Polish Market No 9 (181) 2011

Polish Market :: 9/2011

15 years PUBLISHED since 1996 No. 9 (181) 2011 :: www.polishmarket.com.pl

Energy Infrastructure Polagra Food Innovation

Tomasz Zadroga

President of pge, Vice President of Eurelectric

Contents

9/2011

From The President’s Press Office # 6

From The Government Information Centre # 7

Tomasz Zadroga President of PGE: European energy policy must face some changes # 16

Henryk Majchrzak PhD, Chairman of the Board, PSE Operator: PSE cross-borderly # 18

European Dilemmas - Partnership or Rivalry? 21st Economic Forum # 19

Energy security and ecology go hand in hand # 20

OUR GUESTS

Bożena Lublińska-Kasprzak CEO of the Polish Agency for Enterprise Development # 8

Marek Sawicki PhD Minister of Agriculture and Rural Development # 24

Michał Machlejd President of the Warsaw District Heating Company (SPEC): A clear development strategy determines success # 22

agriculture innovation

Elżbieta Wojnicka-Sycz PhD lecturer at the Institute of Organisation and Management of the University of Gdańsk: Innovation through openness, cooperation and creativity # 9

The FERRO Group: market power and European quality # 11

Wacław Wasiak The Polish Chamber of Packaging: The Polish packaging market # 25

Izabella Byszewska President of the Board of the Polish Regional and Local Products Chamber: Regional Products # 28

Why are Polish products the best? # 29

We are exporting more and more food and agricultural products # 31

Europe is not enough # 12

Chemistry

energy

Patryk Mirecki: Lighter with power # 14

Bogdan Sadecki: Chemistry is still attractive in Poland # 33

Major events in September 2011 with “Polish Market” as a media partner:

International Fair of Food Products Polagra Food

World Green Building Week

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Consumer Credit Conference

34th Autumn Housing Fair New Home

21st Economic Forum in Krynica

19th International Defence Industry Exhibition MSPO

Expo China

3rd Congress of Women

Conference Facilitating- investments by energy saving measurements

The 9th edition of the

pearls of the polish economy ranking

• the largest Polish companies • objective ranking • prestigious gala

Contents

invest in poland # 36

leasing

infrastructure

Bogusław Liberadzki Member of the European Parliament: We can achieve success through a joint effort # 38

Konrad Jaskóła President of the Board of PolimexMostostal SA: The Polish infrastructure at the beginning of it’s jurney # 40

Andrzej Patalas PhD, Eng President of Autostrada Wilekopolska S.A.: Autostrada Wielkopolska is growing # 42

Polish Roads - where we are going # 44

Bogdan Sadecki: Breaking the railway barriers # 46

European construction # 50

Bumar Group – partner of the Defence Ministry in the modernisation of the Polish army # 52

opinion

Maja Sujkowska Chairperson General Partner’s Board at European Center for Legal Consultations: Territorial copyright protection under Polish law, its duration and application to foreign works # 53 Tomasz Bil attorney at law Chałas and Partners Law Firm: Is Polish law ready for Euro 2012 # 54

Poland is strong with SMEs # 60

cultural monitor

Cultural Monitor # 62

The Grand Theatre # 64

Maciej Klimczak Undersecretary of State in the Polish President’s Chancellery: Preserving monuments and landscape # 66

Maciej Proliński: Poland and Ukraine – together on the eve of Euro 2012 # 67

events

pharmaceutics

Małgorzata Zaleska Member of the National Bank of Poland, a professor at the Department of Banking of the Warsaw School of Economics: It was supposed to be so good # 59

sme

law and taxes

Andrzej Krzemiński President of the European Leasing Fund (EFL): Prospects for leasing # 58

Wiktor Kolbowicz Chairman of the “Pod Tężniami” Health Clinic named after John Paul II: We care about health and recreation # 68

Pharmaceutical companies have to adopt a new business model # 56

Polish Market :: 9/2011

15 YEARS PUBLISHED SINCE 1996 No. 9 (181) 2011 :: www.polishmarket.com.pl

Energy infrastructure Polagra food innovation

Tomasz Zadroga

President of PGE, vice President of Eurelectric

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

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English Editor: Sylwia Wesołowska-Betkier Translators: Maciej Bańkowski, Grażyna Śleszyńska, Sylwia Wesołowska-Betkier, Sandra Wierzbicka Photographers: Jan Balana, Łukasz Giersz Polish Market Online Editor-in-Chief: Wiktoria Grabowska Sales: Phone (+48 22) 620 38 34, 654 95 77 Katarzyna Malinowska – Sales Director k.malinowska@polishmarket.com.pl Natalia Suhoveeva natalia.s@polishmarket.com.pl Ewelina Surma e.surma@polishmarket.com.pl PR: Joanna Fijałkowska j_fijalkowska@polishmarket.com.pl

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Editorial When watching what has been happening around the world this summer, one can hardly remain calm. The turmoils in Greece, Italy and Portugal, the Swiss franc exchange rate surging, continuing unrest on the world stock markets, downgrading the USA rating, the riots in London and the tragedy in Norway do not predispose us to be optimistic; on the contrary – it gives us a lot to think about. Let us hope that the coming autumn will calm down the emotions and will not bring further economic and social storms.

There are many important events that are going to take place in September. At the very beginning of the month, there is the Economic Forum in Krynica, followed by Polagra Food Fair. That is why we have devoted this issue of the “Polish Market” magazine mainly to these events, yet not exclusively.

The guests in this issue are Bożena Lublińska-Kasprzak, CEO of the Polish Agency for Enterprise Development, Marek Sawicki PhD, Minister of Agriculture and Rural Development.

For years Polish food has enjoyed an excellent reputation in terms of both its taste and quality. Thanks to the Polagra-Food 2011 Fair, organised during the time of the Polish EU Presidency, the quality of Polish food will be appreciated by guests from all over Europe.

This year in the Polagra Food Fair there are more than 200 exhibitors from the meat, dairy, confectionery, food and alcohol industries. For European agriculture to become really competitive, we have to rise above political divisions both in individual countries and within the European Union, which is why Minister Marek Sawicki emphasises the importance of Polagra Food Fair.

In this issue we are also presenting a very important sector for the development of our economy, namely the sector of small and medium-sized enterprises.

Jerzy Buzek, President of the European Parliament and Chairman of the Congress Programme Council, stressed that “Small and medium-sized enterprises are the foundation of every country’s economy. Therefore, for the entire State economy to function as a healthy organism, one should take care of its basic elements. The position of small and medium-sized enterprises, their development opportunities and their access to capital not only determine growth in Europe, but also the welfare of citizens. Poland noticed these connections and dependencies. The country decided that one of the main tasks in its EU Presidency will be to improve the situation of the SME’s. Small and medium-sized enterprises in the European Union produce 60% of GDP and provide 70% of jobs in the entire EU.” Therefore, as early as October, “Polish Market” will be patron to an important event, the SME Congress. A unique aspect of the Congress is its international character. The representatives of the EU member states, as well as the representatives of Eastern countries, were invited to participate in the Congress. According to the organisers of the Congress, the countries of Central and Eastern Europe have the potential to create a modern SME Silicone Valley. We are also presenting a comprehensive report on infrastructure, which raises a lot of emotions and is one of the key issues in the development of our country’s industry.

Krystyna Woźniak-Trzosek President Rynek Polski Publishers Co. Ltd.

PSE Operator S.A. invites to a discussion panel at the Economic Forum in Krynica The panel is entitled: “Energy secure Europe – creating a common market in the conditions of insufficiency of cross-border connections and domestic infrastructure investments.”

Venue: 21st Economic Forum, Krynica Zdrój

Date: 7 September 2011, 17:20–18:30

List of panellists: :: Maciej Kaliski, Undersecretary of State in the Ministry of the Economy :: Andrzej Czerwiński, Chairman of the Parliamentary Sub-Committee for Energy and the Permanent Group for Energy :: Virgilijus Poderys, President of Litgrid AB :: B oris Schucht, President of 50Hertz Transmission GmbH :: Prof. Waldemar Kamrat, Gdańsk University of Technology :: Prof. Krzysztof Żmijewski, Warsaw University of Technology :: Henryk Majchrzak, President of PSE Operator S.A. 9 /2011 :: polish market :: 5 :: A gnieszka Łakoma (Moderator), “Rzeczpospolita”

Odessa-Brody-PłockGdańsk pipeline

President visits Austria The priorities of the Polish Presidency, support for euro-zone countries plunged in to a debt crisis and EU enlargement in Western Balkans and the countries east of the EU – these were the main topics of talks between presidents of Poland and Austria - Bronisław Komorowski and Heinz Fischer.

At a press conference after the meeting with Fischer, Polish President assured said Warsaw wanted to get involved in solving current economic and financial problems in the euro zone, passing on Polish experiences and skills.

“We want to pass on Polish optimism, which is associated with the fact that we were the only country not to slide into a recession in recent years and which has enjoyed economic growth for nearly 20 years” said Bronisław Komorowski.

He spoke in this context about the Polish experience of difficult systemic reforms. The Polish President spoke optimistically about the future of the common European currency. “We are euro-optimists” he underlined, expressing the belief that there will be no recession in the EU. On his part, the Austrian president added that they had discussed the financial and economic situation in the EU and the desire to overcome the crisis together. “Poland’s readiness in this area is very important,” Fisher noted.

The presidents stressed the good relations between the two countries and expressed their desire to deepen them. EU enlargement in the Western Balkans and the countries east of the EU were also discussed in Vienna. ::

In the capital city of Azerbaijan, Baku, Bronisław Komorowski met with President Ilham Aliyev and the Chairman of the National Assembly Ogtay Asadov.

President Bronisław Komorowski stated in Baku that the plan to build the Odessa-Brody-Gdańsk pipeline had not been abandoned. The President of Azerbaijan Ilham Aliyev underlined that his country had oil and gas pipelines, and that their capabilities were not fully used.

“Poland maintains its profound interest in the construction of a transmission system that would help solve Poland’s energy problems, but most of all would be important for the EU,” stressed Komorowski.

He emphasised that this applied to both the pipeline and “an old project for which EU money had been allocated, the Odessa-Brody-Płock-Gdańsk oil pipeline”.

The Polish President pointed out that oil from Azerbaijan was processed in the Czech Republic. “Azeri oil is already at our borders and it is worth taking care that it became one of the elements helping to solve problems of our region,” he added.

Bronisław Komorowski confirmed that there was political support for the Odessa-Brody-Płock-Gdańsk pipeline, but he added that “in order for the decision on spending a relatively large amount of money to be made, the business plan must be clear.”

As the President of Azerbaijan said, new opportunities to deliver energy from his country to European markets are looked into. “Poland plays a significant role in that,” Aliyev underlined. “Currently we have seven oil and gas pipelines and their potential is not fully used, although all pipelines are operating,” he added. ::

Business is the best bond of friendship “Business is the foundation stone of friendship,” the President emphasized in Tbilisi, at the Georgian-Polish economic forum. He encouraged Polish and Georgian companies to invest.

“Business and common profit are the foundations of lasting cooperation,” Polish President underlined. Therefore – as he said – he encourages Polish companies “to courageously enter the investment market in Georgia.” “This is the moment when you can – without political fears – engage in purely financial dimension,” he added.

He also encouraged Georgian companies “to look into the opportunities offered by the Warsaw

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Stock Exchange.” “Friendship is priceless, on friendship one can and should build, but in order for a friendship to last, new elements of cooperation should be constantly added, so it gives not only satisfaction and fun, but benefits as well,” said Komorowski. He encouraged to look for niches which could be explored by Polish and Georgian businesses.

As he noted, Polish companies are already benefiting from economic freedom in Georgia.

As an example he gave a company which is participating in the privatization of the Georgian health care sector. ::

Election day on October 9 Parliamentary elections are to be held on October 9 and they will be one-day only, Polish President Bronisław Komorowski announced on August 4.

Formally, the election campaign is launched on the day of publication of the presidential decree in the Journal of Laws of the Republic of Poland. This year’s elections will be held under the provisions of the Electoral Code which entered into force on August 1. ::

67th anniversary of the Warsaw Uprising

World Kashubian Reunion

On the “W” hour, Prime Minister Donald Tusk paid homage to the heroes of the Warsaw Uprising at the Gloria Victis monument at the Warsaw Powązki cemetery.

The ceremonies marking the 67th anniversary of the outbreak of the Warsaw Uprising were attended by Hanna Gronkiewicz-Waltz, the Mayor of Warsaw, General Zbigniew Ścibor-Rylski, Chairman of the Union of Warsaw Insurgents, Stanisław Oleksiak, President of the World Alliance of Home Army Soldiers, Stanisław Krakowski, Chairman of the Warsaw Region of the World Union of Home Army Soldiers, and Prof. Władysław Bartoszewski, Prime Minister’s Commissioner for International Dialogue.

The “W” hour on 1 August 1944 was the beginning of the Warsaw Uprising, the greatest independence-oriented rising of the Home Army and the largest military campaign undertaken by the underground movements in the Nazi-occupied Europe. ::

Prime Minister Donald Tusk participated in the 13th World Kashubian Reunion, which took place this year in Lębork.

“In Kashubia we have renounced all radicalism,” said the head of government.

The event intended to integrate the Kashubian community was attended by several thousands of people. “Here in Kashubia we know very well how important peace is – between nations and between people,” noted the Prime Minister.

“I believe that we, the Kashubians, are among the few who understand our brothers from the North, but here in Kashubia we also know how wonderful peace, continence, common sense and moderation are – the values we have managed to preserve here on our soil,” stated Donald Tusk.

The World Kashubian reunions have been held since 1999 in different cities in Pomerania. They are organized by the Kashubian-Pomeranian Association based in Gdańsk. The first get-together of the Kashubian community took place in 1999 in Chojnice. In the following years, the Kashubians met in Hel, Wejherowo, Kartuzy, Słupsk, Kościerzyna, Łeba, Gdynia, Bursy, Gdańsk, Bytów and Puck.

It is estimated that the Kashubian community in Poland numbers around 0.5 million people. ::

Prime Minister of Croatia in Warsaw Prime Minister’s visit to Prague Czech support for the programme of the Polish Presidency in the EU Council and cooperation between the two countries within the framework of the Visegrad Group were the main subject of the talks during Prime Minister’s visit to the capital city of the Czech Republic.

In Prague, the head of the Polish government met with Czech Prime Minister Petr Necas and President of the Czech Republic Vaclav Klaus. “It is somehow symbolic that the first foreign visit during the Polish Presidency is to the Czech Republic, which proves how good relations we have managed to build between Prague and Warsaw,” said Donald Tusk.

“We consider the priorities of the Polish Presidency to be our own, we

completely support them,” declared Prime Minister Petr Necas at a press conference. The head of the Czech government pointed out the significance of the development of internal market for energy security. The current European agenda, including the Cohesion Policy, was discussed. “Both our countries will act in support of the Cohesion Policy as a tool of European integration,” the head of Polish government underlined.

The Czech Republic is among Poland’s chief trading partners. According to data of the Ministry of Economy, in 2010, Polish-Czech trade turnover reached the value of EUR12 billion. Polish imports from the Czech Republic came to EUR4.7 billion and export to the Czech Republic – EUR7 billion. ::

Prime Minister Donald Tusk met with Jadranka Kosor, head of the Croatian government. The talks focused on the forthcoming accession of Croatia to the EU. “This brings great satisfaction to Poles, that Croatia will sign the Accession Treaty during our Presidency,” said the head of the Polish government.

The Prime Minister of Croatia announced that in September they would meet again with the Polish Prime Minister in Zagreb in order to discuss the details of the Treaty. Donald Tusk proposed that the document could be signed in Warsaw, however, as he pointed out, this is subject to further arrangements.

“We intend to work with Prime Minister Kosor on the European perspective for the whole region,” said PM Tusk regarding the possible EU membership of the other Western Balkan countries. “We would like it to be a clear sign for the other countries in the region that the European way, the prospect of EU membership, remains open.”

The Prime Ministers of Poland and Croatia also discussed bilateral economic and administrative cooperation. The Polish government is interested in increasing the number of investments and contracts held by Polish companies in Croatia and other Western Balkan countries. :: 9/2011 :: polish market :: 7

Our Guest Construction

The importance of innovativeness to economic growth Bożena Lublińska-Kasprzak CEO of PARP (The Polish Agency for Enterprise Development)

In modern economic conditions, innovativeness is a key factor in economic growth. In highly-developed economies – and this is the group Poland wants to join – the main stimuli for growth in productivity are innovations based on three pillars: research and development (R&D), knowledge, and education. Innovative activities undertaken by entrepreneurs generate the most added value for industry and services, and contribute to consolidating the competitive ability of the national economy on the international market. Innovativeness is the most important element in increasing efficiency and economic growth, especially in times of turbulent technological changes.

Developmental tendencies of highly-developed countries show that only building competitive superiority based on knowledge and innovations can guarantee stable growth and the creation of new, better workplaces. Innovativeness is becoming one of the key measures of competitiveness on the globalised market. Poland is currently at a peculiar point of development. Previous competitive supremacies, based on low working costs, are more and more falling in significance. Therefore it is becoming necessary to construct new supremacies based on knowledge and innovativeness, constituting a basic factor in long-term economic growth. From this point of view, it is relevant to develop the innovative activity of companies, including research and development, as the most important factors in competitiveness on the global scale.

How does PARP support the innovativeness of Polish entrepreneurs and the Polish economy?

First of all, we need to start with the key role in supporting the innovative activity of Polish companies played by EU Structural Funds.

In the current financial framework, the most significant element in the financial support of innovativeness is the Operational Programme Innovative Economy for 2007-2013, within

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which the Polish Agency for Enterprise Development is implementing 13 Measures. The aim of the programme is to support the development of innovative enterprises and the growth in the competitiveness of the whole Polish economy. Within OP IE, subsidies are granted to projects innovative on the scale of the entire country or on an international level. They are connected mainly with using new technological solutions, products, services or organisations. The task of the Programme is to facilitate access to financing innovative enterprises and encouraging companies to engage in research and development activity, the transfer of solutions from the scientific to the business sector, the purchase and implementation of the results of the research and development works, and their subsequent realisation. Within OP IE, promotional activities for the economy, exports, and the reinforcement of the image of Poland as a country that is attractive to investors, are also organised. The purposefulness of supporting the innovativeness of Polish companies can be seen in many innovative projects on the market and subsidised by the Polish Agency for Enterprise Development. A thermographical matrix for the early detection of breast cancer, a module for the stateof-the-art plane engine GEnx-2B for Jumbo Jets, the first electric bus in Europe, technology for recycling pure resources and energy from electrical and electronic waste, and a modular prosthesis for the human arm with modular, mechanically independent finger modules, are but a few of the projects that have been developed with our financial support.

When speaking of PARP’s support for innovations, it is also worth mentioning the Innovation Voucher programme, which attracts the particular interest of entrepreneurs and whose aim is to initiate contact between entrepreneurs and scientific units. The research conducted by us shows that a significant barrier to growth in

the innovativeness of companies from the SME sector is precisely the lack of cooperation between enterprises and the scientific domain.

Innovation Voucher is actually one of the actions taken by the Polish government and the Polish Agency for Enterprise Development aiming at removing this barrier. Another programme is the Support for Obtaining Grants, which is aimed at increasing the innovativeness of micro, small and medium-sized entrepreneurs through subsidising their participation in innovative international programmes.

We should also mention tools for supporting the innovativeness of Polish companies offered by the National Innovation Network.

The experience of the developed countries shows that it is worth investing in the innovativeness of companies from the SME sector, which are the lifeblood of all modern economies. There are 1,670,000 small and medium-sized businesses in Poland, which comprise 99.8% of all active companies. The SMEs’ share in creating GDP amounts to 47.5% and gives work to over 6 million people – almost 61.3% of all employees. What’s more, companies from the SME sector can be transformed – by ensuring effective support – into big economic entities more willing to invest in innovations. In projects co-financed by the public budget, SME businesses, especially micro ones, use more innovative and risky solutions.

It is clear that the increase in the Polish economy requires redefining the world view of the whole of Polish society. That is why PARP is taking part in the national promotion of innovation. At the beginning of September 2011 we are starting the broad campaign Post-Innovative Attitudes, the aim of which is the promotion and creation of broad knowledge aimed at entrepreneurs and institutions connected with business and administration about the role of innovativeness in creating the competitiveness of companies and the whole economy. ::

Innovation

Innovation through openness, cooperation and creativity Elżbieta Wojnicka-Sycz, PhD

Elżbieta Wojnicka-Sycz PhD, lecturer at the Institute of Organisation and Management of the University of Gdańsk, expert and consultant on innovation, regional development and European integration. Author of expert reports, among others, for OECD, Industrial Development Agency, Polish Agency for Enterprise Development, the Ministry of Regional Development and Province Chairmen’s Offices.

Innovation involves technological, organisational or marketing change. It is essential if companies wish to succeed. The first person to observe the key role of innovation in companies’ competitiveness and general welfare, at the beginning of the 20th century, was an Austrian scientist, Joseph Schumpeter. His key belief was that an entrepreneur was an innovator. According to classical understanding it is a person who sets up a business on the basis of a new idea. Entrepreneurs also represent big companies, but this does not include individuals who set up a new business in a traditional industry, with no new products, structure or production processes. Such individuals are businessmen, not entrepreneurs.

Nowadays the predominant approach to innovation is strategic. It is based on the following assumptions: a) companies are based on markets and resources, b) they look to the future, c) they look for a way to survive. A strategy is a declaration of certain behaviour of the company, which takes into account resources and external circumstances. Companies wishing to be competitive must have a prospective action strategy, and innovation is the main factor in company development. Successful companies are innovative and they consciously implement different models of innovation process management. Below are listed new concepts of innovativeness, such as open innovation, user-driven innovation, design thinking and design-driven innovation.

In a rapidly-changing environment single firms would have to bear huge expenditures in order to maintain a technological advantage. That is why more and more innovative companies decide to make use of network action and absorb knowledge from the environment to increase their innovative potential. They operate according to

the recommendations of the open innovation concept, which also involves engaging in constant transition and improving the whole staff of a company, by the stimulation and use of employees’ commitment and creativity.

The open innovation model does not assume that innovative companies should completely give up their own research activity. Its purpose is not to close internal R&D departments, but rather to support them by the most efficient use of various sources of innovation. Access to the best sources of knowledge plays a vital role in companies’ strategies.

The openness in the open innovation model refers mainly to the method of sharing knowledge with others and inviting others to cooperate. In the open innovation model we find two kinds of openness complementing each other – “outside-in” and “inside-out.” The first type of openness defines a situation where a company uses external ideas and technologies in its business activity. The second type defines a situation where a company gives other companies access to its ideas, technologies and processes.

An example that shows the necessity for an open approach to the innovative process with particular focus on customers is the decline of Motorola’s share in the mobile phone market. Despite its big success after introducing the first slim phone in 2004, Motorola experienced a large downturn in its position on the market, as it offered no new innovative products. The reason behind Motorola’s weakness was its product-centred approach to innovation. In looking for new innovative products, it overlooked the aspect of customers’ experience with their actual products and the need to introduce extra services which would be expected by the customers.

Another new concept of innovation management is the demand-oriented approach to innovation (user-driven innovation). It rediscovers the importance of customers and their ideas for company innovativeness. The user-driven innovation approach is based on a better understanding and knowledge of the overt and hidden requirements/needs/expectations of consumers, by using the information coming from them and very often by using their ideas and ready solutions.

To sustain a competitive edge, companies should follow the experiences of users, i.e. how a given product/service satisfies their needs. Not only is it important to collect opinions within the traditional process of market research, but, what is even more significant, to have the knowledge on customers’ hidden needs. Innovations originating from users include ideas, concepts and project solutions concerning products initiated by them, acquired in the process of the interactive identification of consumers’ needs and their practical use of products/services.

Innovations created by users might involve material products as well as services, the organisation of processes, and technologies, both end products and tools, raw materials, and infrastructure. Users include not only individual consumers, but also companies and institutions. Moreover, one of the sources of innovative initiative may be the staff.

An example of utilising cooperation between companies and customers in innovative processes was the devising, by one of the pharmaceutical concerns, of a marketing plan, based on the ideas from an opinion poll conducted among a thousand cooperating doctors and nurses. During three weeks the participants anonymously expressed their opinions on the solutions proposed by the company, and constructed their own solutions. It turned out that after the implementation of the proposed

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Innovation

solutions product sales significantly improved.

It is exclusively due to an initiative from bike users that the first mountain bicycles were designed. Cycling enthusiasts simply began to improve classical bikes by strengthening their frames, and adding off-road tyres and stronger brakes. About 20% of cyclists still “improve” their mountain bikes and submit their ideas to the companies producing them. In a like manner, more and more companies encourage their customers to express new product ideas, and improve those already existing, via websites.

One of the leading companies in the telecommunications sector, before the implementation of their new solutions, presents them on their website and encourages users to share their opinions.

In computer games companies it is a common practice to employ only active gamers in staff positions responsible for creating new products, as they know very well, based on their own experience, what improvements they would expect from a new game release.

of the organisation’s context, in order to look at it through the eyes of the customer and from this perspective redefine the company.

2. Visualisation of the concept – with a better understanding of how the organisation is perceived and a broader set of criteria for innovation, a new creative process can be introduced towards creating many prototypes, preferably involving users. It is essential to look beyond the current state of affairs, instilling in people the imagination to create new solutions on the global scale.

3. Strategic business design thinking – with well-defined, user-inspired solutions, one must indicate the driving force for the potential success of these solutions. It is important to define the key operations that need to be undertaken in order to carry out the strategy, specify strategic relations at the operational level, and estimate the net effects of new business models in the economic domain.

The most innovative companies implement innovations driven by design, in which they participate as active creators of users’ needs, and they simultaneously utilise their knowledge of various external subjects such as science, fine arts, and companies in the same industry. By using design thinking, they creatively develop and implement new innovations on the global scale.

Design thinking is a method of problem solving which allows you to balance the need for steadiness, effectiveness and predictability with the need for spontaneity and experimentation. According to this approach, the solution-creation cycle involves generating ideas, predicting consequences, testing ideas – experimenting and generalising. Business strategies in the design thinking approach generate both economic value and value for people.

According to Steve Jobs, founder of Apple, design concerns not only the issue of what a given product looks like, and how it is perceived, but also how it works. Following the assumptions of design thinking, there are three basic forces driving business models:

Design thinking is a methodology which derives from the specific sensitivity of designers and their work methods; it combines the needs and desires of people with what is technologically possible to achieve, creating a strategy which realises values that are important for customers and opens up new market opportunities.

Design-driven innovation focuses attention on the fact that customers cannot be the only source of innovation – the most innovative companies are able to create new needs and propose solutions which customers assume to be the ones they desired. These innovations are often based on a new vision and the never-before-practised use of existing technologies. Such companies, in cooperation with scientists, designers, artists, suppliers and other companies in the same industry, look for new ways of implementing existing solutions, and then they propose these solutions to customers. If they meet the needs of customers, new products often become more desired than the original solutions. Take for example the MP3 technology, which was initially invented as a substitute for cassettes and CDs to improve the quality of mobile players such as the Walkman

1. Deep understanding of the user – which means a thorough knowledge

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or the CD player. In 2001 Apple showed the new significance of this technology by enabling users to compile their own music libraries through the whole system comprising iPods, iTunes, and iTunes Store. This technology, combined with the new business model of selling music tracks, allowed users to discover, “taste,” buy, organise and listen to music. Similarly, Nintendo Wii moved game consoles from passive virtual reality, appealing mainly to enthusiasts, to active playing in the real world for everyone, thanks to its motion tracking system.

Design-driven innovations originate from companies and are their proposals which turn out to be exactly what users have been waiting for. The companies which introduce design-driven innovations participate in a network of connections with external subjects, who share the same goals. They are companies from different branches directed at the same users, new technology suppliers, researchers, designers, artists, etc. Within these networks the companies implementing design-driven solutions exchange information concerning potential scenarios, test the validity of assumptions and discuss different ideas. Such an exchange of knowledge permits companies to improve their understanding of customers’ perception of products and services and to influence the meanings that customers ascribe to goods.

Combining different sources of knowledge by increasing the openness of companies, also to their own employees, and promoting creativity, is the way to success. Innovative companies are able to derive inspiration from their environment and transform it into profitable implementations, responding to customers’ expectations. ::

The most innovative companies implement innovations driven by design, in which they participate as active creators of users’ needs, and they simultaneously utilise their knowledge of various external subjects such as science, fine arts, and companies in the same industry, and, by using design thinking, they creatively develop and implement new innovations on the global scale.

The FERRO Group: ­ arket p m ­ ower and European quality

The leader in the sanitary and heating industry on the Polish market – the Ferro Group – on the changes introduced, enhancing its position on the market and new products of the highest quality.

In 2011, in Central and Eastern Europe, a new leading entity in the sanitary and installation engineering sector emerged. The FERRO Group, owing to the takeover of the Czech company NOVASERVIS A.S, not only enhanced its leading position in the sanitary and heating industry, but has also become one of the most powerful companies in the region as regards mixers sales volume. In 2010 the total sales of the Group, including NOVASERVIS, was about 1.5 million mixers and over 8 million valves.

“We are pleased that, thanks to this transaction, the Group’s product range has become expanded and more competitive, which will certainly result in measurable benefits for our trading partners and in the repayment of investments for shareholders.

With this scale of operation we will be able to implement the strategic objectives of the company more effectively and gain new exports markets,” says Aneta Raczek, CEO of FERRO S.A. The business category of this rapidlydeveloping public company is the manufacturing and sales of high-quality sanitary and installation fittings under the name Ferro and heating elements under its own brand Weberman. On the Polish market

Aneta Raczek, CEO of FERRO S.A.

FERRO is also a representative of Caleffi and Cimm, well-known Italian manufacturers. With the acquisition of 100% of NOVASERVIS’s shares, the portfolio of the range increased by hundreds of new products, such as designer mixers lines Metalia 56 and Metalia 57, functional and economical batteries Titania Iris, chrome bathroom radiators and widecollections of elegant bathroom accessories for the installation of bathroom fittings. The company also gained a modern manufacturing facility – in the

Czech plant in Znojmo, the entire product range of NOVASERVIS is being manufactured, based on European standards of technology and work organisation. The plant has a CNC treatment department, its own glassworks, and a galvanic and assembly line, as well as work stations for assembling and polishing mixers. NOVASERVIS strictly complies with quality standards at all stages of production, which applies in particular to the fully-automated chrome plant with closed water circulation, adjusted to the most recent environmental requirements.

The FERRO Group and its award-winning products have been winning prestigious prizes for innovation, brand, design and business credibility. FERRO is the leader in saving water – as the first Polish manufacturer to introduce batteries in VerdeLine technology, which facilitates the saving of up to 50% of water, resulting in financial benefits for households. For this achievement, the company was awarded, inter alia, the symbol Teraz Polska 2010. Among its prizes one should also mention the Second Diamond to the Golden Statue of the Polish Business Leader 2011, the Solid Company 2010 certificate, the Grand Prix Consumer Laurel 2010 and the Rdzeń Machina Design Award 2009. NOVASERVIS was awarded the Czech National Quality Prize CZECH MADE for its Novatorre bathroom accessories, an award for Metalia batteries for the best product of the AQUATHERM PRAHA 2001 Fair and the SHK Brno 2002 Fair Gold Medal. ::

Europe is not enough To conquer the world At the end of the 1980’s, Adam Góral and his brother founded Jazcoop, which operated in the field of fruit and vegetable processing. In 1991, it was joined by a small IT services office. The office, with a few employees, became the foundation of the Asseco of today. It was then that Adam Góral bet on IT, a field to which he is faithful to this day.

The birth of COMP Rzeszów Sometime later, Adam Góral and Jacek Papaj opened the Rzeszów branch of COMP Ltd, which was renamed COMP Rzeszów in 1995.

The first customer to entrust their business to COMP Rzeszów was the Express Bank Spółdzielczy in Krasne.

“We really owe a lot to cooperative banks. Thanks to our cooperation,

we learned about banks, their operations, and the needs of its clients,” says Adam Góral today.

The successful projects for cooperative banks were followed by the first approach from a commercial bank – the Bank Ochrony Środowiska, which remains an Asseco client to this day.

From that moment, the company began to grow, and required the expansion of its structures. The next breakthrough moment came in 1996 – for the first time, COMP Rzeszów implemented solutions for a western bank operating in Poland. It was Rabobank, the Dutch cooperative banking institution, which took over the Bank Rolno-Przemysłowy.

