Polish market No. 8 215/2014

Polish Market :: 8 (215) /2014

Infrastructure

PU B LISHED SIncE 199 6 No. 8 (215) /2014 :: www.polishmarket.com.pl

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finance real estate energy

economic forum

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innovation

special economic zones

mining

Jarosław AugustyniAk president of idea BanK 100 polish market

METRO IN WARSAW

CENTRAL SECTION OF THE SECOND METRO LINE:

6,3-kilometre stretch from Daszyńskiego Roundabout (Rondo Daszyńskiego) to Wileński Railway Station (Dworzec Wileński) Seven stations at a depth of 13-23 metres Six ventilation fan plants 1,855-metre tunnel under the Vistula (northern section ‒ 920 metres; southern section ‒ 935 metres) from Copernicus Science Centre (Centrum Nauki Kopernik) Station to National Stadium (Stadion Narodowy) Station 4,522-metre northern tunnel 4,819-metre southern tunnel, including the 361-metre tunnel linking the first and second metro line

www.metro.waw.pl

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Energy

Jerzy Buzek: Enabling European Union’s innovative reindustrialization - what it takes and what are the stakes Ilona Antoniszyn-Klik, Under-Secretary of State in Ministry of the Economy: The role of Special Economic Zones Unique conditions for investors Marcin Zieliński, Vice-President of Industrial Development Agency: Special Economic Zones managed by the ARP Jerzy Bojanowicz: A successful year for Special Economic Zones Adam Szejnfeld, Member of the European Parliament: Get down to work…

Jan Sosna: Polish Fighters Józef Wancer, President of the American Chamber of Commerce in Poland: Changes that have occurred are impressive, simply fantastic Dr Chris Howitt, Technical Director, 3M Central & East Europe: 3M Innovation leaders

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Prof. Małgorzata Zaleska, member of the Board of the National Bank of Poland: System of compensations for investors’ losses

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Jarosław Augustyniak, President of Idea Bank: A leader and an innovator - creating new market categories, changing the market, defining new directions

Finance

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Krzysztof Pietraszkiewicz, President of the Polish Bank Association (ZBP): Countries which have their own modern manufacturing sectors are less affected by crises

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Kazimierz Małecki, President of the Board of KIR SA: Key infrastructure institution of the Polish banking sector Jarosław Dąbrowski, CEO of DF Capital: Poland the most mature financial market in the CEE region Warsaw Stock Exchange - The largest stock exchange in Central and Eastern Europe

Janusz Steinhoff, Minister of the Economy in the BCC Economic Shadow Cabinet: On the Polish energy sector

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Prof. Krzysztof Żmijewski, Social Council for National Emissions Reduction Programme: Where is the Polish energy sector heading for?

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Herbert Leopold Gabryś: Power engineering in Poland 2014 25 years of changes in the power sector in Poland from the perspective of its participant and co-author

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Opportunities are abroad Andrzej Sikora, PhD Eng., President of the Board of Instytut Studiów Energetycznych Sp. z o.o.: Poland’s energy security is unchallenged

Patryk Mirecki: The Polish energy sector does not exist without coal NEUF 2014 “Power Sector and a Low-Emissions Economy, or What to Do to Make It Profitable”

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Marcin Moskalewicz, President of PERN Przyjaźń SA: Market friendship

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Tadeusz Rybak, President of Mostostal Puławy SA: The investor must cooperate with the contractor: their common opponent is the investment project

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Andrzej Żurkowski, Director of the Railway Institute in Warsaw: The future of railways in Poland

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Tomasz Skowroński, Vice-President of the Management Board and deputy CEO of SABE Investments Sp. z o.o.: Our greatest success is having satisfied customers!

Infrastructure

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From The Government Information Centre

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Real Estate

International Relations

Special Economic Zones

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From The President’s Press Office

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Innovation Logistics

Our Guest

SPIS TREŚC CONTENTS

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Grzegorz Kiełpsz, President of the Polish Association of Developers: 25 years of change - from state housing conglomerates to the free real estate development market

Mieczysław T. Starkowski: Modern retail space shopping mall for everyone Jan Sikorski: TEN-T corridors Cooperation of the logistics and automotive industry Mieczysław T. Starkowski: Mobile payment standard Mieczyslaw T. Starkowski: From resourcefulness to well-known brands

Food Industry

Culture Events Law&Taxes

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Iwona Wendel, Under-Secretary of State at the Ministry of Infrastructure and Development: Problems with boosting the professional activity of women holding doctoral degrees: Where does the problem come from and howcan the women be helped Anna Rulkiewicz, CEO of LUXMED: Healthcare from A to Z Karina Wściubiak-Hankó, President of Alchemia Group: First of all, consistency Anna Stasiak-Apelska: Image rights: be careful when taking pictures Bartosz Weremczuk of Lampart Detektywi Group: The strength of a group - knowledge and modernity Freedom - a road to success The 18th Disabled Youth Song Festival in Ciechocinek Emotions according to Lubomir Tomaszewski Cultural Monitor Maciej Proliński: The days that we already know well...

Maciej Proliński: Italian Joy of Life Maciej Proliński: The memory of the Przemyśl Fortress

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Prof. Eberhard Makosz, Society for Promotion of Dwarf Fruit Orchards: Polish apples on the 25th anniversary of independence, development and democracy

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Bożena Skarżyńska: Association of Polish Butchers and Meat Processors starts a new promotional campaign

August /2014

President: Krystyna Woźniak-Trzosek

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

Vice - Presidents: Błażej Grabowski, Grażyna Jaskuła

Contributors: Agnieszka Turakiewicz

Address: ul. Elektoralna 13, 00-137 Warszawa, Poland Phone (+48 22) 620 31 42, 652 95 77 Fax (+48 22) 620 31 37 E-mail: info@polishmarket.com.pl

Graphic design: Agnieszka Andrzejczak-Charuba, Joanna Wiktoria Grabowska - Lili Projekt

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

(RYNEK POLSKI Publishers Co. Ltd.)

Editor-in-Chief: Krystyna Woźniak-Trzosek Deputy Editor-in-Chief: Ewelina Janczylik-Foryś redakcja@polishmarket.com.pl Marcin Haber m.haber@polishmarket.com.pl Managing Editor: Rita Schultz rita.schultz@polishmarket.com.pl

Sales: Phone (+48 22) 620 38 34, 654 95 77 Marianna Dąbkowska marianna.dabkowska@polishmarket.com.pl Natalia Suhoveeva natalia.s@polishmarket.com.pl

SPIS TREŚC CONTENTS

Beautiful Side of Polish Economy

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Okładka / Cover: Jarosław Augustyniak Zdjęcia w numerze / Photos on issue: www.shutterstock.com

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Poland stands out against the background of the European

Union

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fter “seven lean years” everybody expects now “seven fat years”. Will this biblical rule hold true? Probably not for all. Christine Lagarde, Managing Director of the International Monetary Fund, which has recently been spreading economic optimism, regretted to refute forecasts that the global economy would grow by 3.6% this year and by 3.9% next year. According to the IMF, the US and China will act as driving forces, while the European Union will continue to play the role of a global brake. The debated systemic reforms (as for example the Banking Union) remain a great unknown, and attempts of southern European central banks to stimulate demand do not bring the expected results, but heat up domestic disputes instead.

Against this background, Poland seems to be not very European.

The National Bank of Poland and the Minister of the Economy maintain the forecast that GDP will grow by 3.6% in 2014, by 3.9% in 2015 and even more in the coming years. According to Eurostat, the government’s maneuver with Open Pension Funds (OFE) did the job by bringing the sovereign debt down to 49.5% of GDP at the end of the first quarter of 2014 from 57.1% of GDP in the previous quarter. This is the best result in the whole European Union, where the general government debt clearly increased, and Slovenia, Hungary, Portugal and Belgium are the main culprits.

This particularity of the Polish economy has not gone unnoticed both by financial markets and foreign investors. We have already got used to a high rating of Polish bonds, because one gets used to good immediately. The surge in green field investment in Poland seems to be even more comforting, especially that it has been pulling out from Europe recently. Meanwhile, Poland is not only a regional leader in Central and Eastern Europe, but also favourably impacts the investment structure, with R&D being the third sector to join two dominant ones: BPO and automotive. It was long awaited and it is mostly the result of reasonable spending of state and EU funds. Of course, the most visible progress has been made in logistics and transport. For 30 years, since the mid-1970s, almost nothing was built in Poland, and at the end of last year, the road network in our country tripled to over 1,510 km of motorways and almost 1,250 km of expressways. We also have a well-developed network of airports.

With the sea ports and their accompanying facilities being modernised, Poland strives after leadership in the CEE region. If we use the EU financial perspective until 2020 to make a breakthrough in the

Editorial

“For several years, thanks to EU funds, we have reformed the higher education system and institutions of the R&D sector.

It already brings results.”

railway infrastructure, the transport barrier - so far the most serious obstacle to the development of the Polish economy - will de facto disappear. We tend to underestimate its importance, seeing the attribute of modernity in sectors of the so-called virtual economy. Meanwhile, their development is largely conditional upon transport logistics. Not without reason e-commerce develops most dynamically in western Europe, where the number of transactions jumps by 64% per year and the profits they generate - by 95% per year. E-commerce speeds up the movement of people, money and goods, and - according to the “Mobile Performance Barometer 2014” - Poland rose to the third place in Europe, ahead of, among others, Germany, France, Spain and Italy.

Poland’s investment attractiveness and its development potential for the R&D sector is likely to result in many fat years. We have a powerful innovation potential: 100 thousand scientists (including 60% with a PhD degree), and a high rate of schooling at an academic level (every tenth student in Europe is a Pole). For several years, thanks to EU funds, we have reformed the higher education system and institutions of the R&D sector. It already brings results. First, the number of graduates of technology majors in on the increase, second, the research base is being modernised with many laboratories fitted with the latest equipment, third, there is a growing number of the scientific and business consortia aimed at commercialisation of research. The state strategic approach to the labour market is changing as well. According to the “Study of Human Capital,” a report by the Polish Agency for Enterprise Development (PARP), despite an unemployment rate of 9-10% (as measured by Eurostat), the Polish economy lacks about 600 thousand skilled workers. Hence the introduction of dual professional training in schools and workplaces. The system will be supported by an operational programme directing funds (about PLN 0.5 billion) to local self-governments, labour offices, special economic zones and businesses involved in this model of education. As you can see, Poland pursues a completely different strategy of solving development problems than most countries do, especially in southern Europe. The fu• ture will be ours.

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

August 2014 polish market

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President

Presidents Obama and Komorowski spoke on the phone on Ukraine and NATO

T

he US President Barack Obama spoke on the phone on Monday with President Bronisław Komorowski about the situation in Ukraine, preparations for the upcoming NATO summit in Wales and the transatlantic community’s response to the shooting down of a Boeing 777, informed the White House.

In the statement released on July 21, the White House announced that the two Presidents exchanged views before the meeting of nine leaders of NATO member states from Central and Eastern Europe scheduled in Warsaw on Tuesday. “Presidents Obama and Komorowski agreed on the importance of increasing defence spending by European NATO members,” reads the statement. Furthermore, they stressed the importance of NATO’s contribution to the security of Central and Eastern Europe. “Both leaders also emphasised the need for transatlantic solidarity in response to the tragic shooting down of the Malaysian airliner and Russia’s efforts to destabilise Ukraine”, says the statement.

Malaysia Airlines Boeing 777, flying from Amsterdam to Kuala Lumpur, was most probably shot down on July 17 over eastern Ukraine by a missile fired from the area controlled by separatists supported by Russia. Everyone on board perished.

Tuesday’s meeting in Warsaw of Presidents of the countries of Central and Eastern Europe will be attended by the leaders of Lithuania, Latvia, Estonia, the Czech Republic, Slovakia, Hungary, Bulgaria and Romania. The main focus will be on the NATO summit in Wales in September.

As highlighted by the presidential minister Jaromir Sokołowski, President Komorowski believes that the basic challenge faced by the NATO is to strengthen the eastern flank of the Alliance.

Americans call for declarations to be made to increase defence spending, in particular by the European member states of NATO. The US Secretary of State John Kerry has said recently that countries that currently spend on defence less than 2% of GDP should commit to increase their defence expenditure over the next five years. In 2013, only four NATO countries - the US, Britain, Estonia and Greece - have reached, or exceeded the ceiling of 2 % of GDP on defense. During President Obama’s visit to Poland last June, President Komorowski said that Poland would increase its annual military spending from the 1.95% to 2% of GDP. Obama said in turn that he had asked the Congress for USD 1 billion to strengthen the US military presence in Central and Eastern Europe. (PAP)

The President of Slovakia on a visit to Poland

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residents of Poland Bronisław Komorowski and Slovakia Andrej Kiska positively assessed Polish-Slovakian bilateral relations, while also advocating greater rapprochement in terms of people and economic potential. They discussed security issues and the meeting of Presidents of the region’s countries, which took place on July 22 in Warsaw, in the run-up to the NATO summit.

“I hope, and I can already feel it, that by making a joint effort we can further strengthen the Polish-Slovak cooperation and neighbourly friendship,” Bronisław Komorowski stressed during the meeting with the media. “There are areas where our two nations can get even closer,” he noted.

Komorowski said that Poland has many common issues with Slovakia. He mentioned cooperation within the Visegrad Group, of which Slovakia took over the annual presidency. “We are very keen on the success of the Visegrad Group, and therefore on the success of Slovakia. We will support Slovakia in its efforts aimed at strengthening this forum,” he announced. In the opinion of the Polish President, the Visegrad Group can and should be useful in addressing issues important to the entire region, to the entire Western world. He added that for Poland it is largely a matter of Ukraine, as well as the reaction of the EU and NATO to the Russian aggression towards Ukraine.

Andrej Kiska said that Bronislaw Komorowski was the first President to congratulate him in a telephone conversation on his victory in the presidential election. “It was a good start to our relationship,” he added. The Slovak President judged that the bilateral relations are good. “It seems to me that we could use that potential even more,” stressed Kiska. “If we want to have here in Central Europe peace and development, it is not possible without an active role of Poland,” he said. That is why he feels strongly about Poland’s involvement in the activities of the Visegrad Group. President Kiska said that Slovakia is aware that the level of security in the CEE region worsened. He advocated pursuing common projects in the field of defence.

Meeting of the Presidents of the Baltic States and the Visegrad Group

T

he main topic of the meeting was the NATO summit in September in Newport, Wales. President Bronisław Komorowski invited Presidents of: Lithuania - Dalia Grybauskaite, Latvia - Andris Berzins, Estonia - Toomas Hendrik Ilves, the Czech Republic - Milos Zeman, Slovakia - Andrej Kiska, Hungary - Janos Ader, Bulgaria - Rosen Plevneliev and Romania - Traian Basescu.

“The Russian-Ukrainian conflict is, in my opinion, the most important challenge for the European security since the end of the Cold War, which was for our countries, our peoples far-reaching oppression (...). The Presidents called for the strengthening of the strategic eastern flank of the Alliance,” said President Poland Bronisław Komorowski after the meeting.

“The Presidents expressed deep sympathy to the families and relatives of the victims - innocent citizens of many countries in Europe and the

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world,” said Bronisław Komorowski. He added that investigation must be carried out into the circumstances of this tragedy by the international committee with the participation of all interested countries, and full access to the site, evidence and witnesses must be ensured.

“We expressed our shared condemnation of military actions against the civilian population. We all strongly protested against any form of support for those who conduct terrorist operations,” said the President of Poland.

He noted that Presidents called on to put an immediate and unconditional end to hostilities by the Russian separatists in the Ukrainian state. They expressed a common belief that this tragedy should mobilise us to work more effectively to ensure all the members of the EU and NATO are safe.

Prime Minister

The conversation between Tusk and Poroshenko

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rime Minister Donald Tusk spoke on the phone on Monday July 21 with the President of Ukraine Petro Poroshenko. The conversation focused on the tragedy of the Malaysian airliner in Ukraine. They agreed that there is an urgent need to allow international experts to carry out investigation on the site of the tragedy. President Poroshenko said that he ordered the Ukrainian troops an immediate suspension of operations and fire within 40 km from the site of the tragedy. Prime Minister Donald Tusk informed him about the ongoing consultations between EU partners regarding any further action. It was about, among others, Tuesday’s meeting of foreign ministers of the European Union.

Earlier, on July 18, Prime Minister Tusk called the downing of the plane an act of terror. “This tragedy, because of its civilian nature, size and the fact that the victims come from many countries, is particularly painful. It is also a proof of the evil that is going on in the eastern part of Ukraine,” he said. The Prime Minister stressed that this tragedy should lead to an absolute, firm, and consistent pressure on the separatists, as well as Russia to stop supporting those who are most likely directly responsible for the attack.

Poland’s Prime Minister about EU sanctions against Russia

T

he Prime Minister noted that a single European state stands no chances in confrontation with Russia. “The European Union, acting in solidarity, even if it imposes weak sanctions, is way more effective than individual countries,” said Prime Minister Tusk. He acknowledged that weak sanctions imposed by the whole Europe are better and more effective than even very strong ones placed by one state. Donald Tusk stressed that effective work for the unity of the EU is of paramount importance for Poland’s security.

Referring to sanctions placed by the European Union on Russia, the Prime Minister pointed out that, although timid and inconsistent, they will be costly.

However, they will prevent a lot of more serious costs. “The problem of losses resulting from the accrual of penalties occurs frequently, but the calculation of costs leads nowhere,” he said. In his opinion, Ukraine’s hypothetical collapse due to aggression of separatists or terrorists or directly Russians would cost incomparably more than sanctions. The head of the Polish government

admitted that he is in favour of convening the next summit devoted to strengthening sanctions against Russia. “However, consultations are under way to determine whether the next meeting would bring the expected results,” he said.

Prime Minister Tusk paid tribute to the insurgents

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t Warsaw’s Powązki Donald Tusk took part in the celebrations of the 70th anniversary of the Warsaw Uprising. He laid flowers at the monument Gloria Victis.

It was the first official part of the ceremony organised that day to commemorate the heroic struggle of the people of Warsaw. The ceremony was also attended by government spokesperson Małgorzata Kidawa-Błońska and head of the Prime Minister’s Chancellery Jacek Cichocki. Małgorzata KidawaBłońska took part in the ceremony at the monument “Mokotów Fighting 1944”. She laid there a wreath on behalf of Prime Minister Donald Tusk. At noon, Kidawa-Błońska and Bartłomiej Sienkiewicz, Minister of Internal Affairs, attended the changing of the guard ceremony at the Tomb of the Unknown Soldier. On behalf of the Prime Minister, they made an entry in the visitors’ book and laid a wreath at the Tomb of the Unknown Soldier. The ceremonial changing of the guard was accompanied by the proclamation of the calling to celebrate the anniversary of the uprising and by a gun salute.

The “W” Hour was the culmination of the anniversary celebrations. Every year, punctually at 17.00, sirens howl, church bells ring, cars and passersby stop - to pay a tribute to Warsaw insurgents.

The “W” Hour marked the beginning of the biggest action of the Polish Home Army (AK) and the largest underground military action in Nazi-occupied Europe.

The uprising broke out on August 1, 1944 and lasted 63 days. After the first successes, the insurgents had to give way to German troops occupying the capital. Fights continued into the night of October 2/3, 1944, when the act of capitulation was signed in the SS headquarters in Ożarów.

Nearly 200 thousand people - soldiers and civilians - were killed in the Warsaw Uprising.

August 2014 polish market

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Our Guest

Enabling European Union’s innovative reindustrialization – what it takes and what are the stakes With the new European Parliament in place, new President of the European Commission elected and working to set up a new team of commissioners, the European Union is about to set out its agenda for the next five years. We are very clear about what we want to achieve - innovative, technologically-advanced and competitive economy driven by highly-skilled employees and highly-efficient entrepreneurs. In simple terms, our goal is to secure well-being and prosperity of our citizens. We would like to create attractive jobs for our well educated young generation.

Let us look at how the EU can make it a reality.

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Our Guest

Reindustrialization of Europe When looking at concrete solutions, I want to point to four domains of EU’s policies, which will be extremely crucial over the coming years: research and innovation; industry and SMEs; single digital market; and internal energy market. Those four areas are key to enabling European citizens, industries and European economy to fulfill their highest potential.

They are also the areas of competence of European Parliament’s Industry, Research and Energy Committee (ITRE) which I will chair over the next two and a half years.

What we aim for is the gradual, sustainable reindustrialization of Europe and innovative small and medium enterprises as this year will mark the 70th anniversary of the Roma extermination. Why? Because only modernization of Europe’s industry can strengthen our economy in those areas where highly innovative products and solutions give Europe the necessary global competitive advantage.

Because Europe’s industrial modernization carries the best prospects for EU’s labour market that is knowledge- and innovationbased. This last element is clearly of fundamental importance for the young generation of Europeans, who despite being highly skilled, too often do not find employment, or work in areas where their skills and competences are not fully used.

Priorities for the coming years With reindustrialization as the overarching aim, over the next five years we will have 4 priority areas on which to concentrate. First of all, ensuring that EU’s legal and economic framework enables the European industrial sector to become more innovative. This will require adapting and mobilizing EU’s R&D and education/vocational programmes to effectively respond to the actual needs of the industry.

Secondly, EU’s policies must enable the development and growth of European SMEs. Small and medium enterprises play a vital role in creating innovation and flexibly responding to the challenges Europe faces. Helping strengthen SMEs is as much about financing, as about openness of research programmes, skills-development training schemes, or fiscal legislation. As such, the SMEs must be able to complement large industrial enterprises where the latter prove less effective.

This is of particular importance with regard to building a true European digital

market, which is our third priority area. We must use the advantages of scale of the European market to lower the costs and drive the innovativeness of Europe’s businesses. We are already seeing this in telecommunications. Its lowered costs all across Europe are not only impacting the way we do business, but also the way we act as consumers or the way we communicate. It is about eliminating roaming charges, about shopping on-line across borders, about civic engagement that brings Europeans together. The necessary infrastructure for this can best be developed by large enterprises, but it is clear that SMEs are the drivers of the digital revolution, developing needed applications as well as tools, which are often commercialized by global entities.

Lastly, but perhaps most importantly, exploiting the full potential of EU’s common energy policy will be a fundamental priority for us. It is clear that without cheap, secure energy our economy will not only be uncompetitive, but will in effect decline. We need electricity to operate our infrastructure, we need fuel to transport our goods, we need gas to produce. Without energy our homes, our enterprises, our phones, computers, ovens, cars and radiator-heaters will not work.

Without environmental sustainability, our energy supplies will bring us and the future generations incommensurate costs.

A few more words on energy Europe needs energy that is secure, affordable and sustainable. In terms of energy security, we must complete the necessary infrastructure to build an inter-connected transmission system covering all of the EU by fully exploiting Europe’s indigenous sources. To ensure that our energy is not only affordable but helps build EU’s economic competitiveness, we need diversification of supplies, market mechanisms to shape the prices of all our energy sources and exploit EU’s advantage of scale to ensure a strong position in negotiations with our partners outside the EU. And to ensure that our energy production and consumption is sustainable, we need innovative technologies and efficient use of energy that is economically viable. Ensuring that the EU has a fully implemented internal energy market, or in other words that the EU is also an energy union, will be our priority.

Jerzy Buzek, MEP, Chairman of the Committee on Industry, Research and Energy (ITRE) European Parliament

Making the pieces work together – more than the sum of all parts The European Union has all the instruments to ambitiously modernize our industry. But they need to fully work with each other so that we achieve true synergies. As an additional component, we must see how we can better advance our aims cooperating on those issues with partners beyond the EU. This is why I have accepted not only to chair the crucial ITRE committee. As the only committee we will closely cooperate with as many as four EU commissioners. During this legislature, I will also preside in the European Parliament over a permanent conference which brings together MEPs who chair all parliamentary committees. Working together on concrete solutions in all EU’s policy areas, we will effectively ensure that with the European Commission and the European Council we bring all relevant, existing instruments to best serve what we want to achieve. Furthermore, as standing rapporteur for the ITRE committee on the Transatlantic Trade and Investment Partnership, I want to ensure that the solutions which I have described above will be properly reinforced by our comprehensive partnership with the United States. •

August 2014 polish market

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Special Economic Zones

Special Economic Zones The role of

Ilona Antoniszyn-Klik, Under-Secretary of State in Ministry of the Economy

S

pecial Economic Zones are one of the main instruments designed to support investment in Poland. They are aimed to encourage the regional economic development by promoting certain activities, implementing new technologies, raising competitiveness of goods and services, making use of the existing industrial assets and creating jobs.

To be eligible for preferential treatment, i.e. for income tax exemption, entrepreneurs must start a new investment and have a permit issued by the zone. The permit specifies the following: the objects of the company, the number of jobs and deadline for their creation, the value of the investment and deadline for its completion, the maximum amount of costs to be covered by tax exemption.

There are 14 Special Economic Zones in Poland: Kamienna Góra, Katowice, KostrzynSłubice, Kraków, Legnica, Łódź, Mielec, Pomerania, Słupsk, Starachowice, Suwałki, Tarnobrzeg, Wałbrzych, Warmia and Mazury.

They are located in 163 cities and towns, in 232 communes, covering the surface of slightly over 18,000 ha.

By the end of June 2014, almost 1,500 entrepreneurs held a total of 2,097 permits to conduct business activity in SEZ. The measurable effect of the existence of SEZ is the amount of the capital invested as well as the number of jobs created as a result of permits granted. According to data as at the end of the first quarter of 2014, the

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aggregate amount of investments exceeded PLN 95,5 billion and employment figure was over 200,000. It should also be noted that the increase in economic activity in SEZ entails greater demand for labour force in related sectors, namely due to various services being needed and cooperation links between entrepreneurs and local companies being established.

The impact of SEZ is also significant on the local job market. To be given employment in a company operating within a SEZ, especially in a multinational corporation applying modern manufacturing and organisation standards, potential employees often need to retrain or improve their skills. Moreover, in many cases graduates are hired whose professional profile fits investors’ specific needs.

SEZ also help modernise Poland’s economy. Over 1/4 of investments are made in the automotive industry. A share is relatively large in electronic and electric devices (including domestic appliances) as well as machinery - a total of 10%.

Investments in the industry considered as less modern help implement new manufacturing technologies and organisation solutions.

SEZ support Polish entrepreneurs with more than a 50% share in the zone, and attract foreign direct investments, which account for 80% of the capital invested in SEZ. For many years, major investments have come from: Germany, the US, the Netherlands, Italy, Japan, and the leading investors are multinational corporations such as: General Motors Manufacturing, Fiat, Toyota, Volkswagen, Michelin. This confirms the high attractiveness of SEZ. Apart from investments carried out by entrepreneurs that have been granted permits, there are also infrastructure investments made by companies that manage SEZ and local authorities in order to raise attractiveness of SEZ. Infrastructural facilities within SEZ are used not only by entrepreneurs operating based on permits, but also by other entities. Over PLN 3,2 billion were allocated to such projects over the period from the inception of SEZ until the end of 2013.

SEZ offer a favourable climate for the development of industrial and technology parks

and clusters, which are expected to guarantee Poland’s competitive advantage in sectors such as automotive, aviation, construction, domestic appliances and highly specialised services. A strong cluster-related potential of SEZ is evidenced by the development of a number of specialisations, as well as by the conductive environment for business activity, created by the government, local authorities and companies managing SEZ. Here are a few examples of clusters operating in SEZ: Aviation Valley in Mielec SEZ, Silesia Automotive in Katowice SEZ, ICT Cluster in Pomerania SEZ, Furniture Cluster in Warmia and Mazury SEZ, Tarnów Industrial Cluster in Kraków SEZ, Automotive and Domestic Appliances Cluster in Wałbrzych SEZ. From the point of view of the state budget, tax exemption in SEZ is a comfortable and safe instrument of granting public aid, which is available over many years and depends on the investment and profits earned.

Revenues lost by the state on account of the tax exemption are compensated by budget inflows generated by entrepreneurs due to jobs they create in SEZ. Tax incentives that encourage investment are commonly used in the industrial policies of many countries. They are offered not only by developing economies seeking foreign capital, but also by the EU countries such as the Czech Republic, Slovakia, Bulgaria, Hungary, which compete with Poland over large investment projects.

According to the existing regulations, SEZ will exist in Poland until 2026.

This year, regulations will be amended regarding public aid in SEZ in connection with the adoption by the European Commission of new provisions governing national regional aid, effective from July 1, 2014. The amount will be reduced of maximum aid for most of the regions. The existing limit will remain unchanged for four eastern Poland’s regions only, whereas in case of three most developed (Dolnośląskie, Śląskie and Wielkopolskie) it will be slashed by as much as 15%. Moreover, rules will be toughen regarding aid if exceeding the limit for an investment worth EUR • 100 million.

Special Economic Zones

Unique

conditions for investors

K

atowice Special Economic Zone (KSEZ) provides unique conditions for investors who wish to set up production plants and BPO or R&D units in the most attractive investment location in Poland. Investing in KSEZ is encouraged by state aid in the form of CIT tax exemptions. The tax exemption can be up to 25 to 55% of the investment or an equivalent of 2-year labour costs.

In the first half of 2014, the zone beat an absolute record of popularity. During this period, 58 new permits were issued for investors who declared they would allocate almost EUR 650 million in new projects. Many of these new projects can boast a high degree of innovation in terms of use of modern technologies. These include an investment by Avio Aero, a company from the aviation industry.

Its latest project involves designing and manufacturing of an innovative LEAP turbofan jet engine used to drive single-aisle airliners.

This engine will allow to increase efficiency while reducing operating costs, and thus will help protect the environment.

Automative companies, very strongly represented in the zone, can boast of using a variety of sophisticated technologies in their business. Plastic Omnium Auto from Gliwice is launching in KSEZ a production line for structural components for the automotive industry based on carbon fiber composite, which puts the company among the elite

group of world pioneers of that mostly aviation-related technology. This type of production opens up new possibilities in the automotive industry and therefore meets the latest trends. Thanks to the construction (within the cluster Silesia Automotive) of a composite platform, with the participation of Plastic Omnium, a dynamic development of this technology is expected in Silesia.

Another ultra-modern design is being implemented by Autorobot Strefa. The company has been operating in the Katowice Special Economic Zone since 1998 and manufactures production lines for welding car bodies. The aim of the new project is to start the production of the systems for industrial process control of stations for welding car bodies and the production of components in the form of fabricated metal products.

Manufacturers are not the only companies in the zone. The BPO sector is actively represented too, mainly in the field of IT services and accounting. One example is the French company Steria, whose activities are focused on delivering high quality services to clients in the banking sector, the information technology industry, media and telecommunications. Under the new project, the company will introduce a range of innovative solutions for remote management of IT infrastructure, integration and administration systems.

New attractive investment areas have been attached to the Katowice Special Economic Zone this year. Our current offer includes:

• Over 1000 ha of developable land • Lots ranging in size from 0.5 ha to 200 ha • Possibility to adopt the size of the plot to the investor’s needs • Areas very well connected with major Polish and European transport routes • Fully developed plots (water, electricity, gas, sewer) with access roads • A-class office buildings in Katowice

Join the best!

•

In order to get detailed information, please visit our website

www.ksse.com.pl Katowice Special Economic Zone SA ul. Wojewódzka 42 40-026 Katowice tel.: +48 32 251 07 36 email: ksse@ksse.com.pl

August 2014 polish market

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Special Economic Zones

Special Economic Zones managed by the ARP Marcin Zieliński, Vice-President of Industrial Development Agency

T

he Industrial Development Agency (ARP) manages two of the 14 special economic zones which are now active in Poland: the Special Economic Zone Euro-Park Mielec and the Tarnobrzeg Special Economic Zone Euro-Park Wisłosan.

Euro-Park Mielec, Poland’s first special economic zone, was established in 1995 as a response to social problems caused by the bankruptcy of the WSK Mielec aviation plant, which had employed up to 22,000 people in the 1980s.

The concept to set up a special economic zone as a way to ease the problems resulting from the restructuring of the local economy, which was based on a single industry, and to revitalize it was developed in the south-eastern city of Mielec and by the ARP as were guidelines for the 1994 law on special economic zones. Undoubtedly, the zones which were established later drew upon the experience we had gained in Mielec. The Tarnobrzeg zone was set up in 1997 in a sulphur-mining area, which lost jobs in the sulphur mining and processing industry.

