Polish Market No. 7-8 (203) / 2013

Polish Market :: 7-8/2013

PU B LISHED SIncE 199 6 No. 7-8 (203) / 2013 :: www.polishmarket.com.pl

INSIDE: FINANCE DEFENCE SECTOR ENERGY

FRANZ FUCHS

CEO OF VIENNA INSURANCE GROUP POLSKA, COMPENSA TU S.A. VIENNA . INSURANCE GROUP POLSKA AND COMPENSA TU NA ZYCIE S.A. VIENNA INSURANCE GROUP

Contents

7-8/2013

6 7

Finance From The President’s Press Office From The Government Information Centre

28

Our Guest

8

Janusz Piechociński, Deputy Prime Minister, Minister of Economy; To convince the unconvinced

9

Prof. Stanisław Koziej, Secretary of State, Head of the National Security Bureau; The EU and NATO should complement each other

Franz Fuchs, CEO of Vienna Insurance Group Polska, Compensa TU S.A. and Compensa TU na Życie S.A. Vienna Insurance Group; Growing demand for tailor made insurance solutions in SME

Tomaszewski, 30 Artur President of DnB Nord Polska bank; Predictable business partner Sosna; Private Equity funds as the force stimulating economic 32 Jan growth Maciejewski, President of the Warsaw 33 Adam Stock Exchange; Growing in strength

Energy Economy

10

Andrzej Sikora, President of the Energy Studies Institute; We need a good model for the energy sector

34 Economic Zone;

Piotr Wojaczek, President of Katowice Special To make up for differences

14 Jerzy Bojanowicz; The leaky three-pack 18 Ewelina Janczylik-Foryś; Integration at all costs?

19

Ireneusz Łazor, President of the Board of the Polish Power Exchange; To develop of the gas market

20 Jan Sosna; Europower 2013

36 Programming Council of the Economic

Zygmunt Berdychowski, President of the Forum in Krynica; Towards a New Deal in Europe

Transport investments bolster market opportunities 38 Continued for the Port of Gdynia

Defence sector

22

Mieczysław T. Starkowski; Military capability

39

Prof. Bogusław Liberadzki, Member of the European Parliament, Deputy Chairman of the Commite on Budgetary Control and Member of the Committee on Transport and Tourism; Use assets and do more

24 Military University of Technology in Warsaw; Elite University

41 Innovation in transport

26 for Finance and Analysis; Strength in unity

42 CTL Logistics – the all-round logistics operator

Prof. Zygmunt Mierczyk, Rector-Commander of the Jarosław Dąbrowski

Patrycja Zielińska, Vice-President of Polski Holding Obronny

27

Nicola Bianco, Managing Director of PZL-Świdnik; PZL-Świdnik ready to deliver the complete solution to the Polish Armed Forces

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Jacek Bieczek, President of the Board, CTL Logistics;

KGHM IS A WORLD LEADER IN THE PRODUCTION OF SILVER

www.kghm.pl

Contents

Road Building Industry

Law

44 of the Polish Economic Chamber of Road Wojciech Malusi, Chairman of the Board

Hanas, lawyer at Squire Sanders Święcicki Krześniak sp. k.; 64 Igor Can Poland follow the success of the revolution in the U.S. gas sector?

Building Industry; Unity makes you strong

International relations Dybcio, President of Adrog Sp. j. Zakład Usług Brukarskich; 47 Adam A big comeback of public space

Yurkevych, Chief Executive Officer at Milkiland N.V.; 66 Anatoliy Between East and West

Real estate

Malsky, Ambassador of Ukraine to Poland; 68 Markiyan To aspire after Europe

Frnka, Country CEO, HB Reavis Poland Sp. z o.o.; 48 Stanislav We put much attention to standards

Culture Hernik, President of the Board of Armatura Kraków SA; 50 Konrad Better performance despite economic downturn

Innovation Zieliński, Vice-President Industrial 52 Marcin Development Agency (ARP SA); In innovation we trust

54

Krzysztof Witoń, President of HAWE SA; Fibre to the Home is the Future

72 Cultural Monitor – across seven centuries of the history 74 EUROPEUM of European art 76 Maciej Proliński; The past and the future live in one Castle 77 A great challenge Hauszyld, President of the SEMPER POLONIA Foundation; 78 Marek Recreating Polish intelligentsia

Events

56

Wojciech Nawrot, DSc, Eng. the inventor of the crystal injection technology for building dehumidification; Method for success: specialisation

Sadecki; Modernity in the interest of the natural environment – 58 Bogdan time for ECO INNOVATIONS

60 End-to-end solutions

Wojciech Głownia, General Manager Dell Poland;

62 Maciej Proliński; A University that looks ahead…

Publisher: Oficyna Wydawnicza RYNEK POLSKI Sp. z o.o.

(RYNEK POLSKI Publishers Co. Ltd.)

84 Maciej Proliński; Awards for hard-working Poles Food Industry

86 Bożena Skarżyńska; Sausage – served from a fishing boat as well 88 “Polska Ekologia” Association signs agreement with Thailand

Photographer: Agnieszka Charuba

President: Krystyna Woźniak-Trzosek

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Editor-in-Chief: Krystyna Woźniak-Trzosek Deputy Editor-in-Chief: Ewelina Janczylik-Foryś redakcja@polishmarket.com.pl

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Janczylik-Foryś; Artistic Impressions 2013 – 80 Ewelina another edition of the Festival for Disabled Young People

Writers/Editors: Maciej Proliński, Jan Sosna, Sylwia WesołowskaBetkier, Grażyna Śleszyńska, Janusz Korzeń, Jerzy Bojanowicz, Janusz Turakiewicz

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Reproduction of any material from this magazine requires prior written permission from the Publisher.

Editorial

T

he Eurostat data concerning the 2nd quarter of 2013 provided us with information regarding a prime historical event – here, in June, Poles purchased the largest number of goods and services in the thousand-year history of their nation. And this is the truth, a fact of historic importance, though “Polish Market” is probably the only Polish media outlet to have taken the trouble to inform the country about this.

Why are we alone in doing this? “The economic crisis in Poland is moving forward at a rather slow pace, not as spectacularly as in other countries, yet the majority of people have experienced a decrease in the standard of life,” claims one of well-known Polish political science specialists. This tone is currently dominant in the Polish media and in Poland’s public debate. Six years ago, among the commentaries concerning the fall of Lehmann Brothers and the beginning of the global financial crisis, we published a comment by Leszek Balcerowicz, an architect of Poland’s political transformation, who warned us against the euphoria of the success which undoubtedly was (and still is) keeping the Polish economy on a growth path, while the growth rates of all other countries plummeted below zero. According to Balcerowicz, we will pay for this economic success with a failure in the society’s mental sphere, as a society that has not been affected by a direct trauma in the form of income, consumption and job loss cannot display readiness to accept necessary, long-term anti-crisis reforms. Why should we change anything, if we have managed to defend ourselves successfully?

Today, this prophecy appears to have become fulfilled, even in the sphere of the perception of facts. This, in the 21st century, seemed to be a complete nonsense. Has economics stopped being science, and become a religion? How is it possible that both in the media and in the general public, there is a prevalent belief that the economy has collapsed, and that, with respect to the crisis, Poland’s GDP and consumption has fallen? This is probably favoured by the common practice of not publishing absolute values and relations, but only growth rates. As a result, if we say that, income in July increased in relation to June by 2%, and that in August to July by 1%, then the majority of “those educated by the media” believe that a decrease has occurred. Indeed, the growth rate has decreased, incomes are growing slower than in the previous month, but they are still growing – in August they were higher than in July and in June. Thus, explanations that only a “negative growth rate” (a linguistic nonsense from the logical point of view) would mean a decrease in income, appear fruitless – the general public and Mr. Political Science Specialist know better.

The phenomenon of economics going downhill from the status of science to the status of a religion has its origin not only in the field of statistics interpretation. With global digitization and the rapid development of information technologies, the conscious influence of the individual on the results of economic decisions that are being made, decreases – this is a true paradox of contemporary times! An acquaintance of mine, a producer of frozen strawberries and raspberries from near Łowicz, and his neighbour (who runs a broiler farm), every evening log on to the Internet, not to watch films on YouTube, but to check the listings on industry markets and to gain information on production for instance in China or Australia. I am not sure if this really helps them to keep their farms profitable, but for them it has become a prayer of sorts. However, I can point out, following the TVN CNBC television channel, those for whom this “new order” has brought success at the global scale. These are Polish

LPP and CCC companies, whose capitalisation exceeded lately the capitalisation of KGHM, Polish giant.

Is this a surprise? Yes, but isn’t it educational? It only shows that a bold launch into a digitized global economy can yield global success. Of course, it can – but does not have to – bring success.

This comes about only if backed up by many factors like perseverance, adhering to a good strategy, working hard, and gaining an element of good luck. An increasing part of global financial turnover is decided upon and implemented by stock exchange supercomputers, which transfer billions of dollars from one account to another in a matter of milliseconds. No economic or financial genius can ever keep up with this, so it is easy to understand the doubts of the Warsaw Stock Exchange if it should give up some of its power to such cyborgs. This is probably unavoidable, as nobody can stop technological development. All we will be able to do is cherish the “good ol’ days”, be happy about the successes we have had, and imitate those who have contributed to them. There is plenty to choose from. Did we, in the period of great expectations following the positive European Union membership referendum, expect that after ten years, Poland, a financial dwarf from a European perspective, will become the home office of the largest, most state-of-the-art bank in East-Central Europe, a region encompassing 150 million residents?; that the Polish banking system will be recognised as one of the most modern and the safest in the whole of Europe?; that Polish companies will become regional leaders in the distribution of information and ICT equipment; that Polish IT specialists will be the most coveted professional group in Europe, and that Poland’s e-commerce market will develop at the fastest rate in Europe, despite international innovation rankings placing it at an unjustly low level?

A brief history of economics going downhill from the status of science to the status of religion demonstrates many arguments advocating this tendency. Marek Belka, the President of the National Bank of Poland, answered journalists’ question regarding the halfyear forecast of the zloty exchange rate by saying “you can place a chimpanzee before a camera and get the same result, but the hype and viewing figures will be better.” We can, of course, explain that it was not Poland that transformed the global economy into a casino, and that the Polish expression “business entity” is more rightly being replaced by the Anglo-Saxon “player.” There are two solutions to this situation. The advocates of religion-economics can mock the Evangelic demands “Crucify Him! Crucify!” with every “misplay” of the Minister of Finance. The arduous supporters of science-economics are left with the catchphrase “in order to win, one has to play.”

The readers of “Polish Market” are encouraged to stick to it. Just as we do. ::

Krystyna Woźniak-Trzosek Editor-in-Chief President Rynek Polski Publishers Co. Ltd.

7 -8 /2013 :: polish market :: 5

President Polish President comments on successes and plans of V4

A

mong the notable successes last year, when Poland presided over the Visegrád Group (V4), Mr Bronisław Komorowski listed the Group’s joint and several efforts connected with the EU budget for 2014-2020. At the recent summit held by the presidents of V4 countries in Wisła, Poland, the President of Hungary drew the attendees’ attention to new challenges faced by V4, especially in terms of economic cooperation.

The two-day summit brought together the Presidents of the V4 Member States – Bronisław Komorowski, Poland, Miloš Zeman, the Czech Republic, Ivan Gašparovič, Slovakia, and János Áder, Hungary.

Also present was President of Ukraine, Viktor Yanukovych.

The presidents summed up the Polish Presidency, which had ended in June with Hungary taking over from July, and discussed the priorities for the Hungarian term. Noteworthy achievements of last year, according to Bronisław Komorowski, were the Member States acting together in respect of the next EU budget and concluding a memorandum essential to create an integrated system for gas transport within V4 and a roadmap to achieve workable solutions in this respect.

Bronisław Komorowski concluded that another achievement of V4 is the successful establishment of a common battle group, which would become operational by 2016. “This shows the determination of our countries to encourage the EU to take a firm stand towards a common safety and security policy,” he added. ::

In memory of the Poles murdered in Kysylyn

P

resident of Poland, Bronisław Komorowski and Deputy Prime Minister of Ukraine, Kostyantyn Hryshchenko, visited Kysylyn, Ukraine, to commemorate the Poles who had been killed there in 1943. The politicians laid wreaths on the grave of the 90 Polish victims, including women and children, killed by the Ukrainian Insurgent Army (UPA) on 11 July 1943. They also visited the ruins of the church in which the massacre took place.

“This place speaks of the dramatic experience of 11 July 1943, which took a heavy toll of many Poles,” said Mr Komorowski.

“This ill-fated Volhynian soil witnessed so many dramatic events, so many horrible acts, so many tragedies, so much human suffering and hatred towards one another, that now is finally a good time to reflect upon it. We should all now deeply ponder over all these painful experiences and promise ourselves that we can rise above these tragic events – not by forgetting them, but by carefully considering them, by acknowledging and accepting the truth which does hurt, but also frees people – to reach the

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stage in Polish-Ukrainian relations where there are so many good intentions and so much close cooperation between the peoples of independent countries,” he emphasised.

In Kysylyn, Bronisław Komorowski also put flowers on the grave of Ukrainians and Jews killed by the Nazis. Later, the President commemorated the victims of Ukrainian nationalists killed in a currently non-existent locality of Rudnia, Ukraine. ::

“The funding available for us under the new EU budget must be allocated with care”

P

resident Bronisław Komorowski shared his conviction that Poland must be careful in earmarking funds available to it under the EU budget for 2014-2020, so as to unlock its growth potential, rather than generating additional costs connected for example with, the maintenance of new institutions.

“We need to bear in mind that this is the last tranche of the most enormous amount ever to be allocated to Poland and it constitutes our make-or-break,” said Mr Komorowski at a meeting with town residents and local authorities in Baranowo Mazowieckie province. “To catch up with those that are better off and better organised, we really need to prove we are level headed with this money,” he added.

“We will need to make informed choices, not only to satisfy local ambitions, but to make such use of this money as to spare our children and grandchildren the obligation to provide for various important and fancy institutions in some 15 years, and rather provide them with opportunities to grow,” he said.

The President emphasised that the potential of Poland as a nation had been strongly reinforced by the fact of its membership of the EU. “What is happening with Poland nowadays is unbelievable,” he continued. Mr Komorowski also pointed out that throughout the last fifteen years Poland has undergone a more rapid transformation than over the 150 years before that.

Mr Komorowski argued that we should appreciate this and know how to use this to our advantage. He also said that it was of vital importance whether we, as a country, would be able to seize this tremendous opportunity we were facing and make good use of the resources available under the new EU budget for 2014-2020. ::

President meets representatives of the Pakistani Senate and the Bundestag.

P

resident Bronisław Komorowski held talks with Syed Nayyar Hussain Bukhari, Chairman of the Senate of the Islamic Republic of Pakistan, and Norbert Lammert, President of the Bundestag.

“Poland is committed to ensuring that Pakistan, as a prominent State valued for many reasons, is convinced that Poland is taking a keen interest in furthering and acknowledging the importance of Polish-Pakistani relations,” affirmed Mr Komorowski.

He also added that Pakistan was a country of considerable economic, political and military leverage in the region, but also a transit State, which is located along the way over which military provisions are transported for Polish troops in Afghanistan, and, at the same time, constitutes part of their way back home when their mission is over. “It is, therefore, an important country for us,” the President concluded. ::

Prime Minister Donald Tusk and José Manuel Barroso on the future development of the EU

Thai Prime Minister visits Poland

“

Our countries will work together towards expanded and sustainable trade,” said Donald Tusk, the Polish Prime Minister, after a meeting with Ms Yingluck Shinawatra, the Prime Minister of Thailand. Mr Tusk emphasised that both Thailand and Poland represented stability in their respective regions. Thailand is one of Poland’s leading trade partners in Southeast Asia.

The Prime Ministers also discussed the potential for investment and financial cooperation between the two countries. Apart from the meeting with Mr Tusk, the Thai Prime Minister also attended the opening ceremony of the Polish-Thai Business Forum. On her visit, Ms Shinawatra was accompanied by the Deputy Prime Minister and Minister of Foreign Affairs, as well as Ministers of Agriculture and Industry.

The prime ministers also discussed cooperation opportunities in selected economic sectors, such as green technologies, food, and defence, and attempted to identify potential areas for collaboration in science and technology, tourism, and education.

The Polish Prime Minister attended last year’s Asia-Europe Meeting (ASEM) summit. Held in November 2012 in Vientiane, Laos, the meeting gathered 21 PMs and 14 Heads of State. The agenda included global financial challenges, economic stimuli and opportunities to facilitate trade and investments.

In addition, the visit saw the conclusion of bilateral agreements on economic cooperation, also in agriculture and on establishing strategic dialogue between the parties. ::

Prime Minister of Georgia visits Warsaw

P

rime Ministers Donald Tusk and Bidzina Ivanishvili discussed Georgia’s advancements towards EU and NATO membership, and the overall situation in the region.

“We look forward to seeing Georgia accomplish another step on its way to the European Union after so many years,” said the Head of the Polish Government. Mr Tusk also added that the Prime Minister of Georgia assured him of his commitment to ensuring that fair-play principles are observed in his domestic policy and in relations with the opposition.

Donald Tusk emphasised that his conversation with the Prime Minister of Georgia helped to clarify the reasons behind the recent actions of the Georgian Government and its relations with the opposition. “It confirmed my conviction that Georgia needs our support, especially in view of the Vilnius Summit,” added the Polish PM. Mr Ivanishvili expressed his gratitude for the support Georgia had already received in its efforts to integrate with the European Union and NATO, and to achieve territorial integrity. ::

D

onald Tusk met in Warsaw President of the European Council, Mr José Manuel Barroso. During the meeting Barroso said that now, as political agreement on the long-term EU budget had been achieved, it was time to consider investments. “Investments are the key to unlock the potential of our regions, scientists, and students, but also that of those affected by the growing unemployment brought about by the crisis,” concluded the President of the European Council.

Mr Barroso complimented our country, stating that from being a newcomer to the European Community Poland became one of its key players influencing decision-making on the European level. He emphasised that no landmark decision can now be made in the EU without taking Poland’s position into account. In his opinion, this was effected by the role played by Donald Tusk.

The meeting before PACE brought together the Prime Minister and the President of the European Council in a debate on current EU affairs, including the banking union. The talks also revolved around climate and energy policies. “On the majority of issues, Poland sees eye to eye with the EU. This is what produces such successful outcomes,” said Mr Tusk after the meeting. ::

Consultations between the governments of Poland and Spain

P

rime Minister Donald Tusk met Prime Minister of Spain, Mariano Rajoy, to discuss the economic situation of Europe, the employment of young people, and the power industry.

Mr Tusk stressed that cooperation between Poland and Spain made it possible to adopt an ambitious European budget, with strong focus on the Cohesion Policy. He added that investments fuelled by new European resources were creating jobs both in Poland and Spain. “Both of us hope that 2014 will mark a definitive end to the crisis,” said the Polish PM. “We agreed that Europe will need relatively cheap energy,” commented Mr Tusk on the talks on the power industry. He then stressed that Poland and Spain wished to cooperate in the development of an EU policy that will re-establish the continent as a strong competitor.

Other topics explored by the Prime Ministers included considerations related to security and the fight against terrorism, internal affairs and the current situation in the Middle East. The talks also focussed on the free-trade agreement between the European Union and the United States, and the banking union.

At the same time, meetings between individual Ministers were held. The consultations involved the participation of Minister of Labour and Social Policy, Władysław Kosiniak-Kamysz, Minister of Transport, Construction and the Maritime Economy, Sławomir Nowak, Minister of the Interior Bartłomiej Sienkiewicz, and the Deputy Ministers of the Economy, the Environment and Foreign Affairs. ::

7 -8 /2013 :: polish market :: 7

Our Guest

To convince the unconvinced Janusz Piechociński, Deputy Prime Minister, Minister of Economy

I

t is important to use public debate to compare different views, to balance against each other the disparate rationales and goals of various communities.

By that I mean juxtaposing the world of politics with the world of science in an effort to reach compromise and develop a core strategy. In the times we live in, what this strategy is about is pooling efforts and resources, and looking for the most suitable solutions.

Poland is now in a position where there is no escaping a debate over the energy and its interrelations with the economy and the environment that we live in. In this respect, energy and power-related issues are relevant both for Poland and Europe at large. When setting out the energy policies for Europe, including the energy security, it is essential to consider the external and geopolitical circumstances and developments, and also bear in mind the financial difficulties that the European Union has been struggling with.

Sustainable energy policy should be about striking a balance between three equallyimportant goals: competitiveness, sustainable development and the security of supply.

By extension, there is no place for any tradeoffs between achieving climate objectives and ensuring that the economy is competitive and the supplies are secure. We mustn’t prioritise one goal over the others. This is why I would like to posit that the Polish debate on the 3x20 programme should address the following issues.

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The primary, and the commonly-acknowledged ones, involve energy savings, renewable energy sources, as well as addressing the issue of major CO2 emitters.

Industry is equally important. We need it to make up at least of 20% of the renewable energy sources use. In this respect, it is important that we stabilise energy prices by 2015, and make it our 2030 target to achieve lower wholesale and retail energy prices for the industrial economy and individual households, respectively.

For a year now we have been involved in intensive negotiations with the United States to reach a partnership agreement on trade and investment. So in three-to-five-years time we’ll see the European and American economies come together. And as they do, what will become sadly evident is that Europe has an over-regulated economy with a tremendous growth rate in energy prices (since 2005, the prices for the European energy mix have on average increased by 25%, compared to only 1% in America).

The energy sector must be both competitive and dynamic while staying as effective and environment-friendly as possible. In order for it to develop the way we want it to, however, we must bring to completion the process of building a common energy market and develop a new approach to planning the European transmission infrastructure.

The Polish Government supports sound long-term policies in the areas of climate and energy. This is best reflected in the national low-emission economy development programme put together by the Ministry of Economy, as well as in the strategic plans for adapting the economy to climate change as designed by the Ministry of Environment.

Hence, we are ready to embrace the solutions that will use market mechanisms to achieve the climate and environmental targets without exerting a negative impact on the energy security of individual Member States.

Also, these solutions must not lead to energy price increases.

To accept the new energy and climate commitments, however, a global agreement must be reached first under which the world’s

leading economies will take on the obligation to actively reduce CO2 emissions and undertake measurable efforts towards counteracting climate change. Yet in so doing, the European Union must be careful not to assume unilateral obligations without having other major economies, such as the United States, China, India and Brazil, do the same.

Europe has not widely accepted our standpoint. We are still looking for allies in this area, the aim being to achieve a modern and competitive economy in Europe in which we share knowledge, facilitate the use of new technologies and develop sustainable solutions. Poland is determined to pave the way towards making this happen in Europe, but we need to work together. Current figures show that the European Union is responsible for 11% of all global CO2 emissions. Therefore, even by achieving the CO2-reduction targets in the EU, we are still far from a global improvement in the environmental situation.

As far as the energy mix is concerned, we believe each Member State has the freedom to structure its own economy, including the energy sector, the way it sees fit. What is important to note, however, is that Member States are being increasingly deprived of this freedom because the majority of policies have now to be established at the European level. Poland cannot accept this situation. The 2030 forecast for Poland’s future energy needs suggests that the proportion of coal will drop from 57 to 39 percent. And while it will still represent the leading component of our energy system, the use of renewable and natural-gas-based energy will increase, which is even more likely to happen if the estimated shale gas potential proves to be true. Also, we might see the emergence of nuclear energy in our country.

Our role as a state is to ensure stability for the energy enterprises. We want the public target of producing as cheap and environment-friendly energy as possible to be pursued by the private sector. And we want the sector to function under sound market conditions.

A speech delivered during the 9th NEUF 2013 International Conference ::

Our Guest

The EU and NATO should complement each other “When it comes to security, the most important challenges facing Poland are to encourage NATO and the EU to practice long-term strategic thinking, something about which we are trying to convince our allies, and – right after helicopters and missile defence that are given priority today– to tackle cyberdefence measures and military-oriented space technologies,” says prof. Stanisław Koziej, Secretary of State, Head of the National Security Bureau (BBN).

I

t is important to consolidate NATO around its basic function – defence – that has been at its core since the Treaty was signed in 1949. It is especially vital given that NATO’s operation in Afghanistan – in which the Alliance has been strongly involved for the last ten years conceptually, organizationally and military – will come to an end in 2014. Unfortunately, this was done at the expense of defence, and now we think that it is time for NATO to come back to its roots and begin paying more attention to its basic function.

Such a transformation will find its expression in “Steadfast Jazz”, NATO’s military exercises organized for the first time in many years. They will be held in November in Poland, Lithuania, Latvia, Estonia and the Baltic Sea. It is the first time such important exercises will take place in new member states.

The degree of individual countries’ involvement in the exercises will be a kind of test that will show whether the allies take seriously the declaration contained in the strategic concept of NATO.

In the case of the European Union, Poland’s second pillar of external security, the major challenge is to have a new security strategy adopted. The current one dates back to 2003, and since then much has changed in the security environment of the EU. Therefore, it is absolutely necessary to seriously reflect on the building blocks of the EU and to redefine them. It is highly advisable that the December EU summit, which will be devoted to the common security and defence policy, ends up with the conclusion that a strategic review of the security policy is needed.

The result could be a White Paper of the European security, and consequently a new security strategy. Unfortunately, it is not easy, because the EU is concerned with other problems today.

I believe that the EU and NATO should complement each other. From the strategic point of view, it would be fantastic if we could work out systemic mechanisms of interaction between these two organizations in the field of security. Sadly, regular cooperation failed to be developed at the very beginning, that is when the EU common security policy was first created. It takes place on an ad hoc basis, from operation to operation, as long as it is considered worth being carried out jointly. Thus, incidental solutions are adopted.

Countries - as shown by the ongoing financial problems - cannot afford to function effectively in both these organizations. In fact, the same forces and resources are spent for the needs of NATO and EU, which confirms that some coordination is necessary. Cooperation with NATO should be one of the key issues on the political agenda as part of the new EU security strategy.

For the last ten years, Polish armed forces have been undergoing regular modernization. In the 1990s, it was a rather chaotic process, as ideas varied every year and it was not certain what resources will be available. Then, as of 2001, when Bronisław Komorowski, the then Minister of Defence, introduced a statutory, fixed ratio of defence spending (1.95% of GDP), the modernization of the armed forces has been pursued in a regular manner. The effects are already visible today, because in many ways we have modern armed forces. It is also thanks to the experience gained in Iraq and Afghanistan. Both these missions helped modernize the Polish army with such equipment as the F16, Wolverines or AP rockets.

It is important to continue the modernization, and provided that the investment ratio is not going to change in the foreseeable future - although the Ministry of Finance is looking for ways to break through the protective barrier around the defence budget-we can reasonably plan and launch in the upcoming years large-scale modernization projects, such as missile defence and helicopter programmes. We anticipate that the next tenyear programme, which, according to the NATO cycle, will be introduced in three or four years, will include two other promising programmes. These are cyberdefence systems, because that is the area facing the biggest challenges, and – although it still seems to some people a fantasy – the use of space in security systems, especially communication and reconnaissance. Without harnessing the potential of computerized combat systems, it will be difficult to imagine the effective functioning of the armed forces in ten or fifteen years’ time. :: 7-8 /2013 :: polish market :: 9

Energy

We need a good model for the energy sector Andrzej Sikora, President of the Energy Studies Institute, talks to Ewelina Janczylik-Foryś about the situation of the energy sector, a “small energy three-pack” and Polish coal.

You have recently taken part in the Collegium Civitas debate entitled “Who will pay for energy security? How to finance the Polish power sector?” When speaking about funding new investment projects in the Polish energy sector, we assume that Poland has a model for this sector. But is that true?

Unfortunately, Poland does not have a specific model for the energy sector, despite adopting in 2009 the Energy Policy for Poland until 2030. But I have the impression that the EU climate and energy package and the Energy Roadmap 20501 has caused the government to wake up. The Department for Strategic Analyses at the Prime Minister’s Office, in conjunction with Lewiatan and Polish energy companies, is now working to create an energy market model for the years until 2050.

Under existing legislation, the Ministry of the Economy has the duty to update the Energy Policy every four years. And as the latest four-year period ends in 2013, work is also underway at the Ministry’s Energy Department. What is more, institutions associated pm

1 Brussels, 15.12.2011COM(2011) 885 final Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Energy Roadmap 2050 {SEC(2011) 1565 final}

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with the Polish coal industry are working on their own proposals for the model. One needs to thoroughly analyse the problems of the Polish coal industry in respects of coal price and forecasts for 20-30 years ahead. “What to do with brown and hard coal?”, “How to prepare mines for this post-crisis area?” are the questions asked by experts of the AGH University of Science and Technology, the Polish Academy of Sciences, and the Kompania Węglowa (KW), Katowicki Holding Węglowy (KHW) and Jastrzębska Spółka Węglowa (JSW) coal companies. Of course, work is also conducted in the area of policy for the nuclear energy sector. This involves the question about the place of nuclear energy in the country’s energy policy. And let us not forget about hydrocarbons in shales.

And what about renewable energy sources?

Under the agreements Poland signed upon its entry to the European Union, we are obliged to take action to reduce carbon dioxide emissions and consequently to implement regulations on renewable energy sources. Otherwise, Poland will have to pay high penalties. pm

So the “small energy three-pack” is to be adopted to help Poland avoid the penalties?

The “small three-pack” is another amendment to the Energy Law. When starting the work, Poland ambitiously planned to adopt a “big energy three-pack.” The goal was to divide one law – the Energy Law – into several laws: on electricity, on natural gas and hydrocarbons in general, and on renewable energy sources. The initial plans were reduced to the “small three-pack” and the related legislative process is now underway pm

in the Polish parliament. The “small threepack” is expected to save Poland, which has already been referred to the European Court of Justice, from penalties for non-compliance with the third energy directive. The question of renewable energy sources and the liberalization of the gas market, which means freeing up the prices, is fundamental because these are the main reasons why the European Commission has opened the infringement proceedings against Poland.

Why are there such problems with adopting the “big three-pack?”

The reason is that there is no consensus over the proposal to divide the Energy Law into separate laws: on electricity, nuclear energy, gas and renewable energy sources. The Government Legislative Centre has taken a quite hardline stance on the matter, stating clearly in January this year that they could not imagine the Energy Law being divided into separate laws. Is it important how many laws there will be? I do not know. But it is important for the law to be good. Meanwhile, there is no compromise over energy issues in Poland. It would have certainly been easier if we had had a detailed model for the next 2030 years, one defining the areas of the biggest interest to us. pm

pm

Let us get back to coal, as a part of the energy model. Over the past 20 years, coal output dropped in Poland by half while at the same time the output increased globally. Additionally, in 2012 Poland imported 11 million tonnes of coal. I do not understand why we are reducing coal production in Poland, even though the global trend is quite the opposite, and at the same time import coal from other countries.

