9,000 new jobs in the near future.’

Which global markets do you consider as potentially the most attractive for Polish business?

Logically the EU offers the most benefits to doing business across the Single Market and facilitates trade and investment. Nonetheless, we need to keep our eyes open for other markets, most importantly the emerging markets of Asia, including ASEAN, Africa and Latin America. Polish companies have been very successful in establishing their divisions in different parts of Africa in countries such as Kenya, Ethiopia and Algeria. Latin American and Asian markets, especially China, may entice Polish companies across the industries too. In short, possibilities for Polish businesses exist in these places and that’s why soon trade offices will start opening in those specific places.

How can the success of the Agency be evaluated?

We constantly keep track of all projects in our pipeline and closely follow the investment landscape as it unfolds.

Therefore, we monitor and can measure how much capital has been invested and how many new workplaces have been created as a result of the comprehensive assistance we provide to our investors. As of August 2016, PAIiIZ boasted a total of 180 active investment projects with its global value exceeding EUR 4 bln and more than 46,000 new jobs.

Naturally, not all investment projects will come to fruition, but these figures may give you an understanding of the scale of activities undertaken by PAIiIZ. To be precise, last year PAIiIZ helped 56 investments to choose Poland, which will create over 9,000 new jobs in the near future.

Poland is clearly turning its attention to China. Some people say that China is always only out for itself, more so than other countries. What will Poland get from the relationship with China?

After 1989, Poland was involved in internal transformations. The next steps were to join the European Union and to establish its position on the EU market.

For 20 years, Poland has largely forgotten distant markets of Southeast Asia and slept through the moment when Western countries were building their position in the growing Chinese market. After getting a stable position on the European market, Polish companies have begun to think of more exotic markets. Undoubtedly, the Russian Federation embargo on Polish products has contributed to this trend.

China continues to remain the largest market for the food and beverage sector, after overtaking the United States in 2011. As a result, the Chinese market

is becoming increasingly attractive for European brands, especially in the context of changing behaviour of Chinese consumers. Despite the complex distribution infrastructure and growing local competition, the chances of European SME related with products' sale in China will likely grow. Apart from the aforementioned food sector, it gives an opportunity for the Polish export offer in the fields of natural cosmetics, environmental protection, biopharmaceuticals and medical technology. Due to the abolition of the one child policy at the beginning of 2016, a group of products dedicated to the mother and baby sector can also count on increased interest from Chinese consumers.

Another area of mutual cooperation is the "One Belt One Road" initiative developed by Chinese leadership, as well as Poland joining the Asian Infrastructure Investment Bank. The Chinese side did not specify which countries it intends to cooperate with on this project. The exact course of the route has not been determined, either.

China expects a concrete investment offer from the countries through which it can run. Now we can observe a rivalry among CEE countries, which are trying to present their country as a hub for business in China in Europe. In the context of the new development plan and the potential of existing connections and logistics centres, the promotion of the so-called “northern corridor”, which runs through our country – or ends here – is crucial for Poland. We need a new growth model after 2020, independent of European funds – one option could be cooperation with China. The development strategy of the “One Belt One Road” project creates the potential to intensify political and economic cooperation with China. Due to the fact that the current revitalisation of the Silk Road is one of priorities of the Chinese government, issues of infrastructure can become one of the leading topics in the bilateral relations in the years to come.

The name of the PAIiIZ is a bit hard to pronounce. Shouldn’t the new agency have a name that rings a bell with foreigners?

Indeed, PAIiIZ is quite a lengthy acronym standing for the “Polish Information and Foreign Investment Agency” and some foreigners may find it problematic. That’s why we have forged a brand under the name of “Invest in Poland” and this is the one often used when referring to the activities of PAIiIZ. I personally use the name “the Agency” and probably soon you will find us under the new, more client-friendly name which describes both directions of our activities to and from Poland.

interview by Richard Stephens

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Winds of change

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Moves are afoot to build a network of chambers of commerce around the world to further Poland’s commercial interests.

While not every

EU country or As it turned out, she was not alone. advanced nation boasts a coordinated “The Spanish-Polish Chamber in Spain, international chain of chambers of com- led by Javier Sosnowski, contacted merce, many do. Any country which us to propose that we become part aspires to flex its economic and busi- of an international network of Polish ness muscles around the world and Chambers of commerce. And others are wants to help its businesses maxim- open, so together we started discussing ise their potential abroad should have how to build up such a network.” There just such a network. While Poland has is no wish to impose a standard model several individual chambers in various on other chambers, only to encourage countries across the globe, there is lit- a certain standardisation and conformtle or no coordination between them. ity and develop the concept together There are people, however, working with our counterparts.” The idea, she to change this. One of them is Joanna says, is to propose their concept to Schuhholz, a Polish former marketing other Polish chambers abroad and and sales manager in the logistics sec- get their feedback.

An important question is what kind tor, living and working in Holland as an Executive Director and Board Member of relationship the chambers of comof the Polish Chamber of Commerce in merce will have with the government in the Netherlands. Joanna is playing an Poland and – by extension – the Polish instrumental role in efforts to set up embassies in their respective countries. such a network, and she’s starting close Relations with local embassies will vary to home. "Until recently there were two from country to country, Joanna says, Polish chambers of commerce in The but emphasises that the Polish embassy Netherlands, but this wasn't ideal," says in the Netherlands is fully supportive of Joanna. "So we created one unified their mission and goals. “Chambers are chamber as a first step towards align- associations of businesses and are not ing the chamber with the real needs of state related. We do not expect finanPolish companies wanting to do busi- cial help from the government, although ness in the country. They need a strong some chambers of other countries are partner who knows the local market supported by their governments, such well, can share useful insights and has as the British and German ones. There good local contacts.” are many other ways we can support The Netherlands, she says, is a much each other.” In due course the hope more powerful country in terms of is that Polish companies looking to trade and business than many people in develop abroad will have one coorPoland think. Belying its size, the coun- dinated network of chambers which try is actually the 5th largest global will help them access several markets exporter and the 7th biggest investor. through one entry point. “It could be And that’s the point – a local cham- that Polish companies will take a global ber knows its host country intimately membership. Companies are already because they run businesses there and, asking us to assist them when estabin many cases, have settled down. The lishing contacts in other countries. And chamber can help Polish businesses the government will have a powerful, plug into the potential that so clearly independent global network to work lies in accessing such a country – some- alongside.” Individual chambers, she thing that can be replicated around the points out, have very often existed for world. Another goal of the chamber is to many years, putting down strong local promote a genuine picture of Poland’s roots and having a deep knowledge of business landscape. "Information about the country. That, she emphasises, can Poland abroad is not always accurate,” be priceless, and again something the she states. “It is in our interest, at the government can tap into.

The potential, once such a network heart of the Polish business community in Holland, to make sure the press cov- is established, for the enhancement of ers Poland in a well-informed way.”

Polish business around the world, is From the beginning of her activi- huge. Those who have taken it upon ties with the Chamber, Joanna saw the themselves to carry this through are need to establish relations with other confident it is only a matter of time.

Polish chambers of commerce abroad.

by Richard Stephens

The first meeting

of the group of Polish chambers of commerce abroad will take place after the ‘Polish-Dutch Business Forum’ on 24 November in The Hague. The Forum will be attended by Deputy Prime Minister Mateusz Morawiecki and is supported by the Dutch Enterprise Agency, a part of the Ministry of Economic Affairs.

Joanna Schuhholz,

whose professional background is in logistics, is a Board Member and Executive Director at Polish Chamber of Commerce in the Netherlands. She is a graduate of the Warsaw School of Economics.

‘While Poland has several individual chambers in various countries across the globe, there is little or no coordination between them.’

When life gives you apples…

The humble apple has recently become a poster boy of the Polish export market and has shown how Polish industry can adapt and succeed when obstacles arise.

For years Polish apples were sent wholesale to countries in the east, particularly Russia. Following the imposition of EU sanctions on that country in 2014, ministry of agriculture officials looked good and hard at expanding its agricultural exports, travelling the width and breadth of much of the civilised world – to countries such as Morocco, Kazakhstan and Malaysia – trying to find new export markets for the Polish jabłko, as well as much more.

Poland is set to become the EU leader EU sanctions on Polish fruit exporters. in apple production in the near future, In August 2014, his Association wrote especially if current growth is sustained. a letter to then-agricultural minister “No other EU country has seen such warning that the embargo could result a rapid growth in apple production as in companies in the sector folding, leadPoland over the last decade,” accord- ing to thousands of job losses in the ing to Mariusz Dziwulski, an econ- industry. Two years later, Polish apple omist at BGŻ BNP Paribas, in an farmers are looking for new and exotic interview with daily business newspa- destinations for their apples. per Rzeczpospolita.

What Poles lack in options, they In 2015 Poland accounted for nearly make up for in sheer determination. one in every three apples harvested If apples cannot be exported, there in the EU, head and shoulders above must be something to do with this fruit, the competition. Agriculture experts surely? The answer came in the shape of also expect this year’s harvest to be a a drink which has been a favourite tipbumper one due to positive weather ple of the British for centuries, but has conditions. Poland’s Central Statistical only recently found a foothold in Poland Office (GUS) forecasts 3.5 million – cider. The market for cider is growtons of apples to be picked this year, ing by 500 percent a year, according an increase of 10 percent over the pre- to Ambra, a leading Polish producer vious year, and as much as 70 percent and distributor of alcohol. Back in more than 2005 – a year after Poland 2012, London-based market researcher joined the EU. Euromonitor deemed Poland’s market But the abundant harvests have for cider to be “negligible”, but by 2015, caused a headache for farmers who Poland had become a leader in the struggle to sell all of their produce. “If CEE region. Euromonitor now says that we were to drop the embargo with manufacturers “have been very active Russia […] which imported as many in terms of capitalising on the growas one million tons of apples from ing consumer interest and establishing Poland, we would not have any prob- recently launched products.” Although lems with what to do with this fruit,” this market is not earth shattering, and said Mirosław Maliszewski, president of will not single-handedly save Polish the Association of Polish Fruit Growers. apple exports, it is testament to a very Maliszewski was among the first to Polish attitude. When life gives you understand the potential losses of the apples… by Richard Stephens

‘In 2015 Poland accounted for one in every three apples harvested in the EU.’

Thinking outside of the orchard.

By turning apples into cider, Polish business people have shown that where there is a will there is a way.

photo: Viktorus

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34 Time for Polska Leader

The whole is greater than the sum of its parts, so it makes sense that Polish businesses work together to develop a common strategy for taking on markets in all four corners of the globe.

In the dynamic,

Sylwia Ziemacka,

Leader of International Projects at Rzeczpospolita and Poland Today

crowded, exciting global world which we live in, a positive national brand can either give a company a distinct advantage, or, on the flipside, it can be a burden which creates unnecessary obstructions. Simon Anholt, policy advisor and founder of the Nation Brands Index, points out that, as a consequence of globalisation, all countries must compete with each other for the attention, respect and trust of investors, tourists, consumers, the media and the governments of other nations. A powerful and positive national brand provides a crucial competitive advantage.

Time for Polska is a new project

by Polish daily Rzeczpospolita under Poland Today's patronage. Its objective is to promote Poland abroad, with an important aim being to improve the business environment for Polish companies operating in – or wishing to expand into – international markets. A series of publications under the title Time for Polska will be dedicated to different industries and sectors in which Poland has particular expertise or success. The first issue in the series will be dedicated to Polish consumer and corporate brands, and will be launched in October. In the pages ahead, we bring you a curated selection of companies to be highlighted in the first edition. Poland’s image is often based on historically negative stereotypes. In the eyes of many foreigners, Poland still has strong associations with the former Soviet Union and wrongly believed to be a “tier two” country. This image is a far throw from the aspirations of Poles today. Therefore this modern and enthusiastic country needs a more coherent image – of efficiency, professionalism and, above all, unity.

Discovering Poland anew As Polish-American journalist Monica Zielinski was preparing to leave the US for Poland to work on the Time for Polska project, her friends and family in the United States thought the relocation was a foolish idea, deemed to fizzle out by the year's end. Months later, scrolling on her social media feed and seeing the beautiful pictures and reading the fun stories from her experience in Poland, they have changed their tune,

‘Now is the time for Polska because we are hungry for success.’

Poland ranked 45th in the Country Brand Index 2014-15 published annually by Future Brand. It is a rise of 30 places compared to the previous edition of the survey.

Poland ranked 24th in Monocle's Soft Power Survey 2015/16. It is a rise of one place compared to the previous edition of the survey.

and now enthusiastically want to visit.

We Poles do not seem to be aware about how little the world knows about us, and we don’t invest enough in our image abroad. When Poland Today organised an international press tour in 2014, 50 respected business journalists from around the world took part.

For many, this was their time visiting Poland. One of the key mistakes Polish companies make is to assume that foreigners know about Poland. Because of this they often create materials that are irrelevant for people abroad, sometimes laden with historical and cultural references which might completely go over the head of a foreign audience.

Some products sell in Poland because the marketing rings true on a national level, with a nod to the way Poles spend their free time, dine, or work. Without tweaks, these methods are very often not effective enough for a similar success overseas.

One other basic mistake that Polish companies make is to simply translate their marketing texts into English (or a selection of other languages), assuming that this is good enough for foreign markets. Yet clients and customers abroad are different and need to be approached in a way that makes sense to them. A case in point: In March, Poland Today organised a day of conferences and networking events about

Poland at MIPIM, the prestigious global property trade fair in Cannes. Our aim was to target foreigners, however after the conference had ended, some Polish people politely informed us that they hadn't learnt much from the panels.

This anecdote encapsulates some of the attitudes of Polish business in general: “If we know it, everyone does”. The secret of a good business strategy is to educate potential clients, and then build on that strong and solid foundation.

Playing on the same team Perhaps the problem is not a matter of What, but How. Poland has a number of successful international stories in dozen of fields, yet business people have so far not managed to effectively package this information in a way to impress anyone, irrespective of where they are in the world. To win this fierce battle for global recognition, not only do they need to play on the same team, but try to score in the same goal. Instead of focusing on bettering their own local competitors, every Polish entrepreneur, institution and business organisation needs to engage in the process of building Poland’s image abroad together. The power of each individual story is a drop in the ocean when analysed in the global context, compared to all those stories presented together.

Foreigners, and even Polish people living abroad, say the Polish business community should be more united because together they can achieve more. Their investment in Poland’s image abroad is a long-term investment in their company's development.

There are so-called economic patriots who emphasise the importance of being Polish, but on the flip side there are pragmatic businessmen who like to be associated with their country of origin only when that image is positive (or at worst neutral), and they can derive some benefits from that association.

There are also those who admit that being connected with Poland could even disturb the image of a company.

Some Polish products are labelled as “Made in the EU” rather than “Made in Poland”, believing that being associated with other industrial powerhouses with years of tradition such as Germany or France, could give them the edge in the cutthroat international marketplace

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$602 billion

Poland's brand value According to Brand Finance Institute

leader

from the UK, Poland's brand value has risen significantly over the last few years.

The highest year-on-year increase - and also the highest increase of all 100 countries featured in the ranking - was by 75 percent in the year 2012. This increase was in large part due to the successful EURO 2012 football championship co-hosted by Poland.

$566 billion

$497 billion

dominated by substandard products.

Being a successful global company from Poland is possible. Everything has roots, and nurturing those roots is a key part of building credibility, which in turn is a key business factor.

$472 billion

The trickle-down effect

$269 billion

$229 billion

2010

Country rank: 25th

2011

Country rank: 24th

2012

Country rank: 20th

2013

Country rank: 20th

2014

Country rank: 20th

2015

Country rank: 20th

The general expectation among businesses of all sizes in Poland is that the government should motivate those young entrepreneurs to pride themselves in being associated with this country. The business community can also play an important role here, which will be beneficial for them. It’s about creating a new business culture based on cooperation and openness.

This approach is mainly aimed at the younger generation. The startup community is a prime example. Members share their experiences – even the sour ones – to prevent others from making the same mistakes. That is the kind of approach Poland needs. But on a wider scale. The new Time for Polska project is based on these insights: when we work together we can achieve more, be more visible and show off our real potential.

The main objective of the project is to promote Polish companies abroad, but at the same time it’s also about creating a business platform for Polish companies to integrate, share experiences, and meet targets – together.

