Poland Today Business Review+ No. 037 by Poland Today Business Review+

1 year subscription: EUR 690 (PLN 2760) Newsletter Editor: Lech Kaczanowski lech.kaczanowski@poland-today.pl tel. +48 607 079 547 Sales Contact: James Anderson-Hanney james.anderson-hanney@poland-today.pl

No. 037 / 2nd June 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

MANUFACTURING & PROCESSING Somfy completes phase one of Polish factory that will create 800 jobs by 2020 page 3 Korean Mando to employ 450 at newly opened Polish plant page 3 Home appliances sector in need of more R&D investment page 4

Our guests included (from the right): Senior Editor at The Economist Edward Lucas, CEO of the Warsaw Stock Exchange Adam Maciejewski, World Bank Country Manager for Poland and the Baltics Xavier Devictor, V-ce Chairman of PwC Jacek Socha, President of Confederation Lewiatan Henryka Bochniarz and former Prime Minister Jan Krzysztof Bielecki. Photo: PT

Poland Today celebrates 25 years of economic and political transformation

Just ahead of the 25th anniversary on June 4 of Poland's first free post-war elections, which marked the beginning of the end of communism in Europe, Poland Today brought together leaders and opinion formers to tell the story of the country's transformation to 50 journalists from around the world. page 2

tel. +48 881 650 600

SERVICES & BPO Norway's Schibsted launches 2nd delivery center in Poland page 10 FOOD & AGRICULTURE Norwegians sell Delecta cake mixes business to Bakalland and Innova Capital page 11 RETAIL PROPERTIES Apsys secures loan for EUR 290m Łacina project in Poznań page 11

ENERGY & RESOURCES Enea acquires district heating company in Białystok page 5

Large retail centre to open in Łódź next year page 12

PROPERTY & CONSTRUCTION State bank BGK launches PLN 5bn rental housing fund page 5

POLITICS & ECONOMY Polish GDP rises 3.4% in Q1 with investments showing double-digit growth page 13

JLL report looks at office markets in Poland's 2nd tier cities page 7

Official data show ruling party narrowly win EU election page 14

TRANSPORT & LOGISTICS Blackstone boosts logistics portfolio in Poland to 770,000 sq.m page 8

KEY FIGURES Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 17-19

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25 YEARS OF TRANSFORMATION

Poland Transformed: the country' country's success story traces back to the Polish people If there is one factor that accounts for Poland's successful economic transformation more than others, then it is the country's people, agreed participants at Poland Today's 'Poland Transformed' conference, held May 28 in Warsaw. "If you had to choose one driving force that was behind Poland’s economic success, it is its people," said professor Witold Orłowski, chief economist at PwC (see our interview with Witold Orłowski on page 15). "Over the past 25 years, the economy has taken full advantage of its human capital. We have moved from 30% of the average European gross domestic product to just over 60% now." The conference brought together leaders and opinion formers to tell the story of Poland's transformation to 50 journalists from around the world. The journalists are now well-equipped to relate Poland's success story – and business’s prominent role in it – to their audiences on all continents, just ahead of the 25th anniversary on June 4 of Poland's first free post-war elections, which marked the beginning of the end of communism in Europe. Some of the participants included: Senior Editor at The Economist Edward Lucas, Stratfor Founder and Chairman George Friedman, former Prime Minister Jan Krzysztof Bielecki, President of Confederation Lewiatan Henryka Bochniarz, CEO of the Warsaw

Stock Exchange Adam Maciejewski, CEO of GE in Europe Beata Stelmach, member of the Prime Minister's Economic Council Witold Orłowski and World Bank Country Manager for Poland and the Baltic States Xavier Devictor.

ing that because leadership changed so frequently, it was difficult for any vested interest to establish itself as a dominant force.

Issues discussed included the drivers behind Poland's success, business's role in the Polish transformation, the challenges and opportunities facing the new generation of Polish business leaders, Poland's image abroad and Poland's place in the global context. But no matter the discussion, participants continually came back to the strength, wit and perseverance of the Polish people that made the difference.

Former Prime Minister Jan Krzysztof Bielecki said that Poland’s early political reforms supported its economic reforms. Photo: Poland Today

For example, former Prime Minister Jan Krzysztof Bielecki, pointed out that political reforms made at the beginning of the transformation allowed dissatisfied Poles to change their political leadership frequently – but perhaps surprisingly, this helped the country’s economic reforms. "The political reforms that were implemented were the strongest support for the economic reforms," said Bielecki. "In the early days, we had more prime ministers than a football team has players," he quipped, add-

Stratfor Founder and Chairman George Friedman (left) and The Economist Senior Editor Edward Lucas (right) discussed Poland’s place in the global context with Poland Today Editor Andrew Kureth (centre). Photo: Poland Today

Despite Poland's low position in innovation rankings, GE's Beata Stelmach said that Polish companies are actually quite innovative. "Poland does not have an innovation problem. We've been investing in technology the past 25 years, upgrading our solutions to international standards, closing the know-how gap," she said. "Now we’re in the position to generate innovation from within and there are many companies that are already excelling at that," she added. Though there are plenty of challenges ahead for the Polish economy, participants were overwhelmingly positive about the prospects for Poland going forward. The Economist’s Edward Lucas summed it up nicely: "Poland is finally the master of its own destiny," he said. by Andrew Kureth For an extensive, in-depth series of reports on the conference, please see next week’s issue of Business Review+

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MANUFACTURING & PROCESSING

Somfy completes phase one of Polish factory that will create 800 jobs by 2020

Somfy's sales in the CEE region came in excess of EUR 82m in 2012, marking an 11% improvement y/y. The company said the project is bound to attract its subcontractors and partners to invest in Niepołomice, which may result in creation of a further 1,500 jobs in the area.

"After opening a factory in China we decided to invest in Central Europe because it is one of our fastest growing markets at the moment," Somfy's CEO Vincent Ballet told a press conference at the Niepołomice city hall last year. "We had taken into consideration a number of countries but our final choice was Poland, mainly due to availability of qualified workforce."

Korean Mando to employ 450 at newly opened Polish plant Korean producer of suspension, steering, and brake systems Mando has launched a greenfield plant in Wałbrzych which supplies shock absorbers to Hyundai and Kia and brake clamps to Fiat. The site employs 270 staff but its workforce is to reach 450 by the end of next year, after the company adds brake clamps for Volkswagen to its product range. The investment has amounted to PLN 80m.

France's Somfy, a global leader in the automatic control of openings and closures in homes and buildings, is launching its Polish manufacturing plant in Niepołomice, just outside Kraków on June 3. By 2020 the factory is to create 800 jobs, mainly for women who often have a much harder time finding work than men, particularly in areas with high unemployment. Somfy picked an 8.5ha site in Niepołomice where it has built a 12,000 sq.m factory with an annual capacity of 1m motors. The estimated capital expenditure has so far come to approximately EUR 30m and by the end of 2015 the plant's workforce is to reach 200. Over the subsequent five years, the site is to be expanded at the cost of EUR 35m, raising its capacity to 4m units per annum and its headcount – to 550 workers. Additionally, by the end of this year, Somfy will develop a 10,000 sq.m logistics center at the site, where a further 200 people will be employed. Plans include also an R&D facility.

MANUFACTURING & PROCESSING

Somfy manufactures control systems for motorized blinds, awnings and the like. Image: Somfy

One of the key advantages of the Niepołomice investment zone is its proximity to Kraków, and its pool of skilled workers. The largest investor in Niepołomice is German truck & bus manufacturer MAN, which has taken up some 150 ha of the zone's total area of 540ha, while the top employer is Polish window maker Oknoplast with more than 1,000 employees. Established in 1960 and based in Cluses, France, Somfy is the world's leader in home automation, making motors and controls for blinds, curtains, roller shutters, garage doors as well as security systems. The Euronext-listed company turned over EUR 997m (+0.7%y/y) last year with a net result of EUR 101.2m (+20% y/y). Somfy has seven production sites: two in each France, Italy and China, and one in Tunisia, with a combined staff of more than 7,000. Besides its home country, the French group's main market is Germany.

