WBJ Observer October 2015

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OCTOBER 2015

Number 10 (21)

OF REAL ESTATE N EWS

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

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Market resurrected? NEW SILK ROAD

How the real estate sector can bounce back to last year’s levels

TICKET TO CHINA POLAND WANTS TO CASH IN ON THE NEW SILK ROAD 25 BANKING ON INNOVATION WHY POLISH BANKING IS THE MOST MODERN IN THE EU 30 BOUND BY RED TAPE POLISH ENTREPRENEURS AND BUREAUCRACY 33

OCTOBER 2015

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

APRIL 2015 • WBJ OBSERVER

WBJ OBSERVER • APRIL 2015

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lll IN THIS ISSUE 20-24

INTERVIEW WITH JANUSZ LEWANDOWSKI

Try these:

lll NEWS

25-29

NEW SILK ROAD

4-11 In Review Latest news 12 Dateline 13 Economy

lll COMMENTARY 14 Law Construction code 15 CFM Risk-free leasing 16 IT Smart cities 17 Logistics Innovations 18 Investment Make in India 19 IT Printing

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30-32 Modern banking Innovative solutions 33-36 Entrepreneurship Burden of bureaucracy 72-73 Ranking Banks