WBJ Observer December-February 2016/17

DECEMBER–FEBRUARY 2016/17

Number 12/01 (34/35)

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TAMING MILLENNIALS GEN Y AND THE WORKPLACE >>26

ELECTRIC CARS

Electronic dreams DECEMBER–FEBRUARY 2016/2017

Electric cars made in Poland. Illusion or reality?

ALSO IN THIS ISSUE:

• C o m m e n t a r y • E co n o m y • Te c h • N ew s • I n ve st i n g i n Po l a n d

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IN THIS ISSUE

22-25

43-70 33-42

ELECTRIC CARS

TECH INSIGHTS

LOKALE IMMOBILIA

6-12 In Review Latest news 13 Dateline 14 Economy

18-20 Władysław Kosiniak-Kamysz 30-31 Marc Boderke

72-73 Gadgets 74-76 Events Investing in Poland 78 Events Chemical industry summit 79 Events Office buildings in Poland 80 Events Big data congress

NEWS

COMMENTARY

15 Law Digitalisation in labor law

INTERVIEWS

LIFESTYLE

FEATURE

26-29 Millennials Gen X vs Gen Y

WBJ OBSERVER • dEcEmBER-fEBRuaRy 2016/17

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Morten Lindholm Publisher mlindholm@valkea.com Jacek Ciesnowski Editor-in-Chief, WBJ Observer jciesnowski@wbj.pl Beata Socha Managing Editor, Tech Insights bsocha@wbj.pl Adam Zdrodowski Managing Editor, Lokale Immobillia azdrodowski@wbj.pl Michael Evans Copy Editor Journalist Michael Gaylord Wiesław Galach Graphic Designer wgalach@valkea.com Aleksandra Szydło Graphic Designer aszydlo@valkea.com Contributors Ewa Boniecka Amalia Leitner Karolina Papros Dominika Tkaczyk Jacek Wojciechowski Alex Webber Sales & Marketing Director Tomasz Pawlak tpawlak@wbj.pl

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COMMENTARY / ON INFORMATION TECHNOLOGY

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DEAR READERS JACEK CIESNOWSKI, EDITOR-IN-CHIEF, WARSAW BUSINESS JOURNAL GROUP

This introduction will differ from all the other ones I’ve written so far. Instead of explaining what you can find inside this publication, I would like to say goodbye to all our readers and partners as this is my last issue as Editor-in-Chief of the Warsaw Business Journal Group. I’d like to thank all of you for being with us, and everyone I’ve worked with on all of the WBJ publications for the time, effort and patience they’ve put into their tasks. After four years of working here, I think the time has come for me to move on. Over this course we’ve all tried hard to provide you with quality, unbiased content, which in today’s media landscape is not an easy task. And to be honest, the burden of this challenge has taken its toll on me and I have decided to take a break from journalism.

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I leave the publication in good hands; the editorial staff will remain mostly the same and I can vouch for all of them. The last four years, while challenging, has been a real pleasure and a learning experience. I’ve learned a lot here, not only about journalism but also about teamwork. Even though we had different positions and job descriptions, if one of us failed, so would the whole magazine. But we kept a tight ship and despite so many obstacles, every month we delivered a product I could be proud of. I’m sure that the new/old team will keep this up and I know that the quality will not suffer. I can’t wait to pick up the first issue of 2017. In the meantime, good night and good luck.

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INREVIEW

NEWS

News highlights of the past month

Polish insurer PZU and Polish Development Fund PFR will buy 32.8 percent of Bank Pekao shares from its owner, Italian UniCredit for PLN 10.6 billion. The remaining UniCredit stake (7.3 percent) in the second biggest Polish lender will be sold on the market via equity-linked certificates. “Thanks to the finalization of the transaction, PZU has become the largest financial group in Central and Eastern Europe as a leader both in insurance and in the bank-

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ing and asset management sectors. I am convinced that the existence of such a strong financial institution headquartered in Warsaw will have a significant influence on the financial stability and prospects of the sound development of the Polish economy,” said Michal Krupiński, PZU’s CEO. “The acquisition of Pekao’s shares is in line with PZU’s strategy until 2020, which assumes building a banking group with at least PLN 140 billion in assets and

accumulating PLN 50 billion of third-party AUM. PZU and PFR will cooperate in order to ensure the effective implementation of Pekao’s development strategy, preserving the low-risk profile of the bank, its strong profitability and a stable, long-term dividend policy,” PZU wrote in a press release. PFR expects to achieve a return on investment in Pekao of above 10 percent p.a. and assumes an investment horizon of at least three to five years.

Images: PZU, Pekao

PZU and PFR to buy 32.8% stake in Bank Pekao

COMMENTARY / ECONOMY

Opening 2017 Premium offices ź

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SEPTEMBER 2016 • WBJ OBSERVER

NEWS

SEJM LOWERS RETIREMENT AGE The Polish parliament has passed legislation to lower the retirement age to 65 for men and 60 for women, from 67 for both sexes. “This is a happy day for all employees, to members of Solidarity, for us personally,” said Piotr Duda, head of labor union Solidarity. The retirement age had been increased under the previous government. Duda stated that the previous increase was a “bad situation.” Now, women in Poland will be able to retire at 60, and men at 65. However, the release stated that the government’s work on retirement legislation has not yet finished, as it now begins a review of proposals for reforms to pensions. TAXATION CHANGES FOR HIGH EARNERS ’NOT YET A FOREGONE CONCLUSION’ – MORAWIECKI Minister of Development and Finance Mateusz Morawiecki assured reporters that controversial changes to the government’s regulations regarding joint taxation of spouses have not yet been approved and will only be made after public consultations. He was speaking to the Polish press regarding the budget for the upcoming year. However, he did warn that there would be a “substantial, dramatic change of taxes,” with the intention of progressive measures being introduced whereby tax brackets more accurately coincide with the amount of income earned. The government is considering eliminating the joint tax for high income earning couples, which some believe unfairly benefits higher earners, while penalizing lower earners. The Minister also indicated that the flat tax of 19 percent for all entrepreneurs would remain.

olish lender Alior, which is owned by PZU, has ended talks with Raiffeisen and will not be buying its Polish unit. Alior has had exclusive bargaining rights for the assets since late September. Talks concerned the core banking operations. “As for the termination of talks with Raiffeisen, we decided that the conditions which were proposed were not satisfactory,” Michał Krupiński, CEO of PZU said. On the same day, PZU announced it would be acquiring a controlling stake in Poland’s second biggest lender Bank Pekao. Raiffeisen Bank International (RBI) planned to sell its Polish unit in an effort to strengthen its capital base. The bank now believes it can achieve the former without the sale. “RBI expects to achieve its CET1 ratio (fully loaded) objective of at least 12 percent without any extraordinary measures by the end of 2017,” the statement read. Raiffeisen is also bound by a May 2016 deal with Polish financial regulator KNF to either sell its Polish unit to a WSE-listed bank by end-year, or put the full Polish unit on the Warsaw Stock Exchange by end-June 2017.

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European Council President Donald Tusk said in an interview with Onet.pl that “the fussiness” of the Polish government when it comes to appointing Tusk for a second term is “damaging to Poland’s reputation and might question the country’s dignity.” “It’s not like Europe’s future depends on Tusk and my potential second term. Poland’s reputation is more at stake here. If a country has a representative in a top position in Europe and is picky about it, it can’t be treated seriously and that’s the problem,” Tusk said. He added that his politics are not in line with the Polish government. “I really define Polish interests differently than Law and Justice (PiS) and I will tell you clearly: I think I define them better and more precisely,” Tusk explained. “In 10 years, no one will care whether Tusk was appointed for a second term, or if PiS won or lost elections if it turns out that the EU has fallen and Poland is standing alone somewhere on its outskirts. No one will forgive us that,” he concluded.

Images: Shutterstock, European Parliament

Alior negotiations to buy Raiffeisen Bank Polska collapse

TUSK: POLISH GOVERNMENT IS WEAKENING POLAND’S POSITION

NEWS

GUS: industrial output decreases in October

Polandâ&#x20AC;&#x2122;s Central Statistical Office (GUS) reported on November 22 that industrial production in Poland in October had declined by 1.3 percent y/y. The figure contradicted the previous economic forecast, which had cited an expected 1.1 percent increase in output. Also, it noted that declines were substantial even when adjustments for seasonal factors were

eliminated. In particular, construction output, including assembly production, which fell by 20.1 percent y/y (17.5 percent when figuring in seasonal adjustments), was higher than had been expected. Furthermore, falling production occurred in 20 of the 34 measured divisions, including beverage manufacturing, coal and lignite, and chemical and petroleum products.

On the other hand, in 14 industry divisions, including motor vehicles and trailers, textiles, food and furniture, production increased. GUS also announced that producer prices were higher by 0.6 percent in comparison with October 2015. Prices in construction and assembly production fell by 0.1 percent y/y; they also fell by the same amount in comparison with September.

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NEWS

More IPOs in 2017 – WSE CEO

ałgorzata Zaleska, CEO of the Warsaw Stock Exchange, said in an interview with the Polish Press Agency that there will be more IPOs next year than in previous years. “I am convinced that next year will be better in terms of debuts than this year. We are working hard on it,” she said, revealing that this year, the WSE has held talks with some 100 companies that were mulling over an IPO on the Warsaw bourse. “Some of them have already declared the willingness to float. These are, among others, IT firms, and also municipal firms owned by local governments,” she said. The WSE hopes to attract foreign companies including those from Belarus and China, where the WSE in cooperation with Haitong Bank will organize a road show aimed at attracting local companies. So far in 2016, there have been 18 IPOs on the Warsaw bourse, including seven that moved from the alternative small-cap market NewConnect.

Chopin Airport to be expanded Warsaw Chopin Airport should be expanded to accommodate the growing number of passengers who travel to and from Warsaw, said Mariusz Szpikowski, director of PPL, the company that operates the airport. “Last year, we serviced 11 million passengers, this year it should be some 12.7 million people, while next year it could be as high as 14 million,” Szpikowski said. The company wants to expand the northern part of the terminal and build nine additional

air bridges there, which would cost PLN 80 million. More complex expansion plans are subject to the government’s decision regarding the proposed Central Airport – its location and whether it will be built. In the first three quarters of the year, PPL had over PLN 200 million in revenue, which is a 40 percent increase y/y. Chopin Airport is the biggest such facility in Poland, it currently services some 100 destinations.

WSE to change president

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The value of the drone market will grow to PLN 201.31 million this year, representing a 22.75 percent growth, according to a study from Instytut Mikromakro. Most of the income comes from sales, but that segment is declining (55 percent in 2016 vs. 62 percent in 2016), while the services segment, such as training, is on the rise (33 percent vs. 17 percent last year). Domestic production is also falling (12 percent in 2016 and 21 percent in 2015). According to the report, it stems from the fact that the military and uniformed services are not currently making any big orders. “The segment of training unmanned aerial vehicle operators is worth PLN 13.8 million, we have 46 certified training centers and 3,600 trained operators. This is the third highest in the world and the best in the whole of Europe,” the report stated.

Images: Shutterstock, WSE

Poland’s Treasury had convened an extraordinary meeting, with the main purpose being to change the president of the Warsaw Stock Exchange. The plan for the meeting, the report said, came at the request of the Minister of Development and Finance (Mateusz Morawiecki) and the State Treasury. The meeting will also aim to make changes in the composition of the board and the board of the stock exchange. It will take place on January 4, 2017. The current president of the Stock Exchange is Małgorzata Zaleska, who has been in the position since being appointed 12 January 2016.

Drone market in Poland will grow by 22.75% this year – report

news / snapshot

Up in lights

Image: Shutterstock

The Christmas decorations in Polish cities get bigger and bigger each year. Pictured is the Christmas tree at Pl. Zamkowy. This yearâ&#x20AC;&#x2122;s tree is 27 meters tall and is illuminated with 4.5 million Christmas lights. Holiday decorations in the whole city cost PLN 6.5 million.

Calendar January-March January 11-12

National Congress of Energy and Heating POWERPOL Event: This year’s edition will discuss the development prospects within the Polish energy sector. Featuring representatives from the Polish government and the biggest energy companies. Location: Marriott Hotel, Warsaw powerpol.pl

January 16

March 6-7

TIME Economic Forum Event: Organized by the Polish chambers of telecommunications and IT. This year’s event will focus on artificial intelligence and the concept of industry 4.0. Location: Hilton Warsaw and Convention Centre fgtime.pl

KPMG Tax and Accounting Congress Event: The event is the biggest of its type in Poland. It traditionally features two thematic blocks – tax and accounting. The congress will be attended by chief financial directors and chief accountants of major Polish and foreign companies. Location: Hilton Hotel, Warsaw kpmg.com

January 26

CEE Retail Awards Event: This year, over 450 guests are expected, including more than 100 retailers interested in doing business in the region. Countries covered in the awards include: Poland, Czechia, Hungary, Slovakia, Ukraine, Austria, Lithuania, Latvia and Estonia. The evening gala will be preceded by discussion panels covering retail markets. Location: InterContinental Hotel, Warsaw retailawards.eu

February 9

Polish Infrastructure Conference Event: Representatives of investors, contractors and government will once again meet to discuss the condition of Polish infrastructure. The event will culminate with the “Polish Infrastructure Diamonds” awards gala. Location: Hotel Westin, Warsaw executive-club.com.pl

January 31

BSS Forum Event: The BSS Forum is the international conference of the Business Support Services sector organized in Lublin. Some 300 delegates representing Polish and international organizations as well as public sector institutions will attend. The main goal of the forum is to discuss the current trends, challenges and opportunities within the modern business services industry. Location: Lublin Conference Center, Lublin bssforum.com

WBJ OBSERVER • dEcEmBER-fEBRuaRy 2016/17

NEWS / ECONOMY

FACTS AND FIGURES Data overview November

Warsaw Stock Exchange as of November 2016 Number of listed companies:

0.0%

487

Poland’s CPI inflation

TRADE VOLUMES

2.9%

8.2%

registered unemployment rate

PLN 179.29 billion

Poland’s Q3 GDP

BONDS

PLN 1.32 billion

51.9 pts

Purchasing Managers’ Index result for Poland

FUTURES

6.68 billion Seeing green

Poland sold €750 million five-year green bonds on Monday, at 48 basis points over midswaps, according to Reuters. It is the first such issue by a sovereign state. Proceeds from the sale will be used to fund green projects within the country.

4.63%

PLN 939 billion

Deflation drops

Keeps falling

Year-on-year CPI inflation in Poland, November 2015 – November 2016

Poland’s registered unemployment rate November 2015 – November 2016

10.5 10

-0.5

9.5

8.5

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Oct. ‘16

Nov. ’16

Sep. ‘16

Jul. ’16

Aug. ‘16

May ’16

Jun. ‘16

Apr. ‘16

Mar. ‘16

Jan. ’16

Feb. '16

Nov. ’15

Oct. ‘16

Nov. ’16

Sep. ‘16

Jul. ’16

Aug. ‘16

May ’16

Jun. ‘16

Apr. ‘16

Mar. ‘16

Feb. '16

Nov. ’15

Dec. ‘15

Jan. ’16

Dec. ‘15

-1.5

Minister for Family, Labour and Social Policy Elżbieta Rafalska

-1

“From the budget for the program [Family 500 plus] we will spend PLN 17.8 billion,” Poland’s Minister for Family, Labour and Social Policy, Elżbieta Rafalska said. This year, the government has set aside PLN 17.0 billion for the program. “It’s a small difference,” she added

Data source: Central Statistical Office (GUS), Warsaw Stock Exchange

public debt after Q3

COMMENTARY / LAW

IZABELA SZCZYGIELSKA ADVOCATE, COUNSEL HEAD OF LABOR LAW PRACTICE WKB WIERCIŃSKI, KWIECIŃSKI, BAEHR

DIGITALISATION IN LABOR LAW Currently, such procedures must be performed in written form, i.e. by way of a hard copy with an original signature. E-mail is not yet considered a valid form of written communication, and termination of employment contract by the employer via e-mail may be deemed a violation of the labor law, unless signed with a certified electronic signature. The new rules seem to be very beneficial to employers, not only due to the fact that the storage of digital data is much more convenient and economical, but also because they may contribute to improving and accelerating communication with employees. However, the draft act does not address issues that employers face at present. As per the draft act, only some of the employment documents will not require a certified electronic signature of the employer (e.g. employee’s working time schedules, information about equal treatment and occupational risks), while many other will still require such a signature. While recognizing the electronic mode of communication between the employer and the employee, the legislator did not solve the problem of uncertainty regarding the date of delivery of particular information in electronic form. This will cause practical problems, e.g. in the event of delivery of a termination letter, particularly if we take into account that employers are prohibited from giving notice to employees who are on sick leave. In such a case, the employee may obtain a certificate of sick leave as a result of receiving an e-mail with a termination letter and the employer has no possibility of verifying whether the employee was already sick at the moment of delivery of the termination letter. The increasing importance of IT tools in employment law matters reminds us of the necessity to improve protection of employee data stored on company equipment. The traditional key to the storage cabinet with employee files must be replaced with an effective digital data protection system and clear rules for accessing the company’s equipment.

Image: Shutterstock

Legislative reforms try to keep pace with a rapidly changing economy, but they tend to fall a few steps behind. The emergence and development of new technologies is a challenge for legislators. On one hand, IT creates new areas requiring legislative regulation, and on the other, it may serve as a measure used in the law implementation process. The legislator has finally recognized the use of new technologies, which resulted in the drawing-up of the draft act amending certain acts in connection with shortening the period of storing employees’ records and their digitalization. Pursuant to the provisions of the draft, employers will be able to document their employment relationship in digital form. The employers will be authorized, among other things, to keep personal records of employees, inform employees about the conditions of their employment, issue employment certificates – all in electronic form. It will be possible to effectively conclude and terminate employment contracts via e-mail.

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WBJ Observer presents

THE BIGGEST MENTAL CHALLENGES FOR POLISH ENTREPRENEURS Once political and economic factors are removed, all that’s left are social and cultural characteristics that constitute business reality. Once this dynamic is understood, companies can adopt their strategies and make them appropriate in terms of sales, management and marketing. This article is a statistically supported factsheet enhanced by practical advice on the topic of mental challenges Polish entrepreneurs are facing. Both local and foreign management can benefit substantially from this data, which can aid in understanding the practical meaning of the famous quote by Peter Drucker: “Culture eats strategy for breakfast.” Challenge 1: Micromanagement According to a national census, there are more than 1.8 million companies registered in Poland, mostly micro entrepreneurs. In more than 90 percent of cases, successful companies have achieved success starting from scratch, becoming pioneers on the newly established free market after the collapse of communism. This extreme self-dependence leads to micromanagement, which constitutes an obstacle to growth and causes learned helplessness among less qualified staff and demotivates more highly educated and higher rank employees.

Challenge 3: Think small Even though Pesa, Inglot, Solaris, CD Projekt, and Fakro are famous international brands, Polish entrepreneurs export much less than their colleagues from the EU. The proportion of companies that export is only 3.6 percent (30 percent less than the average in the EU) and they produce €1.7 million in annual turnover, which is 1 million less than the EU average. Although the Polish market has the competitive advantage of hard working staff and lower costs of production, the mental barrier caused by the lack of global goals disables their international business potential. Challenge 4: Lack of education While academic education is thriving (50 percent ratio of higher degree education among millennials), necessary business soft skills are still at an early developmental stage. According to data (Bilans Kapitału Ludzkiego), on average, only PLN 194 is spent annually on employee education. Some 45 percent of

DECEMBER-FEBRUARY 2016/17 • W

MATEUSZ GRZESIAK, WELL KNOWN PSYCHOLOGIST ON THE POLISH MARKET, BOARD ADVISOR AND CONSULTANT

entrepreneurs do not educate their staff in any way, justifying this with the belief that their “staff have adequate knowledge.” Meanwhile, right after professional qualifications in terms of importance, Polish employees want to develop individual and interpersonal competences (responsibility, time management, independence). Challenge 5: Intuitive performance The lack of soft skill education and adequate managerial training leads to intuitive behavior – even if one is successful in their pursuits, they will not be able to consciously transfer best practices to others. This leads to problems with succession, where the younger generation does not want or know how to lead a successful businesses following in the footsteps of their parents. The lack of modeled knowledge is substituted by “luck,” “coincidence,” or “it was to be” concepts, which are not repeatable, nor transferable and scalable. Challenge 6: Lack of innovation Among entrepreneurs who have decided to implement innovative solutions, 68 percent claim that business development would not be possible without it. But among those who do not implement innovative solutions, more than 40 percent claim their business does not need innovation or they are too small a company. Conclusion – some do not realize that innovation does not only exist in the technological realm, but also relates to marketing, sales, leadership and management.