Looking back, we can say with satisfaction that in both cases we have achieved success and met all the goals that we set when starting the special economic zones. At present, more than 50,000 people work in the zones managed by the ARP. Businesses invested over PLN13.5 billion in the zones.

The existing state Special economic zones play a positive role in the economic development of many Polish regions and Polish industry. Statistics showing that investment in the zones has reached around PLN90 billion and that they provide employment to around 250,000 people do not reflect the real contribution of the zones to the economy and national income. The multiplier

12 polish market

effect is estimated to account for 2.5 to 8 jobs created outside the zones as a result of industrial investment within them. The same is the case with household incomes and consequently national income.

The European Union’s new financial perspective The EU’s new map of state aid came into force on July 1. In keeping with regulations binding across the EU, the maximum level of state aid was reduced in a majority of Polish provinces. The level is defined on the basis of the ratio of national income per capita to the EU average. The provinces of Śląskie, Dolnośląskie and Wielkopolskie saw the biggest cuts. In the provinces of eastern Poland - including Podkarpackie, which is the main area of our zones’ activity - the level remained unchanged at 50%. The expected reduction in tax exemptions and more stringent rules for access to state aid, especially for large investment projects, resulted in a sharp increase in all special economic zones in Poland in the number of permits issued, the value of investment pledged and employment. A pleasant surprise for us was high activity of investors also in our zones, which are located in provinces where the level of state aid was not reduced. By the end of June, the zones we manage granted 81 permits for operations, the highest number ever. The investors pledged to invest over PLN3 billion and hire 2,400 workers.

What are special economic zones?

The goal of special economic zones is to create favourable conditions for business activity in selected areas of the country. Preferential

tax treatment is mentioned in the first place in descriptions of the zones. Undoubtedly, this factor is important at the stage of making the decision to invest and choosing a specific location. However, in direct talks businesses already operating in the zones do not regard preferential tax treatment as the most important thing. They stress the importance of sites in the zones being prepared for investment projects, the presence of appropriate infrastructure, full and reliable documentation of the sites, good cooperation with local government units, the presence of workers with appropriate qualifications, the business environment and, which gives me satisfaction, assistance and cooperation with those who manage the zones, both at the time of implementing the investment project and during the investor’s further operation.

The extension of the zones’ operation until 2026 has created good prospects for investment in the coming several years. On our part, we will be increasing the scale of our investment in the zones by for example building industrial facilities suitable for conducting operations in various sectors. We will be leasing manufacturing and office space, which should be of interest especially to small and medium businesses. We have already started the implementation of such projects in Stalowa Wola, Radom and other cities. We will be involved to a greater extent in cooperation with local governments and entrepreneurs in providing training to workers. Supporting innovation in Polish industry is an important part of the ARP’s strategy. We are creating instruments for supporting the transfer of Polish engineering ideas to the marketplace. The support is intended first of all for state-owned companies, companies in the ARP group and more than 300 businesses operating in the special • economic zones managed by the ARP.

Special Economic Zones

A successful year for

special economic zones Following a period of slowdown, which started in 2008 in employment and in 2010 in investments, the situation has now clearly improved. The increased interest that special economic zones (SEZ) have enjoyed recently is evidenced by a greater number of permits granted.

Jerzy Bojanowicz

I

n 2013, 253 permits to conduct economic activity within special economic zones were issued (51.5% more than in 2012), which ecounts for nearly 15% of all valid permits issued since their inception.

SEZ companies had 266.7 thousand employees (over 19.2 thousand more than in 2012 – a 7.8% increase), of which more than 196 thousand were new jobs. The cumulative value of investments in all SEZs by the end of 2013 exceeded PLN93.1 billion – over PLN7.3 billion more (8.5%) than a year before.

“The development of SEZs is a positive incentive for the economy,” was the Council of Ministers’ short yet forceful comment on the “Information on the implementation of the Act on Special Economic Zones as at December 2013,” which was prepared by the Ministry of the Economy and adopted in May. As Deputy Prime Minister and Minister of the Economy Janusz Piechociński stressed, “both domestic and foreign investors are eager to locate

16 polish market

their capital in the zones. All can equally benefit from the development opportunities provided by the zones”. During the press briefing on 14 July 2014 at the Ministry of the Economy, he said: “Foreign investors perceive Poland as the most attractive location for new projects in Central and Eastern Europe. Owing to this, more and more companies are opening their facilities and developing operations in Poland.”

Enterprise enclaves Special Economic Zones were established in order to accelerate the economic growth of Polish regions, promote development and take advantage of new technical and technological solutions in the national economy, while increasing the competitiveness of products and services, developing post-industrial property and infrastructure and creating new jobs.

They are an administratively separate part of

Polish territory, subject to special, preferential tax regime, where the entrepreneur can start a business on a specially prepared land and manage it without any income tax. Moreover, an entrepreneur can receive, free support in taking care of all related formalities and – within some communes – propertytax exemption.

SEZs operate on the basis of the Act of 20 October 1994 on Special Economic Zones. They were originally established for a 20-year period which in 2008 was extended until 31 December 2020 and the area limit for all Polish zones was once again increased (from 12 thousand to 20 thousand ha). It is now also possible (once certain conditions are met) to establish SEZs on private land, something that prompts their area growth. On 23 July 2013 the Council of Ministers extended the operation of the zones until 31 December 2026.

Currently there are 14 SEZs operating in Poland – Kamienna Góra, Katowice,

Infrastructure

August 2014  polish market

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Special Economic Zones

Kostrzyn-Słubice, Kraków, Legnica, Łódź, Mielec, Pomeranian, Słupsk, Starachowice, Suwałki, Tarnobrzeg, Wałbrzych, and Warmian-Masurian, of which the oldest is the Euro-Park Mielec SEZ set up in 1995.

On 31 December 2013 SEZs were present in 151 cities and towns and 217 communes, their area totalling 16,203.68 ha (374.4 ha more than in 2013), of which 20.3% was land that was private on inclusion. The largest area is covered by the Wałbrzych SEZ, which operates in the Dolnośląskie, Opolskie, Wielkopolskie and Lubuskie provinces. The smallest is the Kamienna Góra SEZ (Dolnośląskie and Wielkopolskie). The oldest zone today has over 1,326 ha in five provinces (Podkarpackie, Lubelskie, Małopolskie, Śląskie and Zachodniopomorskie) and includes 25 subzones, such as the ones in Chełm and Częstochowa, opened earlier this year.

Who and what Over 74% of the capital invested last year in SEZs (in PLN billion) originated from Poland (17.87), Germany (14.54), the US (11.27), the Netherlands (10.77), Italy (7.87) and Japan (6.75).

Investors from these countries also held top positions in the preceding years. Their participation in the total value of capital expenditure in 2009-2012 reached 69-75%. The largest participants in the cumulative value of investment were automotive industry companies (26.4%) followed by manufacturers of rubber and plastic products, mainly tyres (10.7%) and other non-metallic mineral products (9.2%).

There was no significant change to the list of major investors as compared to 2012, and the top 15 remained the same, with seven companies keeping their positions, including the top six – General Motors Manufacturing Poland, Fiat Powertrain Technologies Polska, Toyota Motor Manufacturing Poland, Volkswagen Motor Polska, Michelin Polska and Mondelez Polska Production (formerly Kraft Foods Polska Confectionary Production). The remaining positions were taken by NGK Ceramics Polska, Bridgestone Stargard, which made the biggest leap in the ranking (from 14th to 8th place), LG Display Poland, Mondi Świecie, Electrolux Poland, Toyota Motor Industries Poland, Gillette Poland International, Kronospan Mielec and Sitech.

Among Polish entrepreneurs the significant investors last year included Paula Trans, Nordglass, Grupa Azoty Zakłady Azotowe Puławy, Valdi Ceramika, Porta KMI Poland, Aquel, ComArch, Grupa Onet.pl, BRW, Blek-Meble, Bury, Ceramika Paradyż, Correct, Ceramika

18 polish market

Tubądzin, HTL-STREFA and Wytwórnia Klejów i Zapraw.

Poland still high “Poland took 6th position in Europe in terms of the value of greenfield investment projects in 2013. We are still the region’s most attractive country for investment and one of the most attractive in Europe,” said Prof. Zbigniew Zimny, UN expert on FDI, commenting on the “World Investment Report 2014” prepared by the United Nations Conference on Trade and Development (UNCTAD), which was officially released globally on 24 June at the Polish Information and Foreign Investment Agency (PAIiIZ) headquarters.

According to UNCTAD’s survey of the leaders of global corporations, Poland is listed among the world’s most attractive investment locations for 2014-2016. It moved from 14th place, which it had occupied for two years in a row, to 13th. With just five European countries in the top 20, Poland was the only one from Central and Eastern Europe.

The good climate for foreign investments in Poland is confirmed by PAIiIZ’s results. “The value of projects completed with the participation of the Agency in the first half of 2014 is EUR 1589.44 million,” stressed Iwona Chojnowska-Haponik, Director of the Department of Foreign Investments, during the meeting.

Many investments going through PAIiIZ are new projects from companies already operating in Poland. “The 70% reinvestment rate shows the level of confidence placed in our country,” said Anna Polak-Kocińska, VicePresident, of PAIiIZ. “Poland is a country where investors can achieve even more than they initially planned,” added Paweł Tynel, Director at Ernst&Young’s Grants & Incentives Department.

PAIiIZ is currently running 156 investment projects with a total value of EUR2.98 billion. The unquestionable leader is the United States, which is followed by Germany, the United Kingdom, France and Japan. The most popular sectors include BPO, the automotive industry, R&D, aviation, electronics and the wood-processing industry.

Profitable SEZs A zone can be managed by a company with the majority vote at a General Meeting or Meeting of Shareholders held by the Treasury or Province Government. Its profits come mainly from the income obtained from land sales and fees for zone administration and management paid by businesses operating within the zone. That

is why the financial result largely depends on the number of investors.

In 2013 all companies managing special economic zones once again kept their heads high above water. The highest income was achieved by the Wałbrzych Special Economic Zone INVEST-PARK (nearly PLN7.8 million), the Katowice Special Economic Zone (PLN7.5 million) and the Industrial Development Agency Branch in Tarnobrzeg managing the Tarnobrzeg Special Economic Zone (PLN7.4 million).

The total expenditure on infrastructure within special economic zones incurred from their inception until the end of 2013 amounted to PLN3.2 billion (PLN322 million in 2013), of which more than 26.5% involved expenditure from management companies. Their participation in infrastructure investments was 36.7% and the remaining expenditures were financed by communes, utilities providers and the General Directorate for National Roads and Motorways.

A good six months This year can also hold a pleasant surprise, as, according to the Polish Press Agency (PAP), in H1 2014 the companies managing the zones issued 438 permits, which is 70% higher than last year’s overall figure – and that was the best year in 10 years. The entrepreneurs reported spending over PLN21.5 billion and creating more than 20 thousand new jobs.

We need to remember, however, that the SEZs have their drawbacks, too. The downsides include the requirement to incur certain expenditure and continue operations for 3 or 5 years (which might be problematic during an economic slowdown or changes in the overall strategy of a company), the so-called zone fee (administrative fee) to cover the administrative costs of the managing company (paid throughout the period of the permit validity), and the inability to take full advantage of the tax reliefs offered due to late introduction. What’s more, the prices of real property purchased within the zone can be higher than the prices of similar property located outside.

From the beginning until the end of 2013, 2,772 permits to conduct economic activity within the zones were granted. 1,709 are currently valid, as some of them have been withdrawn, invalidated or reversed, or have expired. A permit can be withdrawn if a business fails to meet its conditions, which mainly relates to employment. From the start until 2013, the Minister of the Economy withdrew 642 permits, i.e. 23.2% of the total pool, including 48 in 2013.

•

POLAND

Attracts investors tempting their attention with perfectly prepared infrastructural areas located in strategic cities of north-eastern Poland.

Business sites offered in three provinces: Podlaskie, Warmia and Mazury as well as Mazowieckie being the areas located along major transportation routes are the connectors with neighbouring countries: Russia, Lithuania and Belarus.

Investors doing business in the Suwalki Special Economic Zone can benefit from the largest in the country income tax reliefs ‒ reduced rates of tax n income of up to

50, 60 and 70% of the invested capital.

We can offer you:

Full technical infrastructure, Current zoning plans, Low land prices, Great opportunities for cooperation and development, Availability of skilled personnel and low labour costs, Quick investment process supported at every stage by a professional team of employees.

Suwalki Special Economic Zone SA Phone: +48.87 565 22 17, e-mail: ssse@ssse.com.pl

ssse.com.pl

OLSZTYN

BISKUPIEC

LIDZBARK

WARMIŃSKI

BARTOSZYCE

International Relations

Get down to work…

No one has any doubt today that without support for broadly understood innovation it will not be possible to turn the European Union into the most dynamic and competitive knowledge-based economy in the world. It is a fact that much less money is spent in Europe on research and development than in the United States and Japan. The European internal market is still fragmented and does not create a favourable environment for innovation. Many young talented scientists move outside Europe to seek better work conditions. Will the Horizon 2020 programme, the biggest ever programme for funding scientific research and innovation in Europe, contribute to improving the situation? Will it help us - Polish people and Poland?

Adam Szejnfeld, Member of the European Parliament www.szejnfeld.pl, www.kobiecastronazycia.pl

T

he Horizon 2020 programme, the implementation of which began in January 2014, has a budget of around EUR80 billion and is aimed at creating a coherent innovation funding system – from a scientific concept through the research stage to putting the new solutions, products and technologies into practice. Horizon 2020 replaced three earlier programmes, including the 7th Framework Programme, with all the money designated for financing research and development to be provided from the EU budget for 2014-2020. The

Horizon 2020 programme, to be carried out in the form of contests at EU level, will supplement investment projects supported from structural funds in individual member states.

The aim of the programme is to ensure a better equilibrium among supporting science, enhancing the competitiveness of the EU industrial sector and solving social problems. This is why it is based on three pillars which correspond with its three strategic goals: excellent science, industrial leadership and tackling societal challenges.

Horizon 2020 offers a number of facilitations for organizations, in particular universities and research centres, small and medium businesses and public-private partnerships, which may seek grants. Funding opportunities available under the programme are published on the EU website devoted to research funding1. Around EUR9.3 billion will be designated for scientific research in 2014.

A year later, the amount will rise to around EUR9.9 billion. It is also worth mentioning pilot schemes, like for example the Fast Track to Innovation, which enables applicants to receive funding under an open call for applications. It takes no longer than six months for the money to be awarded to the applicant. Importantly, small and medium businesses are offered additional facilitations and support.

For example, contests for projects planned in 2014-2020 have EUR500 million set aside exclusively for such businesses. The money will be distributed under a new instrument designed for them2.

Undoubtedly, there are very high expectations for Horizon 2020. Time will tell whether it will indeed contribute to strengthening 1 http://ec.europa.eu/research participants/portal/ desktop.en/home.html.

2 One should also remember that small and medium businesses will have an opportunity to acquire funding from the Programme for the Competitiveness of Enterprises and SMEs (COSME).

the EU’s scientific and technological base, and the competitiveness of European industry in the long run. It will not be possible to achieve these goals without close cooperation between science and industry, and without the research results being transferred to the marketplace. If the latter is not done one can hardly speak about making the economy more innovative. It comes as no surprise then that Horizon 2020 puts even greater emphasis than the previous EU programmes on cooperation between scientific research centres and business. This approach will also be conducive to the setting up of clusters – concentrations of interconnected businesses, specialized suppliers, enterprises operating in related sectors and associated institutions in individual fields.

Of course, the Horizon 2020 programme is also an excellent chance of supporting technology transfer in the Polish economy and making it more innovative. Although spending on research and development still accounts for only 0.9% of the Polish national budget, a number of initiatives serving these goals have been carried out in recent years.

The Horizon 2020 programme, alongside the three main sources of funding for Polish businesses – the Operational Programme Smart Growth, Operational Programme Eastern Poland and 16 regional operational programmes – will certainly encourage Polish businesses to seek financial support for innovative solutions. And no one can say that Poles lack ingenuity considering that the very name of the programme, Horizon, selected from among 1,600 proposals, has been put forward by a teacher from Poland and her Czech colleague.

Get down to work, Polish civil servants, get down to work, Polish scientists, get down to work, Polish entrepreneurs!

•

August 2014 polish market

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International Relations

Polish

Figh ters Jan Sosna

I

f the Polish representation in the European Parliament is to be assessed on the basis of the national voter turnout, it would seem that it will be a group of outsiders. However, the first attempt of valuation (“Who did we send there?”) dispels these concerns. When it came to the election of the leadership of the Parliament and the Commission, it appeared that the people we delegate are certainly not new to the job.

The role of the President of the Conference of the European Parliament’s Chairpersons gives quite a special leverage. It namely allows to participate in the meetings of the Conference of Chairpersons (President and its 14 deputies), as well as to oversee all standing and special committees and plenary sittings. The nominee holds the position for half of the term of the EP, i.e. for two and a half years. It was for the first time that MEPs from one country - Jerzy Buzek and Janusz Lewandowski - were entrusted with this responsibility.

The fate had it that the careers of both politicians were running somewhat in parallel.

Both of them held senior governmental positions in Poland. Jerzy Buzek was after all the first Polish Prime Minister to survive in office a full term. Janusz Lewandowski served twice as Minister of Ownership Transformation, was one of the founders of the Warsaw Stock Exchange and of the Mass Privatisation Programme. But splendor came only with their involvement in the European Union’s front. Both were elected three times as MEPs – Jerzy Buzek always does phenomenally well gathering the most votes.

22 polish market

Jerzy Buzek started his career as MEP working in Committees on Science and Technology – he was twice a rapporteur and received many awards for competence and commitment, including the title of the “MEP of 2006”. In 2009, he was the first representative of new member states to be elected (with a record number of votes) for a half term as President of the European Parliament. He put a lot of effort into making the EP a place of an interesting and lively political debate.

In 2010, together with the former President of the European Commission Jacques Delors, he developed a proposal for a European Energy Community, the first document accurately anticipating risks to Europe’s energy security and indicating necessary solutions.

No wonder that his candidacy for the chairmanship of the Committee on Industry, Research and Energy came about as a natural choice. Jerzy Buzek was elected by acclamation, and all were confident that despite his 74 years, he will meet his duties irreproachably, as he always does.

Janusz Lewandowski was in his first term the Chairman and Deputy Chairman of the Budget Committee. Then, in his second term, he resigned as he was appointed as European Commissioner for Financial Programming and Budget. His efforts brought him respect and recognition not to let the EU budget for 2014-20 fall victim to the financial crisis and the divergence of views on the future EU financial mechanisms.

There is much to suggest that both Polish politicians (representing the EPP) will be listened to carefully and respectfully, especially

that in the Conference of EP’s Chairpersons there will be another Pole – Ryszard Czarnecki from the fraction of the European Conservatives and Reformists. Although they differ quite fundamentally in their views on Europe, Czarnecki used to lead a team negotiating the terms of Poland’s accession to the EU under the Jerzy Buzek government.

It can therefore be assumed that it will be fairly easy to find common language, all the more that Ryszard Czarnecki, too, will be serving his third term in the EP, and that he is a hardworking MEP who earned the title of the “MEP of the Year” with a record number of speeches and parliamentary reports.

Experts on the EU The common feature of two other representatives of Poland and the European People’s Party holding leading positions in the European Parliament is that that dealt with EU matters long before Poland’s accession. Czesław Siekierski, a scientist who conducts research into economics of agriculture, already in 1993 won the competition for the directorship of FAPA, the institution coordinating the use of EU aid funds (mainly Phare) in Polish agriculture. He participated in the Polish accession negotiations and has been elected MEP also for the third time. In the previous term, he was Deputy Chairman of the Committee on Agriculture and Rural Development, and now is its Chairman. This is not an easy job. The Common Agricultural Policy represents approximately 40% of the EU budget, but its rules

International Relations were adopted 20 years ago. Today, agriculture has changed and the rules remained as they were. Any attempt to amend them constitutes an infringement of someone’s vital interests.

The only solution is to move forward step by step, something that always leaves everyone unhappy. The context is all the more complex that negotiations are under way with North America... I guess no one would like to switch roles with him to have that sort of headache.

Danuta Huebner, the new President (from the EPP) of the Committee on Constitutional Affairs (AFCO) has comparable experience in the EU battlefield. She was involved in the process of negotiations with the European Union from 1996, heading the government bodies in charge of fulfilling the conditions of accession. In 2004, she took up the EU regional policy portfolio becoming the first Polish EU commissioner. She stepped down in 2009 after winning a mandate in elections to the European Parliament. She then served as the Chairperson of the Committee on Regional Development. In 2014, she was reelected and appointed as Chairperson of Committee on Constitutional Affairs. In the past considered to be a safe heaven, AFCO

has recently got the name of a “hot potato”.

A relatively stable European order started to be – not only tactically – challenged by the UK’s Prime Minister, but also by anti-European parties which have been extremely successful in this year’s elections. AFCO has become a hot spot verbally, and no one knows how it will translate in to reality. The finalisation of transatlantic talks will surely not remain without a significant impact on EU legislation, which means that Huebner will have loads of work. But she never feared it: during years spent at American and European universities, as well as in diplomatic service (i.a. as Deputy Secretary-General of the United Nations) she championed a style of efficiency and calm, which she combines with social sensitivity: her vigorous campaign was remarkable against reducing EU cohesion funds when she served as Regional Development Commissioner.

Hard workers and newcomers Polish MEPs will serve as Deputy Chairpersons of eight committees. Three of them

were recommended by the EPP: Barbara Kudrycka - Committee on Civil Liberties, Justice and Home Affairs (LIBE), Danuta Jazłowiecka - Committee on Employment and Social Affairs (EMPL) and Jarosław Wałęsa - Committee on Fisheries (PECH). On behalf of the European Conservatives and Reformists, Deputy chairpersons will be: Tomasz Poręba - Transport Committee (TRAN), Ryszard Legutko - Foreign Affairs Committee (AFET), Janusz Wojciechowski - Agriculture Committee and Kazimierz Ujazdowski - Constitutional Affairs Committee. Lidia Geringer de Oedenberg, recommended by the Progressive Alliance of Socialists and Democrats, will be a deputy head of the Committee on Law (JURI).

Only two of these – Barbara Kudrycka and Kazimierz Ujazdowski – will debut as MEPs. They are both trained lawyers, having many years of government and parliamentary experience. Someone who is a constitutionalist, or carried out a successful reform of the Polish higher education will manage in Strasbourg.

As for the others, they have a proven track record in the European Parliament, both in lobbying and in questioning. They will surely be active and effective.

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August 2014 polish market

23

International Relations

Changes

that have occurred are impressive, simply fantastic Józef Wancer, President of the American Chamber of Commerce in Poland, talks to Marcin Haber

What is the Polish-American economic cooperation like today? During his recent visit to Poland, President Obama spoke a lot about the US utmost loyalty towards Poland and other NATO countries in the military sphere, but does it translate into the economic relations? Did Poland become a privileged partner for the United States?

It seems to me that in the long term the answer is “yes.” The same goes for the entire EU. However, we have to keep it in certain perspective. The fact that President Obama paid more attention to Poland due to recent political developments, should not automatically be seen as if Poland suddenly became the” most important partner” for the United States. All those who interpret these gestures in a logical and reasonable way - understand it. Others, however, attach too much importance to it. Simplifying, this does not mean that the United States will automatically support military initiatives in Poland in order to protect Eastern Europe from Russia. It is a bit like thinking from the 20th century. In my view, however, the United States pays now much more attention to what is happening in Poland and east of our country. In recent years, Europe has been annoyed pm

24 polish market

that Asia has become for the US more important than Europe. And looking back in history, Europe has always been a key partner for the United States. I agree that, for some time, it has been apparent that the US policy is oriented to the East, especially to China. This did not mean, however, that Europe ceased to be important, either economically or politically.

Personally, I am against a quasi-political movement calling for “more America in Poland.” So I am not a proponent of a greater presence of US troops in Poland. I believe, of course, that the state budget should reflect the needs of the Polish Ministry of Defense. You cannot say “no military spending is necessary because even if something happens, we are a NATO member and the NATO will therefore defend us anyway.”

Economically, the Transatlantic Trade and Investment Partnership (TTIP) is a good example of the future cooperation between the US the EU. It will be the largest such programme in history, extremely difficult to implement and very complex. It is about aligning bureaucratic standards, and not only about doing away with trade tariffs. What will happen, and I say that because I believe that it will happen, will get started a new worldwide process. Rules

will change of trade agreements of global significance. We are talking about economic integration. The difficulty in the implementation of the programme is that on the US side it is going to be the decision of one government and one President, while in the European Union this will involve 28 countries and 28 probably different decisions. There lies the problem of decision-making. On the side of Europe it is quite complicated. Of course, there are other serious problems in specific industries that need solving and that highlight the interests of individual countries. In conclusion, Polish entrepreneurs will gain greater direct access to US markets, and also, indirectly, via the EU. Polish SMEs will benefit from the opening of the US market. The abolition of only half of non-tariff barriers would boost our GDP by 0.2% per year.

Do you think the current political situation in Eastern Europe is paradoxically beneficial for the United States? I am talking about searching for an absorptive market for businesses that have so far traded mainly with Russia.

Everything could possibly lead to such conclusions. I would be the last person to say that it pm

International Relations is the sole motivation that drives the US government. Geopolitics is much more complex than that. Undoubtedly, there is much more talk now of the new role of the United States visà-vis Europe than it was 6-8 months ago. The United States does certainly make use of that situation. It is much more determined and responsive to Putin’s moves than Europe. Europe is lagging, but some sharper reactions are expected, namely in the form of sanctions against Russia. Clearly, the US market is becoming more attractive to many foreign companies involved so far in Russia because of the growing political and economic risks in that country.

Do you think it is a big risk? Does the European Union - and Poland - have much to lose due to trade obstacles?

Let us remember that a lot of Western capital has been invested in Russia in recent years.

And rightly so. For the sake of Western interests, Western countries, as well as global economic development and peace in the world.

At the moment, however, when Russia’s political ethics broke the rules of fairness and violated the neutrality of another country, the world cannot escape taking a clear position and resort to veto. Tangible benefits of individual countries resulting from investment and trade agreements with Russia cannot stifle the voice of conscience. We cannot accept violations of international law, aggression, nationalism and racism. Europe hesitates to take a decisive joint action against Russia, and Putin plays on it. To my mind, Europe is simply afraid of Russia. Europe has become very materialistic, not sure of itself and its values. But when we look at EU exports to Russia, it turns out that these are not outrageous sums. It is not true that ceasing the trade, even to a great degree, with Russia would ruin European markets. We should respect Russian capabilities but not be afraid to stand up when it deems to be necessary to fight for the good of the free world. pm

You mentioned TTIP and that you believe in its success. But do you not think that it will be extremely difficult to reconcile interests of the 28 European Union countries with those of the 50 American states?

I repeat that TTIP, in my view, will only benefit the EU, the USA, and the World. However, due to its complexity it will require a tremendous support, initiatives and long term vision on the part of all stakeholders. Great things require sense of mission, perseverance and time. Flexibility and compromise are essential to reach mutual agreements. I think that it will be easier to pursue this line of behaviour in the USA than in the European Union, pm

because of the government structures existing on both continents.

In the States, each state has its own state structure allowing it a considerable local freedom, but there is also federal governance, which takes precedence in key and vital areas, crucial for the interest of the country. So it seems to me that finding common ground will be much easier on the US side than in the 28 countries of the European Union. Here is a tremendous problem. Although we are in the EU, we do not always believe in its ultimate goals and purposes for the 500 million population. The fact that the European Union is really founded on only one pillar - the monetary system - and there is no fiscal and political unions is the biggest problem, something which does not exist in the US. However, I am still optimistic. I think that the long-term benefits of this agreement are so evident that everyone must make an effort to help achieve them. It is just like in the company: each stakeholder has its own agenda.

The Management Board, trade unions, investors, employees: each of them has its own goals, but they all must be subordinated to the overriding agenda in order to succeed in the future.

Talks on the agreement have been going on for a year...

But what is one year for such an agreement?

I think it is going to take 2-3 years. Additional difficulty is that 2014/15 are the election years in some countries of the European Union. Everyone is afraid that if governments change, it will be necessary to go back to the initial stage of negotiations. It is said, therefore, that it must be completed before such changes take place.

Those who know it, and do not like it, will do whatever it takes to delay it. I think that there is still not enough positive communication to overcome this burden. pm

You have vast experience on the US market as you lived in the United States for many years. You came back to Poland shortly after the transformation. How do you assess the changes that have occurred in the Polish financial sector since 1989? Can it be compared to the US one?

In my opinion, these transformation changes are simply impressive. You can hardly think that it could have been done better. When I was coming back and forth to Poland in 1990-1991, I was shocked with the banking sector. There were no Western-like standards of credit and market risk. The issues of credit risk, the whole philosophy, approach, management policy were something new, and often an outright shocking to local bankers. What, and how quickly, changes took place afterwards, is almost unimaginable for people who were not pm

“In my opinion, these transformation changes are simply impressive.

You can hardly think that it could have been done better. ” here to witness it. Take, for example, the case of personal checks. It was said that Poland as a cash society before introduces plastic cards must enter into the check era. Just like it happened historically in the USA. And Poland made a jump from cash to plastic/credit cards, skipping the stage of checks. Poles love new technology. When I realize how much we use internet, mobile phones, I am not surprised: we are among the leaders. The restructuring of the banking sector has been done perfectly. The creation of an institution regulating and supervising commercial and cooperative banks should be listed among the best examples of Poland’s successful transformation. And yet, Poles are inherently suspicious and cautious of their successes, as a nation. I remember how upset I was in the 90s talking to journalists and politicians asking them why they revealed so little optimism. They do wonderful things and then lose faith in their success. They take three steps forward and then step back. I said it to some MPs and they almost took offence given their past in “Solidarity”, etc. But I was not denying their merits in that historical episode. I wanted to make them realize that they do not believe that what they do is creative and simply fantastic. Some of this negative attitude remains to this day. In the financial sector - fortunately not much. In the banking sector, there have been tremendous changes. The new generation, because it is a matter of one generation, shows so much dynamism, expertise, enthusiasm and skills that they should not have any problems positioning themselves in the world.

And customers have shown that they can quickly learn and demand. They have come to know the power of competitiveness. By the way, it is largely thanks to foreign investors who skillfully introduced in Poland effective principles and standards of service quality and healthy competition.

Polish transformation of the financial sector cannot be compared with changes in the banking industry in the USA because of the history and fundamental structure of the American financial market.

•

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International Relations

3M Innovation leaders Dr Chris Howitt, Technical Director, 3M Central & East Europe, talks to Polish Market.

3M is a leading company within innovation. We are developing new products and solutions for almost every business you can imagine and do successful launches around the globe. But how come we are the leader on so many market?

Over our 100 year history, 3M has expanded our presence into many markets. The principal aim of this market focus is to drive profitable, accelerated and sustainable growth.

Using our unique innovation model, we are able to leverage our technologies across multiple markets – delivering 3M solutions to customers everywhere.

opinion, what are the advantages of this approach? Do you have any 3M technical or R&D community which easily share ideas and communicates?

The culture of collaboration and sharing is right at the heart of our Innovation model. Our Tech Forum provides the platform for this to happen – last year we had over 1000 tech forum events globally, where our scientists from across the globe came together with the sole objective of sharing and learning from each other. There are no barriers to this exchange – collaboration across our teams is keenly encouraged, and sponsored by management.

What impact has R&D for 3M business success as a company?

3M is a technology company. We develop and commercialize technologies by reconnecting with market and customer needs. Annually we invest around 5,4% to sales in R&D (around $1,6B) – this will increase to 6% in the coming years. Our ability to innovate, and to continue to bring new products to market is at the heart of our business model.

Please explain how do you work with consumer/customer insights in order to develop the new product for the market?

Customer connections, and market insights are critical in driving our innovation agenda at 3M. We often do this using our customer technical centers – these facilities play a key role in engaging customers, and helping them to see how 3M as a company can help them become more competitive. Our customer facing application engineers spend their lives out in the field with customers, building an intimate understanding of their environment and issues. These insights are transferred into our laboratories where products can be developed to meet these customer and market needs.