Back in 2011, when Mando first announced the project, their plan was for 300 positions, but at 450 the final figure will be considerably higher. The Polish Mando plant will deliver mainly to car factories in the Czech Republic, Germany, and Slovakia. Korean automotive investors are particularly well represented in the latter.

Automotive exports inch up in 2013 Passenger & LCV production in Poland and automotive exports Auto motive exp orts in EUR bn, left axis Vehicle output in ' 00 0, right axis 20

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With a global workforce of 8,600 employees and EUR 3.3bnbn turnover in 2011 Mando is one of the world's 100 automotive parts makers. Established back in 1962 under the Hyundai International logo, in 1980 the company was renamed Mando Machinery Corp. With factories in Korea, China, India, the US, as well as joint-venture businesses in Malaysia and Turkey and research units in Korea, Germany, and Japan, the stock-listed company supplies its products to some of the world's leading carmakers, including Ford, GM, DaimlerChrysler, PSA, and Hyundai. According to estimates by Poland's investment promotion agency PAIiIZ there are an estimated 900 foreignowned automotive components makers in Poland and the consultancy Frost & Sullivan lists the country as the number one European destination for this type of projects. Their report shows that eight out of the world's ten fastest growing automotive parts makers (BorgWarner, Denso, Bosch, Magna, Delphi, Autoliv, TRW, Tenneco) already have production facilities in the country. According to estimates by AutomotiveSuppliers.pl, parts and components, represented more than 38.8% of the country's automotive exports last year (EUR 6.95bn; +5% y/y), followed by passenger cars and LCVs with 30% (EUR 5.13bn; -3.8% y/y) and Diesel engines with 12.3% (EUR 2.2bn; +4.8% y/y). The total exports figure came to EUR 17.9bn in 2013, 1% up on the prior year, and in 2014 it is likely to reach EUR 19bn, Rafał Orłowski, head of Automotive Suppliers.pl. told Poland Today. The total output of Poland's automotive sector rose by some 6% last year reaching an estimated PLN 110m.

MANUFACTURING & PROCESSING

Home appliances sector in need of more R&D investment investment Poland is the largest producer of home appliances in Europe, but now it needs sector firms to invest in innovation Poland's home appliances sector is booming, but it needs investment in research and development to become more competitive, said participants in the 2nd Forum for Home Appliances Producers, held in May by Müller – Die lila Logistik and Poland Today. The two partners organized the forum in order to create a platform where companies active in the home appliances market could meet and discuss the various issues which are important for the sector, said Michael Müller, CEO at Müller – Die lila Logistik.

Key industry The home appliances sector is a crucial industry for Poland, said Anna Polak-Kocińska, vice president of the management board at the Polish Information and Foreign Investment Agency (PAIIZ). She pointed out that Poland boasts 27 home appliances factories, which support a huge number of subcontractors. Wojciech Konecki, CEO at the home appliances producers association CECED Polska, said that with its 19.7m home appliances manufactured per year, Poland has already become the largest producer in Europe. The sector recorded 11% growth in 2013, with exports accounting for 86% of production. More than 20,000 people are employed in the home appliances sector in Poland, Konecki said.

Michael Müller, CEO at Müller – Die lila Logistik, which hosted the 2nd Forum for Home Appliances Producers in cooperation with Poland Today. Photo: Poland Today

Jan Barbasiewicz of Colliers International pointed out that home appliances producers and distributors are major tenants in the industrial and warehouse property market. According to Colliers data, the home appliances and consumer electronics sectors together account for the lease of 8% of the total existing volume of warehouse and industrial space in Poland (approximately 8m sq.m).

R&D needed The home appliances market has become very competitive of late and much of the discussion during the conference focused on what could be done to make Poland outshine its rivals elsewhere in Europe. The panelists pointed out that a number of factories in the consumer electronics market, which also saw a boom several years ago, have recently been closed. There are fears that the same scenario could materialize in the home appliances sector. According to Paweł Poncyljusz, former deputy minister of economy and now vice president at AVIO Polska, more investment in R&D in the sector could allay those fears to a certain degree. When companies

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invest in R&D facilities – and not just production facilities – it is more difficult for them to withdraw from a country and move production to another location, Poncyljusz argued. He added that the problem with many of the consumer electronics factories was that they were merely assembly facilities. More qualified engineers should be employed in the home appliances market in Poland, Poncyljusz said.

some benefits for the Polish market as it is becoming increasingly clear that investors will not be moving eastwards. “There is too much risk there,” Zuber said. The low labor costs issue is no longer crucial in the home appliances market in Poland, Zuber said. Good quality and access to know-how are becoming increasingly important, he added. Hence the significant role of the education system, which should be better prepared to provide the sector with qualified workers. Not only universities, but also vocational schools have a role to play here, Polak-Kocińska said.

The importance of quality Marek Zuber, an economist and financial market analyst, said that when it comes to macroeconomics, the prospects for the home appliances market are good. The crisis is over, he said, with a majority of European countries now recording positive GDP growth. Also the current crisis in Ukraine could, ironically, bring

Enea acquires district heating company in Białystok Enea power utility’s generation unit Enea Wytwarzanie will purchase 85% in heat distributor MPEC Bialystok from the municipality for PLN 260m, which puts the price tag on the entire business at PLN 305m. The nominal value of the 85% stake was PLN 55.8bn. Enea's key rival in the tender had been France's GDF Suez Energy Services International. The remaining 15% will be distributed between MPEC's employees. Since Enea is the sole owner of the Białystok heat and power plant that supplies energy to the MPEC district heating network, the two businesses are a natural fit, argues Krzyrszof Sadowski, President of Enea Wytwarzanie.

In one of the panels, representatives of Indesit Company Polska, Elica Group Polska, Tokai Okaya Manufacturing, AVIO Group, and PAIIZ discussed ways to make Poland outshine its competitors in the EuropePhoto: Poland Today an home appliances market.

However, PAIIZ’s Polak-Kocińska pointed out that investment in R&D in Poland is increasing, and added that the European Union budget for the 2014-2020 period provides a considerable amount of funds to Poland for such investments.

ENERGY & RESOURCES

Speakers on a panel that focused on Poland's skilled personnel and its prospects for the home appliances market included Marek Tukiendorf, rector, Opole University of Technology (left), and Guido Vreuls, diPhoto Poland Today rector, OTTO Polska (right).

Zygmunt Łopalewski, external relations manager at Indesit, stressed that the labour market is now changing very quickly and universities are often a step behind, not providing personnel the training in the skills that the market needs. by Adam Zdrodowski

Enea Group key financial figures T urnover in PLNb n, left axis N et prof it in PLN m, rig ht a xis 12

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"Merging with the heat network will boost the value of the power plant," the company said in the press statement. "We estimate it will produce 20-25% more electricity and heat, we will also receive 25% more 'red certificates'. At the same time, we will reduce costs and will be able to allocate our resources and staff more efficiently. In our opinion it is very important, since it brings concrete and calculable, additional benefits, " Sadowski said. The largest shareholder in Enea is the Polish state, which holds a 52% stake in the company. Until January this year, the main co-investor had been Sweden's Vattenfall, but the Swedes decided to sell their 19% stake for approximately PLN 1bn, suffering a considerable loss.

PLN 700m in the prior year). In October last year Enea announced PLN 20bn investment program for the years 2014-2020, over which period the group intends to increase its production capacity within electricity by 1,875 MWe (including: 1,075 MWe in power plants, ca. 500 MWe from renewable energy sources, ca. 300 MWe in cogeneration projects) and within heat energy to 1,500 MWt. In mid-May Enea signed a n agreement with the state-controlled bank BGK for a PLN 1bn issue of long-term bonds, which is meant to support its ambitious expansion plans. Enea's key ongoing investment is the brand new 1.075MW coal-fired power unit in Kozienice, which, following its completion will generate some 13% of Poland's electricity. Currently Enea generates some 8% of Poland's power and has a 12.5% share in the distribution segment, supplying energy to 2.4m customers.