“The Rabobank project taught us the most. We found out what management information is. The client forced us to think and operate in these categories. Thanks to this, we became a company creating needs,” is how Adam Góral summarised the period.

Following this project, the company grew in power and acquired more clients, including the BRE Bank Hipoteczny, the Volkswagen Bank, and the Bank Pocztowy.

Debut on the stock market On September 27 2004, Asseco debuted on the Warsaw floor. On the first

listing day of the opening, the company’s stock grew by 28 percent above the issue price (PLN94) to the value of PLN121. The company continued to consolidate its position in the banking sector, but also began to diversify its operations. It also directed its package to entities in the insurance field and to large companies.

“The stock market debut was a real breakthrough. This success exceeded beyond my wildest expectations. The capital market completely changed my way of thinking. Back then, many entrepreneurs believed that you had to make money before you invested in a new idea. The world of financial institutions showed me that the hardest part is to find a good idea,” President Góral comments today.

Asset Soft + COMP = Asseco In November of 2004, COMP Rzeszów acquired 55 percent of the Slovak company Asset Soft, which operated in the implementation of software for banks, insurance companies, commercial enterprises and the public sector.

“In 2001, the Austrian bank Erste Group took over two large banks in the Czech Republic and Slovakia.

As their new owner, it also wanted to take charge of the IT system supply.

Adam Góral

Jozef Klein

President of the Management Board of Asseco Poland

Chairman and Chief Executive Officer, Asseco Central Europe, a.s

Following complex negotiations, we decided to sell the part of the company responsible for implementing systems for those two banks,” recalls Jozef Klein, who managed the former Asset Soft, today’s Asseco Central Europe. “Following the sale, we began to search intensively for a strategic partner, who would allow us to retain our identity. We conducted many interviews, and then we met Adam Góral.

Our aim was to create a large company, and at the same time preserve our local autonomy. Adam had a similar vision. As a result, COMP Rzeszów purchased 55 percent of Asset Soft stock. To us, it was the beginning of a new era, the beginning of the Asseco group.”

“The Slovaks reinforced our position on the bank solution market, and we contributed ideas of diversification and access to the stock market,” says Adam Góral. “I have always said that Asseco is a Polish and Slovak project.

If we had not encountered such honest and hardworking people, it is hard to say how it would all go.”

The Polish-Slovak partnership was confirmed by the new company name – Asseco – which was derived from combining Asse(t) and CO(MP). In 2006, Asseco Slovakia debuted on the Warsaw floor.

Republic, Hungary), Asseco DACH (Germany, Austria, Switzerland), Asseco South Eastern Europe (the Balkans, Turkey), Asseco South Western Europe (Spain, Portugal, France, Italy), Asseco Northern Europe (Scandinavian and Baltic basin countries).

Another company from the group entered the Warsaw Stock Market in 2009 – Asseco South Eastern Europe.

A lot was happening in Poland during this time. The years 20062010 witnessed a series of mergers and acquisitions made by Asseco Poland. They were large-scale events, because they involved Polish IT legends, companies such as Softbank, Prokom Software, and ABG. Thanks to mergers with leading IT companies, Asseco became the leader in the Polish IT market, as well as the number one company in Central-Eastern Europe.

By the end of 2010 Asseco reached even further, and acquired the Israeli holding Formula Systems, listed on the American NASDAQ and Israeli TASE stock markets. Thanks to this, the company is currently present in Israel, the United States, Canada, and Japan.

Poland, Europe, the world…

From this time, Asseco began the consistent creation of holdings operating in individual areas of Europe: Asseco Central Europe (Slovakia, the Czech

income from personal software and services in the amount of 455 million Euros. The small Rzeszów-based company had become a competitor to the global market leaders. Asseco’s complex IT systems are used by almost half the banks operating in Poland. The company’s package also includes advanced solutions for insurance institutions, implemented in the largest companies in this sector, as well as dedicated public administration systems, whose users include the Zakład Ubezpieczeń Społecznych and the Ministry of the Interior and Administration. Asseco Poland also successfully collaborates with the power engineering and telecommunication industries, healthcare, local governments, agriculture sector, and the uniformed services, as well as international organisations and institutions such as NATO or the European Union.

The Asseco project is unique not only on a Polish, but also a European level. “We are attempting to build something between a family company and a corporation,” says Adam Góral. He also never made it a secret that it is his dream to create the first truly global Polish IT company. He is closer and closer to his target. ::

The most important dates in Asseco’s history 1991 – foundation of COMP Rzeszów (the later Asseco Poland) 2004 – debut on the Warsaw Stock Exchange 2004 – first foreign acquisition (a Slovak company, the later Asseco Slovakia).

2007 – m erger with the quoted company Softbank 2007 – i nitiation of the expansion into South Eastern Europe (the Balkans) and Germany 2008 – acquisition of the largest Stock Exchange quoted Polish IT company Prokom Software 2009 – investments in western (Spain) and Scandinavian (Denmark) companies

Asseco today Asseco Poland is currently the largest IT company listed on the Warsaw Stock Exchange, and an important player on the European software manufacturing market. The group took eighth place in the TOP 100 European Software Vendors ranking published by Truffle Capital in 2009, with

2010 – further reinforcement of the position of Asseco in western Europe 2010 – The Asseco Group becomes a global company due to the acquisition of Formula Systems – the largest IT group in Israel, also present in USA, Canada, Japan, South Africa.

Energy

Lighter with power Patryk Mirecki The Power industry (including the electric power generation sector) is one of the economy’s main driving-forces.

In Poland’s case, the previous year and the first months of this year showed that most power companies managed to pick up after the crisis year 2009.

Thanks to the Polish government’s recent veto of the EU’s climate package (which threatened with the closure of cheap coal-powered power plants), the Polish power industry can look into the coming years with optimism.

The domestic market is still dominated by four big, largely state-owned operators: ­Polska Grupa Energetyczna (Polish Energy Group, PGE), Tauron, Enea and Energa, which emerged in 2006-2007 after consolidations carried through by the then government.

The Polish veto concerned a rather unrealistic plan to reduce the EU’s greenhouse gas emissions by 80% by 2050. Acceptance of this plan would entail serious costs for the Polish power industry and the economy in general.

EU climate policy threats The end effect would be serious losses. Experts from the Climate Package Committee at the Polish Chamber of Commerce (KIG) point out that the EC’s project aims to tighten the EU’s todate climate policy. According to KIG, this policy is a serious threat to the Polish economy, industry and consumers, mainly because of the rapid rise in energy costs and other adverse effects, like an unbalanced energy market, delays in energy investment projects, the devaluation of domestic energy companies, and the fact that energy-consuming branches would become less competitive. Moreover, the EC’s proposed roadmap until 2050 does not offer any means by which Poland could reduce the negative effects of the new climate policy. Neither does the roadmap take account of the environmental changes in recent years, an aspect which should have been taken under consideration in preparing the EU’s energy and climate package.

14 :: polish market ::

9 /2011

We stand on coal Poland’s fears concerning the EU’s energy and climate policy are largely due to the fact that our economy is based on hard and brown coal obtained from our own resources. Renewable energy is still a niche sector in Poland, although it has been developing faster over the past years. Maciej Richter, managing partner at Grant Thornton Frąckowiak (GTF), remarks: “Energy production from renewable sources – mainly wind power – has been growing fast. Interestingly, this market is still dominated by small operators, larger companies are practically absent, despite their rather ambitious declarations.” According to Maciej Richter the energy market is facing major strategic decisions, among others connected with the expansion and modernization of several coal-fuelled power units, and the rather controversial plan of building Poland’s first nuclear plant. “It will, therefore, be important to draw up reliable energy demand estimates for the coming decades, which will have to take account of two sometimes disagreeing factors: Poland’s economic growth during the period on the

one hand and, on the other, the EU’s strivings to cut energy consumption and reduce CO2 emissions into the atmosphere. Therefore, the next year or so may shape Poland’s energy market for decades to come”, says Richter. Basing on figures from the Energy Market Agency (ARE), Richter’s firm concluded that almost 90% of Poland’s electricity production at the close of 2010 was fuelled by hard and brown coal (in respectively 57.4% and 32.5%). The remaining 10% fell to gas (3.4%), biomass/biogas (3.3%), water (2.3%) and wind power (1.1%).

Good prospects for 2010 In its energy market report for 2010, GTF noted that the market was experiencing a high, with a rise both in the consumption and production of electric energy. “Electricity production in Poland is on the rise and this trend is unlikely to change despite recent warnings about waning demand for electricity. (…) domestic demand for electric power in 2010 amounted to 154.98TWh, an almost 5.5% rise against 2006”, the report authors wrote. Last year Polish power plants jointly generated 157 TWh of electricity. Also, according to PSE Operator SA, electricity

Energy Company

Net revenue 2010

Net revenue 2009

Net profit 2010

Net profit 2009

Net revenue Q1 2011

Net revenue Q1 2010

Net profit Q1 2011

Net profit Q1 2010

PGE Polska Grupa Energetyczna (Polish Energy Group)

20,476,000

21,623,000

3,627,000

4,337,000

7,294,190

5,321,245

1,261,454

1,113,579

GK Tauron Polska Energia (Tauron Polish Energy Capital Group)

15,428,879

13,694,622

991,383

948,163

5,299,075

3,794,333

387,971

359,587

Grupa Energa (Energa Group)

9,114,000

8,380,000

625,000

425,000

n.a.

n.a.

n.a.

n.a.

Grupa Enea (Enea Group)

7,836,875

7,153,509

639,381

513,610

2,472,230

2,021,380

247,362

219,390

n.a.

6,930,762

n.a.

192,981

n.a.

n.a.

n.a.

n.a.

23,725,000

22,818,000

1,465,000

1,494,000

n.a.

n.a.

n.a.

n.a.

PSE – Operator Vattenfall*

consumption in 2010 was 4% higher than in the preceding year with production up 3.59%. These results, however, must be viewed in the context of the economic slowdown in 2009.

Table 1.

Biggest energy companies. Financial results for 2010 and the 1st quarter of 2011 (in PLN thousands)

Coal and renewable energy

*) in EUR, figures concern the entire Swedish corporation, present in several countries in Europe (in Poland in Upper Silesia)

The report points out that the main reason why most of Poland’s electricity is still coal-generated are the country’s vast resources of this mineral.

In 2010 Poland produced 76.6 million tonnes of hard and 55.9 million tonnes of brown coal and is Europe’s biggest coal supplier after Russia. Nonetheless, last year’s figures also show a rise in renewable energy. So–called ROR (run-of-the-river) hydroelectric plants raised their production by 18% against the previous year, and wind farms by a whole 58%. Production also rose in biomass and bio-gas-fuelled capacity plants. In all, at the close of 2010 power plants fuelled from renewable sources had 18% more installed power than in the corresponding period of 2009.

Source: companies

Table 2.

Electricity production and domestic electricity consumption (in TWh) Source: Grant Thornton Frąckowiak report, PSE data

According to GTF, in 2010 Poland’s fuel and energy jointly companies generated nearly PLN300 billion in sales, PLN23.23 billion in net profit, and a profit ratio above 7.5%. Besides electricity companies, the markets biggest players are firms which distribute power to end users. The distribution of electricity is overseen by so-called Distribution System Operators (DSOs).

The DSOs for Upper Silesia and Warsaw are respectively Vattenfall Distribution Poland and RWE Stoen Operator. The

Mirosław Bieliński

remaining DSOs are grouped in the country’s four major energy groups: PGE, Tauron, Enea and Energa. PGE came first of 23 energy companies in a ranking of 2009’s top 500 net earners run by the national weekly “Polityka.” Next were Tauron Group, Energa, Enea, PSE Operator, Vattenfall Poland, Everen and RWE Polska.

The figures are very similar when it comes to the four biggest energy companie’s financial results for last year and the first quarter of 2011. ::

remarks

President, Energa SA “Investment in developing infrastructure is one of Energa’s main priorities. Currently we are underway with the biggest investment programme in the company’s history, partly financed by international financial institutions. In keeping with an Energa-signed international declaration on sustainable growth in the Polish energy branch, we are also investing in other important spheres. Recently, we opened a small hydroelectric plant, we are also beginning with the construction of a biomass boiler in a heat and power plant in Elbląg. We are also investing in gas-fuelled and coal-fuelled energy.”

Tomasz Zadroga

2010

2009

Total production

156 337

150 912

3.59%

Commercial power plants

146 104

141 874

2.98%

3 266

2 751

18.72%

142 835

139 120

2.67%

- hard-coal-fuelled

89 208

84 272

5.86%

President, Tauron Group

- brown-coal-fuelled

49 459

50 796

-2.63%

4 164

4 049

2.84%

10

21

-53.81%

“In June 2010 Tauron debuted on the Warsaw Stock Exchange offering over PLN4.2 billions’ worth of shares in its initial public offering. Valuewise Tauron’s offering placed second in the European energy branch and seventh among all European floor debuts in 2010. Tauron’s stock attracted high interest, the effect being that we now have a large group of domestic and foreign institutional investors, as well as more than 231,000 private investors, among our shareholders. The share issue was also one of the biggest IPOs ever carried through in Poland.

In December, 2010 Tauron stock entered the main WIG20 index, which shows that we are one of the biggest companies on the Warsaw floor. (…) Our investment programme also entails the construction of power units based on hard coal, natural gas and renewable energy sources.”

hydroelectric power plants heat and power plants

- gas-fuelled other renewable

2010/2009

The big four and others

“What the EU needs is a continental ‘energy mix’ which would focus on, say, water-powered energy in northern Europe, solar energy in the south, nuclear power in France, and coal-fuelled power in countries like Poland and Germany. This is something the entire energy branch – and increasingly more EU officials – see and understand. But it will not be possible without harmonising European law.”

Dariusz Lubera

wind-powered

1 298

820

58.29%

Industrial power plants

8 923

8 203

8.78%

Total foreign exchange

-1 354

-2 191

-38.20%

154 983

148 721

4.21%

Domestic electricity consumption

President, PGE SA, (at the Poland-Germany Economic Summit, June 20, 2011)

9 /2011 :: polish market :: 15

Energy

European energy policy must face some changes An interview with Tomasz Zadroga, President of the PGE Polska Grupa Energetyczna, Vice president of Eurelectric

European energy policy requires a revision that would take into account the costs of planned changes. Work in order to create a framework to shape the future of European energy should start right now. This framework should concentrate on the most cost-effective methods of reducing greenhouse gases emissions, taking into account changes in the global economy. It is worth to use the productive potential of all member states and at the same time aim at the actual reduction of emissions. Such an approach will bring benefits for the entire European industry.

For some time you have been voicing the need for the development of a coal-based power industry. What are the effects?

16 :: polish market ::

9 /2011

There are over 100,000 people working in the coal sector in Poland.

It remains a very important sector Polish and European economies. We have to build a European coal coalition. Apart from the independence, self-sufficiency and energy security which coal deposits give us, there is a real problem with mining, which apart from Poland, to varying degrees concerns Germany, the Czech Republic, Bulgaria, Romania and Great Britain. Please note also that the so-called clean energy from renewable sources is largely subsidised. Therefore I expect that clean coal technology (called CCS) will receive similar support. Its implementation on a large scale will mean the connection of environmental benefits with the maintenance of mining

© Eurelelectric

and coal-fuelled power. It is important, especially in the situation where environmentalists are demanding the closure of nuclear power stations, to produce clean and cheap energy.

But how to convince Brussels?

What arguments do we have to use?

It is worth remembering that Europe is responsible for 14% of the global CO2 emissions. Our successes in the field of controlling pollution has had a limited impact on the global economy, especially since the economies of the United States, China, India and Brazil emit much more CO2 and this trend is growing. Europe is now experiencing a crisis. The sharp increase in energy prices under the banner of environmental protection can become the source of other problems. Moving production, and the related loss of workplaces, are a major challenge today.

Therefore, one should ask the proponents of radical changes in environmental protection, do they actually care about reducing CO2 emissions and diminishing energy consumption in the economy, or do they just want the companies that are harmful to the environment to be transferred outside the EU borders? We are talking about business and this allows for a rational verification of different ideas.

Eurelectric, that is the Union of Electricity Industry is a prestigious trade association representing the common interests of the energy industry. Since June, you have been the Vice-President of this organisation. What is connected with this position and what is the meaning of this organisation for the Polish power industry?

The decision related to the choice for the position of the Vice-President is a confirmation of the high position and importance of Polish power industry on the European market. The PGE Polska Grupa Energetyczna thus joined the exclusive club of the largest companies in the sector in our region.

Energy

It is these companies that discuss, and above all, decide on, the market and its future. Currently on the list of matters that require implementation there are all-important issues such as the regulations related to Co2 reduction, diminishing energy consumption, costs connected to certificate policy, and the struggle for the position of coal in the European fuel mix. The term of the Vice-President is 3 years and during this time I will participate in all decision making pertaining the European energy sector. It is an invaluable experience, as well as knowledge, thanks to which we know more about the realities in our country, we understand this situation better and, most importantly, we have an actual chance to influence the final solutions.

Is this function associated primarily with prestige, or is it more a chance for the Polish power sector to be recognised in international forums?

Sitting on the board of such an important organisation means, of course, prestige and distinction. However, the most important thing is the opportunity to exert real influence on the decisions shaping the situation on the European energy market. I treat this position in the association as a kind of mission in which I want to fight for the right conditions for the development of the Polish energy industry and I assure that our voice will be heard and we will actively participate in the decision making that pertains to our market. Already during a conference in Stockholm I have proposed the socalled European fuel mix, i.e. using the energy potential of various European regions and the full achievement of goals in the climate policy. I refer mainly to the reduction of Co2 emissions. Since we are building a common market, it is worth considering its use also in these areas. The idea met then with great interest. Now it is the time to refine the details.

What are the most extensive problems, that Eurelectric has to solve?

To my mind it is necessary to relaunch a debate in the European Union on the issues connected with the

size of payments, the reduction of Co2 emissions, the ways of measuring them, and the fuel mix signalling the need to withdraw from coal in the situation where we possess large seams of this raw material. Remaining passive may mean that soon Europe will receive a high bill for green energy, and according to the World bank its totality will cost Poland and other EU countries a fall in national income growth and an increase in the unemployment rate. I believe that a consensus on various priorities and a solution acceptable to all parties is possible. To achieve it, one has to discuss these problems and, above all, be open to different arguments. One cannot demand the simultaneous closure of all nuclear power plants and coal-fired power plants.

This would lead to the collapse of the economy. Wind, solar or organic energy is not enough for our needs. Anyone who says otherwise misleads people and makes a very costly mistake.

W hat, do you think are the greatest threats to the Polish and European energy sectors?

From 2014, a common European Electricity Market will operate. Energy Europe is gearing up for fierce competition in the common, combined market. This means that the Polish market will offer electricity under the trademarks of key European players - French EDF, Italian ENEL, and German RWE. This race will only be won by big corporations, economically strong and ready to fight for customers, at the same time prepared to fulfil stringent and extremely costly requirements described in the EU’s climate package. Meanwhile, the Polish energy sector is decapitalised and under-invested. According to conservative estimates, our investment needs will amount to about PLN200 billion over the next 10 years. And this is only for the most necessary projects.

One should ask the proponents of radical changes in environmental protection, do they actually care about reducing CO2 emissions and diminishing energy consumption in the economy, or do they just want the companies that are harmful to the environment to be transferred outside the EU borders?

All manufacturers, but also Polish customers, consuming electricity, will probably have to face higher prices. Especially as the Polish energy sector is in 95% based on coal. That is why we must fight for coal.

There is no doubt that we will be one of the main flywheels of the Polish economy and an opportunity for the development of many industries.

What is the influence and importance of the current EU energy policy guidelines for Poland? Can they be beneficial for us, or are they rather a threat?

Protecting the environment is very important for many reasons, and investing in it pays everyone. It is important, however, to be able to combine the necessary changes with the interests of the people. Looking at the situation rationally, we can ask ourselves - what do people need slightly cleaner air for when they will not have jobs, they will have nothing to live on?

The Polish energy sector has a good momentum, because it must change and it must invest heavily. This allows the faster implementation of modern technologies which are non-hazardous to the environment. But we must have sufficient time to implement them, because it’s impossible to do everything in one year. Other, especially the richer, countries in the EU must accept this.

So, what actions is Eurlectric going to take this year? What ideas do you have in this regard?

The Polish energy sector is facing its best and most important years. We will invest in nuclear power plants and renewable energy sources, as well as modernise existing power plants and transmission networks. There will be competition that will force further changes. If European policy is adjusted to our requests, we will have the opportunity to accelerate the pace of changes in Poland. One thing is certain - without electricity at reasonable prices it’s impossible to build a strong position in any economy. Therefore, we will actively work on all available fields.

Eurelectric is an excellent platform for the fulfilment of our plans and expectations. :: 9 /2011 :: polish market :: 17

Energy

PSE cross-borderly It is necessary to invest in order to increase energy security. In the next decade, PSE Operator plans to implement several investment projects connected with the development of national network and cross-border interconnections.

Henryk Majchrzak, PhD Chairman of the Board, PSE Operator

The company is supposed to invest PLN8.5 billion during the next 5­–6 years. The main expenditure items in the company’s budget for the period 2012–2017 include the extending of its power-generating capacity and the development of cross-border connections. Approximately PLN2 billion will be spent on restoration and maintenance of the existing power grids.

However, energy recipients have to show patience, as the growing demand for energy might cause problems with balancing the energy system between 2014 and 2016. This will, sadly, prompt the increase in the balancing cost and, as a result, in price.

18 :: polish market ::

9 /2011

It was already in 2004 that PSE Operator started allocating some transmission capacities for cross-border connections, through unilateral tenders. Prior to 2004, Polish electrical energy was traded internationally on the basis of the so-called historical contracts or as part of emergency assistance between the neighbouring systems. In 2005, coordinated tenders were first launched for intersystem transmission capacities allocated by PSE Operator. Since 2005, there have been coordinated tenders for transmission capacities offered on a yearly, monthly and eventually even daily basis. Following a decision by the European Commission, as of 2008 PSE Operator allocates transmission capacities on synchronous connections on market terms only, through coordinated tenders.

Since 2004, PSE Operator has been actively involved in formulating and implementing the rules governing the electricity market in Central and Eastern Europe, an area covered by eight Transmission System Operators (TSOs). On 1 January 2011, common rules came into force with regard to tenders for the cross-border transmission capacity allocation, which are managed by the Central Allocation Office (CAO).

Currently, PSE Operator is working to implement the Lithuania-Poland interconnection project. The Polish side must execute as many as 19 investment tasks (the construction of transmission lines and stations), with the expected completion by 2020. The first stage, to be completed by 2015, will allow for adding approximately 500 MW to the National Energy System (KSE).

PSE Operator will co-finance these investments from the Trans-European Energy Network (TEN-E) funds. The

second stage of the project will bring the transmission capacity up to 1000 MW, while allowing transmission in both directions at the same time. PSE Operator intends to perform the second-stage investment tasks under the next financial perspective of the EU (2014–2020).

In cooperation with 50Hertz Transmission, its German counterpart, PSE Operator is planning to retrofit the German-Polish interconnection grid.

Scheduled to be completed by 2014, the project will bring greater operation safety for Polish KSE and the German transmission network. It is about creating the possibility to adjust circular flows on the German side to safe levels, as well as to increase both export and import transmission capacities of the Polish network.

Yet another investment task involves the construction of the third interconnection between the Polish and German transmission systems, along with the necessary extension of the domestic power network. The interconnection is estimated to become operational in 2020. PSE Operator will apply for EU financial support for the project. ::

The priority for PSE Operator is the Poland-Lithuania interconnection project – LitPol Link. The Polish and Lithuanian transmission systems are supposed to become interconnected by 2020, thanks to the construction of 400 kV power lines between Lithuania’s Alytus and Poland’s Ełk, and the extension of the power grid in north-eastern part of Poland.

21st Economic Forum

Krynica Zdrój, Poland, September 7–9th 2011

European Dilemmas

– Partnership or Rivalry?

The Economic Forum in KrynicaZdrój has been organized every year at the beginning of September since the early nineties. Its mission is to build a favourable climate for the development of political and economic cooperation among the countries of the European Union and their neighbours.

Over the 20 years of its activity, the Forum has become a platform for the exchange of opinions, experience, an important place for preparing plans for the future by politicians and business people from more than 60 countries of Europe, Asia, Northern and Central America.

In 1992 the Polish democracy began slowly to become established, political changes were becoming not only the fact, but also everyday reality. The need for international dialogue had been growing for years, but its fulfilment was possible only at that time.

The gap between the countries of the former USSR and the countries in its sphere of influence, and Western European countries was just starting to be bridged; the need to accelerate this process was growing. The countries of

“Polish Market” is a media partner of 21st Economic Forum in Krynica

Number of countries participating in the Economic Forum

the former Soviet bloc, as well as other European countries, needed a debatepolitical and economic. This gap has been addressed by the Forum, which for nineteen years has gathered numerous representatives of the Western European economic world meeting in Krynica, where they have the opportunity to compare their ideas and expectations with those of their Eastern partners.

The Forum includes 5 plenary sessions and more than 100 panel discussions organized within the scope of a few thematic blocks, such as: :: Macroeconomics :: Business, Management :: International Politics & Security :: Forum of Regions :: Forum of NGO & Society :: Energy Forum :: Science & Culture :: The European Union & Its Neighbours :: New Economy :: State and Reforms :: Forum Sports, Health & Money :: Innovations and Sustainable Development

FORUM XX

FORUM XIV

FORUM XII

FORUM XIX

1999

FORUM X

1998

FORUM XVIII

1995

FORUM XVII

1994

FORUM XVI

FORUM V

1993

FORUM IX

FORUM IV

1993

FORUM VIII

FORUM III

1992

FORUM VII

FORUM II

10

FORUM I

20

FORUM VI

30

FORUM XI

40

FORUM XIII

50

FORUM XV

60

2006

2007

2008

2009

2010

0 1996

1997

2000

2001

2002

2003

2004

2005

Plenary sessions, panel discussions and dozens of press conferences, exhibitions and special presentations have become a perfect form of presentation of the economic sector. The official languages used during all the meetings and events of the Forum are English, Polish and Russian. During the last Forum out of 2350 participants more than 1200 came from nearly 60 countries of the world.

Every year the debates of the Forum are reported by the biggest Polish and world’s media. The last Forum welcomed 500 journalists from all over the world, representing nearly 200 editorial teams. Important opinion-forming newspapers as, for example, “Le Monde” and “Le Soir” coined for the Forum the name of the Eastern Davos.

“Frankfurter Allgemeine Zeitung” in one of the reports wrote that at the beginning of the 90s none could even dream that Krynica-based meetings of the then business and political leaders from the Eastern bloc would be mentioned together with the World Economic Forum in Davos. At the same time, one could have read in the French daily “Le Monde” that the Economic Forum in Krynica has been unquestionably a meeting of economic and political elites of Central and Eastern Europe” and that “Krynica has become a symbol of the ambitions of Poland to be recognized as a full-fledged regional superpower in the new, bigger EU.” The event provides the opportunity for frequent contacts among the representatives of the business world.

According to the American “Forbes” magazine, the Forum is certainly a good place for establishing contacts and exchanging ideas, a every year it is visited by outstanding managers and most recognized experts, especially foreign ones. ::

Energy security hand in hand with ecology Art. 3.16 of the Energy Law defines “energy security as a condition of the economy allowing covering prospective demand for fuels and energy in a technically and economically justified manner, while keeping with the requirements of environmental protection.”

Marek Beroud President Operator Logistyczny Paliw Płynnych Sp. z o.o.

Broadly understood security constitutes one of the key aspects of the operation of OLPP. It includes the security of cus­tomers and the products they have en­trusted us with (health, safety, and fire regulations, protection of persons and property), local communities and the environment, suppliers carrying out renovation work and investments in fuel bases, OLPP employees, in the context of workplace security, as well as taxes, when accuracy of tax calculation and timely payments are concerned.

Yet another issue is the energy security of the country. Tasks in this area have been divided among many entities. In the cross-section of energy carriers, these are companies supplying coal, natural gas and crude oil to the market. Next, there are companies pro­ ducing power and heat burning fossil and renewable fuels, obtaining energy from wind and water, as well as crude oil refineries, producing many kinds of

liquid fuels, distributors of coal, power, heat and liquid fuels, and finally logistics companies supporting energy carriers distribution.

The role of OLPP in ensuring Poland’s energy security is partial and concerns its approximately 60%share in national distribution of fuels. The remaining 40% is realized independently by fuel distributors using their own infrastructure or the one belonging to OLPP’s competitors. We provide services for fuel distributors and entities required to maintain obligatory fuel reserves. These services involve transhipment of liquid fuels for current supply of fuel stations, composing pure fuels with biocomponents, in order to meet the National Index Target storage and mandatory fuel reserves.

Living in a time when human activ­ ities have an impact on the condition of the Earth, while carrying out the above mentioned activities, we take up all ac­ tions which, according to the binding laws, are in harmony with the environment and keep with the requirements of environ­ment protection. An example of this may be the functioning of the Environment Management System at OLPP, meeting the requirements of PN - EN ISO 14001 within the framework of the Integrated Management System. Our goal is to ensure that the impact on the environment as identified by these processes remains on a level determined by legal requirements.

This requires very prudent actions and lots of effort, as fuel bases are classified as high risk in terms of occurrence of serious in­dustrial accidents. Fuel bases meet requirements concerning the prevention of accidents and have the relevant doc­umentation (i.e. safety reports, acci­dent prevention programmes, internal operation emergency plans to

prevent, control and mitigate the results of in­dustrial accidents) at hand.

We have developed and implemented a security system guaranteeing the protection of people and the environment, which constitutes a part of the overall management system. Char­acteristic parameters of the environ­ment in our fuel bases are monitored as frequently as described in permits required by the Water Law Act, envi­ronment decisions and other relevant legislation. We strive to meet environmental quality standards. Fuel bases hold administra­ tive decisions on the emission of sub­ stances to the environment, which are updated in case of any changes made.

Our fuel bases are equipped with systems protecting the environment. The pro­cesses of motor gasoline handling are hermetised by means of vapour recovery installations (VRU) with effectiveness guaranteeing compliance with the re­quirements for permissible emissions of hydrocarbons - 35 g/ m3. We have also installed protective measures against the penetration of oil products into soil and water, and systems monitoring the water-soil environment. Fuel bases are equipped with sew­age treatment plants, and some fuel bases additionally house sanitary sewage treat­ment plants.

We carry out rational waste manage­ment. Waste is segregated and safely stored in designated areas, according to disposal programmes and handed over to specialized firms with appro­priate authorizations. We also conduct remediation of soil-water environment (rehabilitation) in cases of contamina­tion of ground and water. In our fuel bases we care for order, tidi­ ness and green areas. We also implement the best available technologies for en­vironmental protection in them.

Energy security policy and ecolo­gy go hand in hand. Even more, a specific kind of feedback occurs. New, more efficient technologies allow for reduc­ ing the impact on the environment and new environmental standards under­ pin the use of newer and more efficient technologies. As a result, both energy security and the environment profit. ::

A clear development strategy determines success Michał Machlejd, President of the Warsaw District Heating Company (SPEC) talks about the company’s development strategy.

You manage a company worth, according to last year’s data, some PLN1.5 billion. What do you think makes for the success of the company?

There is a number of elements which contribute to our success. One of the most important is a clear development strategy. We want to implement new investment projects, which will strengthen the leading role of SPEC on the heating market in Poland. The company which has such a strategy is likely to achieve good results. An equally important condition for success is the staff. I must say that to a large extent we develop thanks to our people, especially middle-level managers, who perfectly understand their function and carry out tasks based on their knowledge and experience. The middle-level managerial staff has a significant impact on programming, the preparation of plans and their implementation. In fact, it is thanks to them and other employees performing current operating and repair activities, as well as investments, that the company has built its capital over the years and reached its current position.

On what projects is SPEC currently working?

SPEC has planned an intensive development programme for the next five years. The projects are worth more than PLN700 million.

The lion’s share of this programme is designed to maintain our infrastructure in a state enabling a further reduction in the number of failures and ensure the best heat supply standards.

This package also includes modernisation work aimed at reducing heat losses.