Now is the Time for Polska because we are hungry for success. Many foreigners say that in Western Europe, the current generation inherited its success, and is not as motivated as their predecessors. There were many Polish brands founded in the 1990s after the fall of Communism which have achieved global success. Their experiences are valuable lessons and they help open doors for those who follow in their footsteps. Poles are well-educated, hardworking and flexible. Our multilingualism and our access to the same technologies as our Western partners give us an advantage. Polish entrepreneurs have passion, vision and a determination to succeed. These qualities, together with an injection of vigour and creativity from the younger generation, combined with the Time for Polska programme, produce a winning recipe for the success of Poland’s global image.

by Sylwia Ziemacka

Most valuable nation brands (2015) according

to Brand Finance Institute:

1. United States 2. China 3. Germany 4. United Kingdom 5. Japan 6. France 7. India 8. Canada 9. Italy 10. Australia 11. Brazil 12. South Korea 13. Mexico 14. Switzerland 15. Netherlands 16. Spain 17. Sweden 18. Russia 19. Turkey 20. Poland

36 Leader

Asseco Asseco is a technology company

that provides software and services to over half the banks in Poland, as well as the largest insurance companies, energy, telecommunications, health care entities and public administration. With operations in 55 countries and nearly 21,000 employees, Asseco Poland is the largest IT company listed on the Warsaw Stock Exchange. In 2013 it was ranked the 6th largest software vendor in Europe in the Truffle 100 ranking. For more than 25 years, Asseco has developed software solutions for key sectors of the economy. With a presence in most European countries, Israel, Japan, US and Canada, the company continues to expand through planned and executed acquisitions around the globe.

platige image Warsaw is the home to one of the most

Social Wi-Fi Free wireless internet has been transformed into an information gathering and communication tool for businesses. Social Wi-Fi is an analytics and marketing tool that allows business owners to identify their clients and be able to interact with them. When guests log in to the establishment’s Wi-Fi, they are presented with promotions, surveys and are asked for feedback about their experience. Social Wi-Fi is used in 20 countries including Germany, US and UAE.

advanced and competitive film studios in the region. Platige Image is an award-winning visual effects, post-production and animation company. With a multicultural workforce of 300 directors, art directors, graphic designers and producers, the team has released more than 3,000 projects internationally. Platige is one of the top five studios in Europe that specialises in video game trailers. Best known for its cinematic work, Platige Image cooperates with top brands such as Ubisoft (“Watch Dogs 2”), Microsoft (“Halo 5: Guardians”), CD Project RED (“The Witcher” series) and Crytek (“Ryse: Son of Rome. Legend of Damocles”). The company also creates commercials for top brands such as Coca-Cola, Nike, Microsoft, Pepsi, Fiat, McDonald’s and Kellogg’s. With its own production house, motion capture studio and top-ofthe-line equipment, Platige Image can produce content from concept to final product.

One of the company's best known directors, Tomek Bagiński, has been nominated for an Oscar and an Emmy and won a BAFTA Award for his groundbreaking work.

37

38 Leader

Sher.ly

Monster & Devices

Sher.ly provides a subscription-based data

A high-tech company has created a com-

syncing and collaboration service for businesses. Logged-in users have access to all versions of the files, and can access them anywhere. The solution feels like using a cloud, but data stays on the user’s own device and synced through a secure, invite-only network. Once the connection is established, users can create projects and invite co-workers to collaborate on files from anywhere.

puter programme that transforms any wall into a touchscreen. Monster & Devices creates software based on depth and image analysis. The company's Touch Anywhere uses complex 3D algorithms to convert a wall into a touchscreen using merely a computer, sensor and projector.

The company would like to see this solution being used in schools as a cheaper alternative to the multimedia boards currently on the market.

Atm Bettermaker What to do when you're on the market for top-notch studio equipment but nothing suits your needs? Music producer Marek Walaszek decided to create his own! All That Music Bettermaker's line of eight diverse handmade devices offers a pure analogue signal path with the control possibilities of a Digital Audio Workstation, to create a workflow with the ability to save presets and automation. All while maintaining the classic analogue sound.

Bin-e The world’s first intelligent waste container,

Bin-e, identifies, sorts and compresses waste – making recycling effortless and cost effective.

When objects are placed into the Bin-e, sensors determine if it is paper, plastic, glass or organic material, and they are tossed into the corresponding compartment and compressed.

The bins are emptied much less frequently due to the compression, and save as much as €3 per sqm of office space per year.

Elephant The founder of this product once heard a friend talking about a break-in at her flat, so he decided to prevent the incident from repeating itself. And thus, (following a long gestation of R&D and testing) the Elephant was born.

The company's first product, Elephant Door, is the first smart door alarm intended for apartments. The device has already won six startup competitions abroad, and partnered with Microsoft to perfect the technology.

39

nazwa działu

arrinera The Italians, French, Germans and Americans all have supercars of their own.

And now so do Poles! Arrinera SA is a capital group which has built the first Polish racecar.

The company is listed on the Warsaw Stock Exchange and participates in car shows in Poland and abroad. The first car they developed is the Hussarya, a vehicle co-developed by British legend Lee Noble. This 789 horsepower beast will soon be burning rubber around the world.

genicore Engineers in Warsaw have developed sintering machines that produce composite materials used in multiple industries around the world.

GeniCore’s technology produces a range of materials to manufacture metal and composite machinery, surgical equipment, construction and stone drilling equipment, as well as for a variety of other applications. Devices have already been exported to Japan, and multiple projects are pending in Europe and Asia.

Śnieżka

kruk

Śnieżka is a paint and varnish company

Not all debt collection companies want to be portrayed as the “bad-guys”. Kruk wants to provide relief from financial difficulties. Kruk is the largest debt-collection company in Poland and the leader of the receivables management market. Founded in 1998, the company operates in Poland, the Czech Republic, Germany, Italy, Romania, Slovakia and Spain with plans to expand. Kruk has managed over 3.3 million cases and purchased 86 debt portfolios.

that owns many of the leading brands on the Polish, Ukrainian, Belarusian and Moldovan markets. The company began production in 1984 and is one of the leaders in Poland in terms of quantity and value. Śnieżka has opened five production facilities in Poland, Ukraine and Belarus. The company's state-of-the-art R&D centre helps it stay ahead of competitors and respond to market demands.

41

42 Leader

Malwina konopacka

Vzór

Malwina Konopacka's limited-edition vase

In the late 1950s, a Polish artist designed a series of armchairs, but only a few were produced. In 2012 an art school graduate decided to start a company and bring the creations back to life. Nearly 60 years after Roman Modzelewski designed the first fiberglass armchair in Poland, Vzór is producing and selling his creations around the world. In 2013, Vzór was awarded in the furniture category at the World Interiors News Annual Awards in London.

collections are intended to serve a purpose in addition to being eloquent decorative pieces.

One of the distinguishing characteristics of Konopacka’s collections are the depressions in the vase surfaces. The curved indents create an unpredictable, unique design element.

Konopacka plans to continue participating in collaborations, exhibitions and publications all over the world.

LPP

LANCERTO

One of the fastest growing clothing compa-

Lancerto is a premium brand that

nies in CEE, LPP has been around for over 20 years and manages five fashion brands. With 1,686 stores in 18 countries, the Gdańsk-based company continues to expand rapidly. LPP’s flagship brand, Reserved, offers stylish and affordable clothing and accessories for women, men and children. With over 400 stores located worldwide, the brand turns runway styles into practical streetwear.

specialises in comfortable, ready-to-wear men’s suits, shirts, coats and jackets. With 40 showrooms in 32 cities throughout Poland and an online store, this leading brand is looking to continue its expansion internationally.

Normally, menswear brands have 26 sizes.

Lancerto has 52. For men who frequently go to the gym or are thin, finding a suit that fits can be challenging. Not anymore.

43

44 Enter the dragon opinion

Will China’s strategic interest in central Europe give Poland the geopolitical importance it has always lacked?

Among the key shortcomings of Poland’s foreign relations is its inability to adequately leverage its position between the West, which it aspires to, and the East, which it fears. Major capitals of the West are well aware that its more-or-less justified fear of Russia will compel Poland, lacking any strategic alternatives, to accept whatever the West offers, without major complaints. Repercussions of Poland’s relatively weak negotiating position include Bartosz Stefaniak its inability to secure any meaningful is Poland Today's aid from the US to bolster its security, co-founder and despite political guarantees stemming creative director. He from its NATO membership and its has cooperated with Le Monde and Agence eager participation in American expeFrance Presse among ditionary missions. Radosław Sikorski, others. Bartosz has Minister of Foreign Affairs in the previalso worked with ous government, was caught privately Poland's Ministry summarising this state of affairs in no of Foreign Affairs on different projects. uncertain terms. The government has He runs a blog about of course changed since then. But evethe balance of power in international relations ryone in Poland from the left to the (facebook.com/3wojna). right is well aware that attempting to For more information leverage its North Atlantic relationgo to madeinPolska.eu ship by over-playing its position vis-àvis Russia would be playing with fire.

Economy above all

World leaders in Warsaw. Chinese

President Xi Jinping and US President Barack Obama visited Poland and met with President Andrzej Duda only two weeks apart. Both tried to make Poland an offer it couldn't refuse.

Recently, however, a completely new player to the east has loomed on the horizon. Accepting him at the table could turn Poland’s international relationship matrix upside down, unchanged as it has been since 1989.

This new player is China. A situation in which China and the West bid for Poland’s favour would entirely redefine its negotiating position and create conditions for the country to become a more significant player on the international scene despite being a relative economic and military lightweight.

Due to China’s long-term and increasing trade advantage over the US, the main area where both countries strive for influence is not military rivalry (for example in the South China Sea) but global trade and the promotion of settlements in their own currencies.

Both the US and China are lobbying for Poland to take part in their strategic projects aimed at building a trade advantage over their biggest rival. China has offered Poland participation in the New Silk Road project, and the US in the Transatlantic Trade and Investment Partnership (TTIP) agreement.

Transatlantic Trade and Investment Partnership

is a proposed trade agreement between the European Union and the United States, with the aim of promoting trade and multilateral economic growth.

The American government considers TTIP a companion agreement to the Trans-Pacific Partnership (TPP).The agreement is under ongoing negotiation.

The Silk Road Economic Belt

is a development strategy and framework proposed by China that focuses on connectivity and cooperation among countries primarily between the People's Republic of China and the rest of Eurasia. The strategy is a subject of ongoing negotiation between China and potential partners across Asia and Europe.

‘Poland emerges as an element of two clashing power plays driven

by USA and China.’

It is in the US’s strategic interest to block not only China, but also Russia, the other major contester of the pax Americana paradigm, from closer relations with the European Union. Thus the goal of the trans-Atlantic trade agreement, currently being negotiated with the EU, is not only to boost the American trade balance, but also to weld Europe closer to the US and block any potential attempts at economic integration with Russia. Synergy between the EU’s – especially Germany’s – capital and technological potential and Russia’s capability in natural resources and demography could create another rival, after China, to contest the mantle of global leadership.

Fortunately, there is Poland, playing the role of a wedge between Germany and Russia in the global balance of power. Similarly to the US, Poland is keen to block any attempts at GermanRussian integration. This is a life and death matter from Poland’s historic perspective.

Uncle Sam rules the waves The United States has an important advantage over its rival, despite falling further behind China in trade balance terms. Thanks to the world’s biggest military fleet, the US controls the main sea routes needed by China for its international trade. Therefore the Chinese are seeking ways to level the playing field by consolidating and expanding land-based trade routes to Europe lying beyond American’s capabilities to project power. Hence the idea of the New Silk Road. Among the road’s possible routes, the northern path via Poland is the easiest to implement and potentially the most stable. Poland (and by consequence the European Union) is separated from China by a mere three national borders (China-Russia, Russia-Belarus, Belarus-Poland) and the route’s most basic infrastructure is already in place: cargo trains between Łódź and China have been travelling for over three years now. The planned southern route of the New Silk Road is still a distant prospect: most of the infrastructure has yet to be developed and, moreover, it leads through the chaotic Middle East. The fact that the European Union and China are split by many national borders on this route

increases the risk that one of the transit countries could derail the cause.

Thus Poland emerges as an important element of two clashing power plays driven by the two global superpowers. On economic grounds participation in the Chinese project appears much more lucrative. A cursory glance at the world map clearly shows that the most advanced civilisations, the globe’s wealthiest and densest population areas, are the ones with direct access to sea trade routes. Meanwhile China, as the world’s biggest exporter and one of its leading importers, plans to limit its share in seaborne trade and turn Poland, centrally located in the middle of Europe (and on EU’s eastern border), into its ‘dry port’, servicing the lion’s share of its trade with Europe. Being for most of its history a land-locked country, Poland didn’t benefit from the intercontinental trade that made the West rich. Now with the Chinese offer, this long-time disadvantage of Poland could potentially be reversed.

The main drawback of locating China’s goods-handling hub in Poland is the absence of north-south transportation routes, running perpendicular to the New Silk Road. The European Union’s development plans for transportation across the region are focused on east-west corridors. Hence China itself is lobbying for the creation of north-south trade lines and deeper integration of infrastructure as well as trade between countries on the Baltic, Adriatic, and Black seas, inadvertently championing Poland’s century-old strategic idea of building the so-called “Intermarum”, intended to eventually become a regional counterweight to Russian and German power.

A manifestation of the Chinese efforts is the intergovernmental consultation platform established by Beijing between China and the leaders of 16 CEE countries. The countries involved are, besides China and Poland, 10 EU countries and five non-EU Balkan states. At these annual summits, Poland is encouraged by Beijing to play the role of informal leader of the CEE countries.

The first inaugural summit took place in 2012 in Warsaw and since then the initiative has gained momentum year by year. This August, several countries established the so called Three Seas Initiative during a summit in the Croatian city of Dubrovnik inaugurated

by Polish president Andrzej Duda. The initiative is intended to become a formal framework for the infrastructural integration of the states between the Baltic, Adriatic and Black Sea. The recently-established Asian Infrastructure Investment Bank will most likely be used as a financial vehicle helping countries across the region to shoulder the costs of building an inter-

connected network of transportation corridors. The bank was formed on China’s initiative to help fund New Silk Road-related infrastructure investments and to promote trade in the Chinese currency. Poland is one of the bank’s 57 founding states, contributing just under one percent of its equity capital. It is widely believed that China would like the bank to become an alternative to the World Bank and the International Monetary Fund which safeguard the greenback-dominated world monetary order. Thus it might not be a coincidence that Poland was the first European country to issue Yuandenominated treasury bonds on the very same day the Three-Seas Initiative was announced. The bond issue was carried out on the Chinese interbank market and the papers were predominantly acquired by China-based institutional investors.

Exchanging orbits The offer to participate in the US-led TTIP agreement looks weak in comparison with Poland’s potential prospects from participating in the new economic order spearheaded by China. TTIP’s main goal is to cement, and potentially expand, a system of economic ties that have sidelined Poland ever since 1989.

As a general rule, an economic centre develops by drawing strength from its periphery countries. Up to a point the situation can be advantageous to both parties. Peripheries that are effectively drawn into production and supply chains managed and financed by the economic centre, can develop alongside the centre itself. In recent decades Poland, as an economic periphery of the G7 countries, has been a clear beneficiary of the process. However, sooner or later, the synergy effect dissipates.

Increased wealth is gradually pushing peripheries into a middle-income trap marking a dead-end to economic expansion based on low labour costs.

Therefore the situation requires that the peripheries seek factors beyond wages to drive competitiveness and, as a consequence, calls for a redefinition of their role in the global economic cycle.

In practice, this forces them into abandoning their complementary role in foreign production & supply chains and manage on their own accumulated wealth and know-how. Hence, the middle-income trap will push the peripheries into a conflict of interests and direct competition with their former patrons.

For the countries of the economic centre this is an existential threat, as maintaining one’s own peripheries is a precondition to maintaining a dominant position and ensuring further growth.

The developing countries’ (especially China) gradual approach towards the middle-income trap is the main driver

46 opinion

for statistics

covering exclusively Poland's economy go to page 20

The share of world's wealthiest G7 countries in the

global GDP falls year by year (among them, the United States is the country that loses least in relative terms). Meanwhile, China is the country that gains the most.

Share of global GDP:

1990

1995

2000

2005

2010

2015

- G7 countries (with US) - G7 countries (without US) - United States - China - Russia - Poland

67.91%

65.87%

65.65%

58.45%

50.14%

46.26%

40.45%

40.89%

34.65%

30.60%

27.19%

21.97%

27.46% 1.86% – 0.29%

24.98% 2.47% 1.02% 0.45%

31.00% 3.59% 0.78% 0.52%

27.85% 4.86% 1.62% 0.65%

22.95% 9.12% 2.34% 0.73%

24.29% 15.03% 1.58% 0.66%

Based on nominal GDP in current $. Source: International Monetary Fund (World Economic Outlook)

2015 trade balance with the rest of the world :

USA: $540bn deficit China: $384bn surplus All figures in current $ Source: World Bank

U.S. trade balance with China:

2015: $367 bn deficit 2010: $273 bn deficit 2005: $202 bn deficit 2000: $83 bn deficit 1995: $33 bn deficit 1990: $10 bn deficit

game of imbalances When counted by purchasing power parity

(PPP), the Chinese internal market is already bigger than the American one (graph below right), making it the world's largest. However, as long as international trade is denominated mainly in US dollars, the purchasing power of the Chinese economy on foreign markets will be much smaller than its American counterpart. China's economy calculated in dollars (according to the current market exchange rate with the yuan) is just over half of the American economy (graph below left). This pushes China to promote international trade in its own currency. This way it is able to buy goods cheaper around the world. According to the IMF, around 10 percent of international trade is already denominated in the Chinese currency.