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In a few sentences, how does the research and development process look like at 3M globally and locally?

3M’s technology platforms are global, and accessible to all. We do have very well developed R&D centers in countries like the US, Japan, Germany – the role of these laboratories is to be developing the core technologies which can be leveraged across the globe. From a local standpoint, countries will always invest in the development of appropriate R&D capabilities to support and growth their businesses – while ensuring to pull strongly on these global centers of excellence. pm

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Collaborative innovation, this approach to innovation is being seen more and more in various industrial sectors. Collaboration is also in the heart of 3M brand. In your

26 polish market

pm

How many research and development sites does 3M has in the world?

3M has operations in over 70 countries – we have laboratories in 85 global locations, and over 40 customer technical centers pm

With regard to sustainability, will current and future 3M solutions have impact on protecting our environment. Is this important for 3M business ?

3M takes its responsibility to the environment very seriously – this was recognized as early as the 1970’s when 3M introduced the pm

Pollutions Prevention Pays initiative – this is still going strong today, and encourages 3Mers to be mindful of how developing sustainable solutions can in fact yield long term business success. Many of our manufacturing processes have been optimized to eliminate volatile organic solvents, moving to water based systems. In short, we will continue to be a responsible manufacturer, and to ensure we treat our environment with respect.

How does 3M make sure that the company stays as the leader within innovations?

3M Innovation improving every life is one of the lines of our Corporate strategy, so for us Innovation is a way of life…it’s what we do, so there is an absolute expectation to continue to innovate. We will continue to apply our business model and to move into new and challenging new markets. Our increased investment in R&D will ensure that we continue to be able to excite our customers with ground breaking new products from 3M. pm

You have been working in Poland for more than 5 years now. What is your opinion on innovations development in our country?

What does Poland has to do to be a good partner for foreign investors?

Poland has been very successful in encouraging foreign investment over the years – geographically, Poland is at the center of Europe, with a stable government, EU membership for over 10 years and a well educated workforce. From an investment perspective, these are very attractive qualities – the recent additional investment from the EU for further structural development in Poland will help make Poland an even more attractive country to invest in moving forward.

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More on website: www.3M.pl

Finance

Countries which have their own modern manufacturing sectors are less affected by crises parties, associations, non-governmental organizations, local governments and chambers of commerce, and first of all freedom to conduct business activity. Some of these measures, mainly those associated with conducting and expanding economic undertakings, including the development of the banking market, were based on decisions made before 1989.

functions associated with assistance to the Polish banking sector and its restructuring. This unique solution applied in Poland has turned out to be an example to follow for many other countries. In the past 20 years, the number of banks in Poland decreased from over 1,900 to slightly more than 640. It should be stressed that they are stable and well managed.

The stability of the banking The Polish banking sector is sector was not a coincidence too small to meet the growing It is beyond doubt that we have achieved needs of the economy Krzysztof Pietraszkiewicz, President of the Polish Bank Association (ZBP)

T

he past 25 years were a period of very intensive changes, not only in the economic sphere, but also in politics, our relations with our neighbours and Poland’s presence in the international arena. It is impossible to speak about the Polish economy without noticing that much has changed over this period in how our country is organized and the way it is present among European nations and countries outside Europe. Firstly, our social and political system has changed, which is confirmed by amendments to the Constitution and a few referenda held in this period. The changes were enhanced by our entry to the Council of Europe, OECD, NATO and the European Union in 2004. This huge political change also included adopting a new system for forming governments, ensuring the freedom of operation to

a lot in the past 25 years. The living standards of Polish people improved very significantly and the infrastructure of the Polish economy saw many changes. Thousands of new businesses have emerged and expanded in recent years. Banking has played a significant role in this area. The sector is a litmus test for the wider economy. The Polish banking sector may be regarded as one of the most modern in Europe in its part associated with the payment and clearing system and creditworthiness analysis. The banking sector, which developed consistently in the environment of quite strict regulatory and supervisory conditions, turned out to be resistant to shocks coming from other countries, even at the time of the biggest crisis in decades. This was no coincidence – we had adopted wise regulations.

Firstly, we guaranteed autonomy to the Polish central bank, we set up the Monetary Policy Council and established a system of supervision over the financial sector in the form of the Banking Supervision Committee, later turned into the Polish Financial Supervision Authority. In 1994, we set up the Banking Guarantee Fund. It collects money ex ante, but also has

Polish bankers have learnt a lesson from the crisis of the early 1990s and the period of change of 1998-2003. Banking sector equities and deposits have grown substantially in recent years. Lending activity increased rapidly, perhaps even too rapidly. But today, after the 25 years of change in Poland, the banking sector should continue to develop in such a way so as to support the economy in an optimal manner. It is too small to meet the growing needs of businesses and retail clients. Compared to other countries, our ratios of equities, loans and deposits to the GDP put us at the bottom of the league table in the enlarged European Union. We should not excessively rely on imported capital for financing our growth. As long as we remain outside the euro zone such imports on a large scale would also mean the risk of importing shocks, which are likely in these quite unstable times. Neither should we remain indifferent in the near future to the issue of the single currency. We have to remember about the need to get prepared for our possible entry to the euro zone, preceded

by Poland’s accession to the banking union.

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Finance

A serious discussion is definitely needed on pros and cons of our adoption of the euro. There are many indications that, as the European economy is stabilizing, the strength of arguments for euro-zone entry is growing, if only because of lower costs of financing and lower costs involved in maintaining a high level of Poland’s credibility. Another issue is the expected increase in foreign investors’ readiness to start operations in our country. In the EU’s next financial period, it is important to make it possible for banks to take part in financing future projects partially funded by the EU so that they are better thought-out and calculated. We should make more effort to ensure that the projects contribute to intensifying the development of Polish enterprise in coming years.

Challenges we have to meet Poland’s credibility has increased immensely in recent years. In the past six years, which were marked by the global crisis, the Polish economy continued to grow. In contrast to other European economies, we managed

to achieve a cumulative GDP growth of 20%.

This does not change the fact that there is still a huge number of tasks we have to carry out in many areas. We have to make some modifications to spatial planning, complete the construction of transport infrastructure and make a wider use of solutions available in the area of electronic economy. We should also complete work on modifying our pension system.

In the area of social security, we should ensure that the solutions are just and more acceptable while at the same time enabling a relatively stable life for the elderly. Social security may play a great role in efforts to reverse negative demographic trends in our country. We also need new social agreements to raise the efficiency of the healthcare and education systems. Likewise, we have to work out and implement a housing funding programme. And this is more than just a social issue. The problem of housing should be treated as an issue of huge economic importance. We need to modernize the housing sector because our residential buildings are very energy-intensive and often of low standards. The energy issue is very important for Poland and we have to

think about it taking into account many aspects. In strictly economic terms, emissions cuts and a reduction in energy consumption is certainly a major challenge for the country.

Given the structure of our economy, with 1.8 million businesses and several hundred thousand large farms, we have to remember about the need to adopt solutions conducive to enhancing innovation, closer cooperation with scientific research centres, and supporting the presence of our businesses in the international arena. In order to achieve this, we need good, stable, long-term and predictable guarantee systems. Equally important is an active economic diplomacy and incentives for modernizing, and in some cases restructuring, Polish companies.

The crisis has shown that the countries which have their own modern manufacturing sectors are less affected. It is our duty to learn a lesson from the recent developments.

This should be done by entrepreneurs, regulators, politicians and scientists.

KATOWICE There are many important debates ahead 22-25 września 2014 of us and a huge amount of work requiring knowledge, imagination and responsibility. •

IV Europejski Kongres

Małych i Średnich Przedsiębiorstw

Nauka - Biznes - Samorząd RAZEM DLA GOSPODARKI

KATOWICE 22nd-25th September 2014 IV European Congress of Small and Medium - Size Enterprises

Main thematic areas: · opportunities and challenges for enterprises, · EU multiannual financial framework 2014-2020, · the triangle of knowledge: science – business – selfgovernment, · innovation · research and development · economic cooperation Europe – East · education and HR · law and taxes in SME

Organiser:

10 years

Science - Business - Self-government TOGETHER FOR ECONOMY

of entrepreneurship without borders

Катовице 22–25 сентября 2014 IV Европейский конгресс

малых и средних предприятий

Hаука - Бизнес - Cамоуправление BMECTE ДЛЯ ЭКОНОМИКИ

Under the honorary patronage of the President of the Republic of Poland, Bronisław Komorowski, the patronage of Mr. José Manuel Barroso, President of the European Commission, and the high patronage of the European Parliament

Co-organisers:

Free registration at: www.kongresmsp.eu/en

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Finance

System of compensations for investors’ losses Prof. Małgorzata Zaleska, member of the Board of the National Bank of Poland

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he Polish financial market has been stable for years. However, from time to time isolated cases producing problems may surface even in a sound financial system. And this is what happened on May 30 this year when the investment firm Dom Maklerski IDM SA had its licence revoked. The Polish Financial Supervision Authority (KNF) pointed out that the firm, for reasons strictly associated with its financial situation, was not able to carry out its duties resulting from investors’ claims. In its communiqué, the KNF also said the system of compensations for investors’ losses could be activated to deal with the case.

The above may contribute to reflections on the protection of investors on the Polish capital market. In Poland, as in other European Union countries, there is a system of compensations for investors’ losses. It is activated when a licensed investment firm goes bankrupt or becomes insolvent. The system has operated since 2001 within the National Depositary for Securities (KDPW). So far the compensation scheme has had an opportunity to prove its worth only once when the problems of the Warsaw Investment Group (WGI) materialized in 2006. The case of Dom Maklerski IDM SA may become the second ever such instance on the Polish capital market.

One should note that the EU compensation scheme has not changed in response to the present crisis, in contrast to the deposit guarantee scheme. The time for the payment of compensations has not been shortened. It

is still three months compared to 20 working days for deposit guarantees. The longer time for the payment of compensations may be justified because it is usually more difficult to determine the amount of money to be paid out as compensations than guaranteed amounts.

This is often associated with difficulty in determining entries in financial books.

Another significant difference between the schemes of compensations and deposit guarantees is the amount to which the aggrieved party is entitled. In the case of the deposit guarantee scheme, the amount has been raised significantly to EUR100,000 in response to the crisis while this has not been the case in the compensation scheme. An investor may receive 100% compensation on the first EUR3,000 of investment and 90% compensation on the next EUR22,000. The amounts are much lower than for guaranteed deposits. As a result, one should demand a rise in the compensation amounts and do so not only because of the difference compared to the deposit guarantee scheme.

Maybe the case of Dom Maklerski IDM SA will trigger discussion and changes to the system of compensations for investors’ losses.

Unfortunately, it is quite typical that changes to Polish law are made retrospectively, in response to developments that have taken place rather than prospectively.

One should also remember that higher compensations mean the need to pay higher contributions to the compensation scheme by its participants and indirectly by their clients.

Therefore, it is necessary to measure the benefits and costs of such a change, the more so as costs involved in keeping the security network are on the rise as a result of adopting other regulations.

“The case of Dom Maklerski IDM SA may become the second ever such instance on the Polish capital market.”

One could return to discussion about the validity of combining the deposit guarantee scheme and the system of compensations for investors’ losses. However, the topic will probably attract interest only when a bank conducting brokerage activity goes bankrupt because this will trigger result the need to activate the two systems. With the legislation in force, this may result in problems with distinguishing the guarantee and compensation amounts.

To conclude, despite the problems and demands mentioned above, the security network in Poland is of high standards, which – I hope – will be confirmed by how the problem produced by Dom Maklerski IDM SA is solved. •

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Finance

A leader and an innovator creating new market categories, changing the market, defining

new directions Jarosław Augustyniak, President of Idea Bank, talks to Rita Schultz.

30 polish market

Finance

You are dubbed “the master of financial start-ups.” How do you come up with new business ideas?

Usually when I’m out somewhere and I don’t have other things on my mind. I come up with the best ideas when I’m on city breaks - strolling along, sightseeing, people watching, thinking. Let’s not exaggerate though about being a ‘master’. pm

And then you’re thinking: “I will change the world, I will do something totally new”…

Its not that I’m an idealist, I just happen to have too much of the entrepreneurship hormone. An idea usually starts with a simple observation: what do people need, or what will they need in the near future which cannot be obtained anywhere now? This is the beginning. When I find such a thing, and I do find them quite often, I start to consider the idea in a broader context, e.g. how would it fit in with peoples’ lives, the wealth of society, etc. And then, it is just a small step towards creating a particular start-up that satisfies these notions. pm

This may sound cliché, but from your experience, why do new businesses emerge in the market?

It all starts with demand, which is either present in the market, or which can be fairly easily created. Every business person dreams of being able to hit a market perfectly with their idea, but such situations come about very rarely. I have managed to do so only on two occasions, once with Expander and the second time with Idea Bank. pm

How can you tell if there is a niche in the market and whether it is worth introducing a new product? There is after all a substantial risk of / in missing the mark.

There is always a risk, but without some inclination to risk there is no entrepreneur.

When it comes to Expander it was a natural evolution. It was 2000, ten years after the political transformation. Poles had managed to satisfy their initial needs, they had replaced their home appliances, bought new TV sets and better washing machines. This was made possible as a result of purchases being made available on credit and payable in instalments. Then they started replacing their Polonez cars with something better, again thanks to the availability of finance. I noticed that more and more people around me were talking about buying their own property, but they did not really know how to go about it. Banks started developing mortgage pm

products, but the average Joe knew next to nothing about them. It was then that I came up with the idea of creating a company that would explain all of this and make a profit on selling mortgage and finance products. From a conceptual point of view the first idea was a complete fiasco, but together with Maurycy Kuhn we perfected it and it turned it out to be bang on target.And it also quite stirred the market. Suddenly it turned out that to raise some credit you didn’t need to go to a bank, it was better to go to a financial adviser. Yet a year before, nobody had even known what such an adviser did.

up an entirely different bank which will offer things not available elsewhere, things which are the basis for building up the assets of every wealthy person. As a result of our cooperation with Lion’s House, we have introduced brand new real-property management and administration services, which in turn has relieved this responsibility from our clients. Recently, we have also done something new. We have created a counselling service for building a classic-car portfolio. It is an incredible market, one which allows clients to combine their passions with making money. We are the first in Poland to offer such services.

Which of your companies has changed the market the most?

Definitely Expander. With it we created a brand new category of business in the market. Then there is Idea Bank., which is the most complex of my businesses. In this case the genesis of the business concept was a bit different. Whilst corporate banking had existed before, they were tagged onto the big banks.

Micro-enterprise banking was, so to speak, a new category, as previously it had been practically non-existent in Poland. The big banks offered either retail or corporate banking solutions – but micro-entrepreneurs are in the middle. Not only do they have completely different needs than those of retail clients, but are also totally unattractive to corporate banking.

There are approximately 2 million such persons, who have enormous credit, leasing and factoring needs. Before Idea Bank, no one had seen them as a separate category in the market, with a particular need. Now, the main stream banks are also starting to look for this type of client. I hope that this has come about partly thanks to us, that Idea Bank has forced the market to change at all levels: in the packages that are being offered, communication, service and the distribution channels.

You are shifting the balance of power, causing a stir in the market every couple of years, keeping other players on their toes.

Do you have any problems because of that?

There is an old saying that success has many fathers, so I too am trying to share mine with as many people as possible (laughs). But seriously, if there appears a new market category which is developing well, it also benefits other entrepreneurs. If we were to take Idea Bank as an example, offering comprehensive services to small businesses, then we could also say that we are simultaneously giving a chance to the providers of specialist services, including legal, courier, accounting, etc. We can’t build everything by ourselves, we need partners. However we don’t always find them straight away. When we break the mould, within the market, like the rules of fee collection or the standard of service, then it is usually first met with objections, and only after some time does it turn out that this is a good direction – one worth joining.

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Is it possible to establish a successful business without this?

Not necessarily. You don’t have to overturn the status quo to create a good business. But of course when you force change in the market, see others following your example, and all this benefits customers, and all this benefits the customers thanks to a faster, cheaper and improved service, it is extremely rewarding. This was the case with Noble Bank, premier clients can be provided with a service at an entirely different level, and this does not mean entering the bank through a different door to get the service from the lower floor.

I presented Lion’s Bank, which is part of Idea Bank, with the same challenge. I said: let’s set pm

pm

What is to you the most important thing when building a start-up? Do you have any personal rules that have turned out to be useful, and that you abide by?

There has to be an idea, but it does not have to be very precise, because, when an entrepreneur is at the beginning too fixed on his or her vision, then he or she can miss the different important signals coming from the outside. And I believe very much in these signals.

When I’m building a business, I listen carefully to what my potential clients, my friends, and even to what strangers are saying. On the other hand, you should know how to differentiate between listening and drawing conclusions, between having a vision and having faith in the success of your business. This faith has to be a bit blind.

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August 2014 polish market

31

Finance

Key infrastructure institution of the Polish

banking sector K Kazimierz Małecki, President of the Board of KIR SA

32 polish market

rajowa Izba Rozliczeniowa S.A. (KIR ) is a key infrastructure institution of the Polish banking sector. It is responsible for the proper and safe course of interbank settlements and for reliable electronic exchange of information in this area.

KIR was founded in 1992 on the initiative of the Polish Bank Association, the 16 largest banks and the National Bank of Poland.

The purpose of its establishment was to build a modern clearing system which would ensure the efficient and safe processing of payments between banks. This goal was achieved soon. Currently, KIR operates several modern and safe clearing systems.

ELIXIR®, the first electronic interbank settlement system, dedicated to the exchange of payment instructions in PLN, was launched already in 1994, gradually replacing

Finance the previous system – SYBIR. With three clearing sessions per day, taking place on weekdays, customers have the possibility to transfer funds electronically between accounts in different banks within a few hours.

The implementation of ELIXIR® positioned KIR among European leaders in terms of the speed of interbank transactions execution. In the period from April 1994 to the end of 2013, 13.2 billion transactions were settled through ELIXIR® to a total amount of PLN 48.2 trillion.

KIR was one of the first clearing houses in Europe to use an electronic signature to protect clearing information, and as early as in 1994 the solution was introduced by Polish banks as well. In 2003, KIR was appointed a qualified certification entity providing certification services with respect to issuing qualified certificates and time markers.

“With three clearing sessions a day, taking place on weekdays, customers have the possibility to electronically transfer funds between accounts in different banks within a few hours.”

In 2005, KIR launched an electronic interbank settlement system for domestic and cross-border payments in EUR - EuroELIXIR. Since 2008, KIR has been an active participant of the Single Euro Payment Area (SEPA).

By adapting the EuroELIXIR system to handling SEPA Credit Transfer instruments, and by transferring settlement to the European TARGET2 platform, KIR has enabled Polish banks participating in that payment system to use pan-European payment instruments.

Thus KIR is part of an integrated European clearing and settlement infrastructure. In the period from March 2005 to the end of 2013 EuroELIXIR system settled a total of 49 million transactions to the amount of EUR 254.7 billion.

Another important step, allowing the extension of the offer of clearing services aimed at banks in Poland, was the launch by KIR of the direct exchange of cross-border payments between clearing houses associated in EACHA (European Automated Clearing House Association). The first partner in this respect was Equens SE, a Dutch-German-Italian clearing house, which started the direct exchange of SCT payment orders with KIR in 2010. Two years later, in 2012, they were joined by Spanish IberPay. At the end of 2013, the cooperation network was extended to Bulgarian Borica-Bankservice AD. All those activities have strengthened the position of KIR on the European market, while expanding the offer of clearing services for Polish banks and allowing the gradual emancipation of KIR from STEP2, a pan-European clearing house, with regard to payments.

Since 2004, KIR has the status of an authorised SWIFT Service Bureau granted by S.W.I.F.T SCRL (Society for Worldwide Interbank Financial Telecommunication) and is the only Polish provider of that global international platform for the transmission of financial data, which is used to implement cross-border financial transactions between banks and other financial institutions.

In addition to clearing systems, KIR also provides services for banks, business entities and public administration, supporting them in an effective and efficient electronic exchange of information. One of such services is OGNIVO, a system launched in 2007 used for the exchange of information relative to clearings between participants of the ELIXIR® and EuroELIXIR systems, KIR and entities cooperating with banks. OGNIVO streamlines the process of handling queries and complaints in banks. Its more advanced modules improve the exchange of information carried out between participants of the system. OGNIVO is also a platform for the implementation of electronic enforcement proceedings. As part of the functionality that allows to trace bank accounts of debtors, bailiffs, administrative enforcement authorities, customs chambers, ZUS or municipal offices can quickly and efficiently obtain information from banks about bank accounts held by persons against whom the proceedings are pending.

PayByNet is yet another payment-support service offered by KIR dedicated to e-commerce and public administration. It allows direct, secure e-payments for online purchases between the bank’s client and the online shop without the participation of an intermediary. The system enables rapid

execution of the purchase transaction, with information about payment execution being transmitted 24 hours a day to the online shop. PayByNet has already been integrated with the Electronic Public Administration Service Platform (ePUAP). It is the first system which enables payment of administrative fees and generation of Electronic Payment Confirmations.

In 2008, KIR was the first company on the Polish market to launch bilix (currently: invoobill), a service based on the concept of electronic presentation and payment of bills. For e-banking customers, invoobill is a convenient and secure way to make payments for the services provided. The service is an intermediary platform between the service provider and the client whom the bank provides with due payment information. Invoobill is currently available to most Polish e-banking users.

Another innovative solution made available by KIR in June 2012 to banks and their client is Express ELIXIR, the immediate payment settlement system, enabling payments execution in real time. This was the first such solution in Poland and the second in Europe (after the UK). KIR performs both clearing and settlement functions, so that payments are executed 24 hours a day, 7 days a week, 365 days a year. The mechanism of clearing orders within Express ELIXIR is based on a secure SORBNET escrow account operated for that system by the National Bank of Poland. This solution guarantees bank clients full security because their funds remain in the banking sector during the entire process of handling and settling payments. The service allows direct execution of orders between the participants, i.e. units of different banks, without the use of any indirect nonbanking entity accounts.

In 2013, KIR joined the group of six banks (PKO BP S.A., Alior Bank S.A., BZ WBK S.A., Bank Millennium S.A., mBank S.A. and ING Bank Śląski S.A.) actively involved in creating the local standard of mobile payments.

KIR will be responsible for the entire operational handling of mobile payments, in addition to providing ICT infrastructure necessary for the execution of payments.

KIR has also initiated a project aimed at the implementation of a local card payment clearing system. The system will be clearing card transactions made ​​in commercial service points, ATMs and other devices located in Poland, using payment cards issued by banks operating in Poland.

•

August 2014 polish market

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Finance

Poland -

the most mature financial market in the CEE region Jarosław Dąbrowski, CEO of DF Capital, talks to Marcin Haber

You have been on the Polish financial market for 20 years. How do you think the market has changed and are these changes for the better?

The Polish financial market is the result of nearly 25 years of development. Its components, in particular the banking system and the capital market, but recently also investment funds and pension funds (OFE, TFI), give reason to be proud. We built, I dare say, the most mature and the most professional financial market in CEE, something thanks to which Poland has made today the biggest step forward in the region. When you compare Poland at the starting point in 1989 and Poland today - 25 years after the transition started - with other countries such as the Czech Republic and Hungary, which were then ahead of us both in terms of GDP and per capita income, you will see that Poland not only caught up with them, but even stepped into pm

34 polish market

the leadership position. There is reason to feel satisfaction because we built the most mature, professional and transparent capital market in the region. And without a good capital market there is no dynamic development of the country, which now can be seen in Ukraine, Russia and CEI countries. These markets are unclear, vague, dependent on foreign capital, and foreign capital is variable, it is coming and going, guided by the different strategies that are not necessarily in line with the strategic development of the country. We avoided scandals, bankruptcies, stock market is transparent, there are professional regulators: the Financial Supervisory Authority, the Ministry of Finance, the National Bank of Poland. However, we are at a point where it is worth considering what is missing or what else should be build so that the next 10 years result in a doubling of the national income. Here, clearly, one of the problems is the bad decision as regards the restructuring of the Open Pension Funds. The good news is that more than 2 million Poles will continue to participate in OFE, which is a good result, although not quite satisfying - only about 15% of those eligible - given the potential.

Indeed, there were fears that Poles will not opt for OFE. About 2 million people remained in OFE, which is probably not a good result on a national scale, isn’t it?

Given the controversial legislation prohibiting advertising of OFE, 2 million of those eligible who decided to save in OFE is a good result, yet below the needs of the capital market. The consequence of it will be a significant change on the capital market, because funds received

by OFE will not allow the full continuation of the current long-term and stable investment strategy. Given the fact that society has decided to continue to operate within the OFE scheme, adjustments should be urgently introduced to it allowing to return to OFE faster than after two years. It could rescue the OFE scheme, pm

following, of course, its necessary consolidation and adapting to the market situation. It could bring positive effects stabilising the capital market in Poland.

How do you see the future of the Polish financial market?

I am an optimist. It seems to me that the general conditions are not the best this year, given the unfortunate reform of OFE. From the point of view of building long-term domestic capital, we have a crisis in Ukraine, which has a greater impact on the economy than expected, we have a deflationary downturn in some European countries, which also has an impact on our exports, and, at the end of it, we have Polish consumers who refrain from shopping because of increased uncertainty. Therefore, in the short term, I would not be very optimistic, I think that the second half of 2014 will be worse than the first one. I assume, however, that next year we will be able to get out of this trap of average growth since there will be a significant inflow of EU funds. Let us hope that the government will partially revise the reform of OFE, which will result in a surge of capital on the stock exchange, in a greater optimism among consumers, and that the situation in Ukraine will stabilise. In my opinion, a very important element is a further reduction of interest rates in Poland because our problem today is not inflation, but economic growth. Arguably, Poland should enter a phase of stimulating economic growth, and the government, despite the upcoming election years, should work towards economic growth through initiatives aimed at deregulation and promotion of entrepreneurship, as well as strengthen the capital market and the banking system to make Poland return to GDP growth rates of 4-5%. This will keep Poland in the leadership position in Central Europe, not only on the financial market but throughout the economy.

• pm

Finance

Warsaw Stock Exchange -

The largest stock exchange in Central and Eastern Europe DF Capital Analysis Team J. Mazurek and R. Rewczuk

The main stock markets in CEE

Warsaw - Warsaw Stock Exchange

The post-Communist transformation in Central and Eastern Europe has been going on for a quarter-century already, laying the groundwork for the development of the capital market.

The capital markets in these countries developed differently, that is why they vary today.

Let us compare the achievements of two young stock exchanges of the CEE region with a welldeveloped stock market and a long tradition.

The largest stock exchange in Central and Eastern Europe is currently the Warsaw Stock Exchange. Romania’s Bursa de Valori Bucuresti is among relatively young small stock exchanges. One of the oldest stock exchanges in the world, Austria’s Wiener Börse, also operates in our region. All these exchanges are modern infrastructure institutions with high aspirations. Each of them is an important element of the local capital market and contributes, to a greater or lesser extent, to the allocation of capital across the country. Each of them offers a wide range of financial instruments: stocks, bonds, derivatives and structured products, etc.

The first Polish stock exchange was opened in Warsaw in 1817 and operated until 1939. It resumed activity only in 1991, after the collapse of the Communist regime.

The first impulse driving the turnover on the Warsaw Stock Exchange came from privatised companies. From the beginning, the development of the Warsaw Stock Exchange was extremely dynamic and now it is the largest stock exchange in Central and Eastern Europe.

The Warsaw Stock Exchange operates a regulated market of shares and derivative instruments, the alternative market NewConnect, the corporate and municipal bond market Catalyst, and the energy market. Since 2007, the Warsaw Stock Exchange has been the CEE leader in terms of market capitalisation of the listed companies, ahead of the Vienna Stock Exchange. At the end of the first half of 2014, shares of 409 domestic companies were listed on the Main Market with capitalization of PLN 607.2 billion and shares of 49 foreign companies with the capitalisation of 298.3 billion PLN. According to the methodology applied by the Federation of European

Securities Exchanges, WSE’s capitalisation amounts to EUR 148.3 billion.

In the first half of 2014, nine new companies debuted on the Main Market of the Warsaw Stock Exchange. The total value of IPOs exceeded PLN 455 million, including PLN 130 million PLN on the primary market. In July, four companies had their IPOs that raised nearly PLN 220 million on the primary market and marketed shares worth PLN 656 million. As a result, during the first seven months, the value of all IPOs on the Warsaw Stock Exchange amounted to PLN 1.1 billion, i.e. approx. EUR 270 million. In terms of turnover, the Warsaw Stock Exchange has also been the region’s leader since 2009. The value of session trading in shares for the previous year amounted to EUR 52.0 billion, while in the first half of 2014 - to EUR 25.7 billion.

The international importance of the Polish stock exchange is confirmed by the fact that approx. half of the session trading volume is generated by foreign investors.

In the alternative trading system - NewConnect - 439 companies were listed at the end of June 2014, with a total capitalisation of EUR 2.4 billion. The value of session trading

August 2014 polish market

35

Finance in shares for the first half of the year amounted to EUR 125 million.

Bucharest - Bucharest Stock Exchange The history of the Bucharest Stock Exchange dates back to 1884, but Communists ruling in Romania after World War II did not accept the free market. Only the fall of the Communist regime paved the way to the market economy in Romania.

In 1995, the stock exchange was launched based on the electronic system and that is how Bursa de Valori Bucuresti was established. At the beginning of its activity, traded capital came mainly from privatisation. A significant development occurred in subsequent years.

Romania’s accession to the European Union in 2007 resulted in a wider-than-ever inflow of investors and foreign companies. In 2008, the first foreign company - Erste Bank debuted on the Bucharest Stock Exchange.

During the boom, which lasted until 2007, it was in Bucharest that share prices increased most dynamically among the three stock exchanges analysed. BET index in 2004-2007 gained almost 380%. However, the crisis that started in late 2007 has made great havoc on the Romanian market - since the beginning of 2008, indices have lost 70%. But subsequent years have brought a significant recovery - in 2009 trading started in shares of closed investment funds, municipal bonds, Treasury and EBRD bonds, and currency futures were marketed.

In 2010, Erste Bank and Raiffeisen Centrobank marketed structured products. In 2011, however, the turmoil on the European markets led to a serious drop in share prices.

Currently, on the Bucharest Stock Exchange’s BSE market shares of over 84 companies are listed, and their capitalisation, according to FESE data, is EUR 18.4 billion.

In Romania, there is also an OTC trading system - Rasdaq. In July this year, 938 companies were listed in this system and their capitalisation amounted to EUR 1.8 billion.

Vienna - Vienna Stock Exchange The Vienna Stock Exchange - Wiener Börse AG - was founded in 1971 by Maria Theresa Habsbourg of Austria and is one of the world’s oldest stock exchanges. Today, as a modern institution, it plays a key role on the Austrian capital market.

The main area of ​​activity of the Vienna Stock Exchange spans stock market, bonds and structured products. Wiener Börse operates

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the following regulated markets: Official Market and Second Regulated Market. The third market is a Multilateral Trading Facility (MTF).

Until 2007, the Vienna Stock Exchange had the largest capitalisation in the Central and Eastern Europe. At the end of 2007, its market capitalisation amounted to EUR 162 billion, now it stands at EUR 90 billion. A decline in the volume of shares traded was posted from EUR 94.5 billion in 2007 to slightly below EUR 20 billion in 2013.

The Vienna Stock Exchange plays an important role in Austria’s economy. In the first half of 2014, it allowed Austrian companies to raise EUR 3.1 billion in new capital, i.e. the

most since 2007, and also approx. 50% more than in the previous two years. During the first half of this year, the value of trading in shares was higher by 30% compared to the same period last year and amounted to EUR 12.3 billion.

Wiener Börse holds a 100% stake in the CEE Stock Exchange Group (CEESEG), which owns stock exchanges in Budapest, Ljubljana and Prague, and is the largest group of stock exchanges in the region. The Group runs three commodity exchanges and has interests in five clearing systems and two central securities depositories. The CEESEG cooperate with 12 exchanges from Central and Eastern Europe.