BROUGHT TO YOU BY MEDIA FORUM

Challenge 2: Distrust Only 23 percent of Polish entrepreneurs (according to CBOS) agree that most people can be trusted, while 74 percent suggested caution in relations with others. Some 47 percent distrust strangers and 31 percent are eager to trust them. As much as 40 percent think that trust does not pay off and leads us to the conclusion that Polish society is generally distrustful and not open to others. This mental barrier, caused by the difficult events of the 20th century, results in the loss of time and money that is necessary to defend oneself from nonexistent threats, it also creates distance in networking and building relationships.

INTERVIEW / W

WŁADYSŁAW KOSINIAK-KAMYSZ, CHAIRMAN OF THE POLISH PEOPLE’S PARTY (PSL) SAT DOWN WITH WBJ OBSERVER TO TALK ABOUT THE TASK OF MAKING PSL’S VOICE HEARD IN OPPOSITION, HIS NEGATIVE ASSESSMENT OF THE CETA AGREEMENT, HIS PROPOSALS FOR STRENGTHENING THE EUROPEAN UNION BY UPGRADING COOPERATION ON A REGIONAL LEVEL, AND ABOUT BUILDING TRUE AND HONEST HISTORICAL POLICY

PP S

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

WBJ Observer: PSL receives low levels of support in opinion polls and you are disregarded in Parliament by the ruling Law and Justice (PiS) government. How do you want to strengthen your role in opposition? Władysław Kosiniak-Kamysz: We are working in difficult conditions; we are derided in Parliament by PiS, who have refused to give us a position of Deputy Marshal of the Sejm, or membership in the Committee for Special Services. Our voices in parliamentary debates are being neglected, moreover we are not present in

the media. We did a study that showed that from August this year to the present time, the evening news has featured PiS representatives 65 times, representatives of the opposition have appeared 35 times, but not once has a representative of PSL been invited to appear, despite the fact that we represent 1 million voters. We must find another way to communicate with the public.

DECEMBER-FEBRUARY 2016/17 • W

There are many young women in PSL, why aren’t you giving them the same exposure as Nowoczesna is doing within their party?

Indeed, in our party we have many experienced female lawmakers and politicians, who are also members of the Sejm. But it is not us who delegate our representatives to the media, it is the journalists conducting such programs who choose their guests. Such is the way in the media nowadays. Still, I hope that our female activists will push their way into the media spotlight and will be able to represent our party effectively. What do you regard as the most important task for PSL in opposition?

INTERVIEW / W

The first one is to negate, not only expose the activity of the government. Although there are many policies that I do not like, there are also certain elements that should be praised. But above all we must present an alternative, not only as anti-PiS, but provide specific examples of how to act differently. To show that it is possible to run normal policy. Today we are faced with barbaric policy and a situation in which two tribes are attacking each other with clubs, and it is not normal. My greatest accusation is that deep social divisions have been created in Poland, and those divisions concern every aspect of our lives. These are divisions concerning ethical issues, historical and social policy. They have introduced the 500+ program, but it excludes families with one child, and what about single parents? Our society is divided on the matter of the Constitutional Tribunal and many other issues and this is leading to the devastation of the national community. It leads to the destruction of our nation and we have suffered such destruction far too many times already. When we are not united, it leads to tragic situations, historically this has always been true. And yet, today there are hateful divisions in the county, and those divisions and the virus of hate will weaken Poland.

Image: PSL

Some have stated that PSL has placed itself between PiS and the other opposition parties. How would you respond to those views? I think that it would be a little insincere to simply say “no.” We have to say “no” but also “yes, but…” There are certain basic values that we care about, so it is not effective to only operate within a policy of negation. Such a stand was not enough to win against PiS during the last election, there was a need for an alternative policy. Yet, now the biggest opposition party, Civic Platform (PO), has based its stand on a political message that states “maybe we are not great, but we are better than PiS.” The policy of a “lesser evil” is not good enough and is not workable in the present day. Do you regard PSL as a rural party, or do you want it to be a nationwide party? Firstly, if we are to gain the support of new groups of society, we must have the solid support of our voting base – those people who live and work in rural areas. PSL is the Christian people’s party with foundations based on Christian values; it is the nationwide party of ordinary people. Our historical roots are in rural

communities and the Polish countryside. But the countryside has changed, and conducting business activity in villages and in the city is not that different. Whether somebody lives in a village or in a city, schools should be the same and residents should have the same access to culture. Our party wants to connect villages with cities. It is necessary to shorten the distance between agricultural producers and consumers, because today it is agents who earn the most money, while the people who buy the produce are on the losing side. It is one of the examples of how big corporations and agents profit from agriculture, rather than the hard working producers. PSL wants to bring cities and villages and all communities closer together, but before that can happen I want to regain the strong support of those people living in rural areas, because that’s where our roots are. Unfortunately, we let those people down a little; maybe some of them were disappointed with us. So now we want to return to them with a program for local Poland. A program called “small homeland.” If we gain bigger support in rural areas, it will translate into growth in urban centers. What is PSL’s stand on the anti-abortion law and the new government program “For life,” which provides PLN 4,000 for mothers who decide to give birth to severely disabled children. As a politician, but also a doctor by profession, what is your view on the issue? In our parliamentary party there is no control over voting on ethical matters; every member is able to vote in accordance with their own beliefs. I think that in this parliament no new bills on abortion will be introduced and the compromise from 1993 will be upheld, even if it does not satisfy all parties. In relation to the “For life” program, I think that this program has been misunderstood, I think that it had no influence on changing the existing abortion law, and I think that sum of PLN 4,000 does not guarantee security and offers no real help in the rehabilitation of a disabled child. I will support different approaches, stressing the importance of the proper functioning of early intervention centers, providing long-term grants for people with disabilities, and the expansion of psychological consulting. What’s your take on the slogan “economic patriotism” which has been presented by deputy prime minister Morawiecki?

We have always supported it and each country should act accordingly. I like the way the Irish do it; all Irish products feature the sign of the clover. I think that it would be interesting if we put our symbol on Polish products. But we cannot become closed off in our own environment, the export of Polish products is also important. So I think that deputy prime minister Morawiecki is good at talking, but in my opinion he hasn’t done anything yet, at least I haven’t yet seen any results. You are against the EU/Canadian CETA agreement, which the Polish Government supports. Why are you taking such a critical stand? I am against CETA for content-related and technical reasons. Firstly, I view the expansion of free trade between the EU and Canada as a threat to small Polish producers and the agricultural sector. Competing with large Canadian farms will be very difficult for small Polish farmers. We produce ecological food in accordance with European standards, which are much higher than those in Canada. The CETA agreement will mean lowering standards in Polish production, therefore lowering the quality of our food, bringing negative results for the health of consumers. The other content-related reason for my criticism of CETA is a concern about the interests of Polish exporters. We don’t export much to Canada, but a lot to the European Union. If a lot of Canadian products are introduced into the EU market, there will be fewer products from Poland. It will have a negative effect on exports to the EU. The political and technical reasons for my stand against CETA concern the way it was accepted. The decision was made in the European Union and only later ratified by national parliaments. The Polish government took a very hypocritical stand in that situation. When in opposition, PiS was opposed to CETA and now without any consultations in parliament they have accepted it. I think that Poland should have negotiated harder over CETA, for instance demanding that after one or two years there should be an assessment and maybe the opportunity to make amendments to the agreement. Protests against CETA are also ongoing in other EU countries such as Germany, France, and Ireland. I do not believe that the free market can regulate everything, and the financial crash in the US in 2008 has shown us that the overwhelming drive for financial profit usually ends badly.

WBJ OBSERVER • dEcEmBER-fEBRuaRy 2016/17

Do you think that the principles of free economy and free trade in the European Union should be analyzed in a new way? Certainly. The European Union needs to change and return to its core values. It needs changes not only in its approach to member states, but also to individual regions. I am in favor of EU integration, but it must be carried out at a regional level. Talks are necessary with regions in the process of deepening integration. When it becomes more decentralized, there could be more integration. And what is your attitude towards PiS foreign policy? I am critical of it, because there are no realistic policies. Year ago, we were treated seriously in Europe, now we are seen as “the black sheep.” There is no positive contact with our neighbors, and in my view, we should have good contact with both the West and the East. I think that Poland’s relations with Germany and Poland’s relations with Russia should be better than relations between Germany and Russia. The war in Donbas and the situation in Ukraine hasn’t changed. The policy of embargoes has done nothing to change Russia’s stance. And are the other members of the EU as strict as Poland in applying sanctions on Russia? I doubt that Germany, Hungary, or Slovakia are as rigorous. I think that

economic sanctions lose their significance when dealing with Russia. I know that by saying that I could be called Putin’s puppet, but it is necessary to take a hard stance. Such a way of thinking is not popular among Poles. I can show you the material we are preparing for our party congress. Concerning the question of whether people are for ending economic sanctions against Russia, 48 percent of respondents were in favor of doing so (in rural areas 40 percent were decisively in favor). I think that it is worth mentioning, even though I know that it could be unpopular. And I will tell you that I have heard some very brutal words against me during occasions such as the 1,050th anniversary of Christianity in Poland, when I was invited to the cathedral by President Andrzej Duda. I prayed for Poland, I was deeply moved, but later shocked by those insults against me. I will survive such insults, but it makes me think; what has happened to my homeland? You personally, and your party are concerned with shaping fair historical policy, which is now dictated by PiS, what do you want to achieve by your efforts? We want to build a true and honest historical policy, with the memory of our patri-

otic traditions and the actions that built an independent Poland. There are great heroes of the People’s Movement such as Wincenty Witos, the creator of our movement and three-time prime minister during the interwar period. PiS politicians and President Duda never mention the Peasant Battalions, which fought against the German occupants for a free Poland during World War II. When talking about the people responsible for the political transition of Poland in 1989, there is no respect shown for the role of Lech Wałęsa. There is no mention of Roman Malinowski, our party leader at that time, who with Wałęsa created the coalition that was such an important step in changing the political system and overthrowing the USSR and communism. PiS is building a false history, highlighting only one historical figure – Piłsudski, and later the Cursed Soldiers and Smolensk mythology. We have the right and duty to build a true and honest history, because in our party we never run away from responsibility concerning difficult moments in our history. PiS does not want to take responsibility for those difficult experiences in our country’s history, only use them for their political aims. There has never been a place in Poland’s history for only one ideology, but there has always been room for tolerance. And I want to add that nowadays in Poland there is a growing interest in folk culture and rural tradition, not only by celebrating local habits, but in a deeper sense, because people want to live closer to nature. PSL will always fight for the rights of Polish villagers, we want to be effective in building and supporting the activity of local communities and our program is focused on caring for the condition and development of Polish agriculture, while PiS has never understood the Polish farmer and rural Poland in general. But recently, PiS leaders have claimed that their party is the champion of the People’s Movement, and they have for the first time honored Wincenty Witos. What are your thoughts on the matter? I think it is one of the cynical political games that PiS plays. You cannot describe a party as having a tradition of People’s philosophy, when it has no serious convictions about respecting human dignity. PiS is very similar to Sanacja, the prewar party that put Wincenty Witos in prison in 1930. I like to recall the words of that great leader, who spoke about a free, democratic country, a man who respected various ideas. I think our current leaders should be reminded of his words.

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Image: PSL

INTERVIEW / W

CYPRUS, A RESILIENT ECONOMY

The rapid economic turnaround of Cyprus has been hailed a European success story and, with growth gaining momentum, the country is determined to up its game

A DYNAMIC ECONOMY

Cyprus has a resilient economy that has time and time again proven its capacity to adjust to continuously changing conditions, and bounce back from external shocks. Before its independence from the UK in 1960, the Cyprus economy was primarily based on agriculture and the export of minerals. However, in the last few decades the country has established itself

as a serious international business and service center for shipping, financial services and commerce, and is classified by the World Bank as a high-income country. The island’s accession to the EU in 2004, and the adoption of the euro in 2008 was the catalyst for its transformation into a competitive financial and business services hub. Following the country’s financial crisis in 2013, Cyprus has undertaken a major reform agenda and although it is still facing economic challenges, the small EU nation has demonstrated incredible resilience. The year 2015 signaled a sooner-than-expected exit from recession and a return to growth, with GDP expected to increase by 1.6 percent in 2016 and 2 percent in 2017. The island’s international financial center suffered a blow in the wake of the crisis, but with robust restructuring to clean up the banks’ balance sheets and build stronger institutions with better supervision, the country is already reaping the rewards. Bank deposits are on the rise and Cyprus has retained and strengthened its reputation as an attractive investment gateway to the EU and other high-growth markets, as well as a secure base to tap into opportunities in the Middle East. Offering a tax-efficient company domicile within the EU, the country is also now emerging as an attractive location for fund managers and promoters.

EMERGING INVESTMENT FUND INDUSTRY

Ongoing improvement of Cyprus’s regulatory framework on investment funds is expected to substantially contribute to the

growth of the sector and the economy. The updated legislation will be implemented in 2016 and the number of funds is set to surge. This sector has the potential to develop into a multi-billion-euro industry, and the island is currently emerging as an interesting EU-regulated jurisdiction for the global asset management industry. Today, the majority of alternative investment funds in Cyprus are of a small- and medium-size and focused on debt and equity securities, real estate and private equity. However, Cyprus has also attracted larger funds including one with assets of €500 million under management. The number of alternative investment funds has doubled in the last five years and foreign UCITS are now widely marketed in Cyprus.

Source: www.cyprusprofile.com (CountryProfiler Ltd) For further information please conduct: Embassy of the Republic of Cyprus in Warsaw Cyprus Trade Center 70, J.Dąbrowskiego Str. 02-561 Warsaw, POLAND phone: 00 48 22 854 01 77 fax: 00 48 22 854 01 80 e-mail: ctc@cyprustrade.pl

PROMOTIONAL FEATURE

Cyprus has seen a boost in confidence with foreign investors flocking back to its shores, attracted by the improved economic climate, large scale projects, privatizations and its strong pro-business culture. Located in the Eastern Mediterranean at the crossroads of Europe, the Middle East and Africa, Cyprus’ strategic position has always played a key role in shaping its 10,000-year history and in developing the island into a convenient center for trade and international business. Despite being a country of only 865,900 people, the Republic of Cyprus has steadily built itself into a thriving business center over the decades. The EUcompliant domicile has one of the highest educated populations in Europe, a lowcost business environment with a wealth of support services, a sophisticated ICT infrastructure and an investor-friendly tax regime – backed up by an extensive network of double taxation agreements with around 60 countries. Not only is Cyprus a developed business hub, but also one of Europe’s favorite holiday destinations, offering the perfect balance between business and leisure.

COVER STORY / ELECTRIC CARS

REVOLUTION ON WHEELS B Y JA N WOJ C I E C H OW S K I

IN A BID TO CLIMB UP THE GLOBAL VALUE CHAIN AND SUPPORT INNOVATION, POLAND IS GETTING READY TO LAUNCH A PROGRAM AIMED AT INCREASING THE NUMBER OF ELECTRIC CARS ON THE ROADS TO ONE MILLION BY 2025, AND THE COUNTRY IS SET TO EMERGE AS A PRODUCER OF LOW EMISSION VEHICLES

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As Poland is making efforts to break into the exclusive club of economies based on hi-tech manufacturing, the government has begun public consultations regarding its program to stimulate the production and ownership of low emission vehicles. The idea to jump on the electromobility bandwagon was first modestly outlined in the Strategy for Responsible Development, also known as the Morawiecki Plan. In it, the development ministry singled out the possible sectors of the economy in which Poland could specialize and develop them into engines of growth. One of the promising industries seen as Poland’s chance to emerge on world markets as a maker of technologically advanced products was electromobility. Its advantages seemed clear: globally it’s still in the early stages of development, thus there’s room to catch up with leading innovators; it could help in solving Poland’s problems with poor air quality; it would increase demand for electricity and generate higher revenues for power utilities; and finally it will boost the innovativeness of a country that is usually ranked at the tail end of the list in Europe. “The program will be a flywheel of the Polish economy, the flywheel of Polish reindustrialization…Are we able to jump and surf on the fourth wave of industrial revolution that is now ahead of us? This is our moment,” optimistically asserted Mateusz Morawiecki, deputy prime minister. Best Practice In September, the government released a document that contained proposals of policies to reach stocks of one million electric vehicles by 2025. It suggests that Poland wants to follow the path that Western Europe has taken to support the ownership of green cars. Among the most popular strategies taken by a number of European governments to popularize electric transport are tax exemptions, one-off purchasing subsidies, financial support to the electric vehicle industry and infrastructure development support schemes. Apart from that, there are numerous incentives promoted by local governments, including public procurement of electric vehicles, provision of free parking places and charging stations, as well as access to bus lanes or restricted areas in city centers. Norway, for example, excused prospective owners from paying the 25 percent VAT, purchase taxes, an-

nual road tax, all public parking fees and toll payments. Given that car levies in this northern country are among the highest in the world, such tax reliefs made it possible to lower the price of an electric car to make it competitive with those with a combustion engine. Another example is Germany, which has recently approved subsidies of €4,000 for the acquisition of an electric vehicle in an effort to raise the total stock to one million. The policies have taken effect. With more than 120,000 electric cars on its roads, Norway has the biggest stock of low-emission vehicles in Europe, followed by France and the Netherlands, which can boast more than 100,000 electric cars on their roads. Poland is at the other end of the scale. In 2015, as few as 259 green cars were registered, and the total number barely exceeded 500. Poland’s strategy The policy mix laid out in the Strategy for the Development of Electromobility draws on foreign experiences, however it is not certain which steps will be taken in Poland. The document states that the most effective instruments used for promoting the ownership of electric vehicles are purchase subsidies, tax exemptions and the development of charging infrastructure. The strategy mentions “soft” measures to be implemented by local governments. It also sees the administration as an agent of change – electric vehicles should account for 50 percent of public institution car fleets by 2025. Despite declarations, Poland will probably not give the go-ahead to financial incentives as the government is struggling to finance its expensive social programs and a tight budget doesn’t allow for any flexibility. Deputy Energy Minister Michał Kurtyka admitted that negotiations with the Finance Ministry only concern tax reliefs for companies. The lack of purchase subsidies, at least in the initial stage of the program, may turn out to be one of the major obstacles in reaching the government’s aims. The average price of an electric car is by no means competitive in comparison to a similar car with a combustion engine. A basic version of a five-door hatchback Nissan Leaf, one of the most popular electric cars worldwide, sells at PLN 128,000. To compare – the price of a new Skoda Octavia starts at PLN 62,000 and the cheaper Fabia is valued at PLN 40,000. It is also worth

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bearing in mind that the average price of popular used cars from abroad stands at PLN 25,000. Considering the numbers, it is difficult to imagine the mass popularity of very pricey electric cars. For Jakub Faryś, the director of the Polish Automotive Industry Association, one million low emission vehicles by 2025 is a fantasy, as it would entail selling 100,000 units a year, whereas the total number of registrations in the whole of Europe in 2015 stood at 150,000. The problem, however, may solve itself within a few years. Currently, the biggest challenge of the industry is lowering the price of batteries, which account for around 25 percent of the value of the car. The aforementioned Leaf features a 24 kWh battery priced at $5,500 ($230 per kWh), but in 2010, when the car made its market debut, the battery’s value amounted to a staggering $18,000. Bringing down the price to below $150

per kWh is attainable in the next decade and it would facilitate the massive growth of the electric car market, according to experts from Bloomberg.