All figures in current $ Source: United States Census Bureau

The American trade deficit with China is almost equal to the Chinese

trade surplus with the rest of the world.

China: $19,524 billion

USA:

USA:

$17,947 billion

$17,947 billion

behind the crumbling economic order based on the dominant role of the United States and other G7 countries.

The draft TTIP agreement is aimed at preserving what can be saved of the pax Americana, constantly under pressure by the growing economic prowess of China. The deal boils down to an array of legal instruments securing a dominant position on peripheral markets and hampering their ability to accumulate the capital necessary to overcome the middle-income trap.

Thus, Poland’s participation in the TTIP agreement could cement its peripheral position in the Euro-Atlantic landscape and impede its ability to tackle its greatest barrier to growth besides demographics. It is worth noting that other countries across Central and Eastern Europe, and Poland’s co-signatories of the Three Seas Initiative, are in a similar position. Meanwhile, participation in the Chinese new order, despite the clear disproportion between the economies of Poland and China, is generating synergies that could become a source of an entirely new competitive advantage.

The bear to the east

Military expenditures as of 2015:

- USA: $597bn (3.3% of GDP) - China: $215bn (1.9% of GDP) - Russia: $66.4bn (5.4% of GDP) - Poland: $10.5bn (2.2% of GDP)

China:

$10,866 billion

All figures in current $ Source: Stockholm International Peace Research Institute

2015 nominal GDP based on market exchange rate of the local currency (in current $) Source: World Bank

2015 GDP by purchasing power standard

(in current international $) Source: World Bank

Yet there is a “but” in this puzzle: Russia.

The lack of an adequate countermeasure to the Kaliningrad-based missile systems is a bigger threat to Poland than the middle-income trap. The threat requires Poland to have a significant exterior guarantor of its security. The Chinese offer however does not include any formal security guarantees similar to those stemming from Poland’s participation in pax Americana. China is not only in an ambiguous strategic relationship with Russia, but despite a fast-growing military budget - currently the world’s second largest - it still lacks the ability to project power onto distant military theatres in a manner comparable to the US. Contrary to China’s pragmatic and Confucian approach, the second largest contestant of the world order, Russia, favours the “foot in the door” strategy.

Taking into account that its economy is smaller than Spain’s (based on GDP in current USD prices), the only effective tool to impact the international landscape at its disposal is its oversized military-intelligence sector. Poland,

as Russia’s neighbour, is especially prone to Russian attempts to test the actual limit of the Euro-Atlantic sphere of influence and the determination of the alliance to defend the current status-quo. Both Beijing and Washington are aware of the detrimental effect of ongoing Polish-Russian tensions on China’s strategic plan to develop the New Silk Road’s northern route. With the US acting as a formal guarantor of Poland’s security, any escalation in military tensions between the US and Russia will automatically strain PolishRussian relations and impede opportunities to monetise the economic synergies between Poland and China.

One can expect, therefore, that Polish-Chinese relations, recently elevated to a strategic level, can become a counterweight to the tense relationship between Poland and Russia. In its own best interests, China should be keen to pressure Russia to de-escalate tensions. Meanwhile, one can expect that the United States will be interested in doing the exact opposite in order to keep at bay forces challenging its power. That may eventually result in far more benefits for Poland’s deterrence capabilities than the basic political guarantees offered by NATO. It is unclear which choice is better for Poland - the one which brings potentially better long-term economic prospects, but which is riskier in terms of security, or the one that safeguards Poland’s security here and now at the price of slimmer economic prospects in the future. It is also unclear to what degree it will be possible for Poland to participate in both simultaneously.

What is clear, however, is that China’s emergence at Poland's front door opens an entirely new dimension in the country’s foreign policy. No matter what Poland’s strategic choice will be, the fact that Poland finally has a choice at all, is already a factor that boosts its position in negotiations.

Perhaps it wasn't by accident that President Xi Jinping's visit to Poland occurred only two weeks before July's NATO summit in Warsaw, at which it was agreed to set up a permanent US military presence on Polish soil. That is far more than Poland has secured in its previous 17 years of NATO membership.

by Bartosz Stefaniak

47

48 Business

Poland 2.0 Poland might not have been the first to adopt the concept of the Internet of Things, nor be its most fervent implementer, but the it is certain to become a part of everyday life

Imagine getting

Global juggernaut

Globally, the market for internet of things will continue to grow exponentially. According to EY, " the number of connected devices [will] exceed 50 billion by the year 2020". However, as more and more objects become connected to the internet, EY fears there could be problems, since "there is a deeply rooted security problem with the possibility of impersonation, identity theft, hacking and, in general, cyber threats".

an SMS on your smartphone from your fridge. It’s writing to tell you that the milk is about to expire, but it also informs you that it has already made an order at your favourite online shop and a fresh supply will be delivered later today. Sound a bit farfetched? It might be closer than you think, as more and more items which we consider to be decidedly low tech are getting connected to the internet.

Although the penetration of internetcontrolled gadgets in Poland is not yet on par with world leaders such as South Korea, the country is already a hotspot in the production of Internet of Things (IoT), according to Ludovic Subran, Group Chief Economist at Euler Hermes, who explained that, unlike other countries which “don't have the sheer need to move beyond the technological frontier, Poland could experiment with IoT in real life, with a clear business incentive.”

Tomasz Kowalczyk, Innovation Manager of HardGamma Ventures, a Warsaw-based VC firm, declares that there are some companies from Poland making waves on the international stage, but that there is still plenty of room for growth.

Keeping a tab on the kids Kowalczyk cited Blastlab - in which HardGamma Ventures is an investor - as a company which has received positive

responses from overseas. The Gdańsk- Communications (UKE), only three based firm specialises in beacons, percent of Polish companies use techdevices which are constantly aware nology which is connected to the interof where they are due to a number of net (apart from computers). Meanwhile, receivers, and can relay different types only six percent intend to expand into of information to users. It produces IoT in the near future.

Of these companies, most are in the a device which essentially consists of two armbands. One is worn around field of transport and logistics, using the wrist of a child, the other around that it for measuring fuel consumption, of the parent. The parent's armband for example, or to notify of road accivibrates whenever the child gets too dents. Around a third of companies far away. Think of it as a baby monitor use it in trade, and merely one percent for the new age. use IoT solutions to monitor vehicles Meanwhile, Oort, another Polish and buildings.

“The Internet of Things is still a relacompany specialising in home automation equipment, is producing items such tively young solution which the market as smart lightbulbs and smart power is only just getting used to,” says Adam sockets which you can turn off and on Stańczyk, Business Analyst at BPSC, through your mobile device. Do you a Chorzów-based IT solutions company. want your meal to be warm when you “This is evident even in large companies, get home from work? These products particularly in production plants, where, allow you to turn on your slowcooker despite large investments in recent years in progressive automation and from your phone or tablet.

Oort CEO Radek Tadajewski says robotics, machines practically do not that start-ups from Poland often communicate with the software.” find barriers in realising their potenAccording to Cisco, which analysed tial abroad. “In Western Europe, I feel the attitude of Polish entrepreneurs - and sometimes hear - that the fact to such new solutions, the most comthat we are Polish means that we don’t mon barriers to IoT are lack of funds make ideal partners for cooperation. (21 percent) and not seeing its imporThis is quite different from the United tance for their business (20 percent).

States or Asia. There's no such prob- As many as 15 percent blamed a lack lem there,” Tadajewski told Polish Radio of knowledge about IoT. in a recent interview HardGamma's Kowalczyk said that Consumer solutions what is missing for Polish start-ups While IoT might still seem like someoperating in the IoT ecosystem and thing far off, the price point of many beyond, is to establish a strong relation- products like smart TVs, internetship between the level of technology connected lightbulbs and location – which in his opinion is quite high – and beacons is dropping, becoming ever the management capabilities which will more within the range of an increasing allow these companies to grow. number of people. A total of 40 percent of Poles own products running on Buying in bulk the IoT ecosystem, while 50 percent But Polish companies are clearly still claim that they will buy such devices in new to the trend towards IoT. According the near future, according to a recent to Poland’s Office of Electronic poll by IAB Poland.

“As Poles become wealthier, they will purchase more and more of this technology,” said HardGamma's Kowalczyk, The market for IoT will double between 2014 and 2018, according to IDC, a global advisory firm, from $1.5 bln in 2014 to $3.1 bln by 2018. As more households and businesses recognise the potential for IoT to not only make their lives easier, but also safer and more productive, the domestic sector will continue to grow impressively.

‘The Internet of Things is still a relatively young solution.’

49

50 Business

Confident, independent and tough Making a successful sale to Poland’s Mittelstand means, above all else, understanding the history and culture of the business owners.

Poland’s stunning economic recov-

Patrick Ney

delivers digital marketing for businesses at communications agency Questia. He has previously advised British exporters and investors to Poland at the British Embassy and British Polish Chamber of Commerce supporting British exporters.

ery from the ruin of war and decades of communist mismanagement has been all the more remarkable for its speed, driven in part by Poland’s 15,000 midsized businesses. Collectively they make up 11.6 percent of the country’s GDP, employ one fifth of the labour force and are a real testament to Poland’s entrepreneurial spirit and determination. But selling to – and working with – these companies can be frustrating for foreign companies.

“This generation of entrepreneurs lived through a unique period of economic and political transformation,” Michael Dembinski, Chief Advisor to the British Polish Chamber of Commerce, told me. Poland’s mid-sized business owners are mostly male, predominantly in their 50s and 60s, and are, in the words of PwC Polska’s Head of Public Policy, Bartek Kwiatkowski, “not unlike 19th century American tycoons – confident, driven, independent and tough.”

Pan Prezes culture Having cut their teeth in Poland and then Europe (over 70 percent of Polish exports go to EU markets) mid-size owners are now facing a series of challenges in order to grow and expand market share. In theory, they should be ripe for external consultancy services and supply chain sourcing. But international companies looking to sell to them often run up against a series of challenges only too familiar to experienced international business people in Poland. History and culture matters. Many businesses are run by the original founder (Pan Prezes) whose business style was forged when Poland’s business culture was very different. “Many have strong memories of fighting the old system,” Michael Dembinski said. “They’ve soaked up a command-and-control philosophy rather than a more democratic, open management style.”

I once met the new export manager for a successful Polish food production company. He was eager to sell his products abroad for the first time, but was visibly frustrated by his CEO’s refusal to consider a rebrand to suit the target market. If it worked in Poland,

‘Pan Prezes is [...] unwilling to take advice. And to pay for that advice?

Forget it!’

PWC's Kwiatkowski “which makes them cautious to spend money on non-core services.”

Stuck in the mud International companies often fail to understand and adapt to this psychology. One British company which I consulted for, refused to shift their high-end Western pricing model to a bite-sized entry level scheme suited to Polish companies, and as a result failed to do business. For foreign businesses, discovering the differences can be frustrating. It s not uncommon for Polish mid-size companies to happily spend $50,000 on a production investment, but leave the design of product brochure to a family friend. “Polish mid-sized business – unlike those in Western Europe – still do not feel comfortable paying professional service fees,” De-Roy said. I was once asked to support a British services company whose initial approach identified flaws in their targets’ business models.

Unsurprisingly, this didn’t get a positive reaction. Poles are entrepreneurial, hard-working and defiantly gutsy. But they can appear prickly in comparison to a fail-fast Western entrepreneurial culture. Michael Dembinski puts it in blunter terms: “Pan Prezes is authoritarian and unwilling to take advice. And to pay for that advice? Forget it!”

it should work abroad too, was the verdict from the boss. “We’re talking about strongly centralised businesses,” PwC's Kwiatkowski said, “with key decisions concentrated in the hands of founders.”

For better or worse, Pan Prezes still runs the show.

Even in a larger company, finding the right decision maker can be tough.

One British businessman running a successful services company in Poland tells me that, “decision making is still in many cases being made and signed off only at the top by C-level executives who are notoriously difficult to contact.”

This lack of contact is partly because, according to Poland’s Central Statistics Office, 15 percent of medium sized businesses have no website, and less than a third use any form of social media to communicate externally. That pattern is mirrored by individual behaviour – according to Megapanel PBI/Gemius only 16 percent of Polish Linkedin users are aged 55+, compared to 27 percent Bright future ahead in the UK and 23 percent in the US. If this article has struck you as pessimisAs a result, companies looking to tic then fear not, the future is positive. target these firms, frequently have “The next generation of business leaders to contact younger, mid-level man- running mid-tier businesses will have agers to advocate on their behalf or grown up in democratic, free-market get nowhere when they approach Poland,” said Michael Dembinski, “they the boss. He’s likely to be the hardest will have studied abroad and gained person to connect to. He is also most work experience overseas – and they likely to deeply rely on personal rela- will still have a Polish determination tionships, which, as a foreign company, and a fire in the belly required to sucyour business is unlikely to have. Many ceed.” Poland and Polish companies Polish businesses closely guard their have a choice. We can fall into the midpurse strings. This is partly about lack dle income trap of markets like South of capital but also about a powerful Africa or Brazil or continue to rise – indiunderlying corporate culture born from vidually and collectively – and break through the ceiling of inertia which surviving tougher times.

“There is a long-standing culture early success can bring. Knowing Poles of frugality and a lack of liquidity,” in as well as I do, I’m optimistic that the businesses which is, “predominantly next 15-30 years will be a time when equity-financed and not debt-financed Poland's economy breaks into full galdue to both legacy issues and limited lop – with mid-size business playing accessibility of capital for SMEs,” added a key role. by Patrick Ney

51

52 business

International university enrolment on the rise Foreign students are increasingly choosing to study at universities in Poland, attracted by the country's low cost of living, promising job prospects and high education levels.

Almost half

of foreign students at Polish universities come from Ukraine and Belarus, followed

by Norway, Spain and Sweden.

Every third foreigner studies

a medical-related course, every fourth economics or business, over 16 percent social sciences, almost 13 percent technical studies and 10 percent humanities.

According to

governmental aims, by the year 2020 five percent of all tertiary education students should be from abroad.

Over 46,000

foreign students “I found that there was so much from nearly 160 countries studied in potential in Poland,” Dolhomut said.

Poland during the 2014-2015 school “Then I went back to Canada to finish my year according to an analysis by bachelor’s degree and even in my textWarsaw-based Perspektywy Education book it says Poland is growing so then Foundation. This is an increase of more I decided to do my master’s degree in than 10,000 from the previous year Warsaw as an exchange student.”

The Montreal native studies internaand international students made up 3.1 percent of the total student body. tional business in order to have an ecoAccording to the study, 83 percent nomic, political and economic outlook of international students were from on the world and is interested in the European countries, mainly Ukraine.

European Commission to work on further European integration.

Sviatoslav Piranovsky – Ukraine

Sviatoslav Piranovsky wanted to Ivan Shema - Rwanda change his life and dreamed of trave- Ivan Shema came to Poland after receivling the world. Born into the Polish dias- ing a scholarship from the Embassy pora in the Ukrainian town of Bolekhiv, of Poland, in partnership with the the 24-year-old left his country to move Rwanda Ministry of Education. “I like to Warsaw and attend the University of doing things that are not mainstream,” Finance and Management. said Shema. “I believe new places have Before coming to Poland, Piranovsky new possibilities, which directly implies studied law in Kiev. “I wanted to more opportunities.” become a lawyer because I was inspired Shema was born in Uganda but

by Hollywood films and I wanted lived in Rwanda after the Rwandan to defend justice. But while I was stud- Tutsi Genocide in 1994. After earning ying, I understood that in Ukraine, it’s a bachelor’s degree in applied comnot as romantic as I thought. It was puter science, he realised he wanted a very corrupt system in the courts and to be an entrepreneur, so he is cureven good lawyers don't earn enough rently studying international business money. You must do something illegal for his master’s degree at the Warsaw to make it big, and I didn’t like that,” School of Economics.

Once he finishes his studies, Shema Piranovsky said.

He continued his education by fin- plans to dedicate all of his energy and ishing prosecutor school, but decided focus on improving the operations to take advantage of his Polish roots of 1000 Hills Products – a company he and was able to apply to a university founded which distributes coffee from in Warsaw. Since his grandmother Rwanda to Central and Eastern Europe was Polish, he had travelled to Poland with a main focus on the Polish market. in the past and speaks the language.

Besides the language barrier, Shema He found an English-taught programme said he’s had a positive experience he was interested in, which might real- in Poland. Before his arrival, people ise his goal of working for corporations warned him about the high possibility and traveling. of racism, extremely cold weather and “I decided not to be scared of any- poor service. However, he said people thing, because it would make me weak. have been very helpful throughout his I’m excited and happy to start classes time in Poland and encourages othin October,” said Piranovsky. ers to give the country a try. “Poland is a great place for studies and a good David Dolhomut - Canada place to gain work experience.”

