WBJ Observer, February 2016

30 PAGES 25 PAGES

FEBRUARY 2016

Number 02 (24)

OF REAL ESTATE N EWS

REAL EST A NEWS TE

PLN 24.50 (VAT 8% included) ISSN 2353-3714 INDEX-RUCH-332-127

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BANK TAX

MOVING BODIES IT CONTRACTING TAKING THE INDUSTRY BY STORM > 38

REINVENTING TWO WHEELS HOW POLES HAVE REIMAGINED BICYCLES > 30

TAXING TIMES WILL THE NEW BANK LEVY HARM THE ECONOMY? > 24

INTERVIEW WITH RAIFFEISEN POLBANK CEO

FEBRUARY 2016

Losing blood ALSO IN THIS ISSUE:

• C o m m e n t a r y • R a n k i n g • I T • N ew s • L i fe st y le • E ve n t s

lll IN THIS ISSUE Try these:

lll NEWS 6-13 In Review Latest news 14 Dateline 15 Economy

lll COMMENTARY

24-29

16 Law Bank tax

BANK TAX

lll INTERVIEWS 18-19 Ilya Ponomarev 20-21 Jerzy Hausner

43-71 LOKALE IMMOBILIA

22-23

INTERVIEW WITH PIOTR CZARNECKI

lll FEATURE 30-34 Modern bikes Reimagining two wheels 37-42 IT insights 72-73 Ranking EU funds consulting companies 74 Events KPMG Accounting congress 75 Events CEE Retail Awards

lll LIFESTYLE 76-77 Gadgets 78-79 Beer pubs in Warsaw 80 Bowie and his Warszawa

FEBRUARY 2016 â&#x20AC;˘ WBJ OBSERVER

FEBRUARY 2016

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WBJ OBSERVER • DECEMBER-JANUARY 2015/16

lll INREVIEW NEWS

News highlights of the past month

The European Commission has launched a preliminary assessment under the rule of law mechanism against Poland, EC Vice-President Frans Timmermans informed. “The purpose of the process we have launched is to clarify the facts in an objective way, assess the situation in more depth and start a dialogue with Polish authorities without prejudging any possible further steps,” Timmermans said. It‘s the first instance of such a procedure being launched. This legal measure was created in 2014 after the EU was accused of failing to deal

FEBRUARY 2016 • WBJ OBSERVER

adequately with a similar situation in Hungary. It can be implemented to suspend a nation‘s EU voting rights and access to EU funding if a ‘systemic threat‘ to the rule of law is perceived. While the Commission did not go that far, it still expressed its concern at what is happening in Poland and declared its intention to enter into a serious, but cooperative dialogue with the government in Warsaw in order to gain more information to assess whether there is a real threat to the rule of law. The commission was unanimous in determining this solution: not a single commissioner voted

against the measure. The unease in Brussels has been caused by laws passed by the new government, which allow them to ignore existing laws and appoint their own judges to the constitutional court, and to hinder the court‘s ability to censure legislation. It now also has control over the appointment of the heads of public broadcasters. This has prompted some officials in the EU to worry about the state of judicial independence and freedom of speech in Poland, seeing the moves by the Law and Justice (PiS) majority government as attempts to drive out liberal European values.

Image: Shutterstock

EC launches preliminary assessment against Poland

NEWS

APRIL 2015 • WBJ OBSERVER

WBJ OBSERVER • FEBRUARY 2016

NEWS

S&P lowers Poland‘s Rating To ‘BBB+‘ S

FEBRUARY 2016 • WBJ OBSERVER

Reserved to open store on Oxford Street

olish fashion giant LLP has signed a preliminary agreement to lease retail space on Oxford Street, London, for some PLN 675 million for 25 years, the Polish Press Agency (PAP) informed. LPP intends to open a Reserved store at the location. The deal is subject to approval by the owner of the building,

LPP said. The company‘s revenues totaled PLN 2.3 billion in the first half of 2015, PLN 820 million of which were recorded on foreign markets. Currently, LPP operates on 16 markets, including the Czech Republic, Russia, Ukraine, Romania, Croatia and Germany.

Images: Shutterstock

tandard & Poor‘s Ratings Services has lowered its long-term foreign currency sovereign credit rating on Poland to ‘BBB+‘ from ‘A-‘ and its long and short-term local currency sovereign credit ratings to ‘A-/A-2‘ from ‘A/A-1‘, with a negative perspective. The agency said in a statement that “the downgrade reflects our view that Poland‘s system of institutional checks and balances has been eroded significantly as the independence and effectiveness of key institutions, such as the constitutional court and public broadcasting, is being weakened by various legislative measures initiated since the October 2015 election.” “The negative outlook reflects our view that there is at least a onein-three likelihood that we could lower the ratings within the next 24 months if monetary policy credibility is undermined, or if public finances deteriorate beyond our current expectations,” the statement also said. Finance Minister Paweł Szałamacha described the decision as erroneous and called on the agency to reverse it. “The S&P agency has not taken economic aspects into account, but is concentrating on politics,” he told private TV channel TVN24. “The economy is doing very well. Just two days ago the World Bank increased its economic growth forecast for Poland. The International Monetary Fund has approved a new renewable credit line,” he added.

NEWS SEJM PASSES 2016 BUDGET BILL The Polish Sejm passed its budget bill for the 2016 calendar year in the early hours of January 30. It projects a maximum deficit of PLN 54.7 billion. According to Finance Minister Paweł Szałamacha, such a budget will realize the pro-family policy goals of the government while keeping public finances safe. The budgetary projections call for GDP growth to equal 3.8 percent, midyear inflation -1.7 percent and public sector finance deficit -2.8 percent of GDP. During the last few days of January, the Sejm dealt with over 300 proposed amendments to the budget bill. Ultimately it passed only 20, all proposed by the Law and Justice party. The budget bill will now go to the Polish Senate. SCHETYNA OFFICIALLY ELECTED NEW HEAD OF PO With 91 percent of votes, Grzegorz Schetyna has been elected the new head of Civic Platform (PO). The voting process lasted from January 2 to January 20, turnout stood at 52 percent. Schetyna‘s only challenger, Tomasz Siemoniak, a former Defense Minister, had earlier stood down from the race, arguing that “democracy is in a critical condition” under the new PiS government and therefore “exceptional unity” is needed within PO. Voting cards had been printed before Siemoniak announced his decision. Due to that fact, the party assumed that a vote for him would be taken as an objection to Schetyna becoming the leader of PO.

Gov‘t presents new tax on trade

President signs new media law

resident Andrzej Duda signed an amendment to the media law following its adoption by the Sejm in the face of some controversy, his chancellery informed. “The president cares that public media is impartial, objective and trustworthy,” said Małgorzata Sadurska, the chief of the presidential chancellery. According to the new law, the head of Polish public radio and television will be dismissed and replaced by three-member boards “appointed and dismissed by the minister of the treasury.” The new board will be under the control of the treasury “until the introduction of new national media organizations,” the bill specifies. PiS wants to “return public media to the Poles,” said PiS MP Elzbieta Kruk during the debate at the Sejm. The law has raised concern with European Commission leaders over the freedom of the media in Poland, and the Council of Europe called on the president not to sign the new bill.

The Ministry of Finance announced that it wants to impose a new progressive tax on retailers of 0.7 percent on revenues of up to PLN 300 million and 1.3 percent on the surplus above that sum. Additionally, Poland wants to levy a 1.9 percent tax on revenues generated on weekends and other holidays. The project stipulates that PLN 1.5 million will be tax-free. Exemptions include pharmaceuticals and reimbursed drugs, meals prepared by the seller, natural gas, water, heat and electricity. The Ministry said that the new tax should bring in PLN 2 billion in revenue in 2016. Earlier, the ruling PiS party had planned to tax the turnover of retailers whose total floor space exceeds 250 sqm.

CEO of Jeronimo Martins Poland, Pedro Pereira da Silva, the man behind the success of the Biedronka retail chain, announced that he is stepping down after 15 years in office. He will be replaced by Luis Araujo. “After 15 years in Poland, Pedro Pereira da Silva leaves Jeronimo Martins Group, which he joined 25 years ago as a management

FEBRUARY 2016 • WBJ OBSERVER

trainee,” a press release said. For his contribution to the economic development of Poland he was awarded, by the former President Bronisław Komorowski, the Order of Merit of the Republic of Poland. Jeronimo Martins is the owner of Poland‘s largest retailer. There are currently 2,587 Biedronka supermarkets nation-wide.

Image: Shutterstock

CEO of Biedronka‘s owner steps down

NEWS

Netflix officially in Poland A

merican provider of on-demand internet streaming media Netflix announced that as of January 6 it is available in 130 countries, including Poland. The Polish website address is as follows: netflix.com/pl “With this launch, consumers around the world — from Singapore to St. Petersburg, from San Francisco to Sao Paulo — will be able to enjoy TV shows and movies simultaneously — no more waiting. With the help of the internet, we are putting power in consumers‘ hands, to watch whenever, wherever, and on whatever device,” said Reed Hastings, CEO of Netflix. The offer for Polish viewers starts from €7.99 (roughly PLN 35). Paid subscription requires a credit card, although there is a no-charge monthly trial period for new customers, but a credit card still is necessary to sign up.

Gov‘t accepts 500+ benefit program O

n February 1, the government accepted the 500+ benefit program designed to reverse Poland‘s negative demographic trends. Under the scheme, the government plans to hand out PLN 500 per month for every child in a family whose per capita income is lower than PLN 800 per month and for every second and subsequent child, regardless of family income. It is to be introduced in April 2016. The sum is available for all

parents, including single parents and is not subject to taxes. The passing of the 500+ program was PiS‘ main pledge during the election campaign before the October general election. “I kept my promise,” said Prime Minister Beata Szydło while waving a copy of the document. “This is a draft of the bill that in a moment, I will present to the Speaker of the Sejm,” she added.

PLN 54.8 BLN

will be Poland‘s deficit in 2016, according to an amendment to the 2016 budget

3.7%

is how much Poland‘s economy is expected to grow in 2016 (World Bank) WBJ OBSERVER • FEBRUARY 2016

NEWS

WBJ OBSERVER • FEBRUARY 2016

NEWS

First gas tanker arrives in Świnoujście

n mid December Poland received the first delivery of 200,000 sqm of LNG or 120 million cubic meters of gas from Qatar at the LNG terminal in Świnowujście. The liquefied natural gas import terminal features an unloading jetty for large LNG tankers, two storage

UK‘S BRIDGEPOINT BUYS SMYK FOR PLN 1.06 BLN Poland‘s Empik Media & Fashion (EM&F) has signed a PLN 1.06 billion deal to sell Smyk, a children‘s apparel and toy store chain, to a company owned by London-based private equity group Bridgepoint, EM&F said. The price includes debt. The company said that it expects the transaction to be finalized by the end of May. The chain has 125 stores in Poland and EM&F said that there is potential for sales to grow by 11 percent a year. EM&F has been trading on the WSE since 1997.

FEBRUARY 2016 • WBJ OBSERVER

tanks and a regasification train. The terminal‘s initial regasification capacity will be five billion cubic meters per annum. The project is worth PLN 3.5 billion and is Poland‘s flagship investment, aimed at diversifying gas supplies, reducing dependence on Russia.

President presents FX mortgage loans conversion bill P

resident of Poland Andrzej Duda held a meeting on January 19 with the representatives of organizations of franc borrowers. After the encounter, the President presented his draft bill aimed at easing the burden of FX mortgage borrowers. The project envisages that the borrowers would gain the opportunity to convert their FX-denominated loans into złoty-denominated credits at “a fair rate,” defined individually by an algorithm set in the legislation and used for the remaining lifetime of the loan. “We used a ‘just exchange rate,‘ which stems from the comparison of the cost of the FX or FX-indexed loan to a PLN-denominated loan,” presidential Minister Maciej Łopiński said. The mechanism of the ‘fair‘ exchange rate is calculated through comparison of the cost of the FX mortgage and the cost of similar PLN-denominated loans.

Images: Shutterstock

NEWS

Poland ready to resettle 100 refugees by March P oland‘s Prime Minister Beata Szydło announced that Poland is ready to welcome 100 refugees by March, underlining that this is just the beginning of a process that will last until the end of the year. Szydło said that Poland wants to have a say over who will be able to find refuge in Poland. “We will set our conditions,” she claimed. Asked about the commitment pledged by the previous government to host 7,000 refugees, the Prime Minister said that “at this moment, we honor

that, we respect that, but it doesn‘t mean that we don‘t want to start a debate on changing the decisions which have been made.” “The thing is that these decisions [to take in refugees] were not good,” she added, referring to recent developments in Cologne, Germany, where nearly 1,000 men, of allegedly North African origin, groped and molested revelers at NYE celebrations. In her opinion, the EU should make efforts to solve the migrant issue outside Union borders.

Sejm passes billing and surveillance act T

he Sejm passed a bill on January 15 amending the way in which public services engage in telecommunications billing and surveillance. The new bill came about as a result of a Supreme Court declaration in 2014 which stated that the previous surveillance bill was partly unconstitutional. The new measure defines surveillance by public services as: “wiretapping, viewing individuals in buildings, vehicles and places that are not in the public space, monitoring of correspondence (including electronic), control of mail deliveries, taking data from storage devices, computers and

telecommunications devices.” The overall length of these surveillance controls may not be longer than 18 months (counterintelligence forces are exempt from this requirement). Under the new regulations, district courts will be able to monitor all surveillance actions and initiate controls post factum to ensure their conformance with the law. Authorized officials will transfer all requested documents to the courts every six months. In addition, the minister of justice will give a yearly report to the Sejm and Senate on the surveillance actions and the results of the controls.

P R O M OT I O N A L F E AT U R E

Škoda: Number 1 in Poland for the seventh year in a row The Czech brand, for the seventh consecutive year, is beating sales records and showing no signs of slowing down in 2015. Yet again Poles have eagerly chosen cars of this brand, beating the record of 44,524 registrations. Škoda is the number one brand, both on the fleet car market, as well for individual clients. Since 2009, Škoda has continuously been the leader of the new car market in Poland. Year by year it continues to improve its position, raising its yearly performance: in the last 12 months, 44,524 Škoda cars were registered, which constitutes a rise of almost 3 percent in relation to its total in 2014 (43,301). That accounts for 12.63 percent of all cars registered in Poland in that time period. An especially noteworthy achievement is its performance among individual clients: 14,210 registered cars, which is 7.93 percent more than in 2014, confirming, not only the attractiveness of the models on offer, but also the benefits of the brand. The carmaker is also maintaining its position as leader in the fleet car market, with a 13.22 percent share, which equates to 30,314 registered cars.

WBJ OBSERVER • FEBRUARY 2016

FACTS AND FIGURES

Data overview overview forfor for December December Data Data overview for December Data overview December Data overview for December and and entire entire 2015 2015 and entire 2015 and entire 2015 and entire 2015

WARSAW WARSAW STOCK STOCK EXCHANGE EXCHANGE WARSAW STOCK EXCHANGE WARSAW STOCK EXCHANGE AS OF JANUARY AS OF JANUARY STOCK EXCHANGE AS OF JANUARY AS OFWARSAW JANUARY AS OF JANUARY

486 486 486 486 486

0.9% 0.9% 0.9%0.9% was the was annual the annual was the annual 0.9%

NumberNumber of listedofcompanies listed companies listed companies NumberNumber of listedofcompanies

was the annual average average deflation deflation in 2015 2015 average deflation in in 2015 was the average deflation in annual 2015 average deflation in 2015

Number of listed companies

Trade Trade volumes volumes

6.7% 6.7% 6.7% y/y industrial outputoutput 6.7%y/y industrial

Trade volumes Trade volumes Trade volumes

3.6% 3.6% 3.6% 3.6%

y/y industrial output 6.7% growth growth in December December y/y industrial output growth in in December

Shares Shares Shares

PLN PLN 14.36 14.36 billion billion PLN 14.36 billion Shares

3.6%

PLN 14.36 Bonds Bonds PLNbillion 14.36 billion

GDP GROWTH GDP GROWTH IN 2015 IN 2015 GDP GROWTH IN 2015

y/y industrial output growth in December growth in December

GDP GROWTH IN 2015 GDP GROWTH IN 2015

Bonds

PLN PLN 82 82 million 82million million PLN Bonds

Bonds

PLN 82PLN million Futures Futures 82 million

7% 7% 7%

PLNPLN 14.65 14.65 million million Futures PLN 14.65 million Futures

y/y retail sales y/y retail sales growth in December growth in December

Growth of main index (WIG), ytd Growth of main index (WIG), ytd

Futures

7% 7%

y/y retail sales retail sales y/yy/y retail sales growth growth in December in December growth in December

Growth14.65 of Growth main index of main (WIG), index ytd (WIG), ytd PLN million Growth of main index (WIG), ytd PLN 14.65 million

-4.69% -4.69% -4.69%

-4.69%-4.69%

Poland is slowly depopulating

9.8% 9.8% 9.8%

The Central Statistical Office (GUS) predicts that in 2050, 277,600 infants will be born in Poland, a figure 41,400 fewer than the 319,000 infants that were born in the nation in 2014.

the registered the registered the registered unemployment unemployment rate rate unemployment rate in December in December in December

9.8% 9.8%

"We are on the cusp of the history of our economy and we need to break out of this trap of a lack of innovation, of the middle income trap. Innovation is the key here."

Dec.’15

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Jun. Apr. ‘15‘15 Mar. '15

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Dec.’15

Oct.’15

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Sep. ‘15

Mateusz Morawiecki, Minister of Development Aug. ‘15

Apr. ‘15

Mar. '15

Jan. '15

Feb. '15

Dec. '14

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12 Poland’s registered unemployment rate, 11.5 11.5 December 11.5 2014 –December 2015

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Year-on-year CPI inflation in Poland, 0 December 2014 – December 2015 0

0.5

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0 -0.5

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0.5

Feb. '15

0.5

Jan. Data'15source:

Warsaw Stock Exchange, Central Statistical Office

the registered the registered unemployment rate unemployment rate in Decemberin December

WBJ OBSERVER • FEBRUARY 2016

COMMENTARY / LAW

JAKUB JĘDRZEJAK LEGAL COUNSEL, PARTNER AT WKB WIERCIŃSKI, KWIECIŃSKI, BAEHR

ŁUKASZ CZEKAŃSKI TAX ADVISER, COUNSEL AT WKB WIERCIŃSKI, KWIECIŃSKI, BAEHR

BANKING TAX – IS PAIN FOR BANKS ANY GAIN FOR THE STATE TREASURY? The brand new banking tax continues to raise much controversy in the financial sector. The bill was passed by Parliament on January 15 and published on the same day, it came into force as of February 1. Such a relatively short period between the date of publication and entry into force is not commonly seen in the case of bills as important as the ones imposing new taxes. An appropriate time span between the publication and entry into force of acts of law, especially the ones imposing taxes, is derived from the Constitution and there might be some concern if that rule has been followed in this case. Clearly, the banks and other affected institutions were not afforded a lot of time to prepare for the new tax.