The second element of our programme is a package of investment projects related to market expansion. In addition to keeping our existing customers, we want to increase our market share. New customers mean additional revenue for the company. We plan to earmark significant resources over the next five years to develop concepts for new pipeline routes, the construction of heat mains and new connections.

consumer will be able to get a reading not only on a monthly basis, but practically online. We will be receiving data as often as every 15 minutes. Thus, not only theoretically, but practically, our customers will be able to get information about their current heat consumption. Obviously, this will enable them to use heat more efficiently and more accurately order it. On the other hand, having this information, SPEC may be more effective and offer the consumer more competitive heat.

The third group are projects connected with the development of new technologies. The most important here is the smart heating project, which will help our company to achieve an improvement in energy efficiency, as well as reduce transmission losses. It is very important for us to improve the efficiency of our company. We want to achieve that through better use of heat, which we purchase from our supplier.

The smart heating system project is of course a project for many years. Its first phase will be to implement an automatic meter reading system. We have already invited tenders for the implementation and maintenance of the system and we hope to launch the project in 2012. It will take at least two years to complete and, apart from the automatic measurement of heat consumption, it will give us more accurate information on the performance of district heating substations. They are extremely important from the standpoint of the entire “smart heating network” programme.

What will this change for an average heat consumer?

Heat consumption readings will be definitely more accurate. What is more, the

Does the development programme involve changes within the company itself?

Yes, we will carry out projects that are indirectly related to our heating operations. In the coming years we want to implement an integrated information system that will support the company’s development, giving us the ability to manage it better. We are also running an in-house programme to transform the company. Its major objective is to improve management. It is also about introducing a new, completely different model of evaluating the work of our employees. We expect that owing to this change the role and importance of middle-level managers will increase.

Does SPEC share its know-how with heating companies operating in the countries located to the east of Poland?

We have an agreement with our counterpart in Kiev – Kievenergo. This is a very large group which transmits, distributes and produces heat and electricity. For several years we have organised a series of technical seminars to share our experience. And I must admit that it is mostly us who pass on experience to our partners in operating a heat distribution network and, in general, in shaping a development strategy. Our partners are very satisfied with that. I think that this is our contribution and proof that Polish companies, our sector in general, may assist in the development of heating companies, in this case in Ukraine, but also in other countries. ::

Our Guest Construction

for innovation and entrepreneurship.

The new EU countries, including Poland, have a simplified system but also here the increasing significance of direct payments is being noted. Maintaining this situation threatens the future of European agriculture. Without innovation and modernization it will not be able to be competitive in the global market. Meanwhile, before us in the near future is the need to double food production. It would be a pity, if Europe did not participate in this growth.

The period of the Polish Presidency coincides with the time of elections to the Polish Parliament. The political struggle has its rules, but there are some boundaries which cannot be crossed.

This limit is a fair description of the current state.

In discussions in Poland and the European Union the topic of the reform of the Common Agricultural Policy is brought up increasingly louder and more often. It is not surprising, because this one of the oldest EU policies was in its assumption to bring together “water” and “fire.” The idea was that farm incomes should be at a level guaranteeing maintaining agricultural production capable of securing consumers with quality foods at reasonable prices. The second important issue, which affects the discussion on CAP, is its shape after 2013, and that means for what will the over 40% of EU budget be earmarked for.

The mentioned boundary points define the temperature of the discussion clearly enough.

I believe that in order to speak about the reform of the Common Agricultural Policy, the current situation should be analyzed. Over the years, agricultural policy has evolved from very strong direct support for agricultural production, with its maximization at any cost, to restricting the production and support for agricultural income.

The world is changing and a number of adverse events are in the making.

24 :: polish market ::

9 /2011

Marek Sawicki, PhD Minister of Agriculture and Rural Development

Over the last 3-4 years we have noted a global economic crisis. We are seeing significant changes in the behaviour of the markets, including agricultural markets. The penetration of these markets by speculative capital has considerably increased. Breaking the links between the process of purchasing raw materials and their movement has led to a loosening of agricultural markets and their destabilization. Nothing significant has happened in the field of supply and demand, and in some markets, we have seen considerable price changes. At the same time, it also turned out that the current Common Agricultural Policy, as in the case of financial markets, does not have effective mechanisms counteracting such events.

Crisis situations have also made us realize that the previous solutions do not meet current challenges.

In my opinion, today the element most disturbing healthy competition in agricultural markets is the inequality of support for farmers across countries. The dominant type of agricultural support is direct support, paying for production readiness. In many countries, farm income is largely derived, in some cases almost 90% of it, from direct payments. This situation perpetuates stagnation and does not force

Hence my suggestions for changes to the shape of the Common Agricultural Policy. This policy has to give an impetus for further development, it has to move away from the historic, and nowadays no more justified, titles to payments.

Direct support should be based on the same, clear principles. The ratio of funds earmarked for the first and second pillar of CAP must be balanced – that is for direct support and rural development.

For European agriculture to become really competitive we must rise above political division, both in individual countries and within the European Union.

Agriculture as a sector of the economy is not like industry. In agriculture it is impossible to change from year to year. Here the changes are planned for years ahead, thinking about the next generations. Soil is not a factory hall, which is relatively easy to equip with new machines and start a different profile of production.

Polish experience of the transition period, preparations to entering the European Union and the past seven years show that we chose the right solution.

Polish food successfully competes on European markets and with increasing competitiveness in the previously exotic markets like Asian and Middle Eastern ones.

Once again there will be an opportunity to see the qualities of Polish food in September at the Polagra Food Fair in Poznań. This year it will be unique, as it will take place during our Presidency.

I will host my colleagues from the EU, with whom we will meet at an informal Council of EU Ministers for Agriculture and Fisheries, which will focus on the issues of food promotion.

I have no doubt that this will be another opportunity to present the qualities of food produced in Poland. ::

Agriculture

The Polish packaging market In analysing the opportunities for and the threats to the Polish packaging market, we shall try to describe this market in terms of its size and structure. We shall also try to compare it to the markets in other countries and to identify the factors which have a decisive influence on the packaging market. Then it will be easier to diagnose its condition, opportunities and potential threats.

Wacław Wasiak, The Polish Chamber of Packaging

Table 1.

The correlation between the level of national income and packaging consumption per capita

So, how do we define and describe the packaging market? Just as for other products, the market size is measured by the volume of sales. For packaging, we use the term “consumption,” understanding that “consumed” means “sold.” It cannot be otherwise.

Based on this assumption, the amount (or value) of packaging consumption is expressed in mass units (quantitative assessment) or in monetary units (value). Most often, packaging consumption is defined by its value in monetary units, which does not mean that the quantitative amounts of consumption are not applied. Each of these methods (forms) of presenting the packaging market has its advantages and disadvantages. Most frequently, the results obtained are compared to make them more objective, so that the differences in the packaging prices in different countries do not substantially affect the value of the packaging consumed. However, in the case of more modern packaging, made of lighter materials and having a lightweight structure, weight (quantitative) consumption indicators would be much lower. According to estimates by the Polish Chamber of Packaging, based on (extremely scarce) statistical data, as well as on specialist literature and the opinions expressed by packaging market analysts, the current packaging market

Country

GDP in thousand USD

Packaging consumption in EUR

Remarks

France

44 550.00

302.00

Data for 2008

Germany

44 519.00

245.00

Data for 2009

Poland

13 861.00

157.00

Data for 2008

in Poland is valued at about EUR6.2 billion, and the world market at about EUR420 billion.

Thus, the packaging market in Poland constitutes about 1.5% of the global market. Is this a huge market?

We can answer this question through international comparisons, by analysing packaging consumption per capita. For Poland, the packaging consumption indicator per capita is about EUR163, EUR302 for France and about EUR340 for Germany, with the average global value per capita amounting to about EUR70.

As can be noted, the differences are considerable. On average, our packaging market has half the value of the markets in the old EU countries. As we aspire to reach at least a similar development level to that which has been reached by our western neighbours, we should seek to achieve a similar packaging consumption indicator.

From this standpoint, the packaging market in Poland and the Polish packaging industry have great development prospects. We shall attempt at answering the questions of whether this will actually happen, and what this will depend on, later in this discussion.

So, what is the reason for such large differences in the consumption of packaging? The answer is provided in the data contained in Table 1. It shows that the size of the packaging market expressed by the indicators of packaging consumption is directly proportional to the wealth of society, expressed in the Gross Domestic Product (GDP). Although this is neither the most ideal nor the most objective indicator of how wealthy the population is, its use is the most frequent.

The level of wealth in society determines purchasing power and shapes demand, simultaneously influencing the general market size and structure. Market analysts use the term “integrated product.” A typical example of an “integrated product” is any product in a package. When we buy a tin of sardines, a bottle of vodka, a kilogram of flour or sugar, we pay for its packaging and contents altogether.

If sugar, flour, alcohol, meat or dairy products, etc., are sold on the market in large quantities, the amount of packaging sold is also big. Thus, packaging consumption depends on the consumption of specific goods (products). The packaging market is, therefore, an integral part of the market in general, including, but not limited to, the market for consumer goods.

How the packaging market reacts to changes in the global market is best shown using the example of the German packaging market during the economic and financial crisis. Packaging manufacturers in that country, during the recession in the German economy (a GDP decline by about 5%) recorded a decrease in sales by about 9% (EUR28 billion in 2009 compared to EUR31 billion in 2008).

In the same period, due to the relatively favourable economic situation in Poland, the packaging market shrank by about 2–3%. Only in those market segments which involve producing capital goods (e.g. the construction industry) and in the automotive industry, a 10-15% reduction in sales was recorded. In the packaging segment for the food industry hardly any tangible changes were observed.

When considering the problem of the opportunities for and threats to the Polish packaging market, it is worth discussing its structure.

The structure of the packaging market In market research and comparative analyses we use the division of packaging products, available on the market, by type of material and by purpose (use).

9 /2011 :: polish market :: 25

Agriculture

Material type Plastic

Poland

Europe

World

2005

2010

2005

2010

2005

2010

36.7

37.0

38.0

38.2

31.4

32.7

Paper and cardboard

26.1

28.3

30.6

32.7

38.4

37.1

Metal

22.2

18.3

18.2

13.6

17.3

17.0

Glass

9.6

9.8

6.7

8.2

6.6

7.4

Wood and other

5.4

6.6

6.5

7.3

6.3

5.8

With regard to the types of material, we distinguish plastic packaging, paper and cardboard packaging, metal packaging, glass packaging and wooden packaging.

The plastic packaging group is divided into rigid plastics and flexible (pliable) plastics.

The plastic packaging group often includes composite packaging, the socalled laminates, if they include a significant proportion of plastic.

With regard to purpose (the area of use) we distinguish the following types: packaging for the food industry, industrial packaging, packaging for cosmetics, and packaging for medicines. In the group of packaging for the food industry, packaging for beverages is often distinguished.

Table 2 contains information on the structure of the packaging market in Poland, in Europe and in the world, in terms of construction material.

The market structure in the developed Western European countries is typical of countries with high levels of economic and technological development. Poland has also been aspiring to such a structure.

Therefore it can be assumed that there will be changes in the structure of the Polish packaging market, leading to the market model of the developed Western European countries.

Thus, in the next few years it is expected that the share of paper and cardboard packaging will increase by about 4–5% in the general market structure, the share of plastic packaging will be maintained, the share of metal packaging will be reduced by about 5%, and the share of glass packaging by about 2%, with a simultaneous increase in the share of wooden packaging and other materials by about 3%.

Table 3 presents the structure of the packaging market by purpose (use), in

26 :: polish market ::

9 /2011

Table 2.

The structure of the packaging market by construction material, in Poland, Europe and the world, in% as of 2005 and a forecast for 2010

Table 3.

The structure of the packaging market by purpose (use), in%

Purpose

Poland, Europe and the world, in% as of 2005 and a forecast for 2010.

The packaging market – a look into the future According to the above data, the consumption of packaging in Poland, in terms of value, at the end of 2008, amounted to about EUR157 per capita, and about EUR260 (average value) for a few of the richest countries in Europe; and to EUR163 in 2010, and at an average value for Western European countries of about EUR310.

Therefore, the average resident of our country consumes 60% packaging less than a resident of Germany, Italy, France and the United Kingdom.

This corresponds to the difference in the national income level between Poland and the countries listed above, because at the same time (2008) Poland reached 57% of the EU average in terms of GDP per capita. By comparison, Luxembourg, the richest country in the EU, reached a GDP level which is 2.5 times more than the EU average (253%).

According to the assessment of economists, Poland will need about 20–30 years to catch up with the EU’s wealthiest countries in terms of the level of income. It seems that in order to make up for the lag in the packaging market Poland will need slightly less time, namely about 18-20 years, assuming obviously that the annual growth rate of the packaging market in Poland will amount to 7–8%, as in 2000–2008. In order to achieve Poland 2005

such growth, the Polish economy should grow at a rate that guarantees an annual increase in GDP of about 4–6%. There are realistic prospects of achieving such growth as early as in 2012–2015, even with the much slower economic growth in Western European countries.

It should be remembered, which we still emphasise, that the packaging market is closely linked to the individual consumption market and in certain demographic conditions reaches its saturation level.

This can be noted when we compare different rates of growth in the packaging market in Poland and in Western European countries in the years 2000–2005. In this period the growth of the market in Poland was close to 160%, with 110% in the old EU countries. This represents a phenomenon that can be defined as “the relative saturation of the packaging market.”

Although today it is difficult to determine the saturation level of the packaging market in Poland, it seems that we can determine it by the value of packaging consumption per capita at about EUR300.

If we can meet the aforementioned conditions for development, we should reach this value within 18– 20 years. This means that the packaging market in Poland - in the light of the current situation and international comparisons – should be assessed as having excellent prospects.

What augurs well for the domestic packaging industry is that it can meet the competition.

Considering the subject of the packaging market in Poland and preparing a forecast for its development, we have focused on the quantitative aspect, not addressing the issues of quality.

In formulating a thesis, which is probably risky in part, about the

Europe

World

2010

2005

2010

2005

2010

Food industry

61.0

57.0

55.0

54.8

66.0

64.0

Capital and consumer goods industry

30.0

32.0

31.0

31.2

24.0

25.0

Cosmetics industry

5.0

6.0

8.0

7.8

4.0

5.2

Pharmaceutical industry

4.0

5.0

6.0

6.2

6.0

5.8

Agriculture relative development limit of the packaging market, in terms of its consumption, qualitative changes in packaging, and therefore also on the packaging market, must be considered as well. At present it is difficult to imagine the limits of development, even when we take this aspect into account. Already the first decade of the 21st century, as befits the 21st century, has brought new developments in packaging - resulting from social and environment-specific needs, as well as those dictated by changes in market organisation.

Today, such concepts as active, intelligent, off-the-shelf, biodegradable packaging, and packaging ensuring contact with the user, have already become reality. Increasingly, packaging which was used as packaging material in the recent years, has become a device whose aim is not only to protect the product, but also to ensure its properties in the long-term perspective, to indicate the whereabouts of the goods, and not to be burdensome to people and the environment, etc.

These are new challenges for the global packaging industry.

To sum up, if the economic situation in Poland remains stable, with a steady GDP growth of 4–5%, hardly any threats to the packaging market should be expected. Under such

conditions, there will be no demand problems, and the domestic packaging industry is, and will be, able to meet market demand.

Given the current structure of the Polish market, no significant changes are likely to occur. Generally, a slight 0.2–0.5% increase in the glass packaging market segment will be maintained. There will be an increase in the share of the paper and cardboard market by about 2–2.5%. A decrease in the share of metal packaging by approximately 4% can be expected, as these materials will be replaced by glass and plastic packaging. There will be an increase in the share of plastic packaging by about 1.5%. The share of wooden packaging and packaging from other materials will increase to the same extent.

As the technology for biodegradable, or more precisely compostable, packaging materials improves, and production costs are reduced, it should be expected that in a few years (2018– 2020) about 65–70% of packaging on the market will be human- and environment-friendly, e.g. in terms of easy recycling and self-degradation.

As the economy develops and poverty declines, the market for luxury goods, such as cosmetics, will develop, and thus the share of packaging for the cosmetics industry will increase.

The packaging market for capital and

consumer goods, household chemical products, hygiene products, household appliances, audiovisual equipment, etc. will also flourish. Against this background, the packaging market for the food industry will be characterised by stabilisation at about 55%. It should be expected that there will be a slight increase in the packaging market for the pharmaceutical industry (population ageing, reforms in the pharmaceutical market).

It still should be remembered that we are talking about the internal structure of the market, not its complete size, because, as we mentioned at the beginning of the article, the Polish packaging market should grow twofold within 15-18 years.

Therefore, each segment of this market will expand at a different rate of development.

In the case of a deterioration in the economic situation and growing living expenses, such as significant increases in food prices, its producers will expect as low prices as possible from packaging providers, in order to minimise the increase in the prices of the products integrated with packaging. Hence, in a difficult economic situation, much more risk will be faced by the packaging industry, than by the market which will be at such a level as society can afford. But let us be optimists. ::

Janusz Rodziewicz President of SRW RP In recent years Polish plants dealing with slaughtering and meat processing have modernized their production. However, many establishments, especially in the field of slaughter, are characterised by low technical level and insufficient sanitary standards. In addition, meat plants are still grappling with problems connected with logistics. It is particularly difficult to meet the demands imposed by commercial chains. Another problem is the deficit of qualified employees. This is due to both the lack of vocational schools and the lack of people willing to learn the profession of a butcher.

The meat market in Poland is made up by businesses of a variety of ranges and profiles. These are both small local companies (MOL) and large companies that are part of national or foreign capital groups. In the highly fragmented market,

shortage of expertise is felt, which is connected to a decrease of performance in most plants. Production capacity of the meat industry is used on average in 50–70%, and fierce competition is accompanied by low margins and minimum profitability.

Optimistic is the significant technological progress in the meat industry and the growing interest of investors, also in the Polish meat industry, indicating that these processes may further.

Brands are also better recognized among consumers. This is connected with the increasingly better labelling of meat products. Customers choosing the product more often follow the labels. The evaluations of EU experts concerning meat consumption in the European Union are also optimistic. They forecast that meat consumption will increase by 2020. ::

9 /2011 :: polish market :: 27

Agriculture

Regional products Izabella Byszewska, President of the Board of the Polish Chamber of Regional and Local Products, tells “Polish Market” about the significance of promoting regional and local products, and preserving traditions.

© M. Iwanicka

marked with the European Quality Label, which gives the guarantee that the product they buy is actually the same as advertised by the producer. This guarantee comes from the fact that all products which bear any of the European Quality Labels, such as the Protected Designation of Origin, the Protected Geographical Indication and the Traditional Specialty Guaranteed, are subject to inspection by competent authorities. They check the consistency of producer declarations regarding recipes, ingredients and production methods.

The objective of the Chamber is to promote traditional and regional Polish products. Why do we need to promote our culinary heritage and regional food in Poland?

Unfortunately, our consumers do not always recognise the quality of traditional Polish products manufactured on a small scale using natural methods. Nor can they distinguish such products from the goods manufactured on an industrial scale, sold in large chain stores. For this reason, the Chamber, associating local producers, promotes high-quality food products, free from chemical additives, enhancers and GMOs. Such products are made with care and diligence by small local enterprises, and give them an opportunity to exist on the market and to create a certain market niche. However, as I have already mentioned, the information on this kind of food is insufficient. For instance, the vast majority of consumers take no notice of the products

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9 /2011

Izabella Byszewska President of the Board of the Polish Chamber of Regional and Local Products

The first Polish quality label, Quality Tradition, has joined the EU Quality Schemes.

This label is granted to top-quality products, mainly in recognition of their traditional character. Quality Tradition is a food quality scheme recognised by both the Polish Ministry of Agriculture and the European Commission. Considering that the application for the European Food Quality Label is a long-lasting process, we decided to follow the example of other European countries, especially France, and to develop our own national quality scheme. The procedure is much faster although the requirements are similar to those of the EU quality schemes. We are even more restrictive as we recognise as traditional only those products which originated 50 years ago, and not 25 as in the case of the EU Quality Labels.

But isn’t it sometimes necessary to convince the producers themselves that it is worth to produce natural food?

As the Polish Chamber of Regional and Local Products was set up by a group of small local enterprises manufacturing high-quality food products, none of its members, and there are nearly 200 of them, needs to be convinced about the benefits flowing from such activity.

Moreover, the Chamber conducts a number of local workshops and training sessions, aimed at fostering the production of traditional food. We share our knowledge with regional producers and farmers. We disseminate the success of local cooperatives, who produce meat, cheese and bakery products according to local recipes. We convince small agricultural holdings to undertake food processing activity. We encourage local producers to stick to tradition. Ten years have passed and it can be noted that those enterprises which put trust in us, and opted for traditional food, are now doing really well on the market. They are gaining more and more recognition, and they have lots of returning customers. Our mission is also to make the consumers aware that the information they can read on the packaging is not always consistent with the actual state. As high quality is proven through an inspection process, it is worth buying those products which have been inspected.

Regional and traditional products are also promoted through Our Culinary Heritage – Regional Tastes competition, which you have invented and managed as the president of the Jury.

This is a national competition for the best regional food product. For a couple of years we have also selected the best regional dishes, made with local products, as we seek to ensure that regional products form a steady part of the local tourist and catering offer. The competition enjoys a growing popularity. This year it has already been organised for the 9th time and the results will be announced during the “Polagra Food” fair.

It is attended not only by local producers, but also by entrepreneurs and owners of restaurants, hotels and lodging houses, who encourage their guests to purchase their services, and to familiarise with the regional cuisine as an element of the regional cultural heritage. For 11 years of the competition, we have managed to prevent a huge part of the Polish culinary heritage from falling into oblivion. We have also identified over 9,000 traditional Polish products, and we have gathered a photographic documentation and knowledge related to these products. The regional finals of our contest take place in participation of the audience, as a result of which more and more consumers can familiarise with our regional products and dishes.

Interviewed by: Ewelina Janczylik

Agriculture

Why are Polish products the best?

It is worth choosing Polish products, the best fruit and vegetables which grow the closest to us. There is a great field of nutrition called macrobiotics, which tells about it. What grows close does not require transportation, additives, etc.

noodles. It is a great soup for the summer and autumn!

Fish are a typical element of our diet. We often have carp, baked, boiled, fried, carp soup, carp aspic. Not only on Christmas Eve, but throughout the year. Likewise, we have herring in various forms. In oil as an appetizer with vodka (Polish of course), a classic salad with eggs laid by green-legged hens, with pickled cucumbers and potatoes.

For lunch we serve herring with onion, apple, cucumber (all Polish! Is there anything more Polish than a cucumber pickled in a brine?), sour cream and potatoes boiled in skin. I recommend it!

For dessert, I often make a jelly from seasonal fruit, grated raspberries, blueberries, strawberries, cherries, and plums. You can eat cold borsch all the time during the summer and warm autumn days – not only the classic one made from beet roots but also fruit cold soups with noodles. You won’t gain weight from handmade soups!

If you are in touch with a free range chicken breeder, there is no better chicken soup as the one made from a real chicken, with a piece of roast beef. ::

with potatoes, pork chop and cabbage, which is served to foreigners as an example of Polish cooking.

If we are talking generally about Polish organic food, I would like to mention the underrated, also in Poland, groats. Groats contain a wealth of vitamins and mineral salts, they can be used to prepare various dishes for breakfast, lunch and dinner.

Just a little imagination is needed.

In many countries, even in Europe,

groats are completely unknown, except for couscous, which comes from the traditions of Berber peoples. I think that we should promote Polish groats abroad, showing how nutritious they are and what dishes can be made with them. Especially now, when more and more people are looking for unprocessed products, not contaminated chemically – we could conquer Europe, and maybe the world, with Polish groats. ::

Krystyna Kofta

Krystyna Kofta, writer, columnist, painter

That is why we eat Polish vegetables and fruit (except for citrus fruit). If possible seasonal ones, straight from the fields, gardens or orchards. In our small garden we grow grapes, a pear tree and quince. We make wine from the grapes and quince liquor. We eat grapes every day. As well as pears, and those we do not eat, we use to prepare jam for winter. Quince is also ideal for red cabbage and as juice for tea instead of a lemon.

Cherry tomatoes are the most wonderful for salads, sauces and tomato soup. I stew them with onion, garlic and later rub through a sieve, add basil and thyme. It can be served with or without sour cream. With or without

Ada Kostrz-Kostecka, PhD My three most favourite dishes are: 1. Boletus soup 2. Rye flour soup with potatoes (the traditional one made for Christmas from real leaven and dried mushrooms) 3. Blueberry dumplings

Ada KostrzKostecka,PhD, manager, economist and author of “Zatrzymaj młodość” (Stay Young)

And why is it worth to choose Polish tastes?

Traditional Polish cuisine was full of all sorts of flavours: spicy, sweet, sour – so it was very diverse and rich in spices and herbs. There was no lack of tasty meat dishes, soups, vegetarian dishes, or wonderful cakes. It is enough to flip through the “Polish Cuisine” to see that. In Poland we also have great fruit: plums, pears, strawberries and raspberries – probably the best in the world. Our jams, homemade preserves are poetry, but we have less and less opportunities to encounter them. It is unfortunate that the tradition of Polish cuisine is associated primarily

9 /2011 :: polish market :: 29

Agriculture

Dishes made with Polish products in “Kresowiak” restaurant in Warsaw Salad with veal livers Cut 100g of cooked veal livers into thin strips, season with salt and pepper. Cook dried mushrooms, then fry them with some onion. Peel and cut into strips a pickled cucumber, chop a boiled egg, add dried tomatoes, then salt, pepper and season it with mayonnaise to your taste. Serve the salad in layers, garnish with flat-leaf parsley.

Goose roulade with omelette Discard goose bones, but keep the skin. Season the meat with salt, pepper and freshly crushed garlic. On top, put an omelette and slices of cooked ham. Roll it up and secure with string while cooking. Cook on low heat for two hours, leave to cool down, serve cold with ­forest fruit sauce.

Bubert Add semolina to boiling milk, simmer it for 5 minutes, then leave to cool down. Grind egg yolks with sugar and grated lemon zest, then add it to the semolina mixture. Serve with berry sauce.

www.kresowiak.com.pl

30 :: polish market ::

9 /2011

Agriculture

We are exporting more and more food and agricultural products Over the decade, exports of food have risen six-fold and are breaking all records, being much greater than imports. This year, Poland is going to send abroad foods worth more than EUR14 billion and our potential is much bigger. Poland imports mainly meat and meat products, fruit and vegetables and diary products. Rising food prices are beneficial for producers. Experts predict a further expansion in the food industry.

In recent years, Polish companies have made important investments to improve their position, which allows them to effectively compete with producers in other countries as far as quality and production costs are concerned. Polish agriculture and Polish food processors owe their success to the much better perception of Polish food in the world.

Bogdan Sadecki

In 2010 agricultural and food products accounted for 11% of total Polish exports. Our western neighbour Germany was the biggest importer of Polish food, with 23% of exported food products. It was followed by Great Britain, the Czech Republic, France and Italy.

The biggest importer of food outside the EU was Russia.

“It is worth emphasising that the agriculture and agri-food industry is the only branch of the economy in which in which we have a positive balance - of PLN10.3 billion. This means that it is bigger by 34% in comparison with 2007. I emphasise also that these exports are mainly the sector of medium and highly processed food, thus it is not raw material sales. Through processing, the agricultural sector creates new jobs and creates employment in the country,” said Marek Sawicki, the Minister of Agriculture and Rural Development, at a press conference “The increase in the volume of Polish agricultural and food products is an effect of the promotional activities of the Ministry of Agriculture and Rural Development.”

In his statement he added that in the previous year, the trade deficit was PLN53.8 billion, but the trade balance in agricultural and food products was positive – it was approximately PLN10.3 billion.

The Far East is becoming increasingly important for Polish exports. Ongoing promotional activities, which aim at increasing trade in Polish agri-food

Polish food on the global market is becoming more noticeable, and every year there are more and more foreign customers buying it. Since Polish accession to the European Union, the value of exports has increased three times. According to a report by FAMMU/FAPA, Polish food exports have increased by 14% in the last year.

In 2010, the value of exported food products reached EUR13.3 billion and the positive balance exceeded EUR2.6 million.

Trade with other EU countries has been rapidly developing. Exports of Polish food to the EU-25 countries in the years 2003-2011 have increased by 248%, while imports have increased by 212%.

The poultry and red meat sectors, as well as the cultivation of oilseed

rape (the growing demand for biofuels), show an increase. This was the result of the industrialisation of food processing and its concentration, required by the adjustment processes to EU standards.

In the first quarter of 2011 Polish food exports increased by 6.6% as compared to the first quarter of 2010. We sold abroad over 15% more food than in the comparable period of 2010. According to the data provided by the Ministry of Economy, in the first five months of this year exports increased by 15.6%, and our food was appreciated the most in the EU countries, where 77% of products were exported. Next year the projected increase in agricultural exports should be approximately 6–10%.

In the years 2007–2010, the sales of Polish food abroad grew by almost 40%, reaching PLN53 billion – as was announced at a spring press conference by the Minister of Agriculture and Rural Development, Marek Sawicki. At the same time, the Minister stated that the increase in food exports is long-lasting.

In total, 80% of exports go to EU countries. The main recipients are Germany, France, Great Britain and the new Member States. Exports include mainly dairy products, cheese, meat, fruit and vegetables. It is very important that there has been a growing share in the processed food exports observed.

9 /2011 :: polish market :: 31

Agriculture

products, are being carried out. “We partook in last year’s food fairs in this country and as the only European country we received a proposal to set up a permanent, three-year exhibition of our agri-food products in Shanghai, which will be beneficial for our entrepreneurs. Moreover, this year five Polish enterprises received consent to export poultry products. Also, milk processing plants have gained the access to this market. As a part of the Polish Presidency and the planned EU-China summit, we are going to promote our food products and successively expand their presence on this market. It is a growing and very promising market, yet in terms of quality guarantee and stability of supplies it is also a demanding one.

Therefore, this autumn an action supporting the consolidation of agri-food processing will be launched to enable Polish entrepreneurs to become major trading partners in these new, opening markets. Apart from China we are also present on the markets in Japan and Singapore. South Korea and Vietnam are also displaying great interest in our food products” said the Minister.

“I encourage entrepreneurs to focus their promotional activities predominantly on local markets and next concentrate on foreign markets. Polish consumers very often choose more attractive, but not necessarily better, imported products, because they are not familiar with the quality and value of home products. Within the Try Fine Food (PDŻ) mark we wish to promote high-quality and home products,” added the Minister.

The Ministry of Agriculture is actively engaged in the promotion of food, which helps in increasing exports, also through the programme Try Fine Food. It aims at helping consumers in choosing high-quality food and the ministerial sign PDŻ is intended to guarantee quality. One of the most effective forms of promotion of home products is participating in food fairs.

This year Polish food products were presented at the fairs in London, Berlin, Madrid and Dubai. One can see/ will see them in Toronto, during the Polish Cuisine Days in Tallinn and at the of Agriculture and Food Exhibition in Budapest.

This autumn a promotion of products with the PDŻ mark will take part in the German chains EDEKA and

32 :: polish market ::

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Analyses by the Institute of Agriculture and Food Economics According to the analysis, the proceeds from the export of agri-food products in 2011 can reach approximately EUR14.1 billion (6% more than in 2010). The Institute estimates that improvements in the economic situation in the EU will have a decisive influence development on the Polish foreign trade in 2011.

“However, this process is slow, and therefore the growth rate in demand is still relatively low. In addition, the increase in food prices on the global markets is further slowing this process. The situation in the EU’s agricultural markets in 2011 will be relatively stable. However, in the first half of the year, the effects of poor harvests in 2010 will be noticed, which will stimulate Polish exports of plant products,” one can read in the analysis.

It was added that “on the other hand, high cereal prices will negatively affect the demand for the fodder and bakery industry. The markets will be more balanced after the harvest, namely in the second half of 2011.

There is little chance for a significant increase in demand for meat products on EU markets but at the same time there will be insufficient supply of meat, particularly poultry and beef.”

According to the IAFE, a much greater barrier to foreign trade will be the cost of international transport in 2011. The situation on the domestic markets of plant products should be more stable than in 2010, but a significant improvement in the relationship between supply and demand is not expected, which will limit export opportunities. The high prices of cereals and other fodder raw materials will decrease the growth rate of livestock production. “However, despite a slight improvement in the market situation of the country, the dominant influence on external factors (growing demand) will mean that foreign trade turnover will grow moderately,” wrote the analysts of the Institute.