Canadian-born David Dolhomut frequently visited his grandmother in Dr. Alexandra Richie - Canada Rzeszów, Poland, but he didn’t fall in Dr. Alexandra Richie is the Władyslaw love with the country until he came Bartoszewski co-chair of History and during the Euro football championship International Studies at the Collegium in 2012. He returned the following year Civitas and leads the study abroad and completed a four-month exchange programme in partnership with the programme at the Warsaw School School of Russian and Asian Studies of Economics. in the US established last year, English-

53 business

Sky-high ambitions. After he

graduates, Ivan Shema (above) wants to grow his business selling coffee in CEE.

Barrister disappointment.

Sviatoslav Piranovsky (above) started studying to become a prosecutor in his native Ukraine, but quickly decided against a carreer in law, instead moving to Warsaw.

Footy fever.

David Dolhomut (left) fell in love with Poland when he visited the country for the EURO 2012 football championship.

speaking students are invited to said Richie. Based on her experiences, Warsaw to study history and culture or Richie said people still come here thinksecurity and defense. ing they’re going to find 1970s Poland.

“I helped initiate the programme But after 1989, the incredible changes, because I saw a need for it,” said youthful entrepreneurial spirit and Richie. When I started coming to energy have created a new Poland Poland, so many of my family, friends, – one worth visiting. acquaintances asked me, ‘Why are Since she thinks Poland is bad at you going to Poland?’ There’s just marketing itself, her solution is educasuch completely wrong ideas out tion. She wants to get as many students there about what Poland is like today. to study in Poland as possible so they They’re just completely outdated, out- can see it for themselves. Richie plans moded ideas about this amazing coun- to involve people who have Polish roots try and there’s all sorts of stereotypes and want to know about their ancesabout Poland.” tors’ country but also encourage entreRichie decided the best way to con- preneurs who are interested in startups vince people Poland is “wonderful” and new developments. and “amazing” is by showing, not tellThe benefits of choosing Warsaw ing. “I thought, let’s get students here. as a destination for studing abroad – Let’s just get them here and show them. over Paris or London – is the specialAnd it’s worked so far, and we just want ised attention, lower cost and unique to keep expanding the programme as experience, said Richie. “I think it’s much as we can,” she said. After each always fun to do something that’s a litsession, she asks students for feed- tle bit off the beaten track and that back and many responded that they shows an unusual side of Europe that’s had no idea or never expected Poland again, unexpected.”

This summer, students interested in to be this way. Some have stayed to do internships, or plan to return. security and defense were in Warsaw Richie graduated from the University during the NATO Summit which was of Oxford and is a historian specialis- held in the city in July. She said there ing in Central and Eastern Europe. She is new interest in this part of the world is the author of “Faust’s Metropolis: for military defense studies and cyber A History of Berlin” and “Warsaw 1944” security. One student who was in the – both of which won prestigious awards. US military used her two weeks' leave She says that the world’s view of to come for the programme. Students Poland perhaps dates back to the time who registered for cultural studies realwhen cities like Berlin or St. Petersburg ised “it’s another Western European were growing in the 19th century, but country that has not yet been discovWarsaw was a kind of “no-man’s land” ered,” Richie said.

During the school year at Collegium because the partitions stunted development and the train and road links Civitas, located in the iconic Palace didn’t connect the capital city to the of Culture and Science in the cenrest of the country. tre of the city, students from Poland, “This economic backwardness of Ukraine, China, the Middle East and course led to these huge mass immi- all over the world study a variety of grations to the United States, Canada disciplines ranging from sociology to and other countries, bringing percep- international relations.

“I haven’t done anything more fulfilltions of Poland that were of poverty, backwardness, anti-Semitism, oppres- ing and more enjoyable as watching sion and that stereotype of Poles students who come here with a sort of remained,” said Richie. view see it’s not what they expected,” After World War I, Poland was rec- said Richie. “It’s so gratifying. Students reated but then World War II devas- here are so hard working. They take tated the country and Communism put risks, they travel and they’re open to Poland behind the Iron Curtain. “It’s the rest of the world. It’s a pleasure true of all countries that were behind to be around these students because the Curtain – people in the West kind of they carry this energy that inspires forgot about them because they were other students and teachers as well.” too busy rebuilding Western Europe,”

by Monica Zielinski

Since 1998, the year when Poland joined Erasmus, the European Union student exchange programme, over 60,000 foreign students from EU countries have studied in Poland while some 150,000 students from Poland having spent a portion of their education in another EU country.

Eyes wide open.

Dr. Alexandra Richie loves seeing her students positively surprised by what Poland can offer.

54

Urban Issues Expo Real 2016

55

urban issues

A busy market.

The real estate industry in Poland, both commercial and residential, is a hive of activity at the moment. But what is driving this and how sustainable is it?

Poland Today talks to leading figures in each of the sectors to find out more about what lies behind the stats and the facts, finding that although prospects look good, the sector is apprehensive about things it has no control over.

A tale of two cities page 62

Echo rising page 64

The untapped potential of Warsaw page 66

It’s not always size that counts page 68

Market will absorb new supply page 70

56 A Perfect Storm urban issues

The real estate market in Poland, both commercial and residential, appears to be booming. How sustainable is this?

When everything seems

Urban Issues Expo Real 2016

to be Vastint. “Every lease we do with busiplain sailing and there are few clouds ness service clients, they say they want on the horizon, it can be human nature to grow strongly in the next three to to ask: “When will it all go wrong?” The four - even seven - years. Requests same could be said of the real estate range from room for 30 – 100 percent market in Poland. With negative interest growth. It shows long-term commitrates and high end-user demand fuel- ment.” According to Krych, Poland has ling strong development in the office innate strengths which help sustain this and warehouse sectors - although less phenomenon. “It really boils down to so in retail - and underpinning impres- education, skills and languages,” he sive sales in the residential market, not says. “When you look at global trends, to mention a dynamism in the hotel Poland was no. 3 in the world and no. 1 sector only recently seen in Poland, in Europe for shared services and BPO Richard Stephens founded Poland Today real estate professionals are asking locations. This proves that Poland can in 2012 to help bring themselves how long this can last. “I’m provide a very good quality workforce.”

Poland to the world looking for signs of what could affect “The business services sector is and the world to Poland. Before this the positive situation, but I can’t see the fastest-growing sector in Poland he was editor of Euany,” says Arkadiusz Rudzki, Managing with around 210k employees,” says robuild CEE magazine Director of Skanska Property Poland. Skanska’s Rudzki. Furthermore, he in his first stint with “Of course there’s geopolitics, but we claims, there’s no sign it will stop any the company, and then returned to conceive can’t influence that.” time soon. “There’s more to come in and establish The “There is a global hunt for yield,” terms of serious operations from US Eurobuild Awards, says Przemysław Krych, Founder & and western Europe – they’re moving organizing the first CEO of Griffin Real Estate. “Alternative their businesses to Poland.” This is good two editions. He has engagements of capital are not attrac- for office developers not only because a degree in Theology & Religious Studies tive. The government pays you nothing, it fuels the need for new office space, from Bristol Univerbanks pay you nothing, public equi- market analysts say, but because it also sity in the UK. ties are overpriced or volatile. Private drives quality in the buildings. “There equity is a very small portion in overall is a lot of competition between these asset allocation. So where do you put companies to employ the best peoyour money? You put it in real estate ple,” says Chatfield. “(The business serbecause it’s yielding. And it’s over 6% vices companies’) biggest concerns are in Poland, which is quite a nice differen- always on HR rather than real estate.” tial compared to 3% in London or 4% in This, according to Rudzki, means Germany. The context for Poland is still employers have to create as attractive relatively good. Politically, the BRICS an office as possible. “Employee rotaare gone - except for India, but it was tion in business services is high, so you never a real property market. Turkey need tools to keep your employees. is off the map. The US is overpriced. After salary, the working environment Poland has a competitive edge over is most important.” other countries,” asserts Krych. “There’s too much money on the global mar- Business by the sea kets,” claims Marek Koziarek, Managing One city which is clearly benefiting Director of Commercial Real Estate from the growth in business services at Bank PEKAO. “So there is a natural is Gdańsk, a major regional city which demand for the money to be invested, has in the past been somewhat in and this demand is visible in Polish real the shadow of Kraków, Wrocław and estate. The check, of course, is that Poznań in terms of economic developfunds won’t buy empty buildings.” ment. “Gdańsk is the fastest-developing According to those active in the mar- city after Kraków,” says Rudzki, adding ket, the incredible growth in business that Skanska has recently bought plots services in cities across the country is a there. One local developer which has guarantee that well-located new offices, long been aware of the city’s potential especially in the main regional cities, is Olivia Business Centre, the company certainly won’t be standing empty. “The behind the successful office project business service sector is absolutely of the same name. Their belief in the the driver of the regional office mar- market has given the company the ket in Poland,” states Peter Chatfield, confidence to start construction of a Commercial Manager at developer high-rise office tower in excess of 150

m, according to the company’s founder and CEO, Maciej Grabski. “The overall business climate in Gdańsk, plus the success that we have seen at Olivia Business Centre so far, gives us the momentum and confidence to build Olivia Star. With its view over the sea on one side and the forest on the other, tenants want to go as high up as possible and take advantage of the beauty that we are fortunate to have all around us,” he enthuses. The city, he claims, has the right ingredients to be a successful commercial centre. “It’s a desirable place to live and work. There are students fresh out of university as well as experienced professionals. And don’t forget we are actually three cities with a population of over 1 million.”

While the business services sector is driving an office development boom in the regional cities, how do things look in the nation’s capital? “Vacancy is currently at around 15-17 percent,” says Koziarek, “but this is an average in the whole market. There are some buildings which are substantially empty.

And there are some projects - those with a flexible approach - which rent out better than average. So some segments of the market are growing faster than others. There remains a demand for good product and this demand will stay.” What’s needed is perspective, says Stanislav Frnka, CEO of HB Reavis Poland. “If you compare (Warsaw) to Vienna, there’s something like 10 million sqm of office space there, for a population of around 2 million. Now, when (the company’s office project) West Station 1 is handed to the market, it will pop to just over 5 million sqm. So you see that there is still a lot of potential.” (To read the full interview with Stanislav Frnka, go to pages 62-63).

“It’s true that there’s a lot of space planned and coming online,” says Chatfield, “but take up is at record levels. It’s the speed of development that is an issue. However, developers don’t make money if they don’t build – they can’t stand still.” Przemysław Krych also references the strong take up. “There was around half a million square metres of net take up in Warsaw last year. Some parts of Warsaw are under-invested when it comes to transportation infrastructure and therefore challenging for both tenants and landlords. There will

57

urban issues

be winners and losers, so you’re back which is in the early stages of trans- at any time to date. This is somewhat of to basics – location, location, location. forming the industrial site of the former an issue in Poland. “The pool of retailAnd of course pricing. The times when Norblin Factory on Zelazna street into ers here – especially in the fashion segeveryone was happy are over.” Koziarek a multi-use scheme. ment - is still shallow compared to the agrees that there will be those who Another company which is trans- UK, France, Germany and other mature don’t succeed, and says that there is a forming a former industrial site into markets, often leading to a ‘copy and basic underlying reason for this. “The a project of many facets, but on a paste’ experience from one shopping market is more mature now,” he claims. far larger scale, is Liebrecht & wooD. centre to another,” says Anna Wysocka “Recently every developer and every The company, in partnership with BBI from JLL. “We estimate that there is owner has to fight for the market. There Development, is breathing new life into a group of maximum 300 "shopping has always been competition, but in the a whole former industrial swathe of centre compatible" brands in Poland at past it was easier to build a professional Warsaw’s Praga district on the east side present,” says Leszek Sikora, Managing project and for it to be accepted by the of the river, turning it into a major desti- Director of ECE Projektmanagement market. But it’s important to stress that nation called Koneser Centrum Praskie. Polska. “This seems strong, but some the net absorption is very high and “This is much more than a commercial of them are quite picky and won’t go we’ll probably see record absorption enterprise, it’s a lifestyle project,” says outside the big cities. In this tough envithis year again. The main reason is the Liebrecht & wooD’s Managing Director, ronment, the efficiency of the project strong competition from completely Mariusz Kozłowski. The office part of is the key thing and this is what we’re new buildings. The life cycle of the the scheme, says Kozłowski, is naturally focusing on now and in the future.” The product is getting shorter – buildings attracting an increasingly prominent competition for tenants will become type of tenant on the Warsaw office increasingly tough, he says. “On the are aging faster.”

Two high profile projects that have market. “We’re not choosing them, but operation side there will be more and leased successfully in the current cli- IT and tech-related companies are nat- more differentiation between top assets, and the differentiation will be mate are Echo Investment’s Q22 build- urally being drawn here,” he says. in the tenant mix of the centres. The ing (for more on this project and a deeper look at the company’s new Retail market a mixed picture competition for tenants will be fierce, direction under Nicklas Lindberg, the While there appears to be good pros- just as they are increasingly optimizing new CEO, go to pages 64-65) and pects for further development of new their chains. Some centres will struggle Ghelamco’s Warsaw Spire. It’s fair to office buildings in several cities across to get their tenants in place.” Attracting say that 3-4 years ago the market was Poland, albeit at the expense of not-so- tenants is at least within the control of sceptical that the city’s office market old older office schemes, the retail mar- the company which develops or owns could absorb such large projects at one ket is facing a more uncertain future. the scheme. Other important factors time. “But we believed in the success After 15 or so years of turbo develop- affecting the retail market, however, of Warsaw Spire from the beginning,” ment, there only remain a handful of are not. “The Polish retail market has says Jeroen van der Toolen, Managing opportunities for new ‘big box’ retail been experiencing some uncertainty in Director CEE of Ghelamco, the project’s centres in Poland, according to Marek recent months,” says Tomasz Lisiecki, developer. “We focused on the Rondo Koziarek. “There are few remaining Chief Investment Officer of TriGranit.

Daszynskiego area (in Wola district of locations for big shopping centres. “A proposed tax on retail stores based Warsaw) long before anyone else. We Developers and asset managers need on turnover has been blocked by the had an ambitious vision for this part of to be much more creative – it’s not European Commission but it’s likely to Warsaw as we had seen the potential enough just to deliver the retail space. return in some form which will continue for building a business hub here. But we Shopping centres are becoming desti- to suppress retailers’ expansion in the knew we had to build more than just nations to meet and be entertained, as near term. Additionally, the proposed an office, so we created Plac Europejski, well catering to your day-to-day needs.” legislation banning Sunday trading is which serves as a town square, an urban Marcin Klammer, CEO of design and currently making its way through parpark and an art gallery.” The area around consultancy company Arcadis, con- liament, further adding uncertainty to Rondo Daszynskiego is rapidly taking curs. “Retail malls need to reposition a nervous industry. The continued ecooff as an office location, with devel- themselves as entertainment leisure nomic expansion, however, and generopers Karimpol (see interview p. 66), destinations, a trend which has been ous social programmes implemented Skanska, Capital Park, Golub Gethouse, growing abroad.” Klammer also points by the new government should, in theHines and the afore-mentioned Echo to an increasingly important dynamic ory, eventually contribute to growth in Investment all developing in the vicin- in Poland’s retail sector. “A major trend the retail markets.”

As is often the case, the investment ity. Stiff competition, but some don’t is going to be older schemes that need see it that way. “We don’t view (the to be re-modelled and upgraded. It’s view offers a wider perspective. “Retail other developers) as competition, we going to be a big wave as most need to assets in CEE are becoming more sought after as institutional invessee them as good neighbours. Together go through a refurbishment.” we’re building a strong neighbourhood,” In an increasingly competitive market, tors search for yield amid an increassays Marcin Juszczyk, Member of the say experts, the tenant mix of a centre ingly expensive Western Europe,” says Management Board of Capital Park, is going to play a more crucial role than Robert Martin, Principal and Head of

Demand for office space in Poland

continues to be strong as companies leased 628,200 sqm in H1 2016. Currently, there is approx. 1.44 million sqm under development, with Kraków claiming a recordbreaking share of 303,000 sqm.

Source: JLL

At the end of H1 2016 modern retail stock in Poland to-

talled 13.07 million sqm across the following retail formats: 9.30 million sqm (71%) in shopping centres, 3.57 million sqm (27%) in retail parks and warehouses, and 0.21 million sqm (2%) in outlet centres.

Source: JLL

58

urban issues

1,312,000 sqm of warehouse space

Urban Issues Expo Real 2016

was leased in H1 2016, the best half-yearly result in the sector’s history. 742,000 sqm remains under construction, of which 51% is being developed on a speculative basis. The vacancy rate reached an historically low level, only 6.1% of existing warehouse supply is available for lease.