Energy

This is a very interesting question. In the process of its political and economic transition, Poland acted on the advice of the World Bank, which strictly recommended us to restructure the Polish coal industry by closing mines. Poland had to meet this condition to receive successive tranches of financial aid.

This is how Poland, which was the world’s third biggest exporter of coal, lost its position to the countries which improved their position by selling more coal. I hope the mines were not closed down for good, that is in a way that makes their effective reopening impossible. This does not change the fact that Poland is still the country with the largest resources of brown coal. It is worthwhile to reconsider our policy and reorient it.

As a consumer, I am glad that prices are competitive and that I am allowed to choose an energy operator. But as a citizen, I worry that our energy security depends on other countries.

This is the problem. For 15 years I have been looking for someone who takes a similar approach to energy security as me and you. pm

Unfortunately, Polish people do not understand that. To make things worse, our government did not understand it either until recently. Any model for the energy sector should contain provisions that would make Poland independent from foreign energy suppliers. If we “are sitting” on this energy, then why should not we sell it? These days, energy is more important than armed forces, than armoured divisions. Those who control access to energy rule the world. It is energy that determines who has an advantage these days. We do not have the right to renounce this advantage.

Some time ago Prof. Buzek proposed that a European internal energy market should be established. He has based his idea on the regional integration of the energy market and on Central European Energy Partners (CEEP). Is this concept right?

The third energy directive – the document which Poland has yet to fully implement – and the Treaty of Lisbon speak about energy solidarity in Europe, which spurred efforts to create a single energy market. The pm

market is defined in a broad sense because it involves not only electricity but also natural gas, raw materials and their free movement.

The single market is supposed to strengthen the position of the European Union in its relations with foreign partners: Russia, Norway, Algeria and the United States. CEEP, an organization set up several years ago, has the same objectives as the third energy directive. The European Commission’s Directorates-General for Energy and Competition are equally important institutions because this is where such problems are raised as market competitiveness, global issues associated with the World Trade Organization (WTO), like for example Russia’s entry to WTO, and negotiations with the United States on expanding economic relations with the country.

But having created a common internal market, we may reach a compromise which will not be satisfactory for all member states in our contacts with external partners. For example, in contacts with Russia, Britain does not need to have an interest in negotiating a single low price of gas because the price it now pays is satisfactory. Meanwhile, Poland is very much interested in a price cut.

You are looking at the problem from Poland’s perspective. But when we start speaking with one voice we are stronger. The European Union is the highest form of democracy because most decisions are based on consensus. This compromise radiates from Brussels.

Referring to the example you have given, additional gas from Russia means more dependence for Poland. But for France or Holland it means diversification of supply sources.

A compromise has to be found over the issue. A common goal of our activities in the European Union is for the energy price to reflect market conditions in a given area. There should not be any constraints that give an advantage to one supplier. pm

Can we speak about the single European energy market if we have not yet worked out an energy model for Poland?

Until recently our work was based on onedimensional forecasts and a skimpy market model. And this started to impede our talks in Brussels and with our partners – suppliers.

The tools they have at their disposal are more advanced. To be treated seriously, we need to have a good model for the energy sector. We have to show the grounds on which we base our arguments. This is the right moment to do so. :: pm

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40

Energy

The leaky three-pack The energy three-pack- as the draft Gas Law, Energy Law and Law on Renewable Energy Sources is called- was released by the government in December 2011, and then subjected to public and interministerial consultation. In the period from March to May 2012, twenty four interministerial meetings and three public debates were held, involving 495 entities that reported 8245 comments.

Jerzy Bojanowicz

A

t a press conference held on May 15, 2012 Waldemar Pawlak, the then Deputy Prime Minister and Minister of Economy, optimistically said that the modified energy bills were expected to be published in June 2012. The most important change was the introduction of stable and long-term solutions to support the Polish energy sector.

The emphasis was placed on the use of domestic energy resources, on energy efficiency and power consumers. The Energy Law makes provision for consumer-oriented solutions, such as support for vulnerable customers; measures that organize the functioning of the energy sector, such as certification of the transmission system operator; facilitations for entrepreneurs, continued support for co-generation and closed systems.

The Gas Law priority was to ensure the development of the natural gas market and the security of its supply. Rules were laid down regarding supply to protected customers, support for vulnerable customers and extension of the transmission and distribution system.

The Law on Renewable Energy sources (RES) provides for immutable rules of support for renewable energy installations; upholding the existing rules of support for the already existing installations; guaranteed prices for selected technologies in micro and small renewable energy installations.

The energy three-pack provided for various amendments to the existing legislation.

In order to ensure their mutual compliance the Ministry of Economy drafted one introductory bill for all three laws. Published in October 2012, it contains mostly transitional provisions within the Law on Renewable Energy Sources, Gas Law and Energy Law.

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Following the legislative process the bill was submitted to the Committee on European Affairs, and then was supposed to be debated by the government and the parliament. But it did not, because the Head of the Permanent Committee of the Council of Ministers decided that the bill be dropped.

MPs’ initiative On November 25, 2011 the European Commission initiated two formal proceedings against Poland for failure to notify transposition or incorrect transposition of national measures implementing Directive 2009/72/EC and Directive 2009/73/EC. In order to avoid negative financial consequences Polish MPs decided to act promptly and on October 9, 2012 submitted the bill amending the Energy Law and some other laws. The bill provided for complete implementation of Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources, Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas. The bill introduces some significant facilitations for connecting micro-installations of renewable energy sources and makes reference to the principle of unbundling of distribution activities. Its first reading was held on December 11, 2012. Andrzej Czerwiński (PO, Deputy Chairman of the Parliamentary Committee on Economy and Chairman of the Subcommittee on Energy) said that the bill – in addition

to the implementation of two Directives - attempts to solve the problem of the gas market. “Certain articles of the bill provide for the gas exchange obligation. The bill envisages changing the manner the President of the Energy Regulatory Office is supervised so as to grant him additional powers. It also defines the concept of micro-installations and medium-sized installations, and provides for organized measures to connect microinstallations to energy grids.” Mieczysław Kasprzak, Secretary of State in the Ministry of Economy, who also took the floor during the parliamentary debate, said that “work is underway on three-pack, especially on the Law on Renewable Energy (...) and that what was presented by the group of MPs are fast implementations, the necessary ones that need to be made in view of the European law.”

In June, the bill was passed on to the Polish President and the Speaker of the Senate who suggested amendments. The Senate took the view that the obligation to trade 70% of the gas through the exchange is too prohibitive: 55% would be enough. It added a transitional provision specifying the supplier ex officio, that is the entity obliged to purchase electricity produced in micro-installations at a price equal to 80% of the average selling price of electricity in the previous calendar year; it also released private individuals generating electricity in microinstallations from the licensing obligation.

This is meant to encourage private generators to consume electricity for their own needs, and sellers ex officio to buy energy.

The amendments of the Senate were debated by the lower chamber of the parliament on July 26, 2013. Three days later, the bill was submitted to the President for signature.

Energy

What’s next?

“The MPs’ amendments to the Energy Law, implementing some EU provisions and inexplicably called the small three-pack, transpose certain provisions of Directive 2009/28/EC on renewable energy sources, but the Polish Economic Chamber of Renewable Energy (PIGEO) has indicated that the transposition is far from being comprehensive. In particular, there is no transposition of the RES Directive’s provisions regarding the promotion of renewable energy sources, a priority or guaranteed access to the grid, support mechanisms, incentives. Even definitions are not fully consistent with the provisions of the European law. The Senate’s amendments theoretically pave the way for the prosumer practices, but they are cosmetic and will have little bearing,” says Tomasz Podgajniak, Vice-President of PIGEO and former Minister of Environment.

It is not surprising that investors put investment projects on hold. They are waiting for the promised, designed to last for years, comprehensive system of support for RES. They rightly believe that regulatory risk is very high, and as long as they do not know the conditions for obtaining green certificates, it is difficult for them to predict the profitability of these projects.

Under the ministerial bill on renewable energy, the highest correction factor was given to photovoltaic installations - those with a capacity exceeding 100 kW were to receive 2.85 green certificates; hydroelectric plants with a capacity of more than 20 MW - 2.3; smaller ones - 2; wind farms built on land between 2013 and 2014 - 0.9, in 2015 - 0.85, and in the following years the correction factor was to decrease each year by 0.25, while offshore wind farms were to be given 1.8 green certificates. A significant reduction of the correction factor was planned for biomass co-firing systems - to 0.3; co-firing installations put into use in 2017 were to be given 0.15, and in 2020 support for co-firing was supposed to be done away with altogether. The correction factor for biomass was planned at 1.15, and for biogas - depending on capacity - from 1.4 to 1.5.

These proposals troubled energy companies which feared that the support system for RES will push them out of the market, while they will also suffer losses because of reduced support for energy produced in large hydroelectric plants and co-firing installations.

The reason behind fixing such correction factors is not known. On the one hand, they

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hinder further development of cheaper renewable energy sources (such as onshore wind farms), whose potential has not been fully tapped yet, and on the other hand they promote much more expensive sources (photovoltaics) or those that will not be put into use (hydropower plants with a capacity exceeding 20 MW). A hydroelectric power plant is being built in Malczyce on the Odra river, but with a capacity of 9 MW, in ŚwinnaPoręba on the Skawa of 4.4 MW. Indeed, Energa plans to build a second barrage on the Vistula River (Siarzewo) with a power plant of 80 MW, but the project worth PLN 2.5 billion will take six years to complete, and it has not even started yet!

produced by plants using renewable sources. The value of green certificates is decreasing because of artificially generated in recent years oversupply of certificates of origin. The surplus of certificates of origin redeemable in 2013 is estimated to be at least 40% (more than 6 million MWh), and pessimistic projections suggest that the margin may continue to grow,” says Tomasz Podgajniak. “Why is there such a surplus? Because we support the long amortized hydropower plants in Solina, Włocławek and Goczałkowice, which get money for green certificates, but invest little in modernization and virtually nothing in new capacities. They account for one third of that surplus. But that is at least real

Since the government’s bill on renewable energy ended up in the dustbin, Jerzy Witold Pietrewicz, Secretary of State in charge of RES in the Ministry of Economy, does not rule out support for multi-fuel firing that favours large power companies. On the other hand, Polish Coordinating Council for Renewable Energy Sources points to the threat of bankruptcy of companies which in recent years have carried out investment projects in the Polish power industry worth several billion zloty, that is much more than large conventional energy companies spent on modernization and investment.

“This is due to the drastic drop in their income, the lion’s share of which was from the sale of certificates of origin for electricity

renewable energy. The fact is scandalous that two thirds of the surplus are green certificates for co-firing biomass with coal. This is not green energy, and it ruins business plans of investors that wish to develop real renewable energy sources.”

During the parliamentary debate over the bill amending the Energy Law and some other laws, Janusz Piechociński, Deputy Prime Minister and Minister of Economy, said that the government supported the proposal submitted by a group of MPs. It is clear that the ministry is still working on the “three-pack”.

It was supposed to be ready by August, but no one believes it will. ::

Energy

7 - 8/2013 :: polish market :: 17

Energy

Integration at all costs?

Early this year, we received news about the signing of an agreement on the integration of the Visegrad Group’s gas supply system. This regional integration, aimed at creating a single market, plays a substantial role in the energy security of the European Union. In addition, the Group has repeatedly proven its potential and its ability to promote joint initiatives at the EU level.

Ewelina Janczylik- Foryś

E

laborating on this topic, Prague welcomed regulator bodies from fuel and energy markets in the V4 Member States. The talks centred around the creation of a regional gas market.

However, a condition that needs to be met before opportunities for integration can be explored, is to provide the required infrastructure, focussing especially on the transit capabilities among the V4 countries.

The regulators confirmed the objectives of the roadmap for a regional V4 gas market, and discussed the possible ways to put it into practice. They also appointed a work team which will contribute, on a regular basis, to the process of building a regional gas market.

We are currently witnessing changes within the gas market. To date, trade in gas has been based on long-term contracts within a limited group of entities. But now this model is turning more dynamic, with short-term contracts increasingly concluded via stock exchanges, and thus gas prices having a stronger impact on sales and demand. Both the American shale gas and the general popularity of LNG have contributed to gas supplies being more flexible and accessible worldwide. This might explain the market transformation.

The gas trade in East-Central Europe has been dominated by large businesses, including PGNiG - which controls as much as 98% of the Polish market. Poland and Hungary are still at an early stage of market deregulation, the former country relying on gas only marginally and exhibiting the lowest consumption per capita in the whole V4 group. Of course, this situation results from the dominance of brown coal in the energy model. What is more, the awareness of diversification of the energy model, including the supply model, is rather low, and the gas market in Poland suffers from substantial monopolisation, with about 70% of

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supplies coming from the same direction.

On top of it, we have to deal with underdeveloped infrastructure in our region. That is just one of the reasons why we cannot really think of Central and Eastern Europe as being highly competitive and able to ensure its energy security. Considering the lack of diversification in Poland, the need for an infrastructure modernisation strategy should not come as a surprise. Its key objectives include the LNG terminal in Świnoujście, the development of the connection hub in Cieszyn, and the building of a connection with Slovakia. But will proper infrastructure and an increased number of connections guarantee a better business position?

Coming back to the matter of cooperation within the Visegrad Group, a flagship project in the field of market integration involves the construction of a North-South Corridor linking the Świnoujście terminal, via the Czech Republic, Slovakia and Hungary, with the LNG terminal in Croatia.

This concept was also addressed in the “Gas Model for the Visegrad Group”, a report prepared by the Centre for Eastern Studies. Tomasz Dąbrowski, an expert from the Central Europe Department at the Centre for Eastern Studies, and the coordinator of the “Gas Market Model for the Visegrad Group Member States”, comments: “The idea to prepare a concept analysis into a target model of the gas market in the Visegrad Group resulted from the wish to meet the growing interest in the integration of gas markets, expressed by Poland, the Czech Republic, Slovakia and Hungary. The mission of our Centre is to prepare expertise assessments and forecast studies on political and economic processes that, from Poland’s perspective, are of key importance. The creation of an EU gas market is definitely one of them, as Poland, much like the rest of the region, still has not fully engaged in the European gas trade. Not only does this pose a threat to our energy security, but it has

a negative impact on prices and the economy’s competitive edge. At the same time, the Centre for Eastern Studies sees closer gas collaboration within the Visegrad Group as particularly interesting, because it combines the elements of an analysis on regional partnerships and changes on energy markets.”

Conclusions than can be drawn from the CES’ study provide perfectly valid grounds for an integration within the V4. First and foremost, it will grant these countries access to LNG supplies through the Świnoujście terminal, and, potentially, to shale gas deposits. Furthermore, we could make use of the infrastructure, like storage reserves – Poland does not have them, while other countries do not use them in full.

We asked Tomasz Dąbrowski whether the project would facilitate a closer integration of the gas markets in Central and Eastern Europe. He said: “At the current stage, I’m a cautious optimist. Surely, the project has identified the main problems connected with the integration of local gas markets, in addition to showing that a stronger collaboration in this field does make sense and simply pays off. The report also put forward a number of steps towards a regional gas market, and most of these were included in the Roadmap adopted by the Prime Ministers from the Visegrad Group in June this year. It has to be stressed, however, that such a regional market will come true only if the measures set out in this document are duly implemented. This requires sustained, joint effort on the part of regulatory bodies, transit network operators and central authorities.”

To date, no decision has been made as to which integration model to choose, that is whether the integration should be based on a cross-border market area, a trade area, or market coupling. Each of these has its pros and cons. Yet, what matters most is that the debate on the matter continues. ::

Energy

To develop the gas market Ireneusz Łazor, President of the Board of the Polish Power Exchange (TGE)

D

ue to the completion of the planned projects, the launching of gas supplies from the LNG terminal in Świnoujście and the supplies from the interconnectors in Lasów, Cieszyn and Mallnow, in the long-term, Poland has the opportunity to become the most diverse market of all the Visegrád Group countries. Hence, if we implement the above operations collectively and systematically, we can become a significant player on the gas market of Central and Eastern Europe.

In this context, we also see the key role of the gas wholesale market, which the Polish Power Exchange opened near the end of 2012. We are active in its development, and the trade on the POLPX gas market is successively growing – we have exceeded 550 thousand MWh of the total sales volume on the forward and spot markets, and a total of over 600 transactions were concluded on our markets. There are currently around a dozen entities active on the POLPX gas market through brokerage houses. We have the ambition to create market conditions for the participants similar to those on the electrical energy market, where almost 85% of the electricity produced in Poland falls to market trade.

In recent times, the operating structure of the more mature, liberalised European

markets, has significantly changed. The importance of contracts indexed with petroleum prices is dropping, while the role of market indexation which recognises the prices from the spot markets or those created in hubs is rising. According to the Oxford Institute for Energy Studies (OIES), approximately more than 40 % of all supplies to Europe were delivered under contracts indexed to market prices. Therefore, if we want to be a significant player on the regional gas market, we must first create an efficient domestic exchange market. In further stages, the integration of the markets of Central and Eastern Europe will provide the opportunity to put pressure for a drop in wholesale prices.

In order to achieve these goals, numerous measures are required. These must involve state institutions, regulators, the operators of transfer systems, and the participants of the market themselves.

The cohesive development of the gas market will be possible only if we simultaneously preserve the three most crucial elements: infrastructural development, a friendly legal environment, and changes in terms of gas supplies.

The development of infrastructure mainly involves the construction of interconnectors, that is intersystem connections with high flow capacity, the opening of the LNG terminal in Świnoujście, and the expansion of the internal transmission network, in order to provide the capability to connect new consumers and increase domestic consumption. Access to inexpensive storage capacities is also important, because the current prices for statutory reserves storage in Poland constitute one of the market barriers for the potential importers of gas.

Speaking of the legal environment, the changes to the Act on excise tax, which is aimed towards the implementation of simpler rules of excise settlement so that the provisions of this Act would not be a barrier in the liberalisation of the gas market in Poland, are definitely necessary. Another factor which would liberate the market is the need to implement changes in the regulation on the diversification of gas supplies of 2000, which provides that the maximum proportion of gas imported from one country of origin in

relation to the total volume of imported gas in a given year cannot exceed 70% in the years 2013-2014, and 59% in 2015. This regulation is a barrier for the enterprises from the energy sector importing gas from abroad, where the costs of supply diversification could challenge the profitability of such operations, and, in the future, limit the effective utilisation of the LNG terminal in Świnoujście. Finally, it is necessary to support investment in linear infrastructure through the introduction of adequate regulations. The last element, equally important in the area of gas supplies, is freeing up gas prices for institutional consumers by the President of the Energy Regulatory Office (an exemption from the obligation to establish tariffs in gas sales), and allowing the availability of a large gas volume on the exchange market due to the market obligation and diversified gas sources – interconnectors or the LNG terminal – which would enable setting a reference fuel price.

The market will surely be assisted with the introduction of the so-called Small ThreePack, which has already been signed by the President. This will be a significant impulse to the development of the gas exchange which sets the market fuel price. In this respect, the exchange will assist in the formation of a natural market mechanism within which the price of this resource in wholesale industrial trade will be lower than that for individual consumers.

The Visegrád Group countries have confirmed their political support necessary for the construction of new connections, and the expansion of existing connections between Hungary, Slovakia, the Czech Republic and Poland, in compliance with the agreements concerning the project of constructing the North-South corridor in Central and Eastern Europe. Thus, the Polish Power Exchange will take active measures towards spreading knowledge on the gas market and its development in order to allow this market to grow efficiently. ::

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Energy

Europower 2013 For seventeen years, the Europower expert conferences in Warsaw have been a broad review of the current problems of the energy sector – electrical power engineering, petroleum, gas and heat engineering. Europower 2013 was dominated by domestic issues.

Jan Sosna

“

The Polish energy sector is facing great challenges. We are observing price volatility on the electrical energy market, we can hear projections that the petroleum and gas markets will be on a downward trend,” said Jerzy Pietrewicz, the Secretary of State in the Ministry of the Economy.

“An additional Polish problem is the progressing depreciation of energy production sources and transmission networks, while the scale of generating capacity replacement is insufficient. At the same time, we have to face the dependency of our economy on the supplies of gas and petroleum, and to consider “climate change and associated regulations.”

Who will benefit from the shale revolution

“The new trends on the gas and petroleum markets have been recently presented by the ‘Directions 2013 report. Positive economic shocks’ (by Deloitte and DnB Nord),” said Artur Tomaszewski, the chairman of DnB Nord Poland. Besides the commonly known consequences of the shale revolution on the gas markets, Tomaszewski pointed to the rise of the production of petroleum from shale.

Thanks to this, the USA holds greater petroleum reserves than Kuwait or Russia, which in the long run, may cause a drop of petroleum prices. “The report projects a positive impact of the new trends on the situation of the Polish economy,” commented Rafał Antczak, an expert of Deloitte Business Consulting. “Despite the fact that Poland is not yet

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present in the global analyses of shale gas and petroleum production and it is still too soon to assess their extractable and documented reserves, the global downward trend in the prices of the energy resources and the radical growth of opportunities for supply diversification will provide Poland with strong impulses for economic growth.”

Creation of energy mar-

kets as an opportunity for Poland

The experts agree that the condition for Poland to use this opportunity is the rapid organisation of a competitive gas market and of energy carriers in general. Mariusz Caliński, the chairman of Duon SA, said that the process of creating the gas market and market supply chain in Poland has already begun.

The infrastructure that is critical to the supply diversification is under construction – providing the opportunity to reverse the flow direction within the gas lines of Yamal and Gazoport, and the interconnectors will provide equal access for the competition, while a reduction in the prices of Gazprom gas has generally removed the disproportion with spot prices. The gas market has debuted on the Warsaw Stock Exchange and there is work underway on the mechanisms of its appropriate operation. This is a good time to create a fuel market in Poland – the EU gas code will come into force in October, but many problems must be solved inside Poland itself.

The domestic and

European markets – energy collision?

The biggest problem today is the operation of the energy sector under current market conditions. According to Maciej Bando, the Vice-President of the Energy Regulatory Office, by having delayed effective investment solutions, Poland is facing a power deficit in the national electricity system – approximately 5 GW during the years 2016-20. And without additional regulations, conditions encouraging energy producers to invest will not be created. Moreover, the current expert debates do not present uniform proposals for solving the problem of ‘the bigger the market, the less funds for investments’. Grzegorz Kenelski, the Vice-President of Enea SA, even ventured to state that the costs of the changes to the sales mechanisms and conditions caused by a competitive battle often outweigh the consumer’s gain. Krzysztof Noga of Duon SA indicated that the implementation of the TPA (Third-Party Access) law has revealed the disability of the measuring system of the energy distributors, and he called the introduction of smart metering the most expensive debt-collection system. Marek Kulesa, the President of the Association of Energy Trading, claimed that the current level of prices (particularly wholesale) makes it impossible to invest in the production of energy, and called for complete abandonment of price regulation. These demands

Energy

were opposed by the Energy Regulatory Office, as Vice-President Bando said outright: “The freeing up of the rates for retail clients cannot become the reason for raising energy prices.” Will the systemic blackout in 2016 become the ultimate solution?

The liquid fuel market –

competition and security

Meanwhile, the Polish market is consumed by debate on the invasion of unregistered economic activity. POPiHN (the Polish Organisation of Oil Industry and Trade) says that illegal sales reached 11% of turnover in 2012, which means there were over PLN3 billion in losses for the the national budget. According to the evaluations of PKN Orlen, the level of illegal sales was similar in the Baltic countries (10%), but it reached 20% in the Czech Republic. During the years 2011-12, Poland saw a drop of official fuel sales, but the number of fuel companies and petrol stations rose.

Piotr Szpakowski of PKN ORLEN, thinks this is caused by the loophole in regulations. The market must be tightened in a way to eliminate companies conducting illegal activity, from the 8,600 that are active in the sales of liquid fuels.

Renewable Energy

Sources – risks for the sector

The RES market has to prevent the outflow of companies and investors. In regard to this, representatives of energy corporations and the government are still putting on a brave face. Bogdan Pilch, the President of PGE Energetyka Odnawialna, argued that companies such as Dong (Denmark) or Iberdrola (Spain) are leaving Poland due to their global calculations, but most experts had a different opinion. Marcin Prusak of DnB Nord said that the Polish system of RES support was only a stopgap solution from its very beginning and defined the year 2017 as the end of the support for this sector, thus the banks withdrew their financing. On top of that, Zdzisław Muras, PhD, of the Energy Regulatory Office added a shortage of facilities for biomass combustion and negligence in the expansion of the network. Professor Andrzej Kraszewski, former Minister of the Environment, made mention of the growing social resistance against new installations in new circumstances blocking the development of RES. As an example, he stated that Polish society does not oppose RES itself, but

rather projects that are not consulted locally. Grzegorz Wiśniewski, the president of the RES Institute, mentioned the installation of over 1 billion m2 of thermal solar collectors.

In this area, Poland is the unquestioned leader, which evidences the possibility of similar success also in the production of electrical energy.

Prospects for the

development of heat engineering and cogeneration

This market also saw the presentation of the whole range of malpractices and negligence: that a high-efficiency cogeneration could host over 10 thousand MW of electrical power, instead of the current 4 thousand MW besides heat generators; that the profits of heating companies are dropping; that the new EU directive has not been implemented; that the law has changed since the beginning of this year and the support for cogeneration has been withdrawn. But there were also counterarguments. Adam Dobrowolski of the Energy Regulatory Office put forth that the heat engineering industry requires projects carried out without the support of public funds, that the implemented model of the rate of return from capital provides stability and predictability for investors, that the losses are often listed through accounting manipulations, and that the system for cogeneration has been simplified and prefers smaller entities. These arguments were supported

by Michał Machlejd, the President of Dalkia Warszawa, declaring that Dalkia still wanted to invest in Poland, and saw the future of heat engineering in the preservation of high standards, new technologies (telemetry, teleoperation, solar panels), and internal optimisation of companies.

Smart networks

and meters – will the benefits outweigh the costs?

Is Kamil Pluskwa, the President of the Consumer Federation, right in saying that the average Polish consumer has no idea of the existence of the smart grid, and associates the installation of the new meter with invigilation, and those attempting to promote the smart grid have been discouraged by the withdrawal of this problem from the latest

energy acts? Will the future of the smart grid in Poland be saved by the involvement of the Energy Regulatory Office, the President of which, Marek Woszczyk, says that the legislator will ‘one day’ tackle the complexity of the problem, so it is necessary to prepare the best solutions and convince society towards accepting them? Some experts, such as Professor Waldemar Skomudek, believe that the benefits for the home energy recipients will be small and the integrated IT platform will only compensate the investment expenditures of PLN6-8 billion on a national level, while the depreciation of 65-75% of the low-voltage networks may make this operation even more expensive. In turn, Wojciech Myślecki, PhD Eng., President of Global Investment Corp., thinks that the publication of the 1st European Smart Grid Standard has opened the way to the electrical energy distribution market to companies outside of the energy field, and “they will be the ones to bring about the revolution there.”

There are already indications of this process within the Polish market. Enea Operator (power engineering) has established cooperation with the telecommunication companies Orange and Tauron Distribution with PTC (Polska Telefonia Cyfrowa). Will the router replace the meter as the home ‘energy gate’?

Sustainable

development = energy efficiency

According to information provided by Zbigniew Szpak, the President of the Polish National Energy Conservation Agency, in Poland, 908 cities hold 50% of the population, which consumes 75% of the energy and produces 80% of the national CO2 emissions. If the current trends were to continue, in 2030, cities would house 66% of the population, while the energy consumed and CO2 emissions produced by it would rise to 90%. Experts believe that this situation must be prevented. Leszek Drogosz, the director of the Infrastructure Office in Warsaw, showed that with the growth pace of before the year 2010, already in 2016 Warsaw would deplete its production and transmission capacities in providing the city with energy. Experts agree that the solution to the problems of sustainable development is in supplementary actions related to energy efficiency. The strategic dimension of energy efficiency for the Polish economy is being realised in a more complete manner – we are already ahead of schedule in fulfilling our obligations under the 3x20 Climate Package. :: 7 - 8/2013 :: polish market :: 21

Defence sector

Military capability The Ministry of Defence wants to provide the Polish armed forces with increasingly sophisticated military equipment. But will it be possible in the face of drastic cuts to the national budget?

Mieczysław T. Starkowski

T

he Defence Ministry’s officials have ambitious plans and have already done a lot. Unfortunately, their effort is doomed to failure if they do not fight with Finance Minister Jacek Rostowski. And the minister is going to reduce the budget of the Ministry of Defence by as much as PLN3.3 billion.

Waldemar Skrzypczak, deputy defence minister responsible for military equipment and modernization, tries to play it down, saying that the most important arms programmes will be carried out as planned. But one can hardly imagine this given that the defence budget is to be cut by 10%. The ministry’s leadership have already shown much determination in effecting big changes in the ministry, with task teams formed in its armaments section. They work on individual modernization programmes: for the navy, helicopters, vehicles, including unmanned ones, armoured equipment and so on.

In June 2012, the government decided to make the Ministry of Defence responsible for all issues associated with offset contracts. As a result, work is underway to reorganize the Department for Armaments Policy. The process of building the Section for the Implementation of Innovative Defence Technologies has also begun. Its mission will be to seek and create opportunities for the development of new technologies to be used by the Polish armed forces. The section was to start operating on September 1 this year. But many experts fear that it will be the first to fall victim to the budget cuts.

For the time being, the outcome of the ministry’s activity is generally positive. The ministry gives preference to the Polish arms industry and Polish products. But it also attaches importance to technological progress, which is unpopular with some circles,

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which are demanding that the armed forces should buy anything that the Polish arms industry produces. The ministry’s leadership do not agree with that, saying that Polish soldiers should have the best equipment – systems that enable effective combat and ensure security. As much of the equipment as possible should be manufactured in Poland and if Polish producers are unable to deliver what the armed forces need they should establish cooperation with foreign partners who provide state-of-the-art technologies.

Another issue is improper lobbying practices. The deputy minister says there are many dubious middlemen active in Poland and owing to these people the ministry loses at least PLN300 million a year. Additionally, a bad atmosphere is emerging around the Polish intelligence agencies.

However, the general opinion is that relations between the Polish defence industry and its most important customer - the armed forces – have greatly improved and there is a big chance that the share of Polishmade products in deliveries for the armed forces will grow. It is clearly specified in the terms of tenders for such deliveries that, in the case of joint ventures, production and services, including repairs, should be relocated to Poland.

Until recently cooperation between Polish firms and foreign partners was virtually non-existent. Thanks to projects recently started, cooperation has become closer and in many cases regular. A good example is the Coastal Rocket Division. The Norwegian defence contractor Kongsberg has developed a good system for the division and is now closely connected with Polish producers. Kongsberg wants to invest in Poland under partnership agreements. And it is

important for Polish firms to be more than merely subcontractors.