Polish food on the Czech table Currently among Polish exports to the Czech Republic, agri-food products account for approximately 12%. In 2010, in comparison with the previous year, the value of exports increased by 8.7% and was EUR849.3 million, while imports were at the same level as in the previous year and amounted to EUR367 million.

The Polish surplus in the Czech Republic in this sector rose by 16.5% interim and amounted to EUR482 million. Among 11 commodity groups in the CN, in the agri-food group the trade surplus is the largest, despite the fourth position of this group in value of exports to the Czech Republic.

The largest share of Polish agri-food exports to the Czech Republic is held by ready food products, beverages and tobacco products (47.8%), followed by livestock (34.6%), plant products (12.4%), fats and oils (5.1%).

The main items of Polish exports to the Czech Republic in this branch are meat and giblets (10.6%), cheese and curd cheese (10.5%), pastry (8.1%), pork (8%), tobacco (6.8%), chocolate and other products containing cocoa (5.2%) and other food products (4.5%). The mentioned items accounted for 54% of Polish agri-food exports to the Czech Republic in 2010.

Source: http: //targi.brno.pl

Metro and in the Austrian Zielpunkt.

It will involve selling products under the Polish brand name, as today our food is sold under shop brands.

Polish products are taking the global markets by storm. This year we are going to sell products worth EUR14.5 billion (about PLN60 billion).

This is a record effect of Polish companies’ expansion and high world prices.

This year’s increase in exports will be due mainly to growing demand for food in the European Union. The situation on domestic markets for plant products in the current year will be more stable than in 2010. A significant improvement in the relationship between supply and demand is not projected, which will limit export opportunities. The decline in the growth rate of livestock production may be the result of high cereal and other fodder raw material prices.

Meat and meat products as well as fruit and vegetables, are the main foods exported from Poland. They are followed by tobacco and chocolate products.

Analysts and experts do not doubt that exports will continue to increase.

Fruit and vegetables, dairy products, poultry and poultry products will constitute the propellers of exports.

It is worth noticing that despite a noticeable improvement, low-processed products still dominate. In 2010 they accounted for 59% of agri-food exports (according to the support foundation programmes FAMMU/FAPA for agriculture). Unprocessed products accounted for 17% of exports. ::

The average Polish household spends over 21% of its total income on food, and in the case of the poorest families it is even 30% (according to analysts)

Chemistry

Chemistry is still attractive in Poland Brilliant results of Polish chemical companies contributed to a revival on the manure market, but the problem is expensive oil. Soaring oil prices might be detrimental to the bourgeoning chemical industry. Last year, it saw a dynamic growth, while significant changes occurred towards the beginning of 2011.

in prices. The year 2010 brought an increase in the production of almost all chemical products surged amid the improving economic conditions.

However, many of them have still not recovered the 2008 level.

Polish chemical manufacturers largely owe their successful performance to a revival on the manure market. Companies forming the so-called Great Chemical Synthesis saw an uptick in sales volume in 2020.

After a recession period, demand reappeared for principal products of, i.a., Ciech. The firm registered a growth in sales of fertilisers by 59%, silicates – by 24%, soda – by 12%, resins by 10%, TDI – a component used for the production of polyurethane foam, glues and varnishes – by 3%.

The upward trend is likely to be sustained in the current year. The price of soda, one of Ciech’s key products, is no longer on the decline; an increase has been reported both in its production volume and price.

An increase in demand for fertilisers was due to the fact that sales is traditionally greater in the first quarter of the year. High prices of cereals prompt spending on fertilisers.

Manufacturers of fertilisers have reason to be satisfied. Since June 2010, the price of ammonium nitrate has risen by 60%, and that of urea – by almost 70%. Even though the price of urea fell from USD375 per tonne to USD355 per tonne at the beginning of 2011, it is still high.

Bogdan Sadecki At the time of Poland’s accession to the European Union, the chemical industry was among the business sectors characterised by high production growth rates. All its branches would register output growth until 2007.

The subsequent global economic crisis did not spare the chemistry industry, which suffered often greater losses than other processing industries.

Recession in the chemical industry branches began in 2008 and deepened during the following year. A muchawaited recovery only came in 2010.

Among the main reasons behind the decrease in production were: sharp decline in exports during the recession period, drop in domestic demand (both from entrepreneurs using chemicals in their businesses and individuals consumers), low prices of chemical products.

The largest part (about 60%) of the chapter entitled “Production of chemicals and chemical materials” deals with basic chemicals, fertilisers, plastics and caoutchouc. Cosmetics, soaps and detergents make up 25% of its contents, paints and varnishes

– about 8%. The rest is devoted to pesticides, artificial fibres and the like.

When analysing changes in the chemical industry according to quarters, it can be stated that recession in the chemical industry branches appeared earlier that in other processing industries, but the growth was more dynamic last year while significant changes occurred at the turn of 2010 and 2011.

Small firms (10–49 employees) play an imminent role in supplying the market in certain groups of products.

They have a significant share in the production of soaps, washing agents, artificial fibres, paints and varnishes, pesticides. In 2009, a decline was observed in manufacturing of basic chemicals, paints and varnishes, pesticides, artificial fertilisers, chemical fibres, while the output of synthetic caoutchouc, soaps and surfactants went down. The decrease in production reached 25% and more in certain groups of products, which was due to falling exports and lower demand on the domestic market. Additionally, the sales value was influenced by a drop

Demand for basic chemicals and plastics in 2000-2009 and forecast for 2010-2015 6% 5% 4% 3% 2% 1%

5

1

5.5

3

5.5

2

4

5.5

5

5.5

5

5

5.3

4

2012

2013

2014

2015

0% -1%

-4

-2% -3% -4% 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Source: CMAI 9 /2011 :: polish market :: 33

Chemistry

The major problem of the chemical industry are the soaring prices of oil, which might spoil its promising prospects (especially endangered is Ciech: toluen, an ingredient of TDI – one of the company’s crucial products, is made of oil). Expensive oil is detrimental to other chemical companies too, as contracts for gas, which is the raw material used by manufacturers of fertilisers, depend on oil prices.

It is difficult for the domestic chemical industry to compete on the European market. From October do December 2010, Zakłady Azotowe (Nitrogen Works) Puławy paid for gas 50% to 230% more than their competitors from Russia and Ukraine. An average price of gas in Europe in that period was one-third lower than in Poland.

Pharmaceutical market The pharmaceutical sector in Poland is made up of basic groups of producers. The first one consists of domestically-owned firms: private (for example: Bioton, Hasco Lek, Polpharma, Adamed, Aflofarm) and not-privatised (Polfa Tarchomin, Polfa Warszawa). In terms of financial results, they cannot be compared to even medium-sized European competitors, but they are well-established brands with a strong market position.

The second group is composed of firms with foreign capital. Their expansion on the Polish market was facilitated by the already existing production and distribution infrastructure. The leading actor and, at the same time, the major foreign investor on the Polish pharmaceutical market is GSK Pharmaceuticals. Other foreign players include i.a. Lithuania’s Sanitas (owner of Jelfa), Hangary’s Gedeon Richter – owner of Polfa Grodzisk Mazowiecki and corporations that took over original acquirers of certain Polafas (e.g. Teva, Valeant).

Foreign producers being greenfield investors had a somewhat longer way to go in quest of development, but they are currently the most important stakeholders in the pharmaceutical sector in Poland (e.g. Krka, Sanofi-Aventis, Lek/Sandoz).

Over the last five years, the production volume of medicines and pharmaceutical substances in Poland rose by as much as 60% (data

34 :: polish market ::

9 /2011

from the Eurostat). This corresponds with an average annual growth rate of 10%, that is much more than in Western Europe (3.5%) and in other CEE countries (in the Czech Republic and in Hungary an average annual growth rate in the pharmaceutical sector is merely 4%). Despite the pharmaceutical sector being characterised by a low sensitivity to macroeconomic fluctuations, an 8% growth in the 2009-2010 crisis period should be regarded as satisfying.

The volume of domestically-produced drugs sold on the Italian market (fourth most important Polish export destination) rose approx. 25-fold, on the French market (third most important foreign market) – 10-fold, while on the crucial for Poland German market, it tripled. A rapid growth of exports towards the Central and Eastern European markets has been sustained.

According to a report by PMR Publications, the pharmaceutical market will be worth in final prices almost PLN31 billion in 2011, that is approx.

4% more than in 2010. The sales dynamics of over-the-counter drugs will indeed be higher than last year, but this will not compensate for a low sales dynamics of refunded medicines.

The latter might increase immediately after the entry into force of the law on stiff prices and markups on 1 January 2012. In the years 2011-2013, a moderate growth in sales volume is expected on the pharmaceutical market on account of the planned restrictions in spending on reimbursement. It can also be anticipated that the purchase force of patients will get reduced, pursuant to an increase in refunded medicines prices, the result of the planned changes to the law regulating the reimbursement of drugs.

Plastics market The year 2010 saw a considerable growth in demand for plastics.

According to data by the Central Statistical Office, 2.26 million tonnes of plastics were used in Poland in 2010, that is 2.5% more that in the previous year.

The most commonly used and most demanded plastic was polyethylene.

With a 37% market share, it came ahead of polypropylene (21% share) and PVC/PET (their joint share did not exceed 25%). ::

Privatisation of the chemical sector will start in autumn By the end of the third quarter of 2011 – probably in September – the Ministry of the Treasury will launch the process of the chemical sector privatisation – announced Adam Leszkiewicz, Deputy Minister of the Treasury, last May in Katowice.

Last year’s attempts to privatise two chemical groups failed to result in signing contracts with investors – they ended up with no decision.

Now – said the deputy minister during one of the sessions held in the framework of the European Economic Congress in Katowice – prosperity in the sector together with positive financial results of the chemical companies create good prospects for privatisation. He argued that the process would be handled more skillfully, with a better chance for getting investors.

“We intend to launch the privatisation processes by the end of the third quarter, when – in our opinion and in the opinion of experts – we will be able to benefit from all these positive tendencies that have occurred in his sector recently,” explained Mr Leszkiewicz.

In his view, selling of the state-owned chemical industry assets more or less simultaneously will result in a “big beat” effect, thus drawing interest from foreign investors. “With a big beat, we will have people to speak to and things to discuss,” said the Deputy Minister.

It is not excluded that PKN Orlen will make one more attempt, in autumn, to sell assets of Anwil. It might coincide with the Treasury’s offer regarding the chemical sector.

Mr Leszkiewicz stressed that a number of positive processes had been held in the chemical industry last year. These included i.a. the consolidation of the Nitrogen Works in Tarnów and in Kędzierzyn, the acquisition of Gdańsk Phosphorus Fertiliser Plant “Fosfory” by Fosfory Grupa Puławy and the new emission of shares by Ciech.

The Deputy Minister pointed to Progress in restructuring efforts, improved capitalisation and financial results of the chemical companies. He claimed that the financial results for the first quarter of 2011 proved the tendency to be durable. “Let’s hope that prosperity will continue,” said Mr Leszkiewicz.

He stated that the dividend policy towards the chemical companies would be pursued in a way so as to strike a balance between the interests of the Treasury and those of the companies.

For the trading year 2009/10, Puławy paid only PLN9 million in dividends. In 2011, the Ministry does not intend to require the distribution of dividends for the previous year; some of the companies closed the year with losses. “If the financial year 2011 brings profits, we will have to reflect on how to proceed so that the money best serves the companies’ interests in terms of development and investment,” added Mr Leszkiewicz.

Among the challenges ahead for the chemical industry, the Deputy Minister mentioned i.a. the costs related to CO2 emissions (estimated at at least EUR260 million per year for the whole industry) or the imposition of excise tax on coal and on coke. He said that in the latter case consultations were being held on how to reduce burdens in certain fields of economy, including the chemical sector. Mr Leszkiewicz assured – upon consultation with the Ministry of Finance – that the increased excise tax on gas would only apply to gas used as fuel, and not as a chemical substrate.

In his opinion, it is of crucial importance given potential additional costs that chemical companies would have to incur otherwise.

Source: PAP

Korean Mando decided to invest PLN390 mln On 6 July 2011 Mando was granted a business activity permission to operate within the Wałbrzych SEZ, and has purchased a 13-hectare plot on which a plant construction is to be launched. The investing company declared that it will have invested PLN390 million and will have employed 280 people by the end of 2015. The company will produce braking systems, steering columns, traction control systems, and shock absorbers.

The company employs over 3,500 people all over the world, and has factories in Korea, as well as in China, Malaysia, Turkey, India, and the USA. Mando is a supplier of companies like as GM, Ford, and DaimlerChrysler.

It is the tenth investor which has decided to choose Wałbrzych SEZ for developing business activity. The total value of this year’s projects in the Wałbrzych Special Economic Zone is estimated at PLN800 mln. They projects are to generate 700 new jobs.

DP Clean Tech Poland in Gliwice The company will take on over 40 employers specialized in investment designing and realisation. DP Clean Tech provides complete solutions for biomass power plants in the fast-growing renewable energy industry. It provides solutions which transform incinerated waste into steam producing energy and heat at the same time.

The production of biomass and municipal waste incineration boilers constitutes DP Clean Poland’s main specialisation. From this year on, DP Clean Poland’s field of activity will be extended by a projectengineering office, which is planned to be built on the premises of the Auro Business Park in Gliwice. Stefan Gąsior, General Director of DP Clean Tech Poland, says “While searching for the location for our new project, we focussed on Silesia, due to the availability of well-educated employees the region offers. The Silesian University of Technology has been educating specialists in the area of heat engineering for a number of years, and we are planning to recruit the majority of our personnel from the graduates of this University.”

A new sub-zone in the Kostrzyń-Słubice Special Economic Zone The new sub-zone is situated in Białogard. 14.38 hectares of investment plots are located near the Białogard Technology Incubator. Some of them have been recognised in the Golden Sites competition, organised by the Minister of the Economy, and the Polish Information and Foreign Investment Agency (PAIiIZ), as the best

36 :: polish market :: 9/2011

investment plot in the Zachodniopomorskie Province in 2010. The area of the sub-zone is covered by the local spatial development plan and is intended for industry and services. Power, gas, sewerage, and water-supply networks are situated in the vicinity, allowing the construction of connections. The area has access to the Wałcz-Kołobrzeg regional road No. 163 and to the national road No. 6 linking the Polish-German border crossing point in Kołbasków with Gdańsk.

The UNCTAD World Investment Report 2011 Poland is the 6th most attractive destination for global investments.

Kraków without competition - best for BPO projects. UNCTAD’s World Investment Report 2011 has been announced on the 26th of July 2011 at the headquarters of the Polish Information and Foreign Investment. Poland’s significant rise in this year’s UNCTAD’s Investment Report (5 places up from 11th position in 2010) confirms the country’s strong position on the international investment scene - Poland was only preceded by the world greatest economies of China and the USA, and ranked before Germany and the UK. Despite the fall in FDI inflow to Poland in 2010 (from USD13.7 bn to USD 9.7bn) in 2011, FDI recovery and upward trends in the inflow can now clearly be seen - FDI inflow after the first 5 months of the year totalled EUR4.2bn, i.e. 86% of the inflow recorded in the first 5 months of 2010, which accounts for 62% of the whole 2010 FDI inflow to the country. In the European context the upward trend has already found confirmation in this year’s annual survey of Investment Attractiveness of Europe launched by E&Y in June 2011. The report says that last year Poland recorded the highest increase in the number of FDI projects across Europe - 40% more than in 2009.

The general upward trend finds reflection in the activities undertaken by the PAIiIZ. In the 1st half of the year PAIiIZ managed to successfully complete projects worth twice as much as the projects completed by the Agency in the 1st half of 2010 - an increase in value by 124%, from EUR377.24 mln to EUR845.5 mln in 2011. The 1st half of 2011 also saw the average value of a single project rise from EUR12.9 mln in 2010 to EUR32.5 mln in 2011, as well as the number of jobs created by projects (by 7%) from 6046 in the 1st half of 2010 to 6494 in the first months of 2011. Kraków has been recognised as the best investment area for BPO projects in the category of Locations for global services outsorcing. UNCTAD’s World Investment Report 2011 predicts that the recovery of FDI flows will continue in 2011 and will reach a total of some USD1.4 to USD1.6 trillion, thus returning to the pre-crisis average. Thereafter, flows are forecast to rise to USD1.7 trillion in 2012 and USD1.9 trillion in 2013. ::

Why is it worth to invest in the Wałbrzych Special Economic Zone: System of tax exemptions – income tax exemptions – real estate tax exemptions Rich offer of the investment grounds – developed communication network – full and complete accessibility to the technical infrastructure – convenient geographical location in the vicinity of the Czech Republic and Germany

We invite you heartily to invest in the WSEZ „INVEST-PARK” We would like to entourage you to acquaint yourself with our offer of the WSEZ „INVEST-PARK” investment grounds on www.invest-park.com.pl

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Infrastructure

We can achieve success through a joint effort Interview with Bogusław Liberadzki, Member of the European Parliament

You were the Minister of Transport and Maritime Economy in 1993-1997. I know that one of your duties is to keep Polish ministers of infrastructure informed on the directions and priorities of EU policies. How do you feel about the infrastructure situation in Poland?

What needs to be worked on? Or perhaps everything is going in the right direction?

Obviously, it depends on what is meant by ”right direction.” If it means building new infrastructure (e.g. motorways, expressways), I think we are going in the right direction, but too slowly. It is necessary to overhaul strategic roads, as it will improve the fluidity of traffic.

Here again, we are heading in the right direction, but too slowly. We need to modernise the basic railway network, and we do declare the willingness to do so, but much too slowly. So my answer to your question is: yes, but too slowly.

Unfortunately, this impacts the manner and the pace of proceedings. Willingness and capability do not necessarily go hand in hand. We do have the willingness, but perhaps the thing is that we lack capabilities. A strong politicisation of transport-related public positions left a generational gap. People who were transport professionals were taken off their jobs. They were replaced by politically faithful newcomers who are not able to manage and assume the responsibility for the transport sector, because they lack relevant experience. In transport, there are two, almost philosophical, categories: time and space. We want to cover a given distance as fast as possible. The transport secor is also exposed to consequences of natural disasters. The lack of professionalism often appears to be an outcome of the rupture of dialogue between practitioners and decision-makers. As a result, practitioners are largely dissatisfied with how the transport sector evolves. As for decision-makers, they are unhappy with this mode of cooperation, for they expect practitioners to comply with their orders. And the transport industry should be built in a joint effort! With great infrastructural projects in perspective, we neglect the necessity to develop the motorways building and maintenance potential. Foreign-based companies can bid for any contract in Poland, while Polish entrepreneurs are reserved when

38 :: polish market ::

9 /2011

it comes to investments because of they fear of uncertain outcomes and unfair, in their opinion, business practices.

What about intermodal transport? Can we succeed in this field too?

The intermodal transport has been a reality for some 10 years. It is the first modern understanding of logistics. Multimodal logistics centres should be established in places where it is possible to combine car and railway transport, as well as in ports. The inland shipping is still very little popular in Poland. What the transport sector needs is a proper public-private partnership. It is up to the public administration to create basic transport facilities and provide land to set up logistics hubs. Infrastructure comes within the competence of the public sector, and will always do. The crucial thing is to achieve a coherent, competitive and sustainable transport system. Success in much needed here.

Since 2001, you have been the head of the Faculty of Transportation at the Warsaw School of Economics. Does this major attract many students? How to encourage young people to chose it, and what is the situation of graduates?

I can observe two groups of students having graduated in different periods of time. The first group includes the students who I had the pleasure to offer a Master’s tutorial until 1990.

A number of them are today companies’ executives, directors, owners of big, prestigious firms. Some of them work in the transport-related field, holding very challenging positions.

In the mid-1990, the Warsaw School of Economics underwent a reorganisation. The teaching system in technical and vocational secondary schools was dismantled. I could notice a weakening of interest in transport-related issues. Perhaps the reason behind this is a reluctance to learn mathematics, which is absolutely necessary in transportation studies within the area of exploitation, as well as in research and statistics, namely when planning the economic development with regard to transport. We have found ourselves at a low ebb, I mean the lack of interest in this major, but I believe there are

already some symptoms pointing to the reversion of this trend. What allows me to think so is that today’s Master’s candidates, even though they are only 5, as opposed to 30 in the past, are the people who have working experience with transport. Transport, logistics and shipping can be our assets on the condition, however, that we will have basic infrastructure. This was understood thanks to a successful performance of big international transportation companies. Poland is comparable with the Western European countries in terms of market activeness.

You completed a one-year scholarship at the University of Illinois. What did you learn there? Did it help you later in your professional career?

First of all, it should be remembered that it was 1986. My first impression: shock. Technological and cultural differences were stunning. During the scholarship period, I learnt to work with a computer which was then unknown in Poland. Moreover, an important, if not the most important, issue was choosing of a scientific specialty in line with my field of interest. I attended conferences on the strategy of transport management. At that time, the United States was going through the process of the deregulation in the transport sector. During my stay there, I had to learn from scratch the basics of economics, macroeconomics and microeconomics. As a scientific specialty I chose transport policy, transport as part of economy, so it was decidedly macroeconomics. For 6 months, I pursued a thorough course in macroeconomics.

I learned that it was essential to set an objective and means to achieve it. I made 8 publications in the United States about i.a. the modern transport economics, ways of defining transport development strategies and transportation companies.

It was already then that I understood the importance of the global thinking, which did not exclude acting on a local level, acting within my capabilities. Thanks to the experience I gained in the United States, once back in Poland, I was put in charge of the first transport investment project, with the business plan and documents being approved by the World Bank.

Interview by Ewelina Janczylik

Regular intermodal connections

OFFICIAL OPENING OF THE TERMINAL IN KUTNO – 30 September 2011

Excellent location: Large cities like Warsaw, Łódź, Poznań, Bydgoszcz and smaller ones like Płock, Włocławek, Konin and Kalisz are located within a 150–200 km radius from Kutno. Therefore, a delivery of cargo directly to the customer’s door can be arranged in a very short time.

KUTNO TERMINAL – the modern transhipment terminal!

Operating parameters (target values): Operational area of 80,000 sq. metres A nnual handling capacity of 200,000 TEU Storage possibilities of over 4,000 TEU 4 railway tracks – 600 metres each 2 gantry cranes, 3 reachstackers Fully equipped container repair workshop 76 power connections

PCC Intermodal S.A. – the leader of intermodal transport in Poland. An investor of the Kutno Terminal, a modern container terminal in central Poland.

PCC Intermodal entered intermodal market in 2005 with the one shuttle train weekly. Nowadays it operates weekly over 50 shuttle trains. Since December 2009, the company is listed on the Warsaw Stock Exchange.

Thinking about dynamically developing market and growing expectations of customers, PCC Intermodal S.A. put emphasis on the highest quality of performed services.

Experience of the company and its over 150 employees within the scope of intermodal services organization ensures leading position of the company among private operators of intermodal transport and makes PCC Intermodal representing stable link in the supplies chain.

The company provides the highest quality door-door container cargo transport. As part of a coherent network of connections, the company carries out regular daily intermodal connections between land terminals (in central Poland, Lower and Upper Silesia), Polish seaports (Gdańsk, Gdynia) and international ports (i.e. Hamburg, Bremerhaven, Rotterdam).

The excellent location of the Kutno Terminal near the main north-south railway line (nr 131), as well as near national roads and motorways, including: DK92 (Polish border-Poznań-Warsaw-Terespol-Polish border), about 1 km the “Piątek” not on A2 motorway (Nowy Tomyśl-Poznań-Stryków), about 40 km the “Kotliska” not on the newly constructed A-1 motorway, 3 km DK1 (Cieszyn-Łódź-Gdańsk), about 22 km DK60 (Łęczyca-Płock-Ostrów Maz.), about 4 km allows for the optimization of costs and offering modern transport solutions with guaranteed service quality.

Dariusz Stefański, Chief Executive Officer of PCC Intermodal S.A.: Launching the terminal in Kutno is the turning wheel of transport operations and the development of intermodal transport network. The modern facility in central Poland will allow us to improve and develop regular connections from / to Rotterdam and German ports (Hamburg/Bremerhaven), as well as extend them further towards the East (Moscow). Starting at the same time new connections to Southern Europe via Sopron (Hungary) we will offer regular connections between the Baltic Sea (Gdańsk/Gdynia) and the Adriatic (Koper) port terminals.

PCC Intermodal – a strong and stable link in supply chain!

Speaking of intermodal transport, we have to remember that it is impossible to separate the investments in point infrastructure (terminals) and the development of connections.

The idea of intermodality is based on the synergy of work.

We combine the strengths of two transport modes (rail and road) to provide customers with the most efficient delivery of cargo containers. The main advantage of intermodal transport is the optimization of the supply chain, both in terms of transport time and costs. Without the places where it is possible to efficiently reload cargo from trains to trucks and vice versa, the development of the network of connections would be inefficient. Therefore, particularly taking into account the prime location of Poland for the execution of intermodal transport in domestic and international relations, facilities as the terminal in Kutno are essential.

www.pcc-intermodal.pl

Infrastructure

The Polish infrastructure at the beginning of its journey An interview with Konrad Jaskóła, President of the Board of Polimex-Mostostal SA

How would you assess the level of advancement in infrastructure projects in Poland?

As far as infrastructure investments are concerned, we are, so to speak, at the beginning of our journey. We have actually been given a chance to create an infrastructure which is modern when compared to the infrastructure which was emerging in Western European countries decades ago. However, the national roads being created for EURO 2012 constitute only 5% of all the roads in Poland.

Several thousand kilometres of expressways, and also provincial, district, and municipal roads, are still to be built and modernised, and also the freeway construction project is to be finally implemented. Also the necessary modernisation of the railroad infrastructure constitutes another huge challenge, which has not been covered by an investment project on the road investment scale so far. In this respect, a properly prepared, coherent plan for railroad infrastructure modernisation which would anticipate the increase in expenditure for investments in this sector would be most welcome.

A re the current tender procedures and regulations favourable to the growth of the investment implementation rate?

In Poland, public procurement law is one of the most modern of its kind in Europe, but we make use of it only to a limited extent. Recently, we have started noting with satisfaction the examples confirming that officials assess complex issues concerning road investment implementation in a similar manner to how contractors do.

It is also worth mentioning that paying undue attention to the lowest-price criterion in tenders may have a negative impact on the work implementation rate. Recently we had such two examples on the construction sites of two sections of the Stryków-Konotopa A2 road, implemented by a Chinese consortium.

I believe that the construction of roads and freeways has good prospects within the

40 :: polish market ::

9 /2011

framework of public-private partnership. The completion of sections of freeways A1 and A2 constitutes a good example of this, since the majority of tasks have been performed in an exceptionally short period of time, even ahead of the schedule. I’m glad that promising examples like this influence the planning of other investments – such as the construction of the Eastern section of the A2 freeway, which will probably also be carried out within the public-private partnership formula. Having these issues in mind, we are increasing the opportunities for the timely implementation of the projects already launched, as well as the future ones.

Do you notice any alarming signals which may stop the fast-moving Polish road construction works?

We’ve got good regulations, more and more efficient contracting authorities, and big executive potential among Polish engineering-construction companies. One significant issue, namely the method for further infrastructure investments financing, remains to be solved. In the years to come, the level of outlays in road investments will depend both on the public finance condition, as well as the new EU budget for the years 2014-2020. It’s crucial that the Government should generate additional funds for road construction. As far as the new EU budget is concerned, I hope that we will manage to keep the high level of outlays for the so-called Cohesion Policy, the biggest beneficiary of which is Poland. Because of this, our country is going to gain new opportunities for railroad and road infrastructure development financing.

It is also worth mentioning that the Government will not withdraw from the road investments, but, in some cases just postpone them, which means that at the appropriate time they will be implemented to serve the next generations for decades.

D oes this mean that the years to come will bring the implementation of other

infrastructure contracts for construction sector companies such as Polimex - Mostostal?

Our annual income from infrastructure projects realisation amounts to several hundred million zlotys. We are continually developing this activity by taking part in further tenders and signing new, significant contracts.

What’s more, we are actively searching for a market for our products and services, in this sector outside the country. We have also created a foreign department for this purpose, the tasks of which include monitoring road construction investments outside Poland, both those already realised and the planned ones.

For contracts outside the country, we take into account the possibility of creating consortia with local entities, we do not exclude purchasing companies with a good equipment base outside the country. Interesting road construction programmes are being offered by Romania and Bulgaria, and also the situations in the Balkans, Ukraine, and Kazakhstan seem promising. However, we are careful about looking to the East. Railroad infrastructure modernisation plans are implemented by such countries as Norway, where the estimated expenditure is counted in billions of euro. We have already signed the first contract there and we hope for more. We are also considering a EU co-financed railroad contract in Romania and participation in the construction of the Trans-Balkan Railway.

Thank you for the interview.

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Infrastructure

Autostrada Wielkopolska is growing Andrzej Patalas, PhD, Eng., President of Autostrada Wielkopolska S.A.

primary. It turned out that there is no usable localization decision, because none road projects included environmental impact assessments.

AWSA received concessions in a gradual open tender in 1997. The financial plan for the first section Konin – Nowy Tomyśl was approved in the year 2000. The construction works were launched in 2004.

The financial plan for the second section Nowy Tomyśl – Świecko (state border) was finalized in 2009. The company draws particular satisfaction from obtaining financing for such a large project confirmed the credibility and trustworthiness of AWSA.

In the early 1990s, Autostrada Wielkopolska SA (AWSA) was registered as the company responsible for the operation of the toll A2 motorway. With what kind of problems did the Management Board meet at the very beginning?

Joint stock company Autostrada Wielkopolska was the first one in Poland established to implement large infrastructure investments. It is difficult to mention all the problems we faced, as there were very many of them. After dealing with one problem, the next occurred. Poland was in a period of profound political and economic changes, new law was

42 :: polish market ::

9 /2011

missing, therefore we based on the pre-war Commercial Code; we also lacked the budget and Polish currency, the złoty, was not exchangeable.

This challenge required courage from the founders of the company, headed

by Mr. Jan Kulczyk.

Until 1990 or even later, the issue of environment protection was ignored. The matter began to be very important when Poland started the efforts to join the European Union to acquire financial and technological support. The banks which expressed interest in motorway projects, in particular the EBRD and EIB, considered environment related issues as

Building a highway you had and still have to examine its impact on the environment. Does the issue of environment protection significantly limit the construction of new roads, or is it possible to develop a motorway while preserving the environment?

The scope of additional studies widened along with the implementation of EU directives in the ongoing process of preparing construction sites.

It concerned environmental issues the most. It is difficult to answer the question to what extent does it cause limitations in road construction in a simple way. It is necessary to differently design roads in respect of environmental conditions. The projects must minimize conflicts, and in some areas this means looking for a new route. The necessity to prepare accurate environmental reports, having them approved by environmental organizations and obtaining environmental decisions statutory takes 3–5 years. This time may be slightly shorter or longer depending on the kind and size of protected areas. Caring for

Infrastructure

Please tell us about the introduced discount programmes for motorway users and its advantages.

The universal discount programme is addressed to all users paying tolls using fuel cards.

After obtaining the consent of the Credit Agent, Autostrada Wielkopolska SA will invite to participate in the programmes all the users of accepted fuel cards: Aris, DKV, Orlen, Routex, Shell, UTA and Ressa.

The discount products will be offered to users after obtaining the consent of banks. With the launch of the currently constructed section, we plan an update of trade policies and implementing consistent products for both Projects.

As an expert, how do you evaluate the current situation in road construction in Poland? Are we headed in the right direction? What is it worth to work on?

Since 2007 there has been a significant acceleration of works. Among other things, the impulse is co-hosting the Euro 2012 European Football Championship tournament by Poland and Ukraine. The speeding up was helped by the earlier started preparatory work, the issued location decisions and the completed land purchase processes.

The preparations were complicated by the implementation of EU directives which was connected with changes in legislation. However, the obstacles were overcome. The lessons learned should be used by the road administration, with whom the cooperation has been effective. The current programme has a huge range. It may turn out that due to objective reasons, some projects may not be fully realized, but despite this, drivers will feel the improvement. It is worth to continue the work on upgrading some

© Autostrada-a2.pl

the environment is not only the preparation of the investment. Banks, before launching loans, request a plan of environmental protection during the construction and operation. In many cases, the organization of works has to be adjusted by changing the functioning of the transport. Technological roads have been made in the motorways traffic lane for the time of the construction, in order to avoid the use of forest roads.

express roads to motorways, especially where the traffic forecast indicates the need for higher throughput.