2 billion in the case of insurers and reinsurers and PLN 200 million for loan providers. What is more, this tax will not be a tax-deductible expense.

The popular term banking tax is a bit misleading as financial institutions other than banks are also taxpayers. This applies in particular to insurers, loan providers and branches of foreign banks and credit institutions. The tax does not apply to national banks, institutions under reorganization proceedings or investment funds.

There may be ways for the banks to mitigate the negative impact of the new tax, e.g. through shifting portfolio of credits to balance sheets of their foreign affiliates or encouraging clients to swap from deposits to investment products. It has also been suggested that the new banking tax could create the opportunity for foreign banks and other financial institutions to start offering their products in Poland directly from their foreign offices (and notably, those who have existing branches in Poland may decide to close these down and operate through their foreign headquarters).

The new tax (0.0366 percent per month, i.e. 0.44 percent per annum for banks) is calculated monthly on the surplus of the taxpayer’s assets (reduced i.e. by own funds) over PLN 4 billion in the case of banks and credit unions, PLN ALTHOUGH THE NEW LAW SPECIFICALLY STIPULATES THAT IMPLEMENTATION OF THE TAX MAY NOT LEAD TO AMENDING TERMS OF SERVICES PROVIDED UNDER CONTRACTS CONCLUDED BEFORE THE NEW ACT CAME INTO FORCE, IT IS STILL EXPECTED THAT THE STANDARD RATES AND COSTS FOR BANKING SERVICES WILL INCREASE

FEBRUARY 2016 • WBJ OBSERVER

There are many voices claiming that as a result of the new tax, the banks will shift the associated costs to the their clients. Although the new law specifically stipulates that implementation of the tax may not lead to amending terms of services provided under contracts concluded before the new act came into force, it is still expected that the standard rates and costs for banking services will increase. Clearly, there are no legal limitations for the costs to be increased on any newly sold products.

The future will show to what extent the above risks will materialize. Nevertheless, the new banking tax has already created a lot of uncertainty, both amongst the financial institutions themselves and their clients, who fear the burden being shifted onto them. u

COMMENTARY / REAL ESTATE

PLANNING TO INVEST IN POLISH REAL ESTATE? LOOK NO FURTHER!

KR Group is a dynamically expanding Polish accounting and auditing group. Established in 1997 and with over 120 experienced real estate professionals, we provide tax, book-keeping and advisory services to real estate fund managers and investors. With a significant share of the Polish market in this sector, our team understands and provides insight into industry issues that real estate investors need to address. Who are you? Most of our clients are Polish companies with foreign capital involvement and foreign entities doing business in Poland. They include: • Investment funds (open and closed ended) • Banks financing real estate investments • Other entities that invest in commercial real estate (office, retail, warehouse, hotel properties) • Companies whose assets consist of real estate.

Why chose KR Group? Managing the finances of a property investment requires time, attention to detail, and knowledge of ever-changing accounting laws. Over the years we have also learnt that to operate successfully in Poland it is crucial to fully understand Poland’s complex regulatory and compliance reporting requirements. Doing so reduces the risk of transactions, and provides the level of transparency expected by key stakeholders. Our property accounting professionals will manage your books so you do not have to. We ensure compliance with all local and international accounting standards. You can count on us to provide financial accuracy, timeliness and peace of mind.

What we do By combining expert knowledge with best industry practice, and extensive transactional and project experience we are able to bring real value to the investment process. Our key services include: • Book-keeping • Nominee directorship • Financial and manage- • Domiciliation ment reporting • Company secretarial • Tax advisory services • Cash management • VAT representation for • Sale of off the shelf businesses from outside companies the European Union • Payroll services We have been successful by building trustful relationships with clients and becoming a business partner in your investment ventures. We can also cut the overall cost of your business operations in Poland. Our team is well connected with other professionals around the world and able to find solutions at every stage of the reporting process and across several locations. In short, our aim is to ensure that you receive the highest quality services and insightful advice to help you on the road to investing success. Office in Warsaw

KR Group, Skartszewska 7 Street, 03-802 Warsaw, Poland T (+48) 22 262 81 00, F (+48) 22 100 65 14, E office@krgroup.pl

WBJ OBSERVER • FEBRUARY 2016

I N T E R V I E W / I LYA P O N O M A R E V

LIVING IN EXILE

WBJ OBSERVER HAD THE CHANCE TO TALK TO ILYA PONOMAREV DURING THE WARSAW SECURITY FORUM. HE IS THE ONLY MEMBER OF THE RUSSIAN STATE DUMA WHO VOTED AGAINST THE ANNEXATION OF CRIMEA IN 2014, HE NOW LIVES IN EXILE IN CALIFORNIA

INTERVIEW BY SANTIAGO DE LA PRESILLA

Do you still consider Ukraine an ally of Russia, at least to a certain extent? Right now we’re not allies by definition, we’re at war. However, it’s still the closest country to us, we’re the closest relatives. I think that Putin will eventually go and that our relationship will be restored. What happened after you voted against the annexation? What was the reaction of the media and your colleagues? Of course there was a lot of pressure, some of my colleagues actually expressed a very contradictory reaction because they were simply jealous. They were saying: “You bastard, you will come out clean and we’ll be compromised forever! We’ll be denied entrance to the west,” but you know, they should’ve had the courage to do the same if they were against the annexation, as well as understanding the consequences. What can I say?

FEBRUARY 2016 • WBJ OBSERVER

Now that Ukraine’s relatively quiet, compared to last year at least, what are your thoughts on Russia’s intervention in Syria? This all looks like it came out of nowhere. Well, the reason is pretty simple. You pointed out a very important thing, that this all happened very suddenly. That means that Russia’s foreign policy is very unpredictable. This is very bad. Foreign policy has to be consistent and it has to be predictable, otherwise a country will always be seen as a dangerous player, and I’m sorry to say that we are very much a dangerous player in the international arena. Again, Putin wants to shift public opinion inside the country to distract the population from the economic hardship that they are living through. Isn’t public opinion of Putin already extremely high? Yes, it is high. However, he needs to sustain it, it’s obvious that the situation in eastern Ukraine has come to a dead end. It’s just not going anywhere and by switching to Syria, he acknowledges that he’s failed in eastern Ukraine, so he’s merely trying to replace one with the other, just to sustain public opinion. So far he’s been successful. Do you really think that the intervention is going to last three or four months, like Russia’s Foreign Minister, Lavrov said? These are groundless expectations. When the war in Chechnya started I remember how, at that time, defense Minister Pavel Grachev said that it would be a one

– month operation at most. The same thing when we entered Afghanistan, it wasn’t expected to turn into such a long and bloody exercise. I’m afraid that the same will happen in Syria. So to a certain extent, do you think that Russian foreign policy is too improvised? Improvised is the correct description. Putin is extremely tactical, his predictions are very spontaneous, he’s extremely shortsighted. He makes decisions based on the current situation with very little planning, and that’s dangerous. All foreign policies are long term by definition, you shouldn’t swing from one extreme to another in a matter of minutes. Have you tried returning to Russia? What are the actual charges against you? If I was to return I’d be arrested immediately. They’re trying to prove that I was involved in assisting someone to misappropriate Skolkovo Foundation funds – they recognized that I never physically touched the money so they can’t blame me directly. They’re accusing me of doing some work that was considered “too expensive.” It doesn’t really matter because they can’t blame me for working. Has somebody else from the foundation been charged? Yes, the irony of the situation is that when they originally opened a criminal case against this guy [Alexei Beltyukov], they were not targeting him, but Surkov, the Deputy Prime Minister at that time.

Image: Ilya Pnomarev

Santiago de la Presilla: How does it feel to be the only member of the State Duma who voted against the annexation of Crimea? The vote was 445-1. Why did you vote against it? Ilya Ponomarev: It’s my job to vote to represent my constituents. I consulted people on how I should vote and I saw that amongst my voters there was virtually a 50-50 split. My personal position was that this would lead to an inevitable war and of course I always thought that a war with Ukraine, our closest ally and the country most related to us, is just inconceivable. That’s why I voted against the annexation.

I N T E R V I E W / I LYA P O N O M A R E V

campaign against MTV, it was like a major assault on the freedom of speech. I recognized that this would be bad for the country and that’s when I decided to go into politics to prevent this. And if you look at the state of Russian media today… Again, I see that I was right. I couldn’t do anything to prevent it, unfortunately, as everyone else was making “compromises” but at least I tried. My conscience is clear, I did the best I could to prevent all this.

“IN RUSSIA WE HAVE A SAYING: FOR NOT BEING GUILTY, YOU’LL BE SENTENCED TO TWO YEARS. Myself, just like everyone else, we were just collateral damage. Surkov then became Chief of Operations against Ukraine, he was acquitted personally by Putin, then they shut the whole thing down. Beltyukov was later released and is also living in the US. I really feel sorry for him, he’s a good guy. What are the chances of the charges being dropped? They are minimal because our system never admits to being wrong. In Russia we have a saying: “For not being guilty, you’ll be sentenced to two years.” If you’re in the system, even if you’re not guilty, you’ll always be charged for something.

In retrospect, after this witch-hunt, do you regret voting against the annexation? Of course not. I regret what’s happening in my country, that’s what I regret. But as I said, I treat it as my job, this decision is not really about that particular vote. I made this decision when I decided to go into politics, I began in politics 15 years ago. My parents always told me that I should’ve left Russia and made a successful business career, because before that I’d had a very successful career – I was vice-president of Yukos, the largest corporation in Russia. I actually got bored, I was thinking: “So I’m vice-president of the largest corporation in Russia, what’s next? I can sit for another 20 years and become the CEO,” but I wanted to pursue something different. So what was it that finally made you run for office? There was a particular trigger event, when in 2001, Vladimir Putin started to

This event wouldn’t be happening if it wasn’t for Russia’s actions in Ukraine. Do you think NATO has cause for concern? A lot of people say that NATO countries shouldn’t worry since Russia is not capable of defeating the Alliance. I think that NATO should be worried, probably not Poland, but the Baltic states should definitely be worried. I don’t see any potential negative developments for Poland in particular, because of geography, but the Baltic states are vulnerable. The problem is that if something happens, it will not be military aggression. Even in Ukraine you can see that one of the sources of these endless arguments is not that there is out-and-out fighting in Ukraine, it’s a covert security operation. Putin is not a military guy, he’s a security guy, he’s a KGB officer – the bulk of the military force there are rebels, they’re supported by Russian military, trained and supplied by Russian military, but the Russian military themselves represent a tiny portion of the fighters in the area. In Syria it’s the same thing – Putin is bombing the moderate Syrian opposition to allow Assad to use his army to attack ISIS. Taking all of this into consideration, how do you see Russia in 5 or 10 years? The next five years are totally unpredictable. Ten years from now, I’m 100 percent sure Putin will be gone and the country will return to its normal developmental path. I think that there could be very unpredictable and dangerous developments on the way. The prospects of the Novorossiya people, the people fighting in Ukraine, that they could come to power in Russia. That’s my fear. Putin has done everything to promote these groups of people as well as to direct public attention in their direction. I’m not sure that Putin is capable of controlling this. u

WBJ OBSERVER • FEBRUARY 2016

INTERVIEW / JERZY HAUSNER

MIXED SIGNALS PROFESSOR JERZY HAUSNER SAT DOWN WITH THE WBJ OBSERVER TO TALK ABOUT HIS REPORT "THE EIGHT DEADLY SINS OF THE POLISH REPUBLIC" WRITTEN BY HIM AND GROUP OF EXPERTS FROM THE ECONOMIC UNIVERSITY IN KRAKÓW. WE ALSO DISCUSS HIS VIEW ON THE ECONOMIC POLICY OF THE LAW AND JUSTICE (PIS) GOVERNMENT AND HIS ASSESSMENT OF THE NEEDS AND CHALLENGES FACING POLAND’S INFRASTRUCTURE, ECONOMY AND FINANCES IN THE CURRENT DOMESTIC AND EUROPEAN CLIMATE

and economy during recent years, you stress that corrections could, and should, be conducted in the framework of the present political system, with respect to the constitution and all democratic institutions. So, how do you view the course taken by the PiS government? Let me start with economic matters. When we want to avoid the danger of the middle income trap we should develop new industrial policy. And here is the question: is the development of such a policy dependent on the need to alter the constitution? The answer is no. There are no obstacles in our constitutional and political system that could hinder industrial and economic policy. The obstacles are linked with the lack of a coherent strategy for development. There are obstacles associated with the dysfunction of various offices, the lack of professionalism, the politicizing of institutions, the poor functioning of corporate governance in state-owned companies and the lack of corporate order in those companies. In that light we drew conclusions about how the state should function and about what should be done in terms of economic policy. But, I would like to strongly

WBJ Observer: Since publishing the report in December 2015, there has been a change of government in Poland. You stress that the report is an independent discussion and is not in support of any particular political party. Its main thesis is that Poland is approaching the middle income trap and a new economic approach is needed. How do you assess the present economic situation in the country? Jerzy Hausner: In our report we didn’t conclude that Poland has already fallen into the middle income trap but that the country could find itself in that situation if no action is taken to make the Polish economy more innovative, and consequently more competitive. It is the most important conclusion in the economic part of our report, but I want to point out that the report deals not only with economic matters, but also with the functioning of the state in various other domains. We are looking at where it functions well and in which areas it doesn’t, where the state should be present and where it should not be involved. In the introduction to our report we stress that, after decades of domination of a neo-liberal approach to the economy, in which the state was treated as the problem, it

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turned out that it is necessary to take action in times of crises. With the awareness of the significance of the state there has been an avalanche of international studies concerned with how it should function in the present economic, financial and political reality. And it should concern Poland. While your report points to some, as you called “sins” in the functioning of the state

underline that the corrective measures proposed in our report in relation to the economic domain are not linked or conditional to implementing constitutional changes or changes in the political system. So, taking a political view of the government’s actions, dealing with the Constitutional Tribunal, the justice system, the civil service and other institutions it is, in fact, a conquest of the state by one political party. It is in contrast to how

Image: Jerzy Hausner

I N T E R V I E W B Y E WA B O N I E C K A

INTERVIEW / JERZY HAUSNER

things should be done and I am concerned that if the economic issues cannot be taken on and resolved it would be the responsibility of the PiS government. Could you clear up the nature of the changes implemented so far by the government in terms of the economy? In response to whether the steps that have so far been taken by the present government in relation to the economy have a clear direction, it depends on how we look at it. If I take into account the declarations made by minister Mateusz Morawiecki, which are still very sporadic and slightly incoherent, I would say that some of them correspond with the thesis of our report. But, if I look at what is actually being done by the government, I see that things are heading in the opposite direction. For example, we emphasize in our report that state-owned companies should not be exposed to political changes along with the changes of government. We point out that a mechanism for the selection of the professional staff in those companies should be created with respect for the rules of corporate order and assessment of their performance, not by current ministers, but by a competent group of executives. The policies of the government are contrary to this idea. You state in your report that the main sin of our economic policy in recent years was “the lack of strategic imagination and sovereign development policy”. You were one of the economists who strongly promoted such a strategy. Do you think that the deputy prime minister and the minister of development Mateusz Morawiecki will acknowledge and try to respond to that problem? I am not able to formulate a definite answer because Mateusz Morawiecki has not, so far, presented a coherent economic program. Whether he will present one I do not know. However, it is clear that such a coherent economic program is needed. It is a way of communicating with society, the participants of economic life, entrepreneurs, experts and the public. Economic policy should be viewed with a long-term perspective and we cannot rely on what Mateusz Morawiecki thinks. Poland should create a national institution to deal with the general strategy for economic development, which would be independent from the government and concerned with the interests of the state and not political parties. The global financial crisis has lead to the revision of many economic and financial ideas. It is also reflected in the strategies of

central banks in many countries, they appeal to the state to lower interest rates. It is a revision of the quantity theory of money, there are some unconventional moves, but from that point of view those financial instabilities have been avoided in Poland. We have built adequate banking supervision and our banking system provides a relatively high level of security, although there are troubles with some cooperative banks. We are now living in an era in which countries are looking for various economic and financial solutions. There is no “one size fits all” solution to the question of how to develop the economy in different countries in South America, Asia and some parts of Europe. Each country has its own structural economic problems and Poland also has such problems. For instance, one of those problems is the low level of expenditure on investments and the low level of innovation, so the question is, how to change it? The government, under the leadership of Mateusz Morawiecki, has created the Council for Innovations. It declares that state-owned companies should be involved in financing innovation projects. How do you assess that move? It remains to be seen whether that Council will lead to the undertaking of any concrete steps or rather, as is usually the case when establishing some kind of council, they will justify their lack of action. The conclusions from our report show that innovation is not born from the orders of any office or state, but it depends on competition in the economy, on creating market conditions to support innovation. The government cannot order the building of innovation. Having said that, I want to remark that some of the conclusions concerning the issues in the economy presented in our report have been understood by Mateusz Morawiecki, and to a certain extent, accepted. However, the question of whether some of our recommendations will be implemented into concrete action, I am not certain, as I am also unsure about the influence of Mateusz Morawiecki in relation to the economic program of the PiS government. Rating agency Standard and Poor’s has lowered Poland’s economic rating and credit credibility. Is it an alarm bell for our country? Each rating has two elements; the first is assessment, the second is attitude. The attitude is a wake-up call because it brings negativelong-term consequences. It also means that

we have to consider that the agency could even perhaps cut the rating further. So, we have to deal with the change and worsening situation. Still, I want to point out that when we assess the general condition of the Polish economy, I would say that the condition is good and that we are not in danger of falling into economic crisis. The picture we present in our report is that currently, our economy looks relatively positive, but there are growing unresolved structural problems. So, why has Standard and Poor’s lowered Poland’s rating? In my opinion there are three reasons: firstly, because there are worsening conditions in our environment linked to the economic development of our country as an emerging market. Secondly, it is an assessment of growing risk in the political-legislative domain in Poland. Lastly, because of the risk connected with the shape of the state budget for 2016 and the fear that the deficit will be passed onto the next budget, which will lead to an expansionist fiscal policy. You have been observing Polish politics for years, so I want to ask you whether you hold any hope that it will ever be possible to achieve minimal consensus between politicians and various groups of society, which would allow for economic problems and their resolutions to be treated as a common national priority, free from political games and maneuvers? I am, by nature, an optimist and a man who never loses hope and motivation to take action. I can say that in a certain sense I would describe myself as a rationalist, who wants to improve the world. Maybe it would now be possible to make the effort to improve certain economic matters. I depend on action not on illusions, the political colors of the men who are currently dealing with the economy have no meaning for me. I am not part of any political party, but I look at matters as a citizen and an expert with significant experience. I believe that economic problems can be resolved and that current ministers dealing with economic matters want to do it. I am not certain about it, but I am not rejecting the possibilities of Minister Morawiecki. Whether my hopes and expectations materialize I do not know. I would like to see it because I wish our economy and my country to develop. But if current economic ministers do not do it, just as I was highly critical of the previous government, I will also be equally critical of the present administration. u