PROPERTY & CONSTRUCTION

State bank BGK launches PLN 5bn rental housing fund

"Our offer will be aimed at individuals who do not wish to take out mortgage loans for decades but do want to feel at home at their rented apartments," says BGK CEO Dariusz Kacprzyk. "We want to convince the Poles that they can live at good-quality rented homes for their entire life, being able to decide about the size and location depending on their immediate needs." According to various estimates, Poland needs some 700,000 housing units in order to catch up with EU standards. Currently, with 365 homes per 1,000 people it ranks among Europe's least developed residential markets. The BGK initiative aims at all individuals who can afford to pay the rent, with no additional conditions. The tenants will all be dealing with a single landlord – an entity controlled by BGK, which will offer apartments with furnished kitchens and bathrooms, in newly-built buildings.

Residential construction in Poland Completed dwellings 180,000 160,000 140,000

Photo: Enea

Enea shares dropped 14% last year, compared with a 7.1% decline in the WIG20 index of the country’s largest and most liquid stocks, according to data compiled by Bloomberg. The Poznań-based company turned over PLN 9.15bn last year (down from PLN 10.1bn in 2012) and posted a net profit of PLN 715m (against

The bank has just signed the first MOUs with commercial developers concerning the purchase of 680 apartments in four separate buildings located in Warsaw, Wrocław and the Tri-city area and it is reviewing offers for further acquisitions in Warsaw, Wrocław, Kraków, Poznań, Tri-city and Łódź.

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Enea's key asset is the Kozienice power station, the largest hard coal-fired plant in Poland.

Poland's special-purpose bank BGK has officially launched a PLN 5bn rental housing fund, under which the institution seeks to buy up to 20,000 residential units in Poland’s major urban markets in a move to stimulate social mobility and provide an alternative to mortgage-backed home buying.

Source: GUS

"In programs like this the devil is always in the details. Solutions of this kind are functioning quite well in Europe, including in Scandinavia. A lot depends on

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whether this model will be accepted in purely cultural terms, meaning whether people will be ready to take rental over ownership. If the Poles become more mobile, then perhaps this might work, but it’s too early to say. It’s also too early to assess what the BGK initiative will mean for commercial developers," Roman Wieczorek, executive vice president of Skanska AB, the Swedish construction giant, which has a residential unit in Poland, told Poland Today. Considering the shortage of housing in Poland, the BGK initiative alone is unlikely to make a huge impact on the market, but it should serve as a benchmark for commercial investors, who are said to be looking at the country's residential sector with increasing interest. "Poland is in a similar situation as the UK. The scale of the residential investment market needs to grow. Cases need to be built up to show successful track records. The BGK investment scheme may provide meaningful benchmarks. However, other rental investment portfolios must also be built up to provide a compelling alternative market for institutional investors to European potentates like Germany, France or Sweden. Besides the prospects of attractive yields, there is overall confidence in long-term capital growth in Poland due to the European convergence process," property consultancy REAS said in a recent report. The growth of Poland's rental housing market will require certain adjustments on the part of developers, who need to come up with a product that would meet the needs of institutional investors. The latter, on the other hand, may be ready to provide some forward funding to developers, helping them deal with the current financing gap in the homebuilding sector. For many developers dealing with an institutional client may be a safer route despite lower margins. "The Polish rental sector seems to be a natural growth market. With similar tenancy rights to neighboring

Germany, the largest residential investment market in Europe, the legal risk is also fairly limited. It is likely that the development of Poland's institutional rental sector will depend on initial investors who build up first rental portfolios. These investors need to accept a higher risk level, as they must build and then rent the newly created portfolios of rental apartments. In return they count on higher yields through selling functioning portfolios of let apartments which are adjusted to the needs of long-term investment funds," REAS said.

also a large group of those who left their hometowns at some point, gained experience elsewhere in Poland or abroad, but would very much like to return, as long as there are opportunities to return to," says Tomasz Krawczyński, Managing Director of Mobica Poland, a British-owned IT outsourcing company, which has just recently opened a development centre in Lublin. According to him, there are a number of Polish cities still waiting to be discovered, for instance Białystok, Rzeszów or Zielona Góra.

PROPERTY & CONSTRUCTION

JLL report looks at office markets in Poland's 2nd tier tier cities As the largest regional markets are becoming overheated, a growing number of IT, BPO & SSC investors are looking to the Poland's 2nd tier regional cities, many of which offer university-educated talents at a competitive cost. The pioneers were mainly large Polish institutions, such as Poczta Polska with a huge bookkeeping center in Bydgoszcz, PZU in Opole, PKO BP contact center in Rzeszów and Ministry of Finance in Radom. Among foreign firms, notable examples include AlcatelLucent with a massive development centre in Bydgoszcz, Finland's OpusCapita with a few hundred staff in Toruń, Medicover in Kielce, IntrumJustitia in Białystok, Citigroup in Olsztyn, and Capgemini in Opole. "The Poles are not as mobile as the Americans. There is always a certain percentage of talents who choose not to migrate, be it for personal or other reasons. The quality of life in smaller towns is often better. There is

Smaller office markets in numbers.

Source: JLL

Some companies tend to locate their new units outside the largest agglomerations, to ensure access to an untapped talent pool as well as cost effectiveness. Access to qualified labor, attractive real estate costs, improving road and office infrastructure and local authorities open to cooperation with investors are all underpinning the attractiveness of these cities. In addition,

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smaller locations offer excellent brand recognition opportunities, an advantage over more mature and popular destinations. Furthermore, some of these cities situated near major agglomerations are convenient locations for disaster recovery centers – special, backup units that allow operational continuity if the main centre experiences serious malfunction that prevents it from working properly. “Warsaw was the first city in Poland to witness the emergence of a modern office market. Investors and developers then gradually started to look at opportunities in other major cities, such as Kraków, Wrocław, the Tri-City, Katowice, Poznań and Łódź, and more recently in Szczecin and Lublin. Today, these nine agglomerations are the most dynamically developing office markets in Central and Eastern Europe. The natural course of further development will therefore focus on smaller urban centers and academic locations, whose potential will gain in importance and gradually attract new investments, especially ones from the business services sector, generating demand for offices," says Anna Bartoszewicz-Wnuk, Head of Research and Consultancy, JLL.

More modern offices needed Despite their relative attractiveness, investors often face the shortage of modern office in smaller cities, an issue addressed by a recent report by the property consultancy JLL. The report looks at Białystok, Bydgoszcz, Kielce, Olsztyn, Opole, Radom, Rzeszów and Toruń - emerging markets, which are attracting significant interest from developers and tenants, especially from the business services sector. Modern office space in the eight cities analyzed by JLL, totals more than 321,500 sq.m and ( comparable to the total volume in Poznań or Katowice) and represents 4.4% of Poland's entire office stock. The vast majority of the existing modern space in these locations offers relatively moderate quality compared to larger

office markets in Poland. This, however, is changing, and A class projects are being delivered to the market i.e. Cezal Business Center A (6,600 sq.m) in Olsztyn and Radom Office Park A (4,850 sq.m) in Radom. Due to the limited availability of speculative space, many companies in these cities (e.g. banks) built offices for their own use.

SkyRes' is one of the latest additions to Rzeszów's modern office market. Photo: JLL "Smaller office markets are attractive alternatives for business services companies, especially those looking to start operations in Poland, as well as expanding or relocating selected functions from their existing cetres in the main agglomerations. Such cities attract both domestic and international outsourcing companies planning to establish smaller units employing up to 150 people. These markets now offer an increasing number of offices that are adjusted to the needs of business services sector tenants, who are seeking convenient space for typical BPO/SSC units, as well as disaster recovery centres. It is worth noting that business services companies are already driving office demand, not only in major agglomerations like Kraków or Wrocław, but in smaller cities as well," says Anna Młyniec, Head of Office Agency and Tenant Representation, JLL.

An estimated 50,300 sq.m is under construction in the eight analyzed locations, with the majority in Rzeszów (19,700 sq.m), Olsztyn (11,900 sq.m) and Bydgoszcz (9,800 sq.m). An additional 194,400 sq.m is in the pipeline, representing a 70% increase compared to Q2 2012. New projects, either planned or under construction, typically enjoy convenient locations within the cities, along with good accessibility by both private and public transport. According to JLL, the immediate availability of modern office space in these cities is moderate (42,250 sq.m). However, there is a very limited supply of high quality units of 1,000 sq.m and above. The availability of office units above 500 sq m is relatively high (24 in existing buildings and 5 in projects under construction) in the eight listed emerging markets. The majority of vacant space (62%) is found in Bydgoszcz, Rzeszów and Radom. Prime headline rents in the analyzed cities range between EUR 8 and EUR 12 /sq.m/ month and are expected to remain stable. However, in some buildings rents can be slightly higher and reach up to EUR 13 per sq.m a month.