The Warsaw Stock Exchange holds undoubtedly a leading position The table below presents a comparison of stock in Central and Eastern Europe among other exchanges exchanges analysed in terms of capitalisation and IPOs. However, the controversial pension system reform (OFE), having a negative impact on the development of the capital market, coupled with the consequences of the crisis in Ukraine, make it necessary to undertake initiatives aimed at maintaining the leadership position.

On the one hand, we have Bursa de Valor Bucuresti, young, one of the smallest in the region, which is now at the point of development in which the Warsaw Stock Exchange was in the late 1990s.

With an effort of an experienced Board, a thought-out strategy, combined with the Source: Federation of European Securities Exchanges creation of the pension system, it may become an interesting partner for the Warsaw Stock Exchange as regards the initial public offerings of foreign companies and dual listing.

On the other hand, we have Wiener Börse, with a lower rate of growth characteristic of mature markets, which may prove to be an interesting complement to the Warsaw Stock Exchange. Coupled with the dynamics and recognition of the Warsaw Source: VSE, BSE, WSE market, it can be a kind of Market capitalisation to GDP ratio in 2012: a stimulus for further development and the emergence of Warsaw Stock Exchange – 36,6% a new strong point on the map Bucharest Stock Exchange – 9,4% of European stock exchanges.• Vienna Stock Exchange – 26,9% Source: The World Bank

25 years in Science

July 2014  polish market

37

Energy

I

think that the broadly-understood energy sector is one of the most important economic issues to be addressed by the state administration. On the one hand we have large gas investments in progress, especially the ones being carried out

by Gaz-System, i.e. the distribution-system operator. I think very highly of them. The recent years have seen the development of capabilities to diversify gas supplies. We have extended several border crossings – the one in Lasów near Zgorzelec, with a flow capacity of about 1.5 billion cubic metres; and the Moravia gas pipe, a connection between Poland and the Czech Republic. I am also thinking of the so-called virtual and physical reverse flow on the Yamal pipeline, which has arisen from new EU regulations, and the Gazoport. Next year we will have the technical capability to import about 10 billion cubic metres of gas from sources other than Russia. This does not mean that we are going to import all our gas from elsewhere, but it will give us a completely-different position in gas price negotiations. Prices for gas imported from Russia are encumbered by the price of the lack of technological possibilities for diversification. Gazoport is a very good investment. Even if it won’t be fully taken advantage of, the effects in terms of reduced prices for imported gas will be important. We definitely need new regulations. I hope that a competitive European gas and electrical-energy market will be consistently developed within the European Union.

I have a favourable opinion of the policy on the gas infrastructure that our Government has been pursuing in recent years. A lot has been accomplished in this respect for

38 polish market

On the

Polish energy sector energy security, also in economic terms, to be seen in a very different light from how it was in the past.

Shale gas is another matter altogether.

Here, I am critical of the Government’s attitude: incompetence, lengthy work on the regulations, excessive fiscalism in legal bills, and something that I have already pointed out – the declining confidence of investors in the state. In this respect, there was the Act on the tax on copper and silver extraction, which was introduced in an accelerated manner to burden KGHM with PLN2 billion. An Act was dashed off and significantly lowered the confidence in the state among many shale-gas investors. The announcements that hydrocarbon extraction would be subject to taxes and the lack of any regulations being introduced over the course of two years made some investors back away from Poland. We are currently conducting relatively extensive work in seeking and identifying shale gas deposits – these investments are very expensive and burdened by a high level of risk. Hence, we should do everything we can to attract investors to this country. It’s irrational to scare them off with excessive fiscalism. I am definitely critical of the Government on this matter. Finally, passing amendments on Mining and Geological Law would be a step in the right direction.

The Act on shale-gas-extraction tax is still not ready. Another matter is regulatory mistakes – Poland still has natural-gas tariffs for municipal customers, which significantly hampers the intensification of domestic gas extraction processes.

My assessment of the substantial investments in the electrical-energy-transmission subsector, and the investments conducted by

PSE, is good. The huge amounts that we invest in our networks will significantly improve this country’s energy security. Our transmission networks are fairly young (40 years old on average, while, e.g., in Germany they are 50 years old).

We need to develop these networks, including in their cross-border layout, if we want to think about a competitive European market for electricity. The current flow capacity of our cross-border networks is relatively low. In exports, if I remember correctly, it is 7 terawatt-hours, in imports 4 terawatt-hours annually. Poland can be an importer of electrical energy – today there is a rising trend in imports, which is a result of lower electricalenergy prices. We import electrical energy both from Sweden (we have a cable connection with them) and Germany. These imports cannot be restricted – we have no technological or legal means to do this.

We need to be aware that the Polish electrical-energy sector has great challenges ahead of it. First of all, the subsector of electrical-energy generation needs to be modernised. A significant proportion of Polish power plants are outdated, with 8-10% lower efficiency than the highly-efficient new units, such as the ones in Bełchatów and Pątnów. For 25 years we have implemented few investment projects in the electrical energy generation subsector. We have built about 2 thousand megawatts of new power, in practice three new power units. This is the result of the lower energy-intensity of the Polish economy, which has been caused by the normalised economy that substantially differs from its pre-1989 form. Now the construction of new high-efficiency power units is the greatest challenge.

Energy Therein lies the rub – there have been problems - not only in Poland – with the implementation of investment projects, especially in the electrical-energy sector based on solid fuel, caused by the unpredictability of many factors that affect production, costs and the economics of electrical energy generation.

I am referring to the consequences of the Climate and Energy Package. Nobody knows what the costs of CO2 emissions will be in ten years. Forecasts differ and there have been attempts at interfering with the emissions market in the European Commission, but as I’ve read recently, Germany is also inclined towards greater intervention. On numerous occasions I have said that the Climate and Energy Package, if it isn’t implemented globally, will harm Europe’s competitive position, and particularly the Polish economy. It is also likely that part of the energy-intensive industry will be relocated outside the EU. Poland, whose electrical-energy sector is based on solid fuels, namely hard and brown coal, emits 50% more CO2 than the European average, which is about 1 tonne per 1 megawatthour. This is a lot and we need to be aware that the costs of electrical energy will increase significantly. The only practical mechanism that could reduce emissions, if we don’t update the consumption structure of energy carriers, is the modernisation of power-generation units, or in other words, boosting their efficiency.

CCS technology, which has already been described on numerous occasions and discussed in various communities, is still not viable in economic terms, as both the investment and maintenance costs of such a system are very high, while the efficiency of power units drops.

Poland’s hard-coal mining industry has seen more than one restructuring operation.

The costs were extremely high. A wide-ranging restructuring programme was launched under Jerzy Buzek. 23 mines were closed down and employment was reduced by over 100 thousand miners in four years. That programme brought a sweeping improvement in the economic indicators. In 1997 accumulation per tonne of coal was negative with over -PLN23 per tonne. In 2001 we had positive accumulation at +PLN 6 and from 2001 mining virtually stopped bringing losses. A good economic climate followed and the industry generated profits exceeding PLN2 billion a year.

Unfortunately that good climate was missed.

No significant restructuring procedures were launched. Currently, with the falling prices of coal in Europe and globally, our mining industry has found itself in an extremely difficult situation. Negative accumulation is back.

Our mining industry can be made competitive with consistent restructuring measures. The signals and comments of politicians

provide no basis for thinking that the Government is planning rational remedial measures. The signal that we won’t be closing down mines sounds absurd to me. Whether a mine needs to be liquidated or maintained is decided by two factors – geology and economics. Why would we tolerate the situation that there were mines generating permanent losses at about PLN80 or even PLN100 per tonne of coal. This is damaging to the entire industry. Instead of spending money on capital investments, which are necessary and will shape their future competitive position, good mines from Kompania Węglowa, spend it on sustaining permanently-unprofitable entities.

The situation in hard-coal mining calls for effective measures. Nobody is speaking about massive layoffs, because the mining industry has never faced them. We need to launch a voluntary redundancy system and those mines which have no chances of sustaining profitability over a longer period of time should be liquidated.

The final issue is the privatisation of mining. I think that a mistake was made in the past when the decision was made to privatise the electrical-energy sector, which was integrated vertically, forgetting about mining. I believe that we need to consider the capital ties between the electrical-energy and mining sectors, as if we talk about refineries which should have access to the resource, we should also think about this issue in relation to electrical energy. We’ve had good experiences with Tauron – since the times of PM Jerzy Buzek two mines have been part of this holding and we should think about organising our mining industry in this way. The potential consolidation or capital ties cannot, however, serve as a substitute solution for restructuring the industry. This should be excluded once and for all, as there are plans to merge Kompania Węglowa and PGE, suggesting that this will help. No, this won’t, if we keep on sustaining unprofitable production capacities.

These are the main problems of our electrical-energy and gas industries. I think that it is time to amend the basic Government document which is the Poland’s Energy Policy, as it is largely outdated. I heard that the Ministry of the Economy was about to start working on this. The document is obviously not easy to prepare.

Other matters I would like to point out ,and which I also see as negative, include the utter chaos in administration regarding who is responsible for what. Even though I spent 8 years working in administration, I am not sure who is dealing with what matters and why one and not some other department is actively addressing a given problem. The Ministers follow the Acts of law and their responsibilities

Janusz Steinhoff, Minister of the Economy in the BCC Economic Shadow Cabinet

“We need to be aware that the Polish electricalenergy sector has great challenges ahead of it.” as listed there. It so happened that the Minister of the Economy has for a long time held ownership rights with regard to coal companies. This resulted from the earlier restructuring programmes. At present, I cannot tell who holds regulatory and who ownership functions, and who does what. Unfortunately, the chaos in administration is rather blatant. I’m sad to say this. I’m aware that regulatory functions must be clearly separated from ownership functions. The Minister of the Treasury cannot have a decisive influence on the energy policy of the State or on regulations, whatever they are. The authority here must reside with the Minister of the Economy. The Minister of the Treasury, naturally, is concerned about the value of the companies he or she oversees, while the Minister of the Economy should care about all entities operating on the market, i.e. about the appropriate level of competition on that market.

My assessment of the electrical-energy sector is negative. We lack mechanisms that will stimulate investments in the generation subsector – and we are not the only European State with such problems. The solutions mentioned include differential contracts and capacity markets – these are two mechanisms, but I get the impression that our authorities • are trying to go back to manual control.

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39

Energy

Where is the Polish energy sector heading for?

Prof. Krzysztof Żmijewski, Social Council for National Emissions Reduction Programme

T

significance, and from the Figure 1: Wiring degree of medium and low voltage in the EU point of view of energy security, it is often more im120 portant than the type of 100 fuel used. In Poland, we 80 have a centralised config53,54 60 uration of sources. Pow40,55 40 er plants are connected to the network like roots 20 to the trunk formed by 0 high voltage transmission lines (400 and 220 Low Medium Low UE Medium UE kV). The world standard is to depart from such solutions towards decentralised Source: Euelectric, Power Distribution in Europe, 2013, energy, distributed and dis- http://www.eurelectric.org/media/113155/dso_report-web_final-2013-030-0764-01-e.pdf seminated in a large number of medium voltage network Figure 2: Indicators of long power outages in the EU nodes (power cooperatives, in minutes per recipient in annual terms municipal and industrial 800 energy), as well as in end700 user low-voltage lines 600 500 (prosumer energy). There 400 are almost half a million 300 of such installations in 162 200 100 the UK, and a million in 0 Germany. Germany has also seen a dynamic development of energy coLU DK DE NL AT BE ES FR FI UK HU SE PT IE CZ IT CY GR SL EE BG PL MT LT SK*RO*LV operatives – 888 at the end of 2013, and UK is chas- Source: CEER, Benchmarking Report 5.1 on the Continuity of Electricity Supply, 2014, http://www.ceer.eu/portal/page/portal/EER_HOME/EER_PUBLICATIONS/CEER_PAPERS/Electricity/ ing Germany.

Prosumer power sources Tab3/C13-EQS-57-03_BR5.1_19-Dec-2013_updated-Feb-2014.pdf are in the vast majority (over 90%) generated based on reis extremely important that they work in the newables, the remaining portion is micro-coarea of retail ​​ prices, not on the wholesale margeneration, i.e. domestic power plants. The fact ket as it is the case of high voltage (110 kV) wind or photovoltaic farms. This means that prosumTable 1: Distribution network development indicators – Poland’s place in Europe er energy can develop now or in the near future without costly support systems. The gross cost Poland’s per unit of energy ( ˜PLN 0,60/kWh) saved on PL UE rating in EU the retail market is almost four times higher than - network density km/km2 11 2,48 2,26 the price on the wholesale market ( ˜PLN 0,17/ - length of network per recipient 17 20,10 19,97 kWh). This, coupled with the poor state of the - number of recipients per resident 24 0,43 0,53 network, will encourage end-users to invest in - SAIDI min./year 22 263 162 • prosumer sources.

- Wiring degree of medium voltage lines - Wiring degree of low voltage lines

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57 52 18 46 28 41 35 39 41 37 12 37 28 33 23 40 33 38 33 31 16 29 23 27 19 23 24 20 23 20 18 10 17 9 11

65 76 45 53 55 90

2012 2012 2012 2012 2012 2012 2011 2012 2012 2012 2012 2012 2012 2010 2012 2012 2012 2011 2012 2012 2010 2012 2012 2012 2012 2012 2011

10 15 17 27 39 39 58 63 68 68 77 89 94 110 125 133 148 164 169 179 197 263 286 288 303

630 708

NL** DK LU* DE UK SE* AT BE CZ SI RO* FR FI ES PL IT CY LV BG HU EE PT LT IE GR SK

100 88

100 96 94 88 83 77 77

he question is simple and clear. Unfortunately, the answer is difficult. Emotions are provoking a statement that the energy sector is not going anywhere – it is spinning in place. There is one essential fact supporting this thesis – a dramatically high rate of material depreciation of energy infrastructure reaching in sub-sectors 70-75%.

Unfortunately, this rate is constantly growing.

Another distressing fact is the average value of SAIDI – System Average Interruption Duration Index – a measure of the average duration of long power outages (> 3 min.) per recipient in annual terms: in Poland SAIDI is 263 min. per year, which is compromising given that in Germany it is 16 min. per year (and is Hesse 10 -13 min. per year). The SAIDI index synthetically illustrates the state of the power network (mainly distribution – medium and low voltage) by informing to what extent recipients can trust supplier to provide them with electricity. At this point, it should be noted that the situation in Poland has improved considerably – in 2009 SAIDI was 409 min. per year!

The fact that the countries of Western Europe enjoy a much higher energy comfort than EU new member states, including Poland, results from the technical condition of the power sector, especially electricity networks. This condition is illustrated by several indicators.

The importance of the network can hardly be overestimated, but most politicians do not understand its role (in his second inauguration speech the Prime Minister did not mention it – did he forget?). Of course, the network must be connected to the sources of supply. Also in this case, their configuration is not without

15 15

23,2% 33,1%

40,6% 53,5%

Energy

Opportunities

are abroad

T

he difficult market situation is felt mainly by Polish companies. There is no real hope for improvement nor for increase in the investment volume.

“We do not expect a rapid improvement in the efficiency of the Polish mining industry, and thus I see no chance for increasing spending on machinery and equipment,” says Józef Wolski, CEO of Kopex. Reduced expenditure on investment in machinery and equipment - as always in such cases - results in tighter competition and a decline in margins. The situation is better in terms of expenditure on first driving.

Here, investments are necessary regardless of the financial standing of mines - they must invest to think about further existence.

The problem is reflected in the results of companies from the broadly understood mining sector. In the four quarters of 2013, the sales of Famur declined by over 20%, and of Kopex - by over 16%. Although Kopex’s revenues from the domestic market fell in 2013 more than Famur’s, the company managed to compensate it, to a much greater extent, with earnings from abroad.

Neither Kopex nor Famur have nothing to be ashamed of abroad. “We provide a complete export offer at the highest technological level,” said Jerzy Markowski, former Deputy Minister of the Economy in an interview with wnp. pl in March. Polish companies are present on all continents, on all major mining markets of the world. More than half of Famur’s foreign revenues are obtained from Russia and the Commonwealth of Independent States, while Kopex - apart from Russia - directs its exports to China, Argentina, Australia and South Africa. And although the value of exports of both companies

The Polish mining industry cuts back on investment. According to the Ministry of the Economy, in 2013 its investment expenditure decreased by more than 12% year on year, while spending on machinery and equipment - by over 35%. To maintain their income at the current level, Polish companies from the mining-related sector must seek contracts abroad.

decreased in 2013 (in the case Famur by almost 50%, in the case of Kopex by 3.4% year on year), their managements see a chance to survive difficult times in foreign sales.

High quality and innovation are not enough, however, to achieve a sufficient level of exports.

We have to invest, that is why, it is so important to know local markets. “Without knowledge of the geological, technical and working conditions in the mines on individual markets it is difficult to obtain any contracts,” says Piotr Broncel, a Board member of Kopex SA responsible for sales. He adds that constant presence on different markets is vital too.

There is a dozen entities on foreign market, of which Kopex is owner or co-owner. Some of them - for example, in Russia and in China deal with aftermarket of machinery and equipment manufactured by Kopex. Part of them among others in South Africa, Australia and China - produce solutions dedicated to a given market. Such a policy is already bearing fruit - “Before we start preliminary talks, potential contractors - for example, in China - are guaranteed that any service of our machines will be done on site,” says Broncel. “On many markets, when assessing bids, the important thing is where machines are produced. The fact that our combine was manufactured in Poland and the longwall roof support in China is an additional asset,” he claims.

Piotr Broncel cites an example of KSW1500EU1 produced in Zabrze, which was sent to China in March. This is a modified version of the model, which is already working in Chinese mines. It has been adapted to mining decks with a slope of 45 degrees. Kopex is the only company outside of China, which was able to offer such a

solution. And although the combine itself was built in Poland, the longwall roof support was manufactured in China by the company Shandong Tagao, which is half-owned by Kopex.

The focus of Polish managers on foreign markets is bringing the desired results. In addition to small contracts - in this industry, a small contract is that of a value of a few or several million zlotys - companies manage to sign contracts worth hundreds of millions of zlotys. In July, Famur entered into a PLN 270 million contract to supply longwall systems to Turkey. Earlier, in February, Kopex announced the contract worth almost PLN 240 million for the supply of a longwall system, and the two paving combines to Rio Turbio in Argentina.

In addition to foreign contracts, the overall financial situation of Kopex is influenced by a good condition of the mining-related services segment, which ranks second in the Group in terms of revenues. The main consumers of services are Polish mining companies. In this field, it is difficult to make savings. Mines have approved plans for production, which must be executed. Investments in first driving are therefore necessary. For several quarters, Kopex’s mining services segment has had plenty of orders.

Despite the difficult situation in the Polish mining industry, the management of Kopex is optimistic about the future: “Our contracts abroad allow us to survive the lean years on the domestic market,” says Józef Wolski. “Now we reap the fruits of investments and activities we have taken up in recent years. It is also a good moment for restructuring and preparing the company for better times, which will certain• ly - sooner or later -come.

August 2014 polish market

41

Energy

Poland’s

energy security

is unchallenged “I get the feeling that Poles lack what I call a “Jagiellonian” approach – a certain self-confidence. Being where we are in Europe, having such a young society and so huge reserves of energy resources we should be a country that guarantees both its own security and that of its neighbours. And yet we have somehow chosen to give it up,” says Andrzej Sikora, PhD Eng., President of the Board of Instytut Studiów Energetycznych Sp. z o.o., in an interview with Jerzy Bojanowicz.

In 2011 you defended your PhD dissertation entitled “Liquefied Natural Gas Versus Other Sources of Importing Gas to the European Union” at the Faculty of Drilling, Oil and Gas of the AGH University of Science and Technology in Kraków. Did it make any practical conclusions?

First of all, it was preceded by work that employed models, or necessary calculations.

The most interesting proposition was rather subversive - the statement that liquefied natural gas (LNG) was an important but insufficient addition to Polish energy security. It was particularly unwelcome in the context of the Świnoujście LNG terminal under construction. Calculations showed that without the ability to participate in the entire process, in a certain guaranteed natural gas supply chain, having only its final part – the gas terminal but no transport logistics secured, not to mention the extraction process - the supply of LNG and its regasification is indeed necessary, but far from enough.

At that time, it was really subversive. Today everyone will say that it’s quite obvious. pm

42 polish market

Do you think that the Government should define the role of Polish Petroleum and Gas Mining (PGNiG)? Should it continue to be a joint-stock company aiming at development, or should it take responsibility for the energy security of the country? How do you see its role?

The worst-case scenario is like when we can’t answer the question of whether we should drive on the right or on the left and we reassure all drivers “Go on. It’ll be fine...”

That’s where we are on PGNiG today.

Mind you, no other Polish business has a statutory provision compelling it to safeguard energy security – neither PKN Orlen nor the Polish Energy Group (PGE). By a strange stroke of fate, PGNiG has such an obligation in its articles of association, even though natural gas isn’t the energy resource of fundamental significance to the Polish economy, as its share in the primary energy mix is only 14%.

97% of all petroleum consumed in our country is imported from Russia. Is it a problem for us? Not really. All our cars run on pm

this oil, processed in Polish refineries. Even though 6 million Polish households – one quarter - don’t have a gas connection, PGNiG has a statutory obligation to ensure the energy security of the State!

Another issue is the fact that the privatisation process of PGNiG, or actually – its flotation on the Warsaw Stock Exchange, was going on in parallel with the implementation of Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas, and with Poland’s accession to the European Union, that is various regulations regarding State aid, competition and so on. At that time, PGNiG was in a tight financial situation and it was difficult to add capital to it in any other way than by issuing shares. Still, we can now look at that situation in a different light and conclude that the very process of going public, particularly in terms of upstream, was strange, if not simply wrong.

Energy Don’t you think that the better solution was to split PGNiG into companies dealing with extraction, transmission and storage of gas, etc.?

Of course you’re right, but it’s easy to say this in hindsight. There were plans to provide a different appraisal of the upstream part, but some of the company’s directors opposed it, including, I remember, the proprietor. Don’t forget that back in 2003 PKN Orlen was not an upstream company, that is, one that prospects for and extracts gas or oil.

In the process of combining CPN with Petrochemia Płocka the proprietor didn’t think it necessary or needed to establish an upstream company. The old assumption that whatever was on land was PGNiG’s and whatever was in the sea was today’s Petrobaltic was taken for granted. People were under the impression that these companies would never be privatised. pm

Unless we have interconnectors.

Hence the EU funds for cross-border connections. We’re in a far better situation today than a few years ago, but it’s still a long way from perfect.

The most important thing is the doctrine, as there are EU member states that say they aren’t interested in issues connected with the supply of resources, but they want a reasonable stock – strategic reserves enough for 8 months or one year. That’s how they define security: “I don’t have to – as a State – own a refinery, it’s enough for me to have a reserve of petroleum derivatives.” This is the case with Germany, where refineries are largely held by Russian companies and nobody sees anything wrong with that. It’s a little different in Poland, where the State owns both coal and refineries. Stock-exchange solutions and privatisation proved futile – the State is still “strong” in these companies.

It would be preferable if it turned out that such an important element for developing energy policy were economic policy, which defines the needs of industry, including heavy industry, such as the automotive or chemical sectors and so on, setting the country’s desired growth objectives.

The Polish economy is going through changes and a rather fast-paced development process. We’re marching forward at full speed, but we’re blindfolded. The market and its invisible hand won’t do the trick. pm

pm

Your idea is that energy security should lie in the hands of the Ministry of the Economy, but this sector has a lot to do with the Ministry of the Treasury, which holds shares in the major electricity companies,

and the Ministry of the Environment, which implements the Directives of the EU Energy Package. Isn’t it better to establish a Ministry of Energy, as suggested before the last Government reshuffle?

What we’re missing is primarily the Government Centre for Strategic Studies, but that’s another matter altogether. I’m against expanding the administrative structures when we’re not even sure what they’re for.

security of my home village. He would gather wood in the forest for fuel and pour paraffin into lamps (even up to the 1960s), as there was no electricity!

Shortly afterwards we took the society’s basic idea of being responsible for the supply of energy resources for the hearth and home. Today, nursery school children know for sure that electricity is from a socket and milk comes from a carton...

Having said this, what is your take on Polish energy security? What conditions must be met for us to say that we’re secure?

Fortunately, Poland’s energy security isn’t really being challenged, as we have a great abundance of energy resources, especially hard coal and brown coal. We can sleep soundly through the freezing winter nights and tread lightly on scorching-hot summer days. Perhaps we might have some doubts when it comes to converting this resource into electricity, as our transmission networks are quite worn out and there has been no investment peak in the manufacturing sector. Still, this is caused by the lack of a consistent economic policy. It’s hard to imagine that anyone in Poland would make a decision to build a 3 or 6 GW nuclear power plant that would operate for at least 40-50 years when we don’t know whether by 2030 Poland will have the same number of steelworks, or any chemical facilities for that matter, which are gradually relocating from Europe due to energy prices. They are twice as low across the pond and even three times lower when it comes to gas.

Today, Gaz System is already prepared to receive gas (even Russian gas) from the West or the South. The situation isn’t the same as in 2009, when we faced a major problem, which we managed to solve. The quality of the infrastructure is still vital because it was very poor in Poland. EU funds have been pumped into constructing pipelines and electrical energy networks, but we still lack a clear idea of new generation capacities and an attempt to define – as the English did with CFD – a price approved by the industry as the minimum and used in model calculations.

pm ...and

pm

What is your view on the current promotion and financial backing of distributed energy sources?

We’ve come full circle – what should the economy look like? If we close a few metalworks and chemical plants and declare that now we don’t need 100-200 MW receiving devices in one place any more, distributed energy might be enough. On the other hand, I remember the time when my grandfather was single-handedly responsible for the energy pm

money from an ATM! That’s why we need to reset the vectors of society’s mentality and embrace prosumer and production applications. I used to work with a Japanese company that generated electricity from small gas appliances and supplied the area of Osaka with 1300 MW of electrical energy during peak hours. This energy was created during such everyday processes as cooking rice and heating water, also in gas cookers and gas water heaters. I’d like this to be implemented in Poland.

Let’s talk some more gas. Do you believe in shale gas in Poland?

At the institute we created an effectiveness model to estimate the costs of preparing the ground for the potential revenues connected with the extraction of shale gas in Poland. Unfortunately, the activities of our administration and lengthy procedures have slowed us down. We have wasted five years, as the first licences were issued in 2009. During that time it turned out that the world holds a few other interesting places, such as in South America or Australia. The United Kingdom used to trail behind other European countries but today claims to satisfy 41% of its energy demand using shale gas.

The EU, being as environmentally-friendly as it is, wanted to ban such extraction methods that could cause pollution. Hydraulic fracturing was used for many years before shale gas crossed anybody’s mind, but then the decision-makers decided that it wasn’t the right way. It’s as if they suggested stopping driving cars with two-stroke engines because other types are more energy-efficient.

I still hope that at least in the north-western strip – Gdańsk Bay, Wejherewo – extraction could actually be profitable. There’s also Zamość Land, a part of Mazowsze and Wielkopolska, which features tight gas deposits.

The most important thing for me is to finally start drilling in as many places as possible, and as deep as we can, to answer the question of whether it’s really worth the trouble.

• pm

August 2014 polish market

43

Energy

POWER ENGINEERING IN POLAND 2014 OF CHANGES IN THE POWER SECTOR IN POLAND FROM THE PERSPECTIVE OF ITS PARTICIPANT AND CO-AUTHOR

25 YEARS

If you are judging changes that occurred to the Polish energy sector over the pas twenty years, then - if you were involved in the process - you need to do something that is almost impossible, i.e. to put into perspective your knowledge, research and documents. Difficult...

Herbert Leopold Gabryś

C

hanges in the Polish energy sector in the early 1990s, which spanned virtually all areas: from structural upgrades, through setting out principles underlying the functioning of the energy market, to preparing first privatisations, would not have been possible had it not been for the radical economic transformation of 1989. Let us remember that it was the result of joint efforts, that it was very hard at times and without any no political splendor. A small part of the Mazowiecki government and its experts, as well as group of MPs from the Contract Sejm’s Special Committee, under the factual guidance of professor Leszek Balcerowicz, instigated a sort of a coup d’Etat. They ushered in capitalism almost overnight, without public debate being engaged in, without the government and ordinary people being fully aware of the consequences and costs to be borne. Amendments were made to tax laws, the law of the financial management of businesses, banking law and foreign exchange law, the law on conducting business activity in Poland by foreign entities, customs law, the law on credit relations, on employment, on collective layoffs and on the

44 polish market

pay rise tax. A real revolution! And this was all happening under extremely unfavourable conditions, namely amid rampant inflation, shortage of foreign exchange reserves and mounting foreign debt. Also, it is rarely mentioned, because not remembered, that zloty became convertible as of January 1, 1990.

A stabilisation fund was created for which USD 1 billion was transferred International Monetary Fund. And here came the first problems. The gap between declarations and practice is usually bigger than assumed. By the way, at the end of 1989, the government had only USD 400 million available and the rest was promised to follow in January. But it happened, and the package of laws came in force!

Except for the general concept of the freemarket economy and some non-public debates among energy experts, no vision of Poland’s future power engineering sector was developed at that time. However, power engineering, by the nature of things, was supposed to be partly monopolistic, and partly – in line with the new political regime – thrown in the arms of free market and – as it was repeatedly stressed – real capitalism.

Here is the sequence of changes that occurred in the power engineering sector in the last 25 years: •

• • • • • •

• •

organisational atomisation of business entities in the power sector after communities were done away with new energy law several strategic studies strategy and energy policies first concepts and privatisations vertical consolidations into four energy Groups capital and structural transformations within the Groups multivariate assumptions and phasing in of the energy market, including the opening of the Polish Power Exchange many significant legislative changes, including the new RES support strategy implementation of the EU climate policies

From many judgments, expressed both by free-market enthusiasts and proponents of the regulatory role of the state, a clear picture is emerging as to the rightness of decisions made, leading to today’s model of the energy market.

Energy Although much could have been done better or more effectively, Poland’s power engineering sector is more resilient to external shocks, namely thanks to marketisation.

Moreover, investment decisions made – in a nervous atmosphere – in recent months with respect to high-performance coal and gasbased generation would be possible were it not for the assets of consolidated Groups.

The significant and rapid decline in wholesale electricity prices has recently changed the existing order in the financial results of the power sector in Poland.

Shifting the margin from generation towards trade and from tariffs to distribution creates a new reality, in which consolidated Groups find themselves differentiated. Lowefficient coal-based generation gives rise to a risk of deterioration of results, which is highly consequential for the functioning of the National Power System. Changes in the wholesale market, drop in green certificate trade, limited use of the biomass co-firing technology to generate renewables, lack of support for “red” and “yellow” cogeneration, smaller advances for covering stranded costs, increase in the cost of CO2 emissions allowances – these are the main reasons why financial results for the year 2013 were clearly worse.

Changes in the country’s electricity consumption are significantly dependent on the economy, and strongly deviate from the forecasts assumed in subsequent versions of the Polish energy policy. These forecasts lose their importance and are no longer essential when it comes to making strategic investment decisions, e.g. in generation.

The demand for power in the whole period confirms that consumption is changing, and although the spread between its average and maximum annual values decreases, it has not posed a threat so far to the National Power System and resulted in many politicians disregarding the need for investment in generation. The installed capacity in the system between 1990-2013 increased by 6,662 MW, i.e. by almost 21%. Before 2000, these were primarily owing to conventional energy, whereas in the subsequent years – it was largely due to renewables (at the end of 2013, a total installed capacity of RES was equal to 5,185 MW). However, the production of electricity from RES is very sensitive to changes in the energy policy, and that is not stable.

Since 2007, the National Power System has offered reduced security of supply, with the share of coal-based generation decreasing significantly at the same time. In June 2013, for

the first time in several decades, the country’s electricity consumption was higher than production – it is an important signal pointing to the threat in balancing two variables.

The experience of recent years in adopting power engineering strategic documents in Poland reveals mistakes in subsequent energy policies and their negligible impact on the real situation of the sector’s stakeholders.

By contrast, the EU climate policy proved to be an extremely important factor. Diverging from the global trends, it is guided by a costly and inefficient philosophy of “climate romanticism,” i.e. decarbonisation of the economy.