WBJ OBSERVER • FEBRUARY 2016

INTERVIEW / PIOTR CZARNECKI

NOT LEARNING FROM PAST MISTAKES I N T E R V I E W B Y JA C E K C I E S N OW S K I

CONCERNING THE NEW BANK TAX AND THE GENERAL CONDITION OF THE WHOLE BANKING SECTOR, WBJ OBSERVER SPOKE WITH THE PRESIDENT AND CEO OF POLAND’S 8TH BIGGEST BANK RAIFFEISEN POLBANK, PIOTR CZARNECKI

Piotr Czarnecki: It’s ironic that so many obstacles are being thrown at the sector, which at the beginning of last year was considered one of the best organized, sustainable, wellcapitalized, most innovative and best performing banking industries in the world. The International Monetary Fund published a report last year analyzing the sector in various countries and the Polish one was presented as a benchmark for others to follow. Thanks to its soundness, Poland avoided being hit by the financial crisis in 2008-09 and now the new government wants to tax us with the highest rate of bank levy in Europe, more than doubling the amount we already pay into the state coffers just to cover increasing social expenditures. In other countries bank taxes are aimed at strengthening resolution and guarantee funds, or they serve as an incentive to decrease the size of a banking sector that has become too big to fail. Until now there was no doubt about the strength of the banking sector and its resilience to shocks, because everyone knew that year by year the banks set aside a big chunk of their profits, which is hundreds of PLN millions for capital buffers, while sharing the rest with shareholders. Now, as a result of successive burdens, profits evaporate quickly, so the capacity to absorb unexpected losses may worsen. Warnings were issued by all major rating agencies. This may cause an

FEBRUARY 2016 • WBJ OBSERVER

increase in funding costs, which in turn can translate into prices paid by customers. One could say that with such good profits you won’t have a problem coughing up additional taxes. If this was the only burden, but we already pay tons of taxes. In 2014, banks were responsible for 20 percent of all CIT collected by the government. Our contribution to the Bank Guarantee Fund, which is nothing but another form of tax, has increased because we had to cover the deposits of several SKOK credit unions and big cooperative banks that went under, and now they are demanding even more from us. On the other hand, the revenue side of the banking business also suffered because of all-time low interest rates and drastically reduced provisions for payment card transactions. This all leads to impairment of the banking sector. This view is shared by many experts, including the head of the National Bank of Poland. On top of that there is the concept of subsidizing one small group of banks’ clients; Swiss Franc borrowers. What can you do in this current political climate? Close up shop? It’s not that simple. Some proponents of new legislation are using the rhetoric that the banks, especially those that are foreignowned, can transfer all of their capital somewhere else. But they couldn’t be more wrong. It’s not our capital, so we can’t do such a thing. The financial supervision will not allow it either. This is the essence of the financial sector,

which is much more strictly regulated than other industries, with more requirements, more costs, more scrutiny. You could sell it. You need to find a buyer first. If the whole sector is under pressure, it won’t be that easy. You can’t just say one day, “I’m giving up.” You have depositories who you are responsible to. And when you’re an international capital group, of which Raiffeisen Polbank is one part, you can’t just close up shop in one of the countries where you operate. This would damage your credibility in other countries. Right now there is one potential buyer, state-owned insurer PZU, which recently purchased Alior Bank. The new government is a strong proponent of repolonizing the banking sector. There are too many mouths to feed in the Polish economy. Many sectors need financing, and without printing money, which I hope we won’t be doing, there aren’t many profitable industries from which you can take money and give it to those in need. Is the banking sector one that needs help? Not yet. When will it need help? I don’t know, but it has happened before. Many banks in Western Europe needed financial help during the latest economic crisis. Over €800 billion of public money was spent on it. Polish banks didn’t get a single cent from the state, because as I’ve said before, we were well and cautiously managed. Let's also

Image: Raiffeisen Polbank

WBJ Observer: The new bank tax, CHF mortgage conversion, higher contributions to the Bank Guarantee Fund. It’s not a great time to manage a bank these days.

INTERVIEW / PIOTR CZARNECKI

banks more and more frequently. When Greece was again on the brink of default last year, what was the prime reason for bailing them out? That the banks were running out of money, from their clients’ deposits. Out of the €85 billion that the EU paid out to Athens in the latest tranche, €35 billion went straight to banks, so they could have the necessary capital to pay out clients’ deposits. Today it seems that we’ve learned nothing from our past mistakes, taking a deposit’s security for granted. They forget that even Poland was in default not so long ago (in the 1980s). We had to reach agreements with the London and Paris Clubs to be able to pay off our reduced debt.

clearly state: the Polish regulator KNF also played a crucial role. But, on the other hand, banking is as same as any other sector, why should it be protected or treated differently? But we’re not protected and treated differently! We always pay all taxes: VAT (banks cannot deduct it), CIT (the banking sector is the biggest payer of all industries), the aforementioned banking fund. We increase capital buffers to fulfill rising regulatory requirements and bear many other costs. Plus, you have to remember the pricey investments we undertake. Polish banking is one of the most advanced in the world, and that is also expensive. Clients would like to get it all for free: security, mobility, liquidity and state-of-the-art technological and financial solutions. Banks can only profit from margins, whether from lending to or borrowing from our clients. This has to cover all our expenses, and where are we supposed to get the funds? You can get funds from your clients, by raising fees and suchlike. No, no. That’s not how it works, you get funds from investors. But in the current investing climate that’s not an easy task. The stock market is in the doldrums. Not long ago, banks were valued at twice their book value, nowadays it’s at book value, and the trend is still towards downturn. Hence, the only way to build your capital is from retained profits, which we will be deprived of because of the sectoral tax. It limits our lending capacity

as we need more regulatory capital to keep our clients’ deposits safe. It always angers me when I hear someone say, “It’s disgraceful that governments are deep inside banks’ pockets.” They don’t have to be. There are good examples like Norway. Because of their natural resources? Oil and gas help, but in principle they decided to spend less than they earn. We can also cite Estonia, which has a balanced budget and no natural resources. Other governments prefer taking on debt. I am afraid we have started a bit too early to sacrifice our advantages as a low cost economy in order to quickly increase social transfers while we are still in desperate need of investments. We should find a balance between the longawaited catch-up with a more western-like consumption level and investments. Anyway, in both situations you use your own savings or borrow money from abroad. Still we have not generated enough local capital. In such a position, discouraging foreign investors would not be a prudent stance. Banks should be happy with higher consumption funded with credit. That’s how they earn a living. By loaning. The basic feature of a bank is the security of its customers' deposits. Firstly, we loan from people, who trust that when they give us their money it will be safe and they will get it back, with interest, or without – here I should be more cautious because one can see negative interest rates in central and commercial

The government’s reasoning for most of the aforementioned changes is not necessarily economic, but rather social. I understand this. I myself am a father of two sons, and can imagine that there are many people in our society who are less fortunate and will benefit greatly from the new allowances. But on the other hand, can this be the sole reason for dismantling one of the biggest and most important pillars of our economy? How will this affect the sector in the longer term? Will the banks consolidate further, or will the weakest links become even weaker? It’s hard to tell at this stage, this might affect not only our sector, but others as well. Investments don’t mix well with such an uncertain climate as we have today. We should not neglect those warning signs like the PMI index falling or negative comments from the rating agencies. I like that comparison of giving blood. You can only give 450 milliliters every two months. It’s a safe amount. You could give more, but it could lead to anemia or other health risks. The banking system is like blood for the entire economy. Could we give more than we are giving right now? Sure, but who knows how it would end. Maybe we’d be fine, but what if not? It won’t only be a problem for us bankers and managers. Most of all, small and mediumsized companies, family businesses, or the core of our economy, which was supposed to be taken care of by the government, will be affected. With smaller profits banks will have to curb lending, and so firms will have less funds to invest, develop and as a result will contribute less to the whole economy in the long run. Large corporations have their own funding sources and access to foreign markets, they will muddle through relatively comfortably. u

WBJ OBSERVER • FEBRUARY 2016

COVER STORY / BANK TAX

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COVER STORY / BANK TAX

Throwing the baby out with the bathwater? POLAND'S NEW CONSERVATIVE GOVERNMENT PLANS TO LAUNCH EXPENSIVE SOCIAL WELFARE PROGRAMS WHICH ARE TO BE COVERED BY ADDITIONAL TAXES. WBJ OBSERVER ANALYZES A NEW LEVY ON BANKS AND ASSESSES THE IMPACT IT MAY HAVE ON THE ECONOMY B Y WOJ C I E C H R Y LU KOW S K I

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COVER STORY / BANK TAX

The

banking sector in Poland is one of the most profitable. We propose that banks share with society,” Law and Justice's (PiS) candidate for Prime Minister Beata Szydło said in parliament in July 2015 while presenting the party's program, of which a robust social spending agenda was a large part. In order to finance benefits for children, a higher personal tax threshold, and the lowering of the retirement age PiS proposed to levy new taxes on large retailers and banks. The latter was intended to bring in PLN 5 billion in revenue, roughly a third of the amount needed to cover the expenditure of the child benefit program. From Tobin to the IMF The idea of taxing financial institutions is not new. It was first tabled by Nobel prize laureate James Tobin after the Breton Woods system ended in 1971. Since the US dollar was no longer pegged to gold and a new regime of volatile floating exchange rates had emerged, the economist proposed imposing a 0.1 percent rate tax on every currency exchange transaction in order to act as

a disincentive to short-term currency speculation. The tax rate would be so small that it wouldn't hurt the real economy (trade) at the same time making speculative transactions unprofitable. “My proposal is to throw some sand in the wheels of our excessively efficient international market,” Tobin wrote in 1978. The idea wasn't picked up on immediately, but it would re-emerge every now and then, particularly after a financial crisis: the Mexican, the Asian or the Russian. The latest resurfacing of the notion was triggered by the 2008 global

“Setting alarm bells ringing that the bank tax will definitely harm lending activities is an exaggeration.

crisis. Two years after Lehman Brothers fell, the International Monetary Fund published a paper, in which it outlined the proposition of a contribution to be paid by financial institutions that would stabilize the system and cover the costs of potential economic breakdowns. The IMF suggested that the levy, called a “Financial Stability Contribution,” should be imposed on liabilities excluding equity and saving deposits. This way, only short-term speculative transactions would be taxed, while citizens' savings would remain untouched. The European Commission calculated that a tax rate of 0.15 percent would yield €50 billion for the EU 27. Some of the battered European countries, which had pumped up to five percent of their GDP directly into

FEBRUARY 2016 • WBJ OBSERVER

All Images: Shutterstock

Elżbieta Mączyńska, Polish Economic Society

COVER STORY / BANK TAX

PLN 5.5 bln is how much Poland budgeted in revenues from the tax in 2016 the financial system in the aftermath of the crisis, jumped at the idea eagerly. The Hungarian experience Although the form of the levy differs from country to country as some of them have embraced it in the shape recommended by the IMF (Belgium), while others have taxed minimum equity requirement (France), or risk-weighted assets (Finland), the goals of these efforts were alike: firstly, to curb risky behavior and diminish the probability of future crises, and secondly, to raise the money needed to cover the costs of past or future crises. But, one country broke away from these shared goals. In 2010, Hungary imposed a banking tax for other reasons entirely: to plug the

budget hole and keep the deficit at 3.8 percent of GDP, the level agreed with the IMF and EU in exchange for a credit line. Since the country was severely bruised by the crisis, with its economy shrinking by 7.5 percent just a year before, social attitudes towards punishing banks were favorable. “It is unacceptable, with common sense, to respect banks as sacred cows at a time when a global crisis that started from the banks happens to be sweeping over the world,” Hungarian President Viktor Orban addressed parliament prior to the passing of a bank levy of 0.5 percent on assets of over HUF 50 billion, making it the highest in the world. Within four years, the country managed to raise HUF 843 billion (nearly €2.8 billion) through the

new tax. But on the flip side, lending activities have fallen by a third, from €60 billion to €43 billion over five years, and banks have shifted part of the tax burden onto their customers by raising interest rates and fee margins. On top of that, some foreign-owned lenders, which started to generate losses, backed out of the country, selling their subsidiaries to the Hungarian state treasury. The renationalization of part of the sector was an offshoot of the new law. Money for children Law and Justice, Poland's conservative party, which won the general election in October 2015, has never shied away from admitting to fashioning some of its policies based on those imple-

WBJ OBSERVER • FEBRUARY 2016

COVER STORY / BANK TAX

mented by Orban. Although Poland didn't undergo a recession at the peak of the global crisis and wasn't forced to bail out its banks, the party promised to tax lenders and large retailers in order to finance its social spending programs. The PiS flagship benefit scheme, 500+, which is set to cost PLN 16 billion in 2016, involves handing out PLN 500 for every second and subsequent child and also for the first child if a family's per head income is lower than PLN 800. Since banks have recorded huge profits over the last couple of years, it was almost certain that the government would knock on their doors for money. Despite the fact that PiS claimed, throughout the election campaign, that it had its bills prepared, the shape of the levy was uncertain until the last moment. Prior to the final vote in parliament, the party said that it would tax assets of above PLN 4 billion at a rate of 0.39 percent a year, excluding equity and treasury papers. However, a few hours before the passing of the law, it raised the rate to 0.44 percent. The government budgeted PLN 5.5 billion in revenue from contributions in the 2016 budget.

a new fund for troubled borrowers. After deducting an additional PLN 5 billion from the new tax, the sector's profits may decline to PLN 6-7 billion this year, which could turn out to be too little to increase lending activities. But, according to Elżbieta Mączyńska, head of the Polish Economic Society, this doesn't have to be the case. She pointed to the fact that it is never one single factor that determines the number of loans taken. What counts is how the economy as a whole is developing. “There are numerous determinants which influence the decision to apply for a loan, including, among many others, the business friendliness of a country, the size of the market, the structure of the labor market, etc. Setting alarm bells ringing that the bank tax will definitely

harm lending activities is an exaggeration,” Mączyńska said. In her opinion, it will surely be a daunting factor, but not one that's decisive in taking credits. In the case of Hungary, a decrease in lending activities was caused, not only by the tax, but also by a recession and the passing of a bill on the conversion of FX mortgage loans into the forint, a move that cost banks a few billion euros. For Mariusz Zygierewicz from the Polish Bank Association, falling lending activity is mathematics. He reminded that in line with regulations, banks need to have around PLN 12-15 of their own means to be able to lend PLN 100. Over the last couple of years, lenders have been putting away 75 percent of their annual profits so that they could raise the value of granted credits. “Banks

Images: Shutterstock

A blow to the economy? The new law raised serious concerns with many analysts voicing arguments that the levy may result in throwing the baby out with the bathwater as the high tax could curb lending activities and thus harm the economy. Although the banking sector recorded an impressive net profit of PLN 16 billion in 2014, last year wasn't as fruitful. This was due to numerous factors, including falling income from fees and interest rates, paying obligatory contributions to cover deposits of bankrupt credit cooperatives and social banks, and donating to

“Banks will be able to swallow the tax.” Marek Belka, NBP

FEBRUARY 2016 • WBJ OBSERVER

COVER STORY / BANK TAX

need to have PLN 10 billion in profit to increase lending activity,” he explained. In the new situation, “considering capital constraints, banks would prefer to grant 40 loans with the highest yields instead of selling 100 cheaper products. 60 applicants would have to do without,” Zygierewicz said. Shifting costs The other contentious matter is the issue of shifting the burden of the tax onto clients. “Without doubt, banks will try to do that,” Mączyńska said, adding that until recently, their operating conditions were luxurious, and now the environment is becoming less friendly. Nonetheless, the law of supply and demand still applies and since lenders live off credits, they can't overdo it with excessive provisions. The Ministry of Finance addressed the issue in a similar vein. It stated that, considering the fierce competition between lenders, some banks will use the opportunity to lure clients by keeping their fees at a constant level. In October, Finance Minister Paweł Szałamacha even declared that state-controlled PKO BP could invite competitors' customers to open accounts with them, suggesting that they wouldn't tinker with charges. But reality turned out to be harsh for the minister. A week before the tax came into effect, PKO BP announced that some of its products would cost more. The decision is easily understood by Zygierewicz. “Firstly, if it doesn't raise fees, the state will lose out on the money from dividends. Secondly, assuming that all customers choose PKO BP over its competitors, the bank would have to raise employment to service them all in a reasonable manner. However, it is not sure for how long the tax will be maintained. If its form changes in a year or two, the lender will be left with an employment surplus.” Although it is enshrined in the law that raising fees in connection with the levy is prohibited, the ban only applies to deals signed prior it coming into force. “Increasing prices won't compensate for the whole portfolio,” Zygierewicz said. But Mączyńska advises not to cry over banks' fate, reminding that they have enjoyed very high rates of returns in the past few years, much higher than companies from other sectors. And, they still have space to optimize their costs by broadening the scope of online banking services, for example.