When it comes to military hardware, all development programmes proposed three years ago have been maintained. A tender process for the delivery of 70 helicopters is now underway. Polish shipyards are to build the Kormoran and Ślązak vessels, and the ministry is about to take a decision concerning the purchase of a submarine. In addition, there are five programmes for the land forces, including the modernization of the armoured and mechanized forces, the expansion of the missile and artillery forces, and the purchase of unmanned aircraft, the Battle Management System and Spike antitank guided missiles.

One should remember that all of these are long-term projects. Some of the contracts may be signed this year, others next year while those involving large projects, like for example the air-defence programme, will be signed perhaps 15 years from now.

We have learned a lot in Afghanistan.

The Rosomak armoured vehicle has performed quite well there. This is why among last year’s successes is a contract with Patria Oy, under which the WZM manufacturer in Siemianowice Śląskie will continue to produce the Rosomak under a licence from this Finnish company. The Ministries of Defence and of the Economy helped to negotiate the contract.

A programme for the development of unmanned aerial vehicles has also been worked out using the experience acquired in the difficult Afghan terrain. There are many Polish and foreign companies which want to take part in this programme. The unmanned systems are to provide new capabilities to the Polish armed forces. “At

Defence sector

present, the Polish armed forces – land and special forces – use more than 10 of our FlyEye unmanned systems,” says Piotr Wojciechowski, president of WB Electronics Group. “These include unmanned mini aircraft used for area observation and reconnaissance, and to locate military installations and detect threats and concentrations of enemy forces.”

The Polish defence industry is looking at processes taking place at the Ministry of Defence with optimism. The ministry’s projects have been described clearly and sources of funding have been indicated. Unfortunately, there is the problem of the severe budget cuts that are planned and the consolidation decisions that have been too hasty and may lead to severing the cooperation ties which have naturally developed over years.

“Companies operating outside the Polski Holding Obronny (PHO) defence group do not accept the rhetoric of the Treasury Ministry and the PHO,” Piotr Wojciechowski says.

“Meanwhile, there is no dialogue among individual groups or a clear-cut justification for the proposed solutions. And above all, there are no activities giving credence to the claim that the government takes care of the whole defence industry and its future and that it is not only the former Bumar Group that is the subject of discussions involving increasingly wide circles of political elites.”

But President Wojciechowski admits that over the last year there were many positive changes when it comes to cooperation with the military. The concept to create task-oriented links among various organizations and the Defence Ministry’s determination to create and promote Polish suppliers of defence technologies show that the government thinks long term and understands economic phenomena in their entirety. Systemic changes – both the best known measures to strengthen civilian control over the armed forces and those less spectacular, like for example giving Polish military attachés the right to promote Polish industry on foreign markets – have resulted in the Polish defence industry being treated increasingly seriously and favourably.

“Over the last year, the Defence Ministry initiated many important weapons modernization programmes,” says Henryk Kruszyński, president of Teldat. “This concerns among others C4ISR command systems, unmanned platforms, the modernization of the navy, and programmes for the armoured forces. The implementation of the programmes may have a favourable impact

on the whole economy. They mean not only acquiring modern types of military hardware for the Polish armed forces but also improving Polish know-how by developing modern technologies in Poland or buying them abroad and transferring to Polish industry.

Investment in the modernization of the armed forces should be seen not only as an expense from the national budget but also as a chance to retain and create jobs, develop scientific research centres and enhance Poland’s potential as an exporter. Products based on new technologies, either developed in Poland or acquired from abroad, will certainly be easier to export. This will strengthen the competitiveness of Polish products on international markets.

“When it comes to our company, while looking favourably at these changes, we are waiting for the Defence Ministry to launch the planned modernization programmes,” adds Henryk Kruszyński.

“Of course, our biggest hope is the long-awaited programmes in the area of C4ISR, in particular the programme called colloquially BMS. We hope that the development work we have conducted for years on network-centric command support systems will find further applications in the armed forces and will contribute within a short time to their significant modernization.” It has been clear for a long time that networkcentricity and interoperability are the most effective and one of the cheapest ways to enhance military capability. Network-centricity and interoperability pose a challenge for the armed forces but if Poland fails to develop these systems it will not be able to meet the expectations of its NATO allies or fully benefit from its NATO membership.

But there are also critical voices. “The sector has seen little change compared to the situation a year ago,” says Jadwiga Nowotnik, director of the Department for International Organizations at Asseco Poland. “At present, cooperation with the Ministry of Defence means first of all much more technical consultations with companies before tenders.

We are glad that public institutions are aware

of the importance of this form of cooperation. This is why, just like other suppliers, we are taking an active part in the consultations and share our vast exp e r i ence.”

T h e Defence Ministry’s officials say they will have enough determination and consistence in their activity. This is important because the defence industry contributes greatly to the country’s security. And the world is not as peaceful as most people think. :: 7 -8 /2013 :: polish market :: 23

Defence sector

Elite University “The Military University of Technology (WAT) is a military school with traditions dating back to 1765 when king Stanisław August Poniatowski founded the School of Knights – Nobles’ Academy of the Corps of Cadets of His Majesty and Commonwealth. WAT is a university of technology educating military and civilian students, and largely focused on innovations and implementations.

For some time, it has also served as the Armed Forces Research Laboratory. In pursuing our mission we look up to are the American West Point and Massachusetts Institute of Technology (MIT), which both unattainable examples in terms of funding, but essentially we have a lot in common,” brig. gen. prof. Zygmunt Mierczyk, Rector-Commander of the Jarosław Dąbrowski Military University of Technology in Warsaw, tells Jerzy Bojanowicz.

military units, where they build their military commanding skills.

Every year we produce more than 300 expert’s opinions, mainly for the Ministry of Defence, but also for other ministries, local authorities and administrative bodies. Sometimes it is necessary to spend a few days doing research at a proving ground, but eventually it allows the Polish army to assess the quality of weapons and military equipment.

ideas, and the use and dissemination of new developments in the theory and technology.

The Military University of Technology naturally participates in creating in Poland the foundations of modern economy, and information and communication technology, which are developed owing to the extensive use of research in the design and manufacturing processes.

What are the major achievements made in recent years?

We have created certain mechanisms for attracting future students. For four years, we have been organizing the Gen. Sylwester Kaliski math competition “Archimedes” in more than 100 schools with which we had signed relevant agreements. The Minister of Education has taken the patronage over the competition that is organized by one of the best mathematicians in Poland, prof. Jerzy Gawinecki, the eminent cryptologist and Dean of the Faculty of Cybernetics.

The Surveyor General of Poland entrusted us his reference laboratory, as WAT participates in European GPS reference research programmes. WAT analyses data on the condition of the ionosphere from across Europe, which helps assess the quality of signal transmission, and thus allows to determine, based on GPS data, the location of a particular point in space accurate within... 4 mm.

We do not rest on our laurels, we are developing. We make part of the consortium that plans to build in Bory Tucholskie one of Europe’s largest radio telescopes. Satellite data provide multispectral imaging. Their analysis is widely used in security systems pm

How do you assess this year’s enrollment process?

Much better compared to last year: 1,770 candidates for 240 places in the military programme of study, an average of more than 7.35 candidates per place, and 6,120 for 1,700 places in the civilian programme, that is nearly 3.5 persons per place. When it comes to the military programme, I can say that there were 24 candidates for one place in geodesy and cartography, 22 in construction engineering, and 10 in chemistry – something that surprised me, but the interest in chemistry has been growing for three years.

Let me anticipate your question and tell you that women account for exactly 10% of students in military studies and 16% in civilian studies. They are very ambitious and often rank among the top three best graduates. pm

How much is WAT a military school, and how much a civilian one?

There are two main legal acts we have to obey: the law on higher education covering the education of students and the law on universal duty to defend the Republic of Poland.

Two separate enrollment processes are conducted for civilian and military students. At the moment, WAT educates and trains for the needs of the armed forces over a thousand students in uniforms, which represents 10% of all students. We are supposed to meet the demand of the Ministry of Defence, which sets limits on admissions of cadets in particular personal corps and specialties of all kinds of forces and services. We also perform mobilization tasks and activities associated with military training of candidates for officers. During the five-year studies our cadets spend 11 months in training centres and pm

24 :: polish market :: 7 - 8/2013

What is the profile of a WAT’s graduate?

At the Military University of Technology we convey theoretical and practical knowledge, a system that is fully consistent with the requirements and standards in force in the European Union. It allows the transfer of pm

Defence sector

related to such things as weather forecasting, flood risks, and monitoring of critical infrastructure (including barrages and flood embankments).

A very important line of research in terms of innovation is optoelectronics, and more precisely photonics, which is cited today by experts as a key area of science and technology. The American magazine “Photonics Spectra” (No. 8/2012) ranked WAT – along with Max Bohr Institute in Berlin, the Fraunhofer Institute, the University of Arizona, the University of Rochester and the Institute of Nanotechnology in Lyon – among the world’s 10 most “flourishing” scientific institutions in the field of photonics.

Last June, we set up the Centre of Biomedical Engineering (CIB), which is the only university cluster in Poland, as clusters are usually formed by a group of industries and companies. There are 14 businesses operating in our cluster, including pharmaceutical companies and medical equipment manufacturers. CIB is open to dual-use technologies.

Since 1990s, we have conducted clinical trials of photodynamic therapy and diagnosis of cancers.

We are interested in nanotechnology, micro- and nanoelectronics. We are able to carry out tests involving new materials and hightech structures, such as nanospheres, which are later used in various types of sensors. We also deal with robots and unmanned vehicles: flying (drones) and ground ones.

WAT’s departments and institutes ensure efficiency of the process of education and research. In my opinion, the greatest potential lies in research teams, which are often interdepartamental. This is perfectly illustrated by our project of anti-missile protection of critical infrastructure and vehicles. The project involves physicists, electronic and optoelectronic engineers, mechanics - researchers from the Department of Mechanical Engineering, Mechatronics, Electronics and the Institute of Optoelectronics. The cooperation of this interdisciplinary research team has produced very good results.

WAT is famous among technical universities for its absorption of EU funds.

Funds for projects and implementations come from the National Centre for Research and Development, EU institutions and international programmes. The largest financial resources are derived from the Ministry of Science and Higher Education, the European Defence Agency (EDA), and NATO. We carry out a number of projects co-financed by the European Union and European Economic pm

Area, namely under the Operational Programmes: Innovative Economy, Infrastructure and Environment and the 7th Framework Programme.

The family of modular special SHIBA vehicles for reconnaissance and road mine clearing was recognized as ITEX 2013 Best Invention at the 24th International Invention, Innovation & Technology Exhibition ITEX 2013 in Kuala Lumpur, Malaysia. The FRONT team from WAT’s Department of Cybernetics took third place in the Worldwide Finals of Microsoft’s Imagine Cup 2013 student technology competition in St. Petersburg, Russia, in the Windows Phone Challenge category for its COPE system. Congratulations, but what’s next?

Since the beginning of the 1990s, there have been many spin-offs and spin-outs around WAT, dealing with the implementation of advanced technologies, including VIGO, Laser Instruments, Solaris Optics and Telesystem-Mesko. Wojciech Nawrot, PhD, developed a method of drying buildings using crystal injection. He allocated funds from the sale of the license to build in Warsaw a proprietary technology park (over 10 000 m2), in which our professors’ teams work on advanced technologies, covering implementations and production.

I am very proud that a number of our innovative developments are deployed into production. This often involves many years of painstaking research without the possibility of publishing scientific results, as it is often required to keep it secret. Implemented products are constantly subject to supervision by their creators and may be upgraded.

That is something that no other university in Poland can boast. For example, Łucznik pm

Arms Factory in Radom will manufacture our Module-based Firearm System using the purpose-built process line. Another innovative implementation is man-portable air-defence systems Grom and their latest upgraded version - Piorun.

Currently, WAT cooperates with about 400 business partners. Besides those already mentioned they include: Polski Holding Obronny (formerly Bumar), Wasco, Asseco, Filbico, WB Electronics, iTTi, Hydromega and many others. The majority of market products manufactered by Industrial Optoelectronics Center, Mesko and Nitrochem have their origins at WAT. We tend to sign licence and author’s supervision agreements with the manufacturers of the products we developed. Thus, we can influence the production quality, product development, and we also gain additional funds that are spent to finance the modernization of the university and author’s fees.

What will WAT show at the 21st MSPO International Defence Industry Exhibition in Kielce?

First of all, the products newly designed and constructed in our laboratories over the last year. These include: multi-biometric system for identification of individuals to counter the threat of terrorism, engine diagnostics system KTO Rosomak, active defense optoelectronic head, encrypted communication system, and a programmable device for remote firing in multiple-launch rocket systems. Of course, these are not all of our achievements, because due to limited exhibition space, it is not possible to showcase everything using a technology demonstrator, as it is the case of the devices mentioned above. All those interested in WAT’s products are welcome to visit our stand. :: pm

7 -8 /2013 :: polish market :: 25

Defence sector

Strength in unity Patrycja Zielińska, Vice-President for Finance and Audit of Polski Holding Obronny Sp. z o.o. (PHO), talks to Ewelina Janczylik-Foryś.

In May we saw the launch of Polski Holding Obronny Sp z o. o., a company which brings together nearly 40 Polish defence companies. Where did the idea to establish the corporate group come from? What is the primary objective for PHO? The creation of PHO was motivated, among other things, by the devising and implementing of a new strategy which stipulates management similar to that in corporate groups.

In so doing, we have undertaken a number of key initiatives, like regarding the financial department and the management of all company assets. Thus, sort of naturally, the strategy brought about the corporate group.

Another goal PHO has set itself is to invest in advanced technologies and explore new markets. pm

We are still waiting for the Government to decide on the consolidation of the defence sector. Will PHO engage in the integration of this sector?

The Government announced integrative measures in respect of the defence sector already in the strategy adopted in 2007. As regards consolidation, we believe this should be a well thought-out process. Irrespective of the decision on its commissioning to PHO or some other entity, consolidation needs to be accomplished. While selecting the contractor, however, the Government should consider current economic and financial analyses, including undertaking a cost-benefit analysis. PHO is of course an undisputed leader in Poland, both in terms of its operational reach and turnover. Most importantly, however, the decision should be unaffected by political factors and be based on solid economic argumentation. pm

Can the Polish defence industry become our leading export product? After all, our technical thought and experience are no worse, when compared to the West.

By all means, yes. Let me stress that consolidation is chiefly needed because now many individual Polish defence-oriented companies have to fight for their place within the global market – doing so not only with foreign, but pm

26 :: polish market :: 7 - 8/2013

also with other Polish competitors. The lack of integration of the defence sector means a weaker synergy of actions and a loss of opportunity to develop the Polish defence industrial potential as a whole. Thus, combining the capacity of several entities will generate benefits and reduce costs for us. Other countries have consolidated their arms industries and this solution has proved successful. Within the internal market, there are few competitors in this field. But such “fratricidal” competitiveness makes it impossible for us to win foreign markets against global players, which makes us a weaker and more expensive potential partner.

It is not without reason that I have asked you about exports. The PHO representation office in Brussels, in charge of managing the group’s interests before NATO and EU bodies, will be opened by the end of this year.

True, we will be opening-up an office in Brussels by that time. This is because every self-respecting established European and North Atlantic defence corporation has its branch there. Our office will monitor current tenders and seek cooperation with partners and contract opportunities with NATO. In addition to performing a lobbying function, it will assist in guiding the interests inherent to Polish foreign policy and defence. The decisions made in Brussels impact not only on the future of the defence sector across Europe and the North Atlantic region, but also on the state of the Polish defence industries.

As the largest such entity in Poland and Central Europe, PHO must be present there and secure the interests of both Polish and Central-European businesses. This is because the defence industries of this part of Europe are less fortunate in contrast to their West European counterparts, which over the years, have gained firm positions there. What is more, in December this year, an EU Summit will be discussing the European strategy for the defence sector, a document which might change the sector as we know it. PHO is playing a major role in the preparatory work for this discussion. Our office will offer new pm

opportunities and fields of activity, bringing long-term benefits to us, the Polish armed forces and Poland as a whole.

The Group has focussed on anti-aircraft systems, but its priorities also include unmanned aircraft and the armoured armament programme.

As PHO wishes to meet all the needs of our key client, we are engaged in the majority of the modernisation programmes of the Polish Armed Forces. Given our long-standing experience, know-how, and leading-edge technologies we have applied in fields such as modern sensors and command systems, combined with our manufacturing potential, we have concentrated on the air defence and anti-aircraft systems as our core business, R&D and organisational ventures.

Most modernisation programmes will also involve the extensive competence of PHO’s subsidiaries, in respect of the procurement and implementation of technologies from foreign suppliers (the Transfer of Technology), in addition to the competence required in the integration of complex systems, as well as in the application of the skills and experience as regards the conducting of comprehensive programmes and projects. pm

Will PHO and BAE Systems work together do build a new tank?

Yes. By the end of May our companies concluded a partnership contract for joint R&D work on a completely new caterpillar vehicle. This will also be a product for export. The concept of a new technology demonstrator will be presented during the next International Defence Industry Exhibition (MSPO) in Kielce, where we will demonstrate that through international cooperation, it is possible to jointly develop a vehicle satisfying the most demanding client.

Our collaboration with BAE Systems shows that PHO can be an attractive partner for the largest players within the global defence market. :: pm

Defence sector

PZL-Świdnik ready to deliver the complete solution to the Polish Armed Forces Nicola Bianco, Managing Director of PZL-Świdnik, talks to “Polish Market”.

Mr Bianco, what are the main strengths of the Polish aviation industry today? Why do foreign companies decide to invest and contribute to the Polish aviation sector development?

Young, well-educated, highly-skilled professionals working in Poland and the Polish R&D centres participating in innovative EU projects are the foundation. This, coupled with the technology transferred through foreign investment and privatization programmes, reinforces Poland’s position in the European aerospace industry.

Undoubtedly, the Polish aviation sector has had a long and rich tradition. Its rapid growth has been the result of successful investments, privatization and restructuring processes as well as cooperation with the world’s largest aviation companies. Potential investors consider the Polish economic and social system, competitive operating costs, and, above all, young professionals’ as the key factors in their decision to invest and expand their industrial bases in Poland. pm

What is your opinion on our ability to introduce innovation into the Polish aviation industry?

The Polish aviation sector is currently in a transition phase. It has been departing from the heavy, mass production-oriented industry and moving towards a new manufacturing approach based on extensive use of modern technologies. Thanks to foreign investment, successful privatization schemes and the contribution from universities and R&D centres, Polish aviation specialists recognize innovation as the key to success. Innovation, accompanied by Poland’s best professionals’ expertise and know-how, make the Polish aviation sector increasingly competitive in the world market year by year. Innovation pm

requires change and people have to be ready to accept change, this is both a challenge and an opportunity, but one the Polish aviation sector has readily accepted.

The AW149 is one of the helicopters presented at MSPO 2013 in Kielce. The AW149 is a multi-purpose military helicopter capable of performing a wide range of missions, including transport, combat support and SAR/maritime SAR operations.

Prototypes production and test activities are completed. What is the programme status? When will the serial production start?

The AW149 programme is well on track, with the military qualification of the aircraft expected by the end of 2013. The latest AW149 rolled off the assembly line in May 2013 and is the basic serial production helicopter. The AW149 in transport configuration will be the first version of the helicopter to go into fullscale production at PZL-Świdnik. We expect this to happen in early 2015. pm

The AW149 helicopter is one of the aircraft offered in the tender announced by the Polish Ministry of Defence for the supply of 70 helicopters for the Armed Forces (initially, 26 helicopters were required).

What is the current tender stage?

The tender process has entered the technical negotiation stage. It is a very important and demanding stage of the competition, both for the bidders and the Polish Armed Forces. Technical negotiations will help us better understand the requirements of the customer/user, in order to offer the optimal solution. pm

pm

What do you consider is most important for the decision-makers: the aircraft’s technical characteristics, industry

development opportunities, standard of service, training and maintenance, or safety and reliability?

Everything you have mentioned is of great importance when making the decision. However, we must bear in mind that the Polish MoD’s purchase shouldn’t be considered only in terms of the initial helicopter acquisition.

The helicopter fleet’s availability, reliability, capability and life cycle cost must also be taken into account. The Polish Armed Forces should be provided with a comprehensive solution. I like to think about this as an opportunity to deliver a complete solution that benefits both the Armed Forces and the citizens.

The competition is considered Poland’s largest ever defense acquisition and for sure will be very demanding.

Indeed. While military budgets are shrinking, Poland’s government has found the resources to modernize its helicopter fleet.

As to the tender procedure, we do have very strong competitors and we are competing against helicopters which made their mark in the history of aviation. However, these helicopters were designed 40 years ago.

Our product is at the start of its life and may remain in service with the Polish Armed Forces for at least 40 years. The AW149 represents a ‘new born’ multi-purpose helicopter competing against ‘the past’. pm

So, what do you think are the odds of you winning the tender?

The MoD will make the final decision, however, I strongly believe in our company, organization, people and their dedication, as well as the technology we are offering. They all give us a very good chance of winning with the AW149. We are confident! :: pm

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Finance

Growing demand for tailor made insurance solutions in SME Franz Fuchs, CEO of Vienna Insurance Group Polska, Compensa TU S.A. Vienna Insurance Group Polska and Compensa TU na Życie S.A. Vienna Insurance Group.

A

mong the few, the Polish economy has avoided severe damage from the economic crisis so far.

As we read in the latest report on the SME sector, issued by PARP (the Polish Agency for Enterprise Development), Poland’s Gross Domestic Product has increased by a total of 16% since 2007. In other EU Member States, it still remains under the pre-crisis threshold. Micro-enterprises, as well as small and medium-sized companies, which together constitute 99.9% of all businesses in Poland and generate three quarters of the GDP, are the driving force for the Polish economy and the major clients of insurance institutions, with a growing contribution to their premiums.

How do Polish entrepreneurs secure their companies?

Over 25%1 of small and medium-sized companies in Poland do not use any insurance in their operations. Among small and micro-businesses, as many as one in 10 and one in four, respectively, have not purchased any policy! This lack of protection means that when hit by an unpredictable event, their firms will be at risk of losing their financial balance. Micro-entrepreneurs are either completely unaware of how useful insurance can be in business or treat a policy as a waste of their limited funds. pm

1 All data taken from a Qualifact survey (May 2013): The finances of the SME sector 2013: The insurance services market.

28 :: polish market :: 7-8 /2013

But insurance, after all, is a crucial tool in managing risks for their businesses. Despite all this, SME insurance is a fast-growing segment of the market. Over a year, the gross premium written from small and medium-sized companies by Compensa has increased by 40%.

How do the smallest businesses insure themselves?

Micro-entrepreneurs who decide to purchase an insurance policy usually seek to secure their property against fire and other perils, thefts, burglaries, and robberies. Highly popular is an insurance policy which covers window breakages and the loss or destruction of electronic equipment. Unfortunately, there is less demand from micro-enterprises for business-liability insurance, even though in some sectors, food and construction for instance, this is a key component of their insurance protection. Indeed, as little as 22% of micro-enterprise owners declare that they do hold such a policy. In the first quarter of 2013, demand for third-party liability dropped by 10% compared to the corresponding period last year. Our experience shows, however, that small and mediumsized firms usually choose to insure this particular risk. On the other hand, it is important to note that the most often-purchased elements of insurance packages are enjoying less and less popularity.

As an example, I can give you policies against the risk of fire and other perils, held pm

by just over a half of all micro-entrepreneurs.

What’s more, the proportion of businesses interested in this type of insurance dropped in the first quarter of 2013 by 5% against the same period in 2012. This is due to a number of factors – some entrepreneurs tend to be overly optimistic or have a short memory, forgetting for instance, about the natural disasters of 2010. History likes to repeat itself, so last June’s reports of inundations and flooding throughout Poland should set off an alarm bell and make them think how to protect their businesses.

What actually is this business-liability insurance you’ve mentioned and what does it protect against?

Business-liability insurance can be of cardinal importance in the event of an injury or damage to the customer’s health or property, caused by an entrepreneur, his employee, or his product. This is a risk every company must take into account. Life writes the most improbable scenarios, and potential damages can hardly ever be predicted. At a restaurant, for instance, guests can get food poisoning, break their teeth on a pip while eating a cake, or have their coat stolen from a poorly-guarded cloakroom. In every case, the responsibility rests with the restaurant owner. A business-liability insurance policy will move the burden of compensation onto the insurer. What’s important, a welltailored policy can extend protection even beyond the entrepreneur’s clients. Coverage pm

Finance

can be widened to include employees or subcontractors. The value of a policy is calculated on the basis of the total protection period which the company has chosen, while premiums chiefly depend on the type of business activity, the companies’ annual turnover, the scope of the insurance, and the insured sum.

Not only are the client’s actual losses taken into consideration, but also profits he or she might have made but for the damage suffered.

Has the crisis affected companies’ decisions on insurance protection?

Looking back at the markets’ response to the onset of the crisis in 2008, in the months to come some businesses in dire straits will also seek savings in the field of insurance.

Consequently, they will save on voluntary policies, especially those not necessarily needed “right here, right now”. The problem, however, lies with fate – blind and completely oblivious to economic trends. Damage is just as likely to occur during a slowdown as during a boom, but in the former case it will hit with all its force, in particular when the company is weakened by the crisis. From the perspective of clients of SMEs, a crisis is the right time to cut spending. Except that a business does not operate in isolation from the outside world. Certain policy categories are coming into prominence just now – insurance against vandalism, professional-liability insurance and product-liability insurance. pm

efficiency for the entrepreneur. What you also need to remember is that the scope of protection can be freely combined, shaped, and adapted to the company’s requirements.

Clients have every right to pay only for what they really need. In this respect, Compensa is a market leader, as it provides the SME sector with an all-risk insurance package.

What is the remedy for underinsurance in the micro-enterprise and SME sector?

A company should identify any threats to its operations. By no means an easy task, so the coverage should be consulted on with a professional insurance advisor. I won’t exaggerate by saying that in the coming months, such a well-planned policy may be a “make or break” for quite a number of businesses. Selecting the right insurer plays a crucial role here. I’d advise that special notice be taken of the insurer’s financial background, its scope of operations, and the service package.

Insurers adjust their services regarding insurance coverage and prices to fit the needs and abilities of the average customer. We, by contrast, remember that small businesses often require an individual approach and attention, but the actual purchase of insurance should be as quick, simple and affordable as pm

possible. Clients must know that, without needless formalities and for a fair price, they can buy the right insurance cover and transfer the risk onto the insurer – hence they need a separate product. In our package, this is “Compensa Firma” - a policy based on the allrisk formula mentioned earlier – an insurance for the company’s property against all risks except those clearly specified in the General Insurance Terms and Conditions. The package nature of our services for the SME sector allows their free combining and adjusting to the company’s needs. An added value is their price, which is more attractive than when several policies are bought separately.

Insurances keep on growing and responding to the requirements of the SME sector.

Compensa, over its 20 years on the Polish market, has gathered extensive knowledge of the problems and expectations of small and medium-sized businesses from a variety of sectors – restaurants, services, construction, retail, and others. With micro- and SME businesses in mind, we have devised an insurance package that will protect them financially against unpredictable events and allow their owners to fully concentrate on their business. ::

Are there any sectors which don’t need to be concerned about insurance?

Risks should be accounted for by everyone.

You simply cannot sleep peacefully with all the abrupt changes around. Surely, some sectors will be less affected by what’s happening due to their profiles, like for example hightech, consulting, or agency companies. Where no production is involved and the company’s property plays an insignificant role, the risk of losses decreases. But they can occur nevertheless. Sometimes problems stem from the employees, especially those low-skilled, employed during a slump or offered reduced wages. In such cases, companies should aim at insuring themselves against errors made by their personnel. pm

What are the market trends as regards insurances for the micro-enterprise and SME sector?

The market is heading towards the socalled all-risks protection, that is insuring company property against all types of risk.

Hence, the protection covers every event, excluding those not specified in the contract.

Such a comprehensive solution ensures cost pm

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Finance

Predictable business partner Artur Tomaszewski, President of Bank DnB NORD Polska S.A., talks to Maciej Proliński.

taken to withdraw from these two segments and deal only with corporate banking.

The decision to change the strategy is well justified in business terms. Poland is perceived by everyone as a very attractive market, including for banking. At the same time, the market is very big and very competitive.

Many large financial groups have already built here a very strong position in the retail segment, which means that the scale of one’s operations has to be big enough to be able to benefit from this market and translate one’s market share into a reasonable return on capital. DNB Group has estimated that a 5% market share is the minimum scale needed.

Without holding such a share one can hardly build a good organic expansion project.

The bank’s Norwegian owners have not taken up this challenge because the risk would have been too high.

expanding it is consolidating in some sectors and we are taking part in this consolidation.

We are focusing on the sectors which have not been hit by the downturn. We are a major bank in providing funding to the energy sector, especially the oil, gas and renewable energy industry. We have taken part in the largest transactions – mergers and acquisition – conducted in Poland in recent years in the technology, media and telecom (TMT) sector by more than 10 large clients. We have a quite strong position in providing services for businesses operating in the automotive industry.

We are among the first banks which started to offer funding to local governments. I am confident that in these uncertain times Polish companies and local governments will be interested in cooperation with our bank, a stable business partner supported by DNB, a large Norwegian group.

And what is the situation in the corporate banking sector like? What about competition in this sector? What potential does the Polish market have at a time of economic slowdown?

I have to add that corporate banking is the business model well-tried by our owner on the markets of many countries – not only in Scandinavia but also in both Americas, Britain, the Far East and other places. The potential of the Polish market is definitely very attractive. Of course, macroeconomic data are not strong now – in the first quarter of 2013 investment in the economy slowed. According to the National Bank of Poland (NBP), this was due to a significant weakening of investment by the business sector and a sharp drop in housing investment. Everyone must have been surprised by this economic slowdown.

Few expected that GDP growth would be so slow this year. But the situation of large firms on the Polish market has become significantly polarized. There are sectors visibly affected by the crisis and sectors that are still faring excellently. Even if the market is not

Does Bank DnB NORD Polska have innovative solutions, which can be offered to these companies?

Being a specialist bank operating in specific sectors is to be, and is, our strength. Innovations and products which sound good as a marketing tool can usually be found in retail banking. In corporate banking it is the knowledge of the sector where the clients operate that is important. A corporate client expects that the bank will simply understand their business. It is not, as was the case in the past, merely checking the client’s liquidity, capitalization and debt figures and then deciding whether or not to provide funding.

Today, this is not enough. One has to understand the clients and their sectors, talk about their business and business model. And financial analysis should be made at the very last stage to confirm the whole process in figures.

I think the keyword here is predictability the predictability of one’s partner. And predictability is possible when one understands the client’s sector. Of course, this is easy to say but, when one looks at the market, there

pm

Bank DnB NORD Polska focuses today on corporate banking, that is something with which it started its operations in Poland 10 years ago. Is this new strategy a signal sent by the foreign investor to the market?