In its communication of January 22, 2014 for the years 2021-2030 the European Commission maintains, though in a veiled manner, this strategy, without taking into account the fact the Community is losing competitiveness because of high energy prices.

For Poland, due to the structure of resources and that of power generation, such a policy is extremely expensive because it involves restrictions that hamper social and economic development. Hence the need, as strong as never before, to bring changes to the power sector strategy in Poland, the guiding force being to ensure the energy security of the country for long years and beyond partisan divisions! • ADVERTISEMENT

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Energy

The Polish energy sector does not exist without

coal Despite the falling coal production in our country, mine shut-downs and employment downsizing, coal is, and will be for long years, the most important component of the Polish energy mix and the main fuel of domestic power plants. Coal and lignite will remain, experts say, the building block and stabiliser of Poland’s energy security. Poland comes first in the European Union in the coal mining industry. Such a strong position unfortunately collides with the EU climate policy aimed at decarbonisation and replacing coal with renewable energy sources (RES), no matter the cost.

Patryk Mirecki

M

any experts voice opposition, pointing to enormous costs that the Polish economy would incur if EU policies are complied with. Indeed, we have still vast amounts of coal and lignite that will suffice for decades to come.

On the other hand, only summary economic calculations show that replacing coal with RES could not do without subsidies from the state budget, and therefore reaching into taxpayers’ pockets.

An important component of the energy mix The importance of coal in the national energy mix was highlighted by the data included in the paper of Kazimierz Szynol from the

46 polish market

Polish Electricity Association, presented at this year’s 10th Coal Dialogue. In our country, coal-fired power plants supplying electricity to the national electricity grid system account for 51.6% of electricity output per year. And lignite-fired power plants generate 24.4%. So in total more than 3/4 of electricity are generated from coal in Poland. Gas power plants account for 2.43%, water power plants - 5.8%, wind and other renewables - 9.12%, industry power plants (working for the nearby industrial plants) - 6,67%.

Moreover, the country has significant coal resources amounting to over 48 billion tonnes Importantly, coal mining still gives - despite its production being downsized - 107 thousand jobs in mines and more than 300 thousand in their environment. So a total of more than a million families make their living thanks to our “black gold.”

Ministry of the Economy: prospects are optimistic According to the Ministry of the Economy, coal in Poland and around the world will keep playing a significant role, and, as indicated by analyses until 2018, the global demand for coal will continue to grow. In the opinion of Deputy Prime Minister Janusz Piechociński, noteworthy is also a long-term forecast that coal will remain an important source of energy, despite the decline in demand from China and the US - the world’s biggest coal consumers. This is a good signal for our energy sector, he adds.

In the opinion of experts of the International Energy Agency, coal is a widely available fuel. It has an impact on the energy security of individual countries, including Poland.

Energy “In this context, our intention to fight not against coal, but against emissions takes on great significance. This can be done and we are doing everything to contribute to the reduction of emissions through highly efficient combustion,” says Piechociński.

Mining has been through a crisis However, the significance of coal, particularly in our country, may decrease in the future.

On the one hand, Poland, like other EU countries, committed itself to reduce greenhouse gas emissions by 20%, increase the share of renewable sources to 20%, and improve energy efficiency by 20% by 2020. On the other hand, recent years have brought declines in the price of coal, which, with increasing imports of cheaper coal, makes Polish product lay in landfills. Mining is still under the crisis, as noted by Józef Wolski, President of Kopex.

The data quoted by the company shows that only in the first quarter of 2014 coal mining in Poland amounted to 18.6 million tonnes (i.e.

4% less than a year earlier). It was a reflection of last year’s trend, when 19.7 million tonnes were excavated, i.e. nearly 4% less than in 2012. At the same time, the amount of coal in landfills increased at the end of March 2014 to 7.7 million tonnes and was 16 % higher than at the end of 2013.

Coal’s selling price exceeds its production cost. The average price in the first quarter of 2014 amounted to PLN 286 per tonne and was 7.4% lower than in the previous year, while the average cost of coal production in January-March 2014 increased by 1.4% compared to the first quarter of 2013 and amounted to PLN 304.4 per tonne. At the same time, coal prices on world markets (Australia, South Africa) returned to several-percent declines both in relation to the end of last year and to the end of the first quarter of 2013.

By contrast, coal exports significantly decreased, while its imports were relatively even higher. In the first quarter of 2014, coal exports amounted to 1.6 million tonnes (nearly 24% less than a year earlier) and its imports were as much (which meant an increase by more than 45%).

The negative effect of (relatively) warm winter The bad standing of the sector coincided with a decline in production and consumption of energy in the country. The energy output in the

first quarter of 2014 decreased by 6.2% compared to the first quarter of 2013 - to the level of 40.9 thousand GWh and consumption - by 1.4% to 41.2 thousand GWh. Coal-based energy production fell by 10% -to the level of 21.3 thousand GWh. Everything should be blamed on a relatively warm winter.

Józef Wolski also cited other data demonstrating the poor condition of the Polish mining industry. The average productivity of a Polish miner was about 700 tonnes of coal, while in the world it is more than 1000 tonnes.

There are two notable exceptions in this respect. In Bogdanka, the annual output reaches 1200 tonnes per miner, and in PG Silesia 1,100 tonnes. According to Wolski, if Polish mines do not find funds for purchases and modernisation of machinery and equipment, effectiveness will not improve of the Polish coal industry.

New coal power units, restructuring and plans to build mines According to a report by EURACOAL (European Association for Coal and Lignite) from last May, there were 29 active coal mines in Poland at the end of last year, of which 15 belonged to Kompania Węglowa SA. The coal output in the whole of last year dropped by 2.7 million tonnes to 76.5 million tonnes, mainly due to decline in production for household use. Exports increased during that time to 9.6 million tonnes, the greatest part of which fell to EU countries (mostly Germany) and Morocco.

The report also points to the Polish government’s plans to carry out major investments in the energy production based on coal combustion. It is already known that in the next five years at least four coal units and a lignite unit with a total capacity of over 4200 MW worth PLN 20 billion will be put into use. In Kozienice, a 1075 MW unit will be built for PLN 6.3 billion, which will increase by 1/3 the production capacity of the plant. After the investment’s completion, Kozienice will generate 13% of the domestic electricity. In Opole, two energy units (in addition to four existing) of 900 MW each are being built, an investment worth PLN 11.6 billion, which was proclaimed in Prime Minister’s Donald Tusk inauguration speech. Jaworzno III power plant - though the project is still facing some obstacles - is to start the construction of an 850 MW power unit. Turów is going to have - for more than PLN 4.2 billion - a new power unit with a capacity of 450 MW.

There are also proposals for the development of new mining projects in the region of Lublin by Kompania Węglowa and Prairie Downs Ltd., an Australian company. Kopex too is interested in new investment projects in the field of coal mining in Poland. According Tadeusz Olkuski, PhD Eng. from AGH, Kompania Węglowa is going to amoung announce the construction of its own power plant with a capacity of approx. 1000 MW, which will be located between the mines Ziemowit and Piast.

It would almost entirely reduce fuel transport costs. Kompania Węglowa plans to build a new mine in the Lublin region, and Południowy Koncern Węglowy is considering of drilling a new mining shaft to increase the production of coal. The construction is also planned by Kulczyk Investments SA of Eletrownia Północ, a coal-fired power plant in Pomerania.

Important announcements relating to the restructuring of the coal industry were made by the government in January 2014. The process is to be completed by 2020. The restructuring will involve mergers or sales of the most profitable mines and labour force downsizing through retirement leaves and partly by layoffs.

New concessions needed for lignite The Polish coal industry has proven resources evaluated at 22 billion tonnes. Plants and mines Turów and Bełchatow belong to PGE, while Adamów and Konin are private companies owned by PAK. In 2013, their total production was 65.5 million tonnes, but resources are gradually consumed and new concessions are needed. The most advanced project - in Złoczew - should get all the permits in 2015.

PGE is trying to get permission in Gubin, near the border with Germany. The Ministry of the Economy will prepare a list of strategic coal resources. It will be very important for the development of the industry, and local self-governments will have to take it into account in local planning.

According to Tadeusz Olkuski, large coal resources can be a strategic fuel for systemic power plants in Poland. However, with the current policy of the European Union, investing in coal-fired units is risky. Olkuski adds that the operation of gas units is far more expensive due to the price of gas. Therefore, gasfired units cannot compete on price with coalfired ones.

•

August 2014 polish market

47

Energy

NEUF 2014

“Power Sector and a Low-Emissions Economy, or What to Do to Make It Profitable”

A

fter more than 20 years of a market economy in Poland the existing capacity for growth is running out and time has come to choose a further development path. There are two paths to choose between: preserve the regulatory and institutional status quo and gradually adapt to global challenges and trends, or opt for a scenario of effective modernization based on innovation and the efficient use of energy resources by promoting low-emissions solutions in the power sector and transport.

Participants in the International Conference NEUF 2014 talked about the investment projects needed, the efficiency of their implementation and technologies supporting the development of and innovation in the energy sector. The topics included: • infrastructural investments in the power sector and what can be done for investment processes to be more investor-friendly (the law on transmission corridors, simpler bidding procedures and relations between the investor and contractor), • low-emissions distributed energy sector (power sector in poorly urbanized areas – investment needs and funding), • ICT solutions for the power industry – from the design to servicing (integration of systems, software for industry, mobile devices, automation and management), • low-emissions coal-based power industry.

Taking part in the conference were: Michał Ajchel, Vice-President of Schneider Electric for the Power Sector, Henryk Baranowski, Director for Business Development at Alstom Power, Mieczysław Borowski, President of the Office of Technical Inspection (UDT), Daniel Borsucki, Director at KHW SA, Jan Chadam, President of Gaz System, Rafał Czyżewski, President of Energa Operator, Tobias Frevel, Managing Director at Energieforen Leipzig, Germany, Gerard Gałeczka, Director of the Plant for the Production of Composite Solid Fuels / Bureau for Innovation and New Products at Polski Koks SA, Surojit Kumar Gosh, Country

48 polish market

From left: Krzysztof Żmijewski, Jacek Piechota, Jerzy Pietrewicz, André Poschmann, Tom Howes Photo: Agnieszka Ferreira

Manager, Board Member at ArcelorMittal Poland, Wojciech Hann, Partner at Deloitte, Tom Howes, deputy Head of the Economic Analysis and Financial Instruments Unit at the Directorate General for Energy, European Commission, Jerzy Kalinowski, Director for Project Implementation, EDP, Mirosław Kowalik, Sales and Marketing Director at Alstom Power, Marek Maniecki, Vice-President of Globema, Grzegorz Staniewski, Vice-President of the Board for Strategy and Development, Enea Wytwarzanie SA, Jacek Piechota, Minister of the Economy in 2001-2003, Jerzy Pietrewicz, deputy Minister of the Economy, Janusz Pilitowski, Director of the Department for Renewable Energy at the Ministry of the Economy, Krzysztof Podhajski, adviser to the President of the European Fund for the Development of Rural Poland (EFRWP), André Poschmann, Head of the Coordination and Monitoring Unit Energiewende at the Federal Ministry of the Environment, Nature Conservation and Nuclear Safety, Germany, Mario Ragwitz, deputy Director of the Competence Centre for Energy Policy at Fraunhofer Institut ISI, Marek Sawicki, Minister of

Agriculture and Rural Development, Andrzej Siemaszko, National Coordinator of Contact Points for Research Programmes, Małgorzata Skucha, President of the National Fund for Environmental Protection and Water Management (NFOŚiGW), Maciej Sokołowski, Director of the Energy Law Department at the Maciej Panfil i Partnerzy Law Firm, Maciej Stryjecki, President of the Foundation for Sustainable Energy, member of SRRGN, Cezary Szwed, member of the Board of PSE SA, Roman Szwed, President of Atende, Katarzyna Szwed-Lipińska, Director of the Department for Support Systems at the Energy Regulatory Office, Andrzej Szymański, President / Sales Director at LandisGyr, Bożena Wróblewska, expert of the Future for Rural Energy in Europe (FREE) and head of the Innovation Department at Gaspol Energy, Stanisław Tokarski, President / General Director at Tauron Wytwarzanie SA, Tomasz Gawlik, President of Spółka Energetyczna Jastrzębie SA, and Krzysztof Żmijewski, Secretary General of the Social Council for the Development of a Low• Emissions Economy.

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Infrastructure

Market Friendship Marcin Moskalewicz, President of PERN Przyjaźń SA, talks to Mieczysław T. Starkowski

For many months, there has been a war in Ukraine. Your company operates a network of pipelines transporting Russian oil. Do you think Poland’s energy security is threatened?

This conflict does not affect directly our country or our company, but military action in the neighbouring country is always a concern and can cause all sorts of threats (including those related to the energy security of the country), so you cannot ignore this problem. But in terms of oil supply, the situation is stable, namely for two reasons: firstly, the oil pipeline system running through Poland to Germany passes first through the territory of Belarus, and therefore is not exposed to acts of war, and secondly, we have an alternative sea supply route via Gdańsk Naftoport. Anyway, oil supplies remain at a relatively high level. Besides, in an effort to further improve the security of supply, we are both expanding Naftoport and building the first in Poland oil terminal able to handle oil supplies from different directions and export petroleum products. pm

You said that Naftoport is for our country a mark of independence when it comes to oil supply. How important is the construction of the Oil Terminal in Gdansk for the Polish energy security?

It is of key importance. The construction of the Oil Terminal in Gdańsk is important for Polish (and probably also the Central-European) oil logistics due to its geographical situation and functionality. It is a crucial factor that the terminal will be located on the Baltic pm

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coast, in the vicinity of Naftoport and Lotos refinery, which derives a significant part of oil from the sea and plans to build a petrochemical segment. On the other hand, the new opportunities created by the terminal - such as the separation of different types of oil or its accumulation, as well as linking this maritime hub with all possible transport systems: from “Przyjaźń” pipeline to tanks and rail show clearly the importance of this project for the country’s energy security, as well as for the further development of PERN Group.

Such terminals are built in many places in the world. Is the construction of the Oil Terminal going to ensure Poland’s energy security, while also being an important step towards diversification of the company’s operations?

Indeed, there are today many such building sites in the world, including - which is not without significance - in several countries around the Baltic Sea. Our investment fills the gap on the Polish coast, and in addition to increasing the security of supply, it actually diversifies PERN Group’s business by extending the range of services offered, which of course will translate over time into revenues. The Oil Terminal is intended to provide flexible oil supplies to Polish and German refineries in the coming years and as a response to the challenges associated with changing supply routes. New tanks will allow to store many different types of oil (and imagine that they are over 150!) from different regions of the world delivered by sea, depending on orders. As a result, it will be possible to better pm

adapt the ordered oil supplies to the demand for refined products, and the flexibility of supply will increase significantly. The terminal will also allow Poland to join an exclusive group of international oil trade players and to implement new services on the Polish market.

Three months ago, the company signed a long-term contract with Italy’s ENI Trading & Shipping SpA. The contract concerns handling, storage and transportation of crude oil for the period 2014-2016. What does this mean for our country?

Indeed, it is an important contract. Talks with ENI began three years ago, shortly after I took over as President of the Board of PERN. I knew that following the decision to build the Oil Terminal we must seek new partners for this project, but also to change the perception of PERN so it is no longer associated by our customers as a transmission company only, but as a dynamic, comprehensive logistics organisation that counts in Europe. We engaged in negotiations with potential partners, including ENI, and although they lasted more than two years, they were eventually successful. It is difficult to overestimate the significance of this contract. On the one hand, it opens up completely new possibilities for oil trading in our country. In addition to the currently used purchase-transportation-selling speedy transactions, the Italian company will be able to reload oil into tanks of PERN, and after a period of storage resell it at a profit to Polish or foreign customers. This is the kind of business, which we hope will be developing in our country, and which will be possible pm

Infrastructure

thanks to the Oil Terminal in Gdańsk. On the other hand, the contract names the first customer of the terminal (though it is still under construction), since it will take over loadings from our Italian partner, and there are indications that others will follow this path too, as suggested by the trade talks we are holding. Finally, it is yet another big international company, which increases the reliability of PERN Group’s and encourages us to commission the investment quickly.

What is the current stage of the investment?

Last year, we settled a tender and signed relevant contracts, and in the spring of this year, we began the construction of the terminal. The work goes quickly: the first cargs (metal parts of tank walls) of five tanks are already being laid. In some places, a double steel jacket (internal and shielding) has been already fitted, and in some tanks we are narrowing upwards the third level, and in others - the second. At the same time, the construction is under way of offices, water pumping plant and high-efficiency water treatment plant. The whole area is adjacent to the Natura 2000 site, so we follow very high environmental standards in order to provide the maximum comfort for the environment. The entire investment will be put in place by the end of the next year, and then we will be able to say that we meet the highest requirements of our customers.

Naturally, the second stage of the project (which we would like to start next year) dedicated to petroleum products and chemicals is still ahead, but we are waiting for the details of a joint petrochemical investment of Lotos Group and Azoty Group. Once completed, the investment will bring a significant surge in revenue for the state budget and for Gdańsk.

Needless to mention an increased interest in doing business in Gdańsk, because, as we all know, one business attracts other businesses, which can be seen in ports such as Rotterdam. I am convinced that it will be much the same in Gdańsk. pm

The company has a long, more-than-50year history, but it is not well-known to a wide audience. Please remind our readers what it does and what this pipeline system means for the Polish economy.

The decision to create “Przyjaźń” was made in 1959, and four years later the first batch of crude oil flowed through the pipeline. So we have been in this business for over half a century, we have a lot of experience and outstanding professionals. Today, we are talking about PERN Group - an organisation of several pm

companies that offer a full range of services: transport, storage and handling of crude oil and fuels, as well as liquefied petroleum gas and lubricating products. Besides, we make blends by mixing fuels with additives and biocomponents, we conduct laboratory testing of petroleum products, inspect the technical condition of the pipelines, and lease fiber optic cabling and Internet data transmissions.

Complying with the highest safety standards, we manage a pipeline network of nearly 2.5 thousand km (through which every year about 40 million tonnes of crude oil is funneled to Polish and German refineries, and to traders operating on the Central European market). We also supervise more than 600 km of product pipelines with a nominal capacity of about 10 million tonnes, modern crude oil and gas reloading terminals, and Naftoport in Gdańsk, which is able to reload 43 million tonnes of oil from the sea.

We also have the country’s largest storage capacity for crude oil, gasoline, diesel, light fuel oil, jet fuel and bio-components. In 23 facilities across the country we store mandatory reserves, strategic reserves and petroleum products for current consumption. We are the primary source of supply for filling stations in highest-quality fuel. The total storage capacity for oil and fuels exceeds 5 million cubic meters (including 1.8 million cubic meters for fuels) and is still being expanded. Storage facilities are connected by a network of pipelines with refineries in Poland and Germany, Naftoport in Gdańsk, and an ultra-modern marine terminal that is being built in Gdansk with a capacity of about 750 thousand cubic meters.

PERN provides testing services for fuel pipelines, including in Ecuador, and the Group intends to develop its innovative subsidiary - Diagnostic Centre for Pipelines and Equipment (CDRI). Is that a new development line?

Indeed, the Pipeline Diagnostic and Equipment Centre - PERN’s daughter company - is currently carrying out an inspection of a nearly 700-kilometer transmission pipeline for the Ecuadorian company EP Petroeucador. Defects in the walls of the pipeline (e.g. changes caused by corrosion) are detected by means of ultrasonic intelligent pistons designed and produced by CDRI. Our people had to work under very difficult conditions: the pipeline stretches from deposits located in the Amazon, through the Andes, where there is probably a pump station at 4,400 metres – probably the highest in the world, to the Oil Terminal on the Pacific. pm

“The terminal will also allow Poland to join an exclusive group of international oil trade players and to implement new services on the Polish market.”

Naturally, this is not the first time CDRI works abroad. Previously, there were sporadic inspections in Belgium, Germany, Romania and the Czech Republic. The wide opening to new foreign contracts and going beyond the European market are the result of a consistently implemented strategy of PERN Group, in which an increasingly important role is played by innovation. This is facilitated by agreements signed last year with two universities of technology: in Gdańsk and in Warsaw (Płock), cooperation with the National Research and Development Centre, and sorting out of the legal situation (taking over 100% shares) of the said PERN’s subsidiary – Pipeline Diagnostic and • Equipment Centre.

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Infrastructure

The investor must cooperate with the contractor: their common opponent is the investment project Tadeusz Rybak, President of Mostostal Puławy SA, talks to Marcin Haber.

At the beginning, I would like to ask you about the phenomenon of Mostostal Puławy SA: what is the key to your success, to your thriving on the Polish market for decades?

I am convinced that the key to success is the people. This capital is particularly important in companies such as Mostostal Puławy, because we provide services and each contract we execute is different. We do have a permanent product, our know-how is the good organisational structure that we have been building for 50 years. As the company’s President, the position I have held for over 23 years, I take great care about continuous professional development of the staff and its proper selection. That is how, I believe, our success is born. pm

pm

You mentioned your over 20-year experience as President. From this perspective, how can you assess the changes that have occurred on the construction market since 1989, the year when Poland began its transistion to a market economy?

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I perfectly remember the times of the centrally-planned economy, which was a sort of El Dorado for construction companies. One could then pick the orders, choose those that were most suitable. Labour force was still in shortage, because there was a lot of work. Of course, in that time, there was not enough of appropriate equipment and technology either.

I was then on a two-year contract overseas, first time in my career, a very significant one because it started in 1987. I returned to Poland in 1989, precisely when the free-market economy was being established. These two years were extremely fruitful in terms of approach to business; the experience I gained in Germany as regards the use of new technologies in the construction industry was very valuable, which is why I came back well prepared.

Shortly after I became President of Mostostal Puławy.

These 20 years was a crucial period for the Polish economy and for our company too. In the era of the Internet and air connections we have contact with the whole world. In

my management model, the thinking has always prevailed that dynamic development is of crucial importance and evolution should go from micro- to macro-business. In the case of Mostostal Puławy, after the regional stage - for several years, we worked mainly for one investor – the Azoty chemical company - we started the nationwide expansion. About 20 years ago, we ventured operations across Europe by setting up a technical office in Germany, and embarked on cooperation with companies in the Nordic countries. Today, there is virtually no country in Western Europe, where we do not have investment projects.

At the beginning, it was difficult, because we had to have permission of the Ministry of Foreign Affairs, to carry out construction works in Germany, and other countries did not often let us in at all. After joining the European Union, this has changed, and today we execute construction contracts across Europe. It is true that we rarely manage to be the general contractor there, especially when it comes to industrial and energy-related construction,

Infrastructure but these are partnership agreements. It is much easier to conduct business abroad than in Poland. But first, we had to learn for years the principles of cooperation. Each country has its own specifics.

You are well positioned to make comparisons between foreign markets and the Polish one. Is the Polish market very demanding?

You can already try to compare, because Poland is in the European Union and provisions are slowly becoming homogenous. But once I read an article in the industry press, in which the author argued that Poland is not a country for second-rate managers. I agree, because Poland is still a country of constantly changing regulations and an unstable currency, although in recent years things are getting better. For months, the euro exchange rate has stayed slightly abover PLN 4, and we mostly work in countries whose currency is the euro.

That said, in Sweden, UK and Norway, we still have the problem of currency translations.

The important thing is that abroad a contract between the investor and the contractor is more like a partnership agreement. In pm

Poland, I try to push through the custom that after signing the contract I always say to the investor: “As long as we negotiated the price, date and other terms of the agreement, we were on opposite sides of the table, and after signing the contract, we need to sit on one side of the table and the opponent is the investment project.” When the investor and the contractor join forces in the confrontation with the investment project, it is going to end up in success. And when they argue and sit on opposite sides of the table, the contract suffers. In Poland, the sentiment is still lingering that one has to outwit the other. The result is that instead of focusing on the project, they meet in court. Few large investment projects are accomplished without litigation, and that is bad.

I have always said that two things destroy the Polish economy: the law on public procurement and inefficient Polish courts that adjudicate very slowly, refer to countless witnesses and experts, which sends smaller construction companies belly up. A large construction company is able to survive such troubles, but small contractors, if not paid for 2-3 months, unfortunately go bankrupt.

What are your thoughts as President of the company, celebrating its 50 years in 2014 and many successes?

Surely, every manager in my position would be proud of that half a century, because I have gone a long and interesting way from building the chemical plant in Puławy, through bridges in Gdańsk or Warsaw, halls in Pruszków and Łódź, to substantial energy investment projects carried out in Europe.

We have made a huge leap in terms of organisation: from 300 to 1,300 workers, because in the meantime, we purchased two subsidiaries: Mezap Sp. z o.o. and Energezap Sp. z o.o.

In addition, we managed to gain confidence of both investors and financial institutions, and so we were rewarded with the prestigious title of the Ambassador of the Polish Economy and the Ambassador of the Province of Lublin and numerous other distinctions. We are a socially responsible company that has been for years supporting cultural events, sports and charity. I think that Mostostal Puławy has a bright and bold future, since we want to continue to develop using these 50 years forged in steel. • pm

The future of railways in Poland

A

Andrzej Żurkowski, Director of the Railway Institute in Warsaw

f ter s evera l ye a r s of predominance of investment expenditures on roads and highways, time has come for intense modernisation of railway lines. Upon its completion, we will have a modern railway network in Poland.

This raises the possibility of creating a modern transport system that would involve all means of transport in carrying out those services for which they are best suited. An important factor is the creation of intermodal hubs. Only the interaction of all modes of transport will meet the constantly growing transportation needs, which are inherent in social and economic development. The special role of railways in such a system

“The special role of railways in such a system is due to the possibility of handling large passenger flows safely, quickly and without the risk of transport corridor congestion.”

is due to the possibility of handling large passenger flows safely, quickly and without the risk of transport corridor congestion.

Also, our asset is the rolling stock, which is excellently developing in Poland, with many supplies to agglomeration and regional railways. A constant attention should be paid to shortening journey times and building such a connection system that will allow train changes while travelling. In this context, the existence of many independent carriers is a significant impediment, both from organisational and commercial point of view.

Recent summer days have revealed problems with throughput on highways. Only efficient railways will guarantee that transportation will not be a barrier to the development of the country. However, technical, technological and organisational railway solutions must be continually improved, hence the very important role of innovation and designating adequate resources for research programmes in this area.

•

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Real Estate

25 years of change – from state housing conglomerates to the free real estate development market Grzegorz Kiełpsz, President of the Polish Association of Developers

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he last 25 years are an extremely interesting period for the housing market. In 1989, the market economy started in Poland. General thinking then was that apartments are “arranged for” or inherited. Free-market access to housing was only becoming a reality.

In the early 1990s, state housing cooperatives continued to dominate, helped by their experience, state-supported access to capital, but most of all by huge land resources they received for free under Communism. The developer market was in its infancy. In 1993, the Central Statistical Office reported that a total of … 3 apartments were marketed for sale or rent!

With private developers and increasing competition, flats started to be built of previously unknown standard. Large glass elements, silent lifts, spacious terraces and underground parking lots: what has been standard for many years in free-market economies was an absolute novelty in Poland.

In subsequent years, housing cooperatives were running out of free land and abandoned development activity being unable to compete with the private sector. Today, more than 90 percent of flats for sale - approx. 70 thousand per year - are marketed by the real estate development market.

How have our cities changed?

Only in the last decade, the number of buildings in the cities increased by approx. 20 percent, of which 10 percent are residential properties. Owing to transformations they have undergone, our cities do not stand out from European cities any longer.

However, there is still much to be done. Poland is the only EU country where the number of households is greater than that of dwellings.

According to various estimates, between 700 thousand and 2 million homes are lacking in

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Poland. If the current pace of growth is sustained, we will not be able to bridge this gap within a decade. Furthermore, there is a lot to be done when it comes to our living space.

An average Pole lives in 24 m2, while the German average is 43 m2.

The condition of the housing industry and its impact on the economy Now it seems that good times are ahead for the housing industry. After a slowdown that began in 2009 with the “credit crunch,” the industry sees again sales levels posted during the housing boom in 2006-2008. The economic stability of the country positively influences purchase decisions, yet many risks must be realised that may undermine the market.

Not without reason is Poland’s construction sector sometimes called the flywheel of the economy, as it generates up to 16 percent of jobs and accounts for nearly 11 percent of the state budget revenues. On average, one job created in the construction industry corresponds with two and a half jobs created in related industries. Much of this share falls to housing.

What’s next?

Currently, the housing sector deals with the Construction and Urban Planning Code and the so-called Developers Act (which are both being drafted) with the increasingly stringent recommendations of the Financial Supervisory Authority, low availability of mortgage loans, the government’s MdM programme designed to help young Poles buy their first apartment, and technical infrastructure issues.

The challenge ahead is also to live up to the new energy efficiency standards and therefore tackle rising construction costs. Technical regulations are also piling up, which is disturbing because they have gone out of control becoming a major factor of growth in housing prices.

In the long term, the Polish residential market is likely to develop as in the West. This means changes especially in the single-family housing development. The share of this segment will decline in favour of multi-family housing. Additionally, Poles will move away from self-built homes towards ready-for-purchase ones.

National and urban policies will aim to stop urban sprawl and promote compact downtown development with limited car traffic, better public transport, including pedestrian and cycling. The importance will increase of the idea of mixing ​​ districts’ functions so that people live close to work and do not have to travel long distances every day.

The future of the housing market will be discussed on October 7 and 8 at the Real Estate Congress-Developer’s Days in Wrocław, • which I already invite you to join.

New investments, evolving needs of residents, social and economic changes - the 21st century has seen a number of changes, which are clearly visible in the context of rapidly growing agglomerations. During the Real Estate Congress-Developer’s Days, which will be held on October 7 and 8 in Wrocław, renowned experts will voice their opinions on the development of the housing market in Poland. The discussion will be attended by representatives of the public sector, i.a. former Prime Minister Jan Krzysztof Bielecki, Secretary of State in the Office of the President, Olgierd Dziekoński, financial market experts, a.i. Chairman of the Polish Economists Society, Ryszard Petru, developers, architects, analysts, bankers and journalists.

More at www.kongres.pzfd.pl

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Real Estate

Our greatest success is having

satisfied customers!

“After 15 years in business, I can say that the overall balance of SABE Investments has been positive. Though we are a medium-sized enterprise, our performance so far has given us a strong position on the market. This is because a developer’s position depends not only on its scale of construction and sales, but also on its ability to take care of completed investments. Hence, our activities involve the management of completed housing developments,” says Tomasz Skowroński, Vice-President of the Management Board and deputy CEO of SABE Investments Sp. z o.o., in an interview with Jerzy Bojanowicz.

We are celebrating in Poland “25 years of freedom”. How would you assess that time from the perspective of a company that is ten years younger?

It should be noted that it was only after these changes had come about that the real estate development business could be pursued. Obviously, before that, housing construction had also been conducted on a big scale, but conditions for a business aiming at putting in place projects that provide wouldbe occupants with a reliable “roof over their heads,” as well as bringing profits to the developers, arose only after 1989. The factors conducive to creating such conditions included, among other things, generating a strong demand, and creating funding possibilities in the form of loans granted by commercial banks.

Nowadays, real estate develops in Poland the same as in the rest of the world, allowing developers to pursue their business through healthy, economic principles. If a company knows how to take advantage of these, pm

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while at the same time maintaining an unthreatened positive financial condition, it can achieve impressive results.

We can say that our achievements are impressive. We are known for our reliability and timeliness, and our price offers and sale terms fit well with market conditions. The effect of such a strategy is having satisfied customers and robust financial results.

How would you assess the situation of developers?

Housing construction largely relies on financing through credit facilities. But credits involve interest: if the interest rates are low, the situation is good for everyone. That is why the current conditions on the real estate development market are improving with every passing month.

A wisely managed real estate development company, offering attractive projects and applying a moderate pricing policy, should not have any serious problems. Of course a question arises: how will the interest rates change pm

in a one- or two-year perspective? Equally important are the banks’ crediting policies and the macroeconomic outlook. What I mean here is the ability of potential customers to obtain credit. Here, too, the situation is improving.

What projects is SABE most proud of?