“I can see a risk that Polish banks will become some kind of information agencies, whose tasks would be to gather information from the market and send it to their parent companies. Mariusz Zygierewicz, Polish Banks AssociationWarsaw Apart from shifting the costs onto their customers, banks have a few other ways to circumvent the law. The legislation, according to the European Central Bank, may provide the incentive to transfer assets abroad and prompt lenders to restructure their portfolios in favor of riskier products. According to Zygierewicz, banks will not transfer retail banking activities because it would lead to increased employment in western countries where salaries are much higher, making the whole effort unprofitable. Nonetheless, transferring assets out of the country is very likely in corporate banking, particularly in those cases involving large projects of low profitability, for example the financing of shopping centers and alike. “I can see a risk that Polish banks will become some kind of information agencies, whose tasks would be to gather information from the market and send it to their parent companies,” Zygierewicz claimed. “Repolonization”? The hidden motivation, just like in the Hungarian case, behind the high tax rate may be the willingness to renationalize

the sector. These allegations can be confirmed by the election campaign statements put forward by PiS politicians. In March 2015, Andrzej Duda, then a presidential candidate, said that the state is powerless vis-a-vis the financial sector and this disparity stems from the fact that 70 percent of banks in Poland are foreign-owned. “There's only one demand – the renationalization of the sector, as banks do with us what they want,” Duda claimed. But to take over banks, the state needs money, and taking into account the social spending agenda, it is unlikely that Poland would be able to find a few billion złotys to finance such operations. In Zygierewicz's opinion, a larger concentration of Polish capital in the sector is not a bad idea, particularly in terms of supporting Polish exporters abroad. But the strategy of throttling banks in order to take them over and then rebuild them from scratch doesn't seem to be smart. “The ownership structure of the sector is good, none of the banks have a dominant position,” Zygierewicz said, adding that this move would be more understandable if there was one predominant foreign-owned bank. Otherwise, it might be art for art's sake. Taxing banks reasonably The idea of imposing levies on banks is not a controversial one, and many experts support it. “I am for taxing banks in the way proposed by Tobin to throw a spanner in the works of the financial sector so that it doesn't take control over the real economy,” Mączyńska claimed. But, Polish legislation causes concerns over the tax shape and its high rate. Although the levy poses little risk for the stability of the sector and banks will probably be able to “swallow” it, as the head of central bank Marek Belka stated, consequences for the economy and customers remain uncertain. In the best case scenario, in which Poland's GDP grows by nearly four percent a year (as it is projected to by international institutions), there are no bankruptcies of social banks or credit unions and the government doesn't pass a law on converting FX denominated mortgage loans, the banking tax probably won't harm the economy. But no one can assure that it will be that way. Additionally, passing the legislation with so many question marks just to reach a political goal is not the way economic policy should be carried out. u

WBJ OBSERVER • FEBRUARY 2016

FEATURE / MODERN BICYCLES

B Y A L I CJA C I S Z E W S K A

Cycle good, cycle smart

FEBRUARY 2016 • WBJ OBSERVER

FEATURE / MODERN BICYCLES

THEY WANTED TO DO SOMETHING UNIQUE IN BUSINESS, EITHER A SOCIAL PROJECT, IMPROVING UNDER-PRIVILEGED PEOPLE’S LIVES OR A SMART SOLUTION THAT COULD EASE MIDDLE-CLASS PEOPLE’S LIVES. SO, THEY WENT FOR A BIKE

Image: Asante Bamboo Bikes

of 2013, Poland had an 8 percent share in the European production output of bicycles. Currently, the domestic market’s value is estimated at some PLN 1.2 billion. It comprises nearly 20 producers, however, it’s dominated by two: Kross and Arcus&Romet. While Kross puts a lot of effort into developing its own technology and following global trends, Arcus is considered a good “assembly plant”. Both companies record annual turnover of some PLN 200-300 million, taking advantage of the nationwide fashion for cycling and the current shopping spree for mid-priced models, in which they specialize. Data from the Central Statistical Office (GUS) shows that in 2014, Poland manufactured up to 990,000 bicycles, which was an increase of 16.6 percent on a yearly basis. The majority of the output sold abroad is exported to Germany, and Taiwan is Poland’s biggest parts provider. Producers admit that Polish customers are getting more and more picky and aware of their needs. On the other hand, Poles are still not into biking as much as western European societies – there are only some 300 bikes per 1,000 Poles, whereas the EU average is 600. Igor Pielas and Marcin Piątkowski are young entrepreneurs who put their faith in bicycle manufacturing, reaching for two completely different business ideas. From Africa with love Warsaw-based Asante Bamboo Bikes (asantebikes.pl) is a quite unique startup as its mission is to empower education and community development in Ghana through manufacturing and selling bicycles made of light and long-lasting bamboo. Its business model is based on social entrepreneurship, which is about “applying practical, innovative and sustainable approaches to benefit society in general, with an emphasis on those who are marginalized and poor,” (Schwab Foundation for Social Entrepreneurship). Pielas, the founder of Asante has been interested in Africa and social entrepreneurship for a while. One day, he came across the Yonso Project, coordinated by Kwabena Danso. The organization operates in 15 communities where it runs several programs such as scholarships, literacy improvement and youth leadership development in rural Ghana, through manufacturing bamboo-made bicycle frames. Hence, the idea was not invented by Pielas himself, he adopted both the business and the social entrepreneurship models. However, he did not want to copy Danso, who consequently became his business partner, he wanted to take part in a social venture that he found promising and effective. “Our mission is to create bikes that change the world. We want to construct a product that gives people joy and does something good somewhere else,” Pielas said, stressing that his project has nothing to do with charity.

WBJ OBSERVER • FEBRUARY 2016

}

FEATURE / MODERN BICYCLES

Education is the weapon Asante launched pre-sales in September 2015 and managed to sell ten bikes (PLN 3,999 each) in just one week. The correlation is simple: one bike equals one scholarship. Pielas does not specify what percentage of the bike’s value funds a scholarship, because the price is to be decreased in March, when the official sales begin. Nevertheless, each grant stands at some $60 -70. "Education is the most powerful weapon which you can use to change the world,” Pielas cited Nelson Mandela, admitting that the quote is sort of his business’ motto. He believes that poor societies, with a lack of, or no access to knowledge, have fewer chances to develop, so what they need is information. From that standpoint, Pielas figured out that he would build interactive libraries in Ghana (going beyond the Asante region). In order to do that, he launched a crowdfunding action. The young entrepreneur has managed to garner enough money to start five libraries and purchase off-line tablets for four of them. Still, he needed funds for the fifth one, therefore, he came up with an idea of producing and selling bamboomade wrist-watches and earmarked 10 percent of their value to the library project (100 watches = 1 library). Each opening was widely covered by him and his coworkers on the internet. Every person who bought a watch could (also can, it’s ongoing) see what they had contributed to. Pielas has high hopes for his venture and does not hide some of his worries related to the market’s feedback, "I am not sure if the social aspect will convince people in Poland to buy my products, but I believe in this model with all my heart and I want to run my business on the basis of a do well, and do good idea.” 32

1 bike = 1 scholarship

Long ride ahead Bamboo-made frames are imported from Ghana, but Pielas has to deal with assembly himself (in his apartment) ,or contract it out to a workshop. Metal and rubber components are either acquired in the country or abroad, depending on the price. Currently, Poland is Asante’s main market, but its founder has an ambitious plan to introduce his products elsewhere, starting with Germany. Furthermore, he wants to expand the merchandise into apparel and other areas. The project is very time-consuming (Pielas is also working for Google Polska), so there was no time to conduct an active investor hunt, but the company certainly needs one. Rafał Brzoska, CEO at InPost, who was given an Asante bike by his friend as a birthday gift, could be one potential colaborator, but Asante’s owner asserted he has not approached him yet. In style Marcin Piątkowski’s product, a folding electric bike has already been hailed as “the iPhone of bicycles” or “a beacon on two wheels”. An expert from Bentley Motors designed the bike’s frame and the ergonomic shape, the venture attracted managers at such international corporations as Tesla Motors, Pepsico, Bupa, Melex, Fiat and Jaguar Land Rover. Just recently, Piątkowski was included in Forbes’ “30 Under 30 Europe” list (among six other Poles), featuring 30 young innovators, entrepreneurs and leaders from across Europe. Jam Vehicles (jivrbike.com), Piątkowski’s company, was founded in April 2012. The year before, he brought the idea of an electric bike into life as part of his master’s degree project at University College London through “researching the perfect urban commuting vehicle”. The school supported the venture initially, but the young entrepreneur launched a kickstarter campaign and managed to raise over £126,000, which roughly translates to PLN 730,000. Not for cyclists “JIVR has all the equipment hidden inside. There is a mechanical drive, instead of a chain. Nobody will get dirty from grease and there will be no need to spend a lot of time on maintenance,” Piątkowski said of his product, adding that it’s easy to fold and store. The process of concept design, prototyping and design optimization lasted two years, a serial manufacturing plant was established last year in Mielec (Podkarpackie voivodship), the hometown of the founder. The staff consists of nearly 20 people. Frame manufacturing is carried out in-house, the rest of the components come from the firm’s suppliers (Sikorsky Aircraft and a Chinese company, among others). What’s interesting, the bike also features iBeacon technology, powered by kontakt.io, thanks to which the vehicle interacts with any smart device. “Our customers are not cyclists,” Piątkowski confessed. He also admitted that demand for his product is higher than production capacity planned for 2016, i.e. 2,000 units, each priced at £2,000. JIVR has designed a functional vehicle for people commuting in busy cities, that is precisely why it is testing its distribution model in a few “significant” European cities and is going to conquer such markets as London, Shanghai, the east coast of the US and Singapore next year. “We bet on making life easier in big cities,” Piątkowski admitted. The first concept store will be opened in Europe, currently, the company is working on a few locations, but the store’s design itself is ready. When asked about his strategy towards Poland, he revealed the company has only served “the customers who bought the bike on pre-order,” and is not going to expand marketing activities.

Image: Asante Bamboo Bikes

Igor Pielas (on the left)

“I BELIEVE IN THIS MODEL WITH ALL MY HEART AND I WANT TO RUN MY BUSINESS ON THE BASIS OF A DO WELL, AND DO GOOD IDEA.

FEBRUARY 2016 • WBJ OBSERVER

FEATURE / MODERN BICYCLES

TELECOMMUNICATIONS

AND MEDIA WORLD

Red C 0 M 100 Y 90 K 5

WBJ OBSERVER • FEBRUARY 2016

210x280_v2.indd 1

2016-01-21 12:38:34

FEATURE / MODERN BICYCLES

}

Mutual appreciation Piątkowski is likely to wait until Polish cycling culture catches up with western trends, meanwhile Pielas could benefit from customers’ growing discernment. Apparently, both entrepreneurs are impressed by each other and are keeping their fingers crossed for each other’s projects. “I’ve heard about the bamboo bike, it’s an amazing thing, especially for connoisseurs of quality and uniqueness,” Piątkowski said. “It’s a XXI-century bike, technically advanced, practical and beautifully made,” Pielas commented on the JIVR. u

}

204 – how many people backed JIVR on kickstarter

“WE BET ON MAKING LIFE EASIER IN BIG CITIES 34

FEBRUARY 2016 • WBJ OBSERVER

Images: JIVR

Marcin Piątkowski

Made in Poland a guide to Polish

NEWS

FEATURE / MODERN BICYCLES

EXPORTS 2015-16

THE DEFINITIVE GUIDE TO POLISH EXPORTS

available now! APRIL 2015 • WBJ OBSERVER

UB AE RR Y 22 00 11 65 WWBBJ J OOBBSSEERRVVEERR •• NF OE VBERM

Image: Shutterstock,

> THE ANNUAL EXPORT GUIDE SURVEYS INDUSTRIES, FIRMS AND ORGANIZATIONS FUELING POLISH EXPORTS.

35 5

IT / BODY LEASING

FEBRUARY 2016 • WBJ OBSERVER

IT INSIGHTS

IT / BODY LEASING

section partner WBJ OBSERVER • FEBRUARY 2016 WBJ OBSERVER • DECEMBER-JANUARY 2015/16

IT / BODY LEASING

By Beata Socha

GOT A PROJECT, NEED A TEAM DEADLINES ARE APPROACHING, THE BOSS IS BREATHING DOWN YOUR NECK ASKING HOW LONG THE SYSTEM WILL TAKE TO COMPLETE, AND YOUR EMPLOYEES ARE ALREADY WORKING MOST WEEKENDS – IN OTHER WORDS A TYPICAL DAY FOR MANY A SOFTWARE MANUFACTURER. WHAT CAN YOU DO IF YOU HAVE NO TIME TO HIRE MORE WORKERS OR YOU’RE AFRAID OF BRINGING IN THE WRONG PEOPLE FOR THE JOB? YOU CAN ALWAYS LEASE SOME ABLE BODIES, A PRACTICE THAT IS BECOMING A GO-TO SOLUTION IN THE IT INDUSTRY

ody leasing or IT contracting – the two terms are used interchangeably – is used when a company faces a labor shortage and, rather than recruiting new employees, it takes on contract workers from a firm specializing in keeping a base of well trained and experienced IT specialists. “This is definitely a growing market. Increasingly often companies take on outside contractors to complete individual projects,” said Mariusz Zarzycki, director, Business Consulting at EY.

FEBRUARY 2016 • WBJ OBSERVER

The practice is ideal for firms specializing in fields other than programming, like banks or insurers. Keeping a team of highly paid specialists who are not needed at all times would be simply wasteful. However, body leasing has long since moved from satisfying only incidental needs for IT engineers. “Software producers are also moving towards such a model,” admitted Zarzycki. They often take on entire teams of contractors for projects ranging from weeks to even years.

No training required How is it better than regular recruitment? You could say it is a way of avoiding recruitment. It is a solution for companies that need specialists straight away and want to avoid timeconsuming interviews and on-the-job training. Body leasing firms boast their specialists are available in a matter of days. “In most cases in IT contracting, the recruitment process takes 1-3 weeks,” Jakub Mazur, senior account manager – IT Contracting at Hays Poland, told outsourcingportal.pl.

IT / BODY LEASING

It is obvious why contractors are a better option to satisfy immediate labor needs, but why do companies choose to pay the extra cost for entire teams of contractors who work on several-yearlong projects? “The individual cost may be higher, but it is similar to leasing or owning a car. Sometimes maintaining your own employees over a longer term is unprofitable,” Zarzycki explained. A candidate’s market But flexibility aside, the reasons why body leasing is becoming so popular in the IT business lie in the specifics of the IT job market. “The IT market is still where the candidate dictates the conditions and will continue to do so for the next few years,” said Mazur. Despite the high number of students and graduates of computer sciences (in 2014, there were 30,300 applicants to computer science faculties across

Poland, with some 13,000 graduates joining the job market each year, according to statistics office GUS), the supply is far from adequate to meet the constantly growing demand. And, the harder it is to find the right skill set, the more valuable are those who possess it. Consequently, IT specialists are, and will continue to be among the highest earners in the country. A software developer with more than 10 years' experience earns an average monthly salary of PLN 7,700 (after tax), according to a report by employment website pracuj.pl. IT is also likely the only field where a novice with less than two years’ working experience can earn more than PLN 5,000 a month, according to data by ANTAL International.

[

WE CAN EXPECT AN INFLUX OF CONTRACTORS FROM FORMER SOVIET BLOC COUNTRIES AND FROM ASIA OVER THE NEXT FEW YEARS.

It takes one to know one Another reason for the continued growth of the market is information

WBJ OBSERVER • FEBRUARY 2016

IT / BODY LEASING

PLN 7,700 IS THE AVERAGE MONTHLY PAY OF A SOFTWARE ENGINEER WITH 10+ YEARS OF PROFESSIONAL EXPERIENCE

asymmetry. Highly specialized technical skills, such as programming technologies, are much more difficult to assess than, say, language or soft skills. The latter can be relatively easily verified by specialized recruiters, the former requires experienced IT personnel. Studies have shown (the first by Sackman, Erikson, and Grant in 1968, later repeated by several researchers) that a very good programmer is often ten times more productive than a mediocre one, even with the same amount of experience and training, not to mention that some coders even have negative productivity, lowering the efficiency of the entire team. Avoiding mismatch Finally, working in the IT industry usually requires a high degree of specialization. Generally programmers specialize in a handful of technologies and frameworks. While a good sales rep can work in a number of industries, a good database specialist may not be the best fit for a mobile app developer. It is also why those who keep exten-

FEBRUARY 2016 • WBJ OBSERVER

sive databases of IT people, and can provide the right people for the job, have an advantage over recruitment agencies. “These companies simply know who does what. It is far easier for them to mobilize the necessary resources,” explained Zarzycki. Information is indeed of key importance in this niche market and that may be why contractors sign confidentiality agreements that preclude them from divulging any details about their employment. They are threatened with hefty penalties for even disclosing the name of the company whose project they are currently working on, an employee of such a company admitted, asking to remain anonymous. Something in between What if a company wants to hire its own specialists, but has no time to go about the entire recruitment process as it needs workers straight away? There are methods combining regular recruitment with IT contracting, called try & hire, where a specialist is hired by an intermediary and leased out to a software company for a trial period of

IT / BODY LEASING

3-6 months. After that, if the programmer is deemed valuable, he or she is hired permanently by the client firm. This new form of recruitment, where the risk of the new hire is borne by the firm providing the workers, seems a good fit for the IT industry. It is offered by companies specializing both in IT contracting and by HR firms, such as Adecco or Work Service. Contractor’s perspective From the point of view of an IT specialist body, leasing has a lot of upsides, as well as a few major drawbacks. The biggest advantage is probably variety: working on several projects a year rather than being stuck maintaining and upgrading the same old system for years on end. Thus, contractors get the opportunity to hone their skills in a number of technologies and frameworks, making them even more valuable on the job market. Also, body leasing firms often offer

higher pay than a regular nine-to-five job: a premium for flexibility if you will. Then again, IT contractors have to deal with an extra layer of bureaucracy: they get paid by a different company than the one they go to work for every day. “Until the time sheet is verified and approved, which happens once in a blue moon, your pay is considered an advance, which basically means the money isn’t actually yours until confirmed,” complained the same programmer employed by a body leasing company. On the other hand, jumping from one project to the next makes any advancement virtually impossible, as you will never be an employee of the company you work for. Some projects could take years, during which time you will see other team members move up the corporate ladder, meanwhile doing the same specialist job. The downsides include lower job security. However, given the imbal-

10x

ance in the market and how easy it is to find a new attractive opening, it is rarely the deciding factor for IT people. Still, there is no denying the fact that switching teams so frequently makes it harder to maintain work relationships. Fresh reinforcements There is one more aspect of IT contracting worth mentioning. It is a great way of bringing specialists from abroad to work for Polish companies. This way the firm avoids dealing with visas, work permits and related issues. It is all handled by the intermediary. The continued disequilibrium in the IT job market and the resulting pay scale makes Poland an attractive destination for specialists from the east. “We can expect an influx of contractors from former Soviet bloc countries and from Asia over the next few years,” admitted Mazur. Needless to say, their salary expectations will likely be lower than those of Polish IT specialists. u

STUDIES HAVE SHOWN THAT A VERY GOOD PROGRAMMER IS OFTEN TEN TIMES MORE PRODUCTIVE THAN A MEDICORE ONE, EVEN WITH THE SAME AMOUNT OF EXPERIENCE AND TRAINING.