TRANSPORT & LOGISTICS

Blackstone boosts logistics portfolio in Poland to 770,000 sq.m Scottish property investor Standard Life Investments Select Property Fund has sold its Polish logistics portfolio, encompassing three logistics parks in Mysłowice (Upper Silesia), Stryków (Central Poland) and Robakowo (Poznań), to Logicor, Blackstone’s European logistics platform and a leading operator of modern facilities in Europe for EUR 118.2m.

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The portfolio, which was developed by Standard Life Investments and development partner, PDC, in 2007/08, consists of seven prime logistics assets providing over 200,000 sq.m GLA of warehouse and office space and a development plot of 70,000 sq.m located within the said three parks. "Logicor has been active in the Polish market since about two years ago. In this period we have assembled a portfolio totaling approximately 770,000 sq.m. We are now the second largest owner and operator of modern logistics facilities in Poland," Logicor's CEO Mo Barzegar tells Poland Today. "We continue to actively look at acquisition opportunities that are complementary to our existing portfolio and customer base in Poland."

According to Standard Life, during the financial crisis, its Polish logistics portfolio provided high-yield, defensive characteristics that fulfilled the demand of international occupiers. However, backed by the Standard Life Investments’ house view, the Select Property Fund is now looking to invest in growth orientated assets focusing on the office and retail sectors in key cities in Europe and specifically Tokyo, as these markets are expected to experience improving growth over the next few years.

"Logicor is a long-term owner and operator focused on investing in modern, functional warehouse and distribution facilities in strategic locations across the European supply chain," says Mo Barzegar. "Poland has been and continues to be an important part of building and expanding our platform across Europe. We remain enthusiastic about the prospect of the logistics market in Poland given the country's continued strong growth, strategic location and improving infrastructure and competitive labor force."

Poland property investment volume 2013 data by market segment in EUR bn

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The industrial park in Mysłowice, one of three sites acquired by Logicor. Image: C&W

"This disposal represents one of the largest logistics portfolio transactions in Poland which demonstrates a continued strong demand for high quality logistics assets in strategic Polish distribution hubs,” said Soren Rodian Olsen, Head of Office & Industrial Investments at Capital Markets of Cushman & Wakefield in Poland, who represented the seller.

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drew Jackson, Fund Manager, Standard Life Investments Select Property Fund. Logicor entered the Polish market in late 2012 with the acquisition of two portfolios totaling 402,000 sq.m from Panattoni Europe and its partners, which included Pramerica Real Estate Investors, the European arm of the US-based Prudential Financial, Inc.'s real estate investment management and advisory business.

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"This sale reflects the Fund’s forward momentum. We’re exiting a period of relative caution and this disposal will help us meet our current objective to refocus on assets that will benefit from the economic recovery we are now seeing in a number of markets internationally. As a Fund we remain a committed investor in Poland and continue to look for new opportunities in line with our overall Fund strategy," said An-

Blackstone's European logistics platform currently owns over 4m sq.m of modern warehouse and distribution space across seven countries. Blackstone is present also in Poland's retail property segment via its King's Street Retail investment platform that owns seven shopping centers in the country with a combined GLA of 250,000 sq.m, most notably Wrocław's Magnolia Park. Since mid-May the seven King's Street Retail portfolio has been managed by Multi Corporation, another Blackstone subsidiary.

weekly newsletter # 037/ 2nd June 2014 / page 10

SERVICES & BPO

Norway's Schibsted launches 2nd delivery center in Poland Kraków's overheated market is pushing a growing number of IT companies to seek a foothold in other Polish regional cities. In recent months, one obvious beneficiary has been Gdańsk, which in May alone attracted two foreign IT investors, both with well established operations in Kraków. Besides US IT outsourcing company Epam Systems (see the next issue of BR+), also Norway's Schibsted Media Group has set its sights on Gdańsk. "We have been able to recruit some of the absolutely best programmers on the market in Kraków. Still, we do observe that the market is more 'heated' than before and we believe we will be better served by having operations in two locations," Stig A.Waagbø, CEO of Schibsted Tech Polska, tells Poland Today. "The two centers will be part of the same company – and both competence and code will be shared freely across the centers. But the teams – both in Kraków and Gdańsk – usually work on different projects, depending on the plans of the partner in Scandinavia. In Gdańsk we will in addition set up an internal consultancy unit which will offer services to Schibsted´s companies in 30 countries. " With 7,000 employees and operations across 30 countries Schibsted Media Group is one of the largest media companies in Europe. Schibsted owns major newspapers in Norway (VG and Aftenposten) and Sweden (Aftonbladet) and it is also a large global player in online classified media with sites in 28 different countries. It owns the largest online classified ad sites

in both Norway, Sweden and France. The media group is listed on the Oslo Stock Exchange. "Schibsted Tech Polska has been growing quickly since the first employees started working in January 2012. Initially the plan was to have a small company with up to 30 employees working on development for four subscription newspapers in Norway. After just a few months of operation other companies in Schibsted Media Group requested to join as partners with their own development teams," says Stig A.Waagbø.

"Schibsted Tech Polska has been a huge success for Schibsted Media Group," says Stig A. Waagbø, CEO of the Polish unit. Photo: John Einar Sandvand

grammers on the market, both frontend and backend. Schibsted Media Group aspires to be a defining and innovative force in the media industry and we look for top talents to help us achieve that."

Sharing of competence between teams working for different partners is an important part of the company culture in Schibsted Tech Polska. Photo: John Einar Sandvand

The Polish unit develops solutions based on the latest web/mobile technologies, and smart TV, all employing agile methods of software engineering. "Today, we have 120 staff in Kraków and we are expecting that number to keep increasing strongly . We a programming hub for 11 different Schibsted companies and one other partner. The biggest newspapers in both Norway and Sweden now have programmers in our company in Krakow. With 12 different partners we work with most major technologies, such as Java, PHP, Javascript, IOS, Microsoft .net and many others. Some of our sites are used by several million people each week." "In Gdańsk, in the first phase we will recruit up to 20 developers. We are looking for the best qualified pro-

Asked about his thoughts on the past two years in Poland, Stig A.Waagbø replies: "Establishing Schibsted Tech Polska has been a huge success for Schibsted Media Group so far. It has enabled our media companies to push forward with much greater force in the digital transformation they have to go through. One reason for this has been the high quality of work delivered by our Polish programmers, who have proven to be extremely competent. In a recent customer survey our partners in Scandinavia rated 'high quality of work' as the biggest benefit of working with Schibsted Tech Polska. Moreover, Poland is close to Scandinavia and frequent flights and short distance make it possible to have frequent contact between Norwegian and Polish colleagues. This enables very close collaboration. Last but not least, the costs are lower and recruitment is easier in Poland."

weekly newsletter # 037/ 2nd June 2014 / page 11

Tur nover, lef t a xis Net result , r ig ht a xis 12 10

20 0

1 50

10 0

RETAIL PROPERTIES

Apsys secures loan for EUR 290m Łacina project in Poznań

-10 0

-4 2013

-2

20 12

20 11

0 -50

Innova Capital has established an SPV to handle the Delecta takeover, which is to merge with Bakalland. In exchange, the latter will issue 16m new shares (its equity includes 19.6m shares at the moment) for Innova, giving the private equity firm an estimated 45% share in the merged entity. As part of the deal, the new company has borrowed PLN 55m from Innova to partially finance the Delecta acquisition. Image: Orkla

Delecta's previous owner, Rieber & Søn ASA, which became part of Orkla last year, used to have a fish processing business King Oscar in Poland, before selling it in 2010 to financial investors. Orkla, once a major player in Poland's print media sector, remains present in Poland with Axellus dietary supplements and health products (part of the Orkla Home & Personal business area), Orkla Food Ingredients (it has acquired a number of small Polish producers since 2012) as well as the extrusion-based aluminum solutions company Sapa (Orkla's 50/50 JV with Hydro).