The housing developments: “Sonata” and “Symfonia”, “Rezydencja Sienna”, “Rezydencja Saska” in Warsaw, and the complex of luxury apartment buildings: “Aquamarina Międzyzdroje” are what we are most proud of. In total, we have handed over more than 1,000 flats.

In our business, it is crucial that the offer is diversified. In our beginnings, our activity focused on the construction and sales of residential units, but when the demand came about for an investment product, that is, second homes or so-called holiday apartments, we extended our scope of business also in this area. Hence, the “Aquamarina Międzyzdroje” project, located by the sea. pm

Real Estate

Within the traditional housing offer, we have implemented both luxury and economical real estate development projects, catering for the needs of different customers.

development, all commercial units have been either sold or leased (depending on their function).

What is the role of “Symfonia” in reviving Wola, which used to be a working class district?

Other developers are implementing their projects alongside our housing development.

Together, we are creating new and attractive urban space. I think that Wola as a region has great potential and great dynamics.

And about the revival... You are welcome to come and see our housing development. Apart from buildings, there is a courtyard with abundant greenery. This serves as a kind of enclave for the occupants, a playground for children, a kindergarten. pm

How are they selling?

As of today, it is impossible to sell 100% of the offer at the stage of construction. The market is becoming more “civilised”. Let me remind you that in 2006-2007, with the housing market booming, all apartments were sold in advance. In my opinion, it wasn’t a good time, as most of the offers were overvalued. Now the situation is different – residential units sell more slowly; however, the market is stable.

SABE Investment is faring well. All of our projects are at an advanced stage with regard to being sold-out, and the number of available units is systematically decreasing. For example, 3 years ago we started selling flats in the “Symfonia” housing development in the Wola district in Warsaw - which we commissioned last year. Out of the total 237 units in all four buildings, we have sold so far as many as 200. I believe we will sell all within six months, maybe a year at most. pm

And how are commercial units selling?

Each of our housing developments features commercial units, which results from technical requirements, but these are not the core of our activity. They comprise 5-10% of our offer. However, in the “Symfonia” housing pm

What flats are the most popular right now?

In 2013, price was the deciding factor, so the highest demand was for small, cheapest flats. This year, we have observed a growing interest in more comfortable residential units, e.g. two-room flats - 57 m2 in size. We also see that flats that are 100 m2 in size are becoming popular. Potential customers seem to feel more confident now. Nevertheless, I think the cheapest flats will sell the best. pm

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In Q2 2015, “Aquamarina Świnoujście” is to be commissioned. Was the “Aquamarina Międzyzdroje” the template for this project?

“The market is constantly changing and SABE Investment always tries to cater for new needs, and to deliver to our clients what they require.”

Tomasz Skowroński

Yes and no. Yes, because in Międzyzdroje, we acquired experience in lease management. Thanks to that, now our offer is more comprehensive: from construction, through

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Real Estate

commissioning, to management of the premises, which means that the buyer can profit from the lease.

What changed was the structure. In “Aquamarina Świnoujście”, a private complex of luxury apartment buildings located within the seaside district of the town, near the marina and about 450 m from a beautiful, wide beach, we concentrated more on lease, so the premises are adapted for that kind of use – an average unit is smaller than in Międzyzdroje.

The investment will comprise four buildings offering luxury apartments, each of 20-78 m2.

As a standard, all of these will be equipped with a kitchenette. Moreover, within the housing development, there will be a 24/7 reception desk, a SPA, a restaurant, and a large underground car park.

And what are the sales results when it comes to the flats in Świnoujście?

Very good. The company benefits from having an advantageous situation on the market, as well as from our varied offers and their good locations. The sales results are very satisfying, as out of the three buildings in the offer, two are practically sold out at a relatively early stage of construction – 60-70%. pm

Earlier you referred to the residential units in Międzyzdroje and Świnoujście as “second homes”. Does anyone stay there in winter?

Of course there are “year-round” tenants, for instance, in Międzyzdroje, 30% of the buyers purchased the flats for themselves.

With respect to Świnoujście, the percentage of those who buy flats for lease is higher. The specific character of such investments results in a decreased of interest in them in out-ofseason periods. pm

You also lease luxurious residences.

These services were offered by our subsidiary Towarzystwo Inwestycyjne AB Invest, but some time ago, we carried out a merger. As a result, SABE Investments has become the owner of several high-standard detached houses of 260-315 m2 in size.

These are located in attractive spots in Warsaw, and are leased by large foreign and Polish corporations, embassies, as well as individual customers. pm

Do you finish the flats according to the buyer’s requirements?

In Warsaw, 95% of the flats are sold as shell units, and the buyers finish the interiors on their own. However, we cooperate with companies who assist customers in that. As for the seaside investments, they are pm

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completed on a turnkey basis at a minimum, as we assumed that no one has time to travel many kilometres to take care of any finishing work. Obviously, the buyer can choose from finishing elements and can also purchase their own furnishings, then, at the handover, such premises are ready for occupancy.

Do you use the services of the same architecture firm?

We cooperate with a few architecture firms. pm

Plans?

Probably come autumn, we’ll begin implementing a small investment in a prestigious location in Mokotów: 20 flats in “Rezydencja Merliniego”. We also keep a look-out for prospective locations in Warsaw. Beyond this, we already own several parcels on which we plan to commence construction works.

Over the 25 years, financial aspects, especially banking and housing construction have changed the most. The beginnings were hard, but the market has now stabilised. In the past, there were many small developers, while now the market is consolidating.

Thanks to the Internet, the business activities of developers are visible and those who are not entirely honest in their dealings with customers, sooner or later, will disappear from the market.

Today, the offerings are rich and everyone can find something for themselves. Indeed, flats with a radically changed standard are purchasable now. In addition, the quality of construction and the technologies used have changed. 20 years ago, nobody would imagine that a complete housing development could be built in a year and a half. pm

Crediting has also changed. Just a few years ago, loans bore an interest rate of 1618%, now it is 5%. This is a huge change for customers - although they still complain about the high prices of flats. Unfortunately, there are barriers for the lowering of the prices, e.g. ones that are bureaucracy related. In order to commence construction works, a developer has to fulfil numerous requirements, and sometimes many years pass from the purchase of the parcel to the moment the investment is begun. This wasted time involves costs, because there are costs connected even with an undeveloped parcel of land. I’m convinced that all these procedures could be shortened.

It’s also worthwhile, and indeed, necessary to better protect the purchasers. An attempt at improvement in that respect is the Development Act that came into effect in April 2012. This, I consider neutral. As is often the case, it proffers both good and poor solutions. I think that maybe some kind of rating for developers could be of use.

The market is constantly changing and SABE Investment always tries to cater for new needs, and to deliver to our clients what they require.

Are there any new complexes of luxurious buildings on central or eastern Baltic coast locales in your plans?

We have analysed such suggestions. However, it all depends on business parameters.

We do not see a project yet that would interest us, but if it fulfils specific economic conditions and there is evidence of a demand, then who knows.

• pm

Real Estate

Modern retail space Shopping mall for everyone

Poles got to like shopping malls. They willingly spend time there, especially at weekends. It is a great business for developers. No wonder that there are already more than 10 million m2 of retail space in Poland.

Mieczysław T. Starkowski

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Real Estate

T

he total GLA (Gross Leasable Area) in shopping malls in Poland exceeded last June 10.1 million m2. In Central and Eastern Europe we are still beating records in absolute terms. We also remain leader in terms of saturation: 256 m2 per 1,000 inhabitants.

“Throughout the country, there are over 440 such facilities,” says Katarzyna Kocon, an analyst at CBRE, a consultancy. According to the criteria of the International and Polish Council of Shopping Malls, we take into account traditional shopping malls, outlet centers and retail parks. These are centrally managed facilities, with an area of ​​over 5,000 m2 and at least 10 tenants.

As far as supply is concerned, the situation is still very good, but when it comes to demand and customer interest, there have been some changes recently. Consumers are becoming increasingly demanding, and it is necessary to constantly examine their needs.

“In addition, the vacancy rate is slightly rising in the malls,” argues Katarzyna Kocon. It amounts to an average of 3 percent. But in some smaller towns it exceeds the average value and reaches up to 8 percent. The reason is an oversupply of retail space, and the lack of a sufficient number of tenants planning expansion in these malls.

The effects are already visible. There are fewer shopping malls being built now than a few years ago, and they tend to be smaller than 5 thousand m2. Developers approach it with increasing caution.

“In the first quarter of 2014, shopping malls were put into service with a total leasable area of 164 ​​ thousand m2,” informs Dominika Jędrak, Director of Advisory and Market Research at Colliers International, a consultancy. These include nearly 380 shops, service outlets and restaurants.

Around the hypermarket

Twenty years ago, every novelty aroused euphoria. The opening of a shopping mall was a sensational event. It was accompanied by unbelievable crowds and incredible media attention. It seemed that this business is very easy, simply doomed to success.

Meanwhile, the modern shopping mall is an extremely complex organism. Contrary to appearances, management is not simple. Laymen do not realise that even the selection of tenants is not accidental.

“More than 20 percent of facilities in Warsaw today belong to the first generation,” says Joanna Mroczek, Director of Research and Advisory at CBRE. There are usually a hypermarket and a dozen or dozens of retail outlets, including catering and services. Many people have become accustomed to it, but experts say the offer is today insufficient.

Competition is increasing and constantly on the rise. First of all, it is location that plays a huge role. One facility is needed in the centre, and another one - outside the city. It entails various things: organisation of parking lots, selection of retail outlets, including services, entertainment, accessibility for pedestrians, public transport, etc.

“The format is very important too,” stresses Joanna Mroczek. The question is whether it is going to be an ordinary shopping mall, an outlet, or a retail park. It makes an enormous difference and you have to take into account all the conditions, depending on which tenants are selected who will generate sufficient profits.

Customers’ needs Let’s assume that so far a hypermarket formed the mall’s basis. But the situation is changing.

Almost all companies now set up smaller facilities: 2-3 thousand m2 rather than 10 thousand m2. More and more often, a grocery store takes up no more than 500 m2. This changes the whole concept of the mall.

There are of course different methods of deploying tenants in the mall. The easiest often wins. Leaders are served first, and then the others. However, the new trend is to give far greater importance to the so-called zoning, i.e. grouping together shops from a single industry: young people fashion zone, RTV zone and so on. Another thing is to provide parking spaces and smooth driving conditions enabling delivery. Therefore, good cooperation between the owner tenants is so important.

Impulse money

But the mall is not only shops. There is no doubt that the weekend in such a place has become a way of life for some. Many people spend this way more and more time - even on weekdays. Therefore, these facilities are also attractive for banks.

Naturally, banks have different experiences in this respect. Therefore, their strategies are different. Some of them have regular facilities,

known as kiosks, or fully self-service branches. Others are not present in shopping malls.

“Two years ago, we started to build the concept of Alior Bank Express (AEX),” reminds Katarzyna Rybicka, Director of the Strategy Department at Alior Bank. “We were guided by one basic aim: to be where our existing and potential customers are. As shown by various studies, 70 percent of Poles regularly visit shopping malls during weekends. Galeria Krakowska handles 100,000 visitors a day. In Warsaw, 850 thousand people regularly shop in 5 largest malls. Therefore, we decided that we need to open branches in such places, especially that fewer and fewer customers are coming to traditional branches.”

Sygma Bank is also seeking expansion in large commercial facilities. But it follows a little different way. Some time ago, it informed it would open 30 island points.

“In this way, we stand out from the crowd,” says Damian Ziąber, a spokesman for Sygma Bank. “First, we are more visible. Besides, traffic is heaviest in these footpaths. And finally it is also a substantial argument - such a booth costs much less (both equipment and maintenance) than a large banking facility. Not to mention the fact that we are able to improve the visibility of our brand and the services we provide.”

“In a large shopping mall, there must be financial service points,” argues Paweł Klimczak, Director of Galeria Mokotów. “Our Gallery was founded in 2000. Since that time, it developed to include more and more bank branches. Currently, there are 3 of them, in addition to 10 ATMs.

Bar next to the cinema

It was already mentioned that in the big shopping malls a new lifestyle was born. Shopping becomes associated with spending free time, with pleasure, entertainment. After a visit to the third store, the customer wants to drink, and later even eat. Because shopping malls are becoming more popular, there is an increasing number of catering establishments: cafes, bars and restaurants.

Initially, there were only simple food service points, then came fast food chains, and now - at least in Warsaw and the largest malls - we often have more expensive restaurants, suitable for arranging a business meeting or celebrating a family event. The offer must be tailored to local needs, virtually to everyone’s pocket.

“Firms open new eateries,” admits Katarzyna Michnikowska, a Senior Analyst at Colliers International. “Of course, there is a difference between large and smaller cities. In the former, August 2014 polish market

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Real Estate

the phenomenon is much stronger, with both network facilities, and individual, sometimes innovative, concepts. In small towns the situation is improving, but not all brands reach them, and mainly local ones develop.

Generally, gastronomy accounts for about 10 percent of outlets in shopping malls, and the figure drops to 6 percent in retail parks or outlet centres. Fragmentation is quite noticeable. The player who has the most outlets (Grycan - 64) has only a 4 percent share of the total. This points to the wide choice and diversity in the sector.

“We realise the importance of gastronomy,” explains Anthony Vesin, Director of Warsaw’s Arkadia. “It is a very important part of the mall.

From the beginning, more than 30 cafes and restaurants have operated in Arkadia. Cafes are located mostly in the passages and between the shops and, restaurants are the basis of food court.

The Management Board of Arkadia attaches great importance to research into the needs and behaviours of customers. It is surveyed how much time they spend in the mall, what they

are looking for, what they like. Virtually everything is looked into: reactions to noise, light, odors, but also immeasurable satisfaction with the atmosphere of the facility.

An oasis of peace

“Knowing the opinions of our customers, we carefully look at the catering,” says Anthony Vesin. “For some time, we have been realising that food court is outdated and too small. It does not fit all comers, because they arrive far more numerous than expected 10 years ago. Therefore, we had to react. We decided to meet the expectations of customers, expanding the dining area and clearly raising its quality and comfort.

The renovation of the ground floor, first and second floors are planned to be completed in August this year. All the main part of the first level of Arkadia - the Theatrum - will be extended by more than 200 m2. (although the number of outlets will not change). Previously, there were a total of over 500 seats. Now they

will be nearly 850. This area has been modernised, with a lot of greenery added. There will a functional, comfortable area, including a new space for children.

Everything points to the fact that shopping malls, albeit at a slower pace than in the past, will continue to grow. Poles have become accustomed to them, and even got to like them.

If, therefore, their owners manage them appropriately, taking care of the needs of consumers, their business is not likely to be in danger in the near future.

“Taking into account the facilities, which were under construction at the end of the first quarter of 2014, it is estimated that by the end of this year about 445 thousand m2 of retail space will be marketed, including more than a half in small towns (with less than 100 thousand res• idents),” claims Dominika Jędrak.

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Logistics

TEN-T corridors Jan Sikorski

64  polish market 

Logistics

Photo: Marcin Rakowski

I

n October 2013 Siim Kalaas, Vice-President of the European Commission and Commissioner for Transport, announced the guidelines of a new EU transport policy.

The importance was confirmed of TEN-T - Trans-European Transport Network, including railways, roads, waterways and air routes, aimed to facilitate transport within the Community, especially from north to south and from east to west.

The EU transport policy implies that at least 30% of road freight will be taken over by other modes of transport, such as railways. The Community wants to promote the so-called intermodal transport, i.e. the one involving more than one mode of transport without cargo being repackaged. An example of this can be container transport: merchandises cover most of the distance in containers on board of vessels, and then reach their final recipients by rail or by car.

“Transport is vital to the European economy.

Without good connections Europe will not grow or prosper. This new EU infrastructure policy will put in place a powerful European transport network across 28 Member States to promote growth and competitiveness. It will connect East with West and replace today’s transport patchwork with a network that is genuinely European,” said Siim Kallas.

The implementation of EU objectives will be possible owing to the core network of corridors, consisting of 9 tracks. It is meant to form a basis for planning coordinated development of infrastructure and for integrating different modes of transport. Each of the corridors is intended to include roads, railways, inland waterways and air connections, and pass through at least three member states.

Two of them pass through Poland - one connecting the North Sea ports with the Baltic states and the Baltic-Adriatic corridor linking Scandinavia with the Adriatic Sea. Especially the second one, which runs through Poland in 80%, makes the most of the geographical situation of our country. It will improve transport of goods to the Nordic countries, facilitate access to the Baltic ports for contractors from Slovakia and Hungary, reduce the cost of Polish exports and imports, and increase the importance of our economy in the region.

The development of the Baltic-Adriatic corridor is also an opportunity for the Polish economy. In the new EU financial perspective, over EUR 26 billion have been allocated for the construction of TEN-T, of which at least 4 billion will be earmarked for the modernisation of infrastructure and for the construction of inland terminals and logistics centers in Poland. Hundreds of new jobs will be created across the country.

It is also a chance for the development of Polish sea ports. Hungary or Slovakia rely for their exports mainly on German ports. If access

“ The development of the Baltic-Adriatic corridor is also an opportunity for the Polish economy. ”

infrastructure is provided, Poland could take over some of these shipments.

Enthusiasm for the idea of the corridor could be seen during the European Economic Congress, which took place in May in Katowice.

Representatives of the regions, through which the Baltic-Adriatic corridor runs, emphasised that investment in TEN-T opens up huge growth prospects for their regions.

Obstacles were also discussed which are encountered by the project. “The corridor will be as strong as its bottleneck - port facilities of the Tri-City,” said during one of the debates Piotr Frąckowiak from the Baltic Container Terminal and the Council of Stakeholders of the Port in Gdynia. He namely alluded to the report by the Team of Economic Advisers “TOR”, suggesting that an increase in cargo handling in the ports of Gdynia and Gdańsk will make the throughput of the Tri-City highly insufficient.

One remedy can be revitalisation of the railway line 201, connecting Gdynia and Bydgoszcz. If adapted to the needs of freight traffic, it would provide an alternative to the GdańskTczew line, which is today one of the most congested rail routes in Poland.

During the debate held in June by the Council of Stakeholders of the Port in Gdynia, Maciej Kaczorek, Director of the Office of Strategic Planning of PKP PLK, said that the company did not plan for the time being upgrades over the entire length of the line. The problem is that the project features too low in the Implementation Document for the Transport Development Strategy. However, in circles close to the Ministry of Infrastructure and Development, there is more and more talk of giving greater priority

to the project. The problems with throughput are also widely referred to by MPs, both from the coalition and the opposition.

It is also necessary to coordinate operations at the international level. Krzysztof Kasprzyk, Councillor at the Permanent Representation of Poland to the European Union, said during the European Economic Congress that Poland had a very strong position in negotiations since the corridor runs in 80% through its territory. However, Krzysztof Szymborski, President of the Baltic Container Terminal and President of the Council of Stakeholders of the Port in Gdynia, claims that necessary investments include cross-border sections too. An example is the border crossing Zwardoń-Skalite where infrastructure system forces splitting the squad into smaller parts, which significantly impedes the transportation.

“Already today, 24 million tonnes of cargo are shipped down the Baltic-Adriatic corridor,” added Szymborski. “For major Polish seaports - and these are in an exclusive group of 94 key European ports - this is not a discovery. However, it is a strategic challenge for the government and its transport policy: ensuring efficient transport of goods between ports and neighbouring countries in the south but also in the east. It is not only about motorways, but also about railway routes and barge transport. There is furthermore, a long list of local projects within the ports and around them. Experience has shown that efficient transport network stimulates the economy along the entire network, not just in ports. Therefore, the strategy is a matter of concern not only of local regions, but of • the whole country.”

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Logistics

Cooperation

of the logistics and automotive industry Solutions and concepts in logistics services for the automotive industry have long moved beyond merely transport operations. Thanks to modern logistics, the automotive industry can develop better, whereas the logistics industry implements stateof-the-art solutions inspired by the requirements of automotive companies.

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W

hy does the automotive industry have such an impact on the logistics sector?

Among other things, this is related to the globalization of the manufacturing process, dispersion of the suppliers of components, or appearance of newer and newer models equipped with advanced technological solutions. An integrated supply chain management system is required.

Logistic operators who want to work for the automotive companies have to keep up the pace, and sometimes even “be ahead”, by designing solutions and services which can be implemented both in the local and in global markets.

is decreasing, sales of parts and accessories to non-European markets have been clearly increasing.

“Comprehensive logistics solutions responding to the specific needs of the automotive industry are necessary to enable the expansion of exports and to ensure that goods reach their destination safely and on time.

From the viewpoint of the transport and logistics industry, in order to provide logistics services for the automotive market, one has to have appropriate know-how and infrastructure - like for example a global network - and meet strict quality requirements,” says Arkadiusz Marczyk, Key Account Manager at DB Schenker Logistics.

European centre for the automotive industry

Multi-stage service

In Poland the automotive industry is an important branch of economy. According to the Association of Automotive Parts Producers and Distributors, around 900 producers of car parts operate in Poland. Thanks to that, our country is considered to be the European centre of subdelivery for the automotive industry. An overwhelming majority of the accessories and parts is exported. The main markets for them are: Germany, the Czech Republic, France, Italy, and Great Britain. The report “State of the Automotive Industry and Its Role in Polish Economy”, prepared by the KPMG consulting firm, shows that even though the number of cars manufactured in Poland

Logistics services for the automotive industry are quite special. A logistics operator has to constantly work on the optimization of their own processes and continually search for new solutions so that they constitute an added value for the customers. Of no less importance for the automotive companies is being ready to provide services for the customer’s process in the whole supply chain. Starting from transport of raw materials from the suppliers, to the logistics of production, to services for the market of spare parts, the so-called “aftermarket”. Moreover, customers expect special services, for example a pre-assembly of components.

Logistics

“Of great significance is also experience in providing services for automotive companies, preferably confirmed by references given by other customers. Knowledge of the specificity of this very market, production in the automotive industry, and processes and methodology of deliveries in accordance with the just-in-time rules are also essential. It is also important for a logistics operator to have high quality standards and work in accordance with the culture of constant improvement. Finally, it is vital that the company can ensure their customer’s security, for example by having appropriate insurance and emergency plans in case of unforeseeable events,” lists Arkadiusz Marczyk.

Solutions adjusted to local needs One should remember that high standards may mean something completely different in Brazil, the United States, Russia, or Poland. It is usually defined by current culture as well as specific local conditions, for example legal. An operator offering their services for automotive companies must know this specificity in practice, be an expert in it - and this can be ensured only by experience resulting from presence of many years on these markets.

A global operator, such as DB Schenker Logistics, has a unique standard of work in branches all over the world, which makes it easier to obtain better results. Automotive companies, while growing on new markets, can encounter some difficulties.

An example would be a company from the European Union opening a new factory in Russia. The flow of goods does not require customs clearance in the EU but it is necessary in Russia. How can one handle in such a case the transfer of production and standard of deliveries to several hundred suppliers as soon as possible? Potential problems and obstacles might make it virtually impossible to maintain high standards. DB Schenker Logistics meets the challenge by offering their customers a global network of offices and terminals, as well as extensive knowledge (in many acquired over decades) about markets in many parts of the world. It enables us to deliver global solutions for local customers: design in Cracow, Poland, and implement in Shanghai, China.

“In the face of the constant drive towards optimizing costs, shortening supply chains, and reducing inventories, uninterrupted access to information is particularly important. Appropriate IT tools are essential here. Starting from the simplest function of tracking to reporting the manufacturing process at the customer’s supplier. We offer our customers tools that enable to quickly launch a professional shipment management centre through which they can manage the shipments of their suppliers and contractors without considerable financial outlays and unnecessary conversion of their IT systems. The system informs you about the delivery of the shipment, enables to check the timeliness and frequency of deliveries and to look for ways of optimization of the whole process,” adds Arkadiusz Marczyk.

Selected examples of services for the automotive industry 1: Handling manufacturing processes - deliveries of

components for assembly One of the examples could be a dedicated solution including rail transport, used for one of the car producers in Germany. DB Schenker’s train, according to the regular schedule, stops at three stations in Germany every day. At every station components from 250 suppliers that have been consolidated in advance using the road network of DB Schenker Logistics are collected. Finally, the train delivers them to the customer’s production plants.

2: Logistics of the market of spare parts and returns It is a demanding logistics service as flows cannot be planned and individual volume of shipments is usually small. The main customers are networks of licensed showrooms or garages. Shipments usually consist of a single pallet or several cartons. As part of this, DB Schenker Logistics offers additional services, such as deliveries on the specific day or time, logistics of returns, cash on delivery, electronic handling of documents, and many other.

3: Special services, like pre-assembly of components DB Schenker Logistics provides these services for one of the key car producers in Germany. In the warehouse located in the immediate vicinity of the factory, the operator pre-assembles modules and then, in the just-insequence system, delivers them directly to the produc• tion line.

Arkadiusz Marczyk, Key Account Manager at DB Schenker Logistics.

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WARSAW

INTERNATIONAL

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WIMS 2014

SUMMIT VII edycja kongresu

Innovation

Mobile payment standard Bank in a cell. Such a buzzword has been on for several years. Big banks have recently taken matters into their own hands. There will be a lot of buzz about it next year.

Mieczysław T. Starkowski

A

t the end of June, the Office of Competition and Consumer Protection (UOKIK) approved the creation by six banks of the Polish Payment Standard. The purpose of this platform is to provide a new payment standard based on mobile communication. This creates a completely new situation for customers. When going shopping, you will soon not need cash or a credit card. Just a mobile phone.

Naturally, there will also be a brand new system on the financial market. For the first time on such a large scale, major banks have agreed to and decided to implement a single and useful for all Poles market standard making use of the latest technologies. It is, moreover, open to other market participants, which means that in the future other banks and financial institutions will be able to use it on the same terms as its founders.

UOKIK pursued investigation proceedings into market concentration. The purpose was to verify whether the establishment of the company will not lead to restricting competition.

UOKIK did market research, asking for opinion the Financial Supervisory Authority, the National Bank of Poland, other payment service providers and banks not involved in the project. The study showed that the concentration will not restrict competition, because the system is open to all financial market participants. After a positive decision of UOKIK, the applicant banks can take a stake in the Polish Payment Standard.

The system will allow any kind of settlements made by ​​ mobile phone: payments in stores, cash withdrawals at ATMs, online payments and mutual settlements between owners of mobile phones (the so-called P2P payments). In each case, it will be done in the same way: with a sixdigit code. The solution can be adopted by banks, clearing agents, as well as ATM operators. The

emergence of a single standard will remove all barriers for companies for which creating their own mobile solutions would mean unreasonable costs. Thus, a local small cooperative bank will be able to use the universal payment system on the same terms as the largest commercial banks.

“The decision of UOKIK allows us to proceed with the next, final phase of the mobile payment system,” says Adam Malicki, President of the Polish Payment Standard. “The solution proposed is innovative. We believe that the introduction of the universal Polish payment standard will definitely change not only the Polish financial market, but also daily behaviours of people.”

The Polish Payment Standard creates an open universal mobile payment system which can be joined by any bank and clearing agent in Poland.

In order to offer its customers mobile phone payments, the bank should add a mobile payment module to its own existing mobile payment application or use the application prepared by the Polish Payment Standard.

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Innovation “Our advantage over other solutions available on the market is that we create a market standard available to all interested parties,” explains Adam Malicki. “So we are already discussing with companies interested in using our system.”

Naturally, there are many initiatives regarding mobile phone payments. Its originators want the Polish Payment Standard to become a universal system in Poland by making it the most convenient and useful for all participants: customers, banks and merchants. They point to its usefulness, which is an extremely important element.

When it comes to the number of initiatives on the mobile payments market, Poland is at the European forefront. But in terms of the use of technologies, Western Europe, and in some areas Asia and Africa as well, are far ahead of us. Poles are full of ideas, but they have difficulty putting them into business practice, and consequently -making them a success. It is because they encounter serious barriers. Above all, they lack capital and effectively functioning financial institutions.

In this case, we are not at a disadvantage, though. The market has not been divided between the global giants yet. There is still room for of original domestic innovations.

For several years, mobile payments in Poland have been worked on by a couple of companies.

Initially, these were mainly ICT companies of all sizes, from start-ups to international corporations. Some of them, especially small ones, have already developed good solutions.

And then troubles started. The essence of this business lies in the fact that it is difficult to act in it alone. In principle, an agreement is necessary between several partners, or so it seemed in the past. Then, a few years ago, the dominant business model required close collaboration between application suppliers, banks, mobile phone operators (and possibly other partners). Meanwhile, the first one - the originator - is usually a small company, which could also play a role (although not necessarily) of a clearing agent. Cooperation was therefore extremely difficult because of an incredible psychological barrier. The giants (banks and operators), perfectly aware of their capital domination and confident - often wrongly - about their technological advantage, were reluctant to accept such an arrangement.

Progress was slow. It took a lot of time for innovative solutions to gain ground. You had to wait for years to achieve success. Small businesses hardly withstood financial burdens.

Among the first applications making use of this technology were parking and public transport fees. Theoretically - a great idea. Still, they have not made a furore.

And we were pioneers six years ago. Poland was the first country in Europe to offer such

services. Unfortunately, there was no sufficient promotion.

Nevertheless, within these few years, a number of providers emerged, as there is an almost universal belief that mobile payments cannot be escaped. There has recently been an increased interest from cities that want to enable mobile payments for parking and public transport.

However, it is not easy to precisely determine the scope of the phenomenon. Companies do not want to disclose the number of mobile payment users, which makes you naturally assume that there are still relatively few of them.

According to information from three years ago, less than 50 thousand people paid this way for public transport in Warsaw. On this basis, it is estimated that there can be a maximum of about 700 thousand across the country.

You can say that mobile payments - unlike celebrities - are known for being unknown. For most Poles, they are still a mysterious novelty.

Therefore, much effort should be put in their promotion and public education. But here comes again the essence of this business. Partner companies did not feel responsible for the development of joint business and did not want to incur all the expenses.

Last year, the situation changed radically. Two biggest Polish banks bet on mobile payments. They have their business ideas and promise to support them consistently. Other partners hardly push their way through under new circumstances. Self-confident mobile operators have been reduced to the role of suppliers of radio waves, because - from a technical point of view - mobile payments are only about data transmission. Banks have created their own solutions and position themselves as sole suppliers. However, they have solid grounds for doing so. The most important factor is the large number of clients (both individual and corporate) accustomed to services offered by their financial institutions.

In addition, they learnt lessons from the past and attach more importance to the promotion of these services.

“When working on the electronic banking solutions, we decided to offer our clients a new quality of mobile payments,” says Zbigniew Jagiełło, CEO of PKO Bank Polski. Last year, we launched our own mobile banking programme of the fourth generation under the name of IKO. A few months later, the initiative was enthusiastically referred to by several other Polish banks.

Based on previous research, they came to the conclusion that there is no point in inventing various applications because it only upsets, and sometimes even discourages, potential customers. Six big banks decided that they want to build a common standard for mobile payments in Poland, and they signed an agreement on strategic cooperation.

The founders of the Polish Payment Standard

The application was filed with UOKIK on February 11, 2014 by: - Alior Bank - Bank Millennium - BZ WBK - ING Bank Slaski - mBank - Polish PKO Bank

The queue is building up

The willingness to use the system has already been expressed by: - Eurobank - BNP Paribas Bank - Credit Agricole - Getin Bank - Idea Bank - Dotpay - PayTel SA - Comp Innovation Centre The Polish Payment Standard is expected soon to announce more companies interested in using the platform.

The project is unique in Poland (and probably in Europe) because of its scale: the financial institutions involved have a considerable market share. Therefore, the Polish Payments Standard was supposed to be operational already in 2014.

As stated some time ago by Zbigniew Jagiełło, it was assumed that at the end of this year the solution could have 500 thousand users. But the plan proved too ambitious. For now, their number reached to 175 thousand (and users of all mobile payment systems in Poland are probably no more than 800 thousand).

The details of IKO are still being fine-tuned, which confirms the above-mentioned thesis that a small Polish company would find it difficult to finalise the project. Only a big bank can afford it.

Bank Pekao SA has developed its own mobile payment system. Today it is hard to say whose idea will win, and therefore who will be the market leader in Poland, and perhaps even beyond its borders.