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Infrastructure Apart from the affordability of the vehicle, the biggest challenge is to create and expand the network of charging infrastructure, which is virtually nonexistent at present. With fewer than 200 charging points, mostly located in private estates or retail centers, Poland is far behind global leaders. The US can boast 13,000 public charging points, the Netherlands – 7,000, Germany – 6,000 and the UK – 4,000. The lack of necessary infrastructure in Poland is the effect of low demand as there are only a few hundred electric cars on the roads. And one of the reasons why there are so few of them is because there are no public charging points. Given that the average range of

an electric vehicle on one charge is no more than 200 kilometers, its usefulness is limited to city driving, as there are no places to “refuel” them. The infrastructure is of critical importance in propelling the electric car market, as the experiences of a number of countries that offer only financial incentives have shown. Spain, which subsidizes up to 25 percent of the value of a car, with a limit of €6,000 has failed to significantly increase its stock of green cars, partly due to the low number of charging locations. To encourage the construction of infrastructure, Poland wants to amend the construction law, offer tax reliefs and make it obligatory to set up charging points next to public buildings, accessible for civil servants and citizens. Whether these measures are enough is a contentious matter as the installation of a rapid charger costs between $5,000 and $10,000. Given that the venture may not

COVER STORY / ELECTRIC CARS

Images: Shutterstock

be profitable, at least in the initial stage, the government is not ruling out the engagement of Orlen and LOTOS, two state-owned oil companies. The former has already begun cooperation with Tesla and opened the first supercharging point at its petrol station near Wrocław in April 2016. Electric car made in Poland The governmental plans go beyond increasing the ownership of low emission vehicles and set an ambitious goal to nurture companies producing components for green vehicles. Poland is also considering the launch of the production of its own electric car with the decision to be made after initial analysis of the country’s industrial potential. Should the project get the green light, the government will offer financial incentives and various entities will be encouraged to apply and work on constructing prototypes. The best projects will get to the next stage where a short production run will be launched. It is expected that one of them will be made by Electromobility Poland, a company with a PLN 10 million-share capital established by four major state-owned power utilities. The ambition to manufacture an electric car that would successfully compete on the global market resulted in a few raised eyebrows. Whereas in 2010 there were only two electric car models available on the market, six years later producers now offer 25 models and within the next three years the number is set to double. This means that virtually all major automobile manufacturers are in the process of developing technology and are already, or will soon start producing electric cars. Ford, for instance, announced that it will be investing an additional $4.5 billion in electrified vehicle solutions in the next four years and that the company will “add 13 new electrified vehicles to its product portfolio by 2020, while more than 40 percent of Ford’s global nameplates will be electrified by the decade’s end.” Optimists argue that it is possible to create an electric car with no experience in the automotive sector, as the case of Tesla shows. Since the launch of the company 10 years ago, the firm has already sold more than 150,000 cars and in 2015 it recorded revenues of more than $4 billion. Nonetheless, Tesla is yet to generate

ating a design” and buying a battery and a drive system from Tesla. He also addressed the money issue, claiming that ventures of this kind are financed with debt. In his opinion, the ecological aspect of the project would encourage banks to invest in it. But battery vehicles are only as clean as the energy source and given that nearly 90 percent of energy in Poland is made in coal power stations, it might not be as environmental friendly as it would seem. According to a Dutch study (TNO, 2015), life-cycle CO2 emissions of an electric car produced and powered with electricity from coal is actually higher than that of a gasoline car. Wojciech Drzewiecki, head of Samar, the automotive sector organization, is skeptical of the governmental plans. In his opinion, the 13 years until 2030 is too short a time to start mass production of electric cars that could compete successfully with foreign ones. It is, however, enough time to encourage investors already operating in the automotive industry to locate the production of cars with alternative propulsion in Poland.

a profit and it ended last year with a loss of nearly $900 million. Despite that, it plans to continue spending heavily, investing $1.8 billion in 2016. The money comes from investors as the company issues new shares nearly every year and also benefits from public aid. The state of Nevada has pledged $1.3 billion for the company’s new battery factory, but as the founder and owner of Tesla Elon Musk said, it covers just 5 percent of the sum that is needed to run the factory. The numbers show how much money it is required to launch production and develop technology. The competition is already fierce and leading automakers spend billions of dollars on extending travel range (most models can currently drive 100-150 miles on one charge) and lowering battery prices. That is apparently why the head of Tauron (one of the utilities that co-established Electromobility Poland) Remigiusz Nowakowski cautiously said that there are a few variants regarding Polish electric car production and one of them includes “cre-

The future of the industry Electromobility will play an increasing role in the global automotive industry. At the end of last year, there were already 1.2 million electric cars in the world – twice as many as in 2014. And a decade ago, the number was measured in hundreds. According to Bloomberg, electric vehicles will account for 35 percent of global new car sales by 2040. The scenario is plausible considering the progress in the development of infrastructure, the falling prices of batteries and increased travel ranges. Tesla will soon introduce its Model 3 with a range of 215 miles on a single charge, and Chevrolet will follow suit with its Bolt EV scheduled for the end of 2016. Both models will be sold at the affordable price of $35,000. The market evolution will be accelerated by new regulations. The Netherlands is in the process of pushing legislation that would ban the registration of fossil fuel cars by 2025, and there are mutterings that Germany may do the same by 2030. The government has therefore correctly identified the opportunity coming from the electromobile revolution, but the aims it has set will probably turn out to be overambitious. Nonetheless, it is the right moment to take action and even modest results could be considered a success.

WBJ OBSERVER • dEcEmBER-fEBRuaRy 2016/17

FEATURE /

Unruly and unmanageable? B Y B E ATA S O C H A

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nterestingly, those who make up all these names are usually their Gen X colleagues and bosses, often described as one of the most cynical generations ever, especially compared to their idealistic Baby Boomer parents (wonder who gave them this colorful nickname). Funny how Millennials haven’t come up with (maybe they didn’t think it necessary) equally sardonic nicknames for their predecessors. Whatever we want to call them, they are becoming the driving force of the economy. According to Merrill Lynch, Millennials will constitute 75 percent of the worldwide workforce by 2025. In Poland, there are 8 million of them,

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nearly half of the entire professionally active pool (17 million in 2016). Local flavor In Poland, the divide between Gen X and Gen Y was dictated not only by access to technology and communication, but also by purely economic drivers. When the last of the Polish Gen Xs reached adulthood, Poland’s free market economy had only been functioning for a few years and at the time opportunities seemed endless. The economy was booming (GDP growth was at 7 percent in 1995), multinationals were storming into Poland offering better-paid jobs and a new corporate culture, where promotion was based on merit, not seniority. The world was their oyster. In the late 1990s college students were eager to hit the job market as quickly as possible, with the record-breakers managing to squeeze five years of university education (BA and MA level) into three. Those who came only a few years later faced quite a different reality. In the early 2000s, university students had very good reasons to bide their time: first the dot com bubble, then Poland’s budget cuts and subsequent slowdown (GDP grew at a rate of a little over 1 percent in 2001 and 2002), and after only a few years of reprieve came the Great Crash of 2008. Why hurry to leave the safe confines of university if the world out there offers no guarantees and no security? Polish Millennials had to learn early on to plan ahead and to prepare for the tumultuous market they were about to enter. Still, while Polish Gen X and their Western counterparts grew up in entirely different realities, Millennials are more of a universal concept, regardless of geographical location. “I think that our Millennials are much closer to their Western peers than the Gen X employees are to their international counterparts. They are better educated, hungry for success, willing to work hard and they are not encumbered by insecurities,” said Michał Gołgowski, managing director at Spring Professional Poland, part of the Adecco group. “They are not afraid of technological novelties. Often, they are more ambitious than Gen X employees. They are also more determined to get international experience and generally open to relocation for work,” he added.

and how they should do it. They like to set their own goals, and they want to understand why they are doing their jobs. They will never become obedient corporate drones. Gen X employees, on the other hand, are vastly task-oriented. They are used to being presented with a list of duties they need to perform, compiling to-do lists and ticking off completed tasks with a sense of job-well-done. Also, when working on their resume, they list responsibilities they had in their previous jobs. Millennials are more likely to focus on their achievements in previous positions and they are much more eager to proudly boast about their successes – something that many

Poles still find difficult. Having a shorter attention span than their elder colleagues, Millennials expect feedback straight away. They definitely like being patted on the back but, more importantly, they need to feel they are learning. And in order to do that, they need continuous assessment. Annual or even quarterly “360 reviews” probably won’t cut it with the younger employees. After all, who can remember what they did 12 months ago. And if they made a mistake at some point, it should have been pointed out right there and then, all forgiven and forgotten. Dredging up past imperfections is pointless to them.

Task vs. goal Innovative and independent, Millennials don’t like being told what they should do

WBJ OBSERVER • dEcEmBER-fEBRuaRy 2016/17

Disloyal or simply mobile? Gen Y employees’ impatience is often the subject of criticism, particularly when it comes to switching jobs. Millennials are definitely far less loyal towards their employer than Gen Xs or Baby Boomers. “This generation does not want to work their ‘whole life’ for one company. They are more demanding and expect justification for the decisions being taken. They are much more aware of their position and expectations,” said Gołgowski. Millennials need to feel they are developing and getting closer to reaching their own professional goals. “If they feel they are stuck in a rut, and the company offers them no prospects, they won’t think about it much and are happy to change their workplace for something more attractive. More importantly, they will act on impulse. According to a report by Gallup, as much as 60 percent of them are open to such a change at any moment,” said Anna Węgrzyn from HR firm BPSC. As the best-informed group in the world, they have all they need to make such a change. They know how many job offers are out there and how much they should be earning. They also know which employers are worth pursuing and which companies they should steer clear of. “Financial compensation is no longer the only decisive factor for younger employees when they choose between taking a job offer, or remaining with their current employer. It is the working atmosphere, how quickly the company is growing, as well as opinions about it shared online and whether it offers advanced technologies. Gen Y employees consider employer branding very important, meaning the kind of image the company creates, particularly online,” said Gołgowski.

Managing the unruly Those who work and manage Millennials tend to agree that they bring a lot to the table. They are well-educated, creative and digitally savvy (some call them digital natives, as they had little experience in a world without the internet). They can also be skeptical and verify what they learn from their colleagues, which can also prove to be valuable. “We are accustomed to thinking that 20-year-olds have a demanding attitude. I disagree with that opinion. What we need to know is how to appeal to young

people and how to kindle their enthusiasm,” said Manuel Rougeron, chair of the board at nc+, during a panel discussion at the European Forum for New Ideas. One of the biggest challenges Millennials pose as employees is their short attention span, which also causes them to get bored easily. That’s where workplace gamification can come in handy. However, turning your workplace into a game is not as easy as it sounds and it can also generate some risks. Defeat becomes a somewhat diluted concept. After all, games always have a reset button, which allow you to try all over again if the first attempt was unsuccessful. The same cannot be said about meeting a deadline, acquiring a client or performing a contract. Managers often signal that the biggest issue they have with Gen Y employees is their immature attitude towards doing business and failing to grasp the gravity of their decisions and choices. Some also point to poor problem-solving skills and their aversion to criticism. Can Millennials be managed? “Today managers are mainly from Generation X, which creates a generation gap and leads

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to one group complaining about the other. Often it is managers and directors who claim that the younger generation is very demanding and unpredictable,” said Gołgowski. Big companies in Poland have already begun to learn how to manage Millennials. They took advice from their Western mother companies, added some of their own local techniques and are doing all right. It is the small and medium-sized firms that have yet to take on the challenge of creating a workplace that will be attractive for Gen Y members. There is no single sure-fire method for doing that. “Certainly, a lot more emphasis is placed on listening to the employee and not telling them what to do. We include young people in decision-making about how the company should develop. Gen Y also needs much more freedom, interesting work benefits, flexible working hours and development opportunities,” added Gołgowski. Turquoise future For the time being, it is the managers (predominantly Gen X employees who

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“MILLENNIALS ARE NOT AFRAID OF TECHNOLOGICAL NOVELTIES. OFTEN, THEY ARE MORE AMBITIOUS THAN GEN X EMPLOYEES. THEY ARE ALSO MORE DETERMINED TO GET INTERNATIONAL EXPERIENCE AND GENERALLY OPEN TO RELOCATION FOR WORK.

have had more time to climb up the corporate ladder) who complain that the younger generation is simply unmanageable. But in the not-so-distant future, the tables will turn: Millennials are already the largest group on the labor market, and many of them are climbing up the ladder to senior managerial positions. What kind of leaders will they make? “It will definitely impact organizations themselves, as they will have to change. We can expect a lot of innovation in building corporate structures and management styles. We could see a rise of companies with flat structures, such as the socalled ‘turquoise companies,’”explained Gołgowski. Frederic Leloux introduced the term “turquoise firm” in his book “Reinventing organization,” published in 2014. He showed on a scale of colors from infrared to turquoise how organizations have evolved over the millennia, from foraging teams 100,000 years ago, through authority of elders emerging around 10,000 years ago, formal hierarchies from the Middle Ages to the modern organizations that emerged after the industrial revolution. At first they

focused mainly on the shareholder perspective (around the times of Henry Ford and early mass production plants), then on stakeholder perspective about a decade or so ago, to finally reach self-management for evolutionary purposes. The latter is colored teal and is one step from a completely turquoise organization: devoid of any hierarchy, where any structure emerges from within. Examples of turquoise organizations abound mainly in the tech industry. Video games producer and retailer Valve (famous for its Steam platform) is a well-known example of a hierarchy-less company and also one of the most desirable employers according to Forbes (although, some ex-employees have criticized it for feeling more like a “high school” than a workplace). In Poland, there are at least a few organizations striving to remain entirely egalitarian by design: web portal INN:Poland named physician rating portal ZnanyLekarz.pl, kindergarten chain Leance, and packaging producer Masterpress as some of the most “turquoise” Polish firms. According to Leloux, it is the next step in the evolution of organizations. Being as creative and inventive as they are, Millen-

nials may well thrive in a boss-less culture, where everybody does what they are good at, and any organization and leadership develops organically. This definitely reduces the chances of mismatch: we all know that even the most scrupulous recruitment process sometimes fails and introverts are reluctantly placed in a position where they are expected to socialize with a large number of people (e.g. sales or PR specialists), while outgoing and extrovert types often struggle with more technical aspects (like preparing Excel files). In a turquoise organization, these tasks could be divided between people who are good at them, they could form teams with a natural emergent division of labor. According to the Fortune magazine, expert consultants who advise firms on how to make Millennials happy in their jobs charge up to $20,000 an hour. With Gen Ys already the largest group in the workforce and the best educated to date, companies all over the world – including in Poland – are becoming acutely aware they cannot afford to miss out on their collective talent. Sooner or later they will all have to become Millennial-friendly, or die trying.

WBJ OBSERVER • dEcEmBER-fEBRuaRy 2016/17

INTERVIEW / MARC BODERKE

PAST, PRESENT, FUTURE MARC BODERKE, CEO OF MERCEDES-BENZ POLAND, AUSTRIA AND CZECHIA, SPEAKS ABOUT THE DIRECTION THE FIRM FINDS ITSELF FACING FOLLOWING ITS TWO DECADES ON THE POLISH MARKET

INTERVIEW BY ALEX WEBBER WBJ Observer: Mercedes-Benz has been present in Poland for 20 years now. What’s changed? Marc Boderke: Poland’s been catching up with the more traditional economies of Western Europe. While those have remained pretty static, here we have seen dynamic development, especially when talking about premium products. Since 2007 that particular segment has almost tripled in size. We’ve changed in terms of product substance and appeal. Ten years ago we were largely perceived as a conservative manufacturer, and while we’ve maintained our traditions of safety, comfort and reliability, we’ve now become more sporty and emotional.

What advances have you introduced? The first partially autonomous car wasn’t created in Silicon Valley, but by Mercedes-Benz.

Currently, our new E-Class can drive autonomously for up to a minute in certain conditions as well as being able to perform lane changes. Beyond that, it’s the first car that can be parked using your smartphone. But that’s only the tip of the iceberg: in terms of technology we’re certain we have the most fuel efficient cars around, and we’re also thinking of alternative forms of mobility – not just vehicle technology, but everything around it. Our Moovel app allows people to work out the best way to travel around taking public transport into account, while the Car2Go app lets users locate a car, access it, borrow it by the minute and then drop it off ready for the next user. We’re clear innovators in these fields. Our current strategy is CASE, which stands for Connectivity, Autonomous Driving, Shared Mobility and Electromobility.

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What does luxury mean to you? A luxury product should be able to touch someone in an emotional way – it needs to provide a special feeling and, in this respect, craftsmanship, styling and technology all play a vital role. In the past the automotive industry would look for “customer satisfaction,” but I don’t think that’s enough in the 21st century: you have to foster a special bond with the end-user and make them feel part of something special – you shouldn’t be looking to simply create a feeling of satisfaction, but something deeper, something approaching love. To do that you need to provide a product that’s outstanding from start to finish. It’s been stated that Mercedes-Benz wants to be the world’s No. 1 premium car producer by 2020. As a goal, how realistic is that?

INTERVIEW / MARC BODERKE

It’s already happening. Markets develop at different speeds across the world, and we’re now seeing that we’re either No. 1 in some countries, or very close to being so. Although we’re not No. 1 yet in Poland, we are within striking distance – it’s definitely not out of reach. You have to let the technology speak for itself, and sometimes that takes time: nonetheless, I actually think we’ll achieve our target much earlier than 2020.

tioned before. The “C” represents Connectivity and deals with aspects such as being able to pre-heat your car using your mobile. “A” is for Autonomous, and we’re making a big effort to be on the cutting edge – each year we’re teaching our cars to do a little bit more. “S” focuses on Shared Mobility and to meet that end we’re looking to embed Car2Go further into Moovel: for instance,

if you’re travelling from Warsaw to Berlin, the system will enable you to purchase your train ticket and then pick up a car once in Berlin to travel that final kilometer. Of course, in the future, the car will actually come to you rather than vice versa. Finally there’s “E,” which in our case means Emission Free/Electrical. In short, we’re working on defining the future.

Obviously a lot has been made of your battle with BMW. Our competitors produce great cars, but I have a very specific view when it comes to our technology – I simply say to people, take a test drive in a Mercedes-Benz and then come back to me with your impressions. I think ultimately our cars speak for themselves. The world needs to take a test drive in one to see how fun driving can really be! What’s the story behind your love affair with Mercedes-Benz? I’m a mechanical engineer, although I never really focused on my studies because I was always too busy tinkering away with my head under a hood. I bought my first MercedesBenz while I was at university and it was then that I first realized the sheer level of engineering involved. After that I was determined to get involved with the company and I was fortunate enough to get my foot in the door. I’m still convinced we produce the best cars in the world and I’m delighted to play a part in that.

Images: Mercedes

What does the future hold for the automotive industry? We’re seeing huge transitional change. On the one hand, that’s driven by technology, on the other by the environment. I believe that in ten years cars will have features we can’t even currently comprehend. I’m sure there’ll be cars that can drive completely autonomously – not just in certain conditions – and although I don’t think combustion engines will disappear, there will be major changes brought about by battery technology. Of course, none of this will happen overnight, but we are seeing step-by-step progress. By 2017, ten of our models will be plug-in hybrids, and I see that as part of a gradual transition to fully-electrically powered cars. With regards to the future, is there one avenue you find yourself pulled towards? There’s not one, but many technological directions we are exploring, and that’s demonstrated by our CASE strategy I men-

WBJ OBSERVER • DECEMBER-FEBRUARY 2016/17

IT / BODY LEASING

AR 201 â&#x20AC;¢ W

Tech Insights

IN THE CROSSHAIRS POLISH FIRMS STILL LACK SUFFICIENT SECURITY MEASURES AGAINST CYBERCRIMINALS. THEIR EMPLOYEES SEEM TO BE THEIR WEAKEST SPOT > 34 BLACK BOX OF WISDOM MACHINE LEARNING IS GETTING A LOT OF TRACTION IN THE BUSINESS WORLD. HOW DOES IT WORK AND WHAT PROBLEMS CAN IT SOLVE? > 40 CEE INNOVATION HUB CEE IS NO LONGER JUST A FAST-GROWING IT MARKET. IT IS BECOMING THE SOURCE OF INNOVATION. INTERVIEW WITH JOHN BIGGS, EDITOR AT TECHCRUNCH > 39

section partner

TECH / CYBERSECURITY

By Amalia Leitner

PROTECT OR SHARE?