You are involved in the activities of the National Chamber of Civil Engineers and the Association of Communication Engineers and Technicians working for the development of transport and construction. As a member of these organizations, do you believe there is a link between the level of education of the future engineers and the development of civil engineering?

On this matter, I have developed my opinion at the Poznań University of Technology (PP), directly cooperating with young engineers in AWSA, as well as with design studios and our contractors. Having a good theoretical background, the work shapes and develops skills. In the case of motorways we deal with a full range of technological solutions and assortments of works.

W hy was Autostrada Wielkopolska II SA created?

The company Autostrada Wielko­ polska II SA was established to execute the second concession for the construction of the 105.9-kilometre Świecko – Nowy Tomyśl section of the A2 motorway. The financial

A2 Nowy Tomyśl – Konin

plan is based on a system of availability fees. The Minister of Infrastructure required us to appoint a new legal entity to achieve transparency of finances during the duration of the concession.

The investment on which you are working is the Nowy TomyślŚwiecko section of the motorway.

When can the works be expected to be finished?

The underway Świecko – Nowy Tomyśl section of the A2 motorway is different from the other constructions I know from by professional experience and it is definitely attractive for engineers who want to develop and gain new experience. The reason is the technology – concrete surface.

The section requires special attention due to natural wealth and full infrastructure for the maintenance during exploitation, passenger service and toll collection system. The problem is the construction of a motorway on several sections of low-bearing soil.

The construction is carried out in a very good pace and according to the concluded agreement. It will be made available to users in the end of November of this year. The full completion including a toll system startup and execution of other minor finishing works will take place in May 2012. :: 9 /2011 :: polish market :: 43

Infrastructure

Polish roads

– where we are going Poland remains a country with poor transport infrastructure quality, according to the World Economic Forum and the Logistics Performance Index (LPI). In terms of infrastructure, Poland clearly stands out from most of the EU-15. An important part of the technical infrastructure in urban transport will not be able to take a further increase in traffic load on acceptable level of standards. The current year 2011 should be the peak period for the road sector in terms of the value of carried out work.

Bogdan Sadecki Despite the progress made in the recent years land transportation in Poland still faces many challenges that may become an obstacle to achieving lasting and sustainable growth, and also the further convergence with the European Union (according to World Bank experts in the report “Poland.

Paper on transport policy – towards sustainable land transport” Report No 59715-PL, February 2011). In the past few years, considerable investments with a focus on road infrastructure sector were made in Poland.

According to the World Economic Forum and the Logistics Performance Index calculated by the World Bank, Poland remains a country with poor transport infrastructure.

Investments in road infrastructure are mainly financed through borrowing. Industry experts are of the opinion that the policy of low tolls contributes largely to the rapid wear and higher maintenance and road network management costs. Faster achievement of sustainable development in the transport sector requires changes in expenditure planning and a system of incentives for the basic sectors of transport, underlines the World Bank’s report.

The need of carrying out the current investment programme together with the availability of funding from the European Union may reduce the incentive to immediately implement the necessary improvements and reforms. By 2015 Poland should make full use of EU funds available

44 :: polish market ::

9 /2011

under the current financial perspective, therefore top priority was given to implementing the investment programme.

Postponing reforms in the sector, would result in further deterioration of the existing network, causing needs for repairs and restoring the road network to be larger in a few years. According to the World Bank, the development of (sustainable) transport in Poland would require a significant improvement in the competitiveness of the railway sector. It would lift the burden from the roads – this particularly concerns heavy freight on long distances. It would reduce the maintenance and upgrading needs of the road sector.

The technical condition of the infrastructure in Poland in comparison with other EU countries has a large, significantly larger, impact on its functioning. Among the 130 countries covered by the Logistics Performance Index, Poland ranks 30th in terms of timely deliveries and 43rd in terms of trade and transport infrastructure. This is the worst result among the six factors indices measured by LPI. In terms of infrastructure, Poland clearly stands out in a bad way from the majority of EU-15 countries. It also negatively differs from some of the new member states.

Therefore we see an urgent need to improve trade and transport infrastructure.

Polish road network consists of a total of 258,910 km of roads. Exactly

speaking 663 km of motorways, 17,859 km of national roads, 28,455 km regional and 211,934 km of local roads.

Local authorities (provincial, county and municipal) are responsible for 93% of the entire road network, while the central government supervises the rest (national roads and motorways).

Roads belonging to the Trans-European Transport Network (TEN-T) cover 4,816 km. The road network is scattered, and its availability and density differs significantly from the EU standards. EU road network density is 111.8 km per 100 sq. km, while it is some 65.4 km per 100 sq. km in Poland, which is about half of the EU-15 level. If municipal roads are subtracted from this equation, density falls to 12.3 km per 100 sq. km – significantly less that EU-15 average (43.3). Availability in Poland comes to 5.4 km per 1,000 residents, which represents roughly half of the EU-15 average – 9.5. After excluding municipal roads, the availability is really small – 1 km per 1,000 residents, or one quarter of EU-15 average – 3.7.

When the density of motorways is analyzed, it turns out that it is extremely low compared to other European countries. In 2007, the length of motorways and expressways was respectively 674 and 294 km, which is 5.7% of the national road network and some 0.25% of all public roads.

Motorways in Poland come to a mere 0.2% of the entire network, as compared with 0.5% in the Czech Republic and almost 3.5% in Hungary.

The differences are huge, which affects many areas of transport-related economy and the residents’ quality of life.

Another aspect in which Poland falls behind international standards is the quality of the roads. The quality of Polish road infrastructure is 2 on a scale from 1 (underdeveloped) to 7 (extensive and effective), as evaluated by the World Economic Forum.

It is extremely significant that the majority of Polish roads is designed for vehicles with load of only 8­–10 t/ axle (the EU standard is considerably higher – 11.5 t/axle). Two years ago, only 2,191 km of Polish roads met the EU standard (including half of those located along the TEN-T route). 11.5 t/axle capacity trucks are allowed to

Infrastructure

drive on transit roads, therefore it is necessary to improve the capacity of these roads to avoid accelerated degradation.

The World Bank report says that the most serious challenge facing Polish companies and institutions in the road sector is moving the focus from ensuring access to infrastructure to meeting the needs of its users. Road sector in the current institutional state is seen as a set of infrastructural resources, which are developed or maintained according to physical parameters such as length and technical condition.

When making investment decisions it is not always required to analyze social and users costs (apart from a few modernization projects or those co-financed by the EU). “Sustainable Future of Transport” – an EU strategy paper (June 2009) places great emphasis on optimizing the relationship between transport networks by replacing it with the current approach based on providing proper physical parameters of the existing road resource.

This strategy recommends that the planning of transport investments focused on their impact on road users, managing traffic congestion and preventing users’ time loss.

The future of transport policies lies in looking at the road infrastructure as a service provided to road users in order to meet their transportation needs.

The main objective of the road sector, its priority, is to ensure effective communication means for people and goods with the use of fine road infrastructure, with toll at a level appropriate to the quality of service and proper maintenance of the infrastructure.

The World Bank’s report diagnoses the situation and gives recommendations concerning: improving service quality, improving planning and efficiency of management, and exploitation of the infrastructure, ensuring efficiency and stability of financing, as well as minimizing the negative impact on the environment.

The years 2011-2012 are expected to be the peak period for road infrastructure. Already in 2011, thanks to large investments by the General Directorate for National Roads and

Motorways (GDDKiA), the value of completed road works will exceed PLN30 billion. According to the report “Construction sector in Poland 2011 – Development forecasts for 2011-2014” published by PMR research company, delays in construction for Euro 2012 European Football Championship, as well and the announced continuation of investments in local roads will cause the market to smoother enter the period of lower expenditure on construction of further sections of motorways and expressways.

After over 40% increases in the first half of this year (according to the report), the dynamics of construction output in bridge and road sector should slow down. In the entire 2011, the value of road works should increase by almost one-fourth to PLN31 billion.

The year 2011 should be the peak period for the road construction sector in terms of value of the works. From 2012, the sector should record double-digit drops as a consequence of a smaller number of motorways and expressways under construction. The road sector is to reach its bottom in 2012, according to PMR analysts (when production will fall to PLN19 billion).

From 2015 production in the field of road construction may start rising again owing to the EU 2014-2020 financial framework being favourable to Poland, as well as owing to the forthcoming implementation of at least one major project in PPP scheme.

GDDKiA plan for 2011 envisaging spending on the level of PLN33 billion is considered to be not very realistic because of many delays in the construction of expressways and motorways. Some of the payments are to shift to the 2012-13 period.

The return to expenditures for construction of national roads in Poland to the level from before 2007 (below PLN10 billion) spent annually by GDDKiA is unlikely in the assessment of PMR analysts due to i.e. recently introduced laws facilitating the preparation of investments and greater possibilities of co-financing project from EU funds. “In the last three years, the road investment machinery has so evolved that it is impossible to radically slow it down now,” believes Bartłomiej Sosna, construction

market senior analysts at PMR and the author of the report.

In addition to decreasing GDDKiA budget, negative impact on the market value of the road construction sector after 2011 will be exerted by concessionaries’ investments, which will decline to almost none already in 2012 (the completion of two large projects currently carried out in PPP scheme is planned at the end of 2011). Further investments by private concessionaries are possible no earlier than in 2014.

Construction output for road and bridge construction 2005–2011 Year

Value in PLN billion

% change y-o-y

2005

9.4

13

2006

1.2

40

2007

1.8

19

2008

18.5

17

2009

23.2

25

2010

25.0

8

2011p

30.9

24

p – forecast source: Report “Road construction in Poland 2011 – Development forecasts for 2011-2014” PMR Publications 2011

“The difficult situation of smaller road construction firms may be improved by the expected growth of investments in the energy sector, which in the future is to become a leading segment of the engineering market in Poland. A large number of energy projects to be carried out after 2013 would considerably improve the size of orders portfolios of the largest engineering companies. Owing to this, the same companies carrying out road contracts would hire small and midsized companies as sub-contractors.

If however, the announced energy investments will not be launched or will start delayed, in view of the smaller orders portfolio and the need to maintain the employment level, the road contracts obtained in the future would be almost fully carried out by the largest construction firms by their own resources. This scenario would be deadly for many mid-sized companies in the road sector,” evaluates Bartłomiej Sosna, construction market senior analysts at PMR and the author of the report. :: 9 /2011 :: polish market :: 45

Infrastructure

Breaking the railway barriers The railway infrastructure in Poland is an enormous barrier to the development of rail transport. Many years of negligence and underfunding of the railway sector have created a situation in which rail transport in our country is losing to road transport (in the opinion of many experts). The condition of the infrastructure continues to systematically deteriorate, due to insufficient funds directed to its renovation.

Bogdan Sadecki PLN3 billion was assigned to the modernisation of the railway infrastructure in 2010; this year expenditure is planned at PLN4.5 billion, and PLN8 billion in 2012.

For many years the railways have been losing in the competition with road transport. The reasons for this include the costs of access to the railway infrastructure – it is several times higher than that of roads. The main reasons for the railway’s lower competitiveness include the ownership and economic status of the railway infrastructure, which differs from that in road engineering, and the inadequate system of organising the railway industry’s management.

On an annual scale, demand oscillates around PLN7 billion – this relates to the financial resources needed to assign to the maintenance of the railway surface of the PKP Polish Railway Lines network (source: www.rynekkolejowy.pl). Unfortunately, only a few percent of the aforementioned demand is assigned to this purpose. The information presenting the results of long-term negligence and the shortfall in the necessary expenditures on the railway industry in Poland, made public by PKP, is alarming.

The Polish railway network covers approximately 19.3 thousand km of railway lines, including 27.9 thousand km of used mainline and main tracks and 9.3 thousand km of station tracks, as well as 47.3 thousand junctions and 16.4 thousand railway crossings. Outstanding repairs require the replacement of 11.8 thousand km of tracks and 17.3 thousand junctions.

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PKP Polish Railway Lines PLC used the following amounts of land infrastructure in its basic elements (according to the status as of 31.12.2010) In order to reach a satisfactory situation in Poland, it is required to replace 1540 km of tracks per year – according to the calculations of the national head of the railway infrastructure.

Specifically, this means the backlog divided into 10 years (1185 km) and resulting from its lifecycle (excluding corridor lines, 355 km modernised with the support of Union funds). Considering junctions, the PKP network

should have 2420 units replaced (including a backlog divided into 10 years – 1735 units – and that resulting from the lifecycle – 700 junctions).

Sad facts: only 500 km of tracks were replaced in 2010, bringing the total completion of annual demands to only 30%, with 445 km being replaced with the use of investment funds. The situation was better in 2009: completion amounted to 43%.

The equally-important subject of junction replacement looks even worse. Only 306 units were replaced in 2010, signifying the completion of less than 20% of the annual demand (242 units were replaced with the use of investment funds). The last time the number of replaced junctions was sufficient for demand was in 1994 (2.8 thousand), and over twenty years ago, in 1990, in the case of tracks (over 1.8 thousand km).

There was mention of the PLN7 billion which should be assigned to the annual maintenance of the railway surface. The elimination of the backlog in track and junction replacement

19 276 KM OF RAILWAY LINES i.e. 37 150 km of tracks, including: 27 856 km of mainline and main tracks 9 294 km of station tracks

43 657 JUNCTIONS including: 18 774 junctions in mainline and main tracks 24 883 junctions in station tracks

16 464 RAILWAY CROSSINGS including: 2 751 category A

25 591 ENGINEERING STRUCTURES 6 525 BUILDINGS source: www.plk-sa.pl

11 544 STRUCTURES source: http://www.plk-sa.pl

Infrastructure

would absorb almost PLN3.4 billion, almost PLN1.2 billion would go to the replacement of the said elements resulting from their lifecycle, PLN1.9 billion would go to the maintenance of the surface, PLN250 million to the removal of thermally-hardened tracks, and approximately PLN100 million to the equally-important surface diagnostics.

Due to the mode of financing infrastructure maintenance, obtaining such funds is impossible (the money comes almost entirely from the carriers who pay for access to the tracks).

Further underfinancing of the repair activities of the railway surface brings the threat of reducing maximum speeds by 20-30 km/h on 10001500 km of track per year and an annual increase in the number of local speed limits on 3500-4000 km of track. There is a threat of closing the operations of 400-500 km of track per year.

During the years 1990-2009, the length of used railway lines dropped from 24.1 to 19.3 thousand km (a fall of almost 20 percent), and if no changes are introduced, this unfavourable trend might continue.

According to PKP projections, if there are no changes, then the traffic schedule for 2011/2012 will cover over

2 thousand km of track unused due to the technical condition of the railway surface being inadequate for use.

This number may rise to as high as 3.4 thousand km in the years 2013/2014, and over 4.1 thousand km in the years 2014/2015.

The railway infrastructure in Poland covers not only the surface. The deteriorating technical condition of the trackbed on some segments is forcing the need to apply operational limits (even closures). Over PLN567 million is needed to restore the parameters of the trackbed within the Polish network. The improvement of this railway infrastructure element requires an annual amount of approximately PLN57 million over the next ten years (PLN8.9 million was assigned for this purpose in 2009, i.e. only 16 percent of demand).

The PKP network includes 25.5 thousand engineering structures. For approximately 2 thousand of them, it is recommended to initiate urgent maintenance-repair work, and even investment operations. The cost of over PLN1.9 billion will cover the re-creation of their initial operating parameters. Besides this, building renovations and modernisation require PLN38.5 million annually, while the renovations and modernisation of railway

structures require over PLN64 million (assuming a 10-12-year programme).

The costs of maintaining the infrastructure in the automation and telecommunication fields should also be added – the estimated annual amount is over PLN310 million. The elimination of the renovation backlog of srk, tk and DSAT devices requires work with a total value of as much as PLN7.1 billion.

We should also remember that there are 16,464 railway crossings in Poland, including 14.168 on operating lines. These crossings of railway lines and public roads are subject to the quickest deterioration, mainly due to the of heavy road-vehicle traffic.

In this case, PKP would need almost PLN386.2 billion to bring them to a condition classified as “good”.

Looking at the above numbers, the costs necessary to return to the initial operating parameters of the railway lines in Poland, we find ourselves with an enormous final amount of approximately PLN47 billion. Since 1998, a total of PLN125.5 billion has been

Almost 100% of the road infrastructure is financed by public money. In the case of railways, the share of public funds is shaping at the level of approximately 20% – 30%.

9 /2011 :: polish market :: 47

Infrastructure

Zbigniew Szafrański, President of PKP Polish Railway Lines, said the following during a debate on the railway sector:

If the railway infrastructure fell under the Treasury, it would solve the three biggest problems of the Polish Railway Lines.

First of all, railways would have the same legal status as roads. Please note the fact that, if there is a sudden shortage of money for roads, whose problem is it? The entire Ministry of Infrastructure is searching for money. When we don’t have the funds for railway investments, whose problem is it? The PKP administration.

For over a year, we have been unable to obtain a loan from the European Investment Bank, because the Ministry of Finance thought that besides EU funds, we had created some additional projects, and therefore wanted the loan. Nobody noticed that 30% of the national contribution to EU projects is non-qualified in this perspective, because the financing regulations have changed. In order to sign an agreement with the Centre for EU Transport Projects, the Treasury must provide a guarantee. In order for such guarantees to be collectable, we must provide security.

You have certainly noticed the yellow plates on the traction network poles, stating that the railway line is mortgaged to the Treasury. It’s absurd for us to mortgage national lines to the Treasury in order to secure Treasury guarantees. This problem would be eliminated, if the railway lines belonged to the Treasury.

The second problem which would be solved is railway line amortisation, which would disappear from the PKP balance sheet. The amortisation will break us. It’s a matter of two or three years. We performed a simulation for 2015 at fixed prices. When we get the investments in motion, and they are getting in motion right now, and right now we are burdened with about PLN200-300 million amortisation costs, which we have to include in the company balance sheet, then in 2015 we only have two cost components, remuneration and amortisation. And this amounts to PLN4 billion. There is no maintenance. Forget about it.

The third problem which would be solved, if the railway infrastructure were to be taken over by the Treasury is the issue of financing the infrastructure. In this case, the Treasury would build its own property, and not subsidise that owned

by PKP. I don’t want subsidies. I just want to administer the network. And the media should stop writing that PKP is a big hole which all the money falls into. I just want to be paid for providing the service of maintaining the railway network and traffic adequately to the expected standards.

However, turning over the railway lines to the Treasury is not that easy. The land belongs to the Treasury, PKP S.A. holds the rights of perpetual use, while we own the structures, i.e. the rubble, track, traction network, etc.

source: www.rynek-kolejowy.pl

48 :: polish market ::

9 /2011

assigned to the transport infrastructure in our country (including 108 billion which went to roads, i.e. 86 percent of the aforementioned expenditures for the entire infrastructure).

PKP Polish Railway Lines PLC is currently implementing investments which will impact on the improvement in the infrastructure condition, with the collaboration – which is important – of European Union funds. The main objective is to achieve the integration of the Polish railway transport with the European Union requirement system in the aspect of technical standards and railway-line interoperations.

“According to the ‘Master plan for railway transport‘ and the multi-year sector investment plan until the year 2013, expenditure on the modernisation of the railway infrastructure will grow. These funds are already bringing the first results, and will be more visible in one year, when several modernised segments will be released for use and attain very attractive average travel times,” said Andrzej Massel, Vice-Minister of the Infrastructure, during the debate entitled ‘European and Polish Railways’, which was held under the aegis of the 3rd European Economic Congress.

“Railway transport should play a much bigger role in our transport system than its current one, but this is not happening, due to the high access costs and the disastrous condition of the infrastructure. According to the recommendations of the European Commission, the ratio of expenditures on the road and rail infrastructure should be 60 to 40, and ours is 85 to 15” said Andrzej Malinowski, President of the RP employers at the 2011 Central European Railway Operator Forum. He also added that “In Poland, we cannot even think about lines dedicated exclusively to passenger transport, as is the case in e.g. USA or China.”

The year 2012 – The European Football Championships In June 2012, Poland and Ukraine will play host to the EURO 2012 European Football Championships, which is and will continue to be an immense challenge. The ability to organise such an event should translate into national support for operations aimed at the best possible preparation of Poland for this national holiday.

The preparation of the railway infrastructure holds significant meaning in this process – it concerns the expansion of passenger transport capacities during the tournament period, particularly on lines connecting the cities hosting the championships.

For Poland, this task is among its priorities, much like the construction of stadiums and roads. The event has accelerated the implementation of many of the investments carried out

by PKP Polish Railway Lines PLC. The implementation of these objectives enforced the involvement of enormous funds from the State budget, the European Union, and the internal resources of the company.

The railway has a developed railway line network, as it connects the cities which will host the championship matches. The process of the EURO 2012 preparations includes numerous railway investments, primarily the modernisation of intercity connections to improve speed, expand the line capacity, and reduce travelling times.

The priority is the construction of railway connections with the airports (Warsaw, Kraków, Katowice, Wrocław), which will assist the cities in servicing the mass passenger transport projected during the 2012 European Championships.

The main objective of this modernisation is to adapt the operational capabilities of the lines to the speed of 160 km/h for classic stock, and 200 km/h for tilting stock (passenger trains), to 120 km/h for cargo trains, and to adapt the surface to the axis pressure of 225 kN. The scope of the modernisation covers the replacement of the track surface, the traction network and railway traffic controlling devices, the elimination of rail and road crossings at track level, and the construction of road overpasses. It also includes underground passageways and pedestrian walkways adapted to the needs of the handicapped, railway stations, and stopovers – new platforms are under construction.

The implementation of the highspeed-railway “Y” line is becoming a challenge. The consortium to prepare the feasibility study for this investment has already been selected. The “Y” line is planned to be released for use in 2020. ::

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Infrastructure

European construction companies go beyond the traditional areas of activity In 2010 in the European Union, capital expenditure in the construction sector fell by 3.6%, which is projected to result in a slight increase of 0.2% in 2011. According to the report “European Powers of Construction 2010,” prepared by business advisory firm Deloitte, the best method for reducing difficulties for the leading companies in Europe is to expand and diversify areas of economic activity.

Deloitte has once again presented a ranking of the 50 largest construction companies in Europe in terms of sales volume. Additionally, it showed 20 leaders in the industry in terms of their market capitalisation. The first place in the rating, in which the criterion was the volume of sales achieved in 2010, belonged to the French company Vinci. It was followed by Bouy­ gues (also from France) and Hochtief (from Germany).

French companies prevail in the report prepared by Deloitte – in the top five companies three were from this country. While the leading twenty companies, as far as market capitalisation is concerned, includes six Spanish companies, placed between the fourth and the seventeenth positions.

Among the fifty European players in construction there is only one company from Eastern Europe. This is Polimer Mostostal SA from Poland, which was in forty-fourth place. Concerns from Spain (Ferrovial, Acciona,

50 :: polish market ::

9 /2011

The ranking of construction companies in Poland by profits for the year 2010.

Source: own study

by Deloitte

No.

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ACS) and France (Vinci) also on prevail the Polish market, but the Austrian Strabag has the lead with a profit of PLN5.4 billion.

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Strabag

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Ferrovial

3 Polimex Mostostal prywatni inwestorzy

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Acciona

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Vinci Construction

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Dragados (ACS)

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Wolf & Muller / Juladal Investment

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3.8

the changing economic situation. According to the experts, many European construction companies noticed early that the traditional business models have ceased to be successful and are exposing these companies to high risk during conjuncture. These are actions based primarily on construction works for the public sector or private investors in this country. Some of the companies have successfully implemented diversification strategies, limiting dependence of activities on the traditional markets. Nine of the companies included in the ranking derive at least 50% of their revenues from extra-construction activities.

“These actions are generally complementary to the construction services, aimed at the same clients, based on long-term contracts, concessions or provision of services, which yield high margins and stable cash flows. These are mainly environmental services, services for the energy sector and a presence on the market of infrastructural concessions. This trend will also be visible on the Polish market in the years to come, when EU funds will be no longer the main source of financing infrastructural investments,” claims Maciej Karsoń, Partner for Deloitte’s real estate and construction team. ::

Bumar Group

– partner of the Defence Ministry in the modernisation of the Polish army Bumar – supplier and exporter of military equipment – celebrates this year its long-term presence on the Polish market and abroad. The Bumar Group consists of 24 Polish firms specialised in the production of armaments and military equipment, and giving employment to 11 thousand people. The leading company of the Group is Bumar sp. z o.o. In 2010, it posted PLN3 billion in revenue. The International Defence Industry Exhibition (MSPO Expo) in Kielce provides an opportunity to learn about the technological and intellectual potential of The Polish national defence consortium.

The Bumar Group at the MSPO Expo 2011 This year’s Bumar’s exposition in Kielce is held under the banner: BUMAR – PARTNER OF THE DEFENCE MINISTRY IN THE PROGRAMME OF THE POLISH ARMED FORCES MODERNISATION. This will be Bumar’s reply for the Ministry’s operational programme package that provides for the development and technological modernisation of the Polish army in the coming years, mapping the necessary directions of change, in keeping with the rational and effective use of available funds and resources.

The main client of Bumar sp. z o.o. within the military sector is the Ministry of Defence. The value of armaments and military equipment which the Polish army is supplied with by the Group’s companies, exceeds PLN1 billion.

Bumar has been involved in the modernisation of the Polish army for many years, providing it with equipment, from uniforms, through soldiers’ personal equipment, guns, ammunition, and mines, to armoured vehicles, surveillance, command and air defence systems, and rockets.

Bumar’s divisions In its market activity, the Bumar Group focuses on 4 groups of products that come under 4 manufacturing and service divisions: :: Bumar Ammunition division covers ammunition and rockets (revolver

ammunition, mortar ammunition, rocket ammunition, including SPIKE, GROM, FENIKS) :: Bumar Soldier division provides equipment for soldiers and agents (personal equipment and armament of soldiers and agents, including revolvers and machine guns, optoelectronics devices, protection equipment i.e. gas masks, helmets, bullet-proof vests, protective clothes :: Bumar Electronics division covers electronics and telecommunications (command systems, radars, sensors, command and control systems) :: Bumar Land division offers land platforms (wheel and caterpillar carriers, armament carriers, tanks, recovery vehicles, bridges) The exposition corresponds with the divisionary structure of the Group: Bumar Soldier, Bumar Ammunition, Bumar Electronics and Bumar Land. It will be located in hall C of the Kielce Fair, as well as in the open-area space, where the Group will for the first time put on display a complete version of an air defence system, dubbed SHIELD OF POLAND. Apart from the above-mentioned Polish Shield, the Group is developing a long-run strategic programme devoted to the personal soldiers’ equipment – Soldier of the Future. Other important projects currently underway include: ANDERS Multirole Combat Platform, Multi Role Tanker Transport MRTT or the

development of precision-guided munitions. All of them will be presented during the MSPO Expo. For the first time in Poland, visitors and guests will be able to watch French rocket launchers Aster 30 and Mica (produced by MBDA), making part of the Shield of Poland System.

Innovation As every year, a number of innovative and technologically advanced products and solutions offered by the Bumar Group have been put up for the DEFENDER award. The candidates include: vehicle bridge DAGLEZJA MG20, PT-72U tank, PPR SPIKE-integrated HITFIST 30P tower, HITFIST OWS 30P tower, set of thermal-visual 180o observation cameras, the fire extinguishing system for combat vehicles, 105 mm ammunition, 40 mm ammunition, 20 mm ammunition, 40 mm grenade launcher, WW15 launcher, RM 100 maritime radar, automatic detector of chemical and radioactive contamination Tafios B. Bumar was placed among 50 most innovative companies in Poland.

Conferences during the MSPO Expo Strategic projects, as well as a wide selection of themes will be presented during conferences and seminars: 5 September 2011 – Defence Industry versus Strategy of the national security; 6 September 2011 – The Bumar Group’s offer for the Polish Armed Forces and Soldier of the Future – comprehensive solution; 7 September – The Bumar Group’s offer for the Ministry of the Interior and Administration; September 8 – Technological potential for the armoured equipment modernisation – presentation for the Military Diplomatic Corps. Additionally, panel discussions will be held beside the exhibits of individual divisions.

The year 2011 marks the 40th anniversary of Bumar. The Kielce Fair will offer an opportunity to sum up and take a brief look back at its achievements, as well to give some insight into its history. ::

Law & Taxes

Territorial copyright protection under Polish law, its duration and application to foreign works Chairperson General Partner’s Board at European Center for Legal Consultations

Maja Sujkowska

Copyrights have a territorial character, which means that an author’s moral and economic rights to a particular work are protected according to a particular country’s act on copy­rights and only within its territory.

This nature of copyrights stems from public law regulations, which indicate that only the country exercising power over a particular territory may impose a specific protection. As a consequence, copyright protection is developed and exists separately in each country, and covers only those actions in respect of a work that take place within that particular country.

The basis for protecting works in Poland is Art. 5 of the Act on Copyright. According to its wording, the Polish Act applies to, and hence protects the works, :: whose author or co-author is a Polish citizen, or :: whose author is an EU member state citizen or a citizen of EFTA (European Free Trade Association) member states – parties to the European Economic Area agreement, :: which were published for the first time on the territory of the Republic of Poland or simultaneously on its territory and abroad, :: which were published for the first time in the Polish language, :: which are protected by international agreements and to the extent specified in those agreements; The protection resulting from the regulations within the Act applies not only to the works which, for whatever reason, are connected with Poland (author’s citizenship, language or place of publishing), but also to the works of citizens from the remaining 26 EU states, as well as from Norway, Iceland and Lichtenstein, and to the works created by citizens of other countries, if those works are protected by international conventions or by countries which signed the convention. These include the signatory states to the Berne Convention, the WIPO Copyright Treaty and TRIPS. According to the wording in the Polish Act, the subject of the copyright is a work. A work is to be considered as each and every expression

of creative activity of an individual nature, created in whatever form, regardless of its value, destination or method of expression. In particular, copyright applies to the following works: literary, journalistic, scientific, cartographic, graphic, photographic, string-musical, industrial design, architectural, architectural and city planning, musical, verbal and musical, stage, stage-musical, choreographic and pantomime, audiovisual (including cinematographic) and computer programmes. The Polish Act stipulates that only the method of expressing a work may be under protection.

Therefore, according to the regulations, the following are not protected: discoveries, ideas, procedures, working methods and mechanisms, and mathematical concepts.

A work is subject to copyright from the moment of its creation, even when incomplete.

“Creation” means a manifestation of the work which would allow at least one person apart from the creator to familiarise him or her with it. The term should not be confused especially with recording, which is an activity of any person (that is including the author) allowing the work to be reproduced made by putting it on any kind of material medium (CD-ROM, canvas, stone or other) which is not protected by the copyrights specified in the Act. According to Polish legislation, an author is entitled to protection regardless of meeting any formal requirements. It means that in order to acquire copyrights and the related protection rights, no specific registration or publishing of the work is required.

The Act on Copyrights and Related Rights states that an author’s moral rights are without time limit and are inalienable. An author’s moral rights include, above all, the right to be considered the author of the work, to sign the work in his or her name, the inviolability of the content and the form of the work, and the accurate use of it, as well as the right to decide about making it available to the public for the first time.

An author’s economic rights, on the other hand, expire after seventy years (Art. 36 of the Copyright Law). As to the author’s economic rights, the Act states that the author has the

exclusive right to use the work and expose it in all fields of use, and the right to receive remuneration for using the work. Fields of use are to be considered especially as various forms of recording and copying the work (e.g. producing copies of the work using printing or magnetic recording methods), and forms of marketing the original or its copies (e.g. distribution or rental of the copies), as well as forms of public performances of the work, exhibitions, projections, playing, broadcasting and re-transmitting and public exposure in such a manner that everyone can have access to it in a place and at a time of their choice.

The time limit for an author’s economic rights results in free access to the work for everyone after the period specified in the Act passes, on the condition that author’s moral rights are respected. A rule of a thumb is to count the protection period from the death of the author or the last co-author. In a situation where the author of a work is unknown, the seventy-year’ period is counted from the date of the work’s first publication. In Poland, the protection period for an author’s economic rights has been extended many times, along with developments and updates in regulations concerning copyright protection. In the beginning it was 20 years from the author’s death, then 25 years, then 50 years, until the protection period for an author’s economic rights reached 70 years.