250

Source: Bakalland

Delecta is a leading player in cake mixes.

coffee under the popular Anatol brand. Bakalland believes the two businesses are complementary and their merger will give them better prospects for growth in Poland and abroad. Bakalland turned over PLN 267m and posted a net loss of PLN 2.5m last year.

30 0

201 0

Delecta is a leading branded consumer goods company in the cake mixes and desserts categories in Poland. The company has been part of the Orkla International business area since April 2013 when Orkla closed the acquisition of Rieber & Søn ASA. In 2013, Delecta's net sales totaled PLN 149m. As of year-end 2013, the company had 341 employees.

Bakalland key figures in PLN m

200 9

Norway's Orkla Foods has agreed to sell its Polish cakes mixes and desserts business Rieber Foods Polska (better known under its consumer brand Delecta) to listed Polish nuts and dried fruit company Bakalland backed by private equity firm Innova Capital. The transaction, which is still subject to regulatory approvals, will total PLN 100m, Orkla said.

20 08

Norwegians sell Delecta cake mixes business to Bakalland and Innova Capital

20 07

FOOD & AGRICULTURE

"Delecta has delivered a very positive improvement in financial performance under Orkla's ownership and has good prospects for the future. At the same time, we think that other owners are better positioned to further develop the company's operations in Poland. The transaction only encompasses Delecta, and we remain fully committed to our Orkla Home & Personal and Orkla Food Ingredients businesses in Poland," says Paul Jordahl, Orkla Executive VP and CEO of Orkla International.

Bakalland is a producer and distributor of dried fruit and nuts, breakfast cereal, and cereal bars. Besides cake mixes and desserts, Delecta produces also cereal

A consortium of banks ING BSK, Germany's Berlin Hyp and state special-purpose bank BGK granted a six-year loan of EUR 187m and PLN 42m to France's Apsys to finance the construction of the "Łacina" shopping mall in Poznań, western Poland. Each of the consortium members contributed over EUR 50m worth of financing. BGK joined the project within the framework of 'Polish Investments' program, created by the government in 2012 to support growthgenerating projects of national and regional significance. The Łacina Shopping Centre will be built in a strategic location in Poznań, on the right bank of the Warta riv-

weekly newsletter # 037/ 2nd June 2014 / page 12

er, a 10-minute walk away from the Old Town, right next to the Rataje roundabout, and directly accessible by bus. This exceptional location in the very heart of the city will ensure easy access both by public transport and by car. With a total surface area of 100,000 sq.m, Łacina will be one of the largest and most modern shopping and leisure centers in Poland.

'Polish Investments' initiative. This program, implemented by our bank, supports projects that have a positive impact on the economy and contribute to creation of new jobs. This investment is of major local and regional importance as it enables revitalization of an important area of Poznań," said Dariusz Kacprzyk, CEO of BGK.

"The construction will begin any moment now as we are determined to open the centre in 2016," said Fabrice Bansay, CEO of Apsys Polska. "At the moment, some 80% of GLA in Łacina is leased or secured."

Łacina will be the regional first shopping and entertainment centre in the Poznań region and according to DTZ its catchment encompasses close to one million residents. The project will create 3,00 jobs during construction and 3,500 following its launch. Besides Apsys, the other investor behind this EUR 290m development is Fonciere Euris.

Over 300 retail and service outlets have been planned, including 220 shops and 40 middle-sized and largescale stores. Łacina will house a Fashion Avenue with some 25,000 sq.m earmarked exclusively for clothing brands and a food court with some 40 restaurants. The anchor tenants will be Carrefour, Leroy Merlin, Van Graaf, H&M and Multikino (an 9-screen cinema multiplex) and the property will house also outlets by Inditex (incl. Zara, Bershka, Pull & Bear), LPP Group (incl. Reerved) as well as Van Graff, C&A, Deichmann, RTV Euro AGD and many other. The property will offer 3,30 parking spaces.

Apsys manages 18 shopping centers with a combined GLA of 650,000 sq.m in Poland where its best-known development is the award-winning Manufaktura shopping center in Łódź.

tor, a Łódź-based company Fabryka Biznesu. The capex is to reach PLN 360m, according to Sukcesja's spokesperson Ewa Samsel. Spread across a 3.2ha site, with a GLA of 46,312 sq.m, Sukcesja will be anchored by a Piotr i Paweł supermarket, Rossman drugstore, 9-screen Helios cinema, as well as H&M and LPP fashion stores (the latter bringing its Reserved, Mohito, Cropp, House and Sinsay), among other tenants. It will be also home to Łódź's first Sports Direct outlet. The electronics & multimedia store wetre to be operated by Avans, but since the Polish chain has just gone bankrupt, the landlord may need to look for a different partner. Besides the movie theater, the leisure zone will include a Pure Jatomi fitness club, and number of other attractions.

"We want Łacina to become to Poznań what Manufaktura is to Łódź - a new city landmark and a place that's bustling with social and cultural activity," says Fabrice Bansay.

RETAIL PROPERTIES

Large retail centre to open in Łódź next year Łacina will open in 2016.

Image: Fabryka Biznesu

"We have joined the consortium financing this unique undertaking because it meets the objectives of the

A cornerstone laying ceremony took place in May at the construction site of Sukcesja, a new shopping & entertainment centre in the central Polish city of Łódź. Located near the Łódź University of Technology campus, international trade fair grounds and new residential projects, Sukcesja is to reach completion next year, creating an estimated 2,000 jobs according to its inves-

Sukcesja will open in 2015.

Image: Fabryka Biznesu

"The entertainment & leisure section has been fully booked already, whereas the pre-lease level for the entire development tops 70%, including contracts that are being finalized. The leasing is being handled by the investor, Fabryka Biznesu, as well as Savills and CBRE," says Ewa Samsel.

weekly newsletter # 037/ 2nd June 2014 / page 13

Besides retail and service space, Sukcesja will offer a number of green areas as well as 1,000 parking spaces. The general contractor Mirbud is currently busy putting together the shell of the building with some 300 staff onsite. Sukcesja will be the first retail property in the Łódź area with a BREEAM sustainability certificate. There are more than ten shopping centers in Łódź, including Manufaktura, Galeria Łódzka, Pasaż Łódzki, and Port Łódź.

gradual recovery of the private consumption that will become again an important engine driving the economic growth this year," BZ WBK said.

comed the detailed data that showed domestic drivers increasingly take the burden from net exports that had been the economy's sole engine less than one year ago.

Retail sales in Poland (y/y)

"Growth composition reveals a broad-based, domestic demand-led recovery. Indeed, domestic demand contribution to GDP growth rose to 2.9pp in Q1 2014 (from 1.7pp in Q4 2013), while contribution of net exports declined to 0.5pp (from 1.0pp, respectively)," PKO BP analysts wrote in an e-mailed commentary. "Private consumption growth reached 2.6% y/y (vs. 2.1% y/y in Q4) amid strong real wage growth (trending in 3.5-4% range – the fastest pace since late 2008), accelerating consumer credit growth and improving consumer sentiment," they added.

15%

10%

CONSUMER GOODS & RETAIL

Easter holidays boost retail sales in April

GDP growth in Poland (y/y) Seasonally unadjusted

-5%

"According to our estimates, retail sales excluding cars and food increased by 3.4%y/y, less than in March (3.6%y/y), but this is still the second best result in the last 20 months. Revival of the labor market continues and leads to higher households incomes (amid still low inflation). This should, in our opinion, result in further

A pr 12

Oct 12

A pr 13

Oct 13

Apr 14

Source: GUS

4.0% 3.5% 3.0% 2.5%

Poland's GDP growth accelerated to the fastest pace in two years, reaching 3.4% y/y in Q1 2014 (vs. 2.7% in Q4 and 2.0% in Q3 2013), amid recovery in domestic demand and significant upturn in investments, the central statistical office GUS last week. The official figure proved slightly higher than the flash estimate (3.3%) GUS published a few weeks ago. Economists wel-

1.5% 1.0% 0.5%

Source: GUS, EC

Q1'14

Q4'13

Q3'13

Q2'13

Q1'13

0.0% Q4'12

Polish GDP rises 3.4% in Q1 with investments showing doubledouble-digit growth

2.0%

Q3'12

POLITICS & ECONOMY

Q2'12

According to BZ WBK analysts, the significant acceleration vs. March, when the y/y growth had come to 3.1%, was mainly due to different timing of the Easter holidays, which boosted sales of food and in nonspecialized stores (April saw two-digit growth in those two categories after a notable plunge recorded in March).