Research conducted by Intel among 250 executives employing at least 150 people from Poland, Czechia, Hungary and Romania has revealed that the majority of companies have a backup plan in case of cyberattacks. However, while Czechia scored the highest with 84 percent, Poland and Hungary came in the lowest, with only 60 percent of enterprises having procedures in place to contain cyber threats. This means that 40 percent of large Polish firms have no way of mitigating losses incurred by an attack. The fact that so many businesses in Poland see no need to develop a backup plan for cyberattacks is somewhat surprising, considering that as much as 27 percent of large Polish companies have experienced a security breach over the past six months, with 5 percent having been targeted more than four times over that period. The high number of successful cyberattacks is largely due to the fact that 62 percent of large Polish firms use passwords as the only security tool. Less than a quarter use two-tier authentication methods (password plus e.g. access card, fingerprint scanners or additional PIN code). Even fewer (8 percent) use passwords plus two additional identity verification methods. The security measures employed by Polish entrepreneurs are far from sufficient, given that the number of new cyberthreats is growing at a staggering rate – up to 327 new threats per minute, according to analysis prepared by McAfee

DECEMBER-FEBRUARY 2016/17 • W

Labs. “We keep discovering ever more sophisticated threats to cybersecurity as cybercriminals keep churning out new cleverly disguised threats,” said Arkadiusz Krawczyk, country manager at Intel Security Poland. Despite the pervasiveness of malware and increasingly ingenious attacks, only about 50 percent of Polish companies see the need to spend more on IT security. “IT managers are planning to increase their expenses on the security of their networks, even though they already consider them secure. A security breach can result in vast losses, both financial and to the company’s reputation. That’s why investments in this area will always be justified,” stated Krzysztof Jonak, Intel’s head for CEE. Who do they target? Approximately 50 percent of attacks were focused on companies with fewer than 2,500 employees, and another 18 percent

focused on organizations with fewer than 250 employees. In some instances, it may not be the organization itself that is the ultimate target but, once compromised, it can be used as a staging point to increase the success of an attack against a subsequent target. “Banks and financial departments, as well as people using online banking, are frequent targets for hackers. Internet criminals steal their data, money and in some cases also damage their reputation,” said Krawczyk. Still, in comparison to other industries, the financial industry has a superior level of protection against malware and the running of unauthorized software on endpoints. Stolen account data can be sold for $1425 per record whereas credit or debit card data for $4-5. Still, the potential damage is relatively easy to contain as the account or card can be blocked upon reporting an incident. Damage to reputation is far more long

Images: Shutterstock

THE NUMBER OF WAYS A COMPANY’S IT SECURITY CAN BE THREATENED IS GROWING AS THE INGENUITY AND SOPHISTICATION OF CYBERATTACKS INCREASES. POLISH FIRMS ARE STILL FAR FROM BEING PREPARED FOR NEW THREATS. STILL, THE WEAKEST LINK IN MOST CASES OF SECURITY BREACHES IS THE HUMAN FACTOR

TECH / CYBERSECURITY

lasting. According to KPMG’s research, nearly half of all people surveyed (48 percent) said that cyberattacks were the reason they chose to change their bank. Under the radar Enterprises need to balance the protection of sensitive information and assets against the needs of employees, affiliates and customers to access information at preferred times and locations through social media, mobile devices or the cloud. Many security incidents go under the radar for fear of punishment, bad publicity or damaged reputation. Of the 5 million fraud and 2.5 million cyber-related crimes occurring annually in the UK, only 250,000 are reported. The most serious recent known attack was on the global SWIFT messaging network in February. Hackers used the bank messaging system that helps transmit billions of dollars around the world every day to steal $81 million in one of the largest reported cyber-heists. Shlomo Touboul, Chief Executive of Israeli-based cyber security firm Illusive Networks, which helps protect banks’ SWIFT payment networks by luring attackers to a decoy system, cites the example of one large global financial institution he works with which experiences more than two billion attacks a month, ranging from an employee receiving a malicious email to user or system-generated alerts of attacks or glitches. Machine defenses filter those down to 200,000, before a human team cuts that to 200 “real” events a

MOBILE EXPOSURE MOBILE DEVICES OFFER PRODUCTIVITY GAINS AND IMPROVE THE QUALITY OF SERVICES DELIVERED TO CUSTOMERS AND PARTNERS. HOWEVER, THEY ALSO INCREASE EXPOSURE TO RISK. ALTHOUGH MALWARE IS NOT PREVALENT, THE RISK COMES FROM PHISHING AND FRAUD THROUGH UNPROTECTED MOBILE DEVICES. IN ADDITION, THE FREQUENTLY USED OUT-OF-BAND AUTHENTICATION THROUGH MOBILE DEVICES, WHERE THE MOBILE IS USED TO ADD MULTIFACTOR AUTHENTICATION (LIKE A NUMERICAL CODE RECEIVED VIA TEXT MESSAGE NECESSARY TO ACCESS A BANK ACCOUNT), COULD EMERGE AS A TARGET FOR ATTACKS IF ADOPTION INCREASES. MOBILE BANKING, PAYMENTS, SERVICES AND EMPLOYEE MOBILITY REPRESENT MAJOR RISKS FOR A FINANCIAL INSTITUTION.

month, he added. To decrease the effectiveness of attacks, banks have improved both communications to, and the education of, customers, as well as reacting rapidly if an attack occurs. However, criminals have responded not only by creating specialized malicious software designed to compromise online bank accounts, but also by subverting the

servers and software owned by reputable institutions to improve the effectiveness of their phishing campaigns; a technique known as infrastructure hijacking. According to the FBI, the latest trend by cybercriminals is to gain employee login credentials by using spam and phishing emails, keystroke loggers and remote access trojans. Such attacks were seen in September 2012, when the Bank of America and Wells Fargo were among those struck. The Financial Services Information Sharing and Analysis Centre has raised the threat level for attacks from “elevated” to “high,” citing “recent credible intelligence regarding the potential” for distributed denial-of-service (DDoS) attacks. Banks are increasingly sensitive to the brand damage caused by IT failings, believing that customers care just as deeply about security and a stable service as loan or deposit rates. Former RBS Chief Executive Stephen Hester waived his bonus in 2012 over a failed software update that caused chaos for thousands of bank customers. HSBC issued multiple apologies to customers after its UK personal banking websites were shuttered by a DDoS attack, following earlier unrelated IT glitches. Safe and social Historically, a common method of targeting banks has been direct email phishing to customers. “Employees usually don’t verify whether the emails they get from their superiors are genuine. Imagine a situation in which an ac-

WBJ OBSERVER • DECEMBER-FEBRUARY 2016/17

TECH / CYBERSECURITY

False pretenses Such an environment creates a perfect breeding ground for a wide variety of social engineering techniques such as pretexting, spear phishing, baiting and quid pro quo. Pretexting is another form of social engineering where attackers focus on creating a good pretext, or a plausible excuse to approach the victim in order to ask them to divulge personal information or sensitive data. These types of attacks commonly take the form of a scammer who pretends that they need certain bits of information from their target in order to confirm their identity. More advanced attacks will also try to manipulate their targets into performing an action that enables them to exploit the structural weaknesses of an organization or company and can come in the form of a request from a “newly hired employee” who wants to be given a “heads up” on a project he is about to join. They can also come in the form of an attacker who impersonates an external IT services auditor and manipulates a company’s physical security staff into letting them into the building, or a Microsoft tech support employee charged with getting in touch about an error they have received from the computer. In order to fix the error, he will ask to install one small program that he uses to diagnose the issue. This program will typically be malware, often with a keylogger and remote access trojan that they can abuse to steal banking credentials, along with anything else they please. They will often also ask to be paid for the service with a credit card. The amount of detail people put up on the internet makes it easy to create a credible story that leaves little room for doubt on the part of the target. It also enabled phishing to evolve into spear phishing that is well matched to the target audience, and is used to widen an existing breach of information one piece at a time. It’s not uncommon to receive emails that seem perfectly normal and may be from a company you have previously worked with, but are, in fact, infected. For example, RSA was famously hacked via social engineering to gain access to the

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SecurID infrastructure. The first step was to email two phishing messages to two groups of relatively low-level employees. The subject was Recruiting 2011, and the messages contained an Excel malware that executed a zero-day attack against the employees’ machines. Despite the Excel file being junk-foldered, at least one employee fetched it from the junk and opened it, executing the malware and compromising their machine. Prior to the phishing messages, it’s presumed that the attacker used social media such as LinkedIn to map the company’s targets by name, and that they guessed the email addresses using a familiar pattern such as first.last@rsa.com. Once

Images: Shutterstock

countant or another person responsible for bank transfers receives confidential information from their boss about a takeover of another company with a request to transfer funds to an account. What will he or she do? Most likely transfer the money without checking whether the email really came from the boss’s mailbox. Unfortunately, the money will go to the cybercriminal,” explained Krawczyk. Over the past decade, the realm of possibilities for cybercriminals employing social engineering techniques has grown exponentially. The need to generate more leads, engage prospects, have more distribution channels, distribute costs, deliver new services more rapidly, scale capacity and outsource applications and systems has made financial institutions utilize social media, mobile devices and the cloud, which potentially makes them more vulnerable. Social media is an emerging customer channel, a point of contact and a potential point of sale. Nearly 75 percent of banking employees make use of social media, yet only 20 percent of banks have deployed technical controls to block or limit organizational usage. This opens up a new window of opportunity for criminals to use social engineering to target victims or spread infected links. Passwords, access cards, biometrics, additional PIN codes or user identification through mobiles may prove to be sufficient enough, assuming we have no internet connection and we protect the data from ourselves as fiercely as we try to keep it out of reach of unauthorized users. In times of letting it all hang out, and very publicly so, people are very comfortable sharing everything from the location and scope of their current project, through what they have for lunch to pictures of their newborn children. It seems that never before has gaining competitive intelligence been as easy as it is nowadays when professionals are encouraged to develop their personal brand, create an online presence and share their successes with the online community.

TECH / CYBERSECURITY

MEDICAL THREATS THOUGH MORE DIFFICULT TO MONETIZE THAN FINANCIAL DATA, MEDICAL DATA IS ALSO BECOMING A HOT COMMODITY, ACCORDING TO A NEW INTEL SECURITY REPORT. CYBERCRIMINALS DON’T GET PAID AS MUCH FOR IT ($0.03-2.42) AS MEDICAL RECORDS OFTEN REQUIRE ADDITIONAL INVESTMENT TO BE USED FOR CRIMINAL PURPOSES, BUT THEY ARE NOT AS WELL SECURED AND MUCH HARDER TO CHANGE (FAMILY NAME, SOCIAL SECURITY NUMBER, ADDRESS). THE PHARMACEUTICAL INDUSTRY AND BIOTECH ARE ALSO AT RISK AS DRUG INGREDIENTS, TEST RESULTS AS WELL AS OTHER INTELLECTUAL PROPERTY AND BUSINESS DATA IS STORED NOT ONLY BY THE COMPANIES THEMSELVES, BUT ALSO BY THEIR PARTNERS, DRUG APPROVING INSTITUTIONS AND SUPERVISORY BODIES AND CAN BE SIGNIFICANTLY MORE EXPENSIVE ESPECIALLY TAKING INTO ACCOUNT THE R&D COSTS IN THAT SECTOR.

the malware was installed, the attacker perused files on the target system and accessed internal RSA websites to determine higher value targets. With that information in hand, they moved toward the higher value targets and eventually to the data they were seeking. Baiting and quid pro quo involve the promise of gratification for the data obtained. In the latter it involves a service and the former frequently takes the form of goods. One experiment designed to assess the security of a financial client involved dozens of USB sticks infected with a trojan virus that were dispersed around the organization’s parking lot. Curious, many of the client’s employees picked up the USB sticks and plugged them into their computers, which then activated a keylogger and provided access to a number of employees’ login credentials. The value of education “Two elements have to come into play in order to prevent cyberattacks: cyber security and education. Executives and producers need to educate their employees and customers. What can protect us against the majority of cybercrimes is intuition and awareness of hazards,” said Krawczyk. “We have been telling entrepreneurs for years that they need to educate their employees, who often turn out to be the weakest link in a company’s security. People are generally trusting, they do what they are asked for, not suspecting the sender of bad intentions,” explained Krawczyk. While partner, client and employee education is a necessity, infection is inevitable. Links will be clicked and attachments will be downloaded, opened, and executed because that is the job of the average employee. Organizations should focus on building a security suite that is fast in detecting a compromised machine or account, and then quickly and automatically quarantine areas that have been compromised, preventing further access to sensitive enterprise data. ◆

WBJ OBSERVER • DECEMBER-FEBRUARY 2016/17

TECH / INTERVIEW

JAROSŁAW MERCHUT, NETWORK ARCHITECT, FUJITSU

ONLINE PROTECTION AND THE INTERNET OF THINGS prevents the installation of malware on their devices, update the operating system, and avoid visiting suspicious websites. For IoT devices, the situation is much more complicated as we cannot install anti-virus software on them. Therefore, it is not only manufacturers of end devices, but primarily telecommunications carriers that should now take responsibility for protecting us all on the web. With advanced software to support DNS traffic, telecommunications carriers can block communication between infected end devices and C&C (Command & Control) servers managed by hackers, thus preventing, among others, participation in DDoS attacks. Advanced software for supporting DNS on the carrier’s side also enables protection against other attacks targeted at the DNS traffic service, or so-called “amplification” and Random Subdomain Attacks. Users will also appreciate services such as Parental Control, which prevents users visiting inappropriate websites. Every internet user should be aware of online threats. They must also demand that their telecommunications supplier provides the necessary services to protect them against such threats. ◆

Images: Shutterstock, Image: ImpactCEE

October 21, 2016 was to be just another boring day during which millions of users of sites such as Twitter, Netflix and Spotify enjoyed access to their favorite online entertainment. Unfortunately, due to a massive DDoS attack on one DNS (Domain Name System) service provider, communication between end users and websites was disrupted. The direct target of the attack was not the end user, or the web application itself, but the DNS service, i.e. one of the pillars of online communication, which translates service addresses such as www.wbj.pl into actual addresses used in a computer network (e.g. IPv4 109.95.159.19). What is worse, it was reported that the attack was conducted only to test exposure, and in future we can expect an even bigger one. DDoS attacks most often use infected computers of unaware end users. The infected computers operate in the so-called ”botnet,” performing tasks set by hackers. Recently, hackers have gone a step further and “engaged” other connected devices, such as web cameras, printers, and all sorts of sensors to work in their botnets. These devices are commonly known as IoT (Internet of Things) devices. Protection against malware is very difficult, but not impossible. End users should, among other things; use software that

DECEMBER-FEBRUARY 2016/17 • W

TECH / INTERVIEW

UNDERSTANDING THE VALLEY

INTERVIEW BY BEATA SOCHA

TECH START-UPS FROM POLAND AND OTHER CEE COUNTRIES HAVE HAD LIMITED SUCCESS IN ATTRACTING VENTURE CAPITAL FOR THEIR ENDEAVORS. THE FEW SUCCESS STORIES, LIKE ESTIMOTE AND BRAND24, SHOW HOW LARGE AND UNTAPPED THE REGION’S POTENTIAL IS. WBJ OBSERVER TALKED TO JOHN BIGGS, WRITER, CONSULTANT, PROGRAMMER, AND THE EAST COAST EDITOR FOR TECHCRUNCH, ONE OF THE MOST POPULAR TECH PORTALS IN THE WORLD, WHO RECENTLY BECAME EDITORIN-CHIEF OF IMPACTCEE NEWS, A POLISH TECH START-UP PORTAL WBJ Observer: What are Poland’s biggest strengths on the tech startup scene? What are its major weaknesses? John Biggs: I think the biggest weakness is storytelling. There is a tendency for Polish start-ups to tell the wrong story at the wrong time and, sadly, I’ve seen them not telling the whole truth a little too much. The strengths are simple: the people. They are smart, personable, and trying hard to build global brands. I think they can win if they build good products and get them in front of people. There are a few tech success stories coming from CEE markets. Could there be more? Unfortunately the only ones I can think of right now are Estimote, Silvair, and Brand24. Everyone else is on their way to greatness, but I’d love to see more exits/A rounds before too long.

What are the biggest challenges for CEE tech start-ups? Is it perhaps an insufficient VC ecosystem? The VC ecosystem is not great and there is no impetus to change it. Maybe the government can step in and fix it but I worry too many companies die an early death too quickly, frustrating efforts to grow. The biggest challenge? All the best companies leave Poland. I’d like to see that change. In Poland’s case, it is often said the biggest obstacle to global success is the relatively big domestic market – start-ups don’t think about scaling up to reach the global market, because they’re too comfortable at home. By the time they do, it’s usually too late. Do you agree? I think that’s just an excuse. No startup founder I’ve talked to thinks they can win by just selling average local oriented products to Warsaw. I think that’s a lie people tell themselves

when “me-too” start-ups seem to get more attention than truly innovative ones. It needs to stop. Many successful start-ups from CEE eventually move to Silicon Valley to gain access to capital. Do you think this is necessary? How difficult is such a move? Right now it’s necessary, but I hope it won’t be soon. I think the CEE VC environment needs to grow up and become bolder. Otherwise they will face another brain drain and there will be nothing left. It’s a dire warning but it’s something folks need to think about. There is no reason for a Polish company to move to the Valley unless they’re guaranteed a sure thing. Building an office in SF works just fine, even one staffed with a skeleton crew of sales people. The mission is to understand the Valley but not become part of it. Why did you decide to become the Editor-in-Chief of ImpactCEE News? I love the whole of Central Europe. For years I’ve found the people’s entrepreneurial spirit fascinating. It is the Visegrad Group that is seeing the biggest change now. Central Europe is no longer a fast-developing region, it is becoming the source of innovation. ◆

WBJ OBSERVER • DECEMBER-FEBRUARY 2016/17

TECH / MACHINE LEARNING

By Dominika Tkaczyk

A SCHOOL FOR MACHINES

NOWADAYS, MACHINE LEARNING SEEMS TO BE THE GO-TO SOLUTION FOR ALL NON-TRIVIAL PROBLEMS IN THE DIGITAL WORLD. YOU WANT TO TARGET A NEW CUSTOMER SEGMENT WITH AN ONLINE AD CAMPAIGN? YOU NEED TO FORECAST DEMAND FOR A NEW PRODUCT? OR MAYBE YOU ARE LOOKING FOR A WAY TO INCREASE SALES BY PROVIDING PERSONALIZED RECOMMENDATIONS TO YOUR CUSTOMERS? JUST CONSULT SOME MACHINE-LEARNING WIZARDS AND YOU WILL BE MAGICALLY RELIEVED OF ALL PROBLEMS. BUT HOW DOES THIS MYSTERIOUS BLACK BOX CALLED MACHINE LEARNING REALLY WORK?

Learning from examples Learning from data or experience is the core principle in machine learning. It is in fact the only way for a computer program to make complex decisions efficiently and accurately enough, without a lot of manual work provided by humans. For example, let us assume we want to write a computer program that is able to categorize news articles into topics. In other words, given any article written in natural language, our program should decide (without any help from a human) whether the article is about politics, sports, music, science, etc. This is a relatively easy task for a human, provided that they are able to read and understand the article. But what if the article is

written in a language we are not familiar with? If we do not understand the words, or even the names of people or locations mentioned, the problem becomes practi-

DECEMBER-FEBRUARY 2016/17 • W

cally impossible to solve. A computer will suffer from exactly the same issue: it perceives an article as a sequence of letters and words, at the same time being

Images: Shutterstock

Researchers all over the world rarely agree on a single definition of machine learning. Probably the best known is a quote from Arthur Samuel, an American pioneer in the field of artificial intelligence: “Machine learning gives computers the ability to learn without being explicitly programmed.” It loosely means that whenever we need a computer program to make “smart” decisions of any kind, instead of giving it handcrafted, specific instructions about how to make them, a much better approach is to let it learn automatically by observing the outcomes of many decisions. Samuel applied this principle in his research in the field of computer gaming. In the 1950s he developed a way for a computer to learn playing checkers by playing tens of thousands of games against itself and observing which board configurations tend to lead to victory. Equipped with this experience, the algorithm was able to choose individual moves with the overall goal in mind and was moderately successful in playing checkers against humans.