There are already a lot of mobile payment solutions in the world. According to the Gartner Group, they have over 11 million users in Eastern Europe. That said, no system has got a very strong position so far. For now, no one says it aloud, but theoretically the Polish Payments Standard could be a European one.

•

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Innovation

From to

resourcefulness

well-known brands

The past quarter-century has seen an amazing entrepreneurship in Poland. At present, there are probably about 1.2 million businesses in operation. Some of them (though still not many) are already large, well-known and recognised in many countries.

Mieczyslaw T. Starkowski

F

akro, Pesa, Inglot, Dr Irena Eris, CD Projekt and many others. Examples of renowned companies can be multiplied. The selection is random, but it is difficult to enumerate them all.

What is the reason behind their successful development? Primarily the courage and determination of their owners, as well as skillful management. Creating legal and institutional environment is also extremely important. However, many people think that 25 years ago conditions for conducting economic activity were much better than now.

“Of course, companies set up at that time have different lineages,” says Andrzej Arendarski, President of the National Chamber of Commerce. At the beginning, the so-called Polonia companies created in the 1980s played a

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crucial role. Their representatives had already had business operations abroad before. Those managing Polonia companies were the people who know the free market rules, have money and good contacts, and possibilities to raise capital. Demand was then huge, which is why these companies were formed in various industries and often grew like a weed. It is in that period that Jerzy Starak and Jan Kulczyk started their businesses.

The second group has roots in craftsmanship, but the majority of craftsmen were unable to push their way through under new realities.

And yet some of them knew how to stand out.

The vast majority, however, is new companies formed in the past quarter-century. They were set up and thrive thanks to good ideas and resourcefulness of their owners. Some grew into

corporations, but small and medium-sized enterprises dominate, and it is them that determine the condition of the economy.

Some businessmen belong to the young generation, which works in new, often innovative sectors of the economy, especially in biotechnology and ICT. For example, in the field of computer games, we have already reached a significant position in the world. These are mostly young companies, but some of them are doing very well, win prizes, find plenty of buyers, including abroad.

Polish business has therefore many faces. Generally, it makes good use of the opportunities offered by the existing economic system. Still, for various reasons, many complain about the fact that the economy is far overregulated. Entrepreneurs have to spend too much

Innovation

WELLtime trying to comply with bureaucratic procedures. There is too much control from the Social Insurance Institution (ZUS), tax offices and so on. This does certainly not make entrepreneurs’ lives easier.

It is difficult to assess the number of companies actually operating. Approx. 3 million are officially registered, including sole traders, but a mere 1.2 million are in operation all over the country (there are virtually no white spots).

There are still not many companies of world renown. The process of building their own brands has only begun. In the early 1990s, Polish companies worked for foreign customers, often anonymously, under different brand names. For example, sewing clothes for export under a foreign brand was very popular. In recent years, this has changed. Polish brands get stronger, sell their goods abroad without fear and complexes. You can see that companies have come to take great care of it. There is no doubt that some of them put a huge emphasis on building the brand. Sometimes it involves a considerable investment abroad. Some companies, including smaller ones, not only sell their products, but also invest capital. They are already present on many markets. This phenomenon started on a larger scale in the last decade.

Some companies have even been in trouble because of rapid growth. Take for example Fakro, a manufacturer of windows. The company encountered unfriendly practices of its competitor - Danish Velux. It is because it has grown so much, becoming a major global player in the industry. And not long ago, it was only starting in a small workshop in Podhale. This example shows that a good idea, hard work and a bit of luck guarantee rapid growth not only on the domestic market.

Unfortunately, there are still not many Polish companies well-known in the world in the sphere of consumption. Manufacturers of rolling stock, or buses are recognisable, but popular consumer products are not. Undoubtedly, this is due to the fact that you need to spend huge amounts on promotion in this sector. To put it simply, for a supplier of locomotives, it is enough to reach a certain number of potential recipients in a given country, explaining to them primarily technical advantages of the product. But if you sell candy, it is necessary to win millions of consumers by playing on their emotions. In this case, it all comes down to individual tastes and elaborate manipulation techniques.

Such activities are costly. Unfortunately, many Polish companies still cannot afford it.

They have very good products, but lack resources for promotion. But even in this area, things have started to change for the better. A notable

example is the food industry. Polish food (bread and meat) is gaining reputation for its high quality. According to Andrzej Arendarski, in this case we can even talk about some strong Polish brands. Many Polish companies, as well as individual products are recognisable. A lot of traditional brands are still there, because they are very well-known and popular, i.a. Hortex, Konspol, or Wedel. And among new ones Maspex or Mlekowita. They have long existed in the public consciousness, associated with good quality, taste and health. Therefore, consumers would certainly be surprised if they are no longer available in stores. But Polish food products find it hard to break through in the world, mostly because of high costs of promotion, as already mentioned.

When it comes to industrial consumer goods, the situation is even more complicated. Polish companies have to compete with global giants that spend huge amounts on promotion. It is about tens or even hundreds of millions of zlotys. Most of Polish companies simply cannot afford it, and therefore find it extremely difficult to successfully compete.

KNOWN Perhaps no one in the world is working today to produce new laundry detergents. This industry has been dominated by corporations that can be counted on the fingers of one hand.

In the field of household chemistry in Poland, an exception is dishwashing liquid Ludwik. It has over 50 years of tradition, consumers got accustomed to it, and it is simply good, that is why it is doing so well.

Overall, there is a lot to be done, because Poland (as a country) is not a strong brand in the world. Foreigners either do not associate it well or do not know it at all. That is why Polish products usually lose in competition with American or German ones. Intensive promotion (with substantial financial outlays) should be done by the government: the Ministry of Foreign Affairs and the Ministry of the Economy. Unfortunately, to date, such measures have been ineffective, and passed virtually unnoticed. Only a few years ago, the Ministry of the Economy started to help entrepreneurs through export support programmes.

The National Chamber of Commerce is running two such projects: Polish Meat and Polish Mining Machinery. They exist thanks to EU funds intended to promote exports outside the EU. “This is important, because in my opinion support for industries is more important and far more effective than for individual companies,” says Andrzej Arendarski. “It namely gives a

chance for local consumers to understand that Polish meat is good as a whole, not just specific products.”

There are several sectors of the Polish economy, which are strong and already known in Europe and even in the world. These include, among others, furniture or dairy products.

They achieve very good results, but recognisable brands - let’s repeat it - are still missing.

You can see it even more clearly by taking as an example Poland’s export blockbuster: vodka. In the past, the owner of the brands was Agros, a foreign trade enterprise. Already in the 1960s, it realised the importance of promotion, spending considerable amounts on it. After the economic transition in the 1990s, Polish vodka lost its strong position in the world. At some point, it disappeared from the shelves outside the country. Here comes another paradox. A large part of the Polish spirits industry was taken over by foreign investors and they started to reintroduce Polish vodka on the markets all over the world.

There are some industries that managed to develop quite well and that give Poland a good rating in Europe. These include, among others, the automotive industry, and above all electric household appliances. In the latter case, we are even a leader in Europe. But these factories are almost entirely not Polish. The technical idea comes mainly from abroad. In Poland, there are only assemblers, because we offer lower labour costs than the West. Naturally, this has good sides too. People have work, earn, pay taxes. But there is also a danger in it. Such factories do not guarantee sustainable development.

Moreover, they can be moved elsewhere at any time, under any pretext.

“In general, it can be said that the Polish economy is growing,” says Andrzej Arendarski. We have survived the world crisis relatively safely.

We enjoy a decent economic growth. We owe it to small and medium-sized enterprises and Polish resourcefulness (i.e. entrepreneurship).

The reasons are known quite well. We were not spared by the history. There were many difficult moments, we encountered many obstacles and we learnt to overcome them. No wonder that in peaceful times we are doing very well.

We are also ambitious and it is another important feature that makes many Polish entrepreneurs want to achieve in a short time at least the same as their counterparts in the West. They have a lot of energy and are able to endure difficulties, which are not acceptable for Western people. So they often get admirable results for a country that 25 years ago started from scratch • its adventure with the market economy.

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Beautiful side of Polish economy

Problems with boosting the professional activity of women holding doctoral degrees:

Where does

the problem come from and howcan the women be helped Iwona Wendel, Under-Secretary of State at the Ministry of Infrastructure and Development

I

n order to give a full answer to this question, one should first of all look at statistics. Women account for nearly 56% of university and college students, but the percentage differs depending on the type of degree programme. Women choose sciences as the subject of doctoral thesis less often than men. It is also worth noting that women account for 40% of all research workers, but the share decreases the higher the academic degree and position.

Among the barriers to boosting women’s presence in the scientific research sector is in particular difficulty with combining family life with research work - achieving worklife balance. Cultural factors are also of no small importance – women choose the humanities, which are considered more “feminine,” more often than men. Additionally, there is also what we call “the glass escalator,” which means that in occupations dominated by women, where there is no shortage of women well prepared to assume high posts, it is men who are promoted more often. The same is the case with the research sector. Women make up almost half of those employed as researchers, but only one in five people with the title of professor is a woman. The prestigious Presidium of the Polish Academy of Sciences (PAN) has 24 members and all but one of them are men. Finally, one should also remember about the pay gap between women and men in equivalent posts.

The Ministry of Infrastructure and Development has actively taken a number of measures to promote support from European Union

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programmes for women. The programmes are designed for example to raise women’s professional qualifications and promote work-life balance. Programmes carried out as part of the National Strategic Reference Framework (NSRO) 2007-2013 support women’s research and business activity in many different fields – from training and assistance in starting up a business to innovative undertakings.

An example is the Pomost (Bridge) programme carried out by the Foundation for Polish Science using funding available under the Operational Programme Innovative Economy. The aim is to help the best scientists with small children to return to intensive research work and make it easier for pregnant women to conduct research projects financed from external sources.

Apart from many measures designed to boost women’s professional activity and make it easier for them to achieve work-life balance, which are available under the Operational Programme Human Capital, there are also support instruments dedicated to female doctoral students. They include scholarships in the fields of formal and natural sciences, and technology consistent with the province’s Regional Innovation Strategy. Doctoral students were also offered additional support in the form of training courses in how to bring research results to the marketplace.

Despite the changes made, we can see that the situation of women on the labour market is still difficult. As a result, apart from promoting the idea of equal opportunities for women and men, we focus on helping

women return onto the labour market and on improving access to care services. We explain what benefits small and medium businesses may gain from introducing flexible forms of work, which enable the employees to reconcile their work with private life. We help women aged 50 or more to raise their qualifications, enhancing their chances on the labour market. Moreover, as part of the Operational Programme Human Capital we have supported the development of enterprise among women, which included granting them non-refundable subsidies coupled with advisory services and training provided in the first 12 months of their business activity and preferential loans of up to PLN50,000 per person. We plan to continue this kind of support in the years 2014-2020 within regional operational programmes managed by province governments.

• In the case of doctoral studies, the biggest number of women have chosen social sciences (30.0%) and the humanities (25.6%), agricultural sciences and engineering and technology. The smallest number of them have chosen engineering and technology (10.3%) and agricultural sciences (6.1%).

At technical universities, female students choose mainly non-technical courses and such faculties as architecture, chemistry, biotechnology, environmental protection, chemical engineering and technology, biomedical engineering and materials engineering. Measures have been taken to promote technical fields of study among young women within two campaigns: “Girls, go to technical universities,” and “Girls choose sciences.”

Beautiful side of Polish economy

Healthcare from

A Z to

Anna Rulkiewicz, CEO of LUXMED, talks to Rita Schultz.

The agreement with the Polish Olympic Committee is an honour for you, isn’t it?

It definitely is. We will now take care of the best Polish athletes, which testifies to the quality of our services. One of our hospitals - Carolina Medical Center - is recognised as a centre specialising in orthopedics and sports medicine. When integrating the healthcare market, we always try to take maximum advantage of the potential of all entities, and Carolina Medical Center has a huge potential. We want to use this medical centre to promote a healthy lifestyle and Polish medicine - also in sport. The infrastructure of this hospital - for example, the functional medicine centre - will be very helpful in achieving our goals. pm

One year and a half ago, LUXMED was taken over by Bupa an international healthcare group. How does the new owner influence the company’s operations in Poland? Does it introduce many changes?

Admittedly, LUXMED and Bupa match perfectly. We did not have to change much, because we think the same way and have the same priorities. LUXMED is thinking long term, and therefore support from the strategic investor is extremely important.

We are pleased that we can now develop as part of Bupa and learn from its experience.

Bupa operates in many countries around the world and perfectly understands differences due to the nature of individual markets.

I believe that Bupa’s entry to Poland is excellent news not only for LUXMED, but also for the entire market. Bupa has no shareholders and reinvests all its profit seeking new solutions to provide even better healthcare. It is pm

You have been with LUXMED for many years. How was the company changing over that time?

When I came to LUXMED in 2002, we had only 3 facilities. Today, looking at its scope of operation, it is hard to imagine how it looked like 10 years ago. We have 161 facilities throughout the country, including 5 hospitals. We are developing a coordinated model of healthcare, offering outpatient care, long-term hospitalisation and diagnostic imaging. We want to provide our patients with medical care from A to Z. We are more and more intensively penetrating the market of highly specialised medical services. Recently, we have signed an agreement with the Polish Olympic Committee to become its main medical partner. pm

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a huge benefit for society, because supporting LUXMED Bupa will contribute to improving the overall health condition of Poles. Bupa is also willing to share its expertise when discussing systemic changes to the medical care sector.

What are the challenges facing healthcare providers in Poland?

Numerous. First of all, providers of medical services in Poland are facing growing healthcare costs. Problems affect the whole market. The population is ageing, there is a shortage of doctors and salaries are on the increase. Companies that are looking for new solutions in healthcare invest in IT infrastructure and medical equipment. All this generates high costs, so it is necessary to optimise operational efficiency to meet the market challenges. pm

There is much talk about additional health insurance. Do you think it solves the problem?

Certainly, the Polish medical market needs new funding streams and additional health insurance is one of the ideas. It has been debated already for a long time, but concrete decisions are still lacking. Meanwhile, experience from Western countries shows that what makes for the efficiency of healthcare systems is not only state budget funds, but the performance of the entire healthcare model. I would not say, however, that additional health insurance is the solution to all problems - it is one of the solutions that can support the Polish medical care market. • pm

consistency

First of all,

con sis ten cy

Beautiful side of Polish economy

Karina Wściubiak-Hankó, President of Alchemia Group, talks to Rita Schultz.

You have been the President of Alchemia for more than a decade now. How has the corporate group changed over these years?

It has changed virtually in every respect.

Today, we are a buoyant group of companies with revenues of up to PLN 1 billion and providing employment to more than 2,000 people.

Seamless steel pipes produced by Alchemia are used to build new generating units, pipelines, boilers, stadiums, flyovers, motorways and so on. One of our companies makes components for the railways, metro and trams. At present, Alchemia offers the widest selection of seamless steel pipes in Poland. pm

What challenges is the Group facing?

The steel sector is closely associated with many other economic sectors, both in Poland and in Europe. A rise in orders in the power, chemical or construction industry has an impact on the situation in our Group. On the other hand, we operate on a very competitive market.

It is especially producers from outside the European Union, who are not constrained by environmental protection requirements, that are stepping up the competition. We also work to pm

broaden and complement our product line, and acquire new certificates, which may help us expand onto new markets, like for example Kuwait and Saudi Arabia. We are also going to exploit a chance that is opening up for the steel industry as the sector may be given at last an opportunity to benefit from European Union funding.

How do you assess the quality of Polish female managers’ education? Why are there so few of them in the highest positions?

Women are becoming an increasingly strong group of managers in high posts. The glass ceiling is cracking, approach to women’s role in life is changing, women are getting bolder and more determined, and family life ceases to be an obstacle to their careers. In this process, women are helped by their excellent education and easier access to managerial posts. I hope that this trend will not only be maintained, but will even gather momentum. pm

pm

You are a wife, mother and a busy head of a company. Is it difficult to reconcile personal life with a career? Does one of them always have to be at the expense of the other?

It once seemed to me that it is absolutely not possible to reconcile the two spheres. Now, I know that these demanding functions may be reconciled if you manage your and your employees’ time in the right way. I was also lucky that my motherhood did not coincide with my moving up the career ladder. The decision to have a child is definitely more difficult when you are at the lower rungs.

Redefining your life is a natural thing once you have children. I personally derive joy and energy from this and it helps me in my work as well.

So what is your recipe for success?

You definitely need to be consistent in striving to achieve your goal, be well prepared and have character traits indispensable for people in managerial positions. Margaret Thacher used to say: “I am extraordinarily patient, provided I get my own way in the end” (smile). You also need a stroke of luck. Such a mixture will certainly suffice. My luck was that Mr. Karkosik believed in me, which gave me a boost and led • me to where I am now. pm

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Law & Taxes

Image rights: be careful when taking pictures In this article, I will try to elaborate on the issue of individual image rights in connection with taking photos.

Anna Stasiak-Apelska

T

he image is a visually recorded (e.g. in the form of photographs, cartoons, drawings) set of physical characteristics of a person, allowing their identification and recognition. The scope of the image rights covers the entire body, not just the face. Importantly, the image can even include characteristics such as the manner of speaking or moving. Often quoted as an example is the way Charlie Chaplin moved.

It is worth noting that, in accordance with Art. 81 paragraph. 1 of the Act of 4 February 1994 on Copyright and Related Rights (hereinafter “the Act”), dissemination of an image requires the permission of the person featured. However, the Act provides for two types of exceptions.

First, in the absence of an express reservation, authorization is not required if the person has received the agreed payment for posing. Second, authorization is not required to disseminate the image of: a) a well-known person if the image has been made in connection with the performance of public functions, in particular political, social, professional ones, b) a person acting only as a detail of a whole, such as an assembly, a landscape, a public event.

In the commercial aspect, it is precisely the image of a man which is the most commonly used personal good in advertising. What is important is that identification by some people, such as family members, is sufficient to say that there has been a violation of the image rights. In the case of well-known people (the definition of them is not included in the Act, but it can be assumed that these are actors, singers, politicians, athletes and persons engaged in other economic or social activities), the violations of image may occur also through the use of look-alikes. This is where the image of

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a look-alike has been used deliberately to inspire confidence in customers and to arouse a positive association with a product or service through supporting it with the image of a famous person, while circumventing the statutory prohibition.

Payment for posing does not always include payment for the use of the image. This needs clarifying in each case. Payment for posing cannot be automatically interpreted as a consent to its dissemination. In addition, approval to disseminate the image does not imply consent to other personal goods being violated, which can happen when a picture of a posing person is posted among other pictures. The creation of such a whole may violate a good name, or beliefs of a posing person, as each personal interest combines two elements - a protected value, and the right to demand from others respect for it.

The risk of breaching the image rights can arise both from its recording and its dissemination. When taking pictures in situations and in a manner other than specified in the Act, it is therefore worth getting a permission to record and disseminate the image. Such a consent is not general in character. This means that the agreement covers a specific image in a specific situation. It may be expressed in any form, but consent cannot be presumed. In contrast, for reasons of proof, it is best to make it in writing.

It should also be noted that even when recording the image of a well-known person, there are limits beyond which it can be qualified as a violation. In certain public situations, such as various official ceremonies, it is possible to record the image of a recognisable person, performing social or economic functions, without their consent. However, the image can

only be used for information purposes, never for advertising. At the same time, “not posed” situations can be regarded as matching “information purposes.”

Another exception specified by the Act, namely the possibility to disseminate the image of a person without prejudice to their image rights, occurs when a person is only a detail of a whole. This provision is quite imprecise.

According to the case law, dissemination of the image does not require a permission if it is only an accidental or accessory element of a whole, i.e. in the event of removal of the image the subject matter and the nature of the presentation would not change (Judgment of the Administration Court in Wrocław of January 30, 2014, I ACa 1452/2013). In this case, it is important to assess the specific circumstances.

An interesting issue is placing pictures in advertising brochures of travel agencies. When photographing the hotel, one cannot take a picture of a family on holidays, without its express consent, and put such a photo in the advertising brochure, pretending that these people are only part of the hotel environment. Such an image risks to give the impression that only in this place and only with this particular travel agency can one spend wonderful moments on holidays. Doing so may be considered as an attempt to circumvent the statutory prohibition.

The image as a man’s personal right is protected by civil law and copyright law. It is a characteristic that belongs to a particular person only. It should therefore be kept in mind that using images of people contrary to the standards set out in the legislation may result in different sanctions. Moreover, the burden of proving that the action was not in violation of the law lies with the defendant.

•

International Relations

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Law & Taxes

The strength of a group -

knowledge and modernity

Bartosz Weremczuk of Lampart Detektywi Group talks to Maciej Woźniak.

L

awyer, detective, security man, taxi driver, real estate agent and tourist guide are among the occupations to which access has been opened under the deregulatory law which came into force on January 1, 2014. The law has removed some requirements which hampered access to the occupations. For the time being 50 occupations have been opened, but work is underway to make access easier to another 200.

Bartosz Weremczuk and Norbert Glinicki received this year the Conquerors of the Market award from our monthly magazine in the Young Managers category. They are among those who have benefitted from the deregulatory law and exploited the new opportunities by setting up Lampart Detektywi (Lampart Investigations) Group.

Bartosz Weremczuk is a licensed detective.

He received his licence at the time when one had to pass a state exam checking his or her knowledge of law, predispositions and skills.

He has always believed that the knowledge of law was fundamental, both in private life and business. He has never worked in uniformed services and gained professional experience while working in a bank and running his own business. Today, at Lampart Investigations he deals mainly with cases of the foreign clients who have problems with their debtors in Poland, want to check their business partners and recover properties. He is also involved in counteracting unfair competition and industrial espionage.

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The strength of Lampart Group is the big number of investigators it employs and its effectiveness. What methods do you use in your work?

Many businesses need to check the loyalty and integrity of their workers and business partners, not only in Poland but often also beyond the country. It is important that the businesses have an opportunity to use services provided by a single firm instead of looking for local investigators, who are not always trustworthy, in each province or city.

As every firm, we have our well-tried methods of operation, but we also base our success on modern technological solutions, which make work easier and at the same time improve the quality of services offered.

I cannot let you in on all our methods, but I do not hide that it is people with vast experience and high skills that are the strength of our firm. It is thanks to our staff that we are able to choose the right surveillance method or other activities. An interesting thing is that we have recently used an unmanned aircraft to carry out surveillance and collect video data and it proved its worth. In many cases work with the use of a drone is simply more efficient. In small towns, where it would be difficult to carry out “standard” surveillance, this form is much simpler, cheaper and more efficient. Additionally, from a bird’s eye view we can see what goes on behind a closed gate or in a terrain which is difficult to access. It is worth noting that technical innovations make our work much easier, but one should also remember that all the methods we use have to pm

be legal because only legally obtained materials can serve as evidence in court.

Are you going to extend the range of services you offer by for example activity in cyberspace, searching for missing people or solving cases that police have been unable to solve?

As regards operation in cyberspace, it is a very popular topic now. It is increasingly often that we have to do with hacking into bank and e-mail accounts. Our specialists have already managed to solve several cases of this kind and this certainly is and will be one of the areas of our operations. When it comes to searching for missing people, the fact is that we are oriented at business clients so we can speak here about searching, however not for people but for debtors’ properties. We also receive cases where police did not want to start operations or decided there were no grounds to do so. pm

What should I wish you and your investigators for the future?

An opportunity to get established on world markets and compete with the biggest detective’s agencies, showing at the same time that Polish firms can provide high-standard services. I would also like the cases we conduct to have as many positive outcomes for our clients as possible. It gives me great pleasure when someone suspected of disloyalty turns out to be an honest person, whether it • is an employee or business partner. pm

Events

Freedoma road to success

A

ceremony “Freedom - a road to success” was held in the World Hearing Center in Kajetany near Warsaw on July 12, during which 10 medals of Polish Success Academy were awarded. The Academy has been founded and presided over by professor Henryk Skarżyński. The event had a family character. In addition to handing out medals, it was supposed to be a meeting opportunity for successful people of the past 25 years, i.e. the people who have had a real influence on the development of the Polish economy, culture and science. “Every such event is a meeting opportunity for those who work hard every day and do not have much time to meet. That is why, every year we organise such meetings so that people can talk to each other, which results in establishing business contacts. That is the idea behind this event: to make successful people meet at least once a year to share their successes, experiences, and also infect others with them,” said Ryszard Konwerski, President of the Polish Business Club.

•

Winners of Gold Medals: Alicja Adamek - President of the Patent

Office, for special merits in the field of intellectual protection

Jerzy Bar - creator and owner of the Investment Society BTA, for “romantic techno” in the new building sector and involvement in the reconstruction of monuments Laureates of the awards

Robert Gajda, MD-PhD - Director of the

Medical Center “Gajda-Med,” for managerial achievements in the field of health

Edward Jaworski - from the Provincial Library in Gorzów Wielkopolski, for many years of achievements in the dissemination of culture and reading in Lubuskie province Andrzej Kraśnicki - President of the Polish

Olympic Committee, for his achievements in the organisation of the Polish Olympic Movement

On that evening, Gold Medals with Diamond of the Polish Success Academy were presented in 6 categories:

Paweł Olechnowicz - President and Chief Executive Officer of Lotos, for innovative business ventures

Winners of Gold Medals with Diamond:

Elżbieta Rusiecka, MD-PhD, for long-term care for the ethics of the medical profession

Science: Prof. Michał Kleiber Culture: Prof. Janusz Gajos Entrepreneur: Zygmunt Solorz Durable success on a global market: Grupa Tubądzin Media: Gazeta Wyborcza Sport: Adam Małysz

Krzysztof Turek - Mayor of the Municipality of Stare Babice, for achievements in the municipal sector in the municipality of Stare Babice.

Prof. Henryk Skarżyński

From left: Deputy Prime Minister Janusz Piechociński, Prof. Henryk Skarżyński, Krystyna Woźniak-Trzosek (Polish Market)

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Culture

The 18th Disabled

Youth Song Festival

in Ciechocinek

On 24-26, July, the Disabled Youth Song Festival in Ciechocinek was held for the 18th time. The festival, organised by the Foundation ProOmnibus, awards every year the most talented vocalists.

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Culture

T

he festival enjoys great popularity among the locals and tourists. The audience spontaneously greeted soloists and the winner of the Grand Prix category, Kamil Czeszel, received a standing ovation. Young people were training for the festival for more than a month at specially organised workshops. the Foundation ProOmnibus creates perfect conditions for the participants and their guardians, organising vocal workshops combined with an over a month’s stay in Ciechocinek.

When opening the concert, Krystyna Woźniak-Trzosek, Editorin-Chief of “Polish Market” and, for eight years, President of the festival’s jury, said: “This year, we are celebrating 25 years of freedom. We are rewarding Poles that had merits during the transformation. This is a good time for reflection and memories about important events. It is a time to remember those who create values, without which no society could progress. I mean those who help others regain confidence in their abilities. The effects of these efforts can be seen, among others, at such festivals. I wish to give special thanks to the organisers of the festival - the Foundation ProOmnibus, Mirosław Satora, Barbara Matwiej, Board members and all the people of good will involved in it.”

The patronage over this year’s edition of the festival was taken over by the Ombudsman for Children - Marek Michalak, who personally graced the event. There were also representatives of local authorities.

Young people were divided into two age categories, under 16 and over 16. Laureates were, traditionally, invited to perform at the Gala of the Pearls of the Polish Economy that will be held at the Royal • Castle in Warsaw on November 7, 2014.

“This is a good time for reflection and memories about important events. It is a time to remember those who create values, without which no society could progress.”

Krystyna Woźniak-Trzosek Polish Market

Krystyna Woźniak-Trzosek

photo: Maciej Szczurek

Participants Youth Song Festival Mirosław Satora Pro Omnibus Foundation

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of Artistic Impressions 2014:

(Ex aequo)

1st Place

Kamil Czeszel

Winners Category

over

3rd Place

2nd Place 84 polish market

Category

below

16 years:

2nd Place

Anna Czaman

1st Place

Milena Wiśniewska

Aleksandra Liske

16 years:

Michał Wiśniewski

Agata Zakrzewska

Magdalena Krzemińska

3rd Place

Grand Prix

Culture

Laura Dziąba

Culture

Distinctions: Anna Ilminowicz

award from the Foundation Pro Omnibus

Katarzyna Wojciechowska

Krzysztof Duda

Natalia Barańska

Award in the category below 16 years

Maksymilian Chlewiński

Władyslaw Kaczmarek

Beata Jarco

Agata Widlarz

Award in the category over 16 years

The Jury

of the 18th Disabled Youth Song Festival in Ciechocinek: Krystyna Woźniak-Trzosek - President of the jury, Editor-in-Chief of “Polish Market” Katarzyna Gaertner - composer Ludmiła Małecka - singer Kazimierz Mazur - actor, director Wojciech Wysocki - actor Sławomir Małecki - educator, composer, guitarist (“Zdrowa Woda”) Jerzy Skonieczny - representative of the State Fund for Rehabilitation of Disabled (PFRON)

From left: Sławomir Małecki, Ludmiła Małecka, Wojciech Wysocki, Krystyna Woźniak-Trzosek, Jerzy Skonieczny, Katarzyna Gaertner, Kazimierz Mazur

Minister Marek Michalak, Krystyna Woźniak-Trzosek , Kinga Śmigielska and Kamil Czeszel - winner of the Grand Prix

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Culture

Emotions according to Lubomir Tomaszewski One of the most important exhibitions of Lubomir Tomaszewski - a Polish painter, sculptor and porcelain designer of world renown who has lived in New York since 1966 - was held in the Palace of Nations in Geneva on June 2-23, 2014. What made the event special was the presence of the artist, who turned 91 on June 9.

Lubomir Tomaszewski with his wife and Minister Małgorzata Omilanowska

T

he exhibition “Emotions by Tomaszewski” features more than 100 works: sculptures made in “a duo with nature,” with wooden parts taken from the artist’s garden, pictures painted with fire and smoke, which is a special medium developed by Tomaszewski, and porcelain figurines and coffee sets, which are still manufactured in the AS Ćmielów porcelain factory. One of the reasons why the exhibition was such a prestigious event was its venue. The Mezzanine, with a panoramic view of Lake Geneva, is the largest exhibition space in the Palace of Nations. It hosts exhibitions of world-class artists, like for example Andy Warhol, the king of pop-art, whose works were shown there in 2013.

The exhibition was opened by Michael Møller, acting director general of the United Nations Office in Geneva, Remigiusz A. Henczel, ambassador extraordinary at the Permanent Representation of Poland to the UN Office in Geneva, Peter Mulrean, US permanent representative to the United Nations

in Geneva, and Katarzyna Rij, the curator of the exhibition.

“It is a great honour to see and open an exhibition of such an outstanding Polish artist, who has constantly and on every occasion stressed his attachment to Poland and whose works stir up such great emotions in viewers,” Ambassador Remigiusz A. Henczel said in his address.

Curator Katarzyna Rij spoke about the uniqueness of the exhibition. She surprised everyone by saying that it was not until 2013 that Tomaszewski had an opportunity to show in Europe his paintings and sculptures for the first time. “I am glad that thanks to the exhibition in Geneva so many important personalities will have an opportunity to see the art of this outstanding Pole. More and more collectors worldwide are discovering Tomaszewski’s sculptures and paintings while his porcelain sculptures are regarded as an icon of 20th-century design,” she said.

Present at the opening of the exhibition were members of the Polish and US representations to the United Nations, deputy Minister of Infrastructure and Development Iwona Wendel, President of the Polish Patent Office Alicja Adamczak and art lovers from around the world.

The exhibition came from Geneva to the porcelain factory AS Ćmielów owned by Adam Spała - winner of the Pearl of the Polish Economy in the category of Applied Arts in 2012.

The factory has for many years produced unusual figurines and cups designed by Lubomir Tomaszewski.

On August 11, Lubomir Tomaszewski received from Minister Małgorzata Omilanowska “The Medal for Merit to Culture – Gloria Artis” - a decoration awarded by the Ministry of Culture and National Heritage of the Republic of Poland to persons and organisations for distinguished contributions to, or protection of the Polish culture and the people’s heritage. Presenting the medal, Minister Omialowska told the laureate: “You are a great legend and it is a great honour to be able to host you and express on behalf of all Poles gratitude for your work, your extraordinary talent and for all you have done for Polish design. Polish design is currently one of the most outstanding Polish brands that we promote in the world. Art you have cocreated has become very fashionable, with many collectors and enthusiasts.”