WBJ OBSERVER • FEBRUARY 2016

181.5 135.0 94.8

– – –

Accenture Grupa Kapitałowa Sp. z o.o. 2 ul. Sienna 39, 00-121 Warszawa 22 349-7000 www.accenture.com

157.0 138.0 98.7

576.0 483.9 339.6

WND WND WND

54.0 38.5 30.3

2 4 –

28 – –

12.7 10.9 3.9

18.7 14.8 10.6

– – –

100 – –

Trade and FMCG / Telecom / Health care

181.5 135.0 94.8

Supported sectors

Energy and industry / Banking and insurance

Sii Sp. z o.o. Al. Niepodległości 69, 02-626 Warszawa 1 22 486-3737/22 486-3734 informacja@pl.sii.eu www.sii.pl

CBRE Corporate Outsourcing Sp. z o.o. ul. Domaniewska 34A; 02-672 Warszawa 3 22 444-9500/22 444-9501 maciej.piwowarczyk@cbre. com www.cbre.pl JCommerce S.A. ul. T. Kościuszki 227, 40-600 Katowice 4 32 201-1532/32 201-1532 office@jcommerce.pl www.jcommerce.pl

IT / Logistics / Back-office

PLN mln 2014 / 2013 / 2012

HR and payroll / Accounting / Marketing/sales

Total revenue

Company name Address Tel./Fax E-mail Web page

Revenue from outsourcing

Rank

Revenue breakdown (%)

Total number of employees / Year founded in Poland

RANKING OF BPO COMPANIES IN THE IT SECTOR

P P

P P P

P P

P –

P P P

– –

Business analysis outsourcing; audit and internal control outsourcing; project management outsourcing

P P

P P P

– P

WND

P P

P P P

– P

ING Bank - 100% 201 WND Śląski; None eSky.pl; 2005 Skanska

P P

P P P

P P

WND

Adam Góral – 9.7%; Aviva WND OFE BZ WBK 1989 – 12.6%; OFE PZU – 6.8% WND

Services

Business appliations; IT systems developing and integration; IT infrastructure; IT tests; industrial engineering

WND Social media monitoring business WND and analysis; intelligence WND

Public administration / Logistics

NEWS

Selected clients

Ownership: Polish / Foreign

Gemalto; Gregoire NXP; 2,000 Nitot – 30% Volvo IT; France mBank; 2006 Sii 70% – 70% T-Mobile

WND

WND 1993

WND

None Barclays; 370 Relam GE; Shell; Amsterdam Microsoft; 2008 Holdings B.V - 100%

Asseco Poland SA ul. Olchowa 14, NR 35-322 Rzeszów 17 888-5555/17 888-5550 info@asseco.pl www.asseco.pl

WND WND WND 8.3 1,428.4 WND 8.3 1,318.8 WND

WND WND WND

Business Data Process Sp. z o.o. ul. Ogrodowa 7, NR 00-893 Warszawa 22 455-2555/22 455-2566 info@calan.com www.calan.com

WND WND WND

WND databases; IT administration and WND WND server support; hosting

– –

– – –

– –

WND

None 15 2003 Calan – 100%

Cegeka Polska Sp. z o.o. ul. Jana Olbrachta 94, 01-102 Warszawa NR 22 532-5840/22 532-5850 kontakt@cegeka.com www.cegeka.pl

WND 2.4 NA

WND 3.2 NA

WND WND WND

WND Software development; system integration WND WND

P P

P – P

– P

WND

WND Cegaka 2013 Group NV –

Ericpol Sp. z o.o. ul. Targowa 9A, 90-042 Łódź NR 42 664-2500/42 664-2555 office@ericpol.pl www.ericpol.pl

WND 268.4 246.8

WND 284.2 271.1

WND WND WND

P – –

– P

– P –

P P

WND

WND 1991

InfoPower Sp. z o.o. ul. Stoczniowa 2, 82-300 Elbląg NR 55 236-4604/55 236-4601 projekty@infopower.pl www.infopower.pl

WND 5.5 6.0

WND 6.6 7.1

WND WND WND

– –

– P –

WND

Jacek Makarewicz; WND Jerzy 2000 Olszewski None

FEBRUARY 2016 • WBJ OBSERVER

WND

Programming;

WND

– –

100%

Ericpol Holding – 99.9% None

Top local executive / Title

Gregoire Nitot President

WND

Maciej Piwowarczyk

Head of Warsaw Global Business Services

Piotr Zyguła President

Adam Góral President

Jarosław Wilk Managing Partner

Lech Andrzejewski General Director

Jan Smela President

Jacek Makarewicz President

SOURCE BOOK OF LISTS 2015/2016

February 2016

30 pages of real estate content

NOTHING MORE NOTHING LESS section partner

LOKALE IMMOBILIA / NEWS

>LOKALE IMMOBILIA

NEWS

l C O M PA N I E S

Panattoni Europe enters Romania Panattoni Europe has decided to enter the Romanian market, in response to interest in this region from tenants, as well as investors. Managing Director, Muler Onfrei, will head the newly opened Bucharest branch. Panattoni Europe's decision to enter the Romanian market was motivated by “the country's great potential,” Panattoni pointed out. The Romanian economy has been improving steadily, and according to the European Commission, this trend is set to continue in the coming years. Forecasts show that in 2016 the Romanian economy will grow by 4.1 percent, and by 3.6 percent the year after, leaving behind Poland, Ireland and Slovakia. u

JUPITER is to feature 100.000 sqm

l I N V E S T M E N T S / R E TA I L

New shopping center to be built in Warsaw The investor also announced that the shopping center will be linked via a tunnel to the adjacent Rondo Daszyńskiego metro station. Construction may commence next year, and will most likely finish at some point in 2019. u

THE NEW MBANK HQ will be delivered in 2017

l OFFICE

mBank signs 12-year lease deal with Ghelamco Real estate developer Ghelamco has signed a 12-year deal with mBank to lease an office building in Łódź, which is expected to be delivered in Q3 2017, the company said. The building will have a total space of 24,000 sqm over six storeys and it will be wholly occupied by the lender. In early February, Ghelamco took a loan of some PLN 144 million in order to carry out the investment. Ghelamco Poland is one of the leading real estate developers in Poland, specializing in delivering office and industrial projects. u l C O M PA N I E S

Ghelamco to issue PLN 350 mln bonds The Polish financial watchdog KNF has approved a prospectus presented by Ghelamco Invest - a subsidiary of Ghelamco Poland - consequently, the company will carry out a PLN 350 million bond issue. In November, Ghelamco Invest issued bonds valued at PLN 50 million. As of 30 September, Ghelamco Invest's liabilities amounted to over PLN 654 million, the company also informed. u

FEBRUARY 2016 • WBJ OBSERVER

Images: Griffin Real Estate, Ghelamco, IKEA, Amazon Polska, HB Reavis

new shopping center the size of Arkadia is to be built next to Rondo Daszyńskiego by Griffin Real Estate. The company plans to build it on the site of the current Jupiter center, which is scheduled to operate only until the halfway mark of next year. The plans call for the demolition of the present building in the second half of 2017 and replacing it with a new construction with a 100,000 sqm GLA. The developer views this investment as one step in the revitalization of the entire district, turning it into a sector with a big-city, metropolitan ambiance.

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AMAZON owns three logistics centers in Poland

l INVESTMENTS/OFFICE

l LOGISTICS

HB Reavis and PKP deliver West Railway Station

Amazon to expand in Poland

PKP, its subsidiary Xcity Investment and real estate developer HB Reavis launched the new West Railway Station on December 9. It took less than a year to complete the project. The new station is mainly located underground, on Aleje Jerozolimskie. It encompasses 1,300 sqm and offers some retail space, McDonald's restaurant is among the tenants. The first stage of a two office-building complex, which is being carried out next to the station, will be completed in the third quarter of 2016. u

-commerce giant Amazon is planning to expand its logistics centers in Europe, including in Poland, Kerry Person, general director at Amazon Polska told the Polish Press Agency (PAP). Person said that the company is looking for new locations. “There is great potential in Poland and we will develop our logistics chain here.” He

added that Amazon will invest in the existing facilities and continue to hire without revealing any details about possible new projects. Amazon owns three logistics centers in Poland, one located near Poznań (Sady) and two near Wrocław (Bielany Wrocławskie). So far, the company has invested PLN 2 billion in Poland. u

OFFICE

80,000 SQM IS HOW MUCH SPACE GHELAMCO LEASED IN 2015, MAKING IT THE BEST RESULT IN THE COMPANY’S HISTORY. DEALS INCLUDED LEASING OF 24,000 SQM TO MBANK IN PRZYSTANEK MBANK FOR ITS NEW SEAT IN ŁÓDŹ, AS WELL AS LEASING 22,000 SQM TO SAMSUNG IN WARSAW SPIRE.

l I N V E S T M E N T S / R E TA I L

IKEA to launch stores in Lublin and Zabrze IKEA Centers is launching investment projects in Lublin and Zabrze and undertaking modernization of its unit in Poznań. Construction of the Zabrze-based shopping center and integrated IKEA store will begin in 2017 and will last approximately a year. When it comes to the store in Lublin, its construction will be

launched later this year, and the opening will take place next year. What is more, in the first half of this year, IKEA will begin modernizing its unit in Poznań. The value of goods sold in IKEA stores in Poland grew by 12 percent y/y to PLN 2.65 billion in the financial year 2015, from September 1, 2014 to August 31, 2015.u

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l OFFICE

Allegro leases space in Warsaw's Q22 Real estate developer Echo Investment has signed a deal with leading on-line auction platform Allegro to lease 7,600 sqm in the Q22 skyscraper, which is being developed in Warsaw city center. “Warsaw is one of our key locations. ... For new technology companies, particularly like ours, leasing such an office is important from the point of view of gaining and keeping the market's best experts,” a statement read. The 155m Q22 is being developed at the junction of al. Jana Pawła II and ul. Grzybowska. It is set to provide over 50,000 sqm of leasable office space. u

Rainbow Tours to build hotels in Greece Polish travel agency Rainbow Tours is planning to construct its own hotels in Greece, Parkiet daily reported. Previously, the company had informed that several places in major tourism destinations would be purchased or leased long-term. “Building a high class five-star hotel is an expenditure of €8-10 million,” Grzegorz Baszczyński, CEO at Rainbow Tours told the daily. However, he did not give any details regarding possible investments. In May, the agency signed a preliminary deal to acquire Greek company K.G. Athanasopoulos I. Sklivas, which is the owner of the President hotel on Zakynthos island. At first, Rainbow Tours plans to renovate the hotel with plans to build a spa in the near future. Rainbow Tours has been listed on the Warsaw bourse since 2007.u

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1.5

million sqm – was Poland's office market take-up last year l INVESTMENTS

THE VALUE of the transaction is unknown

Hines acquires Annopol Business Park Hines Poland Sustainable Income Fund (HPSIF) has acquired Annopol Business Park from Europejskie Centrum Inwestycyjne (ECI), the media reported. Unfortunately, the value of the transaction has not been disclosed. Annopol Business Park is based in the Białołeka district of Warsaw. The facility features an office building and five

warehouses offering over 44,500 sqm of GLA. The industrial space totals 28,600 sqm. Hines Polska manages the assets owned by HPSIF. Europejskie Centrum Inwestycyjne is an international capital group financing and developing all types of real estate investments in Poland and abroad, mainly in France. u

Images: ECI, Echo Investments, Goodman

l H O S P I TA L I T Y

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is how many retail parks were in Poland as of the end of 2015

l INVESTMENTS

Starak involved in real estate

erzy Starak, the owner of Polpharma is investing in an office and housing scheme totaling PLN 220 million, Puls Biznesu daily reported. For some PLN 150 million, Castor Park will constuct an office building in the Mokotów district of Warsaw, near Polpharma's HQ and the housing project. Construction work is to begin in a few months; the facility will offer 22,500 sqm of GLA. Completion is scheduled for July 2017. Starak is a strategic investor in Castor Park. u

l INVESTMENTS

Goodman delivers two buildings at Pomorskie Centrum Logistyczne Industrial space developer Goodman has completed the third stage of Pomorskie Centrum Logistyczne in Gdańsk. Goodman has delivered two facilities offering 38,700 sqm, thus the total space of the center has reached 53,000 sqm. One out of two newly completed warehouses is leased by FMCG distributor Eurocash, the other tenants are Poland Services Transport-Logistyka and Univeg Logistics Poland.

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LOKALE IMMOBILIA / NEWS

l INVESTMENTS

South African Rockcastle Global Real Estate equity fund has purchased Triuva's Platan shopping center in Zabrze. The value of the transaction totaled €51.8 million. Platan shopping mall was launched in 2003. It offers 25,336 sqm of GLA and hosts 75 retailers.

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“This acquisition brings the total number of shopping centers in our portfolio to four existing centers, two new developments and we are actively pursuing numerous other retail opportunities in Poland, which we expect to conclude in 2016,” said Spiro Noussis, CEO at Rockcastle. So far, Rock-

castle has acquired Fabryka Wołomin, CH Pogoria and CH Karolinka for a total value of €220 million. Rockcastle was advised in this transaction by Cushman & Wakefield, Weil, Gotshal & Manges, and CMT. The seller was represented by JLL, Linklaters and Arcadis. u

Image: JLL

Rockcastle acquires Platan shopping center in Zabrze

LOKALE IMMOBILIA / NEWS

4th March 2016 InterContinental Hotel Warsaw Poland

The 3rd Polish & CEE Private Equity Conference 70+ GPs | 60+ LPs | 50+ CxOs

• • •

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LOKALE IMMOBILIA / INVESTMENTS

B Y B E ATA S O C H A

Tough to beat

With over €4 billion in investment transactions, the year 2015 exceeded all expectations, but 2016 might bring a cooldown

The

volume of real estate investment deals in 2015 came in at €4.1 billion, the highest score since 2006, according to data compiled by CBRE. Earlier forecasts put the total investment figure somewhere at €3 billion, but they were readjusted later in the year, “due to a number of very large transactions that evolved during the second half of the year,” explained Soren Rodian Olsen, associate, Capital Markets Group, Cushman & Wakefield. Buying retail The record-breaking result came on the back of particularly strong investor appetite for retail properties, not only in Poland but also in other CEE countries. Altogether, the segment saw a 166 percent year-onyear increase in 2015 and accounted for 43 percent of the entire investment volume in the CEE, as per CBRE data.

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In Poland alone, the retail segment brought in as much as €1.8 billion in transactions, according to JLL. Some of the large-scale deals of the past year include the sale of Galeria Riviera in Gdynia for €291 million to German investor Union Investment, and Stary Browar in Poznań for €290 million to Deutsche Asset & Wealth Management. Apart from the well-established European and American investors, there were also newcomers to the game. South African investor Rockcastle has been buying shopping centers across Poland. Last year it bought four existing malls: the Solaris center in Opole, Karolinka in Opole, Pogoria in Dąbrowa Górnicza, and Platan in Zabrze. The South African investor now has four completed malls in Poland and two which are currently at the construction stage, including Fabryka Wołomin near Warsaw. It is planning on further acquisitions in 2016.

Asian interest Other international investors are also eyeing retail properties, not only in Poland but in the entire CEE region. “Given the ongoing transactions that are expected to close [in 2016], the Czech Republic will be the biggest competitor to Poland. Further growth is also expected in Slovakia, Hungary and Romania,” said James Chapman, partner, head of CEE Capital Markets at Cushman & Wakefield. CBRE adds Serbia, Croatia and Slovenia to the list of potential winners in 2016. “We also expect to see an increasingly diverse investor profile as Asian investors aim to increase their presence within the area,” said Gijs Klomp, head of CEE Investment Properties at CBRE. Smaller deals Meanwhile, the office market in 2015 recorded more deals but smaller in size, as the majority of the purchases took place outside Warsaw,

LOKALE IMMOBILIA / INVESTMENTS

Images: Mayland Properties, Solariscenter

Over the bump All in all, 2015 was a remarkably good year for Poland’s real estate sector, one that will be quite difficult to beat in the coming years. The high investment volume was the product of “investor trust built over the years in Poland as a stable market, the availability of attractive investment products, better access to financing and higher yields than in Western Europe,” explained Trzósło. Interestingly, three out of the four elements listed by Trzósło appear to be in jeopardy this year, which could mean that the 2015 result will be difficult, if not impossible, to repeat. Firstly, the supply of good investment product for sale has been waning over the past few years. Trzósło admitted that the supply could be lower in

{

€4.1 billion

2016 mainly in the shopping center segment. And since retail was the driving force behind the 2015 success, the limited availability of retail assets for sale is more than likely to take its toll this year.

Soren Rodian Olsen, associate, Capital Markets Group, Cushman & Wakefield

Ratings, taxes, China But, even if Poland had a plethora of large retail properties ready to be sold, it is no longer certain it would meet with the same demand it did over the past few years. On the one hand, Standard & Poor’s recently lowered Poland’s rating to BBB+, with a negative outlook. On the other hand, China’s underperformance spilling over to the rest of the world is all but inevitable. “Some international investors could limit their activity. It’s not the direct result of the lower rating, but of investor sentiment as to the stability and long-term perspective of the Polish real estate market (first and foremost economic growth). We saw

was Poland’s real estate investment volume in 2015, according to CBRE.

“The situation in China may impact a wider number of western economies – whether that in turn will influence real estate investments in Poland remains to be seen.

Source: CBRE

JLL reported. Both the transaction volume as well as the average deal value fell last year compared to 2014 when a number of large-value assets changed hands, including Rondo 1 and Metropolitan in Warsaw. “A lot is happening in regional markets, but these are transactions of €30-40 million each, so you need ten of these to match the price of one large Warsaw tower,” explained Tomasz Trzósło, managing director of JLL Real Estate Consultancy. The warehouse space market was less robust than the previous year. “However, one should take into account the fact that 2014 has, so far, been an all-time record. We expect that there will still be very large investor interest in the warehouse market and the turnover is likely to exceed that achieved in 2015,” Tomasz Puch, director of the Capital Markets Department at JLL, pointed out.

€1.8 billion

was the total value of retail real estate transactions closed in 2015 in Poland, according to JLL.

166%

was the y/y growth of the retail sector across the CEE region, according to CBRE.

WBJ OBSERVER • FEBRUARY 2016

LOKALE IMMOBILIA / INVESTMENTS

“Some international investors could limit their activity. It’s not the direct result of the lower rating, but of investor sentiment as to the stability and long-term perspective of the Polish real estate market.

Tomasz Trzósło, managing director, Real Estate Consultancy, JLL

chains (the extra cost will likely be borne by the consumer, but investors are afraid of its negative impact on shopping centers),” Trzósło explained (see story on p. 64). Downhill from now Those more optimistic about the future see the lower rating as the side effect of the current political uncertainties and claim it is unlikely to spill over to the real estate industry. “The change in Poland’s credit rating is surprisingly linked to the political situation and not the country’s

Image: Shutterstock, Panattoni Europe

Image: Stary Browar

similar reactions in 2009, in the wake of the Lehman Brothers collapse and investors feeling wary of the condition of Central European economies,” said Trzósło. On top of that, Poland’s new government has been implementing a series of new regulations, some of which could adversely impact the real estate business. “Investors are also uneasy about some legislative changes, mainly the tax on financial institutions (which may result in increasing the cost of loaning money in the real estate market) as well as the tax on retail

strong economic performance and forecast. We expect that investors experienced in the CE Region are unlikely to change their strategies for Poland,” said Olsen. He did, however, express his concern with the Chinese economy slowing down, saying that, “The situation in China may impact a wider number of western economies – whether that in turn will influence real estate investments in Poland remains to be seen.” All these uncertainties pose a serious question: was 2015 the peak in the current business cycle and could this year be a prelude to another slowdown, at least for the real estate industry? “I do hope that these fears will not become reality and that the influx of investment capital to Poland remains at levels similar to what we saw in 2015,” Trzósło concluded. Come what may, even if all the external and internal disturbances don’t curb the capital inflow into Poland, 2015 might still turn out to have been the best year for Polish commercial real estate for years to come. A year that future results will be compared to, just as 2006 will forever be known as the pre-2008 heyday, the likes of which no one expects to see again any time soon. u

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WBJ OBSERVER • FEBRUARY 2016

B Y S E R G I U S Z P R O K U R AT

The paradox of owning an apartment THE PREVAILING BELIEF IN POLAND IS THAT AN APARTMENT SHOULD BE OWNED AND RENTING IS CONSIDERED A TRANSITIONAL PERIOD BETWEEN MOVING OUT OF YOUR CHILDHOOD HOME AND BUYING YOUR OWN APARTMENT. HOWEVER, RECENT RESEARCH SHOWS THAT THIS ‘OWNERSHIP COMPLEX’ INCREASES UNEMPLOYMENT AND HINDERS THE RENTAL MARKET

The

average Polish family has assets amounting to a quarter of a million dollars, according to a report entitled “The wealth of households in Poland,” issued by the National Bank of Poland in November 2015. The figure takes into account all the actual owned properties, such as houses or apartments. Indeed, Poland has an exceptionally high percentage of people who own the house or apartment they live in (73 percent), compared to only 42 percent in Germany – as revealed in the report. It could very well be inferred that Poles are better-off than Germans. Some analyses put the home ownership figure even higher. According to a report made by the Pew Research Center in 2011, as much as 82 percent of Poles own property, and barely 18 percent of the population are tenants. Furthermore, a deeper examination of

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the ownership structure of apartments in Poland shows that, in fact, only approximately 3 percent of Polish citizens lease their homes on a commercial basis. The remaining tenants live in “housing supported by the state,” which belong to municipalities (municipal housing), National Forests, PKP (Polish Railways), or the army. Eurostat considers all of these cases as leases administered at non-market prices. A social stigma

In fact, Poland and other CEE countries have some of the highest rates of property ownership in the world. It is even higher than in the UK or the US, where about 60-65 percent of the population are property owners. On the other hand, in countries such as Switzerland, Austria and Germany, almost 60 percent of people are tenants and 40 percent are owners. One reason why so many Poles decide to own rather than rent is that, unlike in Germany and Switzerland, living in a rented apartment is stigmatized as a

“The average real rate of return from owning a property was close to zero for the whole of the twentieth century.