TECH / MACHINE LEARNING

completely ignorant of their meaning. So how can our program make smart decisions about the article’s topic? One way to solve this would be to equip our program with specific, handcrafted rules for decision making, such as: “if the article contains at least two of the following three words: ‘football,’ ‘match,’ ‘player,’ it is about sports.” However, we would most likely need hundreds of rules per category for the program to work well, not to mention separate rules for every language we want to be able to process. The cost of employing experts to carefully develop such high-quality rules would be substantial. Is there a better approach? As is often the case, machine learning will come to our aid. Instead of carefully devising thousands of specific rules by hand, we could expose our program to a lot of examples of specific articles with preassigned categories, and let it look for useful patterns in the data. By analyzing the correlations between individual words and topics, our program might notice, for example, that whenever the word “football” appears in the text, 95 percent of the time the article is about sports (the other 5 percent might be articles like this one, in which “football” appears only as an example). This observation could be used for the actual topic prediction: if a new, previously unseen article contains the word “football,” there is a high probability it is about sports. Even though these rules seem similar to the previous solution, in this case they are automatically learned by the computer using data, and without any manual intervention, which considerably lowers the overall cost. We typically refer to the data used for learning as the “training set,” and the process of looking for patterns in the data is called “learning from examples.” It is worth noticing that humans learn similarly in many cases. For example, we do not teach infants to speak by lecturing them about grammar rules that can be used to construct sentences. Instead, we simply talk to them, giving their brains huge amounts of data to learn from. As a result, most adults are able to construct new sentences correctly, even if they never learned any formal grammar at all. Machine learning flavors Assigning predefined categories to objects based on a training set is in fact not the only type of machine learning

“IN A LOT OF APPLICATIONS THE ANSWER THAT IS CORRECT 80 PERCENT OF THE TIME IS STILL USEFUL, WHILE AN ANSWER GIVEN TOO LATE IS SIMPLY NO ANSWER AT ALL. out there, though it is probably the most well-known. It is an example of what we call “supervised learning.” In this type of learning, the computer is presented with examples, which are certain objects (for example articles or images) along with a “label” assigned to them (for example the article’s topic, or the name of the animal depicted in the image). The goal of supervised learning is to learn a general rule relating the characteristics of the objects to their labels. Some classic examples of supervised machine learning applications include: optical character recognition, in which we want to categorize images of handwritten characters by the letters represented by them; spam filtering, the goal of which is to identify email messages as spam or non-spam; medical diagnosis, for which we wish to diagnose a patient as a sufferer or non-sufferer of a particular disease; and weather prediction, which aims to predict, for instance, the air temperature tomorrow. Another well-known type of machine learning is “unsupervised learning,” in which we only have the example objects, but no correct “label” (or “decision”) is

available, and the goal is to find interesting and useful patterns in data. For example, unsupervised learning can be used for customer segmentation, a case in which we wish to divide our customers into several groups based on their characteristics and behavior, such that similar people are grouped together. Another example of unsupervised learning is fraud detection, used to examine a data set of credit card transactions in order to find transactions that may be fraudulent in nature. Other types of machine learning include, “reinforcement learning,” where a computer program interacts with a dynamic environment in which it must perform a certain goal (such as driving a vehicle, or playing a game against an opponent); and “recommender systems,” in which we propose recommendations for a user based on their interests or opinions of people similar to them. Teaching strategies Building a highly accurate machine learning-based solution for a certain problem is not a trivial task and requires a substantial amount of expertise.

WBJ OBSERVER • dEcEmBER-fEBRuaRy 2016/17

The process typically starts with collecting data. In the case of categorizing news articles, a set of example articles with known topics has to be collected. Next, the examples have to be transformed into a representation better understood by a computer, typically using numbers. For example, an article might be represented by the counts of individual words, and an image might be represented by the color intensities of all the pixels. Often, more complex data transformation is needed, for example we might decide that words differing only in grammatical form (“playing” and “player”) or synonyms (“football” and “soccer”) should be represented by a single word. The next phase is the actual learning, during which the program examines the data and tries to discover useful patterns. The patterns found in the data represent the knowledge the program was able to infer, and are usually referred to as “the learned model.” The model is used later on for the actual prediction, when the program is asked, for example, to assign the topics to new, previously unseen articles. The exact approach used by the computer to learn from the data is called a “learning algorithm.” Over the decades, hundreds of different learning algorithms have been developed by researchers and machine learning practitioners. For example, one way to learn is to build a graph of questions asked about a new article we wish to categorize. In such a graph, an answer to a question determines which question is asked next, and at the end we arrive at the predicted category. This is traditionally called “a decision tree,” and is very popular in self-diagnosis schemes, in which we are asked a series of questions about the symptoms we suffer from in order to

obtain a probable diagnosis. Another way of learning would be to analyze the probabilities of various words appearing in articles of different classes; this is called the “naive Bayes approach.” Finally, the training set can be used in a very direct way: since we know the correct categories of the training documents, for a new article we could try to simply assign the topics of the most similar article from the training set. This approach is known as the “nearest neighbors algorithm.” A crucial issue in building a machine learning-based solution is evaluation, which aims to assess the quality of the algorithm by comparing the decisions made by a trained model to correct answers, typically provided by a human. Evaluation serves multiple purposes: it can be used to report the expected quality of a machine learning-based tool, to compare different training methods, or to choose the learning method that should be used in production.

DECEMBER-FEBRUARY 2016/17 • W

Not always straight-A students It is important to note that in real world problems a machine learning-based tool will not be correct every single time, just as we don’t expect any human student to always know the correct answer. What are the factors affecting the quality of machine learning algorithms? First of all, performance depends on the learning method used. Different learning methods have very different character-

istics and make different assumptions about the data. For a specific problem, some learning methods might be more suitable than others, and it is in fact impossible to know in advance what will work best. A poorly chosen learning algorithm, not powerful enough to pick up complex relationships in the data, will give poor results. By far the most important factor is the data the program learns from. In general, real life examples always contain some random fluctuations (typically called “noise”), which will prevent our machine learning-based program being correct 100 percent of the time. But even if we ignore the issue of noise, there are other important aspects to consider related to the data quality. First of all, to learn well, the computer needs to see enough examples, especially since the categories themselves exhibit some amount of diversity. Indeed, after seeing only one article about a football world cup, it is unlikely the program will correctly categorize a new article about judo lessons for children. Moreover, the data has to carry enough information about the categories we are trying to predict. For example, if we do not have the articles themselves, but only know their length and language, it would be impossible to predict the topics, as there is very little correlation between these features and the categories. In this case even huge amounts of data will not help. Finally, the reason for bad performance might be the difficulty of the problem itself. Some problems we try to solve using machine learning are not easy, even for a human, in other cases there might be very little consensus between the experts on what the “right” decision is. An example of such a task is assessing the polarity of the text, that is deciding whether it expresses bad, good or neutral opinions of its author. So why do we bother building machine learning-based solutions, knowing they will inevitably make errors? With the overwhelming volume of data surrounding us, machine learning is often the only way to efficiently process it. The decisions provided by a computer might be of significantly lower quality than those supplied by humans, but they are incredibly fast and cheap. In a lot of applications the answer that is correct 80 percent of the time is still useful, while an answer given too late is simply no answer at all. ◆

Image: Shutterstock

TECH / MACHINE LEARNING

December – February 2016/2017

25 pages of real estate content

NEW OWNER, SAME STRATEGY THE OWNERSHIP CHANGE AT P3, WHICH HAS RECENTLY BEEN ACQUIRED BY SINGAPORE'S GIC FOR €2.4 BILLION, WILL FURTHER STRENGTHEN THE COMPANY'S CORE STRATEGY OF GROWTH, SAYS CEO IAN WORBOYS > 50 EXPANDING THE INVESTOR POOL THE INVESTMENT MARKET CONTINUES ITS STRONG PERFORMANCE, WITH NEW INVESTORS HAVING BEEN DRIVING THE DEMAND FOR COMMERCIAL PROPERTY IN POLAND > 52 WAREHOUSES GO URBAN THE LAST-MILE ISSUE IS NOW BEING INCREASINGLY DISCUSSED GLOBALLY. ARE WE GOING TO SEE THE DEVELOPMENT OF MORE INNER-CITY WAREHOUSE SPACE IN THE COMING YEARS? > 66

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LOKALE IMMOBILIA / NEWS

NEWS

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H O S P I TA L I T Y

ibis budget hotel to open in Lublin in 2018 Hospitality company Orbis has signed a franchise agreement regarding the opening of an ibis budget-branded hotel in Lublin in south-eastern Poland. The hotel will be located on ul. Głęboka in the downtown of the city, and will be developed and owned by investor TK Finans Tomasz Księżopolski, with the opening having been scheduled for the second quarter of 2018. It will offer 90 rooms and will be included in the global reservation, distribution and sales systems of AccorHotels. “A new budget hotel is much needed in Lublin. The city has been developing very quickly and has been attracting more and more visitors – businesspeople and tourists who are looking for venues with well-known brands that offer high quality and standard,” said Tomasz Księżopolski, the owner of TK Finans. Globally, there are now a total of approximately 500 ibis budgetbranded hotels operating in 18 countries. ◆ H O S P I TA L I T Y

INVESTMENTS

Skanska acquires Ilmet site in downtown Warsaw

eveloper Skanska Property Poland has acquired a plot of developed land located near the ONZ roundabout in downtown Warsaw, which currently houses the Ilmet office building, as well as the Warsaw One project that UBS Real Estate, the previous owner of the property, was planning for the site. Arkadiusz Rudzki, the managing director of Skanska Property Poland, said that the purchase of the Ilmet building, which is located opposite the iconic Rondo 1 office tower, is another step on the company’s way to building a portfolio of the best sites in Warsaw. He added that the developer is still analyzing a number of options with regard to the planned redevelopment of the Ilmet site.

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The Ilmet building was completed in the late 1990s and comprises nearly 20,000 sqm of usable space. Meanwhile, according to Skanska, the site has the potential to house approximately 60,000 sqm of GLA. The Warsaw One scheme, which the Danish architectural studio Schmidt Hammer Lassen designed for UBS, calls for a building standing 188 meters tall. Skanska Property Poland is currently developing two large office projects – Generation Park and Spark – in the Wola district of Warsaw. Earlier this year, the company acquired a major plot of land on ul. Łucka in that district, where one of its future office developments will be located. ◆

Hospitality company Hilton Worldwide has signed a franchise agreement regarding the development of a Hampton by Hilton-branded hotel in Oświęcim in southern Poland. The hotel will be located in the downtown of the city and will offer 120 rooms, with the opening having been scheduled for mid2018. It will be developed by Property Partner Investments and managed by Hotel Professionals Management Group. Hampton by Hilton Oświęcim will be the first internationally-branded hotel in the city and will be targeted at guests including the numerous foreign visitors coming to the Auschwitz-Birkenau State Museum every year. Earlier this year, Hilton announced five other new Hampton by Hilton-branded hotels in Poland, which will be opened in Lublin, Gdańsk, Warsaw, Poznań and Kalisz. Since the introduction of the brand to Poland more than three years ago, Hilton has opened 14 Hampton by Hilton hotels in the country, with another 11 now in the pipeline. ◆

Images: Skanska Property Poland

THE EXISTING ILMET building will be replaced by a much taller skyscraper

Hampton by Hilton hotel to open in Oświęcim in 2018

LOKALE IMMOBILIA / NEWS

INVESTMENTS

Hansainvest buys Atrium 2 office building in the Polish capital

ATRIUM II

In what is its first investment in the commercial property market in Poland, German investor Hansainvest has acquired the Atrium 2 office building in downtown Warsaw from developer Skanska Property Poland. The value of the transaction has not been revealed. Atrium 2 is located near the ONZ roundabout and offers 20,000 sqm of leasable space, which is occupied by Credit Suisse, DLA Piper and Bravura Solutions. “With Atrium 2 we are able to further diversify our real estate portfolio. It is our first investment in Poland and we are looking forward to investing even more in this exciting market,” said Nicholas Brinckmann, the managing director of Hansainvest. MF Capital and JLL advised the buyer and the seller in the transaction respectively. ◆

Correction: In the November issue of WBJ Observer, we mistakenly titled the article about the opening of Hala Koszyki “Echo Hala Koszyki in Warsaw completed” which could give the impression that the property is owned by Echo. This is incorrect as the scheme is owned by Griffin Real Estate. We apologize for the mistake. WBJ Observer staff

WBJ OBSERVER • dEcEmBER-fEBRuaRy 2016/17

LOKALE IMMOBILIA / NEWS

OFFICE

Cornerstone laid for Centrum Marszałkowska in Warsaw Investors BBI Development and WSS Społem have held the cornerstone-laying ceremony at the construction site of their Centrum Marszałkowska office and retail project in downtown Warsaw. Builder Korporacja Budowlana Doraco is the general contractor of the scheme which is scheduled for completion in the first quarter of 2018. The Centrum Marszałkowska investment is being developed at the intersection of ul. Marszałkowska and ul. Świętokrzyska, on the site which previously housed the Sezam retail building, just next to an entrance to the Świętokrzyska stop of the two Warsaw subway lines. The development, which is expected to be BREEAM-certified, will offer a total of 16,500 sqm of leasable space, including 3,400 sqm of retail and service area, with CBRE acting as the exclusive leasing agent.◆

CENTRUM Marszałkowska

OFFICE

Mayland to develop outlet center in Rzeszów

eveloper Mayland Real Estate has announced it will develop an outlet center project in Rzeszów in south-eastern Poland, which will be the first retail scheme of this kind in the city. The development will be located on a site on which the company was previously planning a major shopping center project called Bella Dolina. Mayland is still working on the details of the planned investment. For the time being, the developer has revealed the outlet center will be developed as the first phase of a larger retail complex that will also include a new retail park. “We are expecting a lot of interest in the format on the part of the inhabitants of the whole region,” said Maciej Kiełbicki, the managing director of Mayland Real Estate. Mayland has to date completed four major shopping centers in Poland: Karolinka in Opole, Pogoria in Dąbrowa Górnicza, Jantar in Słupsk and Riviera in Gdynia. The company is currently developing the Serenada shopping center in Kraków, and planning projects in cities including Warsaw and Szczecin. ◆

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Construction on tallest office project in Wrocław gets underway Developer i2 Development has launched the construction work on its Wielka 27 office project in downtown Wrocław. The scheme, which will be located close to the iconic Sky Tower apartment building and will be the tallest office building in the city, is scheduled to be completed in the first quarter of 2019. The Wielka 27 development will offer a total of more than 9,000 sqm of leasable space on 14 storeys. There is interest in leasing space in the investment, with i2 Development having already received a number of inquiries from potential tenants, said Marcin Misztal, vice president of the management board at the company. The Wielka 27 project is the fourth commercial scheme in the portfolio of i2 Development which is also active in the residential market. The developer’s business strategy calls for residential and commercial investments accounting for up to 75 percent and up to 25 percent of the company revenues respectively. ◆

Images: BBI Development, Prologis

R E TA I L

LOKALE IMMOBILIA / NEWS

C O M PA N I E S

LOGISTICS

Prologis developing speculative project near Wrocław

PROLOGIS Park Wrocław

Logistics space developer Prologis has announced the launch of construction work on a new speculative project located within the company’s Prologis Park Wrocław V logistics park in Lower Silesia. The 11,400-sqm scheme is scheduled for completion in the second quarter of next year and has already been fully commercialized. A pharmaceutical company (7,195 sqm), online store Emako (2,300 sqm) and a logistics operator (1,890 sqm) took up space in the development soon after construction work began, Prologis has revealed. The Prologis Park Wrocław V logistics park currently comprises six buildings with a total of 136,000 sqm of leasable area. The largest owner and manager of warehouse space in Central and Eastern Europe, Prologis had a portfolio of approximately 4.4 million sqm in the region at the end of Q3. ◆

Budner to change name, grow in new market sectors Construction company Budner plans to change its name to Fundamental Group in January next year and focus on growth in new market sectors in the near future. The builder, which will continue to act as the general contractor for residential and commercial real estate projects, wants to become a major developer of turn-key schemes for external investors. Budner will offer “design and build” services to entities interested in the acquisition of whole residential buildings comprising rental apartments. It also plans to be active in the student accommodation sector, with a number of new dormitories, located in cities including Warsaw and Kraków, now in the pipeline. When it comes to construction services, the company wants to become more active in the industrial real estate and infrastructure sectors. The 2017 contracts portfolio of Budner is now valued at approximately PLN 210 million. The builder’s strategy envisions a debut on the Warsaw Stock Exchange by the end of 2018, said Leszek Stankiewicz, a member of the management board at the company. ◆

WBJ OBSERVER • dEcEmBER-fEBRuaRy 2016/17

LOKALE IMMOBILIA / NEWS

Bank BGŻ BNP Paribas has appointed Yareal Polska as the developer of its planned new offices in Warsaw. The bank will occupy 22,000 sqm, or 80 percent of the total space, in a new project, which will be developed on a Yareal-owned site located at the intersection of ul. Kasprzaka and ul. Karolkowa in the Wola district of the Polish capital. The scheme, which has been designed by the Hermanowicz Rewski Architekci architectural studio and is expected to be BREEAM-certified at the “Excellent” level, is scheduled for completion in the first half of 2020. “Our investments are an alternative to the office towers located in the downtown of the city. We are offering office space for large companies looking for offices in attractive locations, facilities that meet high requirements regarding corporate image as well as offering efficient and flexible space arrangements, green areas and lower rents and maintenance fees,” said Eric Dapoigny, the president of the management board at Yareal Polska. The developer is now also working on Nowogrodzka Square in downtown Warsaw, a boutique office project offering 11,500 sqm of leasable space. ◆

OFFICE

Yareal to develop BGŻ BNP Paribas offices in Warsaw

VISUALISATION of the project

INVESTMENTS

ATUT shopping center

R E TA I L

Atut shopping center in Kraków under construction Investor KG Group has launched construction work on its Atut convenience shopping center project in Kraków. The two-floor scheme, which will be located on ul. Grażyny in the Prądnik Biały district, will offer 3,500 sqm of leasable space and is scheduled for completion in the third quarter of next year. The development will house 14 commercial units, with secured tenants including Rossmann and Pepco. Skanska and BOIG Property Consulting are acting as the general contractor and the leasing agent for the investment respectively. At the moment, there are five operating Atut-branded convenience shopping centers in Poland, which are located in Sosnowiec, Łódź, Jaworze, Węgrzce near Kraków and Pruszków. KG Group is already planning a number of new projects of this kind across the country. ◆

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Investor Rockcastle Global Real Estate has finalized the acquisition of two regional shopping centers – Focus Mall Zielona Góra and Focus Mall Piotrków Trybunalski – from Aviva Investors for a total of €160 million. Cushman & Wakefield, Hogan Lovells, Arcadis and PwC represented the buyer in the transaction, while JLL, Dentons and Deloitte advised the seller. Focus Mall Zielona Góra and Focus Mall Piotrków Trybunalski were completed in 2008 and 2009 by Parkridge Retail Poland and offer 26,800 sqm and 35,200 sqm of leasable space respectively. Aviva acquired the centers in 2012. “This acquisition is perfectly in line with Rockcastle’s growth strategy. Both retail properties provide steady and secure income streams. Thanks to an excellent central location and active property management they have potential for further growth,” commented Spiro Noussis, the CEO of Rockcastle Global Real Estate. Paweł Partyka, an associate in the capital markets department of Cushman & Wakefield, said that the transaction reflects the attractiveness of regional cities for foreign investment funds. According to JLL data, the total volume of the investment transactions closed in the retail property sector in Poland so far this year amounts to €1.675 billion. ◆

Images: KG Group, Yareal Polska

Rockcastle finalizes €160 mln retail portfolio acquisition

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ul. Podchorążych 83, Warszawa

T. +48 535 10 10 10

sprzedaz@tacit.com.pl

www.apartamentyparklane.pl

LOKALE IMMOBILIA / INTERVIEW

Still focused on growth I N T E R V I E W B Y A D A M Z D R O D OW S K I

WBJ Observer talked to Ian Worboys, the CEO of logistics space owner, developer and manager P3 Logistic Parks, about the company’s investment strategy and further development plans in Poland after its recent acquisition by Singapore’s sovereign wealth fund GIC

WBJ Observer: Singapore’s GIC recently acquired P3 Logistic Parks from TPG Real Estate and Ivanhoé Cambridge for €2.4 billion. Will this huge transaction bring any major changes in the current development and investment strategy of P3? Ian Worboys: P3’s core strategy is growth in existing and new territories based around long-term ownership and a continually improving customer-centric approach. This is not set to change; indeed it will be greatly enhanced by the support of our new owner. Our strategy is closely aligned to GIC’s investment ethos and GIC hopes to support the continued growth of P3 backed by GIC’s extensive experience in investing in global logistics. The portfolio of P3 has more than doubled over the last three years. Will the company be focused on new acquisitions, or rather on the further development of existing parks in the near future? We will expand on several fronts. This means further development at our existing parks and acquisitions depending on market conditions. Which markets in Europe are the most important for you at the moment? We are active in 11 countries across Europe. We offer customers a pan-European platform and see many synergies from working across the continent. For example, developing a strong presence in France and Germany is also important to us in CEE, as many companies from those countries are also expanding here and their economies are closely connected.