Yes, it is a kind of return to the roots. But I have to stress that corporate banking has always been an important element in the bank’s development strategy. Throughout these more than 10 years, banking services for large companies were always a stable provider of revenue and profits for the bank.

With time, we added services for small and medium-sized (SME) firms and retail clients to our business. Last year, the decision was pm

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pm

Finance

are few banks which not only say so but also operate in this way.

At what stage are you now in the process of reorganizing the bank?

The reorganization of the bank is nearing completion. We have managed to sell the whole distribution network of the bank’s non-strategic part and a part of the retail and SME portfolio together with jobs. This means that the scale of job cuts associated with the change in the strategy was two-times smaller than expected. At the beginning of last year, our bank employed over 950 people. Around 270 of them were taken over by Getin Noble bank after it had bought our retail business. We are going to enter the year 2014 with a staff of only 300 people, corporate banking and a mortgage portfolio. We have already built teams for individual sectors, trained them or acquired experts in these sectors.

We still get a lot of competence in this area from our owner. We are finalizing the sale of the Monetia banking agencies network. Unfortunately, we have not managed to sell our brokerage office. pm

You specialize in financing the energy sector, both as a group and as a Polish bank.

Is the energy market really a bright future for the banking industry? The market potential of the renewable energy sector, for instance, is still untapped in Poland because we still do not have effective support instruments.

I think there will be no big revolution in the energy sector in Poland in coming years.

We have to rely on coal, although it will certainly be gradually replaced by energy from gas and green energy. Now, the telecommunications and automotive industries are among our strategic sectors. The biggest number of projects we finance is in these sectors. But this may change in the future, with the energy sector coming to the fore. Unfortunately, the protracted work on the law on renewable energy sources has the biggest influence on decisions concerning new investment projects.

We hope that renewable energy issues will be regulated soon because the sector needs money for the implementation of investment projects. We are interested in continuing and expanding our activity in the renewable energy pm

sector and believe that the uncertainty associated with the regulation of this market will soon be removed. It is worth noting that we signed our first loan agreement for funding a renewable energy project in 2010 and the most recent agreement only one month ago, despite the absence of the regulation. So far our bank has signed loan agreements for the construction of wind farms with a combined capacity of 144MW worth around PLN235 million. DNB Group has more experience in this area. DNB banks throughout the world have funded the construction of wind farms with a combined capacity of around 1.6GW worth EUR3.25 billion. We are also looking at the photovoltaic energy market. We would like to be one of the few banks to finance the sector as soon as it is properly regulated. ::

What has been the financial outcome of this change in the strategy so far? What plans does Bank DnB NORD Polska have for 2014?

As I said, for a few more years Bank DnB NORD Polska will be a dual bank – with corporate banking and a portfolio of mortgage loans. We projected that we would close the years 2012 and 2013 in the red, however with a positive operating profit. It is worth noting that last year’s loss was much lower than expected and reached slightly over PLN15 million. This year, the net loss may be higher. And next year the bank should generate a net profit of at least PLN20 million, with the mortgage portfolio pushing return on capital down throughout this period. In 2014, the corporate banking segment should generate a gross profit of PLN40-50 million. We would like this segment’s rate of return on capital to be at the level of 13%.

Our business target is to provide PLN1 billion in credit every year. And we will reach this goal this year. I do not want to talk about the number of new clients because this is not the most important thing for us. Our goal is to attract clients operating in the sectors which we regard as being of key importance for us and to allocate PLN1 billion to them annually.

We are oriented at expansion, and have capital and funding from our owner. pm

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Finance

Private Equity funds as the force stimulating economic growth Despite the fact that global foreign direct investment (FDI) is declining, the inflow of FDI to Poland in the first four months of this year surpassed the result for the full year 2012. According to an UNCTAD report, in two years Poland will become the fourth most attractive economy in Europe and the 14th in the world. One of the main FDI sources is the Private Equity (PE) funds, which have thus far located EUR3 billion in Poland.

Jan Sosna

P

oland is the leader in absorbing PE funds in Central and Eastern Europe (CEE). These have provided approximately 800 companies with capital originating almost entirely from abroad. “The domestic capital is too small, while Open-End Pension Funds (OFE) are prohibited from investing in PE. This contrasts with the USA, where pension fund investments have created such companies as Google or Amazon”, said Marek Panfil, PhD, head of the Department of Enterprise Value Measurement in SGH in Warsaw. “Of course, there are positive examples of PE investmen in Poland, such as Żabka, Luxmed or Zelmer, but there is a shortage of spectacular successes of technological start-ups, which have the strongest influence on the imagination of investors.”

Meanwhile, not only the resources of OFE, the further operation of which on the Polish market is questioned more and more, but also the resources of the government programme ‘Polish Investments’ have little chance of ending up in PE funds. The resources distributed through Bank Gospodarstwa Krajowego (BGK) and Polskie Inwestycje Rozwojowe (PIR) are addressed to both state-owned companies and private investors (including foreign ones), but – as Michał Markowski, the chief economist of the State Treasury Ministry said: “Although they will concern projects not only technically justified, but also guaranteeing a market rate of return, they will hardly reach the level of 20% currently expected of PE.” However, positive signals for PE growth are coming from several international

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financial institutions. Lucyna Stańczak, the director of the European Bank for Reconstruction and Development (EBRD) for Poland, said EBRD wanted to continue the 20-year cooperation with PE funds in Poland. “EBRD has co-financed approximately 25% of the PE investments in Poland, including such companies as Meritum Bank or Emitel, and it holds the experience of the PE managers in high esteem, particularly that obtained in the period of the crisis,” Stańczak said.

What attracts PE funds to Poland?

According to Dieter Lobnig of UniCredit Corporate & Investment Banking Bank Pekao, the main lure is appreciation for Polish human capital, as well as Poland’s stable and secure banking system. Marcin Bębenek, a partner of Royalton Partners, also makes mention of the low and stable political risk, adding that “among the emerging markets, Turkey and Russia could compete with Poland, but that is where the thrill seekers will go.”

What deters PE from Poland?

Piotr Bednarski of Polski Bank Przedsiębiorczości S.A. believes that PE is not very popular in Poland. “They say that we are making money, but they do not say that we develop companies, create jobs. Poland could also use a ‘development bank’ supporting PE, like many other countries have, and this can still be done. What is more important are the difficulties in the generation of projects with high IRR (internal rate of return), which causes superfluidity of

capital for worthwhile projects and generally a lack of leading fields. We have already had a trend for cable TV, now there is one for the medical sector and shopping chains, and no one is able to foresee what will happen next,” added Bednarski.

The generational ‘changing of the guard’ as a paradise for PE?

Following 1990, Poland enjoyed an explosion of entrepreneurship. Today, the generation of the 40-50 year-olds of those days is thinking about what to do with the business, to which they have dedicated twenty years. Straight family succession is not always the obvious answer. The segment of small companies records continuously growing changes – the niches are consolidating, there are acquisitions – a clever player no. 3 is even able to acquire player no. 1, there are numerous combined transactions, large players are formed from several small ones, etc. Many owners are looking for a new investor, without expecting too much. While there was no recession in Poland, the EU’s crisis uncertainty has pacified the expectations of the owners – the ‘bullish’ approach is history. Does this open the operating field for PE? This shows that the ‘win-win’ model can be difficult to apply. ::

This article contains remarks by the participants of the Private Equity Forum, organised by the Executive Club in Warsaw on 5 June 2013.

Finance

Growing in strength Adam Maciejewski, President of the Warsaw Stock Exchange (WSE), talks to “Polish Market” about algorithmic trading and foreign companies’ interest in the exchange.

What position does the Warsaw Stock Exchange have in the region?​ The Warsaw floor is one of the most active markets in Europe. There are almost 900 companies listed on WSE’s two equity markets, which is an excellent result if compared with other exchanges in our part of Europe and the world as a whole. In Europe, we have always been one of the best developing markets. In the first half of 2013, the only floor to record more flotations than WSE was the London Stock Exchange. It is true that the number of IPOs is not enough for a stock exchange to be a leader but it is a good measure of issuers’ activity and shows how they perceive the role that the capital market plays in the development of business. There are more and more foreign firms among the nearly 900 companies listed on WSE, which is another measure of our position in Central and Eastern Europe (CEE). Thanks to the implementation of the UTP trading system, we are technologically comparable with the world’s most developed stock exchanges while the efficiency and security of our infrastructure is of the highest standards. Over the past six years WSE-listed companies issued shares worth EUR16 billion as initial public offerings while the value of secondary offerings exceeded EUR15 billion. On the Catalyst market, we already list around 46% of non-government bonds issued in Poland. In this respect, we are one of the leaders among European markets.

There are other hard data reflecting our position in the region. From 2008 to June 2013 our share in equity trading in the region – the markets of Poland, Austria, Hungary and the Czech Republic - increased from 26% to 67%. pm

In the case of bonds and futures, our share is almost 90%. And our share in the value of capital acquired in that period was virtually 100%. The capitalization of WSE-listed companies has exceeded 50% of the total capitalization of the stock exchanges in the region.

However, it is not capitalization but first of all the trading volume and activity on the IPO, SPO and bond markets that truly reflects the scale of interest in our market and its real value and strength.

Now, our strategic goal is to grow from the position of the regional leader to become a hub for trading in financial instruments. We can achieve this by improving our liquidity, further expanding the network of local and remote members and expanding the pool of investors and issuers. To be able to operate successfully in a competitive environment, we have to be open to international cooperation. We are seeking solutions which will benefit the Polish economy, regional participants in the market and WSE as a company. If we want to keep our leading position in CEE we also have to ensure the development of our regional partners and clients. In the long run, it is only balanced development that makes sense.

WSE is also active in attracting foreign companies to its floor.

In a free-market economy, companies decide by themselves how and where they want to acquire funding for expansion. Our market gives them access to international capital.

Additionally, attractive companies do not get lost among thousands of other instruments and it is easier to attract interest in them from pm

investors and analysts. We offer a world-class standard of services at attractive prices and a stable and diverse pool of local and foreign investors. Thanks to these efforts, there are already 54 foreign companies listed on both markets of the Warsaw exchange. The June debut of another foreign company, AviaAM Leasing, is a result of our consistent strategy to attract new issuers.

WSE’s Market Development Section actively cooperates with many organizations in encouraging foreign companies to come to the Warsaw floor. Apart from our office in Kiev, since June we have had our representative in London. This enhances WSE’s presence in a place where our important business partners are present and reflects our readiness to expand cooperation with foreign participants in the market.

Does the new trading system mean that algorithmic trading is WSE’s future?

We hope that members of the Warsaw exchange will offer their clients algorithmic trading, including the use of the High Performance Assess service which we are going to launch soon. This should mark the beginning of change in Polish investors’ habits. We want the investors to move towards very advanced trading methods and faster processing of various kind of information. Initially, the new services will be used mainly by foreign players, who have experience in this area.

But we are taking a number of supporting and educational activities to ensure that domestic investors join the foreign ones as soon as possible. In today’s world it is impossible to function without modern tools. :: pm

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Economy

To make up for the differences Piotr Wojaczek, President of Katowice Special Economic Zone, talks to “Polish Market”.

able to procure at least 23 new investment projects worth PLN0.8-1.2 billion and creating 1000-1200 new jobs.

The government has decided to extend to 2026 the time limit for the existence of Special Economic Zones. In what ways will this affect the functioning of the Katowice Special Economic Zone?

The decision to prolong the functioning of the Katowice Special Economic Zone is of crucial importance to us. The present deadline, set for 2020, has minimised the likelihood of new investors making use of public aid and, consequently, limited the attractiveness of Special Economic Zones. The new deadline will provide an important argument in our talks with potential investors, especially as we are competing with many other countries, such as the Czech Republic and Slovakia. I would like to highlight the fact that it is we who set the deadline, so the time frame is defined by the Polish government. The functioning of Economic Zones is governed by EU legislation, which does not impose on us any time restrictions. pm

What are this year’s achievements within the Katowice Special Economic Zone?​ We have so far granted 17 new permits, in which companies declared investments worth nearly PLN675 million and created at least 768 jobs. More than half the investments (9) are reinvestments. Krosnopan OSB is planning the largest project – it is going to build its second plant in Strzelce Opolskie, which will give employment to 200 people. The reinvestment of Automotive Lighting Polska ALP is another sizeable project, as the company will invest PLN116 million in a plant in Sosnowiec. This investment will allow ALP to maintain a thousand jobs that have already been created. Another vast project is planned by Dayco Poland. The manufacturer of engine components is planning to rent manufacturing space in Tychy and provide 265 jobs. By the end of 2013 we expect to be pm

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pm

So this means that Special Economic Zones could well function for the next 50 years?

Precisely, government chooses so.

The year 2014 will mark a change in the maximum amounts of public aid for enterprises in Poland. Are there any implications for the Katowice Special Economic Zone?

The Katowice Special Economic Zone includes investment areas in Śląskie and Opolskie provinces, most of which (ca. 75%) are located in Silesia. Public aid is calculated on the basis of investment costs, or labour costs incurred for new employees in the previous pm

two years. The cap on the amounts received as public aid in Śląskie province is 40%, 50%, and 60% of these costs – for small, mediumsized and large enterprises respectively. In Opolskie province, public-aid amounts are 10% higher for each type of enterprise (50%, 60%, and 70% respectively). The amount of public aid is calculated based on the proportion of GDP in a particular province compared with the average EU GDP. These proportions have changed owing to the fact that the region where we operate has been undergoing intensive development. The GDP for the region has been growing at a higher rate than the average EU GDP. Accordingly, there has been a decrease in the intensity of public aid received. Next year it will be decreased by 15 percentage points. For example, a small enterprise in Śląskie province will be able to receive a maximum of 45%.

Is this bad news for the zone?

Only on the surface. On the one hand, less-intensive aid will be compensated for with better prepared investment areas, the possibility to obtain temporary exemptions from property tax and the best proportion in Poland, and Europe, between quality and the cost of human resources. On the other hand, the Katowice Special Economic Zone has been created to make up for the differences in economic growth between Poland and other EU Member States. Lowering the caps for public aid indicates that we have fulfilled the tasks entrusted to us. :: pm

www.ksse.com.pl

Economy

Towards a New Deal in Europe Zygmunt Berdychowski, President of the Programming Council of the Economic Forum in Krynica

2005, 2006, 2007, and in our region even in 2008 and 2009. I have no doubt that further development is not possible without putting in place new rules.

How and in what areas should the new rules be developed to govern the functioning of the Community?

It seems that the political shape of the Community is just as important as the economic dilemma. It is often said that certain solutions cannot be accepted simply because it would mean crossing the Rubicon, transforming the Community into a federation, and a federation means a lack of independence, sovereignty, something that, at least for some countries, is an absolutely fundamental value. So the political context of the ongoing debate is extremely important: it seems that Europeans are aware of the fact that economic presence in many areas is only possible when it is preceded by the military presence, or financial involvement in restructuring, aid, or in any other form of activity. There is no doubt about that, and ways are sought in the Community how to mobilize: first - capital which will allow such a presence, second - elites to accept a slightly different way of making decisions, especially when it comes to activities outside the Community, third - efforts to remodel the relationship between the old and the new members of the Community. The first time will not happen again and we cannot pretend that the cheap labour force from Poland, Slovakia, Hungary, and the Czech Republic did not contribute to a high growth rate in the UK, Germany and France for several years after the enlargement of the Community. I think that no one, including Poles and the Polish government, will ultimately accept a situation in which the only way to maintain economic growth is to emigrate to the developed western economies. pm

On September 3-5 major figures from the world of politics and business in Central and Eastern Europe will meet during the 23rd Economic Forum in Krynica. The motto of this year’s Forum is “Towards a New Deal”. Is Europe, which has difficulty agreeing on rescue plans and regulations, ready to prescribe a comprehensive “new deal”?

Let’s start with the simple observation that the basic resources related to the enlargement of the European Union are exhausted. These resources are a cheap labour force in the East and outlets in the West, technological inflow and major infrastructure projects in the East, performed by large Western corporations. The synergy due to the enlargement of the EU no longer bears profits that it has brought so far. And this is the moment when you have to start to talk about it in order to develop new rules for the functioning of the Community, the economy, but also a kind of political consensus that would allow the recovery of vigour, which could be seen both in the East and in the West in the years pm

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These circumstances make the debate “Towards a New Deal” very special, but does it have any chance for success?

The countries of Central and Eastern Europe are looking for the new rules not because they expect some extra money (although it is obviously desirable), but first of all because we want our western partners to be the beneficiaries of our mutual development. After joining the Community in 2004, we have received a lot of funds, but at the same time 1.5-2.5 million Poles work at low cost for businesses in France, Germany, Spain, UK, etc. We should talk about how to change this model so that benefits are mutual. Political questions must be answered by politicians, because it seems that without a clear definition of what we want to be, it will be difficult for the European Union to achieve the global clout. And there are no illusions about the fact that the presence in Africa, Asia and South America will be conditional on whether we have enough capital to financially support the operations of large corporations in these areas, and whether we have enough power to exercise influence in doing business. These are all questions about whether the political dispute over the future of Europe will bring one or another answer. pm

It looks like there will be a lot to talk about in September in Krynica...

Yes, and foreigners will make up over half of the participants of the Forum. In this respect, some progress has been made over the previous editions. We will host many interesting people not only government officials, but also business people and opinion leaders - academics, journalists, NGOs. The Forum will be even more prestigious than before. :: pm

Transport

Continued investments bolster market opportunities for the Port of Gdynia

The investments in infrastructure facilities, warehouses and office buildings that are being systematically made by Port of Gdynia Authority SA aim at adjusting its services to the current and forecast market needs. The positive financial results achieved year by year by Port of Gdynia Authority SA enable the implementation of new projects. In 2012, total investment expenditures amounted to over PLN62 million. In the last 10 years, Port of Gdynia Authority SA has invested more than PLN660 million. It is planned that in 2013-2015, investment expenditures will exceed PLN730 million. This is the current mission of the Port Authority which creates conditions conducive to a further increase in Gdynia’s terminals cargo operations, and ensures competitiveness with the ports of Western Europe and other great competitors on the Baltic Sea.

T

he implementation of many current and future investment tasks would not be possible by using just the own financial resources of the Port Authority, as was the case till November 2009. The Infrastructure and Environment Operational Programme, providing resources from the EU Cohesion Fund, has become an indisputable ally of the port managers. In 2009, Port of Gdynia Authority SA concluded a financing agreement for the project entitled “The Reconstruction of the Port Channel in the Port of Gdynia”. This project, worth more than PLN95 million, managed to gain co-financing amounting to over PLN51 million. Next, in July 2012, a financing agreement for the project entitled “The Development of Port Infrastructure for Handling Ro-Ro Vessels, with Road and Railway Access in the Port of Gdynia” was signed. The cost of this project amounted to PLN119 million, and the co-financing from the EU Cohesion Fund, to nearly PLN45 million.

According to the management of Port of Gdynia Authority SA, it is beyond all doubt that without these costly projects, further development of the cargo handling potential and attracting new investors would not be possible. The newly modernized infrastructure, especially roads, will be used not only by cargo operators and their clients, but also

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by Gdynia residents. The redevelopment of the Pomorskie Wharf near Skwer Kościuszki Street, as well as of Janka Wiśniewskiego and Polska Streets, are the examples of such port projects that perform municipal functions.

The projects also contribute to the economic recovery connected with employing major contractors and cooperating companies.

Aside from the priority projects in port infrastructure like these currently implemented – the development of the ro-ro terminal infrastructure, the development of the road and rail access infrastructure to the eastern part of the port, the redevelopment of the Szwedzkie Wharf, the development of the last, non-built-up section of the port in the Bułgarskie Wharf area – there are many other investments made in warehousing facilities and office buildings. Another stage of the erection of the Logistics Centre in the western part of the port is ongoing in the form of a second, in this area, high storage warehouse (floor area -18 840 sq. m.). This warehouse will support logistics services connected with the receiving, completing, warehousing and distribution of highly processed LCLs in packages, excluding hazardous cargo. An earlier Port of Gdynia Authority SA’s investment in respect of warehousing consisted in the construction of a high-storage warehouse with an area of 8 thousand m2 at 69

Kontenerowa Street, which was commissioned in December 2010. In turn, the operation of bulk goods terminals will be facilitated in the upcoming years by such projects as the construction of a new, four-chamber grain warehouse on the Śląskie Wharf and the construction of a ground grain warehouse in the area gained after the demolition of the P warehouse at 2 Indyjska Street in Gdynia (for which Bałtycki Terminal Zbożowy Sp. z o.o. will provide comprehensive technological equipment).

Currently, the Port Authority is planning further projects and counts on them being co-financed from EU funds in the 20142020 financial period. These will include a public ferry terminal on the Polskie Wharf and the deepening of Port Gdynia internal waters to 15.5 metres, together with associated investment in wharves and other hydraulic engineering structures.

Irrespective of the investment in port infrastructure, it is worth highlighting that the planned regulations, favourable for the ports with regard to the administrative supervision of cargo, and the accelerating of further modernisation of railway lines, organisational conditions and multi-modal freight prices in Poland, will be very helpful in ensuring competition with the ports of Western Europe. ::

Transport

Use assets and do more…

Prof. Bogusław Liberadzki, Member of the European Parliament, Deputy Chairman of the Committee on Budgetary Control and Member of the Committee on Transport and Tourism, talks to Ewelina Janczylik- Foryś.

a great pro-development opportunity for Poland: logistics can become a Polish national specialty and no strategic documents are necessary to achieve this.

Does such an approach have a future?

It seems that Europe’s economic development is still at the beginning of the road.

If we now have in Poland A1 – A2 or A4 – S3 road interchanges, it means that Poland is a region of new oportunities. In these places there should be sites provided with electricity, sewerage and road infrastructure in order to encourage businesses to locate production facilities in Poland. Transport is the least noble part of logistics. Logistics is our added value and we must not give it up. We often complain that none of the biggest projects such as the S3 expressway, the A1,A2 and A4 motorways, the railway lines: E20, E40, 65, C59 are not built from border to border, and thus are not part of the European transport network. Although they are largely financed by the EU, they do not generate any significant added value and do not bring expected benefits. The longer the process of fragmentation is, the worse it is going to be in economic terms.

Another thing that is no doubt of strategic importance is to encourage the development of businesses and transport operators.

There is no policy of creating and supporting large, flagship operators, and the examples of LOT and PKP only confirm this. Germany does have such a dedicated policy, and the effect is that German railways are tens of times larger than Polish carrier. The state does not support carriers, and does not consider them instrumental in pursuing industrial policy because there is no industrial policy.

Another element of the strategy is awareness. Infrastructure built with European funds must be later maintained at a decent level. Maintaining a motorway is not the pm

Why is there no strategic document in Poland coordinating transportation plans for the coming years? And what are the most important provisions it should contain?

This is a basic question, but I think that drafting such a strategic document is a relatively easy thing to do. But even without such a document there are a couple of issues that raise no doubt. First, the geopolitical situation of Poland offers great potential benefits due to connecting eastern and western parts of Europe. Our geographical situation is no longer a problem, a misfortune, and starts to be our great asset and advantage. Transportation means providing services that either come together with the sale of goods, or are the object of export themselves (transport can be considered in terms of export of ships, cars, aircraft). Transportation covers freight and logistics. Logistics encompasses all matters relating to physical trading of goods. It is about a new field of activity in Poland that is developing well. This can be pm

same as maintaining a national road. Much has been done, and it is a serious sin, for the financial condition of construction and infrastructure maintenance companies to get deteriorated in each sector: railway, road and aircraft. The potential was lost and the outcome is that in a few years’ time we will not be capable to maintain in good condition hundreds of newly built motorway and expressways. It is indeed a paradox that companies winning government procurement tenders go bankrupt. This is because, on the one hand, and let’s be honest here, companies are greedy and lower prices, on the other hand, the government in general should not allow the situation in which a company offering to build a particular stretch of the road suggests 50% of the expected price and wins the contract.

The company meets the requirements of public procurement.

Then it is the government that should be blamed for such legal conditions. We must not create illusions because it destroys the country and businesses. What is characteristic about transport is that it deals with almost philosophical categories: time and space. We want to move as quickly as possible. Transport is a ubiquitous factor of any social, cultural and economic process. There is an element of transport in whatever product we hold in our hands. Following the EU approach, we should systematically support competitiveness of the economy. It is not true that the cheapest is the best. Transport is best when it causes the price of goods supplied to customers to be the lowest. It is thanks to transport that goods are delivered on time and some intermediaries disappear. We always choose the cheapest solutions. For example, choosing the cheapest version of Pendolino probably saved us PLN 100 million, but greater outlays must pm

7-8 /2013 :: polish market :: 39

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be made to modernize the railway line in order to achieve the required speed.

The EU promotes railway transport because it is eco-friendly. Perhaps the EU should have common railways without technical barriers, or at least similar standards?

I have the impression that now differences between the member states are enormous.

First of all, Poland should have a role in shaping the EU transport policy. Each EU country has different systems, technical studies and standards applied. The concept is being developed of railway interoperability, that is driving modernization projects from the Atlantic to the Urals, or at least to the eastern border of Poland. It is about investing in railways with similar parameters such as the axle, speed, but also in common traffic management systems. What is needed is Poland’s presence at the European forum, especially in Brussels. We are very little visible; Polish government simply does not take a position, does not speak on key issues for the creation of a European system, its vision, projects, and then its financing. pm

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Speaking of the export of Polish transport, PKP Cargo has revealed its plans to expand towards the Central European market. The Polish Financial Supervision Commission has just received the prospectus of PKP Cargo. This is the first in more than one year announcement of an IPO on the Warsaw Stock Exchange. Do you think PKP Cargo will succeed in searching for an investor on the stock market?

Let’s look at the facts. In 1997-98 PKP Cargo carried 228-230 million tonnes of cargo; at present it carries 100-107 million tonnes of cargo. If you want to call it a success, I do not share this view. A variety of factors, outside operational activity, contribute to financial results of PKP Cargo. Today we are witnessing an attempt to recapitalize the company through the stock exchange. Will this offering meet with a warm reception? Time will tell ... I personally would very much like the government to treat PKP Cargo as a flagship railway carrier, which is the second largest one in the EU, and which has a chance to expand into the European market if helped by the state. It could contribute to the development of the North-South transit through Poland provided that there is a good railway access to ports in Gdańsk, Gdynia, Szczecin, and Świnoujście. There are works underway to upgrade the railway line to Gdańsk and Gdynia, but it is not the case in Szczecin and Świnoujście. We could also be connected to the maritime highway system in the Baltic Sea. :: pm

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40 :: polish market :: 7-8 /2013

Transport

Innovation in transport

I

n the operations of modern companies, investments in infrastructure development and employee training are simply indispensible. The constantly changing market environment requires companies to be flexible and adaptable. Delta Trans Group regularly invests in novel IT solutions and technical resources, while increasing the range of services provided. This makes it a well-established company in the transport, forwarding and logistics sector. A strategy of progressively increasing its competitive edge turned a company that operated in international transport into a recognised and highly-regarded enterprise providing comprehensive logistics services, including supply chain management at all levels of the logistics process, and also rendering complementary services with added value. Delta Trans Group will be celebrating its 25th anniversary next year.

As customer expectations are growing, transport companies, have to continuously improve their operations and competitiveness. These demands have led to the emergence of the need to increase economic and technical efficiency in transport, and, in particular, to introduce innovative solutions in

these respects. To achieve maximum customer satisfaction, Delta Trans Group is constantly enhancing the quality of its services.

Appropriate management and close cooperation with the customers, and, most importantly, the understanding of their needs, lead to a transport process that lets the users successfully achieve their objectives at the lowest cost possible. The Lean Management concept employed by the company ensures the top quality of services provided.

Delta Trans Group utilises cutting-edge IT solutions that enable it to integrate the key divisions within the company and allow allround management of the fleet, the drivers, and transport activities. The IT solutions deployed additionally ensure maximum control over the transport process, covering order receipt, delivery, and payment. Such solutions reduce the number of errors and make it easier to responde to difficult and complex situations and adapt to changing conditions, which leads the company to success. IT solutions are used for the analysis and control of the services provided. The optimisation of runs and distribution, particularly the reduction of dry runs, and the application of the JiT concept, make the company better suited to

the individual demands of the customer, resulting in more efficient delivery.

The use of multifunctional vehicles, especially allowing heavyweight transport, undoubtedly contributes to cost reductions, as does the continuous monitoring of the fleet and keeping it in good shape. Each year the company pursues a number of viable objectives regarding, environmental aspects.

These efforts are aimed at reducing average fuel consumption and toxic substance emissions. Notably, each and every vehicle operated by Delta Trans Group meets the requirements of the EURO 5 standard, and the fleet is partially equipped with energy-saving tyres.

The company’s drivers take part in training sessions to hone their driving skills.

Companies operating in the transport and logistics sector must not forget that the current high saturation of the market and the resulting fierce competition should stimulate them to seek new solutions in transport. If they wish to prosper and flourish, they need to innovate and introduce solutions that deliver top quality in services and maximum customer satisfaction. By adopting this attitude they will create the conditions that the sector needs in order to thrive. ::

7-8 /2013 :: polish market :: 41

Transport

CTL Logistics – the all-round logistics operator Polish Market talks to Jacek Bieczek, President of the Board, CTL Logistics

In early July your company was granted the ECM certificate for entities responsible for the maintenance of railway tracks.

What are the measurable benefits of this distinction?​ The ECM certificate enables us to provide clients a broader service package for managing tank wagons for transporting hazardous materials and other special railway units.

Thanks to this, for example, we can apply our own management system to clients’ wagons.

The ECM confirms the fulfilment by CTL Logistics of the highest technological and organisational standards in terms of rollingstock maintenance. pm

CTL Logistics has been on the market for over 20 years and has received numerous awards. For instance, you have won the Leader of Rail Transport Competition in two categories. What elements have contributed to your success?

Our approach to contracting parties and the all-round package we provide enables our clients to focus on their primary activities. Cooperation with us brings them great benefits, including, first and foremost, a reduction in the costs of logistics processes such pm

42 :: polish market :: 7-8 /2013

as raw-material supplies, the transport and shipping of products, transshipment, siding management and much more. These activities make up the logistics package of the CTL Group, which are tailored to the customer’s needs, and give them a range of possibilities to use our transport systems on the NorthSouth and East-West routes in Europe.

The companies of CTL Logistics are based not just in Poland but also in several other countries in Central and Eastern Europe.

Do you have plans to expand into other European markets?

In pursuing our strategy, we are investing a great deal in cross-border transport, and in our activities in Germany and east of the Polish border. Last year we shipped over 3 million tonnes of cargo in Germany, and in the first half of this year we handled about 320 thousand tonnes on the eastern border of Poland alone. The service covered, for example, transport, customs clearance, transshipment and other tasks that we perform every day, among others, at our terminal in Bruzgi. We are also closely looking at the situation south of Poland. In recent months we have tested pm

transport between Poland and the Czech Republic for automotive-industry clients.