Image: Shutterstock

LOKALE IMMOBILIA / RESIDENTIAL

way of life for the poor. If one can afford a loan, one takes it – in order not to “stuff the landlord’s pocket.” Some say it is also a matter of common sense and prudence. A person earning Poland’s average monthly salary of PLN 4,000 will have as little as PLN 1,700 as a pensioner, according to OECD data. The average rent of a single-bedroom apartment rarely falls below PLN 1,000 in Poland’s major cities (in Warsaw it exceeds PLN 1,500). A Polish pensioner could hardly be expected to afford to rent an apartment at market prices. What’s wrong with this picture?

One could say it’s all for the best if Poles can be that frugal. After all, what

could be wrong with having your own home? Proponents of having your own place say it facilitates the accumulation of assets and is useful both for individuals and for the entire economy as it enables and encourages people to save. However, in recent years there have been a lot of publications saying that there are also negative effects of an excessive percentage of property ownership. When the majority of the population are property owners, it reflects on the labor market. For 20 years, a British economist, Andrew Oswald has been publishing papers which show that having your own home undermines people’s morale and hinders the mobility of employees, which in turn raises unemployment. The effect discovered by Oswald

shows that each 5 percent increase in the possession of properties leads to a 1 percent increase in unemployment. His research was a snowball that prompted an avalanche of other studies, which largely confirmed his findings. An overly high level of property ownership makes citizens less willing to move to areas where new jobs are created, increases commuting time and leads to a smaller number of new companies being created. Oswald’s observations are what the Austrian school of economics calls malinvestments that eventually result in higher unemployment rates in some regions of Europe. A good example of this phenomenon is Spain, which, not unlike Poland, has a high percentage of home owners compared to renters.

WBJ OBSERVER • FEBRUARY 2016

Moreover, the emphasis put on owning a home in Poland makes the rental market underdeveloped and therefore less transparent. In Switzerland, a tenant may sue the owner and bring action against an unjustified rent increase – and he or she usually wins. Such things are unheard of in Poland. Polish law only provisionally resolves the issues concerning a home lease, leaving both the tenant and the landlord exposed. For example, a renter can lose their home in a matter of a month, which is the standard notice period for most home leases. Packing up your belongings is relatively easy when all your stuff fits into a minivan, but as you grow older it becomes more and more of a nuisance. This is an important factor for families with children deciding to either rent an apartment or take out a home loan. On the other hand, the law also fails to protect the interests of the landlord, who oftentimes has to cover the repairs to damaged property out of his own pocket. Not to mention, it can be a real problem if your tenants have the bad habit of failing to make rent payments. In recent years, a new regulation introduced the so-called “occasional lease,”

FEBRUARY 2016 • WBJ OBSERVER

which makes such tenants easier to evict, thus making home leases safer for the landlord. Still, “occasional leases” are meant to be short-term (they cannot be longer than 10 years), so the issues of long-term renters and their landlords remain unresolved. If the rental market were more substantial, perhaps lawmakers would be under more pressure to provide stronger legal safeguards for both parties. Or maybe the opposite inference is true: if the legal aspects of home leases were better regulated, more people would decide on a long-term lease rather than taking out a loan to buy an apartment. Commodity or investment?

When we look at the correlation of GDP per capita and the percentage of home owners we come to another interesting conclusion. It turns out that less developed countries have higher levels of property ownership. So associating economic development with high numbers of home owners turns out to be a pipe dream. It is quite the opposite in fact. In richer countries, the percentage of property owners decreases. One reason for that could be that people in more developed countries tend to

be more business-savvy and prefer to invest their money in developing their own company rather than acquiring real property. Certainly, owning an apartment can be a form of investment, but its return is only slightly better than a bank deposit. As Adam Smith put it in his timeless treatise: An Inquiry Into the Nature and Causes of the Wealth of Nations, “A dwelling-house, as such, contributes nothing to the revenue of its inhabitant; and though it is, no doubt, extremely useful to him, it is as his clothes and household furniture are useful to him, which, however, makes a part of his expense, and not of his revenue.” Property is therefore of illusory value and its capital characteristics are valid mainly in large and medium-sized cities. Smith’s conclusion is further legitimized by Robert Shiller, a well-known economist from Yale University, who notes that the average real rate of return from owning a property was close to zero for the whole of the twentieth century. A 60/40 balance

Owning real estate of course has its advantages. The main arguments are of a social rather than economic nature. Real estate ownership motivates resi-

Images: Shutterstock

Legal shortcomings

LOKALE IMMOBILIA / RESIDENTIAL

dents to create law-abiding local communities and care about the neighborhood, as well as social integration in a given area. Economists estimate that the optimal proportion of home owners to tenants is approximately 55-60 percent to 45-40 percent. Almost every country offers government programs to support people looking to buy an apartment, like

the current MdM (Apartments for the Youth) subsidy program in Poland. Such programs are generally considered to be a positive stimulus for the market and thus for the entire economy. They have been known to jumpstart more than one sluggish economy and help its recovery after a downturn. However, many would say that the main beneficiaries of such poli-

82%

cies are usually not buyers, but real estate developers. So, if you’re deciding between buying and renting, and you wonder how your decision will affect the market, you’ll have a hard time reconciling the paradox: if you buy a home, you help the economy, but if you settle permanently in one place, you hurt it by limiting your mobility. u

of Poles own property, according to the OECD.

WBJ OBSERVER • FEBRUARY 2016

Luxury real estate market in 2013-2015 (in million PLN) 2013 900 2014 1,110 2015 1,134 58

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LOKALE IMMOBILIA /LUXURY REAL ESTATE

Price alone does not luxury make A 200-SQM APARTMENT ON THE TOP FLOOR WAS ONCE CONSIDERED A PENTHOUSE. NOW BUYERS EXPECT A SPA, FIVESTAR CONCIERGE SERVICES AND 16TH-CENTURY ARCHITECTURE B Y B E ATA S O C H A

uxury real estate is the fourth biggest luxury goods category in terms of total value, after cars, clothes and accessories as well as hotel and spa services. According to a recent report by KPMG, the luxury real estate market in Poland was valued at a total of around PLN 1.134 billion (an 8 percent share of the whole luxury goods market) in 2015, which marked a 3 percent increase upon the previous year. The increase last year was not nearly as impressive as in 2014, when the segment grew by as much as 25 percent, from PLN 900 million to PLN 1.1 billion. Top five

Only five major Polish cities offer what can be described as luxury real estate. These are: Warsaw, Kraków, Wrocław, the Tri-City and Poznań. Out of the five, Warsaw remains the biggest market for luxury apartments in Poland, with transactions totaling PLN 600-800 million a year for the period between 2009 and 2015. The remaining four major agglomerations altogether see annual transactions worth a total of PLN 500-600 million in the same time period. Unsurprisingly, top-shelf luxury apartments, with prices exceeding PLN 16,000 per sqm, are to be found almost exclusively in Warsaw. The capital offered 156 out of a total of 179 apartments of this class at the end of Q1 2015.

Image: Tacit Investment

How much is luxury these days?

The prices for luxury apartments are also the highest in the capital, with the average price at PLN 16,581 per sqm and the highest reaching as much as PLN 65,227 per sqm. But, while Warsaw remains the biggest market in the luxury residential segment, Wrocław and Kraków are quickly catching up. In terms of price at least, they are not that far behind. For the period 2009-2015, the

average price for a luxury apartment stood at some PLN 12,000-13,000 per sqm in these markets, while the top units went for as much as PLN 42,000 per sqm in Wrocław and PLN 36,471 in Kraków. What makes Poles and foreign investors want to pay so much for a residential property and what distinguishes “luxury” apartments from regular ones? City bustle

Most luxury residential developers agree that what makes a residential project “luxurious” is first and foremost its location. “There is a pan-European trend to move back to cities and it is around the city centers that

new investments will be launched, targeting the most demanding customers – those who love being in the heart of city life but look for a peaceful enclave,” said Agnieszka Śliwa, Communications Director at Tacit Investment, the investor that delivered Cosmopolitan in 2014. Warsaw has seen a few upscale apartment towers constructed in its very center over the past few years, the most notable examples being Cosmopolitan and Złota 44. Other cities also have places that people are prepared to pay big bucks to live in. “There will always be demand for good location, a prestigious address and surroundings,” concurred Ron Ben Shahar, main

No longer a status symbol WBJ Observer: How is the market for premium and luxury properties doing in Poland? Jakub Tamborowski: The market for luxury properties in Poland has a lot of potential. We have been recording a growing interest in premium and luxury apartments for quite some time. It is expected to grow in line with Poles’ growing incomes. There is also a trend among wealthy Poles to replace residences outside the city with apartments located in the city center. We could say the time when a detached house in the suburbs was a status symbol is over. Which cities do you think have the biggest potential? J.T.: Until a few years ago it was Warsaw that dominated the market segment. Now,

Jakub Tamborowski, Head of Sales Office in Kraków; Echo Investment

Kraków is taking over as the leader. Regional cities have more land available and therefore a more interesting and varied offer in the premium segment. Demand is particularly strong for projects in good locations and with a good standard of finishing. In terms of Kraków, these are: the inner city, close to the Old Town, near the Vistula River, as well as in prestigious districts such as Wola Justowska. Developers tend to locate pre-

mium apartments in districts neighboring the city center, but also close to green areas. It’s the perfect combination of peace and quiet with convenience, allowing the residents to access the business and recreation on offer in the inner city. What are the prices for such apartments in Kraków? Has the offer increased recently? J.T.: We have not seen a significant increase in the offer of luxury and premium apartments. Unlike the popular segment, the premium segment is stable. Neither have we witnessed any significant price fluctuations. In Kraków, prices in the premium segment stand between PLN 12,000-18,000 per sqm. The most expensive apartments are priced at as much as PLN 25,000 per sqm.

WBJ OBSERVER • FEBRUARY 2016

partner at Angel Poland Group, the investor behind Kraków’s recently completed Angel Wawel project, located near Kraków’s historic Wawel Castle. The project involved the renovation of a 16th century monastery and two chapels, one of which now houses the scheme’s most expensive “royal” apartment. Creating demand

Design is another important thing that distinguishes luxury from regular properties. Back in the 1990s a spacious apartment on the top floor with a terrace was considered an upscale apartment or even a penthouse. Today, people expect more. Such as OVO Wrocław, a multi-function project housing both offices, retail and residential space, as well as a five-star Double Tree by Hilton hotel, whose services will be made available for penthouse residents. Wrocław was in fact the first market to see a residential high-rise constructed: LC Corp’s Sky Tower, delivered in 2013. Suhuckie Ovadiah, investor and CEO of OVO Wrocław expects the market to grow, just like in Poland’s other major cities, even more rapidly than before. And the reason for the increasing demand is not only the fact that Poles are getting wealthier. “When we present and build a new project, we create demand for it,” he explained.

What kind of luxury real estate are Poles buying?

440-460 50-57

Secondary market Apartments 25-35 Houses 140-145

50-60 550-600

Total

1,090-1,177

Images: Złota 44, Angel Poland Group

Primary market Apartments 160-180 Houses 20-25

PA R T N E R F E AT U R E

Even though the market is still very young and small, it is expected to grow fast. Within the next three years, the market will be among the fastest-growing luxury goods sectors in the country. It is expected that its combined value will amount to approximately PLN 1.338 billion in 2018, which would mark an 18 percent increase upon the 2015 figure, according to KPMG. The reason for the growth is not only due to the increased number of transactions but an expected rise in prices for luxury residential projects. “Given that the luxury goods market keeps growing faster than the economy and that demand in the segment is still increasing, prices for apartments of this class have nowhere to go but up,” concluded Śliwa. u

The current situation on the luxury residential property market in Poland

BROUGHT TO YOU BY ZŁOTA 44

FEBRUARY 2016 • WBJ OBSERVER

Transaction volume (annual in PLN million)

Source: KPMG

No way but up

Number of transactions (annual)

The Polish luxury property market has recently been experiencing a considerable revival. In combination with the country’s strong economic performance, it makes luxury property an investment which is growing in popularity among customers. Luxury apartments will grow in number, especially in the capital city, and their value will rise as well because of, among others, the limited availability of construction land in the most soughtafter, central locations. For a few years now, this market segment has been perceived as one of the most secure and resistant to economic downturns as regards investing. However, in comparison to Western Europe, topshelf property in Poland is characterized by a relatively low price level. Prices here are

eight times lower than in London, thrice as low as in Paris, and twice as low as in Moscow. - We have quite a few clients who will buy apartments in six or ten cities. They've been buying in Berlin but I think they're going to switch to Warsaw because of the increased yield and the growth background - says Charles Weston Baker, Director at Savills International. Polish luxury property segment with apartment buildings like ZŁOTA 44 appeal to international investors who are looking to buy a top-quality residence of the same highend standard as the other premier residences across Europe, but at a more attractive price with higher potential returns. Designed by world renowned architect – Daniel Libeskind, ZŁOTA 44 is the tallest and one of the most

luxury residential towers in the European Union and the symbol of the dynamically growing Warsaw. The advantages of the building, which will welcome its first residents by the end of the year, have made an impression also on the top international editorial offices of such prominent press titles as The Sunday Times or Bloomberg. They highlighted ZŁOTA 44 on par with some of the finest residential developments in the world, and the benchmark for luxury living in Poland. For this reason, now is a perfect moment to buy an apartment for investment purposes, especially in the super premium property segment.

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WBJ OBSERVER • FEBRUARY 2016

LOKALE IMMOBILIA / INTERVIEW

Luxury homes

More built-to-suit luxury projects are to be developed in the Polish market. WBJ Observer talked to Arkadiusz Wojciechowski, managing director at brokerage firm Poland Sotheby’s International Realty about the luxury residential real estate market in Poland and the company’s expansion plans I N T E R V I E W B Y A D A M Z D R O D OW S K I

How many transactions are closed annually in this market ? When it comes to the most expensive property, valued at more than PLN 5 million, there are approximately only 40-50 transactions in Poland every year. As for homes valued at more than PLN 1 million, the number stands at approximately 2,000. However, one needs to remember that the price is not the only thing which defines luxury property. A luxury home simply needs to be extraordinary. There are many examples of homes which are very expensive because of their size or the size of the land they are located on, rather than because of their standard. Who buys luxury residential property in Poland? Many of our clients are investors who buy luxury homes for investment purposes.

FEBRUARY 2016 • WBJ OBSERVER

Images: Poland Sotheby’s International Realty

Adam Zdrodowski: How large is the luxury residential real estate market in Poland? How does it compare with other markets in Central and Eastern Europe, as well as with the markets in Western Europe? Arkadiusz Wojciechowski: It is difficult to compare the Polish market with the markets in Western Europe – the most recent data regarding the number of so-called high-net-worth individuals, that is those who have investable finance of at least USD 1 million, perhaps best illustrates where we are. According to a recent report by KPMG, the number of high-net-worth individuals in Poland is estimated at between 40,000 and 50,000 and is growing very quickly. In other CEE countries the numbers are similar. By comparison, in both France and Switzerland there are currently more than two million high-net-worth individuals, so it is on a different scale. The Polish market is relatively small but it is also relatively new, it is developing very dynamically and has real growth potential.