Source: JLL

‘Poland remains one of the big four markets alongside UK, France & Germany. However, the lack of transparency does mean that detailed due diligence is required, particularly as it relates to market rents and capital values. ’ Central Europe of real estate investor Europa Capital. “The Polish principal cities remain the places where investors want to be, as recent transaction pricing has indicated. Steadily increasing consumer spending should slowly translate into an improving occupational market; however, many of the main cities are close to saturation leading to increasing vacancy and rental decline.”

Warehouse market flying The sector which appears to be firing on all cylinders right now is warehouse. “I don’t see any serious problems stopping ongoing development in the warehouse sector,” says Tomek Kasperowicz of Colliers International. “Tenant demand is growing, it’s never been higher historically. Last year was a record year in net take up, and it looks like 2016 will improve on that. Local companies are expanding and there are plenty of companies coming in from abroad, like Zalando setting up in Northwest Poland with Goodman.” “Demand is strong, net absorption is positive, new tenants are coming in, construction costs are low,” says Robert Dobrzycki, CEO of Panattoni Europe. “Warsaw, Łódź, Poznań, Wrocław and Silesia are very strong. Recently Szczecin, and western Poland in general, including Żielona Góra, is becoming more attractive.

Companies, especially from Germany and the Nordics, are benefitting from a low labour and real estate cost base, so there’s a growing market there. Several Scandinavian companies are relocating whole or part of their business.”

Poland, it turns out, is not an isolated case in terms of the boom. “All markets across Europe are performing, with the UK leading the way, delivering the strongest performance we have seen in the warehouse sector since the downturn in 2008,” says Ben Bannatyne, Europe President of Prologis. “Poland remains one of the big four markets alongside UK, France & Germany.

Occupancy in Poland stands at 94% and we are witnessing a huge amount of activity across the market, both in logistics and light manufacturing or production. This is being driven mainly by continued supply chain reconfiguration, E-commerce and the automotive sector.” But Bannatyne adds a note of caution. “However the lack of trans-

parency does mean that detailed due ity branded hotels and strong interest diligence is required particularly as it from international funds the country relates to market rents and capital val- is perceived as a land of opportuniues.” The all-important issue of rents ties. But you need to take into account is one that comes up in almost every the changes in guest behaviour.” Like conversation with a warehouse profes- in the office and retail sectors, people sional. Magdalena Szulc, Business Unit are now looking for more than a funcDirector for SEGRO in Central Europe, is tional building. “People want more than no different. “In my opinion, the biggest just accommodation, they also want issue we face, is that on a very active an experience. This is the reason why market, there should be big pressure operations such as Air BnB are growing on rents. On the mature markets, with and competing with hotels. Hotels have a low vacancy level, the rent increase to adapt to customers’ needs, offering is visible. This is not the case in Poland more personal attitude, attractive pubwhere rents are still low. The main rea- lic space, good local food specialities son for this situation is the high level of and flexible check-in/out options.” A competitiveness on the market, but we hallmark of Poland’s hotel market is its do expect rents to go up in due course.” balance, according to Dominik Sołtysik, Szulc also highlights the importance member of the board of Orbis S.A. of Poland’s skilled labour in attracting responsible for asset management and business. “Poland is perceived as the development. “Poland is a large counplace where the investors can find high- try with important domestic demand, potential, skilled and qualified employ- having a mix of leisure travellers in the ees. We are also seen as a big internal Baltic Sea or in the Southern part of market, so providing companies with the country and business in main cities high potential for business growth. like Warsaw, Poznań, Gdańsk, Wrocław, Observing our clients we can see that Szczecin, Kraków and Katowice. Overall, entrepreneurs are moving their opera- the market offers a good balance tions to Poland – when they think about between leisure and the MICE segment.” their European production, they have The hotel sector has caught the attenPoland at the top of their minds.” tion of investors as well. “Poland’s tourThe final word on the warehouse ism industry is growing, particularly in sector goes to Maciej Madejak, Head of Warsaw. Kraków has always been a sucBusiness Development for Goodman in cessful tourist destination but Warsaw Poland. “Many companies in Germany is now becoming an attractive and safe are looking to establish in Poland. This destination. The dynamics are really is not because we are cheap, but due to quite interesting. The hotel sector in the quality and quantity of the labour. Warsaw needs improvement in many Every time I ask customers if they are of the various sub-sectors but there happy with the quality of the service, are a number of opportunities to be they say yes - that it’s beyond expec- considered.” tations. Poland as a country has huge market potential for e-commerce, serv- Residential sector ing domestic and international markets. – peak demand falling off It’s a matter of time until e-shopping The residential market, which has also really takes off in Poland.” been growing fast of late, is set for a measured slowdown in the next few Increased number years, according to Paweł Sztejter, of visitors drives hotel sector Managing Partner of residential conThe hotel sector in Poland is not far sultancy REAS. “The market has seen behind warehouse in dynamism. record development and sales in the “Poland is experiencing a growing num- last couple of years. In Warsaw the ber of international visitors, stronger current annual level of transactions has domestic demand and the rise of the reached 20,000 primary market apartMICE market,” says Adam Konieczny, ments per annum, which is comparable Country Head of consultancy Christie to the peak of the 2006-2007 boom. & Co. in Poland. “With one of Europe’s But it may change in the next few years. lowest ratio of hotel beds per 10 000 First of all, the MDM subsidy, introduced people, limited number of good qual- to help first-time buyers, will disappear

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urban issues

The number of overnight stays in hotels grew by

‘He lived through times of turmoil and change inconceivable to us today, but let nothing stop him from achieving his dreams.’

in 2018. At the same time the amount of equity a buyer must put in to the apartment purchase has been gradually increased since 2014 to reach 20% as of the beginning of 2017. Both factors will have an impact on sales.” Interest rates and the appearance of institutional investors are both factors which will influence the future of the market, claims Sztejter. “At the moment, buying an apartment as an investment makes good sense and drives the demand, especially in the in the middle market segment. However, if and when interest rates go up, the demand from individual investors will decline. So the market right now is at the peak of the cycle, with stable prices as supply meets demand.

But we expect both transactions and supply to go down, reach the bottom in 2019 and then rise again. A significant emerging trend in the market is the rise of the institutional rental market. The safety on the rental market in Poland is low at present because rental stock is in hands of individual owners and the grey zone is substantial. The entry of institutional owners, pension or investment funds, will introduce proper standards and significantly increase attractiveness and safety of renting.”

why it made sense for them. “South African investors are looking for hard assets in SEE and CEE as a hedge for the volatile Rand. We are a ready-made working platform with over 20 years of track record, and we want to enhance our shareholder base as we grow.”

While REIT’s – and the JSE – can be a source of funding in the future, the market still relies on traditional sources, German banks prominent among them.

Although many market players now say that domestic political factors are less of a concern now than they appeared to be at the beginning of the year, for Martin Erbe, Head of International Real Estate Finance Continental Europe at Helaba Landesbank Hessen-Thüringen, the political climate is still an issue. “The biggest risk the Polish real estate market is facing at the moment is the political situation. Investors need reliable partners and politicians setting a positive framework for business is one of them. domestic capital and provide additional The opposite is a government announcliquidity to the Polish commercial real ing new laws - some becoming legally estate market,” he states. “Investment relevant, others being challenged by in REITs,” he continues, “are an impor- the EU - and a politics which is turntant element of pension fund planning ing away from Europe.” How much of a for individuals in developed markets factor is political risk for investors? “We because commercial property can pro- have not currently stopped investing in vide long-term stabilized cash flow for Poland due to the political environment,” them. Foreign institutional investors says Robert Martin, “but it is a growing purchasing investment stock in Poland concern. There are certain investments are often funded by pension funds from we would currently avoid. For example, their home country, such as Germany transactions involving state institutions or UK. But while German or British citi- would not be attractive for us due to zens are able to invest in Polish com- the uncertainty of direction within mercial property, Polish citizens do not these institutions.” have this option at present.”

Context is everything and, as Poland Today goes to print, we hear the sad South Africa news of the passing of an absolute rock - a source of capital of the Polish real estate market, David Arguably the biggest single event on the Mitzner, at the age of 101. Mitzner, who Polish real estate market in 2016, and founded Apollo Rida development one linked strongly to REITs as a major and investment company, was born in factor in the market going forward, Warsaw’s Wola district. He lived through was the investment in Echo Investment times of turmoil and change inconceivby Johannesburg-listed Redefine able to us today, but let nothing stop Properties, one of South Africa’s larg- him from achieving his dreams. It is not est REITs, leading to the creation of a an exaggeration to say that the present new company, Echo Polska Properties. success enjoyed by so many profesBoth Echo Investment and EPP are sionals in Poland’s property market is now managed by Griffin Real Estate. owed in large part to him because he CEE developer GTC soon followed suit believed – and invested - in the future in accessing funding from South Africa of the Polish real estate market when by listing on the Johannesburg Stock almost no-one else did. The vibrancy Exchange (JSE). Erez Boniel, CFO and of today’s market is his fitting legacy.

Member of the Board of GTC, explains

by Richard Stephens

7.1% per year from 17.6 million in 2006 to 32.7 million in 2015.

The average length of stay in 2015 was about 2.6 days.

Source: Christie & Co.

Urban Issues Expo Real 2016

The advent of REITs to bring local investment into play The Polish market has long talked about the benefits the introduction of REITs would bring, and now if finally looks as though there will be movement here.

“REITs offer a big opportunity for the industry,” says Capital Park’s Marcin Juszczyk, “and it seems the government is taking the issue seriously and wants to pass legislation enabling REITs to be created. The new head of the Warsaw Stock Exchange, Małgorzata Zaleska, says it is a priority. Hopefully it will come into force next year or the year after.” Joseph Borowski, Managing Director of consultancy Knight Frank in Poland, says REITs will balance out the sources of investment funding. “If you look at developed western real estate markets, as a general rule roughly 50% of capital investment in property is domestic and 50% is foreign in a given country. In Poland, the average proportions over the last say five years are less than 10% domestic and greater than 90% foreign. REITS would unleash

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A tale of two cities HB Reavis's Stanislav Frnka discusses the difference between developing in London and Warsaw, and why there is still space for growth in the Polish capital's office market.

Poland Today

caught up with Stanislav Frnka just before he headed off for some R&R in Liptov, a valley renowned for its geothermal energy located between the low and high Tatras in his native Slovakia. At the age of 10 he dreamed of joining the police so he could work with sniffer dogs, but instead he joined HB Reavis after a degree in engineering from the City University of Seattle in Trencin, Slovakia.

He is now CEO of the company in Poland, establishing it as one of the most successful developers in Warsaw.

HB Reavis is active only in offices in Poland at present, and in other countries you also develop retail and logistics centres.

What about the hotel market?

We’re in discussion with several hotel chains about potential for hotels in some of our schemes.

Stanislav Frnka,

CEO, HB Reavis Poland

HB Reavis is a partner

Urban Issues Expo Real 2016

of Poland Today’s edition for Expo Real 2016.

As far as I’m aware, you’re the only central European developer active in the London Market.

What lessons has HB Reavis learnt from your London projects?

It’s a different culture, a different set up. In the Visegrad 4 countries [of Poland, the Czech Republic, Hungary and Slovakia – ed.] we have the same operation model – we do the construction ourselves, and the architects have to follow what we want. In London it’s different and we’ve had to adjust, just like we had to adjust when we first came to Warsaw. The cycles are faster than in CE, with more opportunities to buy – and of course the GBP has depreciated.

There are more companies interested in a plot, seven eight, or even more. In Warsaw there are less big players so it’s usually only two or three. It’s all valuable experience. We were positively surprised about the divestment of our 33 Central project (to Wells Fargo). We built on spec, and first they wanted to lease, then to buy – and they did.

How did a Central European development company with no previous track record in London find such excellent plots?

You have to sniff around. Tomas Jurdak (CEO of HB Reavis UK) was there. There was a tender (for 33 Central) and we were the lucky winner.

As a company active in the United Kingdom, how do you see Brexit effecting the Polish real estate market?

I don’t see any immediate effects.

Some investors try to play the Brexit card, trying to get the price down, but when you get into the details – there are no arguments why they should wait, why they should get a discount.

Investors are cautious, but what we started before Brexit we are continuing now. There’s no difference. Will more businesses come to Poland? There are speculative discussions, but no negotiations have started. Maybe there’s a longer term effect on banks with the clearing issue, euro vs the pound. There could be losses or gains, so there could be an effect on banks.

Its feeling good but it’s not ready yet. It’s a project with great influence on Warsaw’s urban landscape. We hope to be able to share our idea with the people of Warsaw soon.

Can the Warsaw office market take what will be a very large office building?

Let me answer that by going back in time a bit. In 2007/2008, when HB Reavis was looking at Warsaw, the perception of Poland by Slovak people was not so positive. It was perceived as grey, not very attractive for tourists. It was unusual compared to other European capitals, so why should we go there?

When I first came I saw there was a lot of space for development. A lot of space. If you compare it to Vienna, there’s something like ten million sqm If Brexit is not a big issue for of space for a population of around two the Polish real estate market million. Warsaw had less than four milat present, what are the big lion sqm. Now, when West Station 1 is handed to the market, it will pop to just issues facing the market?

Big issues? I can’t think of any. over five million sqm. So you see that Everything is going so well – something there is still a lot of potential. The worry has to go wrong! I don’t like the amount is short-term thinking, or simply peoof money being pumped into the sys- ple are used to a lower vacancy rate. tem – it’s not good for risk assessment. This is a result of “easy” money with There’s funding from the EU, funding for developers building on spec and now start-ups. If you lose the money, there struggling with empty space. You can are no consequences. It’s not healthy. also compare Warsaw with other citIf you’re getting money for nothing, ies in another way. I took part in a diswhat’s your lesson if you go bankrupt? cussion called “Warsaw 2030”, where You need to create long-term profit. expats were asked what they see in the I have heard that the new genera- city and what they expect from it. A guy tion is unwilling to work in BPOs and from Paris who moved here several SSE s. In Warsaw the new outsourc- years ago said the quality of life is beting centres are more advanced, with ter in Warsaw than in Paris! Warsaw is more advanced services. For example, doing really well. The way I know, Polish IT back offices. and Eastern European people, we’re hungry for success. We want to get to I can’t do this interview without the same level as in the West. This is asking about progress on the the main motivation of young people.

Chmielna project. People are This is why, business-wise, it’s worth waiting to hear when it will start… coming here.

‘Polish and Eastern European people, we’re hungry for success.’

What other sectors are you looking at in Poland?

Logistics no – there are too many big players here and the margins are low. We’d like to go into retail, but not residential. We’re not active outside Warsaw so far, but we’re always discussing different sectors, different markets. We would like to grow in Poland – there’s a limit to how much you can do in Warsaw.

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A spate of sales.

HB Reavis has divested two Warsaw office projects recently. The first was Konstruktorska Business Center, sold to Golden Star Estate, the other was GBC I, sold to a global pension fund managed by Savills Investment Management. The picture shows Gdański Business Center II, which remains in the possession of HB Reavis.

Developing in the city. HB Reavis is the

only Central European developer active in the London market.

Their 33 Central office project, pictured, was sold to U.S. bank Wells Fargo earlier in the year, one of the biggest property investment deals in the UK capital in 2016.

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Echo rising Nicklas Lindberg, the new CEO of Echo Investment, talks to Poland Today about how the company aims to be at the top of the office, retail and residential sectors.

You say that from now on Echo Investment will turn capital over quicker than before in order to develop more projects. There is a lot of space coming on-line in the office sector, there don’t seem to be many opportunities in bigbox retail, and you were quoted as saying that the residential market is cooling. Is there space for greatly increased development?

Nicklas Lindberg,

joined Echo Investment as CEO in April.

Echo Investment is a partner of

Urban Issues Expo Real 2016

Poland Today’s edition for Expo Real 2016.

In office, Q22 has leased out well at rents we are very happy with. We’ve never been into fighting for headline rent. It’s more about quality and a building that will serve all our clients’ needs.

Echo is more present in the regional markets than in Warsaw. We’ll always be present in Warsaw, but it’s about hedging your bets. In residential and retail our activity is dominantly in the regional cities, with flagship projects in Warsaw. Our biggest challenge right now is to grow the residential part, especially in Warsaw.

In office, where is the demand coming from?

Frankfurt is on a different level, but Dublin has grown dramatically in the last year or so. Warsaw’s also competing with the regional cities.

We see a lot of companies which grow (in Warsaw) and reach a certain threshold and say ‘I need to diversify my business’. Otherwise they’re cannibalising themselves.

You’ve completed Q22. Will Echo build other flagships?

We are always looking for flagship projects, especially in Warsaw. It’s important to show what we can do, but it won’t be the major volume of Echo.

The biggest priority for us is to grow in all our areas. We’ve divided the company into an office part, a retail part, a residential part and a property-management part, and we now have much more focus and clarity as to which parts we are making enough money and which are not making enough. But what has been obvious over the last couple of months is that growth is crucial to us, especially in residential.