Thanking for the decoration, Lubomir Tomaszewski, touched, said: “This distinction is important for me because it testifies to the fact that I served Poland well”.

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From left: Bożena Gargas (President of the Board of IWP), Katarzyna Rij (van Rij Gallery), Iwona Wendel (Under-Secretary of State in MIiR), Alicja Adamczak (President of the Board of UP), Lubomir Tomaszewski, Krystyna Woźniak-Trzosek (President of Polish Market), Ryszard Kondratiuk (Director of UP)

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Cultural Monitor

The August Cultural Monitor revolves around an exquisite canon (classical music, chamber music, jazz and songs) and the International Festival Chopin and his Europe.

Recommendations by Maciej Proliński

Sergei Rachmaninoff - Piano Concertos - Vladimir Ashkenazy - Universal Music - 2CD +1 Bluray

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achmaninoff is one of the leading Russian composers, author of piano preludes and etudes, songs and four piano concertos interpreted by one of the greatest 20th-century Russian virtuoso Vladimir Ashkenazy and the London Symphony Orchestra conducted by André Previn. Ashkenazy, the winner of many international piano competitions (including the 2nd Prize at the 5th International Frederic Chopin Piano Competition in 1955) has been linked with Decca Records for five decades, and Rachmaninoff’s piano concertos performed by him are among the iconic recordings released by Universal Music. A complete, beautifully published and restored album (these extremely convincing and legendary recordings have been remastered this year for the first time at Abbey Road Studios, with extraordinary quality - 96 kHz and 24 bit audio - being preserved) could not, of course, do without the 2nd concerto - one of the composer’s creations most often performed. Ashkenazy renders in it what is most important - naturalness, but also endearing beauty and lyricism of the middle part. Virtuosic momentum and deep melody float over the whole of it. Only fascinating personalities, their great individuality and originality can deliver such a championship show as regards to both composition and performance.

Lutosławski / Mykietyn - String Quartets Lutosławski Quartet - DUX - CD

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single and very coherent CD includes one of the most important quartets of the 20th century - Witold Lutosławski String Quartet (first performed by the famous American band LaSalle in 1965) and String Quartet No. 2 from 2006 by Paweł Mykietyn - one of the most important contemporary Polish composers. The whole is performed by Lutosławski Quartet - a young Polish quartet established in 2007 as one of the teams of the National Music Forum in Wrocław, consistently promoting Polish music (Lutosławski, Bacewicz, Szymanowski, and one of the Quartet’s members - Marcin Markowicz). As regards compositions, they are invariably fascinating in their innovative sound, musical ideas and the way they are expressed. When it comes to performance, its strength is, beyond virtuosic playing, in the perfect and precise study of each piece and openness to each piece. It feels like the band plumbed the overtones of the music - its roots, analogies, and sometimes perhaps not accidental quotes (though obviously not in a direct way!).

Krzysztof Penderecki - Chamber Works vol. I DUX - CD Krzysztof Penderecki is one of the most outstanding contemporary composers. His work unveils interest in new possibilities of voices and instruments, and a passion for great, monumental forms. For several decades, he has been making music with universal ambitions. If I had one word to characterise his work, I would say “unpredictability”.

His chamber music is today poorly exposed, but it is of considerable importance - subsequent years bring about a number of chamber works written with for excellent performers befriended with the composer, as evidenced by inscriptions, titles, and their virtuoso character. The composer himself sees in chamber music an opportunity to “escape in privacy” as he is convinced that usually more can be said in a hushed voice. This CD allows to trace the evolution of Penderecki’s style, the variety of his ideas, which have never overshadowed the substance of his work - deep drama and lyricism, recognisable from the first notes. It is also a display of Polish musicians who perfectly create their own interpretations of compositions, among which a special place is due to the famous “Sextet for clarinet, horn, violin, viola, cello and piano” and a beautiful, tonal and touching “Ciaccona in memoriam Giovanni Paolo II” for violin and viola.

Ewa Podleś & Garrick Ohlsson - DUX - DVD

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he DVD is a recording of the concert, which took place in December 2011 at the Frederic Chopin University of Music in Warsaw. It features two outstanding artists, regulars of the world’s most important scenes - Ewa Podleś, a Polish singer, and Garrick Ohlsson, an American pianist, winner of the 8th International Frederic Chopin Piano Competition in 1970. The audience listened to two cycles of songs by Mussorgsky, extremely different in expression. In the Russian repertoire of the concert there were also piano works solo by Prokofiev and Rachmaninoff. All these composers wrote unconventional music that was coming from authentic experience. Mussorgsky’s songs are greatly realistic, and “Songs and Dances of Death” (1887) presented as dramatic scenes are extremely true in their “anti-artistic”, though very convincing form. It is hard to forget about it while watching the recording. And so it is about successful collaboration of two great performance personalities, which always means a flawless artistic effect!

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Cultural Monitor

Cultural Monitor – August 2014 Preservation Hall Jazz Band - “That’s It!” - Sony - CD

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stablished half a century ago, the band is one of the top New Orleans jazz performers and is still evolving while maintaining its tradition, which inspires new generations of listeners and artists. “That’s It!” – its new album was created in cooperation with Dan Wilson, Chris Stapleton and legendary Paul Williams, who gave the band some freshness, but could also exploit its classic style. Each of the album’s 11 tracks is a jazz masterpiece that captures everything that is essential in this genre: the highest level of performing arts, clearly showing the beauty of the compositions. But there is something more: many of these performances get called “creations”. After nearly 50 years, nothing changed in this matter. The band’s tournée began on July 11 in Rotterdam and ended on July 23 in Torroella, Spain. It played in Spain, Slovakia, France, Switzerland and the United Kingdom. Polish fans have to wait for a concert of this amazing formation in our country.

“Strug. Leśmian. Soyka” - Universal Music - CD

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wo eminent Polish singers and their personal interpretations of poems of one of the greatest Polish poets - Bolesław Leśmian. It is a beautiful tribute, “not overdone” since nobly austere and modest. And written for two voices only and piano. It is brilliant primarily because it is straight away evident that it is poetry and music from here. Of course, it recalls an old-fashioned manor house rather than a contemporary Warsaw club... But it is not a complaint. Polish song and Polish poetry have been a successful mix for many decades. It is worth fondly paying attention to the natural need for close proximity to these arts.

Another thing is that - something palpable from the very first moments - Staszek Soyka and Adam Strug (just as well as he Leśmian) created here a very original, folk microcosm, which is an attempt to address broad topics - nature and man, individual and community, art and metaphysics. And finally that endearing, though barely touched melody, which so quickly ends.

Not to be missed: The concert of the month!

Czesław Niemen & Akwarele “Do you still remember me?” - Polskie Nagrania - CD

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zesław Niemen - composer, vocalist and instrumentalist. He composed rock, jazz and electronic music. He wrote music for theatre and film. He wrote poems and lyrics. In his compositions, he referred to texts of exceptional Polish poets - Cyprian Kamil Norwid, Adam Asnyk and Kazimierz Przerwa-Tetmajer. Until 1967, he was a member of Niebiesko-Czarni, and later led his own bands: Akwarele, Niemen-Enigmatic and Grupa Niemen. Finally, he performed as a soloist. In 2014, Polskie Nagrania embarked on a unique project – publishing of the artist’s entire restored discography. It is worth coming back to it! Albums were prepared in cooperation with the Czesław Niemen Foundation, and the renovation of the recordings was entrusted to Eleonora Atalay, daughter of Czesław Niemen. Remastering preserving the nature of the original sound of the 1960s, was done by Jacek Gawłowski. “Do you still remember me?” is the third and last album recorded by Czesław Niemen with Akwarele band in 1969; it marks his return to old songs. “I have felt strongly about my personal attachment to them, their popularity in earlier concerts, and their compliance with my performance image,” explained the artist. The CD includes one of Niemen’s most recognisable songs, composed by Mateusz Święcicki and still very often played on radio stations - “Under parrots.” But there are more such gems - subtle and light, full of flavour, sometimes rock and soul-like in expression: “Next to us,” “I’m standing in the window,” “I know you won’t come back,” “Time like a river.”

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he 10th edition of the Festival “Chopin and his Europe” will be held in Warsaw on 15-31 August and under the theme “From Chopin and Grieg to Panufnik.” The programme abounds in excellent artists and many great works of Polish composers.

The event, organised by the Fryderyk Chopin Institute, was invented and has been directed ever since by Stanisław Leszczyński. The festival presents the music of the Polish composer against the background of his times, it brings us closer to the sources of Chopin’s musical style, and shows how his work influenced the subsequent generations of composers, from Romanticism to contemporary music.

A crucial assumption of these concerts is historical performance, i.e. playing music in an authentic sound. However, what sets this festival apart on the musical map of Europe and constitutes a unique proposal in the historical performance trend, focused primarily on Baroque and the 18th century, is presenting the 19th century’s creations in the original sound layout.

During this year’s festival ​​sixteen tracks by Andrzej Panufnik, whose 100th birth anniversary falls this year, will be played, among others, String Quartets No. 1, 2, 3 interpreted by Apollon Musagète Quartet and the Violin Concerto performed by Alexandra Kuls and Sinfonia Varsovia conducted by Jerzy Maksymiuk, which will also play Symphony No. 10. Another theme will be the Norwegian music. In addition to compositions of Edvard Grieg - “Chopin of the North” - we will hear works of Thomas Tellefsen and Arne Nordheim. During two weeks of the festival, the audience will have the opportunity to listen to great Polish compositions including “Krzesany” by Wojciech Kilar, Szymanowski’s 4th Symphony, “Polonaise in A Minor” by Michał Kleofas Ogiński, “Polonaise in F minor” by Maria Szymanowska, “Concerto for Orchestra” by Witold Lutosławski, String Quartet No. 1 “Already it is Dusk” op. 62 by Henryk Mikołaj Górecki.

Among the performers are internationally renowned artists: Nelson Goerner, Dang Thai Son, François Dumont, Janusz Olejniczak, Eugene Indjic, Maria João Pires, Opollon Musagète Quartet, Martha Argerich. You just have to be here!

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Culture

Italian Joy of Life

14.

Festiwal

Ogrody Muzyczne

Evviva l'arte !

Gość honorowy: Włochy

27 czerwca – 19 lipca 2014 roku Zamek Królewski w Warszawie – Muzeum www.ogrodymuzyczne.pl

14.

Festiwal

Ogrody Muzyczne

Evviva l'arte !

Gość honorowy: Włochy

27 czerwca – 19 lipca 2014 roku Dziedziniec Wielki Zamku Królewskiego w Warszawie – Muzeum www.ogrodymuzyczne.pl

14.

Festiwal

Ogrody Muzyczne

Evviva l'arte !

Gość honorowy: Włochy

27 czerwca – 19 lipca 2014 roku Dziedziniec Wielki Zamku Królewskiego w Warszawie – Muzeum www.ogrodymuzyczne.pl

14.

Festiwal

Ogrody Muzyczne

Evviva l'arte !

Gość honorowy: Włochy

27 czerwca – 19 lipca 2014 roku Dziedziniec Wielki Zamku Królewskiego w Warszawie – Muzeum www.ogrodymuzyczne.pl

14.

Festiwal

Ogrody Muzyczne

Evviva l'arte !

Gość honorowy: Włochy

27 czerwca – 19 lipca 2014 roku Dziedziniec Wielki Zamku Królewskiego w Warszawie – Muzeum www.ogrodymuzyczne.pl

Patronat Honorowy:

Organizatorzy:

2014 Presidenza Italiana del Consiglio dell’Unione Europea

Partnerzy:

Projekt 14. Ogrody Muzyczne dofinansowano ze środków Ministerstwa Kultury i Dziedzictwa Narodowego oraz m. st. Warszawy.

Istituto Italiano di Cultura Varsavia

Sponsorzy:

Patroni medialni:

Maciej Proliński

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The Music Gardens showed this year mainly the greatest operas and ballets on screen, the skillful combination of classical and light music, and events and films about the Italian joy of life,” says Ryszard Kubiak, director of the festival.

During the inaugural concert on June 27, Janusz Wawrowski, an outstanding Polish violinist of the young generation, played “Four Seasons for Violin and String Ensemble” by Sukhi Kang and “The Four Seasons Recomposed” by Max Richter. The pieces, both written by contemporary composers, were performed in Poland for the first time. The soloist was accompanied by the Aukso Chamber Orchestra, one of the best orchestras in Poland, under Marek Moś. Among the events worth special attention was the concert on July 14 held to mark the 40th anniversary of a clock being installed on the Royal Castle’s Clock Tower. On that day the great “Quartet for the End of Time” by Olivier Messiaen was performed for the second time in the history of the festival. Another concert – of extremely popular Italian composer and cellist Giovanni Sollima and musicians of the Orchestra Popolare La Notte della Taranta – held on June 30, was a great test for the floor of the festival tent. It is unlikely that as many as 800 joyful people ever danced together on

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this floor. They were roused by the pizzica, a popular Italian folk dance from the Salento Peninsula. Since the first moments of the evening one could feel unusual tension and good energy, which virtually filled the tent.

It was hot, like in the sunny Apulia, and the atmosphere was impetuous, like at dance parties in the region.

As usual, the programme of Music Gardens this year also featured films. This time these were recordings of classical Italian operas and ballets, including Puccini’s “Tosca,” and Rossini’s “The Turk in Italy” and “Cinderella.”

The films “Lang Lang Presents Herbie Hancock” and “Pavarotti – A Voice of the Centuries” also deserved attention. The second one showed Luciano Pavarotti’s duets with Sting, Bono, Eric Clapton and other singers.

The Music Gardens festival was organized for the first time in 2001 on the initiative of cultural manager Ryszard Kubiak, composer Zygmunt Krauze and editor Barbara Pietkiewicz-Kraśko. This is when the festival in the courtyard of the Royal Castle took its shape. The festival was designed to promote more classical forms of art in new arrangements. As a result, it put emphasis on audio-visual productions of operas and ballets, and films about art. As the first festival was enormously popular, the three men

decided in 2002 to set up the Music Gardens Foundation. Since that time the festival has been held every year in July and has attracted audiences of as many as 50,000 music lovers.

A relatively regular feature of the festival is that every year it is composed of over 30 music events of various kind. Members of the Foundation also remember about children. For several years now they have successfully carried out the Children’s Music Gardens programme. Its aim is to stimulate the artistic potential of children and educate them through art. The programme is carried out under the auspices of the Warsaw municipality, with events held both during the summer and winter holidays.

For several years the Foundation has initiated and taken part in implementing other important music events in Poland, like for example La Folle Journée / Crazy Days of Music Festival, Silence Zone Festival in Łazienki Park in Warsaw and Composition Courses in Radziejowice. The Foundation also works with Poland’s most important cultural institutions and cultural organizations across the world, including distributors of music programmes. It is also a member of the IMZ International Music + Media Centre, an international organization of music, ballet and theatre programmes.

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Culture

The days that we already know well...

In the world, it has been held for nearly two decades; in Poland - for five years. La Folle Journée Festival - an international event whose founding father is René Martin, organiser of festivals and numerous concerts of classical music around the world, founder of the Centre de Réalisations et d’Etudes Artistiques à Nantes (CREA) - invites you to embark on a wonderful adventure with classical music in a relaxed atmosphere at the Grand Theatre - National Opera in Warsaw on September 26-28, 2014!

Maciej Proliński

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a Folle Journée Festival has been successfully held for many years in France, Spain, Japan and Brazil.

It enjoys great popularity and has earned a permanent place in the cultural life of these countries’ communities. The idea of La Folle Journée is to encourage and facilitate involvement in concerts of classical music while presenting music at the highest possible artistic level. Short concerts take place from morning to night in many halls simultaneously. Ticket prices are low and an extraordinary atmosphere makes La Folle Journée a meeting with music to which everyone, without exception, is invited.

One of the rules is that the average duration of the concert is 45 minutes. One can enter the hall after the concert began and leave when he feels like it. Nobody is imposed nothing. Attendees choose out of the huge number of concerts those they think are most interesting and arrange a concert trail of their own.

If someone is curious to make comparisons he can listen to the same piece of music in different

versions or see how the same artist finds himself in a different repertoire.

The audience spans people of all ages - babies in pushchairs, several year-old music lovers participating in “Smykofonia,” teenagers, students, the elderly. Participants are completely free as regards outfit, so it can be casual. “Who said that you cannot listen to Mozart and Bach in a T-shirt and worn jeans?,” asks René Martin.

“The idea of this event came to my mind when I was at the U2 concert with my children. Seeing 35,000 fans gathered at a stadium, I thought: Why wouldn’t these people come to listen to classical music? Our festival brings the same excitement as a rock concert: fun, pleasure and shared emotions,” says Martin.

A permanent element of La Folle Journée is concerts of Sinfonia Varsovia, one of the most prominent Polish orchestras, which participates in the festival since its first world edition.

Every year, the festival proves that in Poland there are at least tens of thousands of people interested in such an art and such a form of its presentation, who come to Warsaw from all over the country to attend a real music feast.

This shows how much we need the festival. A few facts from the last year: 60 concerts, 1000 performers and 38,000 listeners!

“After last year, the bar was set very high both in terms of the programme and the number of visitors. Expectations are, understandably, very high. But looking at the attendance, I am calm. We thank our music lovers for confidence. We are happy that you are with us. Be welcome!,” says Janusz Marynowski, Director of Sinfonia Varsovia, the main organiser of the festival.

The programme of the 5th edition of the festival will feature a very interesting, rich and broad panorama of American music - since 1860 until today. It will include works by both prominent American composers (including Gershwin, Bernstein, Barber, Glass) and immigrants who settled in the United States (i.a.

Rachmaninoff). There will also be compositions ordered by US organisations (foundations, orchestras). To enrich these programme slots, much space will be devoted to American popular music, including jazz, blues, and musicals.

Set aside your time already today!

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Culture

The memory of the Przemyśl Fortress Przemyśl - one of the oldest and most beautiful Polish cities, located in the foothills of the Carpathian Mountains, at the intersection of routes to Lviv, the Bieszczady Mountains and the Eastern Carpathians - captivates its visitors with a landscape of steep streets and adjacent old buildings. The richness of its thousand-year history and hundreds of historical sites ensures that everyone will find here something interesting. A magnet that attracts tourists is the famous fortress built by the Austrians in the surrounding hills. 2014 marks the 100th anniversary of the outbreak of World War I, in which the Przemyśl Fortress, one of the largest fortresses in Europe at that time, played a key role. One hundred years ago, headlines with news about the fights in Przemyśl were followed with bated breath all over the world. To honour those who fought in the Przemyśl Fortress and to commemorate those who lived there a century ago, a number of events and undertakings have been prepared in connection with the celebration of the 100th anniversary of the battles for the Przemyśl Fortress.

Maciej Proliński

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he city and the fortress were first besieged by the Russian army in late September and early October 1914.

Despite the fierce onslaughts of Russians, 130,000 soldiers from the multinational Habsburg monarchy managed to defend Przemyśl. This was of great importance for the Austro-Hungarian Empire. Its principal fortress on the eastern front prevented Russians from breaking into the Carpathian and occupying the then great Hungary, and thus the entire monarchy.

The second siege of Przemyśl by Russian started in November 1914 and lasted until March 22, 1915. During that time, the defenders of Przemyśl demonstrated unparalleled courage by taking the offensive against Russian troops besieging them. When stocks ran out, the defenders of Przemyśl were faced with death by starvation. Never conquered, the Przemyśl Fortress had to fall. Before surrendering the fortress to Russians, exhausted defenders destroyed all the remaining stocks of ammunition and blew up impregnable forts turning them into ruin. 9 generals, 93 staff officers, 2,500 officers and nearly 117,000 soldiers were taken prisoner by Russians.

In May 1915, allied forces of the AustroHungarian and German armies came up near Przemyśl again. This time they had to recapture the fortress they had built themselves.

They did it so successfully that the third siege of the fortress in May-June 1915 was the last one in World War I. As part of the commemoration of these events a number of events were held in Przemyśl, including the meeting of delegations

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from Russia, Austria, Hungary, Germany, Slovakia, the Czech Republic, as well as from the partner cities, a service in memory of the victims with the Music Society Choir, a premiere of the multimedia show: “It happened a hundred years ago: a story of love, war, longing and hope.” The performance, directed by Marek Stacharski, with the participation of a symphony orchestra, soloists and actors, symbolically presents the history of the construction of the fortress, the city’s daily life, the outbreak of the war and the battle for the fortress. On July 20, 2014 a balloon took off from the Przemyśl Main Square with letters and commemorative cards. Everyone had the opportunity to mail their correspondence in

the balloon. On this occasion, a special postcard, stamp, postmark were designed. This event is also referred to the history of the city and its fortress.

Following the implementation of air mail, the fortress was totally besieged by the Russian army from 26 September to October 9, 1914. The task was performed by the 11th air company making use of the field airports near Przemyśl. On the “fields of ups” three balloon squadrons stationed. On October 1, the first plane Albatros landed in Pikulice before taking, a few days later, mail to the high command and 148 postcards sent by the officers and soldiers.Under Russian fire, the injured pilot was able to fly beyond the front line landing in Jasło. It was the first and the only flight from the fortress during the first siege. During 136 days of the second siege, 24 aircraft carrying mail flew into the fortress, but only half of them went on a return flight.

From January 20 to March 20, 1915, 10 balloons with mail were launched. They landed in Transcarpathia near Uzhgorod and Kosice, two balloons fell into the hands of Russians, the fate of others is unknown. On March 19, four manned mail balloons took off. Carried by the wind, crews landed in enemy territory in the vicinity of Sokal, Novgorod-Volyn and Brest-Litovsk. The last flight from the fortress was on the day of surrender – March 22. One crew came through to Brest, the other plane was shot down by Russians.

The Museum of the Fortress and war cemeteries of all armies testify to the history of the city and its fortress.

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Food Industry

Polish apples

on the 25th anniversary of independence, development and democracy

Prof. Eberhard Makosz, Society for Promotion of Dwarf Fruit Orchards

During 25 years of independence, development and democracy, Poland has undergone major, positive changes also in horticulture, and particularly as regards apple, which is the most important fruit species cultivated in Poland. Polish apple is one of the important symptoms of the dynamic economic development of Poland in the past 25 years.

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ow-stemmed orchards, once very popular, with 420 large trees per 1 ha were turned into dwarf orchards with 3,000 small trees on a similar surface. The increase in the number of trees per 1 ha had a decisive impact on apple yields. Yields from large apple trees were 15-20 t/ha, and from small ones - 40-50 t/ha. In the years 1980-1989, the apple harvest ranged from 1.3 to 1.7 million tonnes, and after 2000 - from 2.8 to 3.2 million tonnes, with a record in 2012 - more than 3.8 million tonnes.

Along with increased harvests, apple exports

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also surged from about 150 to 850 thousand tonnes, and in the season 2012-2013 - to more than 1.2 million tonnes, of which about 60% to Russia. For several years, Poland has been the largest producer of apples in Europe and the third in the world after China and the US, and for two years - the world’s largest exporter of apples, by 250 thousand tonnes ahead of China. The share of Polish apples in world exports ranges from 18 to 20%. For the first time in the history of Polish horticulture, our apples play a dominant role in the world

market. They are valued for their good taste, high health safety and low prices.

Over the past 25 years, yields also increased of other fruit species. Poland is ranked first in the world in the production of raspberry, black currant and cherry. Polish horticulture managed in a very short time to turn from extensive into high-intensity one. The development of apple production was largely attributable to the processing industry. About 50% of apples were processed into concentrated juice. In the 1980s, the production of apple juice averaged 80 thousand tonnes, in

Food Industry the last 5 years it ranged from 180 to 220 thousand tonnes, and in 2012 it reached almost 300 thousand tonnes, of which 90% were exported to different countries. In terms of concentrated apple juice production, Poland comes out first in Europe and second in the world after China.

The development of apple crop was possible owing to fundamental changes in the volume of production, quality and type of apple trees. Polish nurserymen, based on Western European models, developed apple trees free of dangerous viral diseases and meeting the requirements of modern apple orchards. Trees started to be planted on vegetative rootstocks with a significant predominance of “M.9” rather than on rootstock seedlings “Antonówka”. Production of apple trees went up from several to about 15 million items, of which 40-50% were exported to various countries, mainly in Eastern Europe. Large exports of apples were possible thanks to the newly formed organisations of exporters having the ability to quickly send large batches of apples to distant countries.

Even more reasons to be proud of...

Over the past 25 years, new forms of apple producers and apple exports emerged. These are groups and organisations of producers.

In the last year of the 25th anniversary, they were more than 300, including about 100 dealing with larger exports of apples. Many of them have modern refrigerators with a capacity of over 5,000 tonnes, and facilities for sorting and packing apples to be exported to distant countries, outside Europe. It is worth emphasising that high apple exports were possible only thanks to well-developed producer groups and organisations.

An important factor in the development of modern apple production was a change in the size of farms. The area of orchards increased from a few to a dozen or even several dozen hectares. In most large farms, apple production is highly developed, and in a few dozen - at the highest international level.

These farms are admired by foreign producers, also from countries with high levels of apple production. Methods of apple production in our country are considered by many foreign growers as a model worth following. So far, no one, not only in Europe, has succeeded to drive so large changes in such a short time.

In Poland not only production but also producers changed. They have greater knowledge about modern production and export of apples. They are willing to introduce permanent improvements in the production and

cooperate in various organisations. Their level of education increased and a significant mental makeover occurred. These changes benefited domestic consumers of apples.

Throughout the year, apples are available at retail prices - the lowest in the world.

The basis for success What factors have had the greatest impact on the undoubted success of Polish horticulture on a global scale? The opportunity to travel to Western Europe after 1989 was extremely important. Fruit growers and nurserymen could observe methods of cultivation and production of apples and apple trees. They quickly used experience gained to modernise their orchards and tree nurseries. The cultivation developed of dwarf orchards and the production of trees on rootstock “M.9”.

The methods of apple cultivation and production were popularised by the Society for Promotion of Dwarf Fruit Orchards (TRSK).

In order to make growers better understand modern techniques of apple production, TRSK organised 15 training trips to distant countries where apple production was at a high level.

Producers who - based on the experience gained in various countries - have taken the risk of upgrading their orchards and nurseries had a decisive influence on the process of intensification of apple production. In addition, Polish growers and nurserymen are characterised by diligence, desire to expand knowledge and introduce changes, something without which it would be difficult to achieve success in any field whatsoever.

The factor that had a very large impact on the growth of production and exports of apples was Poland’s accession to the European Union, and thus financial aid obtained. It should be emphasised that such a dynamic development of Polish horticulture and apple exports would be impossible without EU financial assistance. Another important factor resulting from Poland’s accession to the EU is apple trade liberalisation. Without major problems can Polish apples be exported to the whole world. Most apple producers feel very positive about our membership in the European Community.

Fathers of success These undoubted successes have many fathers. Research into modern apple production, developed and implemented by Polish fruit-growing scientists, is extremely helpful.

An important role was played by newly established orchard organisations and institutions associated with the development of horticulture. Various forms of support are noteworthy: from local self-governments and government, especially the Ministry of Agriculture and Rural Development. An important role in these successes was that of companies offering new means of production, including their implementation in practice. It was also of significant help for producers, not only of apples that they could get information about modern fruit production techniques in industry press. Only consistent work of many “fathers” guarantees great successes. One example of it is Polish apples. Over the past 25 years, Polish horticulture has achieved success on a global scale - for the first time in its history. There is reason to say that we have succeeded. And so it is seen by growers from other countries. Every fifth apple produced in Europe comes from Poland. Our fruits have customers who know that it is “good because it is Polish”. Internationally, Polish apples create and perpetuate a positive image of our economy. Poland has become the European capital of apple production. There are reasons for optimism and pride.

Here comes the new In the next 25 years, we will be facing further changes in the production and export of apples. Low-quality dessert apples output is still too large. It needs to be fixed. There are too many entities involved in the export of apples, which negatively affects prices. The remedy can be 5-7 trading companies with the ability to export about 70% of apples. Political and economic relations with Russia, the largest importer of Polish apples, will be important as well. Far too few fruit producers, including of apples, are members of the organisations involved in the production and export of fruits. More together and less alone - such should be our guideline in the coming years.

In the past 25 years, we have laid groundwork for the modern production and export of apples, i.a. by increasing the production potential of our apple orchards. Under normal weather conditions, apple harvest will by far exceed the level of 4 million tonnes.

Then there can be serious problems with handling all the apples at cost-effective prices. In my opinion, a safe level will be 3.5 million tonnes, of which at least 2.1 million tonnes of high-quality dessert apples. Apple production should not be increased, but improved.

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August 2014 polish market

95

Food Industry

Association of Polish Butchers and Meat Processors starts a new promotional campaign

Bożena Skarżyńska

“

Take up Eating Beef” is the slogan of a new promotional campaign carried out by the Association of Polish Butchers and Meat Processors (SRW RP). Its aim is to increase the consumption of beef on the Polish market by educating consumers about breeds of cattle raised in Poland, the quality of beef produced, its taste and potential uses.

Statistics look bad in this respect. An average Poles eats around 1.5 kilograms of beef a year, that is less than 126 grams a month.

Piotr Ziemann, Vice-President of the SRW RP, says that the “Take up Eating Beef” campaign is a joint idea of members of the Managing Committee of the Beef Promotion Fund. Its implementation has been entrusted to the SRW RP and the Polish Association of Beef Producers.

The campaign, composed of various promotional activities, will be carried out over three years.

“We have added the subtitle ‘National Culinary Battle’ to the ‘Take up Eating Beef’ project,” says Piotr Ziemann. “The promotional campaign is mainly targeted at young residents of large cities who are interested in cuisine – cook at home or visit good restaurants.

We are convinced that women looking for new inspirations, new tastes and savings in daily cooking will also benefit from the campaign.”

“The goal of the new programme is to inform consumers about the advantages of Polish high-quality beef, not only certified beef but also produced outside the QMP system,” adds Jerzy Wierzbicki, President of the Polish Beef Association (PZPBM). “We want consumers to see that Polish beef is worth buying. This is a large-scale campaign. We are interested in the effects of the programme, the first of its kind in Poland. I am not going to hide that we expect a rise in beef consumption. Many producers, restaurants, shops and popular cooks have been involved in the programme. We have planned quite a lot of attractive events where beef will be present. This summer there will already be a lot going on about the programme.”

96 polish market

Photo: SRW RP

“Take up Eating Beef” is one of the first Polish food promotion programmes in which beef producers, restaurants, shops and first of all consumers are to take part. The media campaign began on June 25 with a press conference in the Kafe Zielony Niedźwiedź restaurant in Warsaw’s Powiśle district. People from the culinary, how-to, trade and lifestyle media and the blogosphere were present at the conference.

Janusz Rodziewicz, President of SRW RP, Piotr Ziemann and Jerzy Wierzbicki were the hosts of the conference. They told the participants about the project, its assumptions, course and contests planned. Katarzyna Okręglicka, a dietician working with the organizers of the campaign, talked about the advantages of beef produced by Polish farmers.

During the conference, which was held not without reason at the Kafe Zielony Niedźwiedź, the journalists were treated to steaks, which they barbecued together. The guests eagerly “took up eating beef,” preparing it together with chefs Adam Chrząstowski and Dariusz

Kuźniak. They prepared steak tartare and sauces while talking about the taste and quality of beef and its potential uses.

More than 10 meat processing businesses and a few famous Polish chefs, including Adam Chrząstowski, Dariusz Kuźniak and Tomasz Jakubiak, are involved in the promotional activities. The cooks will be supervising them. And especially for the campaign they are preparing their own recipes to be used in home kitchens.

The chefs will also be teaching journalists and other persons how to prepare beef steaks, steak tartare and other beef dishes.

The “Take up Eating Beef” programme is to be part of the most interesting national events.

The first of the 10 events planned for this year was the Car of the Year 2014 gala. Beef dishes will also be served along this year’s promotional route of Harley-Davidson the Legend on Tour and will be promoted at the Gałkowo Masters • equestrian competition.