Some of them are people who “collect” pieces of real estate across Poland as a means of investing their finances and guarding against inflation. Very often the homes which those people buy are not rented but are simply expected to keep their value or even increase

in value in the long-term. Another group is people from various parts of Poland who do not live in Warsaw but do business there and want to have their own apartments in the Polish capital. Those people buy their own residential property in Warsaw to avoid

LOKALE IMMOBILIA / INTERVIEW

staying in hotels, even if they spend just a few days in the city every month. Last but not least, there are obviously people who are looking for more comfortable, luxurious homes to live in. Do foreigners account for a major share of the transactions in the market? Foreigners accounted for approximately 10 percent of the transactions which we have brokered. One needs to mention though, that most of them were people who already know Poland because they do business here or are otherwise connected with the country, for example through their families. We do not see many foreigners who decide to buy luxury property in Poland only because they have heard its success story and thus want to invest in this part of the world. What kind of product are buyers mostly looking for? The luxury sector is very different from the rest of the residential market – we say it is about lifestyle, not about square meters. Buyers are simply looking for a piece of property that is unique. Sometimes the buyer has very concrete requirements – for instance, he or she may only be looking for homes located close to water. However, very often our clients do not have any specific preferences when they first contact us. In Warsaw, we show them apartments located in both luxury residential towers, renovated historic tenement houses in the downtown and new low-rise buildings developed in the most prestigious locations, including Powiśle, Ochota and Mokotów. We are recording a similar number of transactions in all those three types of luxury buildings. Do you see room in the market for more luxury residential towers? Luxury residential towers are still a relatively new product in the Polish market. There is certainly buyer interest in those buildings, both when it comes to people who want to live in such apartments and people who want to have such apartments in their portfolios. We have brokered approximately 30 transactions in luxury

residential towers in Poland. For the time being, it seems that the existing supply is at a sufficient level. We have three new projects of this kind in Poland – Złota 44 and Cosmopolitan in Warsaw, and Sky Tower in Wrocław – which currently offer a total of around 200 apartments that can still be purchased. This is enough to meet the demand over the next two years or so but we expect that more projects of this kind will be developed in Warsaw in the future. A new tower is also planned for Kraków. Has the group of the developers who build luxury homes in Poland changed in any significant way in recent years? Are new companies, both domestic and foreign, entering the market? Yes, the group is changing all the time. On the one hand, there are new international investors interested in developing large-scale luxury projects in Poland. On the other hand, until recently, almost every large residential developer operating in Poland had at least one luxury project in its portfolio. Nowadays there seems to be a move towards specialization in this market – many schemes are developed by relatively small developers whose names are not known to the average Pole and who specialize in luxury investments. Interestingly, there are now also projects appearing in the market which are being developed, not by professional developers, but rather by affluent individuals with contacts in the architectural and construction industries who want to build something unique for themselves. Do you think the latter trend will gain in significance in the coming years? Yes, we think that the Polish luxury residential property market has now become mature enough to see the development of more built-to-suit projects. They will be built by people who think that the market does not offer exactly what they are looking for, people who want to take part in the development process and thus shape the scheme in which they will have an apartment. We are currently working on planned developments of this kind,

helping to bring together the various parties, including individual investors and land owners. Have the prices of luxury property changed much since the latest global financial crisis? The prices have been more or less stable in recent years – the luxury residential market tends to be less affected by economic fluctuations than the other real estate sectors. However, it is also worth remembering that it is much more difficult to talk about average prices in the luxury homes market than in the “regular” residential market since there are far less transactions in the former than in the latter. There is also much more room for negotiation when you are buying property valued at several million PLN. Last November Sotheby’s International Realty celebrated its first year of operating in Poland. What have you achieved so far and what are your plans in the country for the near future? Since we entered Poland we have brokered approximately 280 transactions with an average value of slightly below PLN 1 million. Of course, we hope to achieve even better results this year. It is not the number of the transactions but their quality that really matters and we hope this year the average value will be higher than last year, which will help us further boost our revenues. Our business is expanding and the firm itself is also going to grow this year. An important factor in our success was the partnership with Noble Bank, a private bank in Poland – thanks to this collaboration, customers can use the service advisors SIR. Through this, more than half of the transactions were completed just for private banking clients. This year, we are also planning to open one or two new offices outside the Polish capital. The first of them will be opened in the Tri-city, while the second location is still to be decided – we are looking at Kraków, Wrocław and Poznań. u

WBJ OBSERVER • FEBRUARY 2016

LOKALE IMMOBILIA / BPO

B Y A L E X H AY E S

A taxing time for retail

Few details are available about a new tax that is to be placed on large retail outlets, but for the sector it already looks like bad news

Nowy Ĺ&#x161;wiat 2.0

LOKALE IMMOBILIA / RETAIL

All images: Shutterstock

here can be no doubt that the proposed taxation on large format stores (which is defined as any store of over 250 sqm) is a protectionist measure. The justification for the bill that will establish the tax even states this quite specifically: “The new taxation is also to counteract the expansion of foreign retail networks, which having at their disposal the financial means and the requisite know-how, have been able to quickly subordinate the retail market of our country for themselves.” Any overt discrimination of foreign firms would clearly be a breach of EU law. However, the Act itself will target firms with retail areas of over 250 sqm regardless of nationality. Such a solution has already been implemented by the Fidesz government in Hungary, and according to the new socially conservative Law and Justice party (PiS)

Interfering in the market

Currently, Law and Justice is talking about a tax of around 2 percent on income. In the government’s view this is approximately equivalent to the taxation that such large retail concerns are avoiding in Poland and such a proposal will discourage the remittance of profit to other countries. However, the Polish Chamber of Commerce has a slightly different opinion as to how such a taxation will affect the retail sec-

that the larger supermarket chains will be able to offload some of their costs onto their suppliers. Marek Maruszak, the president of Rossmann Polska, is equally critical of the proposal. In his opinion, businesses will have a really hard time looking for ways to reduce costs: “Does it mean we should fire some of our people and order the rest to work harder? Lower salaries? Some chains will close their business, there will be fewer price wars and prices will rise. That is what happened in Hungary,” he told Gazeta Wyborcza. But one has to remember that it is not just the hypermarkets that will be hit by such a tax. According to Lukas Nemela, the public relations manager for ECE Projektmanagement, over 60 percent of the tenants in the company’s shopping centers lease areas of over 250 sqm. Moreover, the company doubts that its powerful anchor tenants would have the ne-

government, “These actions were one of the elements of the policy that has brought Hungary’s Prime Minister Victor Orban positive results, and which has led to an improvement in the country’s economic situation and the protection of its national interests.” This new tax should be in place by the end of the first quarter of 2016. Are such proposals legal under EU law? Well, it’s hard to say. “Under EU regulations, member states are not allowed to introduce

tor: “The so-called taxation on hypermarkets should, according to its principles, protect independent retailers in Poland. If, however, it is poorly constructed, instead of helping it could destroy small and medium-sized retail businesses.” PwC appear to agree. Gonta pointed out that, “It will not only impact foreign hypermarket chains but also other market players. Most probably it will increase everyone’s food bills, but this price increase will be smaller than the tax rate.” He also points out

gotiating strength to share the costs that the new taxation will cause with mall developers, especially when many are locked into longterm contracts. Rank Progress pointed out that in its retail parks, all of its tenants lease more than the proposed tax-free area. “Such a change will be felt by the whole sector – because we’re talking here about a new tax, which will influence the profitability of tenants,” stated Piotr Kowalski, commercial director at Rank Progress.

any turnover taxes other than VAT. Also, any discrimination of foreign businesses is prohibited,” said Mieczysław Gonta, a director at consultancy PwC. But, he points out that until further details are made available about this law (in particular the tax scale and rates remain unknown) it is impossible to say whether this will be in line with EU regulations.

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LOKALE IMMOBILIA / BPO

Let’s wait and see

Many retailers seem to fear that they are being personally attacked. Maruszak told Gazeta Wyborcza, “For my industry this will be a penalty, and a penalty that has been dishonestly applied. The message is: Because you’re a sucker who honestly pays his bills, now you’re going to pay more.” Lidl felt obliged to explain the comment, “Lidl Polska has not received any tax exemptions in payment of corporate income tax and has not benefited and does not benefit from any income tax exemptions on account of investments in special economic zones.” However, when it came to commenting on the effects of the new taxation on the development of the sector, all the German-grocer would say was that: “In our opinion it is too early at the moment to competently comment upon the announced changes in tax law and the Polish Labor Code.” They are not the only ones that want to keep schtum. Both Colliers and CBRE also refused to comment. The market reaction to the election of the present government has not been optimistic, with the Warsaw Stock Exchange registering falls. “PiS will be able to implement its populist policy agenda unconstrained by

coalition partners,” RBS said in its research. “We remain of the view that this is unlikely to be market-friendly and may keep Polish risk premia elevated, even as a strong economy provides cushions.” Clearly, foreign investors are not enamored of the new government’s policies. The proposed changes to retail must also be considered with other proposed changes to the taxation regime in Poland, such as a tax on banks and derivatives. But, in spite of these unconventional policies, economists are still predicting Poland’s economy to grow by over 3 percent through to 2018, according to figures from Oxford Economics. “Economic projections are based on data analysis. The figures for Poland are still optimistic. The combined direction of the government reforms on GDP growth cannot be determined. Some of the reforms could even boost economic growth,” explained Mateusz Walewski, a senior economist at PwC. We don’t do Sundays either

This tax on large-scale retailers is not the only policy of the present government that will directly interfere with the retail sector. The government is also proposing a ban on

Sunday trading. Most players on the market seem unconcerned by such proposed changes. “As proven by the example of other countries, this type of a decision usually leads to a change in shopping habits, which does not necessarily mean a decrease in a shop’s turnover,” wrote Joanna Mroczek in the CBRE Viewpoint Polish Property Market 2015 report. Rank Progress was also non-committal on the issue of whether the introduction of such a ban would hurt trade. “The greatest impact of these changes will be felt, above all, by all shopping malls, which offer a wide range of entertainment that is directed at the needs of families and which has registered the greatest numbers of visitors at weekends,” explained Kowalski. According to a report by PwC, “The direct effects of taxes and fees constructed in a similar manner to the solutions adopted in Hungary over the last few years could mean a financial burden on the retail sector of PLN 2.5 billion per year.” PwC then simulated the effects of such a tax on the financial results of individual companies and concluded that, “the effect of additional taxes on financial results, discounting other factors, would result in the almost total elimination of the profits that were researched.” u

“The direct effects of taxes and fees constructed in a similar manner to the solutions adopted in Hungary over the last few years could mean a financial burden on the retail sector of PLN 2.5 billion per year.

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LOKALE IMMOBILIA / LAND

B Y A DA M Z D R O D OW S K I

Building Land

Image: Shutterstock

EXCELLENT APARTMENT SALES RESULTS ARE LEADING HOME BUILDERS TO ACQUIRE NEW SITES

FEBRUARY 2016 • WBJ OBSERVER

LOKALE IMMOBILIA / LAND

TheÂ

building land market in Poland has reached record levels in recent months, with the investment activity in the sector now remaining at the highest level in a decade. The prices of the most sought-after plots have been on the rise. The ongoing boom in the residential market in the country has been the main driving force behind the trend. The growing demand for new apartments has encouraged developers to launch construction on more projects and replenish their portfolios with new housing sites. According to preliminary data published by Colliers International in late November, the combined value of all the

transactions closed in the building land market in Poland last year amounted to approximately PLN 2 billion, which was the best result since 2006. Warsaw accounted for as much as 70 percent of the deals, but the major regional cities across Poland are now also gaining in significance. There is a chance that this year the volume of transactions will be even higher than in 2015, Colliers International said in a report. Residential market dominant

The share of residential plot purchases in the whole building land market in Poland currently amounts to around 70 percent, according to Colliers International data. The housing sector is also

expected to continue to drive demand for new sites this year. The main reason for this has been the unprecedented development activity in the residential market. The availability of relatively cheap mortgages and government support for first-home buyers has boosted new apartment sales in Poland of late. Indeed, last year proved to be the best year in the history of the residential market in the country. Recently published Central Statistical Office of Poland data indicates that in 2015 home builders were as active as never before. Companies launched construction on almost 86,500 housing units in the period, which marked a more than 24 percent increase on 2014 statistics. Building

WBJ OBSERVER â&#x20AC;˘ FEBRUARY 2016

LOKALE IMMOBILIA / LAND

permits were granted for the construction of over 97,200 homes, which was 25 percent more than in 2014. Last year some of the major home builders managed to record doubledigit y/y growth with regard to apartment sales. Many companies from the sector believe that they should be able to achieve even better results this year. For instance, Warsaw Stock Exchangelisted developers Dom Development and Robyg respectively offloaded 2,383 (preliminary data) and 2,333 apartments in 2015, which was 23 percent and 10 percent more respectively than in the previous year. Both of the above-mentioned residential market giants invested considerable amounts of money in the acquisition of land for future projects. Dom Development bought, among other things, plots of land located in the Bemowo and Targówek districts of Warsaw. For its part, Robyg acquired plots located in

LC Corp (2,072 apartments sold in 2015) which acquired plots in Warsaw, Wrocław and Gdańsk, and Warsaw Stock Exchange-listed Atal (1,690 apartments sold in 2015) which bought land in cities including Gdańsk and Poznań. Home Broker analysts estimate that residential developers in Poland invested a total of more than PLN 1 billion in the acquisition of plots for new projects in 2015. The largest of them spent PLN 200-250 million on that purpose, the company said in a recent report. Building land market experts point out that residential developers are now making purchase decisions much quicker than in the past. Due to fierce competition for prime plots, the negotiation process has generally become shorter. In the opinion of Mikołaj Martynuska, a Senior Director at CBRE, the rising investor interest in residential plots has mostly been visible in Warsaw, although a significant number of deals have

some of the plots that were previously expected to house office projects but also allow for the development of residential schemes, are these days being acquired with the aim of launching residential investments. When there is a choice, investors usually take the residential option. This shows that investor sentiment in the residential market is now much better than in the office market and that investors are trying to make the most of the strong demand for new homes. Offices less popular

the Bemowo, Praga Południe, Ursus and Wilanów districts of the Polish capital. The company also bought a number of new sites in Gdańsk. Murapol, which sold 2,400 apartments in 2015 and thus currently remains the sector leader, last year signed a number of land purchase transactions in cities including Warsaw, Kraków, Łódź, Wrocław, Poznań and Katowice. Also active was Warsaw Stock Exchange-listed

FEBRUARY 2016 • WBJ OBSERVER

also been closed in the major regional markets including Kraków, Wrocław and the Tri-city. “The demand for residential sites in Warsaw exceeds the supply,” Martynuska said. It is increasingly difficult to buy prime residential plots in the Polish capital, also because some landowners have high price expectations, and the prices of such sites have gone up, he added. Martynuska pointed out that even

Apart from the residential market, the logistics property sector is also now generating more and more demand for building land – Colliers International data shows that transactions in the logistics sector accounted for approximately 20 percent of the total transactions volume last year. There has been significant growth when it comes to the acquisition of plots of land zoned for logistics space. “Investors often buy such sites for speculative purposes,” said Emil Domeracki, a

Images: Shutterstock

LOKALE IMMOBILIA / LAND

Senior Associate, Investment Services/ Land, at Colliers International. This view was supported by Katarzyna Klementowska, a Senior Consultant at Cushman & Wakefield. “Increased tenant activity is leading developers to build on a speculative basis,” Klementowska said. According to Cushman & Wakefield data, a total of more than 550,000 sqm of warehouse space was leased in Poland in the third quarter of 2015, which marked a 24 percent increase upon the same period in the previous year. The high growth dynamics should continue this year. Hotel sites also attracted more investor attention in 2015. A number of international hotel chains, which are not yet present in Poland, including InterCityHotel, Meininger and Leonardo, are now said to be looking for opportunities to open new hotels in the country. “Investors are more frequently turning to hotel plots located in the smaller regional cities, planning the development of low-budget hotel facilities,” said Daniel

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HOME BROKER ANALYSTS ESTIMATE THAT RESIDENTIAL DEVELOPERS IN POLAND INVESTED A TOTAL OF MORE THAN PLN 1 BILLION IN THE ACQUISITION OF PLOTS FOR NEW PROJECTS IN 2015.

Puchalski, Head of Land Advisory Services at JLL. Meanwhile, the share of the office sector in the total volume of transactions in the building land market has been dwindling – in 2015, it amounted to less than 10 percent, according to Colliers International data. The trend is expected to continue this year. The significant number of ongoing and planned projects – especially in Warsaw, which is by far the largest office market in Poland – has

been discouraging developers from adding new office sites to their portfolios. The prices of plots zoned for office space decreased last year. According to the latest Polish Office Research Forum data, the vacancy rate in Warsaw fell to 12.3 percent at the end of December, from 13.3 percent a year earlier, but this still represented 571,600 sqm of readily available office space. Tenant activity has been at a very high level but with several hundred thousand sqm of new office space now under construction in the Polish capital, some developers have already come to the conclusion that the office market in the city is overheated. In the opinion of Klementowska, investors now have a very selective approach to office locations in Warsaw – sites located in the downtown of the city and close to the second subway line are in the highest demand. Also, the size of the planned investments seems to be changing – while numerous new highrise office projects have been announced for Warsaw in recent years, many developers, faced with the huge supply, are now looking for opportunities to develop less ambitious schemes. In Warsaw, office developers are now mostly looking for sites which will allow for the development of medium-sized projects, Martynuska said. He added that investors are now generally more cautious than a few years ago and allocate less capital to particular plots. Some of the largest single transactions closed last year were valued at approximately PLN 100-150 million, Martynuska said. In previous years, some of the record deals exceeded PLN 150 million. For several years, though, transactions exceeding PLN 300 million, like those from the pre-Lehman era, have not been seen. The prospects for the building land market in Poland for this year remain very positive, even if it is difficult to predict exactly what the 2016 transaction volume could be. Much will depend on how much foreign capital flows into the country this year. According to Puchalski, new foreign investors coming from countries such as Saudi Arabia, the United Arab Emirates, India and the Republic of South Africa considered investing in land in Poland last year but, in most cases, have not made any concrete decisions as yet. u

WBJ OBSERVER • FEBRUARY 2016

OBSERVER RANKING

OBSERVER TOP 10 OBSERVER TOP 10

European Union Funds Consulting Companies

1FABER CONSULTING

3 CRIDO TAXAND

TOTAL AMOUNT OF SUBSIDIES (PLN MLN) Number of qualified projects: 619 Programs and activities: POiŚ (9.3, 8.1, 4.5); RPO WK-P (2.5, 5.2.1, 5.2.2, 5.5); RPO WD (6.5); RPO WP (7.1, 1.1.2); RPO WM (1.5); RPO WŚ (1.1.2); POIG (4.4, 6.1, 8.1, 1.4-4.1)

TOTAL AMOUNT OF SUBSIDIES (PLN MLN) Number of qualified projects: 121 Programs and activities: POIG (1.3.1, 1.4-4.1, 4.2, 4.3, 4.4, 4.5.1, 6.1, 8.1, 8.2) POIŚ (1.1, 4.2, 4.6, 7.4, 9.2, 9.4); POKL (2.1.2, 8.1.1, 9.2); PROW (1.2.3); PO RPW (1.3); JESSICA; PL 07 (Norwegian Funds), 5.4 RPO WKP

Address: 01-184 Warsaw ul. Działdowska 11/16 www.faberconsulting.com

Address: 00-132 Warsaw ul. Grzybowska 5A www.taxand.pl

2 DGA

4 EGC

3,610.5

2,981.1

TOTAL AMOUNT OF SUBSIDIES (PLN MLN) Number of qualified projects: 96 Programs and activities: PPOKL (2.1.1, 3.3.4, 4.2, 5.2.1, 7.2.1, 8.1.1, 8.1.2, 9.1.2, 9.2, 9.3); POIŚ (4.3, 11.2, 11.3, 12.2, 13.3); POIG (1.4, 2.1, 2.2, 4.1, 4.4, 6.1, 7, 8.1, 8.2); RPO WŚ (1.1, 1.2.2, 1.3); RPO WM (1.1, 1.5); RPO WŁ (1.1, 2.7, 3.6, 4.1, 5.4); WRPO (1.2, 2.2, 2.7, 6.1, 6.2); MRPO (1.2); RPO WZ (1.3, 6.2); RPO WP-K (4.1, 7.2); RPO WiM (1.1); PROW (objective 313, 322, 323); RPO WP (1.2, 5.1) Address: 61-896 Poznań ul. Towarowa 35 www.dga.pl

RANKED BY AMOUNT OF SUBSIDIES (IN PLN MLN)

FEBRUARY 2016 • WBJ OBSERVER

2,820

2,772.5

TOTAL AMOUNT OF SUBSIDIES (PLN MLN) Number of qualified projects: 642 Programs and activities: POIG (1.4-4.1, 3.1, 4.2, 4.3, 4.4, 4.5.1, 4.5.2, 4.6, 5.4.1, 6.1, 8.1, 8.2); POIŚ (12.1); PROW (1.2.3); POKL (2.1.1, 6.1.1, 8.1.1); RPO WD (1.1); RPO WŁ (3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 4.3, 5.1, 5.3); MRPO (2.1, 2.2B); RPO WM (1.5); RPO WO (1.3.2, 1.4.1); RPO WP (1.4.2, 3.2); RPO WŚ (1.2.2, 1.2.4); RPO WiM (1.1.7, 1.1.9); WRPO (1.2); RPO WZ (1.1.2, 1.1.3) Address: 90-752 Łódź ul. Żeligowskiego 3/5 www.egc.pl