Mostly from international companies coming in. A lot of international companies go to the regional cities and once they’ve grown, they come to Warsaw.

Warsaw is still a very big business services destination and will continue to be so. Look at Credit Suisse taking their second space in Warsaw. It’s the capital, there’s an airport to get in and out quickly. If you look at Warsaw and see the office space per person, there’s still a long way to go. The problem is the second generation buildings that are outdated. They will struggle. The new market is leasing up. But they need to grab their tenants from somewhere.

It also depends on how you define new – here in Poland, if it’s seven years old it can be old. In Sweden an office can be 40 years old and still be new. But we’re a little bit early here to demolish buildings. There’s definitely a trend to come closer to the city centre - there are several tenants in Mokotów, for example, looking to come into the centre. Wola is taking a big part of this. Rents are slightly higher, but you avoid a lot of problems such as traffic jams.

What gives you the confidence that the residential market will remain attractive when you said you think it will cool down?

Which cities are Warsaw competing with in international terms?

We will adapt the project to the market. Pricing must be right.

It will cool down because today we are at a historical peak of instability in the world. But Echo needs to grow in residential because in the regional cities we are between 4-5 percent of the market whereas in Warsaw we are only one percent. We want to reach 4-5 percent in Warsaw. If you have that share in the market, if the market goes up or down, it’s not that relevant. But for that you need the critical mass. You have the same fixed costs, so you need to spread it out over a greater volume.

And you think the sales policy wasn't done right so far with Echo Investment?

In the old Echo we looked at selling slower but getting the best square metre price. I’m of the philosophy that it’s better to get a slightly lower price per sqm and have a quicker turnover. Nobody wants to live in a project which is standing half empty too long, or is a construction site for a long time.

Echo’s new philosophy is to create destinations, where everything you need is around you. What’s important is to get apartments sold so that once completed, people feel that they’re moving into a ready area. With Warsaw Brewery, there’s going to be office, retail, residential and leisure, so the area doesn’t die after 6pm. In the past it was either one thing or the other.

When we came here to Mokotów, it was an office destination more than a residential destination. But we see that it’s turning.

Echo Investment has been a major retail developer in Poland, but now shopping trends are changing. What sort of retail projects does Echo plan to develop in the future?

There will not be so much big box retail as we saw in the past, although there will be a few more. We’re going to buy 1st and 2nd generation centres, change the tenant mix and refurbish them, although we don’t have anything on the radar today. We’re fully busy with Libero, Galaxy and the outlets, we’re working on re-letting the existing portfolio that we divested to EPP. It’s a long time since Echo has been as active in retail as we are now.

Your slogan is ‘The Biggest Polish Developer’ and you want To achieve higher turnover, to be no. 1 or 2 in each sector. what are your sales priorities?

Is that achievable with 4-5 big We’re only building for the popu- developers already in each sector? lar, middle class segment. We’re not going to do high-end like we used to do in the past. We need to sell apartments quicker. The prices need to enable us to be fully sold 6-8 months after completion.

What will you do to speed up sales?

For sure it is. In office I’d say we’re already there. If we don’t get up to that critical mass, then we won’t get the benefits that we’re looking for.

By what criteria do you measure the critical mass?

We only measure it based on howmuch we lease, or in the case of residential, by sales.

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‘I have very high hopes for Poland. I like the whole mentality ’ Why is it so important to be 1 or 2? If the leasing or sales are most important and they’re going well, is it necessary to be 1 or 2?

If you’re 1 or 2 you can change the direction of the market and you can be a guide to the market. You can more easily make strategic partnerships with investors or suppliers. We’re in a business where you need to reach a critical mass. You have fixed costs which are what they are. If you’re going to be a smaller developer, you need to be a niche developer, and that’s not our strategy.

Is there more pressure on the company now that there is international investment in Echo Investment?

I wouldn’t say that there’s more pressure, I’d say there is more focus. Echo Investment has always performed well. In the past we kept the assets we developed. Now we’ll be a pure developer where we’ll have a quicker capital turnover. We won’t keep the assets for a long time. That is of course an effect of the new shareholder structure. Like every other shareholder they want their returns.

Keeping the main office in Kielce – is that a political or strategic decision?

Strategic. Echo is founded in Kielce, we have most of our people and we have roots there. The front office will be in Q22 where the management team and some of the sales force will be. Kielce is going to grow in importance for Echo. That’s where we have the shared services, the architects, the designers – all the in-house services.

There’s a good university in Kielce from which we can recruit. Moving from there makes no sense.

What are the geopolitical issues that can affect the real estate market in Poland?

Brexit has not affected Echo. Having said that, instability is not good, so how will it affect Poland? Some people say it will be good for Poland, some say it will not be good for Poland. Things like Brexit create a bit of a waiting period, when people sit and wait to see what will happen. That’s where we are now.

Decisions take slightly longer. But the Brexit uncertainty seems to be blowing over quicker than I had expected.

There’s a lot of investment in the different markets and things are moving on. It’s a bit strange with the low interest rates, but Poland remains one of the most stable markets in the region.

Are we going to see more business services companies coming into Poland?

We’ll see the players that are already here expand. They try it in a smaller scale then, if it works, they go bigger scale. They reach certain thresholds and then need to expand to bigger cities. You can do very sophisticated stuff here in Poland - the language skills are excellent, the education is good.

Polish people seem to be more hungry for success than the western or Scandinavian markets.

Would you share that opinion?

For sure. That’s why I still love working here. There’s a hunger for success but also a drive to change things. It’s amazing how much has been accomplished in Poland. And the young generation still have enormous drive.

People still work so hard to give themselves a better life. There are so many good examples of people who have succeeded, who are succeeding. I have very high hopes for Poland. I like the whole mentality. Living and working in Poland is a privilege.

How does this hunger and drive compare with Western Europe?

I think it could be a problem for Western Europe. If you have countries like this developing so quickly, and if you see what has happened in the last 27 years compared to the same period in Western Europe, it’s a huge difference. interview by Richard Stephens

Q22 (left) is Echo Investment's flagship building in the Polish capital.

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The untapped potential of the Polish capital Harald Jeschek, Managing Partner of Karimpol Group, looks back at the last two decades of real estate development in Warsaw, and where we go from here.

Karimpol has been in Poland for around 20 years.

What were the circumstances behind your arrival here?

Harald Jeschek,

Managing Partner, Karimpol Group (Equator, Skyliner)

Karimpol Group is a partner of

Urban Issues Expo Real 2016

Poland Today’s edition for Expo Real 2016.

The first time I came to Poland I was in a state of shock, even more so as I had just come from a Tenerife shopping centre project in the Canary Islands. It was April and it was snowing. I saw a city of a type I was not used to – the architecture was completely different. It was partly reconstructed and now I see the advantages of that – Warsaw had the chance to rebuild. It’s now a pleasant city to live in and tourism is increasing.

At that time Karimpol was quite strong in Prague and we wanted to expand further in the region. The first changes in legislation were happening in Poland, and the first wave of investment was coming in. Although there was a lot of legal uncertainty and it was not easy to develop, it was very easy to lease. Now it’s the opposite – it’s much easier to develop but much more challenging to lease. You need exactly the right product in exactly the right location. This is why our buildings have always leased well and continue to do so.

You have said that the metro is important for the project, but isn’t it a bit over-hyped at this stage?

It’s only two lines and management in Poland tend to drive to work.

The metro is why we chose the location. It’s true that in a city like Vienna the metro plays a more prominent role than in Warsaw. It will come into play more in the future than now, which is why we decided to keep lots of parking spaces.

How do you view the demand and supply situation in Warsaw in general, and Wola in particular?

There are a lot of new buildings on line and under construction.

There’s clearly a lot of construction, but also a very high demand for office space. Tenants are willing to move into new premises and they’re looking.

It could be a bit imbalanced in the next few quarters, but we’re only looking at the longer term, and in my experience most predictions that are made don’t come true. A couple of years ago I read views that the market might even collapse, but that hasn’t come true. There

have been two booms and one bust in the last 20 years. The first boom was from the mid-late 1990s until 2001, when the dot.com bubble burst and investment slowed. I don’t know why the dot.com bubble had this effect on the Warsaw market – trigger events often don’t relate to the results. The other boom was from 2004 to 2008, but you could even say it’s continued to this day because the financial crisis did not hit hard in Poland.

You’re going to build the Skyliner office building at Rondo Daszyńskiego in Wola.

Why office, why Wola?

In Poland we only develop office, like in the Czech Republic, but we do other sectors in other countries. We’re a private family-owned developer, so we have to diversify, but not in an endless way. In every country we only invest in the capital because investors always buy in the capital. We see lots of activity in secondary Polish cities, even investment activity, but we concentrate on Warsaw as we find a continuing potential to develop here.

Where is Skyliner in the development cycle at the moment?

The underground preparations are already complete and we’re currently holding a construction tender.

Construction is planned to start at the end of the year. In the meantime we are offering the space to a few potential key tenants.

Rondo Daszyńskiego seems to be quite a hotbed of construction at the moment - too much perhaps?

I think that the success of the latest completions there show that the decision of many developers to locate in Wola was the right decision and this is reinforced by tenant interest. In CBD the vacancy rate is 15 percent, but in Wola it’s lower. The vacancy level is a bit of a worry, but it’s up to the individual developer to build good quality buildings in the right location.

The effect of Brexit is still very much on people’s minds and the implications still ahead of us. What effect do you think it could have on the Polish market?

Brexit was of course a surprise. The only negative consequence I see in the next few months is the uncertainty.

People don’t know what will happen and how long it will take. Once there is a road map, people will feel more secure and then I don’t think there will be much uncertainty. In the end the EU is diversified internally as well, so we feel safe investing in countries which are strong by themselves.

What made you go for a skyscraper, in terms of Warsaw’s office market? It’s said to be more risky, as a high building necessitates a significant amount of space at one time.

We planned it in a way that we wouldn’t exceed a certain amount of space beyond which we wouldn’t be able to manage the leasing. The building has 43,633 sqm of office space which corresponds to the usual office requirements on the Warsaw market.

It´s only twice the size of Equator II.

What would you most like to see the Warsaw city authorities change or introduce to improve: 1) the construction of office projects, and 2) the city of Warsaw as a whole?

Only to do more of the same thing.

Build more infrastructure for traffic and services, continue investing more in the development of public spaces.

Why are the improvement of public spaces important for you as a developer?

Because functional and attractive surroundings create an additional attraction for your building. I would like to see the city investing even more in refurbishing spaces around public buildings. You see the work on the roads, but more care needs to be taken to make them look better.

In your opinion does Warsaw have a strong enough identity abroad?

Warsaw is creating for itself a great living environment – that’s the most important thing right now. At the same time Warsaw´s recognition around Europe is increasing as more people are aware of what’s happening here in business but also in cultural life and tourism.

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It’s not always size that counts The business services revolution in Poland is extending deep down the city food chain, with cities all around the country offering firms a specific set of pros (and cons).

(1) Flying high.

A new airport in Rzeszów (left, pop.

187,000), southeastern Poland, will be an important catalyst for the region to grow.

(2) Success in the making. The city of Olsztyn (below, pop.

88,000) might not yet be on the mind of many firms, but it is working hard to change that image.

Wiktor Doktór

Urban Issues Expo Real 2016

is CEO of Pro Progressio Foundation.

The Foundation focuses on analysis and growth, development and education of outsourcing and modern business services sector in Poland. The Pro Progressio Group also manages outsourcing media in Poland, such as the OutsourcingPortal and Outsourcing&More Magazine, as well as investor support web platform Best2Invest.org.

Entrepreneurs,

both local and global, encounter moments during their career when they have to answer the simple question of ‘where can I grow my business?’

Poland, in its current business climate, has great potential to serve as an answer to this question. The Business Support Services (BSS) sector - a collective term for Business Process Outsourcing (BPO), Shared Service Centres (SSC) and IT or R&D organisations - which currently has major recruitment and not matter as much as in a larger cenoffice needs, highlights the business tre, with 200-300 people, where you potential of Poland. have to analyse all aspects of the investIt’s of course no surprise that the ment and costs really begin to matter. larger cities in Poland are good locations for business. Reports by consult- Universities abound ing, real estate and HR agencies show That said, the question that entreprethe big cities - the so-called Tier 1 loca- neurs are starting to ask is if other tions - currently have an excellent busi- Polish cities are large enough to accomness environment. Kraków, Warsaw modate their business. Are consulting and Wrocław are the most popular companies from the US, the UK or India areas for BSS, with Kraków the ninth fully aware of the business potential most attractive area for BSS in the in Poland’s secondary cities? world and all three in the Tholons Top Since 2008, Kraków, Warsaw and 100 list for outsourcing locations world- Wrocław have lost their dominance wide. Running a business in a large city in the BSS field and there has been can bring lots of opportunities but also a growth in the so-called Tier 2 group of a number of challenges. The bigger cities. Places like Gdańsk, Łódź, Poznań the city is, the more human resources and Katowice have fostered a strong and office space there is available, but position and obtained a number of new it also means greater competition and operation centres. All four have develhigher costs. With small operations oped their modern office infrastructure centres of around 50 people, costs do and each have universities, technical

‘Since 2008, Kraków, Warsaw and Wrocław have lost their dominance.’

schools and a number of private universities with multilingual education focused on economy, law, IT and financial studies. In the last seven years, the BSS industry in all four, has grown even faster than in some Tier 1 cities.

The reason why is quite simple. In the Tier 2 cities, there is a significant HR talent pool available and both local and international real estate developers have built a number of modern office buildings that are available on much more competitive financial conditions compared to Tier 1 locations. Poznań, Gdańsk and Łódź especially have proven to be fast-growing locations chosen by large international companies. In Poznań there are operation centres for Bridgestone and Franklin Templeton while State Street, Thomson Reuters and Alexander Mann Solutions are based in Gdańsk and Infosys, Fujitsu and Nordea call Łódź home.

(3)

(6)

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(4) (5)

(1)

(3) An Ode to Success. The city

of Szczecin (left, pop.

406,000) melds oldworld charm with modern amenities for businesses from all over the world.

Opportunities for local developers But business potential doesn’t stop at the Tier 2 cities. There is already a strong list of Tier 3 cities considered suitable for business, proven by the number of firms basing their operations out of these areas. Lublin is home to 60 operation centres that employ up to 7,000 highly skilled people, while Deloitte has based its European Operation Centre in Rzeszów. Opole is host to Capgemini and PwC, while Bydgoszcz is home to the huge ATOS business centre, and firms like Tieto, Mobica and Genpact have set up in Szczecin.

These cities, especially from a cost perspective, are a lot more attractive than the Tier 1 or 2 locations, but have their own individual challenges. Modern office space is a particular concern, as office space is usually built by local developers instead of international real estate companies. In fact, Szczecin is the only place listed above where inter- even be that, sooner or later, internanational developers have a presence. tional developers will make their way to This is a challenge, but not a bad situa- Tier 3 locations as well.

Is this the end of the list? Not at all. tion: it gives local developers a wealth of opportunities. In Lublin, local devel- Depending on their needs, business opers are currently building more service operators can also consider than 100,000 sqm of modern office smaller, satellite locations such as Kielce, space and in Opole over 26,000 sqm Częstochowa, Olsztyn or Radom, which of space is planned or under construc- have a high potential. Their first BSS tion. New investments are on the way projects are, in fact, already in place. to Bydgoszcz and Rzeszów and it may

by Wiktor Doktor

(4) Road to profit.

New investments like ring roads in small towns such as Czarnków (below left, pop. 12,000) could convince businesses to set up shop there.

(5) Old meets new.

Lublin (below, pop.

350,000) not only offers a charming Old Town, but is developing some 100,000 sqm of modern office space as well.

(6) Cutting edge.

By developing stateof-the-art office buildings, the city of Bydgoszcz (below, pop. 360,000) aims to attract businesses to the region.

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urban issues

Market will absorb new supply Del Chandler, Managing Director for Capital Markets in the CEE Region for BNP Paribas Real Estate, gives his take on Poland’s investment markets following Brexit and for the future.

Has Brexit had any noticeable effects on the Polish or CEE real estate markets?

Del Chandler,

Managing Director for Capital Markets in the CEE Region for BNP Paribas Real Estate

BNP Paribas is a partner

Urban Issues Expo Real 2016

of Poland Today’s edition for Expo Real 2016.

The immediate impact of Brexit was uncertainty in the investment markets.

A lot of investors paused to see how investment yields would react in Poland and other CEE countries but this phase is now over and core investment products are strongly sought after. Prime office products, regional shopping centres and well anchored logistics products have shown very strong demand from investors familiar with Poland and CEE. For the most part, new investors looking to enter the market have remained on the sidelines reviewing each market with care. Prior to Brexit, a lot of new investors from Scandinavia were ready to step into the Polish market because of low yields back home, but they have yet to enter the market as expected. With the exception of core assets, we are also seeing less interest in a lot of the regional cities following the referendum. Opportunistic buyers have remained in Poland and CEE but investors in middle-market, non-core products have had less of an appetite following Brexit. The market has become more selective for non-core products, and vendor’s yields are often not a good match for the remaining opportunistic investors. Despite these concerns, we believe that because the Polish economy continues to maintain a resilient three percent GDP growth, Brexit should have a diminishing impact in the coming months.