Oct 11

Q1'12

Polish retail sales rose at an annual rate of 8.4% in April, in line with market consensus, on a 2.3% monthly increase, the Central Statistical Office (GUS) said last week. In real terms, Polish retail sales were up by 8.9% y/y in April after a 3.3% y/y increase in March, GUS added.

*) European Commission projections

"Gross fixed capital formation (investments) growth accelerated noticeably to 10.7% y/y (vs. 2.0% y/y in Q4 2013). In addition to the upward underlying trend, investments growth in Q1 benefitted from the unusually favorable weather conditions (which brought forward

weekly newsletter # 037/ 2nd June 2014 / page 14

some construction projects) as well as the one-off new cars VAT allowance for enterprises (company investments in transport equipment surged 46.6% y/y in Q1 2014)," PKO BP said. Investments now account for 1.2 pps of the 3.4% headline growth rate, even though only three quarters ago Poland was showing an investment recession. Poland's Monetary Policy Council, which has held rates flat since concluding an easing cycle in mid-2013, is likely to maintain its current approach following the GDP reading. "Growth is substantial and it must eventually be reflected in prices, but there is still room to maintain rates at the current level, perhaps for a period slightly longer than expected," ING Bank Śląski economist Grzegorz Ogonek told PAP press agency.

POLITICS & ECONOMY

Official data show ruling party narrowly win EU election According to official and final results from the State Electoral Commission, Poland's governing party Civic Platform (PO) narrowly won the national elections to the European Parliament on May 25, beating its main rival, main opposition Law and Justice (PiS) party by a mere 0.35 ppt. The center-right PO of Prime Minister Donald Tusk received 32.13% of the vote nationwide, while the conservative PiS led by Jaroslaw Kaczynski scored 31.78%. Each of the two parties will get 19 seats out of the total of 51 Poland has in the European Union's legislature. Voter turnout in the EU election reached 23.82%.

The Democratic Left Alliance-Union of Labor (SLDUP) was backed by 9.44% of Poles, winning five seats. The junior coalition partner, the Polish People's Party (PSL) got 6.80 % of the vote, corresponding to four seats. The biggest surprise was the success of the anti-EU Congress of the New Right, led by the political maverick Janusz Korwin-Mikke, which gained 7.15% of the vote (four seats). Mr. Korwin-Mikke, who unsuccessfully ran for Poland's president four times, served as a member of parliament in 1991-1993, but has since remained at the fringes of Polish politics. His eccentric blend of economic libertarianism and social conservatism seems to have earned him a lot of supporters among the youngest voters, mostly males, as KorwinMikke is a self-proclaimed misogynist, who believes women and other social groups shouldn't have the right to vote. All other parties did not make it to the European Parliament as they fell short of the five percent threshold required for parliamentary representation.

fall in annual terms for five years). In monthly terms the number of unemployed dropped by 103.2k, i.e. the most since 2007. These data clearly show that situation on labor market improves more quickly in Q2, which is positively influencing consumption demand. We expect registered unemployment rate to continue downward trend in upcoming months. We predict unemployment rate to oscillate near 12% in the second half of the year," commented BY WBK analysts.

Registered unemployment in Poland 15%

14%

13%

12% Feb 13 Apr 13 Jun 13 Aug 13 Oct 13 Dec 13 Feb 14 Apr 14

POLITICS & ECONOMY

Source: GUS

Registered unemployment unemployment down to 13% in April

The Polish government hopes for a deeper decline in the unemployment rate in May than the 0.5 ppt fall recorded in April, deputy Labor Minister Jacek Męcina told reporters last week.

Poland's registered unemployment rate decreased to 13.0% in April from the prior-month level of 13.5%, according to Central Statistical Office (GUS) figures released Monday. The number of registered jobless at end-April measured 2.079 million. "The figure was lower by 1pp as compared with the same period of previous year, which was the deepest

weekly newsletter # 037/ 2nd June 2014 / page 15

POLITICS & ECONOMY

25 YEARS OF TRANSFORMATION

European Commission approves Poland's expenditure plans

Time to cooperate

The European Commission has rubberstamped the Partnership Agreement with Poland, a master document for disbursement of the EUR 119.5bn in EU funds the country has been assigned under the 2014-2020 budgetary perspective, Infrastructure and Development Ministry said. Of the EUR 119.5bn in EU funds to be received by Poland in 2014-2020, EUR 82.5bn will be spent on Cohesion Policy, EUR 32.1bn on Common Agricultural Policy and ca. EUR 5bn on programs such as Horizon 2020 or Erasmus. The funding will allow Poland to carry out, in conjunction with public and private financing, an investment program worth EUR 160bn, deputy Prime Minister and Infrastructure and Development Minister Elzbieta Bienkowska told Polish news agency PAP. Poland and the Commission agreed, among others, that spending for transport will amount to EUR 31.1bn, including EUR 10.2bn for railway investments and EUR 15 billion on road investments, Bienkowska said.

Poland Today sits down with Witold Orłowski, a professor of economics, a member of the prime minister’s Economic Council, and chief economic advisor at consultancy PwC, which has roots in Poland going back more than 100 years before its transformation. We spoke about his perspectives on the country’s past and future. • PT: What stage of your life were you at in 1989 and what are your memories of that period? Witold Orłowski: At that time I was in the United States. I had already my earned my master’s degree, and was a post-graduate student at Harvard University on a Fulbright scholarship. I voted at the embassy. I was very interested and excited about what was happening in Poland. There was a new hope. What happened helped me to decide to return to Poland, and I found it very exciting to come back to my home country a couple of months later. • PT: What was it like watching what was happening from the US? WO: It was nice because it was one of the rare moments when Poland was often on the front page of major US newspapers. I could pick up the Boston Globe or the New York Times and there it was. People there were always asking me what was happening in Poland. Of course this was before the time of the internet, so I had to call home to find out myself! But I was proud and happy to see the changes happening, and I was proud that people were asking me questions. I remember the day of the elections in Poland. My family called me when the first results were announced. I immediately told my colleagues at the

graduate student dormitory. But when I told them that Solidarity had won 99 seats in the Senate, they looked at me with some disbelief, because in truly free democracies no party ever does quite that well. I got the sense that they thought maybe Poland at the time was just changing one false democracy for another. But of course that wasn’t the case. • PT: You were a student of economics – what was your view of Poland’s economic situation at the time? WO: I knew that Poland was in a dramatic economic depression. The economy was dying. Indeed, it had been dying for a decade at least, but at that time it was really almost dead. It was such a mixed picture. There was all of this political breakthrough on the one hand but on the other hand I knew that the economic situation was dramatically bad.

Poland’s future success depends on building intellectual and social capital, explains professor Witold Orłowski Witold Orłowski.

• PT: How did you start off your career in Poland then? WO: I made one last trip around the US and in August I was back in Poland. At that time I was planning to

weekly newsletter # 037/ 2nd June 2014 / page 16

prepare my PhD; I didn’t have any position in Polish academia. A little over a year later in 1991, when Poland was negotiating potential associate membership of the EU, Jacek Saryusz-Wolski, who at the time was the plenipotentiary for European integration, asked me to prepare some simulations of the EU association impact for Poland’s economy. The EU had produced some dire models for Poland, and they needed some counter-models to show them. He asked me if I could prepare them in one week. I said that I would, and I managed to do that. Following that I was made responsible for the economic matters regarding negotiations for European Union membership. So I was involved in the transformation process from the early 1990s. Once I started, I spent the remaining 22 years being involved in what was happening in the Polish economy. • PT: And what do you think has been the key to Poland’s success over the past 25 years? WO: It was Poland’s explosion of entrepreneurship first of all – not the foreign investment. The Czech Republic got many more foreign investors at the beginning, but it has been growing at a much slower pace than Poland. Here, there were decisive moves towards liberalization of the economy, and that allowed all of the ‘virtual’ businesses that had sprung up to become legal almost overnight, and flourish. At first this all made Poland look like it was far behind, because Prague and Budapest looked like beautiful commercial centres and in Warsaw there were people trading on the street. But everyone misread what that meant. Poland became the first post-Soviet bloc country to grow on its own. The others were waiting for foreign investors.