OBSERVER RANKING

5 POLINVEST

2,765.9

TOTAL AMOUNT OF SUBSIDIES (PLN MLN) Number of qualified projects: 39 Programs and activities: POIŚ (1.1, 2.1, 9.1, 9.2, 10.1, 10.2, 12.1); MRPO (5.2, 7.2); GIS Address: 30-347 Kraków ul. Jana Brożka 3 www.polinvest.pl

6 BUSINESS

CONSULTING GROUP

1,734.2

TOTAL AMOUNT OF SUBSIDIES (PLN MLN) Number of qualified projects: 134 Programs and activities: PIOG (1.4, 2.3, 3.1, 4.4, 5.1, 5.4, 7, 8.2, 8.3, 8.4); RPO WM (1.2, 1.5, 4.2, 5.1, 6.1, 6.2); RPO WD (6.4); MRPO (9); RPO WSL; POKL (4.1.1, 4.1.2, 8.1.1) Address: 31-060 Kraków ul. Św. Wawrzyńca 15/35 www.kppmd.pl

9PWB

1,258.7

TOTAL AMOUNT OF SUBSIDIES (PLN MLN) Number of qualified projects: 572 Programs and activities: PROW (1.2.3, 1,3, 3.1.2); RPO WM (1.5, 2.1.1, 3.3.2, 3.4, 3.4.3, 4.2, 6.1, 6.2, 8.1, 8.2, 8.4,9.1, 9.4)

TOTAL AMOUNT OF SUBSIDIES (PLN MLN) Number of qualified projects: 206 Programs and activities: POIŚ (4.6, 9.4, 10.3); WRPO (1.2); POIG (4.4, 4.5.1, 8.2); RPO WŁ (2.9); RPO WM (4.3); RPO WP (5.2); RPO WO (1.3.2); POKL

Address: 00-833 Warsaw ul. Sienna 72/8 www.bcgconsulting.pl

Address: 61-758 Poznań ul. Garbary 56/12 www.pwb.com.pl

2,397.1

7PNO CONSULTANTS

2,300.6

TOTAL AMOUNT OF SUBSIDIES (PLN MLN) Number of qualified projects: 222 Programs and activities: POIG (1.4, 1.4-4.1, 4.2, 4.4, 4.5, 8.1, 8.2); POIŚ (4.1-4.5, 7.4, 9.4, 10.3, 10.2); RPO WM (1.5, 2.1, 2.3); PRPO 1.1.B; MRPO (2.3); RPO WP (1.1, 1.5); POKL (2.1, 2.2.1, 8.1); RPO; MARCO POLO; INNOLOT; INNOMED; TECHNOLOGY CREDIT; PL-SK 20072013; NFOŚIGW; NMF/EOG; GEKON; TEN-T Address: 04-175 Warsaw ul. Ostrobramska 75C www.pnocee.pl

Image: Shutterstock

8 KPPM DORADZTWO

10METROPOLIS

1,058.3

TOTAL AMOUNT OF SUBSIDIES (PLN MLN) Number of qualified projects: 246 Programs and activities: POIG (1.4-4.1; 4.3; 4.4; 8.1; 8.2); POIŚ (4.2; 4.3; 4.5; 4.6; 7.4; 9.1; 9.2; 9.4; 10.2); POKL (2.2.1; 5.2; 8.1.1); PO RPW (3.2); PROW (1.2.1; 1.2.3; 3.1.2); LRPO (2.2); WRPO (1.1; 1.2; 1.4; 6.2); RPO WK-P (5.2.2); RPO WL (1.7); RPO WŁ (3.6); RPO WM (1.5); RPO WP (1.2); RPO WZ (1.1.2; 2.2.2; 4.1) Address: 60-467 Poznań ul. Zakopiańska 197 www.metropolisdg.pl

Ranked by subsidies obtained in 2007-2013 programs Notes: WND = Would Not Disclose. Research for the list was conducted in April 2015. Number of employees and ownership structure are as of April 2015. All information pertains to the companies’ activities in Poland. Companies not responding to our survey are not listed. POKL – Operational Program Human Capital; POIG – Operational Program Innovative Economy; POIŚ – Operational Program Infrastructure and Environment; PO RPW – Operational Program Development of Eastern Poland; OPPT – Operational Program Technical Assistance; RPO – Regional Operational Programs.

WBJ OBSERVER • FEBRUARY 2016

EVENTS / GALA BOOK OF LISTS

The 6th KPMG Tax and Accounting Congress comes to a close THE KPMG TAX AND ACCOUNTING CONGRESS TOOK PLACE ON JANUARY 19, 2016 AT THE HILTON HOTEL IN WARSAW. THE EVENT WAS ADDRESSED TO CHIEF FINANCIAL OFFICERS AND CHIEF ACCOUNTANTS OF MAJOR POLISH AND FOREIGN COMPANIES. THIS YEAR, OVER 700 PEOPLE RECEIVED CONFIRMATION OF PARTICIPATION AND OVER 400 MORE WERE ABLE TO FOLLOW THE ONLINE STREAM OF THE EVENT AT WHICH KPMG EXPERTS DELIVERED SPEECHES CONCERNING CHANGES IN TAXES AND ACCOUNTING PLANNED FOR 2016

The

Images: KPMG, Europa Property

KPMG Tax and Accounting Congress, of which this was the 6th edition, is the biggest event of its type in Poland. Lectures were delivered by KPMG Partners and Directors with extensive professional practice, all of whom are licensed Tax Advisers, Legal Advisers and Certified Auditors. The agenda included the following presentations: changes in the 2016 tax procedure, the role of financial directors, VAT, the effect of “the global tightening” on the position of tax director and Polish CIT in the near future, a new tax documentation for transfer-pricing, subsidies and tax allowances supporting companies’ financial activities and many more. The congress was established as a KPMG initiative and has been organized on an annual basis since 2011. The participants of the congress completed a survey on the Polish tax system. The survey results will be provided in a report entitled: “The Polish tax system as evaluated by the participants of the 6th KPMG Tax and Accounting Congress”, which will be published in February. More information about the Congress can be found at kpmg.com/pl/kongresKPMG.

FEBRUARY 2016 • WBJ OBSERVER

CEE Retail Real Estate Awards: 4F and Apsys Group sweep the ceremony

ashion Retailer 4F and developer Apsys Group have blazed their way through one of Central Eastern Europe’s top awards ceremonies. In a significant boost to the retail real estate industry, the 8th edition of the annual EuropaProperty CEE Retail Awards welcomed a record number of attendees, including over 100 retailers actively operating in the region. The awards, held at the five-star InterContinental Hotel Warsaw, brought together some 450 top real estate professionals from the major retail market sectors in the CEE region. Apsys Group almost pulled off a clean sweep of development awards. The developer won Property Management Firm, Developer and Overall Company of the Year. Similarly, 4F collected wins for Fashion Retailer - under 500 sqm, Newcomer and Overall Retailer of the Year. The company was recognised by the jury for its continued expansion, and confidence in the CEE region throughout 2015. Accentuating the strength and interest in the region’s retail sector, many key retailers were also awarded on the night. Other major winners for the retailer specific awards included: Food & Beverages Retailer Costa Coffee, Fitness & Leisure Retailer CityFit, Fashion Retailer H&M, Cosmetics Retailer Rossmann, Big Box Retailer Carrefour and Speciality Retailer Smyk. Property Solution’s Stefan Juszczak claimed the Professional of the Year award, confirming his status as one of the region’s top real estate professionals. In the much coveted and highly contested Shopping Center Director of the Year award, Mayland Real Estate's Marek Ciszewski shone the brightest out of all the short-listed nominees. Prolific retail developer Multi won two prizes for its regional development success in 2015. Forum Poprad in Slovakia won Retail Project in the medium category and Forum Lviv in Ukraine won Large Retail Project of the Year. CBRE Global Investors won the highly contested category for Extended/Refurbished Project of the Year for their successful extension of the Ogrody Shopping Center in Elbląg, Poland. The highly appreciated Ferio Wawer in Warsaw by RE project development, walked away with the Small Retail Project of the Year award. Griffin Real Estate won Investor of the Year, and was recognized by the jurors for its investment success in 2015. International consultants JLL once again picked up the Agency of the Year award. Additional company awards were presented to K|P|R|F Law Office, which received the Law Firm of the Year award. TPA Horwath won Tax and Financial Adviser of the Year and the Professional Service Provider of the Year went to First Title Insurance. Gleeds followed up last year’s success by once again collecting the Project Management Firm of the Year award. Chapman Taylor once again picked up Architectural Firm of the Year, and Berlin Hyp was voted Bank of the Year. For the Full List of Winners please visit: retailawards.eu

GADGETS WE LIVE IN AN AGE OF GADGETS: some are useful, but most are just a waste of time and money. We sift through the latest available tech to pick those that we believe will help you live your life more comfortably and confidently. Diet Sensor

We’re confident in saying that nothing like this has ever been created before. The Diet Sensor comes with an app that allows you to scan the chemical content of the food in front of you and read the results on your smartphone. You’ll instantly know the weight and caloric value of what you’re eating, as well as the amount of carbs, protein and fat it contains. The results are automatically transferred to a logbook in the app, so you can keep track of your daily nutritional habits in real-time.

TECHNOLOGY TO MAKE YOUR LIFE EASIER

Think & Learn Code-A-Pillar

Fisher Price Think & Learn Code-A-Pillar – For those with little kids, here’s an interesting idea: instead of giving them yet another video game or other form of electronic entertainment, you could try and imbue them with the mind of a coder by gifting them a Code-APillar. The toy aims to teach the fundamental skills needed in coding, such as thinking skills, problem solving and sequencing. It has eight tail sections that can be snapped together in different orders to make the toy perform different tasks and move in different directions. Price: $50

fisher-price.com

Price: $250

FEBRUARY 2016 • WBJ OBSERVER

Images:Dietsensor, FIsher Price, Samsung, Casio, Naim Audio, Tba, Get Movi

dietsensor.com

Based on the acclaimed Naim Mu-so, the QB is, simply put, a shrunken version of its big brother. However, despite not possessing the power of the original, it retains its excellent sound quality, making it a good choice for playing music from wherever it is stored. A unique design definitely helps the QB stand out, with an exterior in the shape of a cube with waved edges, available in 3 separate colors. Coming Spring 2016 Price: £595

naimaudio.com

Parrot Disco

Drones are the latest craze, but this one distinguishes itself from the others due to its shape and features. A fixed-wing drone in the style of a miniature military aircraft, the Parrot Disco is also remarkably easy to use: for takeoff, you just throw it up in the air and it does the rest, while getting it back down to the ground is similarly easy with the auto-land mode. An app on your tablet allows you to steer the drone during flight, or alternatively prepare a flight plan in advance. The drone’s battery is good for 45 minutes, meaning you’ll be able to get a few good flights in before you have to recharge it.

Samsung Family Hub refrigerator

Price: TBA

Stay connected, now even in the kitchen. The Samsung Family Hub refrigerator has a 21.5 inch touchscreen panel on which you will be able to create shopping lists, display recipes and order groceries. Even cooler, once you’re already at the store, you’ll be able to see your ingredient inventory by virtue of several cameras installed inside the fridge. Open up Samsung’s app on your smartphone and you’ll know whether you need to buy those eggs or not. Of course, you’ll also be able to use the touchscreen to get your daily dose of entertainment, whether that’s news, music or TV.

parrot.com

Price: $5,000

samsung.com

WSD-F10

Android users, this one’s for you: a smartwatch with outdoor functionality. Built to military standards of shock and dust resistance, this Casio offers water resistance up to 50 meters. Designed with the sporty and adventurous in mind, the WSD-F10 contains many useful functions, ranging from an accelerometer, gyrometer and magnetometer, all of which can be activated with the press of one button, to pre-existing apps for fishing, trekking and cycling. Users also have access to an air pressure sensor, altimeter and other gadgets for their various expeditions. Price: $500

Livesteam Movi

wsd.casio.com

This single camera packs the power of nine. The new Livesteam Movi is a 4K video camera with a 150 degree glass lens that allows for a wide range of shots. However, the camera itself is only half the story – it has an incredible iOS app which allows users to remotely change the angle and zoom, and to choose from nine different shots at once. You can stream the video live from your Movi to friends and customers. Oh, and did we mention that all of these capabilities fit into a neat 2.5 inch cylinder?

Price: Preorder for $200; Regular price $400

getmovi.com

WBJ OBSERVER • FEBRUARY 2016

LIFESTYLE / BEER PUBS

WARSAW 'S BEST BEER PUBS You may associate Warsaw with the consumption of harder liquor, and that would be understandable, the Slavic land’s penchant for all things vodka is well documented. But it would mean that you would miss out on a bevy of the city’s most interesting and unique establishments, which focus their efforts on their beer selection. It seems as though the selection of proper multitap and craft beer bars is growing exponentially by the year. Here are only a few that have caught our eye:

CUDA NA KIJU

A steady favorite of many in the capital. Located in the Communist Party’s former headquarters, this bar is split over three levels and has a bustling outdoor garden in the summer. Inside you have 16 taps to choose from, which serve a balanced mix of craft ales and lagers (and also Prosecco) to suit every mood. If you’re a bit lost with what to pick to begin with, ask a bartender, they will be more than happy to help you figure out what you want. If it’s busy and a quiet chat seems impractical, go with the pilsner on the first tap. Just trust us. While their alcoholic selection is superb, that is only half the story with this place. It’s an absolute must to try their Neapolitan pizzas, available in a variety of combinations. Thin and saucy, it goes down divinely with a brown ale. Nowy Świat 6/12

KUFLE I KAPSLE

This one is for those who treat beer, not just as a beverage, but as a lifestyle. Kufle i Kapsle is another well-run multitap in the center of Warsaw, with 12 taps and 150 (that is not a typo) varieties of bottled beer, you certainly can’t complain about a lack of choice when you enter this place. What truly sets this place apart is its passion for beer on the whole, you can enter into a two-hour discussion with the barman about the beer you’re drinking, discussing its ingredients and the specific production process it went through. The bar also organizes regular brewing demonstrations, beer history lectures and tasting workshops – truly proving its worth as your one stop shop for all things beer. The one downside to its massive popularity is the resulting congestion that occasionally occurs

FEBRUARY 2016

during peak hours. If that is a big problem for you, you can always go to their second location located further away from the center in Żoliborz. Nowogrodzka 25

LIFESTYLE / BEER PUBS

BLA-BLA

Images: Shutterstock, Cuda na Kiju, Kufle i Kapsle, Bla-Bla, Spiskowcy Rozkoszy, Warszawa Powiśle

If Kufle i Kapsle is full one evening, do not despair – a more than suitable alternative is literally around the corner. Originally only serving bottled craft beers, Bla-bla has also joined the multitap craze, offering 10 draught beers at any one time. It seems to be slightly less frequented than some of the other big-name bars in the center, so strategicallyspeaking it is a good choice when you have a large group with you. The pale ales on tap are notably tasty – they should be first on your list when you drop by. Nowogrodzka 22

SPISKOWCY ROZKOSZY

For those who just want to enjoy a good beer in a calm and cozy atmosphere, this is for you. A modestly-sized bar situated next to the now-closed Antykwariat, Spiskowcy Rozkoszy may not serve as many tap beers as the other places on this list, but it more than makes up for it with an exquisite selection of craft beers from around Poland and the rest of the world. As mentioned, the place is not too large, so coming here for pre-drinks on a weekend night with a large group of friends may not be the best idea – it works much better as a place to visit for a pint or two after work, or for a more intimate atmosphere with a friend or significant other. Żurawia 47

WARSZAWA POWIŚLE

No stranger to any veteran of the Warsaw party circuit, this bar does not necessarily specialize in beer, but that doesn’t mean it’s not worth visiting. Situated by the stairs to a local train station, this bar is placed inside an old ticket office from the communist era, converted in modern times into a drinking establishment – an ingenious idea that’s created a unique climate. Many roll their eyes with contempt at the mention of this place due to its reputation as ground zero for the hipster scene in Warsaw, but they’re only doing themselves a disservice, as this place has much more to offer than just mingling with bearded bohemians on bikes. Warszawa Powiśle is incredibly universal – it works just

as well as a breakfast or lunch spot as it does as a place for a beer on a lazy afternoon. And the beer selection is very good, at very decent prices. So drop your prejudices and come along, either when it’s bustling, or when it isn’t, your experience will differ, but that is by no means a bad thing. Kruczkowskiego 3b

WBJ OBSERVER • FEBRUARY 2016

LIFESTYLE / DAVID BOWIE

BOWIE AND HIS WARSZAWA W

hile David Bowie never played in Poland (the only scheduled show in 1997 was canceled due to poor ticket sales), its capital left a permanent mark on his creativity. As legend has it, Bowie wrote the instrumental piece Warszawa (from the Low album, released in 1977) during a short stop in the city, when he was traveling from Moscow to Berlin by train. Journalist and author, Wiesław Weiss, current Editor-in-Chief of Teraz Rock monthly, was the first one who revealed the details of his stay, basing his information on British magazine clippings. But, since they are impossible to track nowadays, he admits that some of it might be wrong. According to lore, Bowie arrived at Warsaw’s Dworzec Gdański station in June 1973. He went for a walk, visited Pl. Wilsona (then known as Pl. Komuny Paryskiej) and bought some records at the local bookstore. One of those albums was by a Polish folk choir called Śląsk, it featured a track entitled Helokanie which inspired Bowie to write Warszawa. Later, he

FEBRUARY 2016 • WBJ OBSERVER

recalled the visit as “the scariest moment of his life” and that the city felt “grey, gloomy and depressed”. The story has some holes as the MoscowBerlin train only stopped at the Warsaw station for nearly 30 minutes, far less time than needed to get to and from Pl. Wilsona. He also visited the city once again in 1976 on his way from Zurich to Helsinki, but according to Paul Trynka’s book “Starman: David Bowie”, he only had a quick dinner at the station. Even though we’ll probably never know when Bowie was inspired to write the song. The city definitely left a mark on him. “I’ve tried to capture this feeling of elusiveness, of being free, when a person feels like he can grab it but in the end is not able to. These emotions you feel when you try to capture that freedom. I really fell in love with this folk song I discovered while in Poland,

which you can easy tell when you listen to my vocals. I sang this melody hoping that it expresses the spirit of Poles. I hoped that when you listen to Warszawa you see that magnificent shadow cast by the city, a shadow which one day might become its reality,” Bowie said in an interview with Weiss. The song, a nearly six and a half minute instrumental piece with some vocals (sung in a made-up language) near the end of it, was never a hit. It was however, used occasionally as a live opener. It also inspired the band which was ultimately known as Joy Division to name themselves after the song (although they chose the English version of the city’s name). The album Low, and the two following records, Heroes (1977) and Lodger (1979) comprise the so-called Berlin trilogy, a period in Bowie’s career lauded by critics, although not necessarily commercially successful due to its minimalistic and electronic nature. David Bowie passed away on January 8, aged 69, two days after the release of his latest album Blackstar.

Images: Shutterstock,

B Y JAC E K C I E S N OW S K I

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