When it comes to Poland, what are your development plans for this and next year? We are currently building three new warehouses at the P3 Poznań park plus the first phase (21,500 sqm) of a new 80,000sqm extension at the P3 Błonie park. We are also prioritizing expansion of our parks at Piotrków and Mszczonów. Next year we will focus on further development of our four existing parks in Poland as well as

DECEMBER-FEBRUARY 2016/17 • W

Images: P3 Logistic Parks

Are you planning to enter any new markets in the next few months? GIC’s purchase of P3 is subject to antitrust approvals in Poland and Germany and so will not close until the end of the year. We will then work with GIC on strategic decisions such as entries into new markets.

LOKALE IMMOBILIA / INTERVIEW

looking for new opportunities to expand our portfolio and enter new regions in Poland.

of a building is at our P3 Horni Pocernice park in Czechia – one of the biggest parks in Europe.

A record 896,000 sqm of warehouse space was leased in Poland in Q3, according to Cushman & Wakefield. Will this strong leasing activity in the country continue in the coming months? Everything indicates that the high level of demand will continue and may even increase. We are certainly very optimistic and can see no signs of a slowdown.

The amount of speculatively developed warehouse space has been on the rise in Central and Eastern Europe of late. Is P3 now developing or planning any speculative projects in the region? Speculative construction is currently part of our activities across Central and Eastern Europe, particularly in areas where

Which sectors are now generating the most demand for warehouse space in CEE? Our customers come from a wide range of business sectors. At present we are seeing particularly strong demand from the 3PL (Third Party Logistics), e-commerce and automotive sectors. Other sectors are growing as well, including IT, light manufacturing, pharmaceuticals and services. Has the growing significance of ecommerce already been felt at P3 parks? Yes, we have been experiencing growth in e-commerce for some time. E-commerce occupiers are one of our largest customer groups across Europe. Our client portfolio includes some of the sector leaders such as Alza in Czechia, Emag in Romania, Agito in Poland and others. As well as e-commerce per se, we are seeing more and more mixed uses in buildings, with customers combining showrooms, sales direct to the public, public collection points and/or ecommerce logistics all in one warehouse. And, of course, e-commerce has directly fueled the growth of returns centers. The best example of this kind of multiple use

vacancy rates are very low and current customers need to expand quickly. So we are working on speculative projects in Prague, Bratislava, Bucharest, Poznań and Warsaw. Do you see any major potential threats to the warehouse property market in Poland and the other CEE countries in the near future? Economic and political stability is vital to retaining and securing customers and undertaking further development. ◆

GIC acquires P3 for €2.4 bln

In what is one of the largest real estate transactions to have been signed in Europe so far this year, Singapore’s GIC has acquired logistics space developer and owner P3 Logistic Parks from TPG Real Estate and its partner Ivanhoé Cambridge for €2.4 billion. The transaction has yet to be approved by regulatory bodies and is expected to be finalized by the end of this year. TPG and Ivanhoé bought P3 in 2013, with the developer having more than doubled the size of its portfolio since then. The company currently has a total of 163 warehouse assets in 62 locations across nine countries. Eleven new sites are now under construction, with a combined 300,000 sqm of space scheduled for completion by the end of 2016. In Poland, P3 holds a total of more than 520,000 sqm of existing logistics assets in four locations. “We believe P3’s strong growth will continue given its diversified, incomeproducing portfolio and substantial land bank. We are confident of the long-term potential of the European logistics sector, and look forward to expanding this attractive platform with the very capable P3 management team. GIC’s extensive experience in investing in logistics globally also allows us to add value to this partnership,” said Lee Kok Sun, chief investment officer at GIC Real Estate.

WBJ OBSERVER • dEcEmBER-fEBRuaRy 2016/17

LOKALE IMMOBILIA / INVESTMENT MARKET

Redividing the investment pie B Y A DA M Z D R O D OW S K I

The commercial property investment market in Poland continues to put up a very strong performance, with the aggregate 2016 transaction volume expected to be only slightly lower than last year’s figure. New investors have been driving the market in recent months

ommercial property in Poland continues to attract international capital, with the investment market figures in the country still staying close to record levels. However, the pool of investors active in the Polish market has become increasingly diversified as more African and Asian money flows in. Last year, the total volume of the investment transactions closed in the commercial property market in Poland amounted to €4.1 billion, which was the second best result recorded in the market’s history, according to JLL data. This year, the total transaction volume

should reach €4 billion. The analysis of the data for the last 18 years shows that German (27 percent), American (20 percent), British (10 percent), Austrian (9 percent) and global (10 percent) investors have invested the most capital in Poland to date. Several large transactions closed earlier this year are set to completely change the proportions for 2016. In Q1-Q3, South African capital accounted for 48 percent of the transaction volume, with German, British and American capital having accounted for 11 percent each, according to Savills. In one of the largest transactions in the

DECEMBER-FEBRUARY 2016/17 • W

history of the Polish market, South Africa’s Redefine Properties acquired a major Echo Investment portfolio for €891 million. Another South African entity – Rockcastle – bought the Bonarka City Center mall in Kraków for €361 million. Analysts are saying that new capital has been flowing into Poland from completely new directions such as Africa and Asia, as well as from countries which have long been associated with investments in the Polish real estate market, including Germany, the UK and the United States. “Apart from German funds, which have been among the market leaders for years now, we are seeing an increasing diversification of the sources of capital, particularly of that coming from outside Europe,” said Piotr Mirowski, director, CEE investment services, at Colliers International. In the opinion of Tomasz Puch, director, office and industrial capital markets at JLL, one also should, in the near future, 4expect the arrival in Poland of specialized investors, focused on the acquisition of assets from one particular (for example warehouse or retail) sector.

Images: Golub GetHouse, Penta Investments

LOKALE IMMOBILIA / INVESTMENT MARKET

More Asian capital coming According to Przemysław Felicki, director, capital markets department at CBRE, South African and Asian investors are set to further strengthen their position in Poland in the coming quarters. “We are witnessing a growing interest in our market on the part of those investors,” Felicki said. Of a similar opinion was Marek Paczuski, the director of the investment department at Savills in Poland, who argued that one should expect more capital flowing into the country from South Africa, as well as from Asian countries including Malaysia and Singapore. Hadley Dean, CEO at Echo Polska Properties, a company that is co-owned by South Africa’s Redefine Properties, believes that “we will see increased activity from South African investors and particularly American investors given the strengths of the US dollar.” According to Dean, Middle Eastern investors currently appear to be more active than they have been and Asian investors, particularly from China, are now placing record amounts of capital into the European property market. “However, Poland has yet to see its fair share,” he said. Damian Grzywacz, a senior manager, business development at Penta Investments, said that the situation in the global markets and the good economic situation in Central and Eastern Europe have been attracting new investors to the region. This has certainly been true for Asian capital. In one of the largest deals closed in the Czech office market this year, Penta recently sold its Florentinum building in Prague to the Chinese investment group CEFC. In the last phase of the negotiations, the buyer outbid a well-known German investor, Penta has revealed. Colliers International data shows that Asian capital has accounted for nearly 20 percent of the total investment volume this year and has been gaining in significance in recent years. Mirowski pointed out that Far Eastern investors invest in Poland indirectly, through investment managers. The acquisition of the Amazon logistics portfolio by a fund managed by GLL Real Estate Partners, and the acquisition of the Gdański Business Center in Warsaw by a fund managed by Savills Investment Management earlier this year are two examples of such transactions. German funds less active? The strong entry of new investors from countries including South Africa into Poland and the limited availability of core real estate product in the country seem to

have been the main reasons for the decreasing percentage share of German capital in the combined transactions volume in recent years. According to Dean, some of the proposed legislative changes in Poland have made some German investors more cautious. “German funds are more sensitive to local market changes and instability. The same changes often do not have the same impact for non-European investors,” he said. While German funds accounted for as much as 40 percent of the total volume in

2012, the figure dropped to 30 percent in 2013, 22 percent in 2014, 26 percent in 2015 and 11 percent in Q1-Q3 this year, according to Savills data. In terms of the total annual value of the investment transactions involving German capital, the figure decreased from €1.061 billion last year to €328 million in the first three quarters of this year. In 2012, 2013 and 2014, it stood at €1.091 billion, €941 million and €694 million respectively. Felicki pointed out that German capital is still present in Poland, but the list

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of the most active investors has changed, with the funds that were investing in the country in previous years having become more selective when it comes to making investment decisions. This results from the fact that most of those funds already have major property portfolios in the Polish market. “By contrast, the investment activity of the funds that were previously not present in Poland, including Warburg-HIH Invest and Hansainvest, has been on the rise,” Felicki argued. Of a similar opinion was Mirowski, who noted that some of the German investment funds have already, due to the large real estate portfolios that they built in Poland in previous years, increased their exposure to the supply and demand dynamics in the country. “However, to the best of my knowledge, they are still very much interested in the best assets as the Polish market offers an interesting premium for risk, compared to Western European markets, considering the quality of the buildings and the capital value per sqm of leasable area,” he said.

Waiting for REIT legislation Felicki noted that the inflow of capital from the other CEE countries, mainly Czechia and Hungary, is a new trend in the Polish market. In his opinion, the percentage share of that capital in the transaction volume in Poland should grow in the next few quarters. Czech investor CPI Property Group, for instance, which already holds a number of commercial real estate assets in the Polish market, earlier this year acquired a small retail park in Tarnów in southern Poland and plans further investments in the retail property sector in the country. Meanwhile, domestic investors still claim only a relatively small slice of the investment pie in Poland. “In the last few years, Polish investors invested on average approximately €250 million a year,” Puch said. The percentage share of Polish investors in the combined commercial property investment volume has recently decreased – in 2014 and 2015 the figure stood at 9 percent and 11 percent respectively, only to drop to 4 percent in the first three quarters of this year, according to CBRE data.

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“The activity of domestic investors is noticeable, but it is foreign capital that continues to dominate,” Paczuski said. He pointed out that Griffin Real Estate, the leading domestic investor in the real estate market in Poland, has been very active in recent years. In the years 2012-2015, Griffin invested a total of approximately €760 million in the property market in the country. However, the company has, to a considerable degree, been supported by American capital, Paczuski noted. Savills data shows that PHN (a total of €107 million invested last and this year), Reino Partners (a combined €114.5 million in 2014-2015) and Octava (a total of €84 million in 2014-2015) have been relatively active. “The investment activity of PZU has visibly decreased of late,” Paczuski argued. “The activity of Polish investors is rather limited, with the trend having continued for the last few years. We expect the planned legislative changes regarding REITs (Real Estate Investment Trusts) to change the situation,” Felicki said. ◆

Image: Savills

LOKALE IMMOBILIA / INVESTMENT MARKET

WBJ Observer presents

THE BEST ADDRESS IN WARSAW Interview with Karolina Kaim, the Chairwoman of the Board at Tacit Investment, and a premium real estate specialist Warsaw’s premium real estate market is growing steadily. Now, there is a new prestigious address on the map – Park Lane Apartments on ul. Podchorążych. It is an incredibly unique and exceptional place. Park Lane is an elite, cozy, seven-storey apartment building that boasts a high standard of finish. It is well equipped, elegant, sophisticated and classy. With its location close to the city center, it offers its residents a truly tranquil atmosphere, as well as a lot of greenery and a view of the Royal Baths. It provides you with an opportunity to enjoy all the delights of Warsaw, but at the same time it offers life away from the hustle and bustle of the big city. Park Lane features 12 apartments with a floor area ranging from 170 to 330 sqm. The interiors were designed to allow their future users maximum flexibility in arranging the space. We truly believe that it is the customer who adds character to an apartment, by adding their favorite couch, photos of their loved ones, or souvenirs from their trips, so the interior finishing must be quite moderate. In this way, while maintaining a very high level of quality and comfort, we enable our customers to express their individuality through their personal belongings. We opted for comprehensive interior finishing of all the apartments, in line with our philosophy that a luxurious product is a finished one. We offer our customers apartments that are ready to move into, as we want them to say: “Yes, I like this place a lot and I want to live here.”

What is so unique about Park Lane? First of all, its one-of-a-kind location, its coziness, as well as a thorough selection of the potential future owners of the apartments, which is still a rarity in Poland. We also make sure that all the non-residential spaces in the building never diverge from the expected quality. That is why we have decided not to sell the spaces located on the ground floor so as not to lose control over them. Obtaining relatively small income from their rental or sale is not our top priority. Instead, we want the Tacit brand to be real proof that our apartment buildings are, and always will be the best. On the day a building is completed, you can move in and enjoy peace and quiet, without having to worry that you will spend the next two years on a construction site.

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BROUGHT TO YOU BY TACIT

Can you fall in love with a place the very moment you enter it? Yes, you can. That is all you need to do.

LOKALE IMMOBILIA / RETAIL

Still before its prime B Y A DA M Z D R O D OW S K I

HIGH-STREET RETAIL HAS NOT YET HAD A CHANCE TO FULLY DEVELOP IN POLAND, WITH A NUMBER OF FACTORS CONTINUING TO HINDER THE GROWTH OF THE MAJOR HIGHSTREET LOCATIONS IN THE COUNTRY. NEVERTHELESS, REAL ESTATE MARKET EXPERTS REMAIN OPTIMISTIC ABOUT THE PROSPECTS FOR THE SECTOR

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LOKALE IMMOBILIA / RETAIL

Images: Vitkac, Kulczyk Silverstein Properties, LHI

As millions of buyers in Poland go out and indulge in shopping sprees during what is usually the peak selling season of the year, the vast majority of them will choose the traditional shopping mall as their preferred destination. High streets in the country have been developing relatively slowly in recent years, with their full potential remaining untapped as yet. The sector is still looking for its place in the retail market, said Katarzyna Michnikowska, a senior analyst, research and consultancy, at Colliers International. However, as the market continues to mature, high streets may now be in for better times. The shopping center segment has seen tremendous growth in Poland in the past few decades, but interest in the other retail formats is also now on the rise, with buyers looking for a new shopping experience. The significance of the high-street retail sector in Poland will, in the long-term, increase, argued Renata Kamińska, a senior property negotiator and a high-street retail expert at CBRE. A nascent market

A report on high streets in Poland published by Knight Frank last year estimated the combined stock of the retail space located in the downtowns of the eight largest cities across the country at approximately 900,000 sqm – that is less than 8 percent of the aggregate modern retail stock. “This is not much, but high-street properties in central locations have increasingly been on the radars of tenants and investors alike,” said

Marcin Juszczyk, a member of the management board at Capital Park. The Real Estate Income Assets FIZ AN investment fund, which was created by the company, was one of the first funds to focus on high-street retail units in Poland. Meanwhile, new real estate investments developed in high-street locations are, slowly but surely, adding to the existing stock. In Warsaw, for example, high-quality retail space located in ongoing schemes, including Raffles Europejski and Ethos, will soon provide luxury and premium brands with new high-street expansion opportunities. According to Kamińska, one should not compare the Polish retail property market with its Western European peers as the history of high streets in the latter is much longer and the high-street shopping culture there has had much more time to develop. Real estate experts point out that in the mature retail property markets around the world there is room for both traditional shopping centers and retail units on high streets, with the two retail formats complementing, rather than competing with each other. Patrycja Dzikowska, an associate director, consulting and research, at Cushman & Wakefield, said that high streets remain attractive to retailers, with premium brands generally preferring to open their stores in downtown locations. “In well developed markets such as France, the UK and Italy, fashion icons can mostly be found on high streets, and only very rarely in traditional shopping centers,” she said. High streets and

malls cater to different consumer needs and should not be seen as alternative retail channels, she argued. A changing profile

The profile of high streets in the largest cities across Poland has changed in recent years. While in 2010 restaurants accounted for 21 percent of total high-street retail, the figure has since increased to 32 percent, according to JLL data. “This is a positive trend, as the catering industry is a driver of traffic on streets,” said Jan Jakub Zombirt, an associate director, strategic consulting, at JLL. A negative trend is the decrease in the percentage share of fashion retailers from 30 percent to 14 percent in the period, he added. “The catering industry certainly is and will be a catalyst for the growth of the main high streets in Poland,” Michnikowska said. Fashion retail, by contrast, is not expected to see much high-street expansion in the coming years, except for micro locations with exclusive or designer clothes stores. When it

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comes to other retailers, a specialized, unique and comprehensive offering that can be a viable alternative to the repetitive offering of shopping centers and the anonymity of ecommerce is the recipe for growth in highstreet locations, Michnikowska added. JLL data shows that apart from Warsaw, high-street rents in the largest cities in Poland have decreased by an average 18 percent since 2010. Rents in the Polish capital have remained stable and have even increased slightly in some high-street locations. According to Kamińska, rents in high streets are comparable to those in prime shopping centers, with high streets remaining competitive retail locations due to the fact that they do not feature the high maintenance fees that are a major cost for shopping mall tenants. The demand for high-street retail space is much lower than the demand for space in traditional retail formats. However, the occupancy levels on high streets in Warsaw suggest there is no shortage of tenant interest in leasing space in such locations. Juszczyk said that only between 10 and 20 of the 300 plus retail units existing on high streets in the Polish capital remain vacant. In the largest cities across Poland, the average vacancy rate in the high-street retail sector is now estimated at approximately 8 percent, according to JLL. Barriers to growth

The hitherto relatively slow development of the high-street retail sector in Poland can be attributed to a number of factors, with real estate experts listing the shortage of suitable space and the lack of proper city infrastructure, including underground parking lots as some of the greatest barriers. Finding quality retail space, especially for a larger store, sized 500 sqm or 1,000 sqm and located on the ground floor, is a challenge. “Such retail units are simply not available in the market,” Dzikowska said.

This is the result of complicated ownership issues and the poor technical standard of high-street retail units. The climate in Poland, not particularly favorable for high-street shopping, is often blamed too. However, Juszczyk noted that in London, for instance, the climate is not a major barrier. Juszczyk also pointed to the lack in the high-street retail sector in Poland (with perhaps the exception of the Vitkac building in Warsaw) of the department store format, represented in Western Europe by such buildings as Harrods in London and Galeries Lafayette in Paris. The lack of a proper marketing policy is a problem too. Experts are saying that improved communication between property owners, managers, municipal authorities and tenants is needed so that joint initiatives can be developed. Kamińska pointed to the initiatives undertaken by Stowarzyszenie Mokotowska (Mokotowska Association) as an example of much-needed promotional activities. The association organizes a number of events to promote ul. Mokotowska – one of the main high streets in Warsaw. Michnikowska insisted that the differences between the perspective of large retail chains and the perspective of local entrepreneurs be taken into account when considering the potential of the high-street retail sector in Poland. For the former, shopping centers continue to be the main expansion targets, while for the latter the rental levels in high streets often prove to be an insurmountable barrier. “Such a situation is a great hindrance to the development of high streets in Poland,” Michnikowska said. Brighter future ahead?