Special rules are in force in Poland in relation to the protection of foreign works – works by foreign citizens permanently residing abroad. According to Art. 7 par. 8 of the Berne Convention, foreign works are protected in Poland for the protection period they are eligible for in their country of origin. A condition for extending the protection of a foreign work in Poland is reciprocity of regulations in this matter between the countries. It means that for works coming from a country where the protection period for an author’s economic rights is shorter than the one stated in the Polish Act, the period may be extended on the basis of Polish regulations if Polish works in that foreign country can also enjoy an extended protection period. :: 9 /2011 :: polish market :: 53

Law & Taxes

Is Polish Law ready for Euro 2012?

The UEFA Euro 2012 football tournament will be the most important sporting event ever hosted by Poland. We await the tournament with great expectations, but there is also some concern regarding the preparation process. Focus is on the infrastructure projects, like stadiums or roads.

But how about the legal infrastructure? Poland has assumed substantial obligations in this field as well.

Tomasz Bil

The author is an attorney at law, Chałas and Partners Law Firm, Branch in Kraków

The Polish government has guaranteed to fully protect UEFA intellectual property and to prevent ambush marketing related to Euro 2012. Countries hosting major sporting events take different approach to such guarantees. Some adopt laws providing for extraordinary measures aimed to protect intellectual property connected to the event, other rely on existing regulations. In Poland preliminary work has been commenced on a draft of extraordinary act that supposed to strengthen the intellectual property protection not only for Euro 2012, but also for other possible similar events in the future. So far the new law has not been implemented, which raises the question whether the regulations on intellectual property and marketing practices that are currently in force provide a sufficient level of protection in the light of the upcoming tournament.

Intellectual property Most of the marks and labelling connected to Euro 2012 are legally protected as trademarks. According to Polish Act on Industrial Property, a right of protection for trademark is granted by the Patent Office after submitting a trademark for registration. UEFA has registered a number of trademarks related to Euro 2012, including “Euro 2012”, “Poland Ukraine 2012”, “Creating History Together”, the tournament logo and mascot designs. An infringement on the right of protection for trademarks by an unlawful use of a trademark identical or similar to the registered trademark results in the holder of the right being entitled to demand the infringing party to cease the infringement, to surrender

54 :: polish market ::

9 /2011

the unlawfully obtained profits and in case of infringement caused by fault also to redress the damage. In addition, the UEFA trademarks should be considered as so-called ‘renowned trademarks’ which enjoy even greater protection. An infringement on the right of protection for trademarks is also subject to criminal prosecution.

Under EU regulations, Polish customs authorities are authorized to detain the goods that are suspected of infringing an intellectual property rights at the borders, which makes trademark protection more efficient. Community trademarks and international trademarks are also protected in Poland.

Some of the designs connected with Euro 2012, in particular the tournament logo or mascot design, are also protected as artistic works under Polish Act on Copyright and Related Rights. The same act also provides for protection of the right to TV broadcasts of the football matches. Copyright protection is not dependent on registration or any other formalities, it only requires the artistic work to be established in any form. An infringement on copyright exposes the infringing party to similar liability as in trademark protection, including criminal prosecution.

Ambush marketing Ambush marketing is defined as parasitic exploitation of the marketing potential of a sporting event by entities that are not official sponsors of the event. Usually it takes a form of advertisement messages that use associations with the sporting event, (eg. by catch-phrases like “unofficial beer of the tournament” or by presenting the general football themes without

directly mentioning the event). Athletes and fans are also used as carriers of advertisement content, for example through gadget giveaways with the logo of the company not being the official sponsor. Under UEFA standards, certain areas, in particular in the vicinity of stadiums, should be considered as ‘clean zones’ where any marketing activity not approved by UEFA is regarded as ambush marketing.

Provisions of Polish Act on Elimination of Unfair Competition will apply in general to ambush marketing. Under the said Act, any activity contrary to good practices which threatens or infringes on the interest of another entrepreneur, including advertising contrary to good practices or misleading the customer as well as designation of products or services which may mislead customers, will be considered unfair competition. The entity whose interest has been threaten or infringed by unfair competition is entitled to demand the perpetrator to cease the unfair activity, to remove its effects, to surrender the profits and to redress the damage. However, some forms of ambush marketing, including placing fair advertisement content in the areas regarded as ‘clean zones’, will not be considered unfair competition.

General protection is not enough for UEFA Polish laws on intellectual property and unfair competition are in conformity with EU requirements and meet all generally accepted international standards of protection. However, the guarantees issued towards UEFA regarding Euro 2012 are not fully fulfilled, in particular those regarding some forms of ambush marketing where UEFA demands extraordinary level of protection of its interests. However any legislative changes aimed at fulfilling the UEFA guarantees require the utmost caution. There is a risk that new legislation will be viewed as unjustified preference for a private entity (UEFA) and a violation of freedom of economic activity which is grounded in the Polish constitution. :: www.chwp.pl

TUBĄDZIN GROUP

– Creator of New Trends Tubądzin Group is one of the leading producers of ceramic tiles in Poland. For many years, it has consistently pursued a policy based on development and openness to market changes and clients’ needs. The Group’s aim is to best accommodate expectations of its ever-growing group of clients, through the continual widening of assortment and coherent marketing activities.

Colour – Tubądzin

Modern Wood – Tubądzin

Tokyo – Tubądzin Maciej Zień Collection

At a time when the space we live in often reflects emotions, passions, personalities and styles, it is necessary while searching for inspirations to go beyond clichés, overcome traditional barriers, look at the usual schemes from a fresh perspective. Indoor space arrangement is not only about functionality, but it is also about creating trends and fashion. New collections and patterns that were first shown in Paris, London or Milan, soon find themselves mirrored in space arrangement, ceramic tiles, furniture, decoration details. That is why one of the most important fields of activity of Tubądzin Group is design. The Group strives to create new trends, which is can be observed in their products: for example, the cooperation with the world of fashion gave rise to collections branded Tubądzin creation by Maciej Zień, while minimalism and natural inspirations are at the origin of the brand Natura di Terra.

Tubądzin Group comprises three manufacturing sites – in Ozorków, Tubądzin and Mogendorf (Germany), as well as the Logistical Centre in Cedrowice.

Lido – Natura di Terra

The production is based on the stateof-the-art technologies and standards, innovative solutions, and finely assorted, highest-level materials. Currently, Tubądzin Group involves: :: 4 brands - TUBĄDZIN, DOMINO, ARTE i KORZILIUS directed at different groups of clients,

:: Sub-brands: Tubądzin creation by Maciej Zień, Natura di Terra, Colour, Struktura :: Over 200 collections of wall and floor and universal tiles Products by the Group are available not only on the domestic market, but also in many other countries: Russia, Belorussia, Lithuania, Latvia, Estonia, Ukraine, Germany, France, Belgium, The Netherlands, The United Kingdom, Ireland, Sweden, Norway, the Czech Republic, Slovakia, Hungary, Romania, Bulgaria, Austria, Greece, Kazakhstan, Moldova.

The Group’s dynamic development is appreciated by clients, various economic institutions and independent experts.

The Group’s dynamic development is appreciated by clients, various economic institutions and independent experts.

Tubądzin Group has won several awards, the most imminent of which are: Promotional Emblem “Teraz Polska”; title “Good Design” granted in recognition of the originality of collections; “Pearls of EU Ceramics” and “Pearls of EU Ceramics Distributors” awarded to individual collections since 2004; statuette “Bathroom – Choice of The Year” presented for quality and design excellence in 2005, 2007, 2008, 2009 and 2011. ::

Pharmaceutics

Pharmaceutical companies have to adopt a new business model This is the last call for companies producing and distributing products which, under the new law, will be reimbursed. It is high time for pharmaceutical firms to revise their current business-legal model.

On 25 March 2011, Polish Parliament passed new cost-reimbursement regulations concerning medicines, foodstuffs intended for particular nutritional use and medical devices. A month later, the Senate introduced its revisions and from 1 January 2012 pharmaceutical companies will have to find their way in a new reality of reimbursed drugs.

As Deloitte writes “the changes will primarily affect two areas: the distribution model and pricing strategy, but not only. A rapid evaluation of the efficiency of the introduced changes will be necessary. New business solutions are necessary to conform to the requirements of the industry due to changes of the provisions of the Act on reimbursement. The regulations to come into force soon will not result in massive withdrawal of companies from operations in Poland or a general retreat from reimbursements.”

The Act introduces new rules on the so-called payback, or the return from the National Health Fund (NFZ) after exceeding the 17% threshold that was set in the NFZ budget for reimbursing medicines. The regulation introduces 50% payback. In other words, it divides the risk between pharmaceutical companies and NFZ. The new regulation introduces a reduction in wholesale margins for reimbursed drugs. It will take place gradually over the next 3 years: from the current 8.91% of the official selling price to 7% in 2012, 6% in 2013 and 5% in 2014.

The Act introduces official prices and margins for medicines reimbursed from public funds and regulations on

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the level of prices and margins of reimbursed drugs. The official retail margin will be calculated from the wholesale price of the product being the basis of the limit in the group. There will also be changes in the retail margins table in pharmacies. A percentage decreasing table will take the place of the current percentage-quota one (source: PAP).

Furthermore, a wide range of penalties for each violation of new rules will apply, covering both criminal responsibility (imprisonment for 8 years, without alternative fines) and [financial] penalties imposed in an administrative mode.

Deloitte underlines that these changes are fundamental and require adaptation in many aspects of the operations of pharmaceutical companies. “The new regulations will require pharmaceutical companies to introduce significant changes i.e. in their legal-business structure. It may be necessary to develop other models of drug distribution, changing the pricing strategy and adopting a new approach to marketing of reimbursed products. The possible solutions include modifications to the existing legal and business structures, or creating entirely new models. In any case, the additional costs generated by such changes have to be taken into consideration. They will mainly concern the appropriate allocation of resources and restructuring of existing operations.

Their size will depend on the degree of organizational complexity of new business structures and the existing portfolio of reimbursed products.”

Deloitte expects the entry into force of new regulations to cause initial chaos, but in the long run not to result in massive withdrawals from operations in Poland. “The changes introduced by the new reimbursement law will have a major impact on the configuration on the Polish pharmaceutical market. Proper solutions will have to be considered in particular by innovative companies,” Deloitte concludes. ::

Leasing

Prospects for leasing The leasing sector can count the first six months of 2011 among the successful ones. The second consecutive double-digit growth result is a proof.

Comparing this period to the first half of 2010, the net value of leased assets grew by 27.5% reaching PLN14.56 billion. This means that the industry has significantly moved towards its performance level from before the financial crisis. In the respective period of 2008, the value of the market reached PLN17.8 billion.

The main factor which is directly connected with prosperity in the leasing sector is GDP growth. Admittedly, this result is largely the outcome of private consumption. Not without significance is also the strong revival in the SME sector, which translates into increased demand for external sources of funding for capital investments.

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Andrzej Krzemiński President of the European Leasing Fund (EFL), Chairman of the Executive Committee of the Polish Leasing Association, Board Member of Leaseurope

Considering the overall leasing market, its driving force are invariably passenger cars, road tractors and construction equipment. The total value of lease contracts in these segments amounted to: PLN3.36 billion, 1.6 billion and 1.2 billion respectively, which represents 23%, 11.4% and 8.2% respectively of all movables and immovables leased in the first half of 2011. All segments recorded significant increases year on year. In the case of passenger cars it was an increase of 39% and in construction equipment – of 44.5%. However, the record growth was noted in the segment of road tractors which noted a 103% increase in the compared periods. It should be noted that the crisis “drove” into the leasing branch in trucks, and currently this is the fastest recovering segment. The segments of

trailers/ semi-trailers and buses noted comparably significant increases.

In the first half of 2011, a significant recovery was noted by the rail transport segment (PLN325 million, an increase of 75.5%) and the aircraft segment (PLN89 million, an increase of 82%).

The branches recovering after the crisis include also the IT market - the segment of modern office technology which covers leasing of equipment and software. It went up by nearly 40%, which means that over 4,700 IT devices and almost 1,000 software units worth PLN248 million were leased in the last six months.

A relatively small increase was noted in the real estate market. This is due to the fact that during the crisis many customers did not make investment decisions. Secondly, a transaction in the market requires a long preparatory period. In the first six months of this year, this sector grew however by 14.5% and the total value of leased properties reached PLN643 million.

Taking into consideration the fact that in the first half of 2010 the real estate sector declined by 54.1% compared to 2009, the result reached today is still unsatisfactory.

As expected, a large decline was noted in the sector of goods vehicles with a capacity of 3.5 tonnes. The decrease of 47.5% is a consequence of the extremely high demand for passenger cars equipped with a cargo compartment and registered as goods vehicles in late 2010, when it was possible to fully deduct VAT on them. The whole leasing sector of these vehicles noted then an improvement in results by over 106%. This means that during those 12 months almost 50,000 light vehicles equipped with a cargo compartment worth over PLN5.4 billion were leased.

In my opinion, despite the unstable situation on the currency market and negative signals coming from the euro zone, the leasing business may look optimistically into the future.

The increase in the value of domestic demand and investment revival in the SME sector will positively affect the national economy, which will translate into an increase of demand among businesses for external sources of financing, including leasing. ::

Opinion

It was supposed to be so good Cross-border banking used to be regarded as a modern and desirable direction in the development of financial markets. Large banks, providing services at international level, used to set trends according to the rule that “money governs the world.” At the same time, they were perceived as safe in line with the principle that “the big can do more” and the “too big to fail” policy.

Prof. Małgorzata Zaleska

The author is a member of the Board of the National Bank of Poland (NBP), full professor at the Department of Banking Warsaw School of Economics (SGH) and member of the Presidium of the Committee on Financial Sciences Polish Academy of Sciences (PAN).

The recent crisis destroyed this idyllic picture. The myths were shattered by the collapse of Lehman Brothers, one of the largest banks in the world, conducting cross-border operations in over 40 countries through more than 600 affiliated institutions. In response to this bankruptcy and other adverse developments, regulators noticed the problem of systematically important financial institutions (SIFI). The idea to subject financial institutions to different legal provisions and prudential regulations depending on the size of the institution and scale of its operations is considered increasingly often. The United States and Switzerland are among the countries which have been introducing special tighter regulations for SIFIs. One can also see a diversified approach to cross-border banking within the Basel Committee and European Union bodies.

The Basel III regulatory standard is to apply only to large banks operating internationally. The CRD IV directive, that is the equivalent of Basel III in the European Union, is to apply to all banks and investment firms (over 8,000 institutions). An especially surprising thing is that the European Commission has calculated that by 2019 these institutions should raise their own funds by EUR460 billion, an amount much higher than aid granted so far to Greece. This means perhaps greater security but also a further increase in the banks’ size and, consequently, in the scale of potential problems.

The activity of large and crossborder banks is analysed in the

context of interrelationships between the world of finance and government, and from the perspective of the security of assets held by banks and the stability of financial systems at national and international level. The more open a banking system is, the greater the risk of a crisis spreading onto it. Owing to cross-border banking, individual banking systems work increasingly as communicating vessels while banks no longer operate “on islands” but rather “in stormy seas.”

This means that risk is easily transferable between individual systems and banks. As a result, healthy institutions may be infected from the outside. Poland is one of the countries which have witnessed such consequences of the crisis and its impact on a healthy banking system. One can mention in this context the sale of BZ WBK SA and Kredyt Bank SA to new owners by the mother banks, who got into financial trouble. This clearly illustrates the relationship between the mother and daughter banks.

Another example of relationships between the mother and daughter banks is the activity of branches of credit institutions based in other countries. Their activity also involves security issues, including the principle of supervision and the principle that the deposits in the branch are guaranteed by the country where the credit institution is domiciled. An exception from this rule is that the host country supervises the liquidity of the branch. But one should also remember that there is no need to open a brick-and-mortar premises

to conduct cross-border operations because this can be done virtually.

Regulating the rules of cross-border activity, including efforts to ensure its security, is a very complex issue.

This activity should not be left to market mechanisms alone. At the same time, it should not be constrained by a maze of administrative orders and bans. And this is even impossible because banking regulations differ significantly among countries, not only within the EU. Additionally, it is difficult to harmonise individual norms, like for example liquidity or guarantee requirements, because of specific characteristics of local markets, and differences in their development level and buying power. Irrespective of the above, an effort should be made to regulate cross-border banking activity. Unfortunately, this means that there are more and more institutions and bodies dealing with the problem of cross-border activity and examining systemic risks associated with it.

As a result, decision-making, supervision and control institutions are multiplying, which does not need to contribute to an improvement in security.

Instead, it may lead to the overlapping of powers, washing over of responsibility and higher costs.

Consequently, cross-border banking, which was supposed to represent strength and security, has become a problem. This does not mean, however, that we should close the functioning of banks within the borders of our own countries. Openness to a new regulatory system in controlling growth in cross-border activity seems to be the right choice. :: 9 /2011 :: polish market :: 59

SME

Poland is strong with SMEs The 1st European Congress of Small and Medium Enterprises – one of the largest business meetings addressed to the SME sector in Central-Eastern Europe is to take place on October 6­–7 in Katowice. On July 5, a conference held by the organizers and patrons of the Congress took place in Warsaw.

They drafted a pre-diagnosis of the current state of the SME sector. The full evaluation and mapping new development directions are the tasks of the Congress.

The sector of micro, small and midsized enterprises is made up by all the businesses employing between 1 (self-employment) to 249 employees, whose annual turnover does not exceed EUR50 million or their total annual balance is not over EUR43 million. This is the most specific sector of the Polish economy. Poland sets European records in the number of registered businesses and the number of women running their own businesses. In Poland, there are over 3.6 million firms, of which a majority are in the micro sector – one- or two-person businesses. What it really means and whether it is a good sign would be shown by a detailed analysis and description of the Polish labour market. Certainly, not all of those, who by definition belong to this sector, really aspire to it. But there are also SMEs, which are a model of private enterprise in free market economy. It is in their interest that the Congress will be held.

As pointed out by Tadeusz Donocik, President of the Chamber of Commerce and Industry in Katowice and the host of the July conference, the Congress is the first initiative of this type after more than twenty years of economic transformation in Central and Eastern Europe. “We have decided that it was time to compare to what extent we have or have not made up for the disparities which separated us from the ‘old 15 EU member states’ in 1989. Therefore, one of the objectives of the Congress is to make a comparative analysis, showing how small and mid-sized enterprises have developed, what support tools are used

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in the ‘old fifteen’ and what in CEE countries,” adds Donocik.

A particular aspect of the Congress is its beyond-national character. Representatives of EU member states as well as the EU’s eastern neighbours – Ukraine, Belarus, Russia, Georgia, Azerbaijan, Armenia, Turkey, Moldovia and Kazakhstan have been invited. These countries and Poland aspire to create a new model of the SME sector, however, based not only on European models, but also American.

Also invited are significant economic activists from the United States, who for Polish SMEs are the partner whom they want to match. According to the organizers of the Congress, CEE countries have the potential to become the SME Silicon Valley of today.

The SME sector plays a very important role in the local community. Its specificity is the ability to respond quickly to local challenges and cooperate with the local authorities.

The fact that cooperation in broader context is crucial for the development of SMEs and improving the competitiveness of the sector, i.e. through innovation was tackled by Olgierd Dziekoński, Secretary of State in the President’s Office: “A major challenge for Poland is to build mechanisms in which small and mid-sized businesses will not only be active in the economic sphere as they are today, but will become the engine of innovation, new organization systems and new proposals for action. The condition for the functioning of SMEs in the field of innovation, the sphere of competitive economy, is the ability to

collaborate and cooperate. The Congress on the one hand will allow to build a place for cooperation in an international sense, and on the other, will show entrepreneurs and organizations of entrepreneurs that cooperation is needed also inside the country. This is the only way that we will be able to effectively represent SMEs abroad.” President of Poland Bronisław Komorowski took honorary patronage over the Congress.

Jerzy Buzek, President of the European Parliament and the Chairman of the Congress Programme Council thus described the situation of SMEs: “Small and mid-sized businesses are the backbone of the economy of any country. Therefore, in order for the economy of a country to function as a healthy organism, it is necessary to take care of its basic cells. Not only Europe’s economic growth but also the well-being of its citizens hinges on the situation of SMEs and their access to capital. Poland spotted these relations and dependencies. It decided that one of its main priorities during the Presidency would be to improve the situation of SMEs. Small and medium sized firms produce up to 60% of GDP in the EU and provide 70% of jobs across the EU. It is therefore important to give them directions for development. In improving SMEs’ situation Polish Presidency will focus on two major tasks. First, facilitating access to capital, and fostering the capacity of SMEs outside their homeland. This will be possible thanks to the liquidation of the so-called bottlenecks in the common EU market.

I am convinced that the European Congress of SMEs, which will take place in Katowice, will be a breakthrough in terms of the European approach to SMEs, and will support the implementation of the basic tasks of the Polish Presidency.”

As it was mentioned by Janusz Steinhoff, the Chairman of the Council of the Polish Chamber of Commerce and the Deputy Chairman of the Congress Programme Council, the event would be an attempt to change the law in force in Poland and the EU,

SME

and the conclusions of the Congress will be forwarded in the form of recommendations not only to the Polish government but also to European institutions. “The SME sector is governed by its specificity. Very important is what is related with the functioning and enforcement of law in the EU. We cannot be satisfied with all the regulations that currently exist in the EU member states, including Poland. We see the excessive casuistry of some provisions and incompatibility of some regulations. I am primarily talking about the access to capital.

Another important issue is the common EU services market, especially competition within the EU. Furthermore, we propose that the EU should open itself faster to the countries outside than it has so far,” said Steinhoff.

Access to financing for small and mid-sized businesses in Poland is very specific. On the one hand, one

of the most common programmes of various government agencies is to help SMEs, but on the other, many micro and small entrepreneurs are discriminated against in access to capital i.e. in the form of bank credit. If the United States were to be a model also in this respect, there, as introduced by Jerzy Samborski, the Vice President of the European Union of Small and Medium Enterprises and the Middle Class Unicorn, 27% of all contracts is guaranteed by law to SMEs. An insightful and critical analysis of the SME sector was presented by Bożena Lublińska-Kasprzak, President of the Polish Agency for Enterprise Development (PARP) – the coorganizer of the Congress. “In 2009, roughly the same number of enterprises were established and collapsed.

This result shows that we should

focus on the survival rate of businesses and their development potential and transformation from micro business to small, medium and large enterprises (...) Polish firms often do not plan, do not think strategically, more than half of them do not have a strategy. Polish businesses do not find financing outside, they do not cooperate. There is no B2B. There is also a lack of cooperation with the scientific circle. More than half of Polish entrepreneurs engage in business activities without using external information.

As you can see there are quite a lot of weaknesses that are worth discussing. It is definitely worth talking about what other instruments and measures are needed to improve the situation of SMEs. One of the problems is the low degree of innovation.”

We will know in October what are the solutions in the opinion of businesspeople themselves. ::

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9 /2011 :: polish market :: 61

Cultural Monitor

Chopin on our mind

Compiled

by Maciej Proliński

Avant-garde and the world around us The 54th International Festival of Contemporary Music, “Warsaw Autumn”, will be held on 16-24 September in Warsaw. It is the biggest festival in Poland devoted to contemporary music and one of the largest events of its type in Central and Eastern Europe. Organised since 1956, it has been seen as a creative event with a tremendous legacy and prestige.

“This year we’d like to present music that’s not just focussed on itself, but opens up to the world around, comments on it, and aims to make a difference. It’s about our reality and composers’ attitudes, who take a stand on current social, political, civilisational, and cultural issues. We’ll get the chance to listen to a number of documentary works. For example during the inauguration, Rolf Wallin’s ‘Strange News’ with lyrics by Josse de Pauw – a composition which addresses the problem of child soldiers in Africa, involving an

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From 22 September to 10 November, the Warsaw Institute of Industrial Design will host an exhibition completing the 18th “Good Design” (Dobry Wzór) competition for the best-designed products and services on the Polish market, which is organised by the Institute under the auspices of the Minister of the Economy. The Institute’s monitoring services selected 800 products and 80 services meeting the criteria of good design and recommended them for further evaluation in the competition. The leading field in the ongoing monitoring was, as last year, the field of home-improvement, while public design overtook the field of work and services. As for services, cultural services dominated again. In September an international jury will select the winners, awarding Grand Prizes in four categories – Home, Work, Public, and Services, and the Prize of the Minister of the Economy – the Design of the Year. The development of this event is worth following, as is its impact on the economy. ::

The Royal Collection in the Palace on the Water

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Good design comes of age

orchestra, an actor, and a video projection.

The lyrics and the video material use television report footage recorded in 2006 in Uganda and the Congo,” says Tadeusz Wielecki, the festival’s director. The festival’s audiences will also be treated to the world premieres of compositions by younger generation composers Agata Zubel, Paweł Hendrich, and Aleksan­ der Nowak, commissioned by “Warsaw Autumn.” The finale will feature the orchestral “Scontri” homage to the recently-deceased outstanding Polish composer of global renown – Henryk Mikołaj Górecki. ::

Until 16 October the Palace on the Water, in Warsaw’s Łazienki Park, is showing the exhibition “Rembrandt and others” presenting 153 works from the collection of the Royal Baths Museum, the Lanckoroński collection from the Royal Castle in Warsaw, the National Museum in Warsaw, and the Museum of the Polish Army.

This unique collection of Stanisław August Poniatow­ ski, the last King of Poland (1764-1795), is the first event in the series of exhibitions planned by the Royal Baths Museum, dedicated to Royal collections and Stanisław August’s patronage. “Rembrandt and others” features the paintings of Marcello Bacciarelli (the King’s court painter), Rembrandt, Anton van Dyck (portraits), Anthon Raphael Mengs, and Jacob Jordaens. It is the first exhibition at the Palace on the Water since 1795, and it was selected as the venue because Stanisław August once presented his collections there. :: P l a k a t · M i c h a ł B a t o r y · Realizacja korony · MAGIC/ Paris · ASKA · BATORY

The 30th International Chopin in the Colours of Autumn Festival will take place in Antonin between 15 and 18 September. This is the fifth festival in the world, and the second festival in Poland dedicated to Chopin – after Duszniki, Mariánské Lázně (Czech Republic), the Valldemossa Charterhouse (Mallorca) and Ghent (Belgium). The event is organised by the Centre for Culture and Arts in Kalisz and the Wielkopolska Centre for Culture – Antonin. Yulianna Avdeeva, the winner of the 16th Chopin Piano Competition is to be invited for the inauguration of this year’s festival. As for the final concert, “Chopin in the Velvet Night,” its special guest will be the outstanding Polish stage and film actor, Jerzy Trela. ::

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Cultural Monitor

World cinema with a temper!

The 27 Warsaw Film Festival will be held from 7 to 16 October.

It is the leading event in the region, and probably the most important film festival in Poland. th

Its organiser – the Warsaw Film Foundation – wants to present the best films from all over the world of the previous and current season. It is also an opportunity to see films that will probably never screen in Polish cinemas. Each year a poll is organised among the

A concert-filled autumn

“The New Moon,” photo courtesy of the organizer

The painter of the elements in Kraków

audience to pick the most popular films. There are five competition categories, with different profiles. The films presented are evaluated by five juries. The festival will also feature the 7th CentEast Market – an event for professionals. Its objective is to promote Eastern European films all over the world. More and more sales agents, distributors, festival selectors and producers from Poland, Europe and the world come to each CentEast – this year to be organised between 14 and 16 October. ::

A dozen oil paintings and several dozen watercolours by the English artist William Turner, a genius painter of the elements, will be on display from 1 October at an exhibition in the National Museum in Kraków. This will be the first and only presentation of the artist’s works in Poland. The exhibition will arrive from Hamburg. It will be open to the public from the beginning of 2012!

The exhibition will show the artist’s growth and changes in painting landscapes. Apart from works on paper, there will be 12 oil paintings. Three of them will be borrowed from private collections in the United States. Joseph William Turner (1775–1851) was born and raised in London. He was only 14 when he was admitted to the Royal Academy of Arts. In 1799, at the earliest possible age, he became an associate member of the Royal Academy. “Turner’s paintings rarely leave the Tate Gallery.

It’s just one of a number of reasons that will make this exhibition a true hit at the National Museum,” invites Zofia Gołubiew, the Director of the Kraków Museum. ::

On 6 October, John Scofield, one of the most important and creative jazz guitarists, is coming to the Warsaw Congress Hall. As a soloist he co-authored the success of the ensembles of Miles Davis, Billy Cobham, and Jack De Johnette. Forming his new quartet, Scofield invited Nigel Hall, the vocalist of the famous ensembles Soullive and Lettuce, the bassist from The Black Crows, Andy Hess, and the legendary New Orleans drummer, Terence Higgins. His latest album, “A Moment’s Peace” is a jazz tribute to the traditions of great standards by Lennon, McCartney, and Gershwin, and a demonstration of Scofield’s very own perfect composing skills. Scofield will perform the concert version of this album in Warsaw.

The legendary band The Holmes Brothers, one of the major contemporary folkjazz, blues and soul ensembles, will star during the autumn Era Jazz concert tour. “The five Era Jazz club concerts are a great opportunity to get to know the genuine music of the American South, and the slums of Chicago. ‘Feeling the blues’ is the most important element of The Holmes Brothers’ concerts, offering perfect music and great entertainment,” invites Dionizy Piątkowski, the director of Era Jazz. We can experience the magic of Chicago blues, and the vitality of gospel at concerts in Warsaw (4 Nov. – Klub Palladium), Gdynia (5 Nov. – Klub Ucho), Poznań (6 Nov. The Blue Note), Łódź (7 Nov. – Klub Wytwórnia), and Kraków (8 Nov. – The Lizard King).

On 11 November in the Atlas Arena in Łódź we will have the chance to listen to the soothing voice of Sade. Her great comeback took place last spring – she performed for over 150,000 people in 21 countries. The unforgettable performances of her band combined classic sounds with stunning graphics by Sophie Muller, providing an unforgettable concert experience. This will be the first time Sade will perform in Poland! During the two-hour performance the fans are taken on a tour of the Sade’s timeless hits – from the swing of “Smooth Operator” to the passionate blues ballad “Jezebel.” The set list also features compositions from the critically-acclaimed album “Soldier of Love,” which has recently gone diamond John Scofield, in Poland. :: © Era Jazzu

Lublin in dialogue... Lublin in confrontation...

The 16th Theatre Confrontations will take place in Lublin between 14 and 22 October.

This year’s programme was created in cooperation with the Adam Mickiewicz Institute and will focus on the Poland–Russia–Eastern Partnership artistic dialogue, being also the starting point for a several-year-long cooperation programme with young stage authors in the region, presenting communities from various areas of Europe. This year we will get to see the majority of Lublin’s theatres. This is an

acknowledgment of artists, who have not featured in the festival for a long time. In Lublin we will also see popular performances from all over Poland and abroad, including “No matter how hard we tried” directed by Grzegorz Jarzyna and based on Dorota Masłowska’s work, “Dog cage” from the DAKH Centre of Contemporary Arts in Ukraine, and “Being Harold Pinter” by the Belarus Free Theatre.

The Theatre Confrontations will also be joined by the Maat Festival presenting physical and

dance performances. The symphonic concert “I, Culture Orchestra,” which will end the festival, is also to be a sensational event.

It is a most intriguing orchestra, composed of young musicians from countries east of the EU, which is to feature in Europe’s best concert halls this year, conducted by Pawel Kotla from Poland. It is in Lublin that these young musicians will launch their tour of the major European concert halls, and all this within our cultural Presidency of the EU. :: 9/2011 :: polish market :: 63

Cultural Monitor

The Grand Theatre… who were open to the world – Iwaszkiewicz and Szymanowski, who came from a region that today lies in Ukraine; a work set in the multicultural space of Mediaeval Sicily, discreetly marked by the Mediterranean myth of Dionysus; finally, a work whose latest production was originally shown at a prestigious Austrian festival by a native British director – this is our key to a modern Europe of Nations!

In the 2011/2012 season we want to show you the premieres of two masterpieces from the 1840s: Stanisław Moniuszko’s “Halka” and Richard Wagner’s “Der fliegende Holländer.”