• PT: What must Poland do to continue its economic success in the future? WO: This task is going to be even more difficult than the transformation we have achieved over the past 25 years. Developed economies do not consider poor countries as rivals. They are considered a countries whose competitive advantages can be exploited. But now the competitive advantage that we have used – lower wages – is evaporating. They are still relatively cheap compared to those in Western Europe, but no longer very cheap. Therefore, we need an economy that is much more knowledge-based. But this has to translate to Polish companies, not foreign ones. A German company wouldn’t necessarily be attracted by our intellectual capital, since it has plenty at home. Polish companies have to use this intellectual capital to build products and brands for which there will be demand outside of Poland. Now, there are only a handful of recognized Polish brands internationally. Those brands must also begin tapping into customers in developing markets. If you look at Poland’s export structure, it’s mainly foreign brands, made in Poland, to developed economies. In other words, Poland is a product deliverer to slow-growing economies. That will not be Poland’s recipe for success.. • PT: How can Poland make use of its intellectual capital to build these internationally successful brands? WO: This is where social capital – the ability to cooperate – comes into play. Building a multinational company is possible only once you are able to cooperate and make use of people’s talents. At the moment, most Polish entrepreneurs, even the very successful ones with large companies, tend to want to control everything. They rarely want to use the talents or initiative of their people. They see that

as a threat. Instead, they just want to find ways to make their employees work more efficiently. These are entrepreneurs who started off selling on the streets. At first, they only had to worry about themselves. Then they gained a few employees. Now, it may be over 1,000 employees, but sometimes they are still trying to run their company the same way. But the best global companies are the ones that look for ways to make their people as innovative as possible. Poland has one of the hardest working populations in the world – but the best way to work is to spend the day thinking, then inventing something that brings value. It’s not working 16 hours a day.

POLISH ENTREPRENEURSHIP Today, Poles are well-known for their entrepreneurial spirit. But were they always this way? Not according to Orłowski. “Entrepreneurship in Poland really appeared during the 1980s. Previously Poles were not an entrepreneurial nation .Prior to World War II, the entrepreneurs were mostly the Jewish and German industrialists. Poles were more passive. They were the workers. But somehow in the 1980s, when the communist system started to die, for Poles the idea of building private firms became an act of rebellion and survival – it was like building the underground state. “Everybody started thinking: ‘What business should I start? The communist economy will not allow me to survive.’ Building a business was a way to fight the system.”.

weekly newsletter # 037 / 2nd June 2014 / page 17

KEY STATISTICS Consumer Prices Prices

Inflation

Alcohol, tobacco +3.4

-0.3 +0.3

-0.5

+0.8

+2.2

+1.4

+3.7 +0.7 +3.9 +0.3

Clothing, shoes

-5.0

-3.7

-4.7

-1.7

-4.3 +0.8

-4.4 +2.8

Housing

+1.9

+0.2

+1.9

+0.1

+1.8

-0.1

+1.7

0.0

Transport

-2.7

+0.1

-2.1

-0.1

-0.3 +0.6

-1.2

-1.5

-1.1 +0.4

Communications -7.8

-0.3

-3.2 +0.4

-1.7

-1.5

Gross CPI

+0.1 +0.7 +0.1 +0.7 +0.1 +0.3

0.0

+0.5

Jan '14

+17.3

-21.3

-0.6

+12.5

+2.3

+5.8

+4.8

+7.0

+3.1

+8.4 2013

y/y (%)

Feb '14 Mar '14 Apr '14

Year

2009

2010

2011

2012

Turnover in PLNbn

582.8

593.0

646.1

676.0

n/a

+4.3

+5.5

+11.6

+5.6

+2.3

y/y (%) Apr 14

+1.2

Feb 14

-0.2

Dec 13

+1.6

Dec '13

m/m (%)

m/m

Oct 13

+1.6

Aug 13

+1.8

y/y

Jun 13

Food & bev

Month

5% 4% 3% 2% 1% 0% -1% Apr 13

y/y m/m y/y m/m y/y m/m y/y m/m

Feb 13

Sector

Retail Turnover

Dec 12

Apr '14

Oct 12

Mar '14

Aug 12

Feb '14

Jun 12

Jan '14

Apr 12

Data in (%)

Residential Construction Dwellings

2009 2010

2011

2012

2013 Jan-Apr y/y

178.8

174.9

184.1

165.1

138.7

158.1

162.2

141.8

127.4

(in '000 units)

Producer Prices Prices

Industrial Output Outpu t

Permits

2014

(%)

48.8

+15.9

Commenced

142.9

45.1

+27.7

m/m (%)

-0.7

-0.3

-0.1

0.0

-0.1

-0.2

-0.1

m/m (%)

+6.0

-6.2

-9.7

+2.9

-1.8

+9.4

-2.3

U. construction

670.3 692.7 723.0

713.1 694.0

693.2

-1.0

y/y (%)

-1.4

-1.5

-1.0

-1.4

-1.3

-0.7

y/y (%)

+4.4

+2.9

+6.6

+4.1

+5.3

+5.4

Completed

160.0 135.7

152.5

46.9

-1.8

Year

2007

2008

2009

2010

2011

2012

2013

Year

2007

2008

2009

2010

2011

2012

2013

Source: Central Statistical Office (GUS)

y/y (%)

+2.0

+2.2

+3.4

+2.1

+7.6

+3.3

-1.3

y/y (%)

+10.7

+3.6

-3.5

+9.8

+7.7

+1.0

+2.2

Gross Domestic Product

Oct'13 Nov'13 Dec'13 Jan'14 Feb'14 Mar'14 Apr'14

-0.1

-0.2

-0.1

0.0

-1.8

-1.7

-1.6

-1.5

2007

2008

2009

2010

2011

2012

2013

+7.4

+4.8

+0.2

-0.1

+1.0

+0.2

-1.8

397,429

n/a

455,528

-1.5%

Q3 2013

+2.0%

405,554

-1.9%

Q2 2013

+0.8%

296,314

-2.3%

2013

+1.6%

1,635,746

-1.5%

2012

+1.9%

1,596,379

-3.7%

Sentiment Indicators

2011

+4.5%

1,528,127

-5.0%

Economic sentiment and consumer confidence indicators

2010

+3.9%

1,416,585

-5.1%

y/y (%) Year y/y (%)

+24.2

+3.2

-3.2

-8.9

+5.8

-3.9

+14.4

+17.4

+12.2

2007

2008

2009

2010

2011

2012

2013

+15.5

+12.1

+5.1

+4.6

+11.8

-0.6

-12.0

6,060

138 6,290

143 6,061

B 138

8,615 196

3,491

152 3,560

155 3,625

158 3,690

161

Energy

6,196

188 5,828

177 6,021

183 6,736 205

-20

152 3,693

3,432 146

157 3,766

3,421 146 3,408

160 3,895 166 145 3,456 147 3,913 138

Transportation

3,439

122 3,547

125 3,589

127

IT, telecoms

6,685

174 6,707

174 6,654

173 6,695 174

Financial sector 6,356

143 6,702

151 6,109

137 6,602 148

3,613 144 3,652

145 3,823 152

National average 3,741 149

Source: Central Statistical Office (GUS)

120

-40

Key Economic Data & Projections

100

Indicator

2010

2013

*2014

GDP change

+3.9% +4.5%

+1.9%

+1.6%

+3.5%

Consumer inflation

+2.6% +4.3%

+3.7%

+0.9%

+1.0%

Producer inflation

+2.1% +7.6%

+3.4%

-1.3%

-1.4%

CA balance, % of GDP

-5.1%

-5.0%

-3.7%

-1.3%

-0.6%

Nominal gross wage

+3.9%

+5.2%

+3.7%

+3.4%

+5.2%

Unemployment**

12.4%

12.5%

13.4%

12.3%

3.99

4.12

4.19

4.20

4.12

60 Aug 1 1

3,556

Co nsumer conf id ence (lef t axis) Economic sentiment (right axis)