Despite all their growing pains, high streets in Poland are expected to continue to develop in the coming years, with a number of economic, societal and urban planning trends now supporting their growth. Those

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investing their capital in new projects in highstreet locations, in Warsaw at least (including Kulczyk Silverstein Properties, the investor behind the Ethos scheme in the downtown of the Polish capital), are convinced of the positive prospects for the high-street retail sector in the city. Maciej Zajdel, a member of the management board at Kulczyk Silverstein Properties, argued that there is now increased interest in high streets in Poland from luxury and premium brands that want to open their flagship stores in the country in such locations. According to Zajdel, this is largely the result of the economic situation around the world. Lower sales in major market outlets including Russia and China have led the brands to shift their attention to countries such as Poland, which has seen an increase in luxury goods sales of late. The number of affluent people in Poland has been on the rise – according to KPMG data, the number of those earning more than PLN 7,100 per month will this year exceed one million. The trend will continue, with the figure expected to grow to almost 1.3 million in 2019. Zajdel argued that high streets in Warsaw and in Prague currently have equally good growth prospects. He noted that last year the purchasing power in the Polish capital was more than €2,000 higher than the purchasing power in the Czech capital. According to Zombirt, the ongoing changes in the downtowns of Polish cities, including densification and revitalization processes, as well as the upgrading of public spaces, are also now a major driving force behind the development of high streets in Poland. Dzikowska too agreed that the main high streets in the country have growth potential. “The number of potential clients has been rising. Current trends including consumers looking for a ‘new shopping dimension,’ as well as new investments in high streets allow one to be optimistic,” she said. ◆

Images: Kulczyk Silverstein Properties, Atrium

LOKALE IMMOBILIA / RETAIL

LOKALE IMMOBILIA / INTERVIEW

Retail Focus INTERVIEW BY ALEX WEBBER

The CEO of Atrium in Poland, Scott Dwyer, speaks about the firm’s continuing evolution in the country WBJ Observer: How would you define Atrium’s strategy this year? Scott Dwyer: We’re a stabilized business looking to reshuffle our portfolio so that there’s a bigger emphasis on Warsaw. Our strategy isn’t about planting flags across the country, that’s no longer something that feels relevant, instead it’s more about exploring the good real estate we have in good catchment areas. Traditionally your portfolio has been scattered around the map: what’s driven this change? There’s one thing that people really aren’t talking much about and that’s demographics. It’s obvious that declining workforce will create a conflict when it comes to sustaining GDP growth and that’s especially relevant when speaking in terms of smaller towns and cities. That’s why we’ve made the decision to focus on larger cities. Warsaw in particular. We have three centers in Warsaw: Promenada, Targówek and Reduta. When they were built they were on the edge of the city, but now they’re in the very heart of areas that are actively growing and expanding outwards. It makes sense to invest in these schemes. It’s true that there are some people who might say that it’s counterintuitive to focus on a city where competition is at its fiercest, but you have to remember that Warsaw is a growing city. The facts are that with the spending power of the local population, you could more or less justify a new shopping center being built in the capital every couple of years. How will your portfolio change? We’re in a unique position that enables us to focus on our key cities while the market is hot, whilst also selling our smaller assets: ultimately, the plan is to sell anything under 30,000 sqm. Cur-

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LOKALE IMMOBILIA / INTERVIEW

rently, we have 21 assets, though that will eventually shrink to nine assets in seven cities. Of those assets, seven have been earmarked for either redevelopment or extension. It’s really all about focus, about manufacturing a better portfolio. Some would say you’re getting rid of dead wood? No. What we’re selling isn’t “bad” real estate; in fact those centers are perfect for those who want to be big players in a smaller market. At Atrium, however, we’ve reached the stage at which we need to make a decision with regards to who we are and what we want to be. Once again, that’s all related to gaining focus.

ing 8 percent of the GLA to 17 percent. As for cinemas and fitness clubs, they’re enjoying a real renaissance. In the past they were considered problem tenants, but now they’ve become drivers of footfall. Because they open before and beyond normal retail hours, they’re now seen as a chance to keep people inside a center for longer. What trends are you noticing in terms of more traditional tenants? Centers were once dominated by grocery chains/hypermarkets and fashion. Yet while these grocery chains are getting smaller, fashion brands appear to be

going for even larger formats. When TK Maxx opens a huge store, other retailers respond likewise, and we’ve seen that the larger they grow, the bigger their sales. How has the emergence of e-commerce affected your offer? We view the internet as a great opportunity to drive footfall. Concepts such as click-and-collect are growing increasingly popular and, again, we see that as a real chance to visit our centers and use their facilities. Of course, to be able to take advantage of this you need a center that’s big enough to offer the diversity that can make this possible. ◆

Promenada is already undergoing a significant expansion and, as you mentioned, other centers will follow suit. What’s the reasoning? We have to continually invest: bigger centers will always have higher footfall because their offer is broader. But to be able to offer this diversity, you need to have a shopping center that’s big enough. Diversification in terms of retail and leisure opportunities has become more important than ever... Yes. People are reducing their urban footprint, yet they want to go out – that’s driving a lot of the changes. We’ve seen how shopping centers in countries such as Spain and Sweden have reacted to this, and we want to introduce that here in Poland. Centers in Poland simply have to evolve, and that’s why you’ll be seeing pop-up programs and mobile containers in our assets. We have the space for them, and we have the flexibility to see what works and what doesn’t. Too many centers rely on “the usual suspects” but we’re actively looking to change that. For instance, we have a new cinema operator in Reduta that we think will trigger a bit more competition in the cinema offer in Warsaw.

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Image: Atrium, Dantex

Food and leisure was something that used to go largely under the radar, it’s now become something more and more centers are becoming aware of... Centers need to increase their food and leisure components, and that’s something we’re taking very seriously: for instance, in Promenada this sector will eventually be increased from cover-

LOKALE IMMOBILIA / MICRO-APARTMENTS

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

Small is beautiful?

The

micro-living trend, known in some of the well-developed property markets around the world for some time now, could soon emerge in Poland, with a number of micro-apartment projects currently under construction in the largest cities across the country. Will the smallest of the micro-units, which Polish law

A NUMBER OF DEVELOPERS IN POLAND ARE NOW OFFERING SO-CALLED MICRO-APARTMENTS SIZED FROM AS LITTLE AS 14 SQM. COULD SUCH TINY UNITS, NOT FORMALLY RECOGNIZED IN THE COUNTRY AS RESIDENTIAL PROPERTY AND PREDOMINANTLY TARGETED AT BUY-TO-LET INVESTORS, BECOME POPULAR WITH BUYERS? W

R â&#x20AC;¢

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does not even define as housing units, attract much buyer attention? Experts are saying there is room for growth in the segment, but its exact potential is still difficult to evaluate. A global phenomenon

Dantex is now developing its WolskaKwadrat project in Warsaw, which will include micro-apartments sized from 14 sqm. The company offers potential buyers the possibility to sign an agreement with an operator who will take care of the management and rental of the units. Ochnik Development has also recently launched construction work on its Studio Centrum scheme in the Polish capital, which will comprise 85 microapartments. The smallest of them are sized 14 sqm. Maximilian Mendel, a partner, transaction advisory, at REAS, pointed out that micro-apartments or micro-units are a global phenomenon, and are mainly offered in high-density and expensive markets where buyers or tenants are very price sensitive. Developers in Asia, in particular, embraced the micro-living trend early on. “In densely built-up Tokyo small units have been the standard for a long time now, while the trend is relatively new in the US and in Europe in modern times,” Mendel said. No single definition of the product in question exists. In Poland, where regulations call for apartments to be sized at least 20 sqm, developers have been applying the term “micro-apartment” to refer to a number of various products, including hotel rooms. “Legally, micro-units sized below approximately 20 sqm are not recognized as dwellings in Poland,” Mendel noted. This means that one cannot register permanent residence in such units and one has to pay a higher, 23 percent VAT rate for them, instead of the regular 8 percent rate applicable to apartments. Of course, you can still live in a microapartment, you can rent it out and you can sell it. In fact, although there are situations when such units are bought for owner-occupation, buy-to-let investors account for the majority of the purchases, Mendel said. Indeed, developers themselves admit that micro-apartments are a typical investment product. Ochnik Development has revealed that more than 70 percent of the apartment purchases in the company’s Studio Centrum project are made for investment purposes. Sławomir Horbaczewski, an economist and real estate market expert, argued that micro-apartments can be an attractive alternative for students, as well as for professionally active people who because of their dynamic

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and intensive lifestyle spend most their time outside home anyway. “Micro-apartments can be an attractive investment product for those people, as they require a relatively small financial outlay and can easily be sold when the professional or life situation of the owner changes,” Horbaczewski said. Room for growth?

The micro-apartment segment should see further growth in Poland in the coming years, although units of this kind will likely remain an interesting niche and will not account for a significant part of the market. Ewa Przeździecka, the sales and marketing director at residential developer Unidevelopment, argued that even if micro-apartments were legally recognized as a residential product, the attractiveness of such projects for developers and apartment buyers alike would not be obvious. She pointed to the relatively high construction costs of micro-apartment projects. If such schemes were to be treated in the same way as regular residential schemes, regulations would require developers to provide a parking space for each microapartment in the building, Przeździecka noted. She was also skeptical about the size of the demand for such product among both buy-to-let investors and those buying micro-apartments for owner-occupation. At the moment, Unidevelopment is not planning to put such small apartments up for sale, Przeździecka said. Marcin Liberski, the marketing and sales director at developer Atlas Estates, argued that the company has seen a lot of

interest in the smallest apartments available in its projects. One of the ongoing schemes includes units sized from 25 sqm to 30 sqm, all of which have already been sold. “If we decide to plan apartments sized less than 20 sqm, the crucial thing will be ensuring the proper functionality of such units so that the right balance is struck between the small apartment area and the meeting of the expectations of potential buyers,” Liberski said. According to Horbaczewski, microapartments have a chance to catch on in the markets in Warsaw and in other large cities in Poland where there are many potential tenants and there is a constant inflow of new inhabitants. In those locations, the accommodation needs of the inhabitants will not be met for a long time yet so there will continue to be room for new residential supply, including very small units, even if the price per sqm of the smallest apartments is higher than the price per sqm of large apartments. Investors may find the relatively low total price of micro-apartments attractive and it is that price that the developers of such units will certainly focus on in their marketing activities, Horbaczewski said. Also, Mendel said that the prospects for this market segment seem to be moderately positive. “The scale of the market for such products is difficult to assess. From the supply side, it depends mainly on the availability of land plots with the proper land use designation. When it comes to demand, the market still seems to have room for growth,” Mendel said. ◆

Image: Ochnik Development

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LOKALE IMMOBILIA / INTERVIEW

Catering to investors

I N T E R V I E W B Y A DA M Z D R O D OW S K I

WBJ Observer talked to Marek Roefler, the management board president at developer Dantex, about the current trends in the residential market in Poland and the companyâ&#x20AC;&#x2122;s development plans for the future

WBJ Observer: The number of new apartments that developers put up for sale in the third quarter of this year has decreased by 20 percent q/q, according to Reas data. Is this a sign of an upcoming market slowdown? Marek Roefler: We are still witnessing a large supply of apartments in the market. The 20 percent decrease in the number of new apartments that appeared in the market in Q3 is, in our opinion, something natural. One should bear in mind that from the beginning of 2017 banks will require higher, 20-percent down payments from those applying for mortgages. The Reas data is evidence of the stabilization of the market, which should maintain the balance between the demand and the supply, for the benefit of both developers and apartment buyers. Apartment sales in the largest cities have remained at a record high level in the last few quarters. Will developers be able to achieve equally good sales results next year, when the subsidies granted within the governmentâ&#x20AC;&#x2122;s MdM program are more restricted? The impact of the MdM program on sales levels has been considerable. However, we should remember that the program is not the only factor influencing the market of new apartments. There is still the lack of an attractive alternative for investors on the market. Bank deposits, shares traded on the Warsaw Stock Exchange and fund shares cannot offer the same returns that are offered by the property market. Developers are coming up with new instruments that allow investors to make money from renting apartments.

Will the recently introduced National Housing Program (Narodowy Program Mieszkaniowy), which is aimed at increasing the availability of apartments with

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Images: Dantex

What is the percentage share of purchases for investment from the total sales? In the case of our company, purchases for investment purposes account for approximately 30 percent of the total apartment sales. To make sure that we have attractive properties in our offer, we buy plots in the best locations across Warsaw. This not only requires a thorough analysis of the market and the prospects for the development of infrastructure in the given locations, but also involves significant upfront investments in future projects.

LOKALE IMMOBILIA / INTERVIEW

relatively low rents, have any major impact on the residential market in Poland? Programs of this kind are much needed, especially by those who are just beginning to live on their own and for those with lower wages. We need to remember though that the availability of the apartments in the program will be limited and it is not yet known exactly when and where the apartments are to be developed. The existing residential market regulations, in particular the so-called recommendations “S” and “T,” have already resulted in a kind of selection of potential apartment buyers. The aim of the recommendations was to lower the number of defaults on mortgages and they have, in a natural way, resulted in stricter lending policies of banks. Developers’ clients need, from the beginning, to be financially prepared for a planned apartment purchase and are rather unlikely to be interested in the apartments offered in the National Housing Program. So, even though its details are not yet known, we do not expect the program to have a major impact on the market.

The Wola district of Warsaw, where many of your projects are located, has emerged as the location with the largest number of new residential schemes in the city of late. Will the high development activity in the district continue in the coming years? Wola has huge potential – there are still many interesting plots of development land there. Additionally, the location of the district and its excellent, both existing and planned infrastructure translate into lots of interest in the market. This trend is now being reinforced by the extension of the second subway line, which is a strong magnet for clients. Which other locations in Warsaw are the most promising at the moment? Apart from Wola, the Praga Południe district also deserves attention – that is why we are now developing the large Rondo Wiatraczna investment there. We are interested in all locations that have investment potential. Buyers are currently very much aware of their needs, which requires developers to invest in high-quality projects.

Is Dantex planning to enter any markets outside Warsaw in the near future? Our development activity is focused on Warsaw. We know the market very well and have adapted to its dynamics and specificity. We still have a lot to do here, but of course we are keeping a close eye on markets in other large cities too. How many new residential projects will Dantex launch next year? And where they will be? Next year, we plan to launch construction work on five projects. These will include another phase of the popular Przy Arkadii project, as well as new schemes located in the Wola, Mokotów and Bemowo districts – their details are yet to be revealed. Your WolskaKwadrat project in Wola is one of the first schemes in Poland to offer so-called micro-apartments. Who is such a product targeted at? Micro-apartments WolskaKwadrat is an investment offer targeted at those who wish to earn money by renting apartments. This is a comprehensive product that does not require any major engagement on the part of the buyer as a professional operator is in charge of the management and the rental of the property. Due to the small size of the apartments, the minimum investment threshold is relatively low – a down payment of PLN 15,000 is enough to invest in the safest instrument available in the market. Will this segment of the market develop in Poland? Dantex is one of the first developers in Poland to offer rental micro-apartments in the condo system. We are aware of the fact that this is a new product that has come to our country from well developed markets. Only when the product is professionally prepared, when an experienced operator is provided and continuous rental and management are guaranteed, will schemes of this kind become more popular in the market. Meeting several other conditions is important too. The location of the project needs to be attractive for potential tenants. The quality of the service needs to be comparable with that seen in high-quality hotels. Last but not least, one needs to find the abovementioned operator, who will shoulder the full responsibility for the management and rental processes. We are convinced that the percentage share of such investments in the market in Poland will continue to rise. ◆

WBJ OBSERVER • dEcEmBER-fEBRuaRy 2016/17

LOKALE IMMOBILIA / LOGISTICS

B Y B E ATA S O C H A

The last mile

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Images: Shutterstock

URBAN LOGISTICS IS BECOMING A HOT TOPIC THESE DAYS. WAREHOUSES ARE NO LONGER ONLY BUILT NEAR HIGHWAY INTERSECTIONS. ATTENTION IS SHIFTING TO THE LAST-MILE PROBLEM WITH EVER MORE CREATIVE WAYS OF SOLVING IT R

LOKALE IMMOBILIA / LOGISTICS

E-commerce has changed the way we see not only retail, but also logistics these days. Online sales were worth PLN 15.7 billion in 2015 in Poland alone, which accounts for 5 percent of Polish retail in total, according to research firm PMR. There are already 13 million online stores operating in the country. With the growing competition, retailers’ no. 1 priority is maximizing customer satisfaction, which also means

cutting delivery times. Same-day deliveries are already becoming yesterday’s news in the logistics business. Now, four-hour deliveries are becoming “the new black.” “With e-commerce it’s all back to location, location, location. It’s about being next to large population centers,” siad Ben Bannatyne, president of Prologis for Europe. According to Robert Dobrzycki, CEO of Panattoni Europe, we are seeing a big shift

right now location-wise, with e-commerce being the main driver. “The occupier side is determining what we build. E-commerce facilities, including large fulfillment centers and distribution facilities are very labor consuming. Highways are always important, but labor is the key factor right now. Those big facilities are getting closer and closer to cities, which is creating big challenges,” he said. Apart from labor shortages, limited land supply is one of the main challenges, particularly in Western Europe. That’s why retailers need to be increasingly creative in ensuring their customers’ satisfaction. “Last mile is getting a lot of attention. In the omni-channel concept, stores are the last mile (in the click-and-collect model),” stated Mo Barzegar president/CEO of Logicor. However, for pure online retailers, warehouses and distribution centers are still the way to go. That is why “Amazon wanted a facility within a one-hour drive to London,” he added. Reverse logistics is further complicating matters for online retailers. “If you look at

WBJ OBSERVER • dEcEmBER-fEBRuaRy 2016/17

LOKALE IMMOBILIA / LOGISTICS

traditional brick-and-mortar retail, returns have always been at a steady 7 percent. When you consider e-commerce, returns go up to 25-40 percent and every single item has to be inspected by hand. Return centers need a lot of people who will be look at, feel, touch and smell every object that comes back,” explained Ian Worboys, CEO of P3 Logistic Parks. Smaller and more expensive

With logistics clawing its way deeper into large population centers, space is becoming more and more of an issue. “With demand for quicker delivery times, we need to bring the last-mile sortation and distribution centers within the city. If you go inside Paris, there’s a four-five storey building where Amazon has taken up space. It’s like a traditional multi-storey warehouse you can see in Tokyo, with parking on the rooftop.