With every year, the proportion of rail operators in Polish transport is decreasing, as road transport is getting more orders at their expense. What is CTL doing to handle this situation?

The last six months have proven that the situation on the transport market is highly dynamic. Both the rail and road transport markets have recorded a decline. Still, the railways are and always will be unbeatable for bulk transport. A good example is the situation on the German market, which is dominated by a national German operator, but this still leaves space for such companies as CTL Logistics GmbH. The domestic market also provides opportunities to compete with road transport, although this is far from easy. For a long time now we have been implementing a prestigious contract with BSH Bosch und Siemens Hausgerate for the supply of home appliances from Łódź to Nauen near Berlin, which was previously carried by road transport. We see the key to success in flexibility and alertness to shifts in market demand. pm

Transport Corporate social responsibility and environmental awareness are very important and fashionable subjects these days.

In the social context, what is the CTL Environmental Responsibility Programme based on?

In CTL Logistics we are making every effort to rationalise both production and administration. Such initiatives provide measurable results, namely reduced consumption of fuel, electrical power, heat, paper and other materials. On a macro scale our programme is being implemented in cooperation with the largest coal companies. Through our CTL Maczki-Bór S.A. Company, we are participating in a logistics chain for receiving and disposing mining waste. As part of this activity, we have transported and disposed of more than 90 million m3 of industrial side-products. We also conduct systematic searches for new solutions in collaboration with scientific research institutes in terms of processing side-products and finding new practical applications for them.

Another example of our activities is also the revitalisation of the Koniecpol – Częstochowa Stradom route performed by the CTL Service Sp. z o. o. Company owned pm

by the CTL Group. The investment plans involve the replacement of the rail-track surface, the strengthening of the track substructure, the replacement of crossovers and the revitalisation of engineering systems. Thanks to this, it will be possible to restore the parameters of railway infrastructure and reach timetable speeds of 120 kph, which will shorten the journey from the Koniecpol Station to the Częstochowa Stradom Station from 1 hour to about 35 minutes. This investment is essential for the local community.

A lot of time in recent public discussions has been dedicated to industry, and the power and construction sectors. There has been much less interest in the logistics sector. What is the current situation in the sector from your perspective?

Similarly to other sectors, the market for rail transport and logistics services is going through a crisis, which is being reflected in weaker results. More than in other industries, transport is susceptible to all kinds of changes. We are discussing competitiveness in relation to road transport, the costs of access to the railway infrastructure, and the impact of the impasse in the construction industry pm

and the aggregates market on the situation of freight companies. As other sectors, however, we are also waiting for the progress of events resulting from, firstly, the unification of European regulations, and secondly, the new EU Financial Perspective. Soon we shall see how well companies such as CTL Logistics will fare in this new environment. We are optimistic, but also equipped with a brand-new strategy for the coming years – it’s essential in business. :: The CTL Logistics Group is an international logistics company operating since 1992 on the Polish market and in other European countries. It provides its customers with complete logistics products involving the rail transport of bulk goods (i.e. coal, coke, aggregates, scrap metal, and others), containers, fuel, and chemicals, road transport, shipping, rail-unit rental and sidings management. The package covers railfreight transport, intermodal transport, shipping, transshipment services, customs consultancy, the management and maintenance of rolling stock and services at transshipment terminals. CTL Logistics provides international transport services, bridging the logistics gap between East and West.

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Road Building Industry

Unity makes you strong “The Chamber tries to cooperate with authorities at various levels, aiming to ensure that more money is spent on roads, the programmes managed by the administration are reliable, and that there is genuine cooperation between both parties in the investment process,” Wojciech Malusi, Chairman of the Board of the Polish Economic Chamber of Road Building Industry, tells Jerzy Bojanowicz.

How was the Chamber created?

The Chamber was set up in the spring of 1994 under the Law on Chambers of Commerce, which requires 100 founding members for a nationwide chamber of commerce to be established. We were 106 at that time, and at present we bring together about 200 companies.

Over the 19 years we have become, somewhat surprisingly, the biggest industry trade group in the whole construction sector.

The Chamber’s genesis dates back to the problems faced by businesses in the course of economic transition in the early 1990s.

Most of these problems were due to reorganization – that was right in principle – of the road sector, involving the separation of administration from contracting. The General Directorate of Public Roads, which preceded the General Directorate for National Roads and Motorways, had an executive pillar. After its separation, 240 businesses were set up involved in the construction and maintenance of roads. They found it hard to operate because an organizational mistake was made: the founding body of these enterprises, employing 100-200 people, was the Ministry pm

44 :: polish market :: 7-8 /2013

of Transport that had no time to take care of them, because it was concerned mainly with “giants” – railways, airports, shipyards, etc.

The initial operations suffered from the lack of the law that would allow these businesses to convert into companies. Once the law was passed, the privatization process gathered momentum. I cannot ignore the positive role of the then Minister of Transport and Maritime Affairs, Bogusław Liberadzki, who enabled prompt privatization of the businesses from the road sector. We do speak with one voice, especially when presenting dilemmas of the road construction companies to the government and the legislature.

And we know that unity makes you strong.

In addition to representing the road sector, we also take care of the market.

What do you mean?

We operate differently compared to the widely understood marketing. Our client is specified: it is either the state or local governments that have public funds at their disposal.

Their share in the revenues of the road sector as a whole reaches 99%, as the only private investors are the owners of hypermarkets who order the construction of parking lots.

Poland is the only country in which the programme of the construction of motorways and express roads led to the bankruptcy of many companies involved in it. It is a touchy issue, because it is the decisions of the state as an investor that led to this situation. I cannot think of a company that did not incur losses after getting involved in that business.

It is symptomatic. pm

Shouldn’t they blame themselves, since they placed unrealistic, too cheap bids?

A prudent investor should not be glad that the bids were well below the estimate. pm

You should immediately recognize this as an unreliable supplier and rejected his offer.

Because whenever and wherever, it is the investor that is responsible for the project. Their role is to create and establish such conditions of the tender, so as to select the best offer, which does not mean that it must be the cheapest. Otherwise, the investor is allowed to tender consciously dishonest contractors who offer the most abnormally low, unrealistic prices, not to comply with the project in time and at the expected technical level.

Nowhere in the world is there a ban preventing potential contractors from applying for contracts. Theoretically, it is assumed that anyone has the right to join the tender, but not everyone is capable of performing the contract, for example build a motorway section.

Therefore, the biggest mistake is that for various reasons investors fail to stipulate conditions that would hold back unscrupulous contractors. They bear responsibility for the fact that these projects limp along. I cannot think of any project carried out by the General Directorate for National Roads and Motorways that was complated on time, while private concessionaires, Autostrada Wielkopolska and GTC, kept up with schedules.

Chambers of commerce are - do not be afraid of the term - lobbying for their members...

Not true. We are not lobbyists. We deal with general matters. The Chamber, in accordance with the laws on the chambers of commerce and administration, has the right to give opinions on any bills drafted by the state bodies. Therefore, we give opinions on any bills directly or indirectly relating to the road sector. Of course, another question is whether our opinions are taken into account.

In 1996, we were successful in proposing that pm

Road Building Industry

part of the excise duty levied on fuels be allocated to the National Road Fund. By contrast, our suggestions were not considered regarding the law that provided for the use of the so-called partially motorable roads.

We consult all legal acts: laws and regulations. We cooperate with the Public Procurement Office on amendments to the Public Procurement Law. Some of our demands are taken into account, and some other, inconvenient for the investor, that is the state, are not. We actively participate in the activities of the Subcommittee set up last April as part of the Parliamentary Committee on Economic Affairs, in view of the consideration of bills amending the Public Procurement Law. The Chamber traditionally organizes free of charge seminars on public procurement during the Fair of the Road Construction Industry in Kielce and Warsaw. It is a curiosity that my colleagues from other countries have direct contact with relevant ministers, something that is unthinkable in Poland! It is a pity that we do use in Poland from the knowledge and experience of people who were building motorways in much worse conditions than in Poland, for example in the Middle East.

A group of advisers should have been created to avoid glaring mistakes.

You are talking about the Chamber’s multiple contacts with the Public Procurement Office, and yet for years the practice to set the lowest price as the most important criterion for assessing the bids has been criticized.

We have been talking about this since 1994.

The best solution would be to introduce... the public procurement rules that were in force before the Second World War. Amendments to the current law, and there were a few dozens of them, do not solve the problem. I do not insist that there should be only one criterion, such as the price. It is up to the investor to fix the security line I mentioned above by stipulating appropriate conditions in the tender specification. For default of such a buffer tenders are entered by companies with no experience and absolutely not prepared for the implementation of these tasks.

For nearly 20 years, the Chamber has been struggling to draw up a template contract. On the other hand, I wonder why we do not apply in Poland the so-called Conditions of Contract developed by FIDIC (Fédération Internationale des Ingénieurs-Conseils/International Federation of Consulting Engineers), which pm

46 :: polish market :: 7-8 /2013

contain descriptions of standards in view of the preparation and performance of investment projects, as well as template contracts and contractual provisions. But before using the FIDIC’s Conditions of Contract, you need to choose the contractor.

Life has shown that, regardless of the financial situation, government officials seem to attach greater importance to a good representation of the State Treasury’s interests.

The lowest price bid always wins and everyone accepts it. Another and more important issue is the public interest, the one which is usually distinct from the interests of the State Treasury. No account is taken of the fact that it is harmful to the state in the long run: first, because the government has to spend more to finish what has not been finished by those who placed the cheapest bids - see for example sections of the motorways A-1 and A-4, second, because when contractors go bankrupt, the unemployment rate goes up, and that is a burden for the state. We all lose, especially drivers, because roads are not built on time.

If tender conditions are well defined, it is easier to agree on the implementation of the project. The state should therefore act as Cerberus ensuring that unscrupulous contractors are not allowed to public tenders.

While the ordering party requires the bidder or the consortium to provide a track record of having completed within five years at least three adequate sections of road, it does not specify the location, so the references are presented from Africa, Asia, etc. Why does not the investor require the contractor - following the example of the World Bank - to have in Poland, at the time of placing the bid, a certain number of machines and to perform with its own forces some 60% of the contract value, including the earthworks and surfacing? If it did, there would be no accidental bidders. In Germany those applying for the construction of a motorway must prove that they have the required number of machines, such as road

rollers, and give their identification numbers.

In Poland the state officials are satisfied with the company’s statement that when it wins the tender, it will have the appropriate machinery, a bitumen mixing plant, and so on, while in Germany officials pre-check that there are machines actually parked with the specified identification numbers!

Another issue is the so-called “double tender” organized by the company that has just won the tender to execute all the works. And because it wants to earn, it lowers the price even more. The result is faulty projects made using materials of poor quality.

Are there innovative companies among the members of the Chamber?

It is difficult to be innovative in this sector, since paving methods were invented a long time ago. There are of course porous asphalts or scrubbed concretes, but these are only improvements of what is already well known. The first asphalt surface was made of ground bituminous limestone in 1835, and in the second half of the 19th century the petroleum asphalt technology was introduced in the United States. For example, in 1876 petroleum asphalt was poured on Pennsylvania Avenue in New York City.

It all depends on the ordering party, since the road construction industry uses the world’s most advanced methods. What differs is contracting culture and the level of cooperation between the investor and the contractor? They have divergent interests, and for the project to be completed within the specified time limit, there needs to be understanding between them, they must have a common interest. But that is something we still must learn. pm

How do you see the future of the sector?

It all depends on how much money will be allocated on road projects. ::

pm

Road Building Transport Industry

A big comeback of public space Adam Dybcio, President of Adrog Sp.j. Zakład Usług Brukarskich, whose core business is paving services, talks to “Polish Market” about a revolution in Polish cities.

Municipal projects in Warsaw, especially infrastructural ones, have for decades been regarded as a real challenge for construction companies because of the structure of the soil and because of the city’s history. The city has been damaged and reconstructed on many occasions, with no documentation surviving. Is that true?

Yes, it is. And let me give you an example. In 1999, before Pope John Paul II’s visit to Warsaw, we were repairing a damaged granite pavement on the flyover of Karowa Street, well- known for annual car rallies. On the night before the pope’s ride on the flyover, there was a torrential rain. The storm water sewer overflowed and the water washed away the base of the sidewalk and part of the roadway, leaving a 1.5-metre hole. The car of a Colombian TV correspondent fell into it but luckily there were no casualties. Things like that happen in a big city and no one is to blame. Warsaw’s soil is very difficult. No one should be surprised with, for example, problems with building the metro line which is under construction now – 60 years ago attempts to bore metro tunnels failed because the technology we had at that time was not sufficiently developed. Today, we are able to do that but whenever something is built or repaired in the city problems are inevitable.

On the other hand, one should remember that the appearance of Warsaw and other Polish cities is changing. We do not see now monolithic asphalt and concrete pavements or concrete block pavers of various kind, which in Western Europe are used exclusively around shopping and warehousing facilities. Europe is moving towards natural pavements, mainly stone ones, both when restoring old architecture and on modern projects. Of course, designers sometimes attach more importance to an attractive look rather than utility. pm

pm

It seems you are able to reconcile these two features. One example is Hoover Square on Krakowskie Przedmieście Street in Warsaw. Built by Adrog, it looks stunning and has a potential to be used in many different

ways. Another example is the space in front of Staszic Palace, which attracts passers-by on hot summer days with its water curtain. The fact that the paving is so resistant to this downpour, which was not planned in the original design, proves how excellent your workmanship is.

The credit for this goes to the use of natural stone – such conditions do it well. Unfortunately, our showpiece - Krakowskie Przedmieście Street – copes much worse with unplanned conditions. As the roadway has been narrowed, there are less vehicles moving along but public bus traffic is now more intensive. As a result, little remains of the beautiful natural colour of the roadway.

In cities across the world, including Warsaw, there is a real plague, which we have not been able to eliminate. It leaves numerous ugly stains on natural paving.

What is it?

This plague is chewing gum spitted out by passers-by. It breaks my heart to see the paving that we have brought to perfection being covered every year with more and more stains, which are practically impossible to remove.

Perhaps the culprits are simply not aware of that because generally for several years now we have seen much less damage done by vandals to street furniture and paving.

For the project on Krakowskie Przedmieście Street, the main part of Warsaw’s Royal Route, we used around 190,000 tonnes of stone imported from across the world. Additionally, there was not enough space there to arrange a regular “construction site” and for the storage of materials. Consequently, we had to solve very difficult logistics problems and do it in such a way so as not to disturb the functioning of important state institutions located in the area. This showed us that problems on structural landscaping projects may be greater than on projects involving the construction of buildings. pm

But there is much satisfaction.

Indeed, we feel satisfaction when we look at something that we have managed to do well and when we see that it serves people well.

Personally, I am satisfied for example with the pm

job we have done while revitalizing the surroundings of the Royal Castle, the area at the foot of the castle from the side of the Vistula river, especially the fountains. It is not only because thousands of people come there in the evening to admire “sound and light” shows with water and laser beams and because in summer more and more people seek there a place to relax and a refuge from heat. There are projects where satisfaction is combined with the splendour of the place we have managed to excellently arrange for visitors. One example is the area surrounding the Monument to Chopin in Łazienki Park. And there are projects where no splendour is involved, like for example revitalizations of parks, especially playgrounds for children. But it gives us great satisfaction that our children can grow up in a pleasant environment. I also think we are gradually building our reputation as a company specialized in “diverse but difficult” jobs. The renovation of the paving of the Old Town Market Square and Piwna and Szeroki Dunaj Streets in the Old Town, a project we have been awarded in a tender process and have just begun to carry out, has such a character. We had to respect the interest of the tourist sector but I do not hide that it will be another technological challenge for us to do the job now, at an unfavourable time of the year. :: Zakład Usług Brukarskich Adrog Sp. j. has operated since 1991 providing a whole range of services associated with the design and implementation of road building and maintenance projects, and with developing public and green areas. The company specializes in difficult paving works with the use of natural stone, granite and basalt pavers, concrete pavers and concrete slabs. It also makes vertical and horizontal traffic marking and traffic engineering designs.

The company renders its services in a reliable manner, and in keeping with deadlines, good building practice and technical experience. Since 2003 Adrog has held a certificate of qualification from Road and Bridge Research Institute and an ISO 9001:2000 quality certificate. Adrog is now repairing the paving of the Old Town Market Square, Piwna and Szeroki Dunaj Streets, Piłsudskiego Streets, Modernist and Naturalistic Gardens in Łazienki Park and the Military Cemetery in Warsaw.

7-8 /2013 :: polish market :: 47

Real estate

We put much attention to standards Stanislav Frnka, Country CEO, HB Reavis Poland Sp. z o.o., talks to Ewelina Janczylik- Foryś.

What is the office market in Warsaw like?

How does it compare with the markets in other CEE capitals?

Relying on my experience, I can “compare” Warsaw with Bratislava and Prague because HB Reavis operates on these markets. Political and economic considerations aside, Bratislava is a small market. There are not many global players on it. In Prague, the situation on the commercial property market is a little better than in Bratislava. However, one should remember about the scale when comparing a nation of 40 million like Poland, 10 million like the Czech Republic and 5 million like Slovakia. We carry out projects on all these markets but the situation in Poland is the best. And I think it is right to call it the leader among CEE countries. pm

There are now many office properties under development in Warsaw and competition is very strong. How are you going to attract customers for your latest project Konstruktorska Business Center?

What will attract them is our experience. We have been gathering it for over 20 years now. Konstruktorska Business Center is an office building located in the district of Służewiec. It is very well connected to other parts of Warsaw and offers the biggest single-floor area in Poland – 7,341 sq m.

This may be of interest for large companies which want to have all their departments on a single floor. Among the strong points of this office building is its architecture and environment friendliness. As regards the architecture, we are proud of the glazed façade of the building, its double-height reception area, the two parts of the building being connected by a suspended glass bridge, and top-quality finishing. The internal patios are filled with greenery and trees. As for environment-friendly solutions, the building has been designed to minimize its environmental impact and reduce the consumption of electricity, which will result in a significant reduction in the maintenance costs. In the process of construction, much attention is paid to standards applied in acquiring building materials and managing construction waste. A feature that may be interesting to prospective tenants is that the building will be powered exclusively by electricity from renewable sources – wind farms – and

that there will be 33 charge points for electric cars in the building.

This means that the importance attached to environmental friendliness is a standard in building rather than a fad, doesn’t it?

Definitely. Although one has to admit that green-building certificates, like for example the British certificate BREEAM (Building Research Establishment Environmental Assessment Method) have given rise to a kind of fashion for environmental friendliness. There are many cases where a building is certified but nothing more follows. In our case, these are not platitudes – we meet not only BREEAM requirements but also install modern and energy-efficient air-conditioning, ventilation and heating systems and so on. pm

pm

48 :: polish market :: 7-8 /2013

Tenants are particularly sensitive about rental rates and maintenance costs. What are the prices for renting office space in Warsaw?

The tenant interested in our project looks largely at costs, that is rental and maintenance costs. We give every customer a personal touch. I do not hide that we negotiate rental rates with them. As for maintenance costs, the reason why we have used all of the most modern solutions is to bring the costs to a minimum and make them as attractive for the tenant as possible. pm

The “open space” office layout is increasingly replaced by the “innovative office” design where the most mobile workers do not have a workstation of their own while in office they use one of the vacant workstations. Can this kind of change be seen in your offices as well?

Tenants increasingly want to have an influence on the design of the space they lease.

Our standard is to provide open space for 70% of the leasable area while the remaining 30% is enclosed office space. Rest areas are popular in open-space layouts. In Konstruktorska Business Center, space is maximally efficient. We can indeed see changes driven by the growing awareness of customers.

how much space is occupied by individual sectors?

At present we have lease agreements signed for 60% of the total office area. As regards sectors, we will definitely have businesses operating in the IT, air-conditioning and FMCG industries. Among the tenants are such companies as Żywiec, Otis, Carrier and IMS Health. HB Reavis Polska also has its office in Konstruktorska Business Center.

What are your investment plans in Warsaw and on other markets?

The office market has its ups and downs.

Thanks to our experience of more than 20 years, we are well prepared for any situation on the market. As I said at the beginning, investing in Poland’s capital is attractive for us and we appreciate excellent locations in the city. Among the investment projects now carried out or planned by HB Reavis Poland is Gdański Business Center I, which is now under construction, Postępu14 office building, Zachodni Railway Station in Warsaw and the West Station complex. We also own a site at the very centre of Warsaw and are now working on plans to develop it. :: pm

pm

pm

Could you say what percentage of the space has already been leased out and

Stanislav Frnka, Country CEO, HB Reavis Poland Sp. z o.o He joined HB Reavis in 2006. Since 2008 he has managed the company on the Polish market as Country CEO. Initially, he had dealt with the acquisition of new sites for development in Hungary, Romania, Bulgaria, Croatia, Ukraine and Poland. At present, he focuses on the stable expansion of HB Reavis in Poland in keeping with its strategy. He has contributed to the acquisition of the site for Konstruktorska Business Center and the implementation of the project. He also secured an agreement with PKP SA for the modernization of Zachodni Railway Station in Warsaw and the construction of the adjacent office complex.

One firm Many things to be proud of It is good to build more. It is also good to do it well.

With this philosophy we have been for many years among the largest construction companies in Poland.

Over more than twenty years of our operations we have built more than 400 modern facilities honoured with numerous awards.

A confirmation of the top quality of our services is the unabated trust of our Clients - this allows us to build more and more.

www.warbud.pl

Real estate

Better performance despite economic downturn Even in the rather unfavourable market conditions, Armatura Kraków has been able to increase sales and substantially improve their financial performance. Konrad Hernik, President of the Board of Armatura Kraków SA., talks to “Polish Market”.

The first half of this year was not a good period for the construction industry.

Indeed, the first half of the year was not a good period for the market for construction materials and interior furnishings. Being affected by the current economic slowdown and rather high unemployment, the demand for sanitary products remained fairly low. Additionally, due to the unusual weather conditions we have seen this year, the construction and installation works started much later than usual. Of course, this also had a negative impact on the market demand. We are forecasting that, depending on the product segment, the domestic sanitary market might have dropped year on year by over a dozen percent in the first half of 2013. pm

So how did Armatura cope in this market?

In planning this year’s operations, we expected somewhat unfavourable market conditions. Having achieved higher sales of faucets and valves by the end of 2012, we expected the sales of these products to drop in the first quarter. The decline did not surprise us, although we also had,delays in valve sales, being products usually frequently replaced after the winter season. However, despite having less success, we also saw developments that were positive for our sales. Last year’s implementation of antidumping duties on aluminium heaters by the European Commission allowed us to record very high sales levels of such products in the entire first half of the year. In May, we also introduced a wide range of ceramic products. In effect, we saw a definite sales growth during the second quarter of this year in comparison to last year, with a record high level of monthly sales in June. pm

Last year was not a successful one for Armatura. What is the company’s current position?

In 2012, the operations of Armatura were impacted on by three external factors at a time, which had a decisive impact on its financial performance. On the one hand, the pm

50 :: polish market :: 7-8 /2013

falling demand contributed, for most of the part, to the growth in the sales of the leastexpensive products with the lowest margin.

On the other, the over-20% rise in the USD exchange rate greatly reduced the margins of the products based on imported components, while the record-high prices of copper and aluminium significantly pushed up production costs. Additionally, the performance was greatly affected by the costs of stopping the extensive restructuring. Currently, most of the unfavourable trends are reversing. The falling prices of metal have greatly improved the cost-revenue ratio, while the fall and relative stabilisation of the USD exchange rate has affected the rise in margins. We have also successfully completed restructuring and implemented a significant part of the measures aimed at saving on production costs. In effect, we recorded a demonstrable growth in profitability across all product groups within the second quarter of 2013. The achievement of the expected cost savings, with growing sales, enabled the Armatura Group to record financial results it has not experienced in a long time.

What results can be expected this year?

Will the company pay a dividend?

In the second quarter of 2013 we came close to the results which we had previously targetted. The EBITDA level amounted to almost 10% of sales. The next quarters should see the high level of performance remain stable, even if with cautious expectations concerning the economic conditions. We are expecting that we will be able to achieve over PLN 18 million at the EBITDA level in the full year 2013. The improvement in the financial results of the Armatura Group also stems from the continuous trend of reducing the level of reserves and external debt. The falling interest rates are being accompanied by a significant reduction in financial costs. We are also assuming that the results of this year might grow after the possible sale of some of the real estate we own. In effect, we are expecting

that the net results produced during this entire year will allow us to return to the recommendation of paying a dividend.

What is your outlook for Armatura’s future? Is the improved profitability a onetime effect, or will it be a sustained trend?

In recent years, we have been intensively working on significant structural changes.

However, the difficult decisions have brought about the expected cost savings in practically all areas of our operations. Since 2013, we have been a much more cost-effective company, which is currently well prepared for an improvement in its performance, even in the period of economic downturn. Expecting the economy to slow down, we simultaneously developed new segments of product ranges and hence boosted our market potential. This helped us see both the potential for sales growth, mainly supported by new product groups, as well as further potential for improving the financial results. Even with cautious sales planning, our financial objective is to increase EBITDA by at least PLN 5 million per year and top the EBITDA level of PLN 30 million in the year 2015. pm

pm

How will the improved performance affect the stock prices?

I expect that with a further improvement in the results, in two years’ time the stock price will again exceed PLN 3. Following the significant improvement in the financial performance and given favourable prospects, the current value of Armatura’s stock is no longer reflective of the real-term potential. :: pm

Innovation

In innovation we trust Marcin Zieliński, Vice-president Industrial Development Agency (ARP SA), talks to “Polish Market”.

utilisation of the potential it has, ARP S.A. has developed “The ARP S.A. Development Strategy for the years 2012 – 2015.” with the intention to carry out innovative projects.

ARP S.A. intends to actively participate in the innovative economy, that is the knowledge-based economy, in which the successful entities are the ones that prove effective in searching for new, unique solutions, and which are capable of implementing such solutions in the economy. We are planning to expand the ARP S.A. portfolio by including additional innovative products, particularly those in the form of innovative, effective corporations, pro-innovation initiatives activating innovative business ideas (the organisation of contests for the business of the future), and diverse strategic alliances in the mix of science, capital, and business.

There is always talk of transferring scientific experience and knowledge into business, that is commercialising scientific research. However, it is still hard to see the results of such cooperation. The ARP strategy also addresses this subject.

What is your concept to make such cooperation successful?

ARP S.A. creates practical connections between business and science through the initiation of optimal forms of cooperation, particularly with NCBiR and research institutions and universities in terms of, the establishment of special-purpose vehicles. ARP S.A. has implemented and is carrying out several innovative projects as part of this cooperation.

In building a knowledge-based economy and providing entrepreneurs with greater access to innovative technologies, ARP S.A. is carrying out a project named the Radom Centre of Innovation and Technology (RCIT) LTD pm

Restructuring has attracted a lot of attention thus far. Today, as the ARP S.A. Industry Development Strategy for the years 2012 – 2015, shows you are transforming the primary focus of ARP S.A., with increased orientation towards innovative projects. So what is behind this transformation?

ARP S.A. is a strategic company of instrumental importance in the state’s policy to adapt Poland to operating within the market economy environment. ARP S.A. deals with restructuring oriented towards privatisation, and also inspiring competitiveness and adaptation to contemporary market conditions.

Seeing the ever-changing market conditions and needs, the legitimacy of stimulating the growth of entrepreneurial competitiveness, and the growth of value through the optimal pm

52 :: polish market :: 7 -8 /2013

in Radom, which aims at transferring innovative technologies to increase the competitiveness of the enterprises of Radom and its surrounding area. The project includes the construction of a technology incubator in Radom, which is to be followed by a science and technology park. RCIT is a project which will integrate the operations of institutions representing local-government authorities, the Radom scientific community, entrepreneurs, and social institutions involved in the development of entrepreneurship in the Radom region.

ARP S.A. commercialises the results of scientific research. In 2011, it became involved in the Nano Carbon project and develops Polish technologies associated with graphene. Within the Nano Carbon project it maintains cooperation with the following research institutions: the Institute of Electronic Materials Technology, the Institute of Precision Mechanics, the Tele and Radio Research Institute, and the Centre for Industrial Applications of Mathematics and Systems Engineering.

Together with the Polish Academy of Sciences (PAN), ARP S.A. is working on the implementation of a platform for the prediction of the results of research and development work. Under the contract for research and development signed with PAN, ARP S.A. finances the “Platform for Virtual Prediction Markets” programme, implemented by the Centre for Industrial Applications of Mathematics and Systems Engineering (PAN). The aim of the platform is to provide support for investment decisions in the area of the innovative economy, as well as the products of the future, the labour market of the future, the technologies of the future, and the future applications of innovation.

Innovation

ARP S.A. has completed the CEBBIS international project, which develops the innovation potential of companies by providing them with access to new IT tools, created through strengthening cooperation between the companies and the R&D sector.

ARP promotes the development of special economic zones (SSE). They will be closed down in 2026. The question is, what then?

Do you have a plan to sustain all the work and SSE management post-2026?

For almost 20 years, ARP S.A. has been managing SSE, offering assistance to entrepreneurs at every stage of investment-project implementation. It has helped identify the appropriate location, develop the infrastructure and adapt it to the needs of the project, so that the construction could commence and be successfully completed. This cooperation is not only about counselling and assistance in fulfilling administrative procedures and communicating with local-government entities, but also preparing tenders for the construction of production halls commissioned by the investor, and in some cases also capital participation. ARP S.A. can continue such operations after the tax exemptions in the special economic zones have been lifted. pm

You want to support innovation, which covers the replacement of coal-based energy production with the production of energy based on natural gas, and in the future on shale gas. Is this move not too risky? Our coal reserves are huge, while the issue of shale gas remains unclear.

Why is Polish coal losing so much value these days?

ARP S.A. is involved in innovative ventures falling under the State Energy Policy in the scope of the 2007-2015 National Development Strategy adopted by the Council of Ministers for developing energy-saving technologies and the acquisition of new and renewable energy sources, aiming to provide security of energy supplies, which is of fundamental importance in sustaining the country’s economic growth. The heavy demand for energy, the inadequate level of the development of the fuel production and transport infrastructure, the high dependency on external supplies of natural gas and the almost complete dependency on external supplies of petroleum, as well as the environment protection obligations, including those pm

associated with the climate, require strong measures to prevent the situation of the fuel and energy consumers from deteriorating. In terms of environment protection obligations, the European Union has established quantitative targets for the year 2020, the so-called “3x20%”, that is reduction of greenhouse gas emissions by 20% against 1990, a reduction of energy consumption by 20% in comparison to the projections for the EU for the year 2020, and an increase of the proportion of renewable energy sources to 20% of total energy consumption within the EU, including an increase in the use of renewable energy sources in transport to 10%.