M ay 1 4

Q4 2013

Feb 14

Q3 2013

Manufacturing

Retail & repairs

+18.7

No v 1 3

Q2 2013

Construction

-64.0

Aug 1 3

Coal mining

Q1 2013

Current account def. in % of GDP

+2.7%

+21.5

M ay 13

Sector

GDP in PLN bn current prices

+3.4%

-2.9

Feb 13

A: avg monthly wages in PLN B: indexed avg wages, 100=2005

146.1

Q4 2013

+14.3

Source: The Central Statistical Office of Poland, GUS

Gross Wages

Growth y/y unadjusted

131.7

Q1 2014

m/m (%)

N ov 12

y/y (%)

-0.1

Period

Oct '13 Nov '13 Dec '13 Jan '14 Feb '14 Mar '14 Apr '14

Aug 1 2

Year

-0.1

Month

M ay 12

y/y (%)

Oct'13 Nov'13 Dec'13 Jan'14 Feb'14 Mar'14 Apr'14

Feb 1 2

m/m (%)

Oct '13 Nov '13 Dec '13 Jan '14 Feb '14 Mar '14 Apr '14

Construction Output

Construction Prices Price s Month

Month

Nov 11

Month

The economic sentiment (1990-2010 average = 100) is a composite made up of 5 sectoral confidence indicators, which are arithmetic means of seasonally adjusted balances of answers to a selection of questions closely related to the reference variable. Source: Eurostat

EUR/PLN

2011

2012

Sources: NBP, BZ WBK, GUS *) projections **) year-end

weekly newsletter # 037 / 2nd June 2014 / page 18

55.49 ↓

100 SEK

45.65 ↓

100 NOK

50.97 ↓

10,000 JPY

USD EUR

350

300

15.08 ↓

100 CZK 10,000 HUF

400

299.37 ↓ 136.82 ↓

Money Supply in PLN m Monetary base M1 - Currency outside banks M2 - Time deposits M3

as of 30 May 2014

WIG-20 stocks Price Change Change in alphabetical 30 May 23 May end of order '14 '14 '13

WIG Total index

Nov '13 Dec '13 Jan '14 Feb '14 Mar '14 Apr '14

PLN (up to 1 year)

4.5%

4.3%

4.2%

4.5%

4.4%

PLN (up to 5 y )

4.9%

4.8%

4.9%

4.8%

PLN (over 5 y)

4.8%

4.7%

4.8%

4.7%

→ Asseco Pol.

PLN (total)

4.8%

4.7%

4.8%

4.7%

↓ Bogdanka

EUR (up to 1m EUR) 1.9%

1.9%

2.0%

1.9%

2.0%

EUR (over 1m EUR) 3.0%

2.9%

3.6%

3.4%

3.3%

3.0%

83.49

+2%

52,066. 066.97

40.9

-11%

Change 1 week

115

-2%

-9%

Change end of '13

↓ BZ WBK

366

-4%

-6%

↑ Eurocash

43.5

+1%

-9%

WIG-20 blue chip index

↓ Grupa Lotos

37.2

-4%

+5%

46.94

-12%

2,4 2,429. 29.51

↑ Kernel

+4%

-26%

Change 1 week

-1% ↓

↓ KGHM

115.9

-1%

-2%

Change end of '13

+1% ↑

8350

-7%

496

-4%

-1%

→ Orange Pol.

10.45

+7%

Credit

→ Pekao

185.5

+3%

55,000

The financial sector's net lending in PLN bn,

↓ PGE

20.95

-3%

+29%

54,000

4.65

-4%

-10%

↓ PKN Orlen

42.18

-5%

+3%

51,000

40.6

-1%

+3%

50,000 49,000

↑ Alior Bank

Warsaw Inter Bank Offered Rate (WIBOR) as of 30 May 2014 Overnight

1 week

1 month

3 months

6 months

2.60%%

2.60%

2.62%

2.72%

2.74%

→ JSW

Central Bank (NBP) Base Rates Jan '14 161,544 546,487 113,455 947,443 418,259 962,416

Feb '14

Mar '14

158,330 548,033

173,213 558,954

114,680

116,657

954,284 964,624 423,296 968,442

422,990 980,377

Reference

Apr '14

2.59%

168,511 548,394 119,261 969,754 439,137 986,142

- Net foreign assets 140,617 135,759 132,849 126,943 Monetary base: Polish currency emitted by the central bank and money on accounts held with it. M1= currency outside banks + demand deposits M2= M1+ time deposits (inc in foreign currencies) M3= the broad measure of money supply Source: NBP

Lombard

NBP deposit

4.00%

→ LPP

Rediscount

1.00%

↓ mBank

2.75%

loan stock at the end of period

↓ PGNiG

Type of loan

Jan '14

Feb '14

Mar' 14

Apr' 14

Loans to customers

914,189

914,068

923,709

928,450

↓ PKO BP

- to private companies

263,063

263,941

267,553

270,886

→ PZU

446.4

-1%

- to households

567,984

567,257

569,334

573,332

↓ Synthos

4.41

-6%

-19%

Total assets of banks

1,628,197

1,616,891

1,628,519 1,639,359

↓ Tauron

5.34

-2%

22%

Source: Central Bank NBP

-1% ↓ +2% ↑

WIG Total closing index last three months

53,000 52,000

30 May 14

100 DKK

Warsaw Stock Exchange, rates in PLN

on loans to non-financial corporations

31 Mar 14

339.24 ↓

30 May 14

509.28 ↓

100 CHF

21 Mar 14

100 GBP

14 Jan 14

414.20 ↓

30 Oct 13

100 EUR

Key indices

Term / currency

450

23 Aug 13

304.35 ↓

17 Jun 13

100 USD

Stock Exchange

Average weighted annual interest rates

24 Apr 14

as of 30 May 2014

Interest rates

7 Mar 14

100 USD/EUR against PLN

Central Bank average rates

13 Feb 14

Currency

Source: Warsaw Stock Exchange

T rade Poland's ten largest trading partners, ranked according to 2013

Poland exports and imports according to commodity groups, according to SITC classification EXPORTS in PLN bn Jan-Feb 2014

y/y (%)

share (%)

2013

EXPORTS in PLNbn

IMPORTS in PLN bn share (%)

Jan-Feb 2014

y/y (%)

share (%)

2013

share (%)

No Country

Jan-Mar share 2014

IMPORTS in PLN bn *2013

share No

Country

Jan-Mar share 2014

*2013

11,425

+7.0

10.6

69,304

10.9

7,921

+2.4

7.6

47,906

7.4

1 Germany

35,357 21.6% 139,334 21.5%

Beverages and tobacco

1,296

+22

1.3

8,624

1.4

564

-8.9

0.6

4,150

0.6

2 UK

10,511

6.4%

41,503

6.5%

2 Russia

19,708 12.0%

Crude materials except fuels

2,799

+0.9

2.8

15,744

2.5

3,551

-2.3

3.6

21,585

3.3

3 Czech Rep.

10,119

6.1%

39,421

6.2%

3 China

16,346 10.0% 60,914 9.4%

Fuels etc

5,001

-7.8

5.4

30,013

4.7

13,046

+7.5

11.9

75,539

11.7

4 France

9,958

6.0%

35,745

5.6%

4 Italy

8,339

321

+49.7

0.2

1,864

0.2

397

-4.4

0.4

2,646

0.4

5 Russia

7,200

4.4% 34,058

5.3%

5 Netherlands

5,973 3.6% 25,005 3.9%

7,409

4.5% 27,450

4.3%

6 France

6,523 4.0% 24,533 3.8%

7 Czech Rep.

5,709 3.5% 23,778 3.7%

Food and live animals

Animal and vegetable oils

43,408 26.3% 159,622 25.0%

79,601 12.3%

5.1% 33,703 5.2%

9,592

+4.1

9.2

59,103

9.3

15,616

+3.2

14.8

92,917

14.3

6 Italy

Manufactured goods by material

20,989

+0.7

20.7

129,915

20.3

18,664

+4.2

17.6

112,392

17.3

7 Netherlands

Machinery, transport equip.

40,068

+7.8

37.0

239,434

37.5

33,679

+4.5

31.6

216,608

33.4

8 Ukraine

n/a

18,037

2.8%

8 USA

3,647

2.2%

17,350