How do investors perceive the large amount of activity on the Warsaw office market?

The major concerns of investors today are the volume of office space delivered and the pipeline projects. This year, the total stock of modern office space in Warsaw exceeded five million sqm and there are clear signs of a development spree underway: 650,000 sqm is currently under construction and approximately one million sqm is in the initial stages of planning. This large supply will definitely have an impact on rent levels, but this will be a short-term phenomenon. Rents are expected to decrease and bottom out over Q4 2016 / Q1 2017 period, leading to stability in the second half of next year. The market

will eventually absorb the new supply as Warsaw still has enough space for the current and planned office stock.

In the long-term, I would not expect any major turbulence regarding rent level. Prime yields remain under pressure due to the general availability of financing and lack of core products, but a significant spread of pricing on value-add and opportunistic assets is evident. Financing remains high, even with an increase of interest rates by an average of 0.50 bps, caused by the new banking tax.

In terms of investment activity, which sectors are hottest at the moment and which have slowed down?

Investors are constantly looking for prime assets located in the largest Polish cities with Warsaw as the most preferable location. Due to the limited supply, they have to search for alternative market sectors and asset types previously seen as niche. More and more, investors are eagerly looking at the regional cities where good core retail projects, office buildings and warehouses can be found. Outlet centres enjoy increasing popularity among investors thanks to their advantages as an investment product: in terms of yields and rents, they are more resilient to market fluctuations than other types of assets. Due to the booming logistics market, this kind of product is growing in importance. Quality class industrial and logistic products are expected to trade at around 6-6.25 percent with exceptional cases closing at 5.5 percent.

Can we expect more investment deals in the hotel sector in the years ahead?

First of all, the last two years have been excellent for the hotel business in Poland. The number of tourists visiting Poland is increasing, and in 2015 Warsaw recorded 4.2 million visitors.

This summer, the hotel occupancy in the Tri-City region was close to 100 percent and Zakopane saw record high occupancy rates. The last two years have been the best the industry has seen in living memory. In the future, projections show at least ten new hotels being delivered per year. Future growth looks like it will be sustained under the current economic conditions and will continue to be robust.

‘Growth looks like it will be sustained under the current economic conditions.’

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72 history

Eyewitness: Muhammad Ali vs Zbigniew Pietrzykowski Halina Pietrzykowska shares memories of her husband, Zbigniew Pietrzykowski, in particular his relationship with Muhammad Ali, whom he duelled for gold at the Rome Olympics in 1960

The final match

Zbigniew Pietrzykowski Born on 4 October 1934, Zbigniew

Pietrzykowski was a three-time Olympic medal winning boxer. Fighting at light middleweight, he won bronze at the 1956 Melbourne Games, before moving up weight divisions to light heavyweight, where he won silver at Rome 1960 and bronze again in Tokyo 1964. During his career, he fought a total of 350 bouts, winning 334, drawing two and losing 14, including four golds and a bronze at numerous European Amateur Championships. He won the Polish Championships 11 times and represented the Polish national team in a record 44 fights. His mother taught high-school mathematics while his father was deputy director of a gardening school. He died on 19 May 2014, in BielskoBiała, at the age of 79.

Float like a but-

terfly, sting like a bee – Cassius Clay (Muhammed Ali) won the final bout of the Rome 1960 Olympics against Poland's Pietrzykowski.

was held on 5 September 1960, and we watched the fight live on TV. We were one of the few families to actually own a set at the time.

The first two rounds were close and Ali (then still known as Cassius Clay) initially looked unsettled by Zbigniew’s style. But Ali managed to avoid trouble in the second round and finished big in the third, leaving Zbigniew on the ropes by the bell. The judges awarded Ali the victory on points. My husband immediately recognised Ali’s class and dedication, and knew that he had talent. He was only 18, eight years younger than Zbigniew, and was in better shape.

Zbigniew didn’t like fitness training; in Poland he usually won by knockout or submission so he didn’t feel as though he had to focus on conditioning. But this shortcoming became apparent in a serious fight. Some people told my husband that he must have been disappointed that he didn’t win the gold, but he always replied that he was very happy with silver. He respected who he was fighting and followed Ali’s later fights. He always spoke highly of him.

We met 63 years ago. I was in 9th grade at the high school where Zbigniew’s mother worked, and he often visited his mother. One of my classmates knew Zbigniew and saw that he liked me so he introduced us.

I just fell in love with him. We dated for over two years and married shortly after graduation. He was two years older than me – I wasn’t even 18!

My family wanted me to put off the wedding and go to university, but his parents were very supportive and helpful. My father-in-law talked my father and sister into agreeing to the wedding.

Although the boxing was brutal, he was delicate and sensitive. He was a gentle and good man.

When we met, he was training at the Stal Bielsko club. At the beginning his older brother didn’t want him to box.

He said he was too puny and weak. But then he saw that Zbigniew actually had talent and told him to move to BBTS Bielsko because it was a better club.

Zbigniew spent the rest of his career there. I don’t know why he specifically chose to box, but he used to say that had he not boxed, he would have played volleyball. After he retired in 1968, he worked as a coach for Bielsko,

‘He used to say that had he not boxed, he would have played volleyball.’

GKS Katowice and Wisła Kraków, where he coached for eight years. He was also a partner in a building materials company which I ran, and in a restaurant called Pavilion, which his friend ran.

Following a patriotic spurt, he became a member of the Sejm lower house of Polish Parliament in 1993. Like every Pole, he was interested in politics. He really enjoyed his term of office and served until 1997. It was a different parliament to today. People really wanted to fix things and to build a good country. After that, he sat on the board of the Polish Olympic Committee.

Ali and Zbigniew got on really well.

In 1979 we were invited to Italy for the film festival of sport in Saint Vincent at Ali’s special request. We stayed there for over a week and Ali was really happy to see him. I only saw Ali briefly and said “hello”, but he and Zbigniew sat together in the jury of the festival and talked and joked a lot. Zbigniew really liked Ali and the feeling was mutual.

In 1980, a US television channel invited Zbigniew on as a surprise to Ali, who was delighted to see him.

People often asked Zbigniew what his greatest achievement was, and he would always reply that it was his wife and two daughters, and later our four grandchildren. We were very close. Our grandchildren loved to listen to his stories and used to question him all the time about Rome and his career. And Ali remained with us, in a sense. When one of our daughters was very young, she said she wanted either a puppy or a piano, and we decided on a doberman puppy. Zbigniew insisted it was called Ali. Our beloved dog lived for 12 years. Later our grandson also wanted a dog and Zbigniew again insisted it must be a Doberman called Ali!

Interview by Michael Płociński, article by Liam Frahm

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history

74 history

It happened in...

September Aviators Franciszek Żwirko and Stanisław Wigura fatally crash in 1932 in Těrlicko, then part of Czechoslovakia.

Filled to capacity.

The interior of the aircraft hangar in Berlin filled with planes representing the different countries which were taking part in the Challenge 1932 competition in the German capital.

the art of flight The International Tourist Plane Competitions, known as “Challenges",

were major aviation events held in interwar Europe. Conceived by the Aero-Club de France, the first Challenge was held in Paris in 1929.

German pilot Fritz Morzik won, and as a result the second Challenge was held in Berlin in 1930 which Morzik also won. The third Challenge in 1932, also in Berlin, was famously won by Polish pilots Żwirko and Wigura.

On 11 September 1932,

Polish aviaWigura’s success in aviation did not tors Żwirko and Wigura were killed fly- prevent him from helping design furing to Prague when the wing of their ther aircraft for RWD. Built in 1931, the RWD-6 sport plane snapped during RWD-7 sports plane became a recorda heavy storm. Only two weeks ear- breaking aircraft: flown by Drzewiecki, it lier, on August 28, the pair had won the set a speed record for the light touring prestigious FAI International Tourist class in 1931, travelling at 111 mph, and Plane Competition in Berlin, Germany, an altitude record of 19,755 ft the folwith Żwirko piloting and Wigura as lowing year. Wigura also helped design the RWD-5 which, in 1933, became the mechanic and second pilot.

Born in Warsaw in 1901, Wigura smallest plane ever to have crossed the studied at the Faculty of Mechanical Atlantic Ocean, flying 2,226 miles from Engineering at the Warsaw University Warsaw to Rio de Janeiro. of Technology, starting in 1922. There he met Stanisław Rogalski and Jerzy International Champions Drzewiecki and formed the RWD air- In 1932, the RWD-6 aircraft was built, craft manufacturing team with Rogalski designed specifically to compete in the and Drzewiecki in 1927. By 1928 the 1932 Challenge (the 3rd International team had completed their first aircraft, Tourist Plane Competition) which was the RWD-1, then focusing their work on held in Berlin. The competition conaircraft for sports aviation, including sisted of three sections. First, technithe 1929 RWD-2 and the larger RWD-4 cal trials, which awarded points based in 1930. In 1929, Wigura graduated as an on the quality and ability of the aircraft engineer and also completed a piloting as well as for features such as comfort course from the University Aeroclub in and visibility in the cockpit. The second Warsaw, allowing him to become active stage of the Challenge was a 4,575 mile in sports aviation. It was at the Aeroclub rally across Europe, starting and ending that Wigura met Franciszek Żwirko, in Berlin via several countries, includa friendship which would cement ing Poland, Italy and France. The final test in the Challenge was a maximum the careers of both men.

Five years Wigura's senior, Żwirko speed test over a 300 km course.

The victor was decided by the maxiwas born in Święciany (in preset -day Lithuania), at the time part of the mum speed test on 28 August with the Russian Empire. During World War competition being very fierce. Żwirko One, he volunteered for the Russian and Wigura won by three points, leavArmy, joining General Józef Dowbor- ing German Fritz Morzik in second Muśnicki’s Polish corps in 1917. He then place. While their success was cerfought the Bolsheviks during the tainly a result of their aviation skills, Russian Civil War. Having battled his the technical features of their RWD-6 way to Poland following the Bolshevik also played a key role in their victory. victory, Żwirko completed his pilot Both Żwirko and Wigura were awarded training in Bydgoszcz and Grudziądz Golden Crosses of Merit. Also, Warsaw before becoming a fighter pilot in was made host of the 1934 (and final) the Polish 1st Air Regiment. In 1929, International Tourist Plane Competition he was appointed as a liaison officer in honour of the pilots. to Warsaw’s University Aeroclub, which All of Poland celebrated. Poems allowed him to increase his activity in were sent to newspapers in honour of sports aviation and meet young piloting the pilots’ achievements. But, the celenthusiasts, including Stanisław Wigura, ebrations were short-lived: As a result then a young engineer. of their win, the pair were invited to From their fateful meeting, Żwirko numerous air meetings and were due and Wigura often flew together, to attend one such event in Prague on with Żwirko acting as the lead pilot 11 September. However, a heavy storm and Wigura often taking the role of broke the wing of their RWD-6, leading mechanic and second pilot. In their first to a fatal crash in the forest of Těrlicko. flight as a team, the pair flew a 5,000 The news of their untimely death km round trip itinerary which covered shocked Poland: Żwirko was only a few Warsaw, Paris and Barcelona, end- days short of his 37th birthday, Wigura ing again in Warsaw in 1929, aboard was only 31. The country mourned and a flimsy, Polish-built RWD-2 prototype. the pair were buried in a joint plot at the Following the success of this trip, the Powązki Cemetery in Warsaw, in the pair began to compete internationally: Avenue of the Notables. At their funeral, in July 1930, they took part in the 2nd the airmen’s coffins were mounted on International Tourist Plane Competition, top of the wreckage of their plane and flying a newer iteration of their design, transported through the city. Both were but were forced to withdraw due to posthumously awarded the Knight’s engine failure. This did not dampen Cross of the Order of Polonia Restituta. their success, however, with the duo In 1993, 28 August was made Polish winning the 2nd Flight of South-West Aviation Day (celebrated to this day) Poland and the 3rd Light Aircraft in commemoration of their success.

Contest later that year.

by Liam Frahm

75

history

Proud pilots.

Franciszek Żwirko (R) and Stanisław Wigura (L) stand next the Polish RWD-6 aircraft, which won the Challenge 1932 competition in Berlin.

Road of heroes.

photos: FoKa (Forum), Wikipedia

The road leading to the Chopin airport in Warsaw is named after these two intrepid pilots. Ulica Żwirki i Wigury is 5.5 km long and was officially opened in 1934.

76 travel

Poland’s Indiana Jones Legendary explorer, author and journalist Jacek Pałkiewicz talks to Poland Today about how he uses his travels and expeditions to fly the flag for Poland around the world.

A job like no other Jacek Pałkiewicz was born in 1942 in a Ger-

Eye on the world.

Jacek Pałkiewicz's modest beginning did not stop him from becoming one of the world's pre-eminent explorers.

man labour camp in Lower Saxony, where his mother was forcibly sent during World War II. He grew up in Northern Poland and emigrated to Italy in 1970. Pałkiewicz is a Fellow of the Royal Geographic Society in London and has lead over 50 expeditions to some of the most remote and inaccessible corners of the world.

In 1982, he founded a survival school, teaching the physical, mental and psychological skills he has honed during his many years of exploration. He has worked with the Russian Cosmonaut Training Centre for extreme conditioning and more recently served as ambassador for the Masurian Lake District in its attempt to become recognised as one of the ‘New Seven Wonders of Nature’ competition, where Masuria was ranked the most beautiful natural area in Europe. He is the author of more than 20 books and reports of his expeditions are often published in leading European magazines and newspapers. In 2010, he was awarded the Pro Ecclesia et Pontefice by Pope Benedict XVI, and in 2015 he was bestowed the Order of Merit by decree of the Polish president.

In 1975

Jacek Pałkiewicz made a solo crossing of the Atlantic, travelling from Dakar in Senegal to Georgetown, Guyana, in a 5.5m-long lifeboat with no sextant, wind rudder or radio. Having navigated the Mazury Lakes as a child and sailed in the Polish merchant navy for two years, Pałkiewicz had experience on the water. The challenge, however, proved exceedingly physically and mentally testing. During one severe storm, when Pałkiewicz spent three days bailing out water from his small craft, he reached the limits of his resistance. Yelling out his surrender to the empty vastness of the sea beyond, unable to eat or sleep and covered in sores caused by the sea spray, Pałkiewicz decided to fire his distress flare the next time he saw a ship. But when a Cuban exploration vessel, the Antarctic Ocean, found Pałkiewicz two days later, his resolve had returned and he refused rescue. After 44 days of isolation and struggle, the Pole reached dry land in South America, having conquered the Atlantic Ocean.

Humble beginnings “When I was little and people asked me what I wanted to do when I grew up, I always said ‘I will be an explorer’.

I hadn’t even started school, but I knew.

My aunt used to read travel books to me, and I used to trace the names of the places she talked about on a globe my father had given me. The exotic names like ‘Timbuktu’, ‘Hong Kong’ and ‘Buenos Aires’ made a huge impression on my imagination. As I got older, the writings of Kipling, London and Stevenson felt like invitations to explore the world,” Pałkiewicz said.

He felt like an outsider growing up behind the Iron Curtain. “The non-communist world was closed to me and I didn’t have a passport, so I applied to the Nautical School in Gdynia to become a sailor. Unfortunately, I failed an eye test and was rejected. It felt like a tragedy at the time. However, my mother said to me, ‘you know who else can travel the world – a journalist’.

So I began to work for Polish newspapers, but it was still too small a world – I could only go as far as places like Bulgaria or Hungary. I dreamt of the great wide world that was shut to me, so I tried to get out illegally. I went to Yugoslavia, where it was easier to cross the border, with only ten dollars in my back pocket. I tried to get across into Italy but I was caught and held for two weeks in Belgrade before being deporting back to Poland. But by then, I had the experience and knew what to do the next time round, so I tried again and succeeded.”

In 1989, Pałkiewicz set his sights on travelling to Oymyakon in Siberia, the coldest inhabited place on Earth where

‘My aim is to wave the Polish flag – it’s my moral responsibility.’ temperatures have been recorded as low as -71 degrees Celsius. The 1,300 km trek from Yakutsk, travelling on reindeer-hauled sleighs, proved as life-threatening as he had anticipated.

While travelling along the Tompo River, the ice suddenly shattered underfoot and the reindeer and sleigh were submerged in the water. With the reindeer losing strength every minute, Pałkiewicz and his team had to act fast. The sleigh was their only mode of transport, and without it they would be trapped in the frozen Siberian wilderness with no chance of rescue. After 15 minutes of superhuman effort, Pałkiewicz and his team, thoroughly exhausted and numb from the cold, hauled the reindeer and sleigh out of the water and back onto the ice. With temperatures dropping to 50 below freezing and 40 mph winds, frostbite and hypothermia posed a serious risk. In order to stay warm, the group stopped frequently for the team to run on the spot. Finally Pałkiewicz and his friends successfully navigated the 1,300 km of Siberian wasteland and reached Oymyakon.