Waldemar Dąbrowski - General Director of the Teatr Wielki – Polish National Opera

When I invited you to see the premiere of Karol Szymanowski’s “King Roger” directed

by Mariusz Treliński in 2000, I said I hoped the production not only would revolutionize the perception of the masterpiece itself, but would also become an impulse for the entire opera world to take an interest in what to my mind is the greatest Polish opera. Luckily my optimistic speculations found confirmation in reality. Consecutive noteworthy productions of “King Roger” – in Wrocław, at the Opéra Bastille in Paris, in Bregenz, St. Petersburg, Barcelona, Edinburgh, Madrid – enabled Szymanowski’s musical mystery play finally to shine in Europe with the brilliance it deserved. In Poland, meanwhile, discussions about opera came out of their musical niche and encompassed widening intellectual circles. The bridge leading us into the 2011/2012 season will be the Bregenz production of “King ­Roger,” the work of David Pountney, the Warsaw premiere of which will inaugurate Poland’s Presidency in the European Union. Apart from the poeticmusical duo of Schiller and Beethoven, it is truly hard to find a more apt artistic metaphor of the spirit of the continually expanding European Union. A work by two great Poles

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I see the potential value of the premiere of “The Flying Dutchman” in the fact that after more than a decade spent staging a spectacular series of interpretations of Italian and Russian, Polish and French works, Mariusz Treliński is finally stepping into the realm of German opera, and into its pivotal Wagnerian idiom at that. As regards “Halka”, a production entrusted to Natalia Korczakowska, author of an exceptionally good version of Wolfgang Rihm’s “Jakob Lenz,” I have hopes for it as a way of reforming the perception of Moniuszko’s theatre, which is purely Polish though somehow universal as well, and which needs to be wisely and carefully freed of the outdated aesthetics of handlebar moustaches and a style that has been followed for decades.

The production of “Medeamaterial” by Pascal Dusapin, the great French opera composer, marks the return of the multi-talented Barbara Wysocka, winner of the Polityka Passport 2010 award which she received for her production of Philip Glass’s “The Fall of the House of Usher” at our theatre. “Medeamaterial” will be a continuation of the “Territories” experimental cycle whose diverse repertoire will also include “Senso,” an opera by the Italian composer Marco Tutino which had its world premiere a few months ago in Palermo.

Therefore “Senso” is yet another contribution, after “King Roger,” to the pan-European dimension of opera theatre involving a Polish theme. In this respect, however, it has to make way for the revival of Mozart’s Don Giovanni with Mariusz Kwiecień in the title role. This is the “opera of all operas,”

composed by an Austrian to an Italian’s libretto, its plot set in Spain, the world premiere performed in Prague and then instantly grabbed by a number of European cities, including Warsaw in the time of King Stanisław August Poniatowski.

After the previous, more “Italian” season, this year Russian music will be represented very strongly. The ballet premiere of an audience favourite, Pyotr Tchaikovsky’s “The Nutcracker” which Krzysztof Pastor has entrusted to Wayne Eagling from Britain and Toer van Schayk from The Netherlands, the three-part ballet The Biblical Parables (the first link in the chain being Sergei Prokofiev’s “The Prodigal Son” to a libretto by Boris Kochno, a friend of Szymanowski’s and later secretary to Diaghilev himself), and finally Igor Stravinsky’s “Le Rossignol” – a work from the borderland of opera and ballet, will be part of a solid bridge connecting eastern and western sensitivity in Warsaw.

The strongest span of that bridge will most likely be Andrei Konchalovsky’s production of Sergei Prokofiev’s “War and Peace.”

The finale of this season, which is the result – as in previous years – of creative discussions with Mariusz Treliński and Krzysztof Pastor, would not have been possible without the continued building of the system of coproductions with prestigious foreign institutions: the Bregenzer Festspiele, the opera houses of Bologna, Copenhagen, Palermo, St. Petersburg. The effect of this collaboration will – hopefully – contribute significantly to our cultural reality; we will discuss its essence from 13 to 15 October 2011 during the annual international conference of the Opera Europa association the topic: Added Value. I would like to point out that Opera Europa, an association with as many as 117 music institutions as its members, gave the privilege of organizing this conference to our theatre at a special time for our country – the time of Poland’s Presidency in the European Union. This makes it an event of symbolic significance. It will highlight the pace at which the Teatr Wielki – Polish National Opera has managed – in the course of just the past three seasons – to travel the long road from the status of a barely recognizable opera theatre to a player in the European opera champions league. ::

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Cultural Monitor

Preserving monuments and landscape Maciej Klimczak – Undersecretary of State in the Polish President’s Chancellery

The importance of cooperation with state institutions, local governments, private sector, civil society organizations and private owners for the benefit of National Monuments The June Forum for Public Debate focused on National Monuments showed how important it is to use the enormous potential lying in the presidential distinction of selected sites.

Strengthening the brand of the Monument should begin with the integration of local communities around these sites. A sense of social cohesion, pride and responsibility for National Monuments can be a boost to cultural activities, tourism development, thus contributing to economic development of the region. These sites should become a unique instrument for promoting Poland in the world. In order for this to happen it is necessary to ensure adequate funding for these sites. Debate participants presented many examples of good cooperation in attracting large national and European funds earmarked for conservation of these sites.

Cooperation between owners, local authorities and state institutions, conservation departments at various levels, is necessary to draft the correct conclusions and then for the proper settlement of subsidies.

Increasingly important partners are social organizations who feel responsible for the proper care of these sites – as it is the case of the Association of Friends of Tarnów Region.

A large part of National Monuments are sacral sites. The Debate showed broadly understood cooperation of conservation services for the benefit of these sites; its participants became acquainted with the problems of ethics in the protection of monuments, the art of proper maintenance and new techniques of conservation. Further meetings of diverse circles representing National Monuments that will allow for the exchange of experiences and elaboration of model solutions are necessary.

66 :: polish market ::

9 /2011

Maciej Klimczak, Teacher, civil servant, diplomat. He has graduated from the Faculty of Pedagogy University of Warsaw. In 1990 he joined the Ministry of Culture and Arts as Deputy Director of the Department of Cultural Education, and since 1992 Director of the Department of Culture Popularisation.

In the years 2001–2005 he was Undersecretary of State in this Ministry, in 2003 he served as General Conservator.

At the same time, in the period 1995–2001 Maciej Klimczak was a lecturer at postgraduate studies in Cultural Management at the Warsaw School of Economics (SGH). In 2005 he was awarded the Silver Gloria Artis Medal.In 2005–2009 Maciej Klimczak was Poland’s Ambassador to Latvia. In 2010 he was awarded the 3rd Class Latvian Commander’s Cross of the Three Stars Order. On 18 March 2011 he was appointed Undersecretary of State in the Polish President’s Chancellery. ::

The role of spatial planning in the maintenance of both monuments and landscape We are all aware of how important it is to shape the viewing axes or the spatial composition around such objects as National Monuments. One of the main tasks of spatial planning is to shape the spatial order, understood in accordance with the provisions of the Law on spatial planning and development, as “such shaping of space, which creates a harmonious whole and takes into account all conditions in structured relationships and functional, socio-economic, environmental, cultural and compositional-aesthetic requirements.” It is important that more attention than ever before is devoted to this subject, especially to the shaping of visual values, in planning. After the June Debate in the Presidential Office we have initiated efforts to develop new criteria and procedures for recognizing sites as National Monuments. These criteria should – in our

opinion – condition the entry of a new site on the list, the land development plans, plans for care and management.

In addition, UNESCO standards applicable to heritage sites should be taken into consideration. These changes may lead to prolonged procedures, but it should be kept in mind that the best form of protection is proper spatial development taking into account the requirements of maintaining spatial order, architectural and landscaping values, as well as requirements for the protection of exclusive cultural heritage sites, which National Monuments are.

Chances for implementing the European Landscape Convention The findings of the European Landscape Convention are in force in Poland since 1 January 2005. The text of the agreement was published in the Journal of Laws in 2006. The Department of Nature Conservation of the General Directorate for Environmental Protection deals with the implementation of the Convention.

We trust that the process of implementing the European Landscape Convention will take place at the right rhythm. This requires a detailed analysis of Polish laws relating to the landscape shaping. Currently works on the provisions to change the Nature Conservation Act are underway. We can assume however, that the implementation of the Convention will require changes in other laws. The landscape and its values are one of the components of the instruments forming the space, therefore these changes will affect planning as well as landscape conservation and management. It should be expected that the text of the Convention, which after all is in the implementation phase, will allow for greater legitimacy in the topics of landscape in planning practice. It is worth noting that the National Secretariat of the Landscape Convention was established in 2010. On its website it runs activities to promote the Convention. ::

Cultural Monitor

Poland and Ukraine

– together on the eve of Euro 2012!

The European Stadium of Culture (ESK), a project presenting the cultural wealth of Poland and Ukraine, and also the first important social event heralding Euro 2012, has been launched. The idea of the project, whose inauguration took place between 12-14 August 2011 in Rzeszów, is to present Poland and Ukraine in relation to the tremendous international sporting enterprise the two countries will host in less than a year.

Maciej Proliński “Through culture, an indispensable element distinguishing Poland and Ukraine from the rest of Europe, we wish to reinforce the image of both countries, showing their innovativeness, uniqueness and openness towards cooperation,” declares Katarzyna Mazurkiewicz, the administrator of the ESK programme. The project also has a significant modern, non-artistic touch to it, drawing attention to the natural necessity for closeness between Poland and Ukraine, and also to the wall at our mutual border. “How many great rivers we have to cross?” - is indeed a profound and valid question - both about the traditional and the modern, living culture.

ESK, initiated by the Minister of Culture and National Heritage, is run by the City of Rzeszów and the National Centre for Culture. Honorary Patronage of the project has been taken by the President of the Republic of Poland, Bronisław Komorowski.

In the midsummer of 2011, during the inauguration of the Stadium, nearly 100 Polish-Ukrainian projects took place - concerts, exhibitions, film screenings, workshops, debates, urban activities and plays. “Rzeszów is today the capital of culture,” Tadeusz Ferenc, the Mayor of Rzeszów, announced proudly from the stage. Multiple artistic events were opened by the concert “Gramy razem!” (“We play together!”) on the city’s marketplace. We heard, among others, the premiere performance of the songs written for the European Stadium of Culture by the

excellent Polish composer, arranger and musician Krzesimir Dębski, and the young Ukrainian conductor and composer Roman Drozd. As well as hits known from the world’s stadiums, performed by Polish and Ukrainian artistes. The vocalists were accompanied by the Subcarpathian Philharmonic Orchestra, the Lvóv Chamber Orchestra, the Warsaw Chamber Orchestra Choir and the choir of the “Singing Poland” programme. At the end, the renowned British band Morcheeba appeared on stage. The same evening, Poles and Ukrainians took part in a competition for the “2012 Hit of the Stadiums.” The artistes who took part in it included Maciej Maleńczuk, and the bands Wilki, Haydamaky and

Enej. The winning song of the competition was “Mundialeiro” by Maciek Maleńczuk, one of the most prominent Polish singers.

Rzeszów also became the starting point of the international expedition “Globall” whose participants set out for a journey to Africa to artistically and athletically stimulate local communities and come back in 2012 to Poland and Ukraine.

An important element of the event turned out to be the “U Project” exhibition, an initiative of the members of Sputnik Photos, an international photographic collective bringing together artists from Central and Eastern Europe. The photo exhibition was accompanied by short sessions, forming an amazing story about Ukraine, a country still looking for its own identity.

This year’s great inauguration of the European Stadium of Culture is but one of the key stages in the project’s implementation. On the National Centre for Culture’s website we find that the Stadium includes establishing stable cooperation structures between Poland and Ukraine in the form of artistic projects, to be used after 2012, triggering social sensitivity, including sponsors, activists, public and commercial media in Poland and in Ukraine, and also financing and obtaining funds for the development of common cultural initiatives in Poland and in Ukraine. Subsequent editions of the European Stadium of Culture are to take place in Rzeszów each year. Plans also include involving Ukrainian cities in the future. :: 9 /2011 :: polish market :: 67

We care about health and ­recreation An interview with Wiktor Kolbowicz, Chairman of the “Pod Tężniami” Health Clinic named after John Paul II

The “Pod Tężniami” Health Clinic is a health resort offering health, rehabilitation and SPA services, but isn’t it above all a hotel?

Our Clinic offers a wide range of health-rehabilitation services, unlike typical hotel objects oriented towards short-term stays. Our guests come here to receive treatment, rehabilitation, regain their strength and forget about daily matters.

It is a huge complex to control.

I know that you manage it really well, which is proven by the awarded title of the Manager of the Polish Hotel Industry. How did you achieve it?

I do not have any problems with management and we are truly doing great. The Clinic was established 30 years ago, and the beginnings, as they usually are, were really difficult.

The result of thirty years hard work is today the beautiful, developed object.

However, we do not rest on our laurels; new investments are pending all the time. We strive to enhance andmodernise our resort all the time. It is nice to hear from our guests, and a large proportion of them visit us every year, that they are curious about the new changes we have implemented. Each year there is something new, we introduce new ideas and modern solutions.

The clinic’s Patron is John Paul II. You set a really high standard.

Having such a patron is an obligation, which is proven by numerous prizes, such as “Teraz Polska,” “Po Prostu Najlepszy,” “Europrodukt,” and “Gazele Biznesu.” What is the secret of your success?

From the very beginning, a team of well-selected people has worked

to do something for the region. We prepared the “White Saturday” project. We were represented by, among others, doctors, therapists, physiotherapists and all marketing staff. In fact, all employees were involved. The event aimed at conducting the largest number of examinations in the Motion System Laboratory. We examined a lot of people in search of possible spine and foot problems. Also crucial were the biomechanic examinations, that is, the examinations conducted by manual therapists. Much interest was attracted by the rheumatologist’s consultations, but also by the cardiologist, neurologist and diabetologist.

Will you continue this project?

We will attempt to hold this event cyclically. We noticed that patients are interested in free-of-charge medical consultations. Very often the patients consist of whole families. In the professional laboratory we conduct specialist examinations, among other things the diagnosis of bad posture among children.

for us, people who can and like to cooperate, who are devoted to work, and, what is important, who also like their work. Together we are heading in the right direction. This means that the highly-set standard is attainable for us. This is the whole secret of our success.

In July, 2011 you ran an event called “White Saturday,” during which you rendered free of charge services, among others, in the form of medical consultations. How did it go? Did you enjoy much interest?

Ciechocinek does not exist without the Pod Tężniami Clinic, but then the Pod Tężniami Clinic does not exist without Ciechocinek. It is an inseparable relationship. We wanted

The Clinic realises a project called “The Passport to Export.” What is it and why is it classified as innovative economy?

Each year we host a large number of guests, and most of them come from Poland. We wish to present our programme to guests from abroad. We are interested in the Scandinavian, German and French markets. Within “Passport to Export” we implement marketing and promotional activities targeted at these markets. We took part in fairs in Finland at the beginning of this year and an economic mission to Germany, within the ITB fairs and to Israel. We plan to take part in fairs in Sweden and France. The guests who have experienced our services later bring their friends. For us it is a sign that our actions are heading in the right direction.

Interviewer - Błażej Grabowski

Health Clinic “Pod Tężniami” We offer health and diagnostic stays, as well as cardiology, slimming and anti-nicotine stays.

We recommend specialist rehabilitation packages i.e. healthy heart, healthy spine, rheumatological and renewal, beauty and relaxation.

Treatment and rehabilitation · treatment of rheumatic and musculoskeletal diseases · treatment of heart and cardiovascular diseases · treatment of skin diseases such as psoriasis and vitiligo Beauty and care · medical consultations and treatments in aesthetic dermatology · beauty, relaxing and silhouette modelling treatments Recreation and leisure · year-round outdoor and indoor brine pool · dry sauna, steam and herbal bath · salt cave with mini graduation tower

John Pauls II Health Clinic

Medical Services Cooperative 7 Warzelniana Street, 87-720 Ciechocinek, tel. +48 54 416 70 00, fax +48 54 416 70 07 rezerwacja@podtezniami.pl, www.podtezniami.pl

Economic Monitor

Economic Monitor June 2011

Key economic trends

sorption of EU money, the completion of the inventory rebuilding process and a slowdown in the pace of consumption growth. The trade balance and investment in fixed assets will have a favourable impact on Poland’s economic growth.

The Ifo World Economic Climate indicator, compiled on the basis of surveys among experts worldwide, increased slightly in 2011Q2 thanks to a major improvement in assessments of the world’s current economic situation. The indicator describing projections for the global economic situation in 2011H2 slightly deteriorated but remained at a high level, though a bit lower than in 2011Q2. The revival of the global economy should continue in 2011H2 but at a slightly slower pace than in 2011Q2. The economic climate indicator for Western Europe is consistently pointing upwards, although the trend has weakened.

The assessments of the economic situation in North America deteriorated slightly, mainly due to less optimistic expectations for the future. The economic conditions in Asia were also assessed less favourably in 2011Q2 than at the beginning of the year, with the indicator staying below the peak value of 2010Q2.

According to projections made by the National Bank of Poland (NBP), in 2011Q2 Poland’s GDP growth will slow in year-on-year term. The slowdown will continue in 2011H2 to a level below 4%. As a result, the projected real GDP growth rate for 2011 will be 4%. The reasons include measures taken to reduce the government deficit, a slowdown in the ab-

(Source: www.nbp.pl)

The BIEC Leading Index (WWK), which indicates future economic trends, rose in 2011M7 by 1.0 point month on month. However, one can still see no forces which could give a boost to the economy in the near future. Despite growing wages and a rise in employment, internal demand is dampened by high inflation. The spreading problems of the eurozone economies and the poor condition of the American economy constrain the economic growth of Germany, which directly affects our exporters. Public investment projects supported by EU funding will continue to be the strongest driving force behind the Polish economy in the second half of the year.

(Source: www.biec.org).

Industry Since mid-2010 the pace of growth in industrial output has been slowing. In 2011M6 it was still positive but this month saw an especially

16% 14% 12% 10% 8% 6% 4%

10.6

10.4

10.4

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10.1

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2010 M8

2010 M9

2010 M10

2010 M11

2010 M12

2011 M1

2011 M2

2011 M3

2011 M4

2011 M5

2011 M6

2% 0%

in cumulative terms

in non-cumulative terms

Fig. 1. Change in industrial output, Mt/Mt-12

Source: Central Statistical Office (GUS)

fast drop in the growth pace. However, new orders were picking up fast, which may indicate that output will not slump in 2011Q3.

The pace of growth in industrial output has been slowing since 2010M7 after it peaked in 2010M6. The June drop was especially sharp – in 2011M6 output was higher by 2.0% in year-on-year terms, compared to an increase of 7.7% in the previous month. The gradual slowdown in the pace of industrial output growth is also reflected in the seasonally adjusted data. After seasonal adjustments, output increased in 2011M6 by 4.5% compared to a year earlier against an increase of 8.7% in the previous month. The slowdown in industrial output growth was largely attributable to the weakening performance of the manufacturing sector. In 2011M6 manufacturing output was up by 4.4% year on year against an increase of 9.5% a month earlier (seasonally adjusted data). Output in the mining and quarrying sector grew by 6.6% year on year, which was a slightly slower pace than in the previous month, while growth in output in the water supply, sewage and waste management and land reclamation sector accelerated to 7.5% year on year. Output in the last two sectors is now growing at a stable pace. After a drop noted in the previous month, output increased again in the supply of electricity, gas, heat and hot water (up by 0.4% year on year).

In cumulative terms, industrial output has been growing since the beginning of the year. However, the pace of growth has been increasingly slow. The only exception was 2011M5, when very strong output figures were recorded. In 2011M1-6 output was higher by 7.4% compared to a year earlier against an increase of 8.5% in the previous month.

In 2011M1-6 labour productivity in the industrial sector measured by sales per employee was by 4.7% higher than in 2010M1-6.

(Source: Informacja o sytuacji społecznogospodarczej kraju. I półrocze 2011; www.stat.gov.pl).

In 2011M1-5 productivity was higher by 5.6% compared to a year earlier while in 2010 productivity growth had exceeded 10%. This 9/2011 :: Polish Market :: I

-1.2

-4.0

ment fell again in year-on-year terms (by 11.5%) as did the output of pharmaceutical products (by 6.8). The output of computers, electronic products and optical products decreased by 30.5%. tobacco products

1.0

computers, electronic and optical products

3.6

machinery and equipment

5.6 4.3

food products

7.4

chemicals and chemical products

9.6 9.6

beverages

electrical equipment

textiles

rubber and plastic products

motor vehicles, trailers and semitrailers

leather and related products

other transport equipment

metal products

furniture

metals

other non-metallic mineral products

12.4

pharmaceutical products

14.3

wood, cork, straw and wicker products

15.6 15.2 15.2

paper and paper products

18.6

wearing apparel

20.8

printing and reproduction of recorded media

23.2 22.8 21.5

coke and refined petroleum products

Economic Monitor

-5.1 -10.0 -16.8

Source: Central Statistical Office (GUS) Fig. 2. Change in output in selected manufacturing sectors, 2011M1-6, Mt/Mt-12

shows that the pace of change in labour productivity in the industrial sector is slowing consistently.

The good news is the acceleration of new orders in the industrial sector. In 2011M6 businesses operating in this sector had 10.8% more orders than a year earlier; in 2011M5 the number of orders was higher by 8.4%. Growth in orders for exports accelerated to 10.6% year on year versus 3.8% in the previous month.

With the number of new orders growing at a faster pace, growth in industrial output is not likely to slump in 2011Q3.

Among commodity groups in key industrial sectors, in 2011M6 growth in the production of intermediate goods was the fastest – the seasonally adjusted increase reached 10.6% year on year but was smaller than in the previous month (12.4%). June was a second month in succession to see a slowdown in the output of intermediate goods. After a few months of fast increases, in 2011M6 the pace of growth in the output of investment goods fell sharply to 4.5% year on year from 14.5% in 2011M5. As regards other types of goods, only the output of non-durable consumer goods increased year on year – by a mere 0.2%. The increase was much smaller than a year earlier. What is more, growth in the output of consumer non-durables has been weakening since 2010M8. In 2011M6 the output of energy-related goods fell by 0.7% II :: Polish Market :: 9/2011

compared to 2010M6. Since the beginning of the year the rate of change in this output has hovered close to 0% with no clear trend.

The worst situation is in the case of durable consumer goods as their output is decreasing increasingly fast. In 2011M6 it was down by 15.2% in year-on-year terms.

In 2011M1-6 output increased in year-onyear terms in 24, out of 34, segments of the industrial sector, including the production of “other non-metallic mineral products” (up by 23.2%, including products made of cement, lime and plaster – up by 35.5%, and products made of concrete, cement and plaster – up by 31.7%), metals (up by 22.8%, with the output of noble metals and other non-ferrous metals – up by 33.0%), furniture (up by 21.5%), metal products (up by 20.8%, including steam generators – up by 29.7%, and metal structural components – up by 28.8%), motor vehicles, trailers and semi-trailers (up by 15.2%, including parts and accessories for motor vehicles – up by 18.0%), and rubber and plastic products (up by 15.2%).

In 2011M6, the output of metals increased by 22.1% year on year, the output of metal products increased by 20.5%, the output of furniture went up by 18.7%, the output of “other non-metallic mineral products” rose by 16.9%, and the output of rubber and plastic products went up by 10.0%. After a rise in 2011M5, the output of machines and equip-

(Source: Informacja o sytuacji społecznogospodarczej kraju. I półrocze 2011; www.stat. gov.pl).

July 2011 was a fourth month in succession with no major changes recorded in business climate. Businesses expected their order books to grow in the next three or four months. Projections for employment and production were less optimistic. Capacity utilisation stayed at a level similar to the one recorded a year earlier.

In 2011M7 the general business climate indicator in manufacturing was positive and stayed close to the previous month’s level.

Projections for the economic situation and the ability of the businesses to meet their financial obligations in the next three months were optimistic. Projections for orders books and production were more optimistic than a month earlier. However, the scale of job cuts may be larger than had been expected in 2011M6. Prices of finished products may grow at a pace similar to that expected in the previous month. The assessment of the current economic situation was again pessimistic. The assessments of production and order books, although positive, were more cautious than a month earlier. According to businesses, domestic orders grew at a slower pace than in 2011M6 while growth in foreign orders was similar. Businesses still had difficulty, though slightly smaller one than in the previous month, with meeting their current financial obligations on time. The stocks of finished products were regarded as slightly larger than satisfactory. Producers of “other non-metallic mineral products,” and electrical appliances reported that their inventories had increased excessively. Producers of pharmaceutical products, textiles, paper and paper products reported that their excessive inventories had decreased. In 2011M7 capacity utilisation in the manufacturing sector was estimated at 74%, a level similar to that reported a year earlier. Capacity utilisation increased year on year in the production of metals, machines and equipment, chemicals and chemical products. Capacity utilisation decreased in printing and reproduction of recorded media, the production of paper and

Economic Monitor

paper products, foodstuffs, beverages and tobacco products.

25

(Source: Informacja o sytuacji społeczno-

20

gospodarczej kraju. I półrocze 2011; www.stat. gov.pl).

Construction Construction and assembly output is growing increasingly rapidly, which is mainly due to large infrastructure projects, including the construction of motorways and other roads.

The situation in the residential building sector is improving, although very slowly. In coming quarters construction should make a positive contribution to GDP.

15 10 5 0 -5

2010 M6

2010 M7

2010 M8

2010 M9

general business climate

2010 M10

2010 M11

2010 M12

output

2011 M1

2011 M3

2011 M4

2011 M5

2011 M6

2011 M7

order books (projection) Source: Central Statistical Office (GUS)

Fig. 3. Business climate indicators in the manufacturing sector

* The projection is for the next three months

25% 20% 15%

17.6

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2011 M3

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-6.1

In 2011M6 construction and assembly output rose by 17.0% year on year, slowing from 23.9% a month earlier. Construction and assembly output has been growing increasingly fast since 2010M8, with only some temporary drops in the pace of growth over this period. The seasonally adjusted data also indicate a rise in construction output, although on a slightly smaller scale – 15.3% year on year in 2011M6 against 18.5% in 2011M5. Thanks to the strengthening of the growth trend in construction, output figures are improving in cumulative terms. In 2011M1-6 output rose by 20.8% compared to 2010M1-6 when it had dropped quite significantly. In 2011M1-5 growth in output was a little slower – 19.3% year on year.

Of the individual segments of the construction and assembly industry, output growth is the strongest in the construction of civil engineering facilities. In 2011M6 output increased in this segment by 40.2% year on year. Despite the fact that the pace of output growth slowed from 49.9% in the previous month, it was high enough to ensure a consistent acceleration in cumulative terms. In 2011M1-6 output rose by 39.6% year on year. The output of specialised construction work also accelerated – to 29.6% in 2011M1-6. The increase was slower in noncumulative terms – 22.8% year on year against 30.5% in 2011M5. The situation of businesses dealing with the construction of residential buildings was the worst. In 2011M6 sales in this market segment fell by 3.8% year on year.

Although an increase of 4.1% was recorded in this segment in cumulative terms in 2011M16, a slowdown had been noted since the beginning of 2011. Sales in this segment might have passed their cyclical peak.

2011 M2

-10% -15% -20% -25% -30%

2010 M8

in cumulative terms

2010 M9

2010 M10

2010 M11

2010 M12

in non-cumulative terms

Source: Central Statistical Office (GUS)

Fig. 4. Change in construction output, Mt/Mt-12

Among businesses dealing with infrastructure building, those specialised in the construction of roads for wheeled vehicles and railroads recorded in 2011M1-6 a rise in output by 62.7% in year-on-year terms. The businesses have the largest share in this sector. The output of businesses dealing mainly with the construction of pipelines, telecommunications lines and power transmission lines was also higher than a year earlier (up by 21.1%).

Businesses dealing with the construction of “other civil engineering structures” recorded a 5.3% drop in output. Among builders deal-

ing with specialised construction work, the highest year-on-year increase in 2011M1-6 was noted by those providing “other specialised construction works” (up by 62.1%) and finishing works (up by 34.4%). Businesses providing mainly demolition and site preparation services recorded an increase of 21.2% while those dealing with wiring, plumbing and other utility systems recorded a rise of 12.0%. In 2011M1-6 the share of residential and nonresidential buildings in total construction and assembly output was lower than a year earlier while the share of civil engineering facilities 9/2011 :: Polish Market :: III

Economic Monitor

20 10 0 -10 -20 -30 2010 M6

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tions for the situation in the sector made on the basis of opinions voiced by the surveyed managers were slightly better. Expectations for the next three or four months were positive, though more cautious than in 2011M6. In the coming months managers did not expect any changes in the prices of construction and assembly services. They planned some slight job cuts. They expected that the financial situation of construction businesses would deteriorate further.

domestic orders (projection) Source: Central Statistical Office (GUS)

Fig. 5. Business climate indicators in the construction sector

* The projection is for the next three months.

Trade 2011M6 was a second month with retail sales in constant prices growing at a slightly slower pace. Wholesale sales also slowed. The slowdown affected mainly retail and wholesale sales of food. Despite that, growth in merchandise sales in 2011Q2 was high and should make a positive contribution to GDP in this period.

12% 10% 8% 6% 4% 2%

0.7

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0% -2% -4% 2010 M6

2010 M7

2010 M8

in cumulative terms

in non-cumulative terms

Source: Central Statistical Office (GUS)

Fig. 6. Change in retail sales, Mt/Mt-12

mainly motorways, expressways, streets and other roads - was higher.

(Source: Informacja o sytuacji społecznogospodarczej kraju. I półrocze 2011; www.stat. gov.pl).

In 2011M1-6 the number of home completions continued to decline in year-on-year terms.

The number of home permits was higher than in 2010M1-6 while the number of home starts was smaller.

(Source: Informacja o sytuacji społecznogospodarczej kraju. I półrocze 2011; www.stat. gov.pl).

In all these cases – home completions, starts and permits – the rate of change in their number is steadily increasing.

IV :: Polish Market :: 9/2011

The general business sentiment in the construction sector deteriorated in 2011M7 and was assessed as negative. The assessment of the financial situation in the sector was the most pessimistic. Projections were optimistic but more cautious than a month earlier.

In 2011M7 the seasonally adjusted business climate indicator in construction was assessed negatively and at a slightly lower level than in the previous month. Assessments of order books and production were negative and at a lower level than in June. The assessment of the financial situation in the sector had been the most pessimistic for a long time. In 2011M7 it deteriorated again quite sharply after an improvement in the previous month. Projec-

In 2011M6 retail sales in constant prices increased by 6.4% year on year compared to 8.5% year on year in the previous month. In cumulative terms, in 2011M1-6, growth in sales slowed to 7.6% year on year from 7.9% in 2011M5. Wholesale sales in current prices rose in 2011M6 by 11.1% year on year against 19% in the previous month. Growth in wholesale sales had been slowing since the beginning of 2011. In 2011M6 it was the slowest since 2010M7.

In 2011M1-6 the highest year-on-year increase in retail sales by businesses employing up to nine people was recorded in the case of “other sales in non-specialised stores” (up by 29.7% year on year), sales of motor vehicles, motorcycles and parts (10.9%), and sales of solid, liquid and gaseous fuels (5.4%). In all the three segments, growth continued in 2011M6 and was the highest for “non-specialised stores.” Sales of “food, beverages and tobacco products,” which have the highest share in total retail sales, dropped in 2011M16 by 2.5% year on year. It was the only group of products in which a drop was recorded in this period.

(Source: www.stat.gov.pl).

Wholesale sales in current prices rose the fastest in 2010M6-2011M6 in stores selling IT and communications tools, machines, equipment and additional appliances (up by 61.5% year

In 2011M7 the seasonally adjusted general business climate indicator in the retail sector was negative. In the previous three months it stayed close to 0. Assessments made by micro, small and medium businesses were pessimistic.

Large businesses presented positive assessments. Retailers selling textiles, clothing and footwear were optimistic, though more cautious than a month earlier, while those selling food were more pessimistic. In the “motor vehicles” segment, assessments turned from positive in the previous month to negative while in the “household appliances” segment they became slightly less pessimistic. Current assessments and expectations for the ability of businesses to meet their financial obligations remained negative. The level of inventories was still regarded as excessive. The outlook for demand in the next three or four months was increasingly dim. In this situation, businesses had plans for larger job cuts than a month earlier. A regards prices, they expected that these would be growing at a slower pace.