Clearly, we’re going to see more multi-storey warehouses being developed within the cities,” stated Barzegar. Given the shortage of available land near and within city areas, some declining outof-town retail parks could be transformed into urban logistics hubs, as a report by UK law firm Addleshaw Goddard suggested. “Ecommerce growth and an increased global flow of goods are big drivers of change, but if we fail to deliver new employment space, then the stark reality is that some retailers will not be able to expand their online operations and others will be forced to significantly raise delivery charges to meet the increased costs of warehousing. This will ultimately affect consumer choice and value,” said Jonathan Powling, partner at Addleshaw Goddard. Perhaps in a few years, an entirely new asset class will appear. “You’re going to see a convergence of use: maybe with logistics on the ground floor and with residential

DECEMBER-FEBRUARY 2016/17 • W

Multi-storey or mixed-use?

apartments on top. Innovative developers are going to experiment with this product and I think cities and planning commissions are going to be open to it as well,” Barzegar added. Innovation is already making waves in the logistics industry, as Amazon – the e-commerce leader in more than just size, continues to experiment with drone deliveries. Worboys, however, is convinced they will ultimately find use in cross-country shipments rather than inner-city parcel deliveries, due to the safety regulations that are becoming increasingly complex. Alternative routes

However, robots may in fact become a standard delivery option in other places. MIT engineers are developing autonomous boats (aptly called “Roboats”) that could potentially use urban waterways to speed up deliveries and take some load off the overcrowded streets. The prototypes are

Image: Shutterstock

E-commerce is therefore no longer only about large fulfillment centers. It’s also fueling demand for smaller units. “We may be big box developers, but we’re also developing little 3,000 sqm units for the likes of DHL,” said Worboys. Segro is also interested in delivering small business units. “It’s worth stressing that e-commerce is no longer only about major players, but increasingly also smaller e-stores, with local reach. … [SBUs] are a perfect fit for smaller companies and they can be a logistics base for internet retailers as well as delivery firms,” said Magdalena Szulc, head of Segro for Central Europe. “The smallest modules start from only 300 sqm and as warehouse/office projects they are an ideal solution for companies looking for good locations within the administrative limits of a city, suitable surroundings and easy access to transport infrastructure,” she added. Apart from the location and size, e-commerce is changing the inside of the warehouses, too. Logistics centers clearly need larger social areas and more car parks (unless they are highly-automated, since – you know – robots don’t need that many bathrooms), as well as more expensive equipment to speed up the shipment processes. Interestingly, tenants now invest even twice as much as developers in outfitting their facilities and installing sophisticated equipment, “which is good news for us, as landlords and long-term owners, because we know they are not going to move out quickly,” explained Worboys.

IX Bal Doroczny

Stowarzyszenia Greckich Przedsiębiorców w Polsce

LOKALE IMMOBILIA / LOGISTICS

Stowarzyszenie Greckich Przedsiębiorców w Polsce

W imieniu Zarządu Stowarzyszenia HERMES mamy przyjemność zaprosić Państwa na tradycyjny IX DOROCZNY BAL w piątek 3 lutego 2017 roku o godzinie 20:00 w Hotelu Sheraton (ul. Prusa 2, 00-493 Warszawa)

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WBJ OBSERVER • dEcEmBER-fEBRuaRy 2016/17

LOKALE IMMOBILIA / LOGISTICS

THE ECONOMICS OF 3D PRINTING

ITEMS

W R A W R R A PA S A

RETAIL PRICE RANGE

.8 4 .22 9.00 104.48 82.84 812.8

COST TO 3D PRINT 2. 0. 0 10. 9

report, after oshua Pearce 201

scheduled for testing in Amsterdam in 2017. The initial stage of the project will take five years. “This project imagines a fleet of autonomous boats for the transportation of goods and people that can also cooperate to produce temporary floating infrastructure, such as on-demand bridges or stages that can be assembled or disassembled in a matter of hours,” said Carlo Ratti, professor of the practice of urban technologies in the MIT Department of Urban Studies and Planning (DUSP). Although currently focused on water cities, like Amsterdam, the prototype could find a more widespread use, as some 80 percent of global economic output is concentrated around coasts and rivers, while approximately 60 percent of the world’s population lives is such areas. “By focusing on the water system of the city, Roboat can create opportunities for new environmental sensing methods and climate adaptation. This will help secure the city’s quality of life and lasting functionality,” said Arjan van Timmeren, professor and scientific director at the Amsterdam Institute for Advanced Metropolitan Solutions in the Netherlands, which is cooperating with MIT on the project.

centers supported by hyperlocal distribution facilities that allow for orders to specific postcode groups to be consolidated, be it to parcel shop networks, homes, or offices,” stated Tim Robinson, chief executive at Doddle, a UK-based parcel and delivery firm, and contributor to the report. “That will allow carriers to pay the costs of triplehandling out of system, while also consolidating locally and getting the benefits of consolidation at a regional level,” he added. Just print it

Perhaps there is an altogether different way to solve the last-mile logistics problem. DHL analysts claim that 3D printing may in fact disrupt the manufacturing and logistics industries in the not-so-distant future. Until recently, 3D printing was seen mainly as a gimmick, used predominantly by engineers and designers for prototyping as well as a toy for the affluent. However, recent cost analysis shows that many items can be sold cheaper if they are printed rather than manufactured offshore, then stored and shipped over long distances. Accord-

Tech to the rescue

This is not the only way modern technologies could help the overburdened logistics industry. With costs of storage and shipping getting higher in almost every European market, logistics firms as well as retailers are looking into increasing the costefficiency of their shipments. Big data and cloud-based storage could help companies to improve their supply chains, cut down on storage costs and speed up deliveries. As the Addleshaw Goddard report suggested, this could be particularly important for the fashion industry, where expediency is vital in meeting new trends. “We’ll see tech-enabled, high volume, high-throughput national distribution

DECEMBER-FEBRUARY 2016/17 • W

ing to a report prepared by DHL, a jewelry organizer can cost anywhere between $9.00 and $104.48, whereas the same item can be printed for less than a dollar (see table). “This shows that leveraging 3D printing in the right product segments makes sense. It can especially provide great value where there is a high level of complexity and customization in the design and production of a product, as well as where there is a need for smaller batch sizes,” DHL innovation analysts stated in the report. “Of course, not all products and parts can and will be 3D printed. Therefore it will be essential to understand early on where 3D printing will be advantageous to your manufacturing and supply chain strategies,” they added. Whichever route the logistics industry takes, there is little doubt that it will have to continue to evolve as shopping habits and consumer needs develop. Perhaps one day big box warehouses at highway intersections and giant trucks will be as antiquated to delivering goods as telegrams and handwritten letters are to delivering news. ◆

Image: Shutterstock

Source

GADGETS TECHNOLOGY TO MAKE YOUR LIFE EASIER

Price: $199

Price: $150

Nanoleaf Aurora is a modular LED panel lighting system that you can arrange in any pattern you like. The kit comes with nine triangular panels. You can control the colors by voice or by an app. It should also work with most major home automation systems on the market. Each panel can connect to another by any of its three edges. The order you arrange them is how they'll show up in the app and you'll be able to configure lighting changes that sweep cleanly across each panel.

In the era of smartphones, a gadget like the Star Trek communicator, while back in the 1960s looked like an amazing piece of technology, now looks a little bit obsolete. Still, if you are a massive fan, owning a working replica might be a dream come true. It pairs with your phone via Bluetooth. You answer calls by flipping the cover, just like on the show. It also has an impressive 100-feet range. It comes with a stand for wireless charging.

Nanoleaf Aurora

Nanoleaf.me

Shop.startek.com

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Images: Paramount, Nanoleaf, Kobold, Plantronics, Chefsteps, Rokblok

Star Trek communicator

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.

RokBlok

Portable vinyl players, while not very popular, have been on sale for many years now. The RokBlok, however, puts a little spin on the idea. Instead of the whole turntable, with the needle and other necessary elements, the RokBlok is a… block. The 5x5x11 cm cuboid packs all the needed elements, including speakers, although for better sound quality it is recommended to use an external Bluetooth speaker. You just lay a vinyl record on a flat surface, put the block on it and that’s it. The block has rubber wheels and ensures that the center of gravity does not rest on the needle to prevent widening the grooves.

Joule

Sous vide, a cooking technique in which food is cooked at low temperatures has been a trend in the gastronomy world for years. No wonder that there have been a number of devices priced and designed to use in your home. Joule is one of them. App-controlled, it heats the water to the desired temperature and cooks food, you can also choose from a number of presets. Price: $199

Chefsteps.com

Plantronics Explorer 500

rokblok.co

Bluetooth headsets have evolved over the years. Now, they’re not only for talking while driving, but also to communicate with apps like Siri, Cortana or Google Now. The Explorer 500 recognizes three languages: English, Spanish and French. It comes with HD audio and noise canceling technology. It also comes with a handy strap that you can loop around your bag or keychain when you don’t have to use it, as you don’t want to be caught with a headset in your ear. It’s not 1999 anymore after all. Price: $50

Plantronics.com

Price: $99

Kobold VG100

The Kobold VG100 window cleaner is a glasscleaning device. Equipped with a battery, microfiber cloth, a tank for water and cleaning agent, it can clean some 20 sqm of glass. It coats the windowpane with a cleaning liquid, which it then vacuums off leaving your glass shiny as new – without any streaks. And after using, you just wash the cloth, charge the battery and you can clean glass surfaces again. Price: £250

Kobold.vorwerk.co.uk WBJ OBSERVER • DECEMBER-FEBRUARY 2016/17

EVENTS / INVESTING IN POLAND

THE INVESTING IN POLAND 2017 PROJECT CULMINATED WITH AN EVENT HELD AT THE WARSAW STOCK EXCHANGE. BESIDES THE ANNUAL, WHICH WAS PUBLISHED FOR THE EIGHTH STRAIGHT YEAR, WARSAW BUSINESS JOURNAL GROUP ORGANIZED A LAUNCH CONFERENCE WITH DISCUSSION PANELS AND AN AWARDS CEREMONY

The

INVESTING IN POLAND 2017

(L-R) Jacek Ciesnowski, Editor-in-Chief, WBJ Group; Nadia Bouacid, Head of Business Development Unit, The Polish-French Chamber of Industry and Commerce; Ewa Łabno-Falęcka, Head of Corporate Communication and External Affairs at Mercedes-Benz; Jeroen Van Der Toolen, Managing Director Central & Eastern Europe at Ghelamco; Katarzyna Soszka-Ogrodnik, Spokesman and PR Manager at German-Polish Chamber of Industry and Commerce

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event, as always, attracted experts, businesspeople and decision makers. At the first panel discussion, we talked about FDIs in Poland and what challenges are still hampering them. We also discussed what has changed in Poland in the last two decades when it comes to the investment landscape. “The infrastructure [or lack thereof] has stopped being an issue,” said Katarzyna Soszka-Ogrodnik, Spokeswoman and PR Manager at the German-Polish Chamber of Industry and Commerce. “Ten years ago it was one of the biggest concerns among German companies, while nowadays they rarely ask about it,” she added. The other change came from Polish administration, which has begun to implement a more proactive approach to foreign investors. “Ten years ago, a lot of the cities were not prepared well enough to really attract foreign investors. Many people didn’t speak English. Now it’s totally changed. For example, the mayor of Katowice came to us himself, asking to build modern office space to attract companies. We needed to finish the project by a certain date so they gathered everyone who was needed to complete the paperwork and we worked out all the details in one meeting. The mentality has changed; that is why Poland is so successful. So many of our employees are studying at the weekends,” said Jeroen Van Der Toolen, Managing Director Central & Eastern Europe at Ghelamco. Red tape, however, can still be an issue. “Without hard work the investment will fail. For example, we’re now finalizing a deal with one French investor that took two years of work, there were moments when we were sure that everything would collapse, luckily all sides persevered,” said Nadia Bouacid, Head of Business Development Unit at the French Chamber of Industry and Commerce in Poland.

EVENTS / INVESTING IN POLAND

This was seconded by Ewa Łabno-Falęcka, Head of Corporate Communication and External Affairs at Mercedes-Benz, the company that will invest €500 million in a new engine factory in Jaworze. “We had to negotiate with so many different authorities, from ministers to local entities, it was very hard work, but it ended successfully,” she explained. SEZ: good but not key

The topic of incentives was also brought up, with Poland being the only EU country with Special Economic Zones. Most agreed that while they serve a purpose, they’re not a tool that serious companies consider when making their decisions regarding investments. “Our investment is worth €500 million, while public aid we’ll receive is worth €18 million. We’ll spend three times as much on training our employees. We’d build this factory anyway, whether it was in a Special Economic Zone or not,” ŁabnoFalecka said. Innovations where are thou?

Images: Tomasz Mateusiak/ WBJ

The second panel focused on investing in innovative industries and Poland’s potential as an innovation hub. Poland continues to trail other EU economies in innovation rankings, placing 23rd in the latest European Innovation Scoreboard. According to Bartosz Niedźwiedzki, Director of Innovation Management team at EY, one of the reasons for the poor ranking is the fact that companies don’t report their R&D activity because they have no incentives to do so and no sanctions for failing to report.

(L-R) Ogierd Bałtaki, HR Director at Samsung Electronics Polska accepting the Investment of The Year statuette from Małgorzata Zaleska, President of the WSE

The ranking shows that despite Poland’s low overall score, there are areas where it is ahead of the majority of EU economies: in innovation activities unrelated to R&D (such as equipment and license purchases), number of industrial design and trademarks in relation to GDP and in education. It is clear that the Polish economy isn’t lacking human capital or creativity, or even money. “What Poland is short of is cooperation,” said Łukasz Leśniewski, Head of Economic Analysis Department at Polish Information and Foreign Investment Agency (PAIiIZ). Panelists pointed to some of the government’s past mistakes in fostering Poland’s innovative industries, including the decision not to buy Polish Iryda airplanes.

(L-R) Ryszard Jania, CEO of Pilkington Automotive Poland recieves the Investment of the Year award from Małgorzata Zaleska, President of the WSE

“If the Polish government decided not to purchase Iryda planes, how could we expect other countries to buy them?” said Jacek Łęgiewicz, Director at Samsung Electronics Polska. He did, however, commend the government for its shift in policies towards investors already present in the country. “For some five years, government agencies have switched from trying to catch new investors to working with those that have already gotten to know Poland, so that they continue to invest in the country,” he stated. The continued cooperation was also highlighted by Niedźwiedzki, who insisted that Poland is unlikely to attract cuttingedge investments if it doesn’t accept that

(L-R) Ewa Łabno-Falęcka, Head of Corporate Communication and External Affairsat MercedesBenz; Tomasz Pawlak, WBJ Group Sales Director

WBJ OBSERVER • DECEMBER-FEBRUARY 2016/17

EVENTS / INVESTING IN POLAND

investors begin their presence with simple processes, such as manufacturing. He stressed that: “We keep saying that we don’t want assembly lines in Poland. However, a lot of companies that started out with assembly plants in Poland now have R&D centers here.” Przemysław Kosek, Director at S&T Services Polska, also pointed to opportunities that lie ahead, including in the not-so-obvious

(L-R) Radosław Górecki, Communications Manager at Ghelamco recieves the Investment of The Year award from Małgorzata Zaleska, WSE President

industries. “There is a large investor in Poland producing lighthouses, a product that Poland has very limited demand for. These goods are produced here and sold to other countries,” he said. Investment of the year awards

The initiative marks the fifth time Warsaw Business Journal Group handed out the Investment of the Year award. Based on

various factors, ranging from the amount invested, innovativeness, local impact, number of new jobs created and long-term effects on the Polish economy, the Warsaw Business Journal Group editorial team picked Samsung Electronics Poland and its plant in Wronki, Pilkington Automotive Poland for its car windshield factory in Chmielów and Ghelamco for the Warsaw Spire office complex.

WBJ Group would like to thank our partners Strategic Partners:

Business Partners:

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Specialized Translations

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Images: Tomasz Mateusiak/ WBJ

(L-R) Beata Socha, Managing Editor, WBJ Group; Jacek Łęgiewicz, Public Affairs Director at Samsung Electronics Polska; Bartosz Niedźwiedzki, Director of Innovation Management Team at EY; Łukasz Leśniewski, Head of Economic Analysis, PAIiIZ; Przemysław Kosek, Director of Special Projects at S&T Services Polska

N TT SS // C H E M I C A L I N D U S T R Y S U M M I T EE VV EE N

CHEMICAL INDUSTRY SUMMIT & AWARDS GALA The 5th edition of the “Chemical Industry Summit & Awards Gala” took place on November 21 at the Sheraton hotel in Warsaw and culminated in the Polish Chemistry Diamonds award ceremony. The topics discussed during this year’s summit included the competitiveness of Polish and European chemistry, the coal gasification project, the chemical industry in the context of the “Morawiecki plan,” and the methods of increasing the innovativeness of domestic companies “We are honored to once again meet such an outstanding group of leaders from the most important entities in the chemical industry. We are glad that the conference is becoming more and more popular every year, especially since this year it is taking place under the honorary patronage of Jarosław Gowin, Minister of Science and Higher Education,” said Beata Radomska, the CEO of Executive Club. The first panel concerned the changes taking place on the gas and oil market in the context of increased shale mining in the US, which has transformed into an exporter, and whether the deteriorating position of Europe can be compensated for with good logistics. During the second panel of the conference, speakers talked about the chances for the implementation of the “Morawiecki plan” and their understanding of the notion of “economic patriotism.” “Innovation” was the keyword of the last panel, which was also focused on explaining why Poland is so low in European classification. When the debates ended, a letter of intent was formally signed between BASF Polska and the Institute for Chemical Processing of Coal. Andreas Gietl, President of the Management Board of BASF Polska and Aleksander Sobolewski, Director of the Institute, participated in the ceremony. Outstanding representatives of the chemical sector gathered for the fourth time to participate in a formal gala, which has become known as one of the most important initiatives in the industry. This year, the Competition Jury, chaired by Michał Kleiber, chose winners in eight categories: Legal advisor of the year: Weil Gotshal & Manges; Strategic advisor of the year: Fluor; Chemical company of the year: PCC Rokita; Start-up of the year: Sat-Agro; Start-up of the year distinction: Smart Nanotechnologies; Ambassador of the chemical industry: BASF Polska; Investment of the Year: Synthos and Grupa Azoty Puławy; Personality of the chemical industry: Przemysł Chemiczny monthly and Jerzy Majchrzak; Business Executive: Mariusz Bober, President of the Management Board of Grupa Azoty.

DECEMBER-FEBRUARY 2016/17 • W

OFFICE BUILDINGS IN POLAND / EVENTS

DO NOT BE COMPLACENT

Images: Executive Club, Nowy Adres

The Polish office real estate market is in fairly good shape. But we can’t afford to rest on our laurels, as looming threats and market changes may significantly increase competition between entities operating in the real estate segment over the next few years – this is how, in a nutshell, we could sum up the conclusions reached by the participants of the 9th edition of the “Office Buildings in Poland” conference, organized by Nowy Adres, which took place on October 19-20 at the Hilton Hotel in Warsaw The conference kicked off with the lecture “Brexit and the office real estate market – hard times ahead, or something to cheer about?” delivered by renowned economist, former Prime Minister and chairman of the National Bank of Poland, professor Marek Belka. He had some optimistic news for the real estate segment: in his opinion, the Polish economy, despite political turmoil, is doing well and the effects of Britain’s exit from the European Union structures will be negligible. “Against the background of developing countries, Poland has no problems with inflation, corruption, crime and the issues of currency convertibility, while our economy keeps increasing its price competitiveness. We have the lowest level of con-

sumer goods and services prices in the entire EU and among OECD countries. Labor costs are 20 percent lower than in Czechia and Slovakia. Consumers are in a great mood, housing is in its best shape in years. Despite a low rate of absorption of EU funds at local government level, I see no reasons why our 3 percent annual growth rate should not be maintained,” said Belka. In his opinion, however, we should not expect a massive capital outflow from the British market to the Polish office sector. “Today it is hard to predict exactly what the effects of Brexit will be – it is a fact that is yet to come. But I don’t expect a relocation of the City of London to Warsaw. Some 31 percent of the capital flowing into Europe’s commercial real

estate market is located in the UK. Investors still see London as a supraregional financial center and this is where bank headquarters and service centers are located. For comparison, only 1.4 percent goes to Poland. We should also be concerned because Brexit is a huge blow to the cohesion of the European Union” Belka added. Consultancies: adapt the offer to market requirements One highlight was a discussion panel featuring partners and managing directors of international consultancies operating in Poland. It was the first ever meeting of this kind in our market and it attracted great interest among the conference participants. The panel participants agreed that internet growth and related rapid changes in the awareness of both tenants and office building owners are forcing consultancies to change their profile and constantly expand their range of services, for example, to include office relocation management or finishing. “Fifteen years ago the market was more broker-like, our work was mostly about connecting tenants with landlords. Now the market has matured and consultancies have to bet on services, there is no other way,” said Tomasz Buras, managing director and board member at Savills. ◆

WBJ OBSERVER • DECEMBER-FEBRUARY 2016/17