Jacek Palkiewicz is a humble, softspoken patriot without a political trace in his blood. “My aim is to wave the Polish flag – it’s my moral responsibility.

When you travel abroad, people have only heard a few things about Poland.

In the Unites States, people know Lech

Wałęsa, John Paul II and vodka. In Asia in the 1970s and 1980s, they knew [Polish football player Grzegorz] Lato and now they know Lewandowski. I do Poland's marketing because I don’t think the country has ever known how to market itself well. Take for example the reconstruction of Warsaw following World War II. In the 20 years following the War, the city was rebuilt, and architectural experts said that no city had ever undergone such a re-birth. But since Poland didn’t make a big deal of it, people don’t talk about Warsaw when they talk about cities brought back from the desolation of war in the way they talk about Hiroshima or Dresden.

I really don’t think we’ve shown the world the many strengths that we have in areas like science or arts or literature.”

The quest to market Poland takes the explorer to far flung corners of the world, sometimes where no man has gone before. In 1996, Pałkiewicz led a scientific expedition tasked with identifying the source of the Amazon River, in order to find the river’s true length.

Eventually the team located a small spring in the Apacheta ravine on Nevado Quehuisha, in the Peruvian province of Arequipa, which stands at 5,150 m above sea level. Confirmed by satellite image 15 years later, the Peruvian Geographic Society certified the Apacheta spring as the official source of the Amazon, making it the longest river in world – beating the Nile – at a length of 7,040 km. The site discovered by Pałkiewicz and his team is now marked by a monument erected by the Peruvian government.

Looking ahead His next expedition is to China and is called ‘New Silk Road 2017’, part of the joint Sino-Polish initiative under the name ‘One Belt One Road’. “The aim of our mission is to promote a positive image of Poland, to show it in the best light possible,” says Palkiewicz. “The initiative is a big political and economic priority in China and our expedition will hopefully help to raise awareness about it in Poland. We have the backing of several ministries within the Polish government and we’re being sponsored by Polish and Chinese companies.

We need to raise around PLN 1.5 mln before we set off. For me, it’s such a huge event and I’m not thinking beyond it. I’ve been everywhere that I’ve ever wanted to go and now my dream is to show and inform people what Poland is really like and to tackle the misconceptions that they might have about the country.” Poland’s greatest living explorer won’t rest until he feels he’s played his role in this. It will be perhaps his greatest challenge.

interview by Richard Stephens, article by Liam Nolan

77

travel

The source.

Pałkiewicz set off in 1996 to find the source of the Amazon river, and confirmed that it is the longest in the world. The Peruvian government erected a monument to commemorate the Polish explorer and his team.

Off the beaten track. In 1999

Pałkiewicz, then aged 57, crossed the Sahara desert on foot (and camel back), without vehicles or other mechanical aids... A real man's adventure.

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EVENT rEViEw

MipiM property fair

Poland Today in Cannes At MIPIM 2016 Poland Today secured the participation of Mateusz Morawiecki, Deputy Prime Minister of Poland and the country's Minister of Development, whose involvement made a big impact on the whole event. Mr. Morawiecki was the highest-level official from Poland ever to participate at MIPIM, which this year attracted approximately 23,500 participants, and the most senior figure from any country at MIPIM 2016. The panel in which he took part, part of Poland Today's two-day 'Poland & CEE Days' conference & networking initiative – which consisted of the Executive Dinner on Tuesday 15 March in the evening, and four panel sessions on Wednesday 16 March – was fully packed with attendees from around the world. The deputy Prime Minister assured the audience that Poland remained an excellent country in which to invest and do business, but was questioned closely about the government's policies and actions, not only by moderator Henry Foy of the Financial Times, but also by the audience, some of whom took the opportunity to express their concerns about the impact of the government's policies on international investor sentiment.

Alexander Goepfert, partner and head of real estate investments Europe at law firm Noerr reminded the audience that Poland is a mature and stable market but cautioned that continued global investor interest in the country will depend significantly on the stability of the political system and the atmosphere created by the government.

Above: Richard

Stephens, founder and editor of Poland Today opening the 'Poland & CEE Executive Dinner'.

photos: Mipim

Real estate talked shop

Also packed was the real estate panel led by Mrs. Hanna Gronkiewicz-Waltz, the Mayor of Warsaw, and featuring five of the biggest developers operating in Warsaw: Echo Investment, Ghelamco, HB Reavis, Skanska and Xcity Investment.

The heads of these companies were persuasive in calming concerns from some quarters that there is too much office development activity in the market, pointing out that Poland’s capital city still has a lot of catching up to do when compared to other cities of a similar size and status in Europe. The tone of the panel was optimistic about the leasing prospects of new upcoming office developments, judging by the success of Echo Investment’s Q22, Ghelamco’s Warsaw Spire, HB Reavis’s several recent projects in the capital and Skanska’s landmark schemes in major cities around Poland. Special thanks also go to our partners for the CEE Breakfast panel, RICS, and for the Poland Lunch panel, PropertyEU.

Above: The RICS

panel led by Maarten Vermeulen (far right).

Left: Stanislav Frnka, CEO of HB Reavis Poland and Arkadiusz Rudzki, MD of Skanska Property Poland.

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Left: approximately 23,500 participants attended MIPIM 2016 in Cannes. The Polish representation was, as usual, strong.

Below: Deputy Prime

Minister and Minister of Development Mateusz Morawiecki (right) is greeted by the CEO of Reed Midem, Paul Zilk.

Above: Mateusz

Morawiecki addressing the international audience at Poland Today's 'Poland & CEE Day'.

Right: Maciej Król of Xcity Investment.

Left: Jeroen van der Toolen, MD CEE of Ghelamco.

Below: (l-r) Henry

Foy, Financial Times; Mateusz Morawiecki; Katarzyna GruszeckaSpychała, deputy Mayor of Gdynia; Jacek Levernes, president of ABSL; Prof. Dr. Alexander Goepfert, Partner and Head of Real Estate Investments Europe, Noerr law firm.

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Cee SuMMit in WarSaW

The importance of city vision Many leaders in their fields participated in the CEE Summit in Warsaw, which Poland Today co-organised with the Urban Land Institute (ULI) and PropertyEU, but there will be no complaints if special mention is made of the presence of two legends of urban development from across the pond: Carl Weisbrod, Chairman of the New York City Planning Department, and Tom Murphy, the former Mayor of Pittsburgh.

Both men shared their rich experience with a rapt audience of real estate professionals and civic authorities. Their words also provided a natural context to the capital markets discussion which was a strong feature of the conference.

Carl Weisbrod revealed the ‘three legs’, as he termed them, of NYC’s economic development policy from the beginning to the present day: Diversity in economics and demographics, human talent, and the importance of infrastructure in maintaining a competitive edge. On human talent, he emphasised the innate immigrant nature of the city. “Over three million of our 8.5 million residents are foreign-born,” he said. “About 40 percent of them have arrived since 2000 or later, and half of New Yorkers speak a language other than English at home.” NYC, he made clear, wears this badge with pride. Moreover, he said that in the experience of his city, it is always the children of immigrants – the so called ‘2nd generation’ - who are the most dynamic and motivated amongst the population. Something for Polish society to note, surely.

Tom Murphy, a three-term mayor of Pittsburgh from 1994-2005, is famous for transforming the city from a seemingly hopeless case in the post-war years to being named ‘Most Livable City’ in the country by The Economist. “We did it through partnership with the private sector,” stated Murphy. “Developers weren’t our adversaries, they were our partners.

We shared the risk with them and we shared the reward.” The city’s reputation for union intransigence was turned on its head and is now known for innovation and entrepreneurship. Cultural facilities like the ballet and opera were built on former industrial sites, and the old baseball stadium was blown up, with a new one built dowtown. Basically, they made the city centre a place of excitement.

“A city can’t just drift towards the future,” advised Murphy. “It has to know where it’s going. It has to have leadership and attract talent. Authenticity is crucial – it can’t just copy other cities. Warsaw needs to keep the authenticity that makes it a unique place, but there needs to be a strategic vision so when the investors and developers say ‘we want to build this’, it fits into a bigger picture.”

Below: In 1983 Pittsburgh was officially the most economically depressed city in America after deteriorating rapidly since the war, when it had been the industrial centre of the country, producing 60 percent of its steel.

Between 1970 and 1990 it lost 15 percent of its population.

Now it is one of the most desirable places to live in the world. Former Mayor Tom Murphy told CEE Summit attendees how he drove this transformation.

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Right: Carl Weisbrod, Chairman of the New York City Planning Commission

Below: Rafał

Kulczycki, Director of City Development, Kraków, Leszek Sikora, Managing Director, ECE Projekt-management Polska, Maciej K. Król, CEO, Xcity Investment

Left: Hadley Dean, CEO of Echo Prime Properties, with Robert Dobrzycki, CEO of Panattoni Europe Below:

Tom Murphy, former mayor of Pittsburgh.

photos: Agata Dąbrowska

Above: Przemysław Krych, Founder & CEO, Griffin Real Estate

Left: Gordon Black, Senior Managing Director, European Private RE Equity Group, Heitman.

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Global business leaders meet in Warsaw

photos: Executive Club

EVENT rEViEw

exeCutive Club ConferenCe

2016 has been a year full of important meetings for business leaders, and the events organised by the Executive Club enjoyed great interest among the representatives of leading Polish companies.

Executive Club

is an organisation of top managers which promotes the highest standards of leadership in the business environment.

Left: The winners of the Private Equity Diamonds were recognised together on stage at the end of the gala.

“We are constantly growing. Currently the Club brings together over 180 companies from different industries. We try to meet the expectations of our members and, apart from well-proven solu- industry-oriented subject matter of the tions, we always try to come up with meetings enables the development of new initiatives. 2016 was an exception- solutions applicable in various areas of ally good year with its highly successful the work of top management staff and international event, European Executive speeches are given by some of the finForum,” said Beata Radomska, CEO of est specialists in the field. This year, two Executive Club. Another conference year club meetings took place that focused on was opened by the 7th edition of 'Polish innovative and entrepreneurial Poland.

Infrastructure', which was attended by the At the first, the debate concerned the lack largest representatives of the sector from of adjustment of the Polish educational system to the needs of modern business.

Poland and abroad.

Moreover, the members of Executive The year also saw the “Investment Forum Club had the opportunity to meet in & Private Equity Awards Gala” take place a select group and talk about the direcfor the 7th time. The most distinguished tions for Polish companies during the representatives of the investment market Economic Forum in Krynica. sector debated the future of the industry, perspectives for the foreign expan- The Executive Club’s main event of the sion of Polish companies, and effective year was the 4th edition of the two-day cooperation between banks, investors, international "European Executive Forum" and law firms. The conference part of Congress, entitled “Age of Innovations”, Above: Chris Lowney, the renowned the event was opened by prof. Dariusz and was devoted to the subject of lead- economist and writer - and former Jesuit Rosati, and prestigious “Private Equity ership and innovation in Europe. Among who was managing director of JP Morgan, a keynote speaker at the "European Diamonds” winners included Innova the special guests were prof. Patrick was Executive Forum Congress".

Capital, Wirtualna Polska and home.pl. Barwise from the London Business School, The Club also organises meetings dur- Chris Lowney, economist and writer, ing which representatives of Polish and former Jesuit and managing director foreign enterprises discuss the chal- of JP Morgan, and Paddy Miller, professor lenges faced by management today. The at IESE Business School.

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Right: Richard Stephens, Founder and Editor of Poland Today, is a regular moderator and host of Executive Club conferences and galas.

Left: Paddy Miller,

Professor at the IESE Business School in Barcelona, was a special guest at the European Executive Forum.

Right: Krzysztof

Pietraszkiewicz, President of The Polish Bank Association speaking at the Investment Forum.

Left: Polityka

Insight's managing director, Wawrzyniec Smoczyński, led this panel on the digital revolution.

Above: The Execu-

tive Club attracts top business leaders as speakers. This panel discussed the topic "M&A transactions - an economic barometer?"

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KryniCa eConoMiC foruM

‘Polish Davos’ sees thousands of participants this year

Above: (l-r) Slovak PM Robert Fico, Ukrainian PM Volodymyr Groysman, Polish PM Beata Szydło, Hungarian PM Victor Orban, and Czech PM Bohuslav Sobotka.

been awarded the 'Man of the year' award at this year's event in Krynica.

“The theme of this year's meeting, "Europe facing challenges – united or divided?", reflected the current situation on the Old Continent. There were over 3,500 participants at 26th Economic Forum and nearly 600 journalists from dozens of countries,” it continued.

At the event Hungary’s Viktor Orban – who won this year’s ‘Man of the Year’ award – and Poland’s Jarosław Kaczyński – who won the award last year – pledged to wage a “cultural counter revolution” together inside the European Union. It was the first time the two had met in public.

photos: ABSL

Viktor Orban has

“A record number of participants and Right: The leader accredited journalists, over two hundred of Poland's governing thematic debates and special events, the PiS party, Jarosław Kaczyński (l) took participation of heads of government part in a panel and parliaments, as well as ministers discussion with and parliamentarians from the coun- Hungarian PM tries of Central Europe” attended this Victor Orban (r) year’s Krynica Economic Forum - according to the Forum’s website - marking the informal start of post-summer business.

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The Association of Business Service Leaders (ABSL)

represents the business services sector in Poland. ABSL members consist of over 170 global investors including Accenture, Capgemini, Goldman Sachs, Hewlett Packard and IBM.

abSl ConferenCe in KatoWiCe

Condi steals the show

Dr. Condoleezza Rice’s speech during the 7th ABSL Conference in Katowice in June revolved around three main subjects. Firstly, she mentioned Poland’s current political state, saying that “no other country sacrificed so much to be a democracy”, but mentioned that there is still a long way to go and it is the responsibility of every citizen to protect the democracy.

Further, Dr. Rice analysed the condition of Europe facing both Brexit and the immigrant problem, concluding that European leaders struggled with convincing their people of the good elements that a common Europe has brought, thus extremism and separatism was born. Finally, she acknowledged the shifts in current political debate brought by social media: in a time of swift information flow, democracies struggle as they work slowly to bring about compromise. Dictators, meanwhile, move quickly, providing people with answers before the questions are even asked. Dr. Rice also assured the audience that no matter the outcome of the upcoming presidential elections in the US, the country’s engagement in NATO will remain as it is. The annual ABSL conference, which brings together leaders from across the business spectrum, particularly in business services, was this year held under the banner of ‘Transforming ourselves, changing the world’. photos: ABSL

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Sandra Massoud

was born in the coastal city of Jounieh in Lebanon to a Polish mother and French-Lebanese father. Having studied banking and finance in Lebanon, she moved to Poland in 2005 to do a Masters in Finance at Kozmiński University in Warsaw. She now manages ‘La Maison’, a restaurant serving a fusion of French/ Mediterranean cuisine in Warsaw and is married with four children, three boys and a girl.

From Lebanon, with love Poland Today sits down with Sandra Massoud, a Lebanese restaurateur living in Poland, to ask about her experiences in the country

‘(Poles are) very welcoming, homely and have a strong sense of hospitality, much like Lebanese people.’

What were your first impressions of Poland?

My grandparents live in Zakopane and some of my favourite childhood memories are from the two or three months we’d spend with them in the summer during the school holidays.

I grew up with my parents and sister in Lebanon, where there were no flights because of the war in my home country so we’d drive for six days to get to Zakopane. I loved it there when I was young and I still do now.

Because I didn’t have family in Warsaw, I didn’t go until I got married there in 2004. I also remember how different the food seemed because I was used to the simple mountain food we ate in Zakopane. You can eat whatever you dream of in Warsaw!

Was there anything about Poland that took you by surprise?

When I moved to Warsaw to study, I found it hard being away from my family. In Lebanon, families are very close: we’re always together, surrounded by people ready to help with anything, so no-one feels alone. I love that, and it’s something I try to teach my children everyday. I had also expected Poles to be cold people since the weather is cold, but I was pleasantly surprised: they’re very welcoming, homely and have a strong sense of hospitality, much like Lebanese people.

What is your most memorable experience of living in Poland so far?

Opening my restaurant was a very memorable, emotional experience for me. I love cooking for people because I love to see people happy while they’re eating and experiencing different flavours and textures. The idea of opening a restaurant came to me the first week I visited Warsaw because I missed French-style pastries. I didn’t act on it until I was having a coffee on Chłodna street (in central Warsaw) ten years later: it was one of those summer nights, and I fell in love with the street and its history. I heard that the restaurant was for sale, and that’s where the story began. I would love to stay in Poland in the future.

interview by Liam Frahm

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