5.4

food, beverages, tobacco products

motor vehicles, motorcycles and parts

6.2

2.8

-2.5

newspapers, books and other sales in specialised stores

10.9

solid, liquid and gaseous fuels

13.2

furniture, radio and TV equipment, household appliances

14.8

other

18.8 textiles, clothing, footwear

The assessment of the business climate in the trade and repair of motor vehicles deteriorated in 2011M7, mainly due to increased pessimism in the assessment of financial obligations. Projections for the next three or four months also worsened.

29.7 other retail sales in non-specialised stores

on year) and tobacco products (41.9%). However, in both cases, growth was slower than in the previous month. The sharpest drop was recorded in wholesale sales of household appliances, radio and television equipment, and other household articles (down by 12% year on year) and sales in non-specialised stores (down by 9.7%). For the first time in more than a year a drop was also noted in wholesale sales of food (down by 1.1%).

pharmaceuticals, cosmetics, orthopaedic equipment

Economic Monitor

Source: Central Statistical Office (GUS)

Fig. 7. Change in retail sales of selected products in 2011M1-6, Mt/Mt-12 10 5 0 -5 -10 -15 2010 M6

2010 M7

2010 M8

2010 M9

general business climate

2010 M10

2010 M11

sales

2010 M12

2011 M1

2011 M2

demand (projection)

2011 M3

2011 M4

2011 M5

2011 M6

2011 M7

Source: Central Statistical Office (GUS)

Fig. 8. Business climate indicators in the trade and repair of motor vehicles

(Source: www.stat.gov.pl).

The Current Consumer Confidence Index (BWUK), which describes current trends in

9.4

14.4

9.2

United States

9.9

Euro Area

Croatia

4.0

Austria

European Union

4.1

Netherlands

7.4

Belgium

4.5

7.5

Sweden

Luxembourg

7.6

Cyprus

6.1

7.8

Finland

6.2

8.0

Italy

Malta

8.4

Slovenia

Germany

9.3

Poland

7.2

9.7

France

6.5

9.9

Hungary

Denmark

11.4

Bulgaria

Czech Republic

13.4

12.2

Slovakia

14.2

Portugal

21.0

Spain

Independent surveys conducted by three institutions show an improvement in consumer sentiment in 2011M7. However, this improvement is not stable and the future situation is still uncertain. Assessments concerning prices and the households’ potential to buy slightly improved.

Ireland

Consumer sentiment

Source: Eurostat

Fig. 9. Harmonised Unemployment Rate in selected countries in 2011M6, seasonally adjusted

9/2011 :: Polish Market :: V

Economic Monitor

individual consumption, improved in 2011M7 by 0.9 pct. points compared to the previous month and reached -24.6 pct. points. However, the index was by 13.1 pct. points lower than in 2010M7, although the difference between its readings this year and last year diminished somewhat in July.

(Source: Koniunktura konsumencka. Lipiec 2011; www.stat.gov.pl).

Among individual components of the confidence index, there was an improvement in the assessment of Poland’s general economic situation and, though to a smaller extent, in the assessment of the household’s potential to buy. The assessment of the financial situation of households deteriorated. All components of the consumer confidence index were again assessed negatively. The assessment of the general economic situation remained the most pessimistic component of the consumer confidence index. Consumers’ views of their potential to buy were much less pessimistic.

The Leading Consumer Confidence Index (WWUK), which describes trends in individual consumption expected in the next months, improved by 1.7 pct. points compared to the previous month and amounted to -26.9 pct. points. The reading was lower than a year earlier by 10.6 pct. points.

(Source: Koniunktura konsumencka. Lipiec 2011; www.stat.gov.pl).

As in the previous month, only one component of the index deteriorated compared to 2011M6 – the assessment of the financial situation of households in the next 12 month.

Among the remaining components, the assessment of Poland’s general economic situ-

ation was the least pessimistic, although still in negative territory. Projections for unemployment and the households’ potential to save were more pessimistic.

According to the Ipsos consumer confidence survey, 2011M7 was a successive month seeing a slight improvement in consumer sentiment. The reading of the Ipsos Consumer Confidence index had been increasing for four months. However, the improvement compared to 2011M6 was small – only 1 pct. point. It was mainly due to a stronger outlook for the current situation. However, expectations for the future became slightly more pessimistic.

Source: www.ipsos.pl).

The BIEC Economic Welfare Indicator, which reflects the economic condition of the population, strengthened in 2011M7 by 0.4 points.

The improvement was small compared to the drops noted in the previous three months.

But the negative impact of inflation was significantly reduced. The fall in inflation in 2011M6, especially as regards prices of food, fuels and clothing, contributed to an improvement in the situation of households.

The indicator also went up thanks to a rise in wages. In June they increased more than inflation -by almost 6% year on year. Employment growth weakened. With wages growing at a faster pace and with plans to raise the minimum wage, one may expect that the situation on the labour market will deteriorate and more people will be employed in the informal economy, which will have an adverse influence on the financial situation of households.

(Source: www.biec.org).

13.5 13.0 12.5 12.0 11.5 11.0 10.5 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011 2011 2011 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6

non-seasonally adjusted

Fig. 10. Registered unemployment rate, %

VI :: Polish Market :: 9/2011

seasonally adjusted

Source:Central CentralStatistical StatisticalOffice Office(GUS) (GUS) Source:

Labour market In 2011M6 the seasonally adjusted unemployment rate decreased slightly in Poland as the number of newly registered unemployed had been falling for a few months. June saw no major changes on the European Union labour market.

In 2011M6 the seasonally adjusted harmonised unemployment rate (HUR) for Poland decreased by 0.2 pct. points to 9%, after it had remained stable for four months, a level lower than the European Union average of 9.4% and the euro-zone average of 9.9%. Among EU countries, the highest unemployment rates were recorded in Spain (21%), Ireland (14.2%) and Slovakia (13.4%)1. The lowest unemployment rates were in Austria (4%), Netherlands (4.1%), and Luxembourg (4.5%). The highest rise in the unemployment rate was recorded in Bulgaria, Ireland, Spain and Cyprus – by 0.2 pct. points in each of the countries. The largest drop – also by 0.2 pct. points – was in Austria, Poland, Portugal and Sweden. June was a third month in succession with the unemployment rate in the United States going up slightly – from 9.1% to 9.2%.

In Poland, the registered unemployment rate amounted in 2011M6 to 11.8% and was by 0.4 pct. points lower than in 2011M5, thanks to a seasonal revival. The seasonally adjusted unemployment rate was lower by 0.1 pct. points month on month and higher by 0.1 pct. points year on year.

In 2011M6 the number of unemployed registered with employment agencies amounted to 1,883,300 and was by 2.1% higher than a year earlier. In 2011M6 the year-on-year increase in the number of unemployed was smaller than in the two preceding months. The good news is the continued downward trend in the number of newly registered unemployed.

It is attributed not only to seasonal factors. In June around 173,700 newly unemployed people were registered with employment agencies, which represented a drop of 7,800, or 3.7%, compared to the previous month (seasonally adjusted data). The number of unemployed who were taken off the official register also decreased slightly, but the seasonally adjusted number of people taken off the register 1 No data were available for Estonia, Greece, Lithuania, Latvia, Romania and United Kingdom.

Economic Monitor

(Source: Informacja o sytuacji społecznogospodarczej kraju. I półrocze 2011; www.stat. gov.pl).

The BIEC Future Unemployment Rate Index (WRP), which provides data on expected changes in unemployment, dropped in 2011M6. June was a second month in succession to see a decrease in the index. What is more, the scale of decrease was 1.5 times larger in June than in May. The change was a sign that the situation on the labour market was improving moderately while the impact of seasonal factors was also strong.

(Source: www.biec.org).

PLN3.650

4%

PLN3.600

3%

PLN3.550

2%

PLN3.500 PLN3.450

1%

PLN3.400

0%

PLN3.350

-1%

PLN3.300

-2%

PLN3.250

-3%

PLN3.200

-4%

PLN3.150 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011 2011 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6

average nominal wages (seasonally adjusted, left axis) Source:Central CentralStatistical StatisticalOffice Office(GUS) (GUS) real wage change, Mt/Mt-12 (non-seasonally adjusted, right axis) Source:

Switzerland 0.6%

Croatia 2.0%

Norway 1.3%

Turkey 6.2%

Iceland 4.8%

European Union 3.1%

Sweden 1.5%

Euro area 2.7%

Slovenia 1.6%

France 2.3%

Czech Republic 1.9%

Germany 2.4%

Netherlands 2.5%

Italy 3.0%

Denmark 2.9%

Spain 3.0%

Malta 3.1%

Greece 3.1%

Finland 3.4%

Portugal 3.3%

Belgium 3.4%

Hungary 3.5%

Poland 3.7%

Bulgaria 3.5%

Austria 3.7%

Slovakia 4.1%

Luxemburg 3.8%

United Kingdom 4.2%

Latvia 4.7%

Cyprus 4.5%

Estonia 4.9%

Lithuania 4.8%

Fig. 11. Wages in the corporate sector

Romania 8.0%

because they had found jobs was a bit higher than a month earlier and amounted to 95,300.

At the end of 2011M6 women accounted for 53.5% of the unemployed registered with employment agencies compared to 51.1% a year earlier. Compared to June 2010, the share of unemployed not eligible for unemployment benefits and unemployed graduates increased respectively by 2.8 pct. points to 83.9% and by 0.3 pct. points to 3.3%. The percentage of unemployed people who had been in employment before becoming unemployed stayed at a level similar to that recorded a year earlier (79.5%), with people dismissed for reasons on the employer’s side accounting for 3.9% of all such unemployed against 4.6% in June last year. Among the unemployed being in a special situation on the labour market, the share of long-term unemployed rose by 6.4 pct. points compared to a year earlier to 49.8%. The long-term unemployed were the largest group among the unemployed registered with employment agencies. The share of unemployed without job qualifications also increased (up by 3.3 pct. points to 30.6%) as did the percentage of unemployed aged over 50 (up by 0.8 pct. points to 22.2%), the percentage of unemployed parents with at least one child aged under 18 (up by 0.7 pct. points to 8.4%), and the percentage of unemployed university graduates aged under 27 (up by 0.1 pct. points to 1.2%). The percentage of unemployed aged 25 or under decreased by 0.4 pct. points to 20.9%). The percentage of disabled unemployed people stayed at a level similar to that recorded a year earlier (5.2%). The number of unemployed in all the categories mentioned above rose in year-on-year terms, with the highest increase recorded in the number of long-term unemployed (up by 17.4%) and people without qualifications (by 14.6%).

Source: Eurostat Fig. 12. Harmonised Index of Consumer Prices in selected countries, 2011M6, Mt/Mt-12

Average employment in the corporate sector is on the rise. But there are signals indicating that demand for new workers may weaken. The pace of change in real wages stays at a moderately low positive level.

In 2011M6 the number of people employed in the corporate sector was 5,527,000 and was higher by 3.6% than a year earlier. The pace of increase was similar to that recorded a month earlier. The seasonally adjusted data indicate a continued upward trend in employment. Compared to 2011M5, the increase in employment driven by non-seasonal factors amounted to 13,500 people, or 0.2%.

In 2011M1-6 the number of job offers submitted to employment agencies amounted to 403,500 and was by 26.5% smaller than a year earlier. In June their number was smaller by 24.7% year on year and by 7.2% month on month (seasonally adjusted data). At the end of 2011M6 the number of group lay-offs

planned was slightly higher than in May but lower than in June last year, with 405 workplaces declaring they planned to make 42,300 workers redundant.

In 2011M7 the number of job offers posted on the Internet did not change significantly from the previous month. July was a second month in succession with a stable number of job offers. In the same period of last year there was a rapid increase in the number of job offers. In 2011M6-M7 the number of offers for people with the lowest qualifications dropped significantly in the service, health care and tourist sectors. However, in the last two sectors the number of offers was still higher than a year earlier. The number of job offers for physicians and pharmacists was smaller than in the same period last year. In 2011M6M7 the number of job offers for economists, accountants, insurance specialists and similar professionals decreased slightly but was still high compared to previous years. In this 9/2011 :: Polish Market :: VII

Economic Monitor

Table 1. Selected labour market data

Average employment in the corporate sector, in thousands Change in average employment, year on year, % Average nominal monthly wage in the corporate sector, in PLN Change in real wages, year on year, % Registered unemployment rate

2010M6

2010M9

2010M12

2011M3

2011M5

2011M6

5 336

5 364

5 379

5 509

5 514

5 527

1.1%

1.9%

2.4%

4.1%

3.6%

3.6%

3 403.65

3 403.68

3 847.91

3 633.54

3 483.99

3 600.47

1.3%

1.3%

2.3%

-0.1%

-0.7%

1.6%

11.7%

11.5%

12.3%

13.1%

Change in the number of job offers submitted to employment agencies, y-o-y, %

15.1%

12.6%

8.2%

-29.4%

-14.5%

-24.8%

Employment rate according to LFS (BAEL) *

50.4%

51.1%

50.6%

50%-

-

-

Unemployment rate according to LFS (BAEL) *

9.5%

9.1%

9.3%

10%-

-

-

Economic activity rate according to LFS (BAEL)

55.7%

56.2%

55.8%

55.6%-

-

-

* Quarterly data

group of occupations, the sharpest drop was noted in the number of vacancies for lawyers.

It was the only category, apart from physicians and lawyers, where the number of job offers was lower than a year earlier. There was still a high number of offers for marketing specialists. In 2011M7 there was a rise in the number of jobs in the construction, IT, manufacturing and sales sectors.

In 2011M6 average nominal wage in the corporate sector amounted to PLN3,600.47 and was higher by 5.8% year on year against 4.1% in the previous month. After seasonal adjustments, nominal wages were higher by 0.4%. Real wages rose in June by 1.6% year on year. Excluding some slight and temporary drops, since 2010M3 real wages had been growing at a stable, though slow, pace.

Prices In 2011M6 Poland’s CPI inflation decreased quite significantly. It is not sure, however, whether this marked a reversal in the inflationary trend. Transport and food prices were still growing rapidly, though at a slower pace than a month earlier. Inflationary expectations of private individuals increased again after they had remained stable for two months.

In 2011M6 the harmonised index of consumer prices (HICP) for Poland amounted to 3.7%, which represented a significant drop from the 4.3% in the previous month. In the same period, the HICP for the European Union decreased from 3.2% to 3.1%. It was the first decrease in the index, although slight, in many months.

VIII :: Polish Market :: 9/2011

Source: GUS and authors’ calculations

Upward inflationary pressures persist in the European Union, largely due to younger member states2. In 2011M6 the highest inflation was in Romania, where prices were higher by 8% than a year earlier, and in the Baltic states, where prices were higher by almost 5%. Among older member states, the United Kingdom is struggling with the consequences of earlier efforts to fight the crisis through intervention in money supply. In 2011M6 prices in this country were higher by 4.2% year on year. The pace of growth in consumer prices was slower in this period in Sweden, Slovenia and the Czech Republic – respectively 1.5%, 1.6% and 1.9%. The HICP index for the euro-zone was the same in 2011M6 as in the previous month (2.7%). The European Commission’s projection was for a 2.5% increase in euro-zone prices in 2011M7.

In 2011M5-2011M6 Malta and Cyprus recorded the most unfavourable changes in the HICP index, with a rise of respectively 0.6 pct. points and 0.4 pct. points. Prices slowed the most in Slovenia, Poland and Estonia, with the HICP index decreasing by 0.8 pct. points in the first country and by 0.6 pct. points in the latter two.

According to the methodology applied by the Central Statistical Office (GUS), in 2011M6 consumer inflation in Poland amounted to 4.2% against 5% a month earlier. As in previous months, transport prices and prices of food and non-alcoholic beverages grew the fastest – by 6.4% each. However, the pace of increase in these two groups of prices slowed in 2011M5-2011M6. In 2011M6 only communications prices were lower (by 3.6%) than a year earlier and the drop was larger than in 2 Data were not available for Ireland.

the previous month. Prices of the remaining product groups increased, with a significant acceleration noted in prices of alcoholic beverages and tobacco products. They were higher by 3.6% year on year compared to a rise of 3% in 2011M5.

The inflationary expectations of private individuals increased in 2011M7. The inflation rate expected in the next 12 months was 4.7% versus 4.2% a month earlier. In July the percentage of people expecting that price growth would accelerate fell slightly from 19.4% to 19.3%. At the same time, the percentage of those who expected that prices would be growing at the same pace increased by 5% from 48.3% to 50.3%. The percentage of those who expected that price growth would slow was similar to that noted in the previous month – 20.4%. The percentage of respondents who said that prices would remain unchanged dropped significantly from 3.7% to 2.2%. A very slight percentage of those surveyed (0.2%) said that prices would be lower.

Other respondents were undecided.

The BIEC Future Inflation Index (WPI), which provides data on consumer goods and service prices several months in advance, fell in 2011M7 by 0.6 pct. points. The index has shown no clear upward trend for a year, while tendencies conducive to a slower growth in prices have strengthened in recent months.

In coming months seasonal factors will be additionally constraining price growth. They have an especially strong impact on food prices, which have a large share of around 24% in the CPI goods basket.

(Source: www.biec.org).

In 2011M5 producer prices in industry grew at a slower pace than in the previous month

6.4%

5.8%

4.5%

4.2%

3.6%

3.4%

2.5%

2.2%

0.9%

0.2%

food and non-alcoholic beverages

cost of housing (rent and utilities)

restaurants and hotels

health

alcoholic beverages and tobacco products

other goods and services

education

home furnishings

clothing and footwear

recreation and culture

communications

6.4% transport

Economic Monitor

-3.6%

the slowest in the building construction sector (up by 0.4%).

Transport and warehousing prices grew by 2.1% year on year. The increase was slower by 0.3 pct. points than in the previous month due to a slowdown in prices of warehousing and services supporting transport. Prices in this sector rose in 2011M5 by 1.8% year on year versus 2.9% a month earlier. Growth in telecommunications prices was also very slow (0.1% year on year). Road and pipeline transport prices went up by 2.5%. The increase was similar to that noted in April. Growth in water transport prices accelerated to 13.4%.

Source: Central Statistical Office (GUS) Fig. 13. Change in prices of selected consumer goods and services in 2011M6, Mt/Mt-12

Central bank and monetary policy

but this pace was still quite high. Construction prices had been gradually accelerating since the beginning of the year but the pace of their growth was still slow.

At a meeting on July 5-6, 2011 the Monetary Policy Council decided to keep central bank interest rates on hold. The most recent decision to raise the rates had been taken at a meeting on June 8. The central bank interest rates are now as follows: the reference rate 4.50%, the Lombard rate 6.00%, the deposit rate 3.00%, and the rediscount rate 4.75%.

supply of electricity, gas, heat and hot water, prices rose by 3.5%; in the water supply, sewage and waste management and land reclamation by 4.6%.

In 2011M5 average construction and assembly prices rose by 0.7% in year-on-year terms versus an increase of 0.6% a month earlier. Construction prices have been accelerating since the beginning of 2011 thanks to the favourable demand factors which are driving construction growth. However, these are largely associated with government spending on the construction of motorways and other roads. Prices in the sectors of civil engineering facilities and specialist construction work went up respectively by 0.9% and 1% in year-on-year terms. Price growth was

The pace of growth in producer prices in the industrial sector slowed in 2011M5, a second month in succession, but remained high – 6.3% year on year compared to 8.8% in the previous month. In mining and quarrying, price growth was the fastest, though slower than a month earlier (19.6% versus 22.7% in 2011M4). In manufacturing, the largest segment of the industrial sector, price growth slowed significantly – from 8.6% to 5.9%.

Price growth was slightly slower than a month earlier in the remaining segments. In the

10% 8% 6% 4% 2% 0% -2% -4%

2010 M6

2010 M7

inflation

2010 M8

2010 M9

2010 M10

2010 M11

industrial prices

Fig. 14. Producer and consumer prices in Poland

2010 M12

2011 M1

construction prices

2011 M2

2011 M3

2011 M4

2011 M5

2011 M6

Source:Central CentralStatistical StatisticalOffice Office(GUS) (GUS) Source:

The June decision to raise the rates was prompted by the growing inflation rate, which remains above the central bank inflation target of 2.50%. The inflationary expectations of households also remain at a heightened level. The Monetary Council expects that, despite the decision to raise the rates in 2011M6 by 0.25 pct. points, inflation will continue to grow because of rising global prices of raw materials. Under the inflation projection prepared by the Economic Institute of the National Bank of Poland (NBP), if the interest rates remain at the existing level the inflation rate will amount to 3.7%-4.4% in 2011 and 2.1%-3.4% in 2012. The Council assesses that the tightening of the monetary policy since the beginning of the year should enable a return of inflation to its target in the medium term. The July inflation and GDP projection supports this assessment. In the medium term, inflation will be curbed by a likely slowdown in economic growth in conditions of fiscal policy tightening, including a reduction in public investment and interest rate increases.

(Source: www.nbp.pl).

The Monetary Council does not rule out taking further measures to compensate for a rise 9/2011 :: Polish Market :: IX

Economic Monitor

actual figure for 2011M1-6 expenditure

actual figure for 2011M1-5 revenue

273,144.4

313,344.4

107,925.4

131,649.1

134,513.7

154,883.4

Poland in 2011M5. Official reserve assets increased by EUR1,231 million in April and by EUR1,558 million in March. In 2011M6 official reserve assets amounted to EUR75.3 billion.

2011 budget law target Source: Ministry of Finance

Fig. 15. Government revenue and expenditure, in PLN millions

in inflation if prospects for its return to the target deteriorate.

At the end of 2011M6 the zloty traded at EUR3.9866 and USD2.7517 against EUR3.9569 and USD2.7468 in 2011M5. Despite the decision to raise interest rates in 2011M6, the zloty is weakening, which is mainly attributable to the situation on international financial markets.

The share of loans denominated in foreign currencies in the newly granted mortgage loans has diminished but the Monetary Council thinks that this share may rise again, consequently reducing the efficiency of the monetary transmission mechanism. In its July 8 document, the Council says that solutions should be adopted to keep the supply of new household loans denominated in foreign currencies in check. The exchange rate of the Swiss frank is on the rise, which in the future may influence demand for loans in this currency. The Council sticks to its position that Poland should enter ERM II and the euro-zone as soon as possible after all legal, economic and organisational conditions have been met.

(Source: www.nbp.pl).

In 2011M5 the seasonally adjusted M3 money supply rose by 0.4% compared to the previous month. In 2011M6 the money supply increased by 0.3% month on month. At the same time, growth in this monetary aggregate slowed in year-on-year terms. In 2011M6 the M3 money supply was higher by 7.1% than a year earlier.

In 2011M5 the year-on-year increase was by 0.6 pct. points larger. In 2011M5 the seasonally adjusted M1 money supply (latest data) was by 1.0% lower than in 2011M4. The rate of its change in year-on-year terms was 9.3% X :: Polish Market :: 9/2011

and was lower than in the previous month by 4.3 pct. points.

(Source: www.stat.gov.pl).

Trends on the Warsaw Stock Exchange Twenty two companies debuted in June 2011 on three markets of the Warsaw Stock Exchange (WSE). At the end of 2011M6, the WIG20 blue-chip index stood at 2,802.01 points, the WIG broad-market index at 48,414.36 points and WIG-BANKI at 6,801.48 points. Compared to 2011M5, the three indices changed respectively by -3.50%, -3.22% and -4.38%.

In 2011M1-2011M6 the WIG20 index gained 2.1% and the WIG index 2.3%. In June most of the WSE indices dropped significantly from the previous month, with the WIG-Informatyka down by 6.96%, WIG-Chemia down by 6.71%, WIG-Ukraine down by 6.64% and WIG-Deweloperzy down by 6.44%. Only two indices – WIG-Telekomunikacja and WIGSurowce gained in this period – by respectively 0.06% and 1.13%.

(Source: www.gpw.pl).

The drops resulted mainly from the unfavourable situation in the euro-zone and growing prices of raw materials.

Balance of payments Preliminary balance of payments statistics show the outflow of EUR2,078 million from

In 2011M5 the current account was balanced.

The balance on current transfers (transfers from the European Union) was positive as was the balance on services. The balance on goods and the balance on income was negative. In 2010M5 and 2011M4 the current account balance had been negative at respectively EUR-938 million and EUR-988 million.

The negative balance on goods deteriorated by 35.7% compared to a year before and totalled EUR-980 million. The value of goods exports was estimated at EUR12,157 million, which represented an increase of 20.9% compared to 2010M5. The value of goods imports was estimated at EUR13,137 million, which represented a year-on-year increase of 21.9%.

Income from services increased by 60.3% compared to a year earlier, or by EUR105 million, to EUR279 million. The income from services account totalled EUR2,213 million, up by 11.5% compared to 2010M5 and by EUR65 million compared to 2011M4. The expenditure on services account was EUR1,934 million, up by 6.9% year on year and by EUR101 million compared to 2011M4.

The balance on income was negative at EUR-963 million against EUR-1,154 million in 2010M5. Receipts on the balance on income totalled EUR547 million and were higher by 28.1% than a year earlier. Expenditure on the balance on income totalled EUR1,510 million, down by 4.5% compared to 2010M5.

The balance on current transfers was positive at EUR1,664 million, which represented a year-on-year increase of 117.8%. The balance was largely influenced by transfers from the European Union (EUR1,611 million).Receipts on the balance on current transfers totalled EUR1,974 million and were higher by EUR923 million than in 2010M5. Expenditure on the balance on current transfers totalled EUR310 million and was higher by EUR23 million.

In 2011M5 the capital account balance amounted to EUR104 million and was lower by 47.5% than a year earlier. Revenue on the capital account amounted to EUR117 million and was lower by 44.5% than in 2010M5. Expenditure on the capital account amounted to EUR13 million.

In 2011M5 the financial account balance amounted to EUR-2,530 million against EUR-

Economic Monitor

Table 2. Selected components of the balance of payments, in PLN millions 2010M5 Current account Balance on goods Balance on services Balance on income Balance on current transfers

2011M4

2011M5

-938

-988

0

-722

-1 004

-980

174

315

279

-1 154

-917

-963

764

618

1 664

Capital account

198

872

104

Financial account

-152

2 216

-2 530

Polish direct investment abroad

-239

287

-433

Foreign direct investment in Poland

-557

1 237

-764

-17

-91

5

Portfolio investment - assets Portfolio investment - liabilities

956

1 217

706

Other investment - assets

-1 848

1 114

-1 206

Other investment – liabilities

1 581

-1733

-687

-28

185

-151

-1 205

-1 231

2 078

Derivative financial instruments Official reserve assets

Source: National Bank of Poland (NBP)

152 million a year earlier. Polish direct investment abroad amounted to EUR-433 million and foreign direct investment in Poland to EUR-764 million. Portfolio investment assets increased by 129.4% year on year to EUR5 million. Portfolio investment liabilities dropped by 26.2% to EUR706 million. The balance on the account of other investment assets was negative at EUR-1,206 million. The balance on the account of other investment liabilities was also negative – EUR-687 million.

(Source: www.nbp.pl).

National budget At the end of 2011M6 the national budget deficit amounted to PLN20.4 billion, narrowing by 14.1% compared to the end of 2011M5, as growth in budget revenue was faster than in expenditure.

In 2011M1-6 national budget revenue amounted to PLN134.5 billion and expenditure amounted to PLN154.9 billion. Budget revenue reached 49.2% of the total amount planned for 2011 under the budget law (up from 39.5% a month earlier) while budget expenditure reached 49.4% of the total amount (up from 42%). In 2011M5-2011M6 budget revenue increased by 24.6% and expenditure by 17.6%. The budget deficit narrowed by 14.1%

to PLN20.4 billion. Compared to a year earlier, in 2011M1-6 the implementation of the budget revenue plan was by 3.4 pct. points more advanced while the implementation of the budget expenditure plan was by 0.7 pct. point less advanced. As a result, the ratio of the actual budget deficit at the end of 2011M6 to the deficit planned for the year 2011 was much lower - by 19.8 pct. points, than a year earlier. At the end of 2011H1, the budget deficit accounted for 50.7% of the figure planned for the whole year. In 2011M1-6 year-on-year growth in budget revenue and expenditure accelerated compared to 2011M1-5/2010M1-5 but revenue grew at a much faster pace than expenditure – 17.8% year on year versus 2.6%.

In 2011M5-2011M6 growth in receipts from the European Union, mainly in structural funding, was the fastest (up by 118.9%).

Non-tax income also rose sharply – by 117.5%.

Growth in income from taxes was slower

(17.1%), with income from indirect taxes going up by 19.6% and income from personal income tax going up by 15.7%. Income from corporate income tax rose by 2.3%. Compared to the end of 2010M6, the pace of growth in non-tax income was the fastest (84.4%). The second fastest was the pace of growth in receipts from the EU (36.3%). Receipts from taxes grew in that period by 11.8%, with receipts from corporate income tax increasing by 27.9%.

Among individual budget expenditure items, in 2011M5-2011M6 spending on subsidies for the Social Insurance Fund and Pension Fund grew the fastest – respectively 21.7% and 21.2%. Growth in spending on domestic debt service grew at the slowest pace (7.7%).

In 2011M6 spending on foreign debt services was higher by as much as 27.3% year on year while spending on Poland’s own contribution to the EU budget was higher by 23.1%. In the same period, spending on domestic debt service and the value of subsidies for the Social insurance Fund dropped respectively by 11.4% and 2.9%.

Poland’s government debt has been constantly expanding, with growth in domestic debt accelerating and growth in foreign debt slowing.

At the end of 2011M5 government debt totalled PLN778.2 billion against PLN747.9 billion at the end of 2010. It was higher by 13% than a year earlier. The pace of growth in government debt accelerated – at the end of 2010 government debt was higher by 11.6% than a year earlier. Central government debt accounted for 92.7% of the total government debt and was higher by 11.7% than a year before. In the same period local government debt increased by 42.9%.

At the end of 2011M5 central government domestic debt amounted to PLN543.3 billion and was higher by 10.9% than a year earlier and by 1% than a month earlier. The debt is

Table 3. Government revenue and expenditure in 2011 according to preliminary data In PLN billions

% of annual target

2011 budget law

2011M1-5

2011M1-6

2011M1-5

2011M1-6

Revenue

273.1

107.9

134.5

39.5

49.2

Expenditure

313.3

131.6

154.9

42.0

49.4

Deficit (–) / Surplus (+)

-40.2

-23.7

-20.4

59.0

50.7

Source: Ministry of Finance

9/2011 :: Polish Market :: XI

Economic Monitor

increasingly high and in 2011M5 its growth accelerated slightly compared to 2011M4.

In 2011M5 long-term domestic debt, which makes up the largest part of the central government domestic debt, grew the fastest (24.8% year on year). The main creditors were non-banking domestic investors. Debt owed to these investors increased in 2011M5 by 10% year on year. Growth in debt owed to foreign investors was faster – 47.6% while debt owed to domestic banks decreased.

At the end of 2011M5 central government foreign debt amounted to PLN199.7 billion and was higher by 5.7% than a year earlier. Its growth slowed considerably from the 13% in 2011M3. This was mainly attributable to a slower increase in long-term debt, which accounts for the largest share of Poland’s foreign debt. In 2011M5 it was higher by 4.9% than a year earlier compared to a rise of 10.4% in 2011M4. Most of the foreign

XII :: Polish Market :: 9/2011

debt was in bonds. Growth in debt owed by Poland to the main creditor – the European Investment Bank – slowed compared to the previous month but was still fast – 26.6% year on year.

Notes It is always clearly stated in the text if the data given are seasonally adjusted or in cumulative terms. Otherwise, the data are nonseasonally adjusted and in non-cumulative terms. GUS and Eurostat use the TRAMOSEATS procedure for seasonal adjustment.

Time series cleared from the impact of seasonal factors by the authors of the report have been adjusted using the ARIMA X-12 method.

2011M6 – June 2011 2011Q1 – first quarter of 2011 2011H1 – first half of 2011

2011M1-6 – cumulative data for the JanuaryJune 2011 period 2010Q1-4 – cumulative data for the period from the 1st to the 4th quarter of 2010 Mt/Mt-12 – rate of change for a given month compared with the same month a year earlier Mt/Mt-1 – rate of change for a given month compared with the preceding month Qt/Qt-4 – rate of change for a given quarter compared with the same quarter a year earlier Qt/Qt-1 – rate of change for a given quarter compared with the preceding quarter Team of experts: Robert Pater, Ph.D., Łukasz Cywiński, Tomasz Soliński, Ph.D. Institute of Economics University of Information Technology and Management in Rzeszów www.ig.wsiz.pl