ARP S.A. is carrying out the “Demand Response” initiative, which is the concept of the prospective implementation of demandmanagement instruments in the electrical energy system through intelligent measuring systems. Operationally, it is one of the instruments for the integrated planning of energy resources in terms of demand. The main objective of the initiative is efficient energy use through the reduction of consumption and load control (load reduction or load transfer to a non-peak period). Demand control limits the negative effects of uneven and excessive demand for electrical energy. This entails the growth of efficiency in the production, transmission, and distribution of electrical energy.

ARP S.A. has joined the support, under cooperation with the National Centre for Research and Development (NCBiR), for the development of technologies associated with the production of shale gas in the form of debt financing of a programme oriented towards the support of big, integrated research and development ventures, which cover the pilottesting of the developed solution to prepare and commercialise innovative technologies

in the field of shale gas extraction. The programme is addressed to scientific consortia with shares held by a business. The agency has entered into a contract with the National Centre for Research and Development on the joint venture concerning the development of original technologies for shale-gas production. Both ARP S.A. and NCBiR have allocated PLN 125 million each for each of the two recruitments. The first call for applications was closed on 22 November 2012. For the purposes of the programme, it was assumed that NCBiR would provide public aid in the form of subsidies for research and development to the entrepreneurs and scientific institutions within the consortium. Furthermore, large businesses have the opportunity to take advantage of loans granted by ARP S.A. for carrying out development works. The cooperation between ARP and NCBiR in the aforementioned programme allows the entrepreneur to obtain a loan through a simplified procedure, in that only one application is to be submitted to NCBiR. The defence industry is a very important sector of every economy, as it influences its strength and competitiveness. So what is the reason behind the objective to reduce equity participation in the companies that create the military-industrial potential?

The reduction of equity participation of ARP S.A. in military-industrial potential companies in the portfolio is dictated by ARP S.A.’s need to comply with “The Strategy for the Consolidation and Support of the Polish Defence Industry in the Years 20072012”, adopted by the Council of Ministers on 31 August 2007. :: pm

7 - 8/2013 :: polish market :: 53

Innovation

Fibre to the Home is the Future Krzysztof Witoń, President of HAWE SA, talks to Patryk Mirecki.

result of its popularity will be a deterioration in quality. When too many people will be using the same transmitter, speed will drop significantly. There is no such problem with FTTH technology.

What services are we talking about?

Among these services is entertainment, especially high quality television services, including interactive ones. But I want to emphasize the role of e-medicine, e-administration and business services of various kind intended for small and medium firms. Their introduction will be a big injection of energy to the economy. Global experience shows, as indicated by research studies, that an increase in the broadband penetration rate by 10 pct. points is translated into a rise in the region’s GDP by 1 pct. point. It is a huge chance for Poland, particularly its poorer regions, especially as we can use for this purpose the large EU funding allocated to us for development. Never again will we have a chance for making such a big progress in terms of technological, social and economic development. pm

To what extent does data transmission capability determine these days the introduction of new services to the economy, public life and consumers? How would you assess the resources of Polish data transmission networks? What factors are now driving demand for data transmission? Will the existing resources be sufficient to meet demand in individual network segments?

Data transmission capability is of course key when it comes to new services. And at present, there are no conditions in Poland conducive to their introduction. First, we still have the problem of digital exclusion in many parts of the country and even poor quality Internet access is not always available. Secondly, at around 0.5%, the penetration of fibre-tothe-home (FTTH) technology is only nominal in Poland. This is simply a disaster. We are falling behind not only European leaders, like for example Scandinavian countries, but also the countries in our region, like Russia, pm

54 :: polish market :: 7 -8 /2013

Slovakia and Bulgaria, which have taken conscious and bold decisions to build FTTH infrastructure and are now using it. We are even lagging behind Hungary and Ukraine, which rank at the bottom of the average category.

In the first group of countries, the penetration rate is at 15-35%; in the second one it is 5-10%. And one should remember about the Digital Agenda for Europe, which requires that by 2020 all EU citizens should have access to broadband Internet above 30 Mbps and 50% to broadband above 100 Mbps. It is only FTTH technology that can enable us to reach these goals.

There is much talk about another technology – LTE. Indeed, LTE technology has a big potential, but it will only serve as a supplementary solution for people between the home and office. Because of its limitations, the technology will ensure neither symmetric data transmission nor a stable transmission level. The pm

What position does your company have on the Polish data transmission market – in the backbone, distribution and lastmile segments? How much will this position strengthen as a result of the mergers and acquisitions you have already carried out or are planning to carry out in the near future?

At present, we have 3,500 km of our own backbone network and 500 km of distribution network. No one else in Poland has such a big asset. It gives us an absolutely unique position. Under our strategy, by 2017 we are going to extend our backbone network to 3,900 km by supplementing it with some geographically strategic sections. The distribution network is to have 6,800 km. And of course, we are beginning to build the last-mile network.

In five years’ time we want to have 700,000 km of lines connecting us to end-users. In the pm

Innovation

past, there was much talk about HAWE in the context of large acquisitions. I am not planning them. We have our mission and everything that is needed to carry it out. And we are focusing on that. In our business model, the important thing is that we will remain a carrier of carriers.

What does that mean?

We will not be competing for the end-user with such operators as Orange, Plus, UPC, Netia and others. It is them that will be our important customers. We will give them access to end-users and the technical capability to provide any service, even the most advanced one, on the basis of the best possible infrastructure, which has virtually no limits. Apart from these market leaders, we will give access to customers on equal terms to small local operators and content producers – small online broadcasters. Our model marks the beginning of a era of real and open competition, which is obviously the best situation for the customer. pm

A particularly promising area in the strategy of the HAWE corporate group for 20132017 is cooperation with the central and local government and the power sector in the construction and operation of broadband networks. But there are some problems with using EU funding for the construction of the networks and with reaching agreement with prospective coinvestors – owners of roads, railways and power companies - as to the construction of lines on a shared land. Will HAWE be able to overcome these difficulties?

Over the past 20 years the situation has changed considerably. HAWE has vast experience and know-how in network construction.

I mean not only technological knowledge but also expertise in dealing with legal complexities and similar problems. As I mentioned, we also have a 3,500 km backbone network, which we have designed and built. And we have carried out many projects. Of course, there are problems. We are greatly worried about delays in the implementation of some pm

EU-funded projects, not only because, as a company, we are interested in their implementation but first of all because the money is a big chance for Poland, which should not be wasted.

But I am optimistic because I know that we have a huge potential. We also have excellent partners, with whom we work on EUfunded and other projects. Our ORSS company works for example with Orange and Alcatel Lucent. We can also see huge interest from various partners operating in the telecom sector and other sectors. They are aware of the benefits that our cooperation can produce. Many of the talks we are holding have not been completed yet so I cannot talk about them in detail. But I am sure that the benefits and prospects that our cooperation on infrastructure projects offers will convince us to work together. ::

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7 - 8/2013 :: polish market :: 55

Innovation

Method for success: specialisation Wojciech Nawrot, DSc, Eng. the inventor of the crystal injection technology for building dehumidification, talks to Ewelina Janczylik-Foryś.

The last time we spoke was over 10 years ago. Let us remind our readers of the specific features of crystal injection, the technology you have created.

Crystal injection is one of numerous building dehumidification methods. This is a technology inspired by the work of Ilya Prigogine – a Professor at the University of Brussels, who studied the phenomenon of crystal self-organisation. He received the Nobel Prize in 1977 for the mathematic and thermodynamic explanations of this phenomenon. And I simply implemented this phenomenon in practice!

When I began to use this method, it was an absolute milestone! In those days, considering the time’s level of technology, it was an absolute novelty!

The crystal injection® technology entails the creation of a mineral anti-humidity barrier, the durability of which is practically timeless. It can be applied in vertical and horizontal anti-humidity insulation of walls, without the need to unearth the external walls, since the solution is injected into the structure.

The more humid the wall, the more effective this method will be. This is why, prior to the procedure, the injection holes in the walls are additionally dampened. The method can be applied to dehumidify humid structures made from any construction material, with various wall thickness and diverse levels of dampness and salinity. pm

What do you mean?

We operate differently compared to the widely understood marketing. Our client is specified: it is either the state or local governments that have public funds at their disposal.

Their share in the revenues of the road sector as a whole reaches 99%, as the only private investors are the owners of hypermarkets who order the construction of parking lots.

Poland is the only country in which the programme of the construction of motorways and express roads led to the bankruptcy of many pm

56 :: polish market :: 7 -8 /2013

companies involved in it. It is a touchy issue, because it is the decisions of the state as an investor that led to this situation. I cannot think of a company that did not incur losses after getting involved in that business. It is symptomatic.

What are the advantages of this technology?

In contrast to other methods, this one is very affordable, while also convenient and durable – with no time limits. Furthermore, it is environment-friendly and simple to apply, as well as it builds an anti-humidity barrier with mineral products made in Poland and from Polish materials. Also worth noting is its absolute harmlessness to humans and buildings. Now it might seem obvious, but then, hearing about all those toxic epidemics around, we considered this as a major advantage of the injection method. pm

Where can we see your work?

The technology was first used in the palace in Łowicz in 1987. Other buildings subjected to dehumidification with crystal injection® include the National Theatre in Warsaw, the Chopin Manor in Żelazowa Wola, the Cenacle in Jasna Góra, the Navy Command headquarters in Gdynia, the Maria Konopnicka Manor in Żarnowiec, and numerous sacral buildings and palaces in historic complexes across Poland. pm

The technology is enjoying much popularity in Poland and abroad. But how did it all start?

Since July of 1987, over 20 thousand buildings have been dehumidified in Poland and abroad, including approximately 200 in Western Europe. Currently, over 300 Polish and 16 Western European companies operate under the crystal injection® license.

I won’t deny the fact that the beginnings were very hard. I could not count on my fellow community, or any support or promotion for pm

my invention. I dare say my technology was battled against, because it ruffled the market in those days. Please try to imagine the sense of dislike from the competition.

But as I understand, the situation has changed. The trust in the technology has risen.

Yes, my persistence and hard work was worth the trouble. Together with the Military University of Technology, we undertook a special experiment. Using my dehumidifying method, we were able to save numerous valuable monuments. We did this without any financial reward; you could say that this was our contribution into the preservation of Poland’s cultural heritage. pm

All the barriers prompted you to create an Auteur Technology Park.

I used the funds obtained from the implementation of my patents to set up an Auteur Technology Park with an approximate area of 10 thousand m2. The business has successfully operated and expanded since 2002.

The initial purpose of the park was to promote the invention. Currently, several other companies operate there, launching innovative products and services at a European level. Of course, we mutually support each other with our knowledge and experience. These great people are creating an aura conducive to development. pm

Innovation

You hold almost 50 patents. Considering the current implementations, this is an impressive number.

I believe that, in order to achieve good results, in-depth research should be carried out within the same domain. At the moment, however, Poland indeed lags behind other countries with regard to the number of patents. pm

pm

What is the reason for this situation? After all, not only has our technical thought not changed, but, quite on the contrary, we have enhanced our potential.

Please note that before World War II, Poland did not have the same problems as it does now. But in those times, our patriotism was clearer. After 123 years of occupation, we were much closer to the global leaders in more areas than now. Besides being created, new technologies were also taught in numerous schools of science. Today, the shortage of such schools is a substantial problem.

Furthermore, the current social atmosphere does not favour the promotion of the talent path. Polish inventiveness rests with Polish universities. Unfortunately, we are missing that national note of economic patriotism.

We have no respect for our own solutions,

our own technological thought. This is despite patriotism being one of the keys to patent generation.

“Leaders makes leaders!”, as Americans say.

Please tell me how Poland, a medium-sized country in Central and Eastern Europe, can be a seedbed for talents and leaders?

What are your plans for the future?

I have accomplished almost everything that I think is possible in this technology.

I would like to continue to develop my activity, but in the area which I know and in which I specialise. :: pm

Wojciech Nawrot, DSc, Eng. Graduated from the Faculty of Chemistry at the University of Warsaw in 1962, becoming a research assistant to Professor Wiktor Kemula. In 1971, he completed five-year doctoral studies at the Faculty of Civil Engineering at the Warsaw University of Technology. Later that same year, he defended his doctor’s thesis, written under the supervision of Professor Włodzimierz Skalmowski.

He is the author of 47 patents and nearly 100 publications – mainly in the field of materials technology and structural physics – as well as three monographs on the protection of buildings from corrosion.

Wojciech Nawrot is the inventor of the crystal injection technology for dehumidifying buildings from the humidity drawn inwards from the ground.

For its creation and implementation, he has received numerous awards and distinctions in Poland and abroad. He has had seven gold medals bestowed upon him at the most important global invention exhibits in Brussels, Geneva, Pittsburgh, Beijing, Casablanca, Nuremberg and Moscow. In 2006, the U.S. American Biographical Institute chose Wojciech Nawrot as the “Man of the Year 2006”. In the same year, the International Biographical Centre in Cambridge, England, qualified the accomplishments of the author of crystal injection by adding his name to the “Cambridge Blue Book 2005/2006” book of contributions. On 22 October 2009, Minister Radosław Sikorski presented Wojciech Nawrot, for his services to the promotion of Poland abroad, with a Diploma of the Minister of Foreign Affairs and a commemorative pectoral signed by the President of Poland.

Minister Radosław Sikorski presents to Wojciech Nawrot a Diploma of the Minister of Foreign Affairs

7 - 8/2013 :: polish market :: 57

Innovation

Modernity in the interest of the natural environment - time for ECO INNOVATIONS Eco-innovations lead to the development of new products and processes that significantly decrease the adverse impact on the environment. They are the answer to the modern economy’s requirements: the combination of innovative solutions with the interests of the natural environment.

Despite the ongoing changes, Poland is one of the least eco-innovative countries in Europe.

Bogdan Sadecki

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holistically at a given solution. This attitude should include not only the direct, but also the indirect, results of its application.

The most common classification of ecoinnovations includes the following types:

• technological, e.g. products, processes, • social, e.g. behaviour, consumption habits, • organisational, e.g. eco-audits, green R&D, • institutional, e.g. cooperation platforms, informal groups, networks.

Eco-innovations are considered by the European Union as an important element in environmental policy, as they are indispensable to the meeting of environmental-protection requirements and the development of economic competitiveness. This important issue has been brought up in cooperation with the Poznań International Fair in the debate entitiled “Eco-innovations made in Poland. The near or distant future?” The meeting was held last year on 24 November during the POLEKO International Trade Fair of Environmental Protection. Jan Skowronek, Coordinator of the Polish Platform of Environmental Technologies (PPTŚ), highlighted that “State Administration should create a business-friendly environment in the field of eco-innovations and environmental technologies. In turn, businesses should generate demand for such solutions, and science should create supply based on national, EU, and global-industry needs.”

Joanna Węgrzycka, Director of the “Business for the Environment” programme from the Environmental Partnership Foundation noticed the presence of an eco-innovations market in Poland. “Many SME’s are implementing new solutions because they have to if they want to keep their business afloat.

Therefore, environmental technologies are being developed and will be developed. Currently, the attitude of companies is changing

as they begin to notice in this area an opportunity to create new products and services.

And so, for instance in the Clean Business programme competition, the greatest number of applications in 2009 was seen in the innovative-product and innovative-process categories. This shows that SME’s are interested in the sector of environmental technologies.”

Marian Grądkowski pointed out that the real demand is mainly for simple and affordable solutions. “Companies with a global reach are serious competition for Polish producers.

Implementation costs and relatively low economic efficiency represent barriers for many pro-ecological solutions.”

Iwona Ciach, Chief Specialist at the Department of Environmental Instruments, stated that the Ministry of the Environment had committed itself to creating a concept of an environmental technologies monitoring system. “Work on the monitoring system, whose main aim is to facilitate access to information on environmental technologies, is ongoing.”

Enterprises implementing ecoinnovations in Poland, 2006-2008 (percentage of the whole) Industry %

Services %

In total

26.5

16.1

The public sector

35.6

23.3

The private sector

26.1

16.0

10-49 employ- 21.7 ees

14.6

50-249 employees

34.1

20.6

> 249 employees

57.5

35.0

Source: Central Statistical Office (GUS) (2010)

T

he concept of eco-innovation emerged not so long ago - in the 1990’s, in response to the growing awareness of threats to the environment on the one hand, and the increase in the importance of innovations for competitiveness and economic development on the other. In the face of increasingly serious ecological issues and the search for new and more balanced paradigms of economic development after the recent global crisis - eco-innovations are subject to increasing interest on the part of public authorities and scientists.

The term innovation is constantly evolving; it has become extremely popular in recent years thanks to various European Union initiatives and support programmes. Eco-innovation is innovation that increases the efficiency of natural-resource use in the economy, decreases the adverse impact of human activity on the environment or boosts the resistance of the economy to environmental pressures.

The definition shows that as well as reducing the negative impact of economic processes on the environment, it is equally important to use natural resources in a productive way. In addition to the ecological dimension, it also addresses the economic (i.e. cost reductions) and safety issues (the decreasing dependence on supplies of resources). Also eco-technologies, ecological or environmental technologies, or “green” technologies - the ones that have some environmental advantages - are identified within this term.

Unbalancing ecosystems will more and more often lead to a sudden increase in the pressure of the changing environment on economic systems - for example, the outcomes of climate change and the necessity of reducing its cost through adaptive actions. Practical experience in developing and introducing eco-innovations shows the necessity to look

Innovation

• the generation of savings – lower consumption of energy and other resources • the reduction in external costs • the implementation of innovative technologies • the creation of a favourable company image

Businesses implementing ecoinnovations in Poland, 2006-2008 (percentage of the whole)

many cases eco-innovative actions are part of general modernisation in a given enterprise. At the same time, environmental regulations were not mentioned as a substantial factor behind the undertaking of environmentally-beneficial actions.

Poland is among the least eco-innovative countries in Europe (source: Ekoinnowacje w Polsce. Stan obecny, bariery rozwoju, możliwości wsparcia. [Eco-innovations in Poland. Current condition, barriers for development, support opportunities] The Institute for Structural Research, Warsaw 2012).

The sources of such a state of affairs should be sought in broader innovation-related prob-

Factors that make companies undertake environmentally-beneficial measures The need to lower the costs The need to improve the condition of the local environment The improvement in the company’s image The need to modernise the technology An opportunity to improve market position For the employees’ sake (the issue of OSH) Not applicable Legal obligation (applicable laws) Clients or customers’ pressure or requirements Residents’ pressure Not applicable Local authorities’ pressure Banks or insurance agencies’ pressure or requirements

% 76 55 55 43 39 29 21 16 16 6 4 2 2 0

Source: the Environmental Partnership Foundation (2010)

Businesses should take interest in ecological innovations, because they allow them to increase their competitiveness, among others, through:

source: GUS (2010)

All the major obstacles listed above are experienced the most by SME’s, which have limited funds at their disposal and less opportunities to gain useful knowledge and experience than large enterprises.

The European Commission has stated that the 4 Polish companies on the list of the 1500 world’s most innovative businesses were put there… by mistake. ::

Example: Audi’s LED lights as an ecological innovation approved by the European Union

In 2010, the Environmental Partnership Foundation, conducted a survey among SME’s which revealed that the main motivation to undertake actions to the benefit of the environment is the striving to lower the operating costs of a business. Therefore, this shows that Polish entrepreneurs are noticing the efficiency dimension of the eco-innovations and economic benefits resulting from their implementation. Companies often undertake such actions to improve their image, and also, which is quite interesting, due to nonbusiness reasons, to improve the local environment. In comparison with the research conducted several years before (the Environmental Partnership Foundation 2004), there has been a significant increase in the importance of this factor. This is reflected in the businesses’ growing awareness of ecological issues, and the importance of a pro-environmental attitude on the market. The comparison of the statistics on factual pollution with the self-assessment of the entrepreneurs (Sokół 2009) demonstrates that the surveyed enterprises’ assessment of their own impact on the environment appears incomplete. In

lems – both when it comes to the research and development resource and its results and the conservative approach of Polish business to the implementation of novel solutions. At the same time, compared against the overall picture of innovation in Poland, eco-innovation is relatively strong, which may suggest that this area has the capacity to shape Poland’s innovation in the years to come. Another serious hindrance is the ignorance of entrepreneurs. Despite a general increase in ecological awareness and the understanding of the cost reduction potential connected with the implementation of environmentally-friendly solutions, businesses still have problems with the identification of the opportunities and benefits of implementing eco-innovations in their companies. All this is accompanied by low legal awareness (resulting from being under-informed and too weakly supervised), the underestimation of one’s impact on the environment, and the reluctance to use counselling services in this field. Financial barriers comprise a general problem at every stage of the development and implementation of novel environmental technologies.

LED lights substantially decrease fuel consumption, which means that such lighting systems will have a significant impact on the economy of vehicles through the reduction of CO2 emissions. Due to this, the European Commission granted Audi’s solution the official certificate.

Research on how much fuel can be saved owing to the discussed lights was commissioned. Main-beam headlights, dipped-beam headlamps, and number-plate lights were tested. In ten New European Driving Cycles, the tested Audi A6 exhibited a decrease in carbondioxide emissions by one gram per kilometre. As a result, the European Commission officially recognised that LED lights are an innovative solution reducing CO2 emissions. Audi is the first company to have received such a certificate.

For example – conventional, halogen dipped-beam headlamps require more than 135 W of power, whereas Audi’s LED lights show much greater efficiency, using only ca. 80 W. LED Daytime Running Lights made its debut on the Audi A8 W12 in 2004. In 2008, there appeared the R8 sports model, which was the first car in the world to feature full LED lights.

LED lights are characterised by high efficiency and provide high safety and comfort. Owing to the colour temperature of 5.5 thousand K, the light it produces is similar to daylight, almost completely reducing the drivers’ eye-fatigue. LEDs do not require maintenance, and their life equals the life of the vehicle.

7 - 8/2013 :: polish market :: 59

Innovation

End-to-end solutions Wojciech Głownia, General Manager Dell Poland, talks to Błażej Grabowski.

Since June 2013 you have been General Manager Dell Poland. Before, you were responsible for the region of Central and Eastern Europe. What are the tasks ahead for you?​ In June I was entrusted with the responsibility for business in Poland. Compared to other CEE countries, business in Poland is the largest, and the market is the most developed and advanced. That is something that creates great opportunities, but also poses different challenges. Polish customers have often very special expectations, as they seek tailor-made solutions. Companies in Poland no longer believe that if they have problems with infrastructure, it is sufficient to add another server, switch or the likes. This is not a comprehensive solution that solves the problem. Customers expect from companies like ours business consulting in terms of infrastructure. pm

Does it mean that Dell is a consulting company?

Step by step we are moving in this direction. This is due to a change in strategy as a whole; we do not do here anything against the corporation. A few years ago, our founder Michael Dell, along with the company’s management, decided to pursue new development paths and modify the corporate strategy. We are going to move from a worldwideknown supplier of several types of solutions (PCs, notebooks, servers) to being a strategic advisor to our customers with respect to infrastructure and its use. pm

pm

So where does Dell see the greatest potential?

60 :: polish market :: 7 -8 /2013

In the past three years Dell took over a lot of technology companies. The distinctive thing about all these acquisitions was that the acquired company’s line of products and services was complementary to ours. It is a well thought-out strategy and now we are facing the problem that some of our customers do not know exactly what we offer because it is such a wide range. Many customers traditionally identify our logo and our company with a supplier of computers or servers, but not with infrastructure security, although we have the best solutions in the world in this respect.

What is now Dell’s message to the market, then?

Dell is a provider of comprehensive endto-end solutions for network infrastructure, including cloud solutions. We provide our customers with efficient infrastructure solutions. It often happens that customers have their own infrastructure, but the cost of its maintenance and use is far too high and needs optimizing. They want to use their infrastructure to do more things and pay much less. And we are able to provide such solutions. It is important to optimize the IT infrastructure management, and I am talking about all of its components such as data centers, servers, switches, storage solutions, and network management. What is becoming very popular with businesses is Bring Your Own Device (BYOD), or turn on your device to the corporate network, so you can use it normally. This is a challenge for many IT administrators. We offer tools that simplify the whole process and at the same time make it possible to exploit the full potential of employees. pm

If an employee has got accustomed to using a particular computer or smartphone, and the company makes them work with other tools, it will take some time before they get used to them. We must remember that today’s employees represent a new generation that does not understand why they should go to the office if the same can be done at home or anywhere else, and the same applies to devices.

Employers cannot afford ignoring the needs of employees and there is no turning back.

Does all this mean that what Dell offers is primarily addressed to large audiences?

What we offer includes solutions for companies of all sizes, for very large, but also for medium and small ones. An example of a solution is the VRTX server. It is a device in which in a single case there is room for some blade servers, disk array for flexible expansion, switches, and four power supplies. The whole device is quieter than a standard computer, and can easily be put under the desk.

This gives you a full data center solution in one box. And that is a solution dedicated to small and medium-sized businesses; there is no other product of this kind on the market.

Medium and small businesses are very important customers for Dell. pm

Overall, what objective do you think is currently the most important?

My dream is that if any-sized company in Poland feels that it needs an IT infrastructure solution, it would think - I have to see what Dell offers. :: pm

Innovation

A University that looks ahead…

The Medical University of Lublin has an established reputation on the Polish education market.

For years it has occupied top positions in national rankings prepared by the media. As nowadays the academic community is expected to combine their intellectual potential with the language of business, Maciej Proliński reports on the good practices and plans in this aspect he found in the Development Strategy of the Medical University of Lublin for 2014-2020.

T

he Medical University of Lublin is the city’s most popular higher-education institution, with 15 candidates per place on average, and as many as 30 at the Faculty of Medicine with Dentistry Division. “Candidates choose our university convinced that in the future there will be no shortage of jobs for its graduates.

They are right. Our graduates are virtually unaffected by unemployment – nearly all of them find jobs,” said Włodzimierz Matysiak, the university’s spokesperson. 17 years’ experience in English-language teaching attracts more and more foreign doctors-to-be every year. 1,050 foreign students from 55 countries give the university 13th place in Poland in terms of internationalisation. This is very important, as we cannot forget that the fate of higher-education institutions in the coming years will be decided on the continental level. In a shared educational and academic space, only those universities which provide up-to-date curricula and have a substantial academic record will stay afloat. Today, when you are running a school such as the Medical University of Lublin, it is impossible to keep these separated.

Over the last few months we have been looking for directions for the university’s development, which has resulted in the Development Strategy of the Medical University of Lublin for 2014-2020, that contains ambitious, far-reaching plans for the future. It provides a number of very promising assumptions, the implementation of which will give the university not only prestige, but also a stronger position on the education market, in Lublin, and in the macroregion. The most important objectives include the need for greater activity by the university in elaborating educational and health policies, and systematic

62 :: polish market :: 7 -8 /2013

activities in the field of image building in a competitive environment for education services. This is reflected in a set of operational objectives, that is building a network of international cooperation, and bolstering the university’s position in relations with the socio-economic environment as a key partner in developing health and educational policies in medical sciences. One might say these are just declarations and plans, but in Lublin you can already find good practices in the field of providing intellectual potential, combined with the language of business and responding to contemporary challenges.

The Medical University of Lublin will soon have its own Centre for Experimental Medicine. The project worth PLN8 million, will be implemented by Skanska. The research centre will begin its activities in 2014, as the second facility of its type in Eastern Poland. As part of the project, the contractor will build the centre and its supporting infrastructure.

The centre will conduct scientific research for clinics, and the pharmaceutical, chemical, food, and agricultural industries. The experiments will set the directions for the development of medicine. The centre will also enable the academic staff of the university to develop and improve their skills, which will be reflected in higher quality teaching.

Investing in R&D facilities is an opportunity to tighten cooperation between the scientific and business communities. Thanks to the resources from the “Development of Eastern Poland” Programme, the Medical University of Lublin was able to furnish equipment for its labs and develop collaboration with enterprises in the veterinary and medical industries.

Within the framework of the project “The comprehensive equipping of R&D laboratories

conducting research on biomaterials and modern methods for analysing the substances used in biomedical and pharmaceutical sciences”, state-of-the-art research infrastructure has been provided to four specialist labs in the university’s four divisions - the Chair and Department of Pharmaceutical Microbiology with the Laboratory for Microbiological Diagnostics; the Chair and Department of Biochemistry and Biotechnology; the Chair of Chemistry and the Department of Physical Chemistry, and the Chair and Department of Forensic Medicine. The university has earmarked nearly PLN13 million for this purpose, of which PLN11.6 million will be granted from the “Development of Eastern Poland” Programme.

The lab equipment is used for research into molecular biology, enzymology, and materials engineering. Purchasing advanced hardware allowed the Chair of Biochemistry and Biotechnology to develop its scientific-research cooperation with business, including VetAgro from Lublin, a producer of veterinary medicines, and ChM from Juchnowiec Kościelny, a manufacturer of metal medical implants.

::

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Law

Can Poland follow the success of the revolution in the U.S. gas sector?

Igor Hanas, lawyer at Squire Sanders Święcicki Krześniak sp. k.

L

ooking from Poland’s perspective at countries in which shale gas makes up a large portion of the energy mix, we primarily notice the opportunities and potential. Business and politicians are discussing the potential high revenues for the state and investors.

Increasingly, shorter investment periods for shale gas production are being mentioned.

Meanwhile, a realistic assessment based on U.S. experience shows that we have 15 years or more to wait for industrial-scale shale gas production. And this assumes that sufficiently large deposits of this fuel can be found in Poland to make production economically viable.

There has been much discussion about unconventional gas for three years, although the discussion has recently become toned down.

It mainly focuses on the potentially high revenues for the state once industrial shale gas production starts, as well as the prospect for Poland to become another Norway, which built its wealth, among others, on gas (albeit conventional one). An example of rapid growth in natural gas production is the “gas revolution” in the U.S., which suggests that it is only a matter of time and good intentions (including the government’s) before a similar scenario comes about. However, the unique conditions that have helped bring about successful shale gas production in the U.S. and Canada are ignored. And there are several major factors.

Information about gas deposits and infrastructure

The fact that the U.S. has considerably larger shale gas deposits than Poland is rarely

64 :: polish market :: 7 -8 /2013

mentioned. The production of crude oil and conventional gas has been going on in the U.S. for decades. Tens of thousands of wells have been drilled which, today, are a valuable source of information when prospecting for shale gas. Crude oil and conventional gas production was accompanied by the development of the industry and infrastructure, which was then used by the emerging shale gas sector.

Poland does not have that kind of potential. On the other hand, the lack of infrastructure can be seen as an opportunity to develop a modern shale gas sector in Poland.

Fair distribution of profits

The fact that the U.S. landowner receives a share of the profits from mining under his property is forgotten in the discussions. In Poland, just as in Europe, minerals are state assets. In the worst-case scenario, a Polish farmer can have his land expropriated and possibly hope that, some time in the future, he will receive a share of the profits from shale gas extraction indirectly from national and local taxes.

Time for development

The factors described above, as well as less bureaucracy in the whole of the production process than in Poland, enabled the U.S. to exploit shale gas more quickly. Shale gas production has significantly affected the structure of the Polish market and, as we have recently seen, also the European market. However, this process started in the U.S. before 2000, which shows that, even there, it has taken almost 15 years for the structure

of the energy sector to change and for independence to be achieved in energy raw material extraction.

Favourable legislation

The public is told that gas prices are low in the U.S., at times nearing $ 70 per 1000 m3 (which is unthinkable in Europe, not to mention Poland). The U.S. has had special legislation for a long time placing heavy restrictions on exports of energy raw materials. Therefore, gas production was targeted at practically only the domestic market.

Likewise, no infrastructure enabling exports has been developed over the years.

Work is currently underway to amend the outdated legislation, enabling shale gas to be exported outside the U.S. market.

Shale gas and the struggle against greenhouse gas emissions

Rapidly increasing shale gas production and the growth in the share of natural gas in generating electricity and heat has reduced greenhouse gas emissions in the U.S. This means that the U.S. is currently capable of considerably reducing its emissions without being forced to modernize through legislation, as is the case in the European Union. A question mark has now appeared over the existing policy of promoting renewable energy sources as having significantly lower emissions and being far less arduous on the environment. The U.S. is currently taking a cautious approach to subsidizing renewable energy projects because shale gas enables

Law

the achievement of the low emissions policy.

This means that the European Union, where renewable energy sources are promoted, has numerous opponents of shale gas.

Can Poland follow the U.S. in the “shale revolution”?

Given the above factors, it is difficult to expect the industrial production of unconventional gas to start within the coming few years in Poland. This process is being additionally slowed down by the state’s information policy, which is not conducive to building a positive atmosphere around shale gas.

Statements from the authorities frequently contain information on taxes which will be charged to prospecting companies and potential investors for shale gas production. But after all, there is still no certainty that the gas in Poland can be produced on an industrial scale. In arguing the high taxes, officials

willingly refer to the Norwegian model of charges, without mentioning that it is not shale gas that is extracted in Norway, but conventional gas, where the risk of economic failure is incomparably lower.

The result is that global operators, with many years of experience in this business, have left Poland without any sentiments, moving their activities to other regions of the world, where (at least in the media) governments do not concentrate on the fiscal policy targeted at prospecting companies. The withdrawal of several major investors has contributed to the preparation of new rules of taxing hydrocarbon production, which the Polish government announced in mid-June of this year. The bill which was presented is far more reasonable. It provides, among others, for a temporary exemption from taxation for prospecting companies, which spend funds on hydrocarbon production. It also proposes more tax rates, which depend on the structure

of revenues and expenses related to these activities.

This is undoubtedly a good sign for investors. The question is just why this was not done two years ago. The decision-making process regarding shale gas projects requires time and re-analysis, which consequently adds months of delay in obtaining the first tax revenues from hydrocarbon production. New circumstances have also appeared during these two “wasted” years, which means that investors previously interested in shale gas will no longer return to the Polish market. If only because of the cheap shale gas from the U.S., which may reach Central and Eastern Europe through the LNG terminal in Świnoujście after 2015. ::

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International relations

Between East and West Anatoliy Yurkevych, Chief Executive Officer at Milkiland N.V, talks to Natalia Suhoveeva.

The Milkiland corporate group is one of the five largest producers operating in the milk-processing sector on the markets of Russia, Ukraine and Poland. Which of your products are particularly popular with consumers? What is the group’s production potential?

Cheese is the main and largest segment in our output. We process around 545,000 tonnes of milk a year, of which 300,000 tonnes is used to make cheese, 175,000 tonnes goes to other dairy products and the rest to dry milk products. We produce cheeses mainly in Ukraine and then export them to Russia, Kazakhstan and other countries. Unfortunately, since 2000 the European Union market has been closed for cheese and other milk products from Ukraine. pm

Because of their quality?

Because of veterinary requirements.

Ukrainian and European veterinary control procedures are still incompatible. When we pm

66 :: polish market :: 7 -8 /2013

considered entry onto the Polish market, we thought in the first place about the segment which is of biggest interest to us - cheese production. We planned since the beginning that we would not be importing Ukrainian products to Poland and would focus on the markets where our sales were already strong, but using Polish experience, technologies and milk supply sources. Our investors were very anxious about our lack of experience in selling on Western European markets. They were doubtful about our ability to cope on the highly competitive European market. But we immediately assured them that our strategy remained unchanged - to direct our exports mainly to Eastern European markets.

The acquisition of a Polish milk-processing plant is a logical consequence of your entry onto the Warsaw Stock Exchange (WSE). Are there any other reasons?

The main criterion we took into account was logistical proximity to the chief markets pm

for our products. In a geographical breakdown, 60% of our sales is on the Russian market, 35% in Ukraine and 5% in other countries. We looked at several countries neighbouring on the Russian market: Poland, Belarus, Lithuania and Latvia. Belarus seemed to be the most attractive from the point of view of profitability because the country has very low production costs. But in terms of administrative regulations, management and the transparency of rules, the market is very unpredictable. Lithuania, in turn, is a quite small and closed market where milk processing is monopolized by three producers. Meanwhile, Poland is a market with a very big potential in terms of raw material, development, concentration, and the presence of a large number of smaller producers who seek consolidation. This is why we decided to start production in Poland. Our bank proposed us to buy the Ostrowia plant in Ostrów Mazowiecka. The first meeting was held on January 30, 2012 and the transaction was finalized in August 2012. We bought the plant together with the SM Spomlek dairy cooperative, which operated there under a lease agreement. We held negotiations with Spomlek to terminate the lease agreement early and on February 1, 2013 we took over the management of the plant. We invested in restructuring to fulfil the requirements set by the EU and CIS to exporters. In May 2013 we received permission to launch production. Now, our main task is to reach the production quality standards we require, carry out the first deliveries to the Ukrainian market and then to Russia and other countries. At the same time, we are gathering experience and examining the conditions of the Polish market to understand how to exploit the potential of the Ostrowia brand and decide about the direction we should choose.

International relations

What production potential does Ostrowia have now?

The plant in Ostrów Mazowiecka has a production capacity to process around 140,000 tonnes of milk annually. But these days it is not important how much you can produce but how much you can sell, at what price and where you can get the raw material from. The milk supply system in Poland differs from that in Ukraine – there are quotas and long-term contracts. Stability and predictability is very important. Since Ostrowia has gone through bankruptcy proceedings, it now has to restore its good reputation.

We have to show our partners in Poland that we can and are ready to work normally, in a stable manner and offer prospects. pm

Do you have your own milk supply sources in Ukraine?

In Ukraine, we buy 92% of the milk we need and produce only 8% by ourselves. There are no quotas and no annual contracts. Spot prices have a very big impact on milk purchases. Additionally, proximity to the Russian market greatly influences prices. pm

How many people does Milkiland employ?

Milkiland employs around 7,000 people, including those working in our plants in Russia. We own two Russian companies. The better known of them is Ostankinsky Molochny Combinat. The Ostankinskaya trademark is among the three leading on the Moscow market in terms of sales. In 2013, we also bought the Rylsky cheese plant in Russia. In our factory in Ostrów Mazowiecka we employ 125 people, of which 75 have come to us from Spomlek. And 20 people work in our office in Warsaw. Here, we are creating a strong consolidated sales team made up of specialists who know well the Polish dairy market.

The team will be responsible for the Polish and EU markets. Production and logistics are concentrated in Ostrów Mazowiecka. pm

How do you assess the milk production market in Central and Eastern Europe – its saturation level, competitiveness and openness to new production opportunities?

Owing to veterinary barriers, virtually no dairy products from the East reach Western Europe. At present, Western Europe makes around 20 million tonnes of cheese annually and is also its biggest consumer – bigger than the United States. It is also the main exporter of cheese, including to eastern markets where pm

milk is still in short supply. The main importers are Russia, Kazakhstan and other Asian countries whose populations are growing fast while the climate is not good for milk production. All research studies indicate that the shortage of milk products in Eastern Europe will be increasing. It is a perfect opportunity for us to combine our knowledge of eastern markets and our sales system with the new production capacity, technology and raw materials available in Poland.

The road from being a company trading in milk on the local market to a European leader took you less than 20 years. Next year, Milkiland will be celebrating its 20th anniversary. What were the milestones on this road in your view?

We are still far behind such European giants as Nestle and Danone, which are conducting large-scale acquisitions of plants in Eastern Europe. There are four big French companies on the Ukrainian market alone.

They are entering the Russian market via Ukraine. The American company PepsiCo has bought Wimm-Bill-Dann, a very large producer. But our priority has always been to feed people. Milk is one of the basic products and Ukraine has always been an exporter of milk products. Building an efficient milk production system, organizing our milk processing chain and high quality have been our well-chosen goals and development directions since the very beginning. pm

Milkiland N.V. is a company registered in Holland, listed on the Warsaw Stock Exchange and holding business and quality certificates granted by reputable international firms and agencies. Does it help you to achieve success on Central and Eastern European markets?

It does. We have benefited greatly from our entry onto the Warsaw exchange. It was a well-thought-out choice. In 2007 we were getting ready for floatation on the Frankfurt Stock Exchange. If it had not been for the crisis we would have entered the Frankfurt floor in December 2008. But then the crisis began and we put our plans on hold until better times. When we looked around in 2010 it became clear that the Polish market had went though the crisis unscathed and that the Warsaw exchange strengthened its position. In contrast, the position of the Frankfurt exchange weakened to some extent. The reason was its concentration on the internal market and perhaps more pessimism. When pm

we met the management of the Warsaw exchange in May 2010, we studied the experience of other Ukrainian companies on the Warsaw floor and debuted on this market in December 2010.

Do you already have plans for your further development on the Polish market?

I have to say that Ostrowia will not be our last acquisition on the Polish market. We are closing the stage when we launched production. We are refining our standards and starting to work at full steam. Now, our products should go to the market, the consumers will assess them and give us a feedback. As soon as this period is over we will look around and decide about our further expansion. pm

We are hearing a lot about “cheese wars.”

There are reports that the trend towards using more and more chemicals and less and less natural ingredients is intensifying in the milk-processing sector. What is your quality policy?

Without delving into policy nuances, I can say that in the milk-processing industry, as in any other sector, there are producers who are only interested in quick profits, even if that means adulterating products. But there is always another group of producers – those who attach importance to reputation, long-term cooperation and prospects. They use natural ingredients and good recipes. And then it is the consumer who decides which producer to trust. And there is one more important criterion – how one feels. Consumers choose our products because they like their taste and because they feel well after eating them. pm

What do you think about Polish-Ukrainian relations?

Neighbours should live in peace. We should stop thinking and despairing over the past. It was other people, not us, who were involved in the past events. These were their choices. Now, we are here and we take our own decisions. We decide whether to live in the past or go forward and build our common future. The life of every generation is short so we should be working together, visiting each other and sitting at the same table. Today, Ukraine is open both for EU nationals and for Russians. Ukraine is no longer a “buffer zone” between the two worlds. It is a country where business interests meet and economic cooperation between the East and West is growing. :: pm

7 -8/2013 :: polish market :: 67

International relations

To aspire after Europe Ambassador of Ukraine to Poland, Mr Markiyan Malsky, talks to “Polish Market”.

The Warsaw Stock Exchange (GPW) currently lists the 11 largest Ukrainian companies. Their capitalisation amounts to PLN8.19 billion, accounting for about 1% of the total capitalisation at the GPW (PLN775 billion) and 3.5% of the capitalisation brought in by GPW-quoted foreign companies (PLN230 billion). What are the reasons behind such interest by the Ukrainians in entering the Warsaw Stock Exchange?

The presence of Ukrainian companies on the Warsaw Stock Exchange is yet more evidence for the developing economic relations between our countries. Over the last few years, Warsaw has become a listing centre for market leaders from Ukraine, as can be well seen in the new index. The issuance of Ukrainian stocks currently constitutes an effective way to leverage funds. However, access to capital is just one of the arguments for joining the Warsaw Stock Exchange.

Companies regard entering international capital markets as a milestone in their development, as it offers new business opportunities, expands their investor portfolio, and provides current investors with a measure of how successful their operations are, in addition to an accurate assessment of their own capitalisation. What’s more, the GPW has already been “explored” by the Ukrainians, and until recently rated our companies at a premium – this allowed them to generate more capital than in other stock exchanges. The Ukrainian listing pioneers in Warsaw, such as Astarta, Kernel, and Agroton, have shown Polish investors how profitable our businesses can be. Combined with the expansion policy pursued by the GPW in Ukraine and the cultural bonds between our countries, all this has brought about profound effects. pm

pm

How would you describe the Ukrainian government’s programme of economic growth in the coming years, and how will your economy develop once you join the free-trade zone with the EU? Will this lead to increased exports of goods and services from Ukraine?

68 :: polish market :: 7 -8 /2013

A few months ago the Ukrainian PM announced the “State Activation Programme for the Economic Development of Ukraine for 2013 - 2014”.

This programme for economic advancement involves the concentration and transformation of resources, with a focus on the areas generating the highest revenues: • reducing dependence on imports; • fostering extra demand on the single market, with special consideration of domestic, traditionally-exported products; • promoting exports, also by enhancing the market competitiveness of domestic products.

The fundamental principle behind the Programme is to ensure maximum efficiency in fund management, coupled with absolute transparency in the decision-making procedures.

The Programme’s key innovation lies in the new rules for granting loans. The basic priority is to significantly reduce interference by supervisory authorities in economic activities. Soon, draft legislation covering this area will be submitted to Parliament.

Another aspect of the Programme stipulates a decrease in the administrative barriers for the development of business. A Development Bank will also be established as a primarylevel institution to serve as an implementation tool for the investment policy. Its task will be to provide, on a rotating basis, collateral to commercial banks which, on their part, will be granting long-term loans for modernisation projects in the real sector of the economy.

The next step involves support for small and medium-sized enterprises. The Programme will provide them with direct assistance, besides creating conditions for small businesses to obtain orders, while operating under programmes for the replacement of imports, power security, construction, etc.

The second priority of the Programme is to implement policy governing the replacement of imports. A number of State-support mechanisms will be offered to enterprises from the key sectors, also those with substantial potential in this area. These chiefly

include companies trading in technical and agricultural products, as well as petrochemical, pharmaceutical and light industries.

The Programme will stress the importance of scientific and technical research aimed at meeting economic needs, and the deployment of mechanisms for the adoption of industrial innovations. In particular, a wide array of State-support mechanisms will be introduced – from assistance to enterprises-producers, with their loan conditions, to the introduction of State production orders.

This involves the latest developments in fields such as biotechnology, new materials, and medical equipment.

The following prospects have been forecast for Ukraine’s economy, after it accedes to the free-trade zone with the EU: • increased exports of goods and services: the estimated additional revenue from the liberalisation of commercial conditions will reach 2-3% with the greatest increases in the exports of agricultural and food products; improved results will also be observed in the textile and leather, metallurgical and metal processing, chemical processing, transport services and legal-services sectors; • increased imports of goods and services: additional growth spurred by new trading conditions will amount to 0.8-1.5% (imports are expected to rise especially in chemicalindustry products and technical products); • a faster economic growth rate: an increase by 0.7-0.9% in the rate of real GDP growth compared to the basic level; • more citizens employed in business: an increase of 130-190 thousand compared to the basic level; • easier access to the EU markets for domestic exporters; • increased migration of employees, which to some extent will be conducive to the improvement in their occupational skills; • easier access to investment resources; • enhanced competitive edge of domestic products, also in third-country markets; • extended reach of products and services in the single market.

International relations

Worth noting is that favourable changes in trade and commercial relations between Ukraine and the European Union are already taking place. Thus, the last 5 years have seen close cooperation between both parties’ experts with a view to removing barriers to bilateral trade.

Apart from the financial sector, which directions of cooperation between Ukraine and Poland offer promising prospects?

We believe that there is still a substantial untapped potential in terms of a bilateral trade partnership. Economic revival both in Ukraine and Poland, accompanied by the readiness of Ukrainian and Polish businesses to start cooperation, create a beneficial environment for taking bilateral trade and economic relations to a whole new level.

Developing the banking system, strengthening non-banking financial institutions, and reducing credit risks, will form optimum conditions for the implementation of midand long-term loan projects, and also innovation and investment projects. It is equally important to renew the mechanisms responsible for the functioning of special economic zones. The Ukrainian government is currently working on legislative initiatives aimed at resuming their operation: “On amendments to the Act on ‘The general rules of the creation and operation of special economic zones” pm

and “On amendments to the Act on ‘The stimulation of the development of the regions’”.

The most promising projects now available to Polish investors include cooperation in the fields of construction, the development of road and transport infrastructure, and the provision of a wide variety of services. We also have many opportunities to work together on the diversification of renewable energy sources and supplies aimed at obtaining long-term European energy security warranties. This mainly pertains to the creation of a Euro-Asian Transport Corridor.

Confronted with many barriers and problems to accessing the Ukrainian market, entrepreneurs are especially concerned about the authorities’ delays in refunding excess VAT. Can we expect any remedial measures here?

Companies with foreign capital have been very active in broadening their presence in Ukraine. As reported by the Ukrainian Ministry of Revenues and Expenditures, the twoyear period of 2011-2012 saw an increase in the total sales of their products by 4%, that is from UAH838.6 billion to UAH870.3 billion. A growth in transport occurred as well – by 22% (from UAH159.4 billion to UAH205.3 billion).

The taxes paid by foreign-owned companies to the State budget reached UAH50 pm

billion in 2011, a figure which in 2012 grew to UAH54.2 billion.

On its own part, Ukraine is sparing no efforts as regards specific and targetted areas, to create an investor-friendly environment and conditions ensuring fair competition for both domestic and foreign business.

The amount of VAT refunded to foreign investors in 2012 amounted to UAH19 billion, i.e. 28% more than in 2011 (14.8 billion). As clearances of accounts constituted 55% of VAT refunds, the latter were done automatically.

The frequency of audits of foreign-owned companies is on the decrease – while in 2011 auditors conducted 1539 inspections, this dropped to 1056 a year later. All in all, since 2010, the number of such audits has been reduced by 2.5 times.

The activities of tax and customs bodies serve to introduce legislative and organisational innovations with a view to creating favourable business conditions in Ukraine.

Quite recently, the tax authority has offered a new service to foreign-owned companies – they can now obtain a legal assessment of tax risks to their investment projects. Thus, tax officials will help them in avoiding any threats that may stem from the erroneous interpretation of Ukrainian laws. ::

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R INSIDE OU ER SEPTEMB I S SUE

Cultural Monitor

The summertime Cultural Monitor covers some interesting new releases.

Maciej Proliński recommends.

Apollon Musagete Quartett – “Multitude” – Universal Music Polska - CD

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omage to the three outstanding Polish composers – Witold Lutosławski, Henryk Mikołaj Górecki, and Krzysztof Penderecki. The album serves as an excellent promotional vehicle for the Apollon Musagète Quartett, a band that devotes a lot of attention to the most recent compositions created in the last decades – Polish and foreign. The album contains string quartets by Lutosławski, Górecki, and Penderecki, and is closed by the joint work of the Apollon Musagète Quartett. The title track starts off where Lutosławski’s quartet ends.

The strength of this band lies in the perfect and precise rendition of each track and openness to any composition, even the most stylistically different. You can feel that the musicians have mastered the subtext of this music – its source and sometimes even its intentional references.

“String Big Band - Koncerty w Trójce” – Polskie Radio - CD

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ecorded at the concert of an extraordinary ensemble – String Big Band, consisting of Atom String Quartet and the Sinfonia Viva orchestra, and featuring guest appearances by Agnieszka Wilczyńska – vocals, and Robert Kubiszyn – double bass. “My idea was to combine two (seemingly, but only seemingly, distant) worlds – chamber music and big band music, to create a universal language that could bring joy both to philharmonic music lovers, and the frequenters of jazz clubs. The most beautiful themes from the repertoires of Duke Ellington’s or Glenn Miller’s orchestras have been imbued with a completely new quality. Without drums and wind instruments, they still captivate with the sheer brilliance and intensity of their rhythm, and, at other times, with the pure lyricism typical of Tchaikovsky or Ravel,” wrote Krzysztof Herdzin, who arranged the project, in the introduction to the album. It worked! Never before have improvisation and swing been employed by a string orchestra with such a successful end result.

“Andrzej Trzaskowski - Polish Radio Jazz Archives”Polskie Radio – CD

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ndrzej Trzaskowski is the pioneer of jazz in Poland, a pianist, composer, conductor and a music critic. He created compositions for the piano, orchestra, chamber music and film and stage music. He played concerts in many countries of Europe and in the United States of America, where he collaborated with Stan Getz, among others. The album features tracks by bands fronted by Trzaskowski, which were recorded during the Jazz Jamboree ’62 festival, as well as in Studio 1 of Polskie Radio in Warsaw in the same year. The CD contains tracks of the legendary band, The Wreckers, with whom Trzaskowski gave concerts at the festivals in Newport and Washington, and the jazz clubs of New York, San Francisco and Boston – again in 1962. The disc also features records by his quintet and trio.

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“Bach / Partitas / Sarbak” Lado ABC - CD

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he collection of Johann Sebastian Bach’s Partitas as performed by Małgorzata Sarbak, a harpsichordist and teacher of the younger generation, is the first complete Polish issue of the Partitas performed on a harpsichord. The Partitas, which represent a genuine challenge to any virtuoso, can be seen as a musical treatise that summarises all of Bach’s achievements in the field of suites. Their publication in 1731, as the first part of the Clavir Übung cycle, caused a sensation in the musical community. As Nikolaus Forkel (Bach’s first biographer) described them: “Never have such excellent harpsichord compositions been seen or heard. Everyone who learnt a few of such works well could make a career in the world.” And that is what might be waiting for Małgorzata Sarbak!

“Jazz Jamboree’62 vol. 2 – Polish Radio Jazz Archives” - Polskie Radio - CD

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ith every new release, the archival publications of Polskie Radio show that the artistry of the legendary jazz festival in Poland was not only very intriguing back then, but is still capable of captivating audiences! The album features the recordings of the Polish quintet of Andrzej Kurylewicz, the trio of the Hungarian pianist Atilla Garay with the Czech bass player Jan Arnet and Andrzej Zieliński playing drums, two vocal standards sang by Wanda Warska, accompanied by the Trio of Wojciech Karolak, the Gdańsk Big Band of Jan Tomaszewski, Jerzy Matuszkiewicz’s Swingtet, and also the New Orleans Stompers, who are a volcano of energy, and the Soviet Vadim Sakun Sextet.

George Benson – “Inspiration: A Tribute to Nat King Cole”- Universal Music Polska - CD

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eorge Benson is a prominent American singer and composer, one of the most outstanding jazz guitarists in the history of music. Suffice it to say that he recorded over 50 albums in his long career as an artist. The latest is an example of a work that, paying homage to a great artist, is also building another musician’s legend. The album begins with a rare record of young Benson (aged 8) singing “Mona Lisa.” Benson started singing Cole’s songs as a child and this record shows not only his great musicality, but also the admiration that he felt to Cole’s music from his most tender years. A similar devotion to music, but also an extraordinary refinement of tone can be found throughout the album. Such tracks as “Unforgettable”, “When I Fall in Love” or “Smile” in versions, featuring a 42-piece orchestra of the Henry Mancini Institute, the guitar and vocals are really charming.

Cultural Monitor Natalie Cole – “En Español” – Universal Music Polska - CD

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nother homage to Nat King Cole and Natalie’s first Spanish-language album. The Spanish standards were recorded years ago by Nat King Cole. On the one hand, the artist was inspired by the records of her father, and, on the other, she was drawn to the romanticism inherent in these songs.

Produced by Rudy Perez (Billboard’s Latin-American music producer of the decade). “En Español” introduces the audience to the irresistible beauty of this music. What we get is excellent duos where Natalie sings with Juan Luis Guerra (“Bachata Rosa”) and Andrea Bocelli (“Besame mucho”). Without a doubt, though, the most touching duo is that of Natalie singing with her father in “Asercate Mas” (this was made possible by the same technology that was used for the multi-award winning album “Unforgettable”).

Anna Treter – “Wielki Wiatr” – Polskie Radio - CD

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nna Treter is a vocalist and lyricist, known for her work in the Kraków band “Pod Budą” in which she has performed since its formation. For 10 years she has also been active as a solo artist, with 3 albums to her name. “Wielki Wiatr” (The Great Wind) is her long-awaited fourth album, which contains 13 new songs, featuring mostly her lyrics and the compositions of the guitarist Jan Hnatowicz, who earlier gave the “Pod Budą” band many of its hits. This music, with some Polish and world-music, jazz and ethnic elements, is a fascinating experience for even the most refined ear. I highly recommend this album to all those who value subtle and original songs. A bit Dylanesque and Cohenesque, it combines lightness with melancholy and a journey to the source.

“Strange Weekend” – Polskie Radio – CD

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compilation of Polish rock and funk music from the 1960s and 70s prepared by the DJ group from the Soul Service group. The album features such bands as Dżamble, Klan, Romuald i Roman, Breakout, Skaldowie, and Czerwone Gitary. Who knows what Polish rock music would look like without their contribution? It is great to listen to, and still up to date. This is art that continues to endure and exert an influence. The entire compilation sends a mature, energetic and positive message both for the loyal fans of Polish rock and for those who still have a lot to learn about the diverse history of this genre. The latter, as they experience “Strange Weekend”, will probably be surprised that the second track is performed by Czerwone Gitary. So different, raw, with a discernible Hendrix-esque vibe!

“50 największych przebojów” (50 Greatest Hits) – Polskie Radio - 3 CD

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n June of this year, the National Festival of Polish Song, Poland’s largest music event, celebrated its 50th anniversary. The 3-disc compilation contains 50 greatest hits of the festival’s history. The album opens with a song that captivated the hearts of the audience at the 1st Festival in 1963 – “Czarne anioły” (Black Angels) sung by Ewa Demarczyk. The release also features the Zamość-born poet and romantic from Kraków – Marek Grechuta, Czesław Niemen and his all-time favourite “Dziwny jest

ten świat” (Strange is this World), Maryla Rodowicz – the first lady of Polish song who has returned to the Opole stage after over 40 years, and Stanisław Sojka, an excellent musician and vocalist. The publication also features Alibabki, who accompanied almost all the significant stars of the Polish stage, Skaldowie – the originators of Polish rock, and popular bands such as Maanam, Perfect, Lady Pank, T. Love, and Zakopower.

Maryla Rodowicz – “Absolutnie nic” (Absolutely Nothing) – Universal Music Polska – CD

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nother episode in the year-long series, i.e. “Antologia Maryli Rodowicz” (Maryla Rodowicz Anthology)– provides a collection of all of her albums published since 1970 until the present. “Absolutnie nic” is an album issued in 1990. For those who have listened to the greatest hits of Rodowicz throughout her career, this album will bring a certain surprise (she tries her hand at other musicians’ songs, which appeared on the Polish music market). Still, people will find there the most distinctive feature of Rodowicz – her great voice, moving lyrics (including the outstanding poets of Polish song; aside from Agnieszka Osiecka, these are: Andrzej Sikorowski, Jacek Kleyff, Stanisław Sojka, and Michał Zabłocki). One will also find a great deal of really emotional music (the composers include Andrzej Sikorowski, Ryszard Szeremeta, Grzegorz Turnau). Of additional interest is the presence on the album of accomplished improvisers – the guitarist, Wojciech Waglewski and trumpeter, Tomasz Stańko.

“Arcydzieła Polskiego Kina: Janusz Morgenstern” (Masterpieces of Polish Film – Janusz Morgenstern) -Universal Music Polska - CD

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He was the most creative director I have known,” Andrzej Wajda said of Morgenstern. Janusz “Kuba” Morgenstern, who died in 2011, was the maker of such TV hits as “Stawka większa niż życie” (More Than Life at Stake) and “Polskie drogi.” He also directed beautiful films about the feelings of successive generations of young Poles. About love so big that “it only tried to happen”… The package includes these films about love: “Do widzenia, do jutra…” (Goodbye, See You Tomorrow) (1960) with Zbigniew Cybulski and Teresa Tuszyńska, “Jowita” (1967) with Cybulski’s last film appearance, Barbara Kwiatkowska-Lass, Daniel Olbrychski, and Kalina Jędrusik, and a strong debut by Jadwiga Jankowska-Cieślak in “Trzeba zabić tę miłość.” All material has been digitally remastered as part of the KinoRP project. Three stories: an impossible romance between the daughter of a French consul and a student-artist in a Bohemian setting of student theatres in the Gdańsk of 1956; the love of a lost and bored young architect-athlete who is incapable of growing up towards the ideal of a woman, whose gorgeous eyes he saw briefly at a ball, and whom he unknowingly ignores in his daily life; and finally a young girl growing up into the bitter adulthood of the 1970s, as she is serving her compulsory apprenticeship in a hospital before medical studies. You just have to see these! 5-6 /2013 :: polish market :: 73

EUROPEUM - Centre for European Culture – across seven centuries of the history of European art 12 September 2013 will be the day of launching a new branch of the National Museum in Kraków – EUROPEUM - Centre for European Culture – in the historic Granary at 6 Sikorskiego Square. It will house a permanent exhibition spanning over seven centuries of West European painting, and an information centre on the Polish collections of this art. “We invite everyone to visit the restored 17th century building where – for the first time ever – the National Museum in Kraków will present its body of West European art”, says Zofia Gołubiew, the Museum Director.

Lorenzo Lotto (ca. 1480-1556), Italy, Adoration of the Child with the Saints – John the Baptist, Joseph, Francis, and Catherine, owner: the National Museum in Kraków

Culture

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he Granary, nowadays nested in the corner of Sikorskiego Square, could already be found in the 18th century maps of Kraków. History has linked it to the grange owned by the Princely House of Jabłonowski. Having come under municipal possession in 1905, the Granary came to house the town dairy, as well as a shop. After World War II, it was handed over to the National Museum for storage purposes. From 2008 to 2013, this historic edifice underwent a major restoration which includes, among other things, insulating the foundations, renovating the facades, replacing the rooftop and laying new floors.

The structure also received advanced Francois-Xavier Fabre, burglary- and firePortrait of Michał Bogoria alarm systems. The Skotnicki, 1806, owner: the renovation cost National Museum in Kraków PLN9 million.

The hallmark of the EUROPEUM - Centre for European Culture exhibition will be the body of modern European art from the National Museum in Kraków. This, to date, has been presented as part of the Czartoryski collection at the Princes Czartoryski Museum – a Branch of the National Museum.

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Visitors to the Granary will be offered a journey across seven centuries of European art, with a presentation of over 100 paintings and sculptures. The collection, amassed since the Museum’s opening in 1879 (mainly contributed by donors), initially did not fall under any special treatment, as the Museum – in line with its name – paid most of its attention to national art. This changed, however, after the War, when the Museum acquired several great painted and sculpted works of West European art. Among these are “The Crucifixion” by Paolo Veneziano, the “Adoration of the Child” by Lorenzo Lotto, “The Sermon of St. John the Baptist” by Pieter Brueghel the Elder, a French 14th-century sculpture - “Madonna with the Child”, and “The Bust of the Bishop” made around 1500 in the Netherlands.

In addition to those mentioned above, visitors will have an opportunity to see other illustrious works of art: the mediaeval Catalan Madonnas, “Christ as the Man of Sorrows” by Jan Gossaert Mabuse, Luca Giordano’s “The Flight into Egypt”, “Portrait of a Boy with a Dog” by Nicolaes Maes, “Portrait of Antonio Canova” by Antonio d’Este, “Portrait of Michał Bogoria Skotnicki” by Francois-Xavier Fabre, and Bertel Thorvaldsen’s “Mercury”.

The EUROPEUM - Centre for European Culture is not only intended to gather museum collections, but also to serve as a cultural centre for Kraków residents and tourists. What is more, the centre will perform

Jacob Victors, Fight between a Rooster and a Cat, from the collection of the Tarnowski Family from Dzików

Maciej Proliński

educational functions and become Poland’s only information hub devoted to West European art. In the 21st century, its role will be to make the general public aware that, for centuries, the culture and many domains of Polish art have been inseparably affiliated with the rest of Europe.

EUROPEUM - Centre for European Culture will also stage concerts, as well as lectures on the broadly-defined European culture. ::

Real estate

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Culture

The past and the future live in one Castle All the artworks and archives of the Royal Castle in Warsaw are to end up online as digital copies. The new website of the institution already hosts the works of the court painters of Stanisław August Poniatowski – Bacciarelli and Canaletto. “Many of the items in the collections of the Royal Museum in Warsaw have European, perhaps global significance. For the next few years, our objective is to provide access to these collections to a broad group of audiences, to take them to the digital world,” says Andrzej Rottermund, the Director of the institution, which is so important to Polish culture.

Maciej Proliński

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he Royal Castle in Warsaw – the Monument of National Culture and Heritage – is a historic place. It was the quarters of the royal court and Polish authorities. During World War II, it was totally destroyed. Today, the symbol of State sovereignty acts mainly as a museum, which, besides the permanent exhibition typical of a residential museum, also hosts numerous temporary exhibitions, and witnesses many celebrations of the highest State profile.

The new website of the Royal Castle, http:// www.zamek-krolewski.pl, has been available online since June 2013. The new layout is dynamic and attractive, while the modern technology facilitates convenient virtual tours of the Castle through computers, tablets, and smartphones. For starters, we see the Castle from the front and the renovated facade on the Vistula, as well as the formal rooms the Senators’ Room, the Throne Room, and two works of Rembrandt. You can wander around the Castle’s galleries, quickly find current information in the Calendar section, see some of the digitalised collections – approximately 50 items, including the paintings of Marcello Bacciarelli and Canaletto.

A new feature is the portal’s integration with

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social media - Facebook, Twitter, YouTube, Google+, Instagram. The website is available in Polish and English.

The new website was created in cooperation with Squiz Matrix, a company with global experience in designing websites for museums and similar institutions, such as the Victoria and Albert Museum, Westminster Abbey, and the National Museum of Australia.

The project was financed from the resources of the Ministry of Culture and National Heritage in the amount of over PLN11 million, in addition to the grant provided by the Teresa Sahakian Foundation of over PLN130 thousand, and the Royal Castle’s own funds.

In the near future, the Castle plans to use Squiz Matrix for such issues as support for the process of access and distribution of the digitlised collections (content-related service, logging-in, distribution, authorisation, verification, additional information about the collections), electronic payments and online distribution (tickets, publications, special offers), an interactive map of the Castle and a miniguide available online for all mobile devices with internet access within the Castle.

The Royal Castle in Warsaw holds over 50 thousand museum items and almost 100 thousand archive items. All collections are

to be digitlised, including the collections of the Ciechanowiecki Foundation (almost 950 items) and the Teresa Sahakian Foundation (almost 17 thousand), which are exhibited in the Castle.

For the time being, the Castle’s website presents the works in two dimensions. The institution is also planning 3D digitlisation.

Aldona Modrzewska, the manager of the collection digitlisation team, forecasts that next year, the institution will open a special site adapted to the presentation of the digital copies of the works in three dimensions. The Royal Castle is already in negotiation with three other royal residences concerning this matter. Together with the Łazienki Park in Warsaw, the Palace in Wilanów, and the Wawel Castle in Kraków, the institution plans to carry out a pilot programme in autumn 2013.

The digital forms of the castle’s collections will also be available through Europeana, the internet museum, archive, and the European library. :: 1) Portrait of Stephen Báthory; Marcello Bacciarelli, (1731-1818); 1768-71 2) Portrait of Bolesław Chrobry; Marcello Bacciarelli, (1731-1818); 1768-71

Krzysztof Penderecki’s ‘The Devils of Loudun’ directed by Keith Warner; Photo by Per Morten Abrahamsen, material of the Danish Royal Opera in Copenhagen.

Culture

A great challenge The Management of the Grand Theatre – National Opera is announcing its repertoire schedule plans for the 2013/2014 art season. The Polish and foreign opera and ballet classics will be performed side-by-side with contemporary compositions in Warsaw. The premiere of the new production of Krzysztof Penderecki’s ‘The Devils of Loudun’, will take place on 2nd October 2013. For his 80th birthday, the composer has prepared a new version of the score of his work. The performance, directed by Keith Warner, is co-produced by the Danish Royal Opera in Copenhagen. “The repertoire plans will cover four new opera productions: the world and Polish premiere of contemporary works, the essential work of Wagner, the final opera of Peter Tchaikovsky, and the pearl of European modernism. We are facing a great challenge,” says Waldemar Dąbrowski, the Head Director of the Warsaw opera.

Maciej Proliński

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In preparing the 2013/2014 season, we are consequently fulfilling the basic principles serving as the foundations for our management of this institution: the creation of a repertoire at the highest level, the artistic value of which will not be up for discussion, and discourse will arise only from the thought included within. I am hoping for an interesting season, which will be composed of propositions that are not always easy, but valuable - with no exceptions.

Inspiring, not obvious, open to an individual, very subjective, reception, absorbing to all spectators in their individual ways,” stresses Waldemar Dąbrowski.

The first premiere of the new season will be the ballet ‘Hamlet’, choreographed by Jacek Tyski – the soloist of the Polish National Ballet, who has already become known as a talented artist during the previous seasons, including during the ‘Creations’ workshops organised by the Warsaw opera annually.

‘Hamlet’, with the music of Ludwig van Beethoven, and the set design of Robert Majkut, will premiere in October.

One of the grandest events of the new season in the National Opera will also be the October premiere of the ‘The Devils of Loudun’, by one of the greatest contemporary composers, Krzysztof Penderecki, directed by Keith

Warner. The leading roles will be played by Louis Otey and Tina Kiberg. The libretto of the opera is based on the text of the Aldous Huxley novel, which tells of the inquisition trial of Father Grandier in the 17th Century.

“We have commissioned a new version of the performance from the composer. He wrote 147 pages of new music without extending it at all,” Dąbrowski reveals. The premiere of Richard Wagner’s ‘Lohengrin’ will certainly be an artistic event, as it has been prepared in a co-production with the Welsh National Opera in Cardiff, directed by Antony McDonald (April 2014).

Near the end of 2013 we will hear the music of Peter Tchaikovsky and Bela Bartok, which will happen through the opera entitled ‘Jolanta / Bluebeard’s Castle’, which are two single acts joined into one performance directed by Mariusz Treliński. The conductor will be Valery Gergiev, while the leading roles will be played by Tatiana Monogarova and Sergei Skorokhodov.

The season will be closed by ‘Moby Dick’, which - commissioned by the National Opera in Warsaw - will be the world premiere of another work by the important Polish contemporary composer, Eugeniusz Knapik. Gabriel Chmura will be responsible for music

directing, while the Director will be Barbara Wysocka.

There will also be two premieres of the Polish National Ballet: ‘Romeo and Juliette’ to the music of Sergei Prokofiev, choreographed by the Director of the Polish National Ballet Krzysztof Pastor, and ‘Don Quixote’ with the music of Ludwig Minkus, choreographed by Alexei Fadeyechev.

“Both titles will greatly expand the repertoire of our ballet. I also deeply believe that they will be liked by the Warsaw public, which is fond of literary ballet spectacles,” adds Dąbrowski.

The concert season will be opened with a performance by the great Polish mezzo-soprano Małgorzata Walewska. Anna Faber will accompany her on harp.

Further plans include the concerts of the London Symphony Orchestra (May 2014), the intriguing singing duet of Aleksandra Kurzak and Mariusz Kwiecień, and also the comprehensive, anniversary festival of the work of Krzysztof Penderecki (November 2013).

The festival will host today’s top stars of the world of classical music, including the violinist Anne-Sophie Mutter, the contrabassist Roman Patkolo, and the conductor Valery Gergiev. ::

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Culture

Recreating Polish intelligentsia Maciej Proliński talks to Marek Hauszyld, President of the Semper Polonia Foundation

According to the data of the Ministry of Foreign Affairs, over 18 million Poles live abroad. In Poland there are several foundations and associations supporting expatriate Poles abroad. In what way does Semper Polonia stand out among them?

Semper Polonia was established on 10 April 1997. The initiative was given the honorary patronage of the Chancellery of the President of Poland and is supervised by the Ministry of Foreign Affairs. Our goal is to help Polish communities in the world, to promote Poland in the international arena and to build a Polish lobby abroad. We believe that investing in people is today the most notable and necessary tool to create a Polish lobby. The foundation’s mission has been from the very beginning to recreate the Polish intelligentsia in the world after it suffered great losses during World War II. Therefore, we launched a few programmes aimed at a young generation of Poles. The first one -”Opportunity for graduates” - is addressed to high school students of Polish origin who wish to continue education in their countries of residence. The programme includes courses in the official languages of the graduates’ countries of residence. The programme started to be implemented in 1998 in Lithuania and Belarus. The courses benefited nearly 10 thousand graduates from Belarus, Kazakhstan, Latvia, Lithuania, Moldova, the Czech Republic, Romania, Russia, Serbia and Ukraine. The measure of success is that the ratio of young people admitted to university studies increased from 30% to 90%! Another thing to be highlighted is our scholarship programme pursued since 1998 and aimed at students of Polish origin living and studying abroad. The result is impressive - the programme benefited 15 thousand people in 32 countries. It is accompanied by internships in Polish companies. So far about 700 young people have been offered employment in Polish companies and their foreign subsidiaries thanks to this programme. pm

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How to ensure stable funding for organizations acting for the benefit of Poles living abroad in these rather tough economic times?

We are a non-profit organization. It is difficult for us to acquire funds in Poland for our initiatives, primarily because these are directed at people abroad. We have some faithful benefactors, but we simply cannot compete with charities that operate here and now - in Poland. In the years 2002-2011 we were supported by the Polish senate. But ever since the sources of funding were transferred to the Ministry of Foreign Affairs, I must confess I feel there is a crisis in relations between Poland and Polish communities abroad. pm

One opportunity to create a modern image of Poland was your initiative called the Online School of the Polish Language. Did you make use of this opportunity?

This was our greatest defeat. The idea to create the Online School of the Polish Language was born as early as in 2002. Cuttingedge technologies were not then used to establish closer contacts between Poland and Polish communities abroad or to promote Poland in the world. The school could offer an opportunity to create a modern image of Poland, to highlight the role of Polish minorities in the world and to preserve Polish heritage.

We prepared several language versions - initially English, German and Russian. We were all excited about it! The Ministries of Science and Higher Education, Culture and National Heritage and Foreign Affairs were willing to allocate some funds to help finance the project. Only the Ministry of Education astonishingly vetoed it. Why? For fear that the development of this online school could undermine the programme of delegating Polish teachers abroad... I do not see the grounds for such a fear. We were not creating anything new in the world. And even today the idea, as we see it, is still not pursued. We are still very far away compared to other countries. pm

Sport is certainly one of the easiest areas to promote Poland abroad. So let me ask you about one more initiative of the foundation - “Polonia-School Olympic Clubs”.

The programme was inaugurated in 2002 and aims to create conditions for practicing sports and promoting the Olympic idea among young people of Polish origin living outside Poland. Clubs are run at Polish schools and Polish organizations in 20 countries. Between 2002 and 2010,53 such clubs were formed. The foundation not only inspired organizing extra classes for young people talented in sport, but also provided the emerging sports clubs with equipment and books. Before the Second World War the flagship Polish sports club was Pogoń Lwów. Football players of the team were five times the champions of Poland. In 2008, together with the Consulate General in Lviv, we managed to reactivate the club. Today, Pogoń Lwów is a third-league football team in Ukraine, but also a hotbed of talents. Young people can develop their skills there despite the fact that the club does not have its own facilities such as a pitch. I should add that in recent years we have supported the formation of Polish clubs in England and Ireland that bring together young Polish economic migrants in these countries. :: pm

Obowiązujące postaci znaku Ustalenie obowiązującej postaci znaku jest wstępem do standaryzacji systemu identy kacji wizualnej rmy. Standaryzacja ma na celu stworzenie spójnego / jednorodnego wizerunku marki, a co za tym idzie zwiększenie świadomości marki wśród klientów. Wymuszenie stosowania tej samej wersji znaku przez rmę, jak i podmioty współpracujące z rmą np. Agencje reklamowe czy studia reklamy wizualnej. Stosowanie jednego standardu ułatwia rozstrzyganie sytuacji spornych które mogą wyniknąć podczas używania jednego znaku przy współpracy z podmiotami z zewnątrz jak i wewnątrz rmy.

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Events

Artistic Impressions 2013 – another edition of the Festival for Disabled Young People

Text: Ewelina Janczylik - Foryś; Photos: Maciej Szczurek

T

he gala concert in the Concert Bowl of Zdrojowy Park closed the 2013 Ciechocinek Artistic Impressions. For three days, the spectators gathered at the Concert Bowl in Zdrojowy Park, listened to and applauded the excellent young vocalists from all of Poland, who performed Polish and worldwide hits.

The participants in the Festival are young, disabled, but exceptionally musically talented people, who often pay for their accomplishments with great sacrifices, as they persistently drive themselves to expand their skills.

The festival is a contest, so the participants have to work very hard before the final gala concert. Mirosław Satora of the Pro Omnibus Foundation said: “For over 2 weeks prior to the gala concert, the young people work very hard during the vocal workshops, trusting and following the instructions from the singing teachers. We, as the foundation, are responsible for creating conditions conducive to their development, orienting them towards the selection of the

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right songs, and – most importantly – preparing them for singing. These kids are undoubtedly talented, but talent is not enough.

They also have to work hard, but they see that their efforts translate into success.”

34 disabled youngsters, exceptionally talented vocalists from all Poland – winners of numerous national festivals – took part in this event. The vocalists were accompanied by the band from Bydgoszcz conducted by Artur Grudziński, which made its debut at this festival.

This year, the great actor Wojciech Wysocki was invited onto the jury, and he received an ovation from the spectators. Agata Świtała, the daughter of the late singer Grażyna Świtała, appeared on stage. It was on the initiative of Agata’s mother that the Festival for Disabled Young People was founded 17 years ago. Her idea is now continued by the Pro Omnibus Foundation.

The Grand Prix was won by Natalia Smogulecka from Bydgoszcz. Natalia sang “Mein Herr”, originally performed by Liza Minnelli in “Cabaret”, for which she received

a standing ovation from the many thousands of spectators in the Ciechocinek Concert Bowl.

Natalia Smogulecka, Grand Prix 2013

Events Aleksandra Liske, 1st place in age category of 16 and under

Agata Zakrzewska, 1st place in age category of over 16 Ex aequo

Laura Dziąba, 2nd place in age category of 16 and under

Michał Wiśniewski, 2nd place in age category of over 16

Kamil Czeszel, 1st place in age category of over 16 Ex aequo

„This Festival is a truly

The high artistic level made it quite difficult to choose the winners. There were only 14 awards up for grabs, including the most important – the Festival’s Grand Prix. The jury was presided over by Krystyna WoźniakTrzosek.

The jury awarded the first two places in the age category of 23 and under to Agata Zakrzewska from Warsaw (Marek Grechuta’s “Świecie nasz”) and Kamil Czeszel from Toruń (“Psalm stojących w kolejce”). The second place in this category went to Michał Wiśniewski from Ostrowite (“Blues dla tych, co nie tracą ducha”).

First place in the age category of 16 and under went to Aleksandra Liske from Gołanice

in Wielkopolska (“I will always love you”), and second place went to Laura Dziąba from Tczew (“Set fire to the rain”).

Eight participants received honourable mentions: Edwin Tarka (Kutno), Milena Wiśniewska (Malbork), Karolina Kruze (Elbląg), Katarzyna Rudnik (Malbork), Dariusz Buczek (Chojnice), Władysław Kaczmarek (Poznań), Marek Okręglicki (Andrychów), and the debuting Radosław Graczyk (Łodź).

Krystyna Woźniak-Trzosek, the chairperson of the jury: “This Festival is a truly unique event, as it brings together young people and their close ones whose path of life has usually been

unique event, as it brings together young people and their close ones whose path of life has usually been a difficult one to tread.

”

a difficult one to tread. We’ve been shown how to live by all those who sing, compose and play instruments, as we’ve also been by those who look after them. They don’t let their illnesses, worries and hardships take control of their lives, although they have every reason to do so.

This is why, while congratulating all the Participants in the Festival personally and on

Ciechocinek – Award Winners Grand Prix 2013

2nd place – Michał Wiśniewski –

Natalia Smogulecka – “Mein Herr”

“Blues dla tych, co nie tracą ducha”

Age category of 16 and under 1st place – Aleksandra Liske –

Honourable mentions

“I will always love you”

Dariusz Buczek – “Im więcej ciebie tym mniej”

2nd place – Laura Dziąba – “Set fire to the rain”

Radosław Graczyk– “Mały Książę” Władysław Kaczmarek – “Nim błyśnie dzień” Karolina Kruza – “Halo”

Age category of over 16

Marek Okręglicki – “Bal drewnianych lalek”

1st place, tie:

Katarzyna Rudnik – “Jaka róża taki cierń”

Agata Zakrzewska – “Świecie nasz”

Edwin Tarka – “Tak całkiem bez dziewczątek”

Kamil Czeszel – “Psalm stojących w kolejce”

Milena Wiśniewska – “Taka mała”

Krystyna Woźniak- Trzosek, the chairperson of the jury during speach

7 -8 /2013 :: polish market :: 81

Events Honourable mentions: Władysław Kaczmarek

Milena Wiśniewska

Marek Okręglicki

Dariusz Buczek

Katarzyna Rudnik

Edwin Tarka

Karolina Kruza

“This event in Ciechocinek

behalf of the jury, I would also like to thank these young artists for showing us adults how to live, to be able to enjoy life and cherish it as the greatest of gifts, despite all the adversities they have encountered.

It is here, during this Festival, that great friendships are born. This is where you can see people compete without being in the slightest bit malicious or emotionally uptight. Instead, what they do is work hard, holding a belief that deep down there’s a talent in every one of us, which becomes relevant and valuable only after we take the courage to let it out and share it with others.

Jury after debate. From left: Sławomir Małecki, Jadwiga Aleksandrowicz, Mirosław Satora (organizer), Krystyna Woźniak- Trzosek, Jerzy Skonieczny, Ludmiła Małecka and Wojciech Wysocki.

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All these young people have this courage and remind us adults about the values we often tend to forget.”

Interestingly, despite the contest nature of this event, and the element of competition which, in theory, should be sensed among the participants, the atmosphere is excellent and friendly. The best proof of the good relations among them is their mutual support. It perfectly fits the motto of our foundation: “Unus pro omnibus et omnes pro uno”, which means “One for all, and all for one.”

When asked what the festival in Ciechocinek means to her, Krystyna WoźniakTrzosek, replied:

reminds me of an old English piece, that says: ‘Take time to be friendly, it is the road to happiness.

Take time to dream, it is hitching your wagon to a star.

Take time to love and be loved, it is the privilege of the gods.

Take time to look around; it is too short a day to be selfish.

Take time to laugh; it is the music of the soul.

(A fragment of an old English text)

Tadeusz Mazowiecki, Prime

Beata Sobocińska,

Minister in 1989-1990, and

Ombudsman for Children Office

Senator Michał Wojtczak

”

Mirosław Satora, Pro Omnibus Foundation

The John Paul II Health Clinic "Pod Tężniami" is a place, where the nearness of salt graduation towers and a beautiful park guarantee excellent atmosphere conductive to physical rehabilitation, regeneration and leisure.

SPA & Wellness

The John Paul II Health Clinic

„Pod Tężniami” in Ciechocinek, POLAND

Day SPA, Wellness & Beauty, SPA massages, sauna complex, Nordic Walking

Medical SPA

Balneology and rehabilitation Treatments for rheumatological and traumatic-orthopaedic disorders Treatments for the cardiovascular system and heart disease Treatments for skin disorders

Leisure and Recreation Outdor and all year round indor pool Brine swimming pool with aqua attractions Salt cave with mini graduation tower

Food and dining Restaurant and Diet Restaurant Restaurant "Onyx”, Café "Victoria”

Klinika Uzdrowiskowa „Pod Tężniami” im. Jana Pawła II Spółdzielnia Usług Medycznych ul. Warzelniana 7, 87-720 Ciechocinek tel. +48 54 416 70 00, rezerwacja@podteznami.pl www.podtezniami.pl

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Events

Awards for hard-working Poles On 3 June 2013, during a formal gala in the Teatr Wielki - Polish National Opera in Warsaw, we could see the winners of the 23rd edition of the “Teraz Polska” competition and of the 4th edition of the “Outstanding Pole” competition.

Maciej Proliński

T

he “Teraz Polska” emblem is one of the most recognisable symbols promoting the best products, services, innovative projects and local governments in Poland.

The Polish Promotional Emblem Foundation, a private, non-profit organisation, is the organiser of the competition. Any company may enter the competition - it does not have to be Polish. They only have to operate and to have been registered for at least 12 months in an EU Member State, and their product has to have been available on the Polish market for at least 6 months.

Krzysztof Przybył, Chairman of the Polish Promotional Emblem Foundation, stressed that the “Teraz Polska” brand promotes successful Polish entrepreneurship, culture, sports and science.

“It is the smart and conscientious Poles who are the power of the Polish economy and entrepreneurship, the ones who act as the propeller for brand Poland. The “Teraz Polska” Foundation is a careful observer and a catalyst of development changes. Apart from this competition, it also organises debates for all those who truly believe in the promotion of the country and brand Poland,” said Przybył.

This year’s edition was on an exceptionally high level. The Jury of the “Teraz Polska” Emblem selected 31 laureates, including 14 products, 9 services, 2 innovations and 6 local governments. The Jury also gave the special “Teraz Polska” Awards and the “Outstanding Pole” Awards.

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“93% of products and 97% of services assessed in the competition received positive assessments. And about 40% of the companies received 900 points or more out of 1000. This year the companies operating in the greentechnology business and regional food products dominated,” noted Michał Lipiński, the Competition Director.

The products that were awarded with the “Teraz Polska” promotional emblem are, among others, an intelligent street light control system from Apanet Green System, buckwheat honey beer from Jabłonowo Brewery, Lorens&Wiktor Południe suits, Oknoplast windows and fruit and vegetable juices made

by PPUH Tłocznia Mauer Krzysztof Mauer.

In the services category, the following received awards: the Central Clinical Hospital of the Ministry of Internal Affairs in Warsaw and Prote - Technologie dla Środowiska sp. z o.o. In the innovative projects category, the “Teraz Polska” emblem went to Balton sp. z o.o. and ChM sp. z o. o. In the local government category the winners were Stepnica, Kozienice, Stronie Śląskie, Piła, Władysławowo and Zakopane.

The jury also gave awards to outstanding personalities who, with their professional work and achievements, significantly contribute to the promotion of Poland in the world.

The “Outstanding Pole” title was awarded to Rafał Olbiński, the world-famous surrealist painter, illustrator and poster designer, who lives in New York, and Krzysztof Penderecki, one of the greatest contemporary composers

and conductors, who celebrated his 80th birthday this year. The Jury also gave honorary “Outstanding Pole” awards to former Polish Prime Ministers Jerzy Buzek and Tadeusz Mazowiecki for their lifetime achievements in their work for Poland and Poles.

The laudatory speech for Mazowiecki and Buzek was delivered by Janusz Steinhoff, Deputy Prime Minister and Minister of Economy in the Jerzy Buzek Government. “This stage, the place we are in today, has not come out of nowhere. We owe it, to a large extent, to Tadeusz Mazowiecki,” he said. He stressed the role of the first non-communist Prime Minister as an architect of systemic changes, not only in Poland, but in the whole of Central and Eastern Europe, the changes that brought about the fall of the Berlin Wall and the breach of the Iron Curtain. “He achieved all the goals mentioned in his policy speach and he was not afraid to pay the political price for that,” he said about Jerzy Buzek. According to Steinhoff, both politicians have always thought about Poland, rather than election sweet talk.

In addition, the Teatr Wielki - Polish National Opera got an award for constantly improving the level of national artistic achievements as well as promoting Polish culture internationally. The 3rd Channel of Polish Radio was awarded an honourable prize for the implementation of the public-radio mission in the sphere of achieving a high level of cultural sensitivity among numerous generations of Poles. ::

Food industry

Sausage – served from a fishing boat as well The Association of Polish Butchers and Producers of Processed Meat (SRW RP) has organised the 3rd Polish Meat Festival (Świętomięs Polski).

Bożena Skarżyńska

T

he “Polish Meat Festival” is an event promoting meat and processed meat products. It has been successfully organised for three years by the Association of Polish Butchers and Producers of Processed Meat (SRW RP). During the summer Festivals, subsequent regions of the country present the accomplishments of Polish meat and smoked meat producers. The Meat Festival has already been held in Poznań in the Wielkopolska Region and Chorzów in Silesia. This year, this great festival of the Polish meat industry was hosted by Gdańsk.

The authorities of Gdańsk made a perfect choice when it comes to the date of this year’s Świętomięs (10-11 August): during this time, the Old Town hosts the famous St. Dominic’s Fair. And despite the fact that this was the 753rd Fair already, the 3rd Meat Festival and its scenario fit into this event in a colourful and... big way.

It is hard to present all of the items on the rich, two-day schedule in a brief report. They included joyous parades on the Long Market, and along the nearby streets and the bank of the Motława, as well as serious discussions on the condition of the meat industry. Its problems were discussed during a special conference, during meetings with scientists and practitioners, and during galleon voyages.

The excellent products of Polish processed meat producers were promoted on land and on water. The “Meat Festival Fishing Boat”

86 :: polish market :: 7 -8 /2013

cruised the Motława for two days. The participants in the St. Dominic’s Fair received several thousand sausages and frankfurters made specifically for the 3rd Meat Festival. The historical galleon’s voyage around the port started a huge parade, during which the event was opened by Vice-Minister of Agriculture Tadeusz Nalewajk, the Gdańsk municipal authorities, and the Meat Festival hosts, who cut a symbolic ribbon, made of... frankfurters.

The hot and cold sausages, frankfurters, hot dogs, and meat stews were served in several Gdańsk locations from a field pan and the Meat Festival cauldron (several thousand helpings). Among other places, they were available on the beach in Brzeźno, on the Long Market (which hosted the meat university with lectures, which was supported by performances by famous musical acts), and on the Coal Market, where scientists encouraged children and adults to supplement their diets with the best kinds of meat. Three kinds of meat – pork, beef, and

poultry – since they were the ones promoted during the Meat Festival.

These three types of meat were used not only in stew, but also in all the served sausages and frankfurters. The gourmets stressed that they were exquisite! The participants in the Meat Festival all agreed that the event was a success. The locals of Gdańsk suggested it should become a permanent fixture on the city’s calendar event. Who knows, maybe it will...

One thing is certain - next year, the Meat Festival will travel to another region of Poland. There is also no shortage of those willing to organise this event.

And as for now, information on this unusual happening reaches numerous cities, since the so-called “Meat Festival Post” is active during the meat event. The funny postcards promoting this event, but mainly the Polish meat, will reach many addressees in the country and abroad. ::

Food industry

“Polska Ekologia” Association signs agreement with Thailand

D

uring a recent visit by a Thai goverment delegation to Poland, headed by Ms Yingluck Shinawatra, the Prime Minister of Thailand, who stayed in Warsaw from 2 to 5 July, an agreement on trade cooperation between the two countries was signed on 4 July in the Sheraton Hotel. The delegation was accompanied by more than 60 entrepreneurs from Thailand who were interested in starting commercial relations with Poland.

The agreement was signed as a result of the efforts made by the “Polska Ekologia” Association, especially owing to the initiatives taken by Mr Andrzej Parafiniuk, head of the Association’s Auditing Committee.

The agreement was signed on behalf of Thailand by Mr Preecha Treesuwan, Advisor

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to Thailand Trade Representatives, and on behalf of the Republic of Poland, by Ms Bożena Wróblewska, CEO of the Polish Chamber of Commerce Promotion Centre.

The cooperation agreement provides for the promotion of mutual trade, including the organic farming industry. It also includes collaboration on projects concerning tourism, culture, education and sport, and also cross-investments.

Those present at the signing ceremony included Ms Srirat Rastapana, Director General of the Department of International Trade Promotion at the Ministry of Commerce of Thailand, Mr Sathaworn Subsoontorn, Commerce Consul at the Embassy of the Republic of Thailand, Mr Tadeusz Ignasiak, former Commercial Counsellor of the Republic of Poland in Thailand, acting as the representative of the Ministry of the Economy, Mr Andrzej Parafiniuk of the “Polska Ekologia” Association and Ms Jolanta Lyska, Office Manager, as well as Mr Piotr Ziemann of the Association of Polish Butchers and Cured Meat Manufacturers. The event was also attended by journalists and a television crew from Thailand.

Thailand is the most prominent partner of Poland as far as Southeast Asia is concerned.

The value of bilateral trade has reached more than USD 1 billion, although in 2012 trade between Poland and Thailand was not as intensive – it amounted to USD 730 million. Owing to its strategic geographical situation in

Southeast Asia, Thailand plays the role of a gateway for Poland in terms of trade in other Asian countries. This is of crucial significance in the context of the plan to create in 2015 the ASEAN (the Association of Southeast Asian Nations) Economic Community, ensuring free movements of goods, services, investments and labour force among its ten Member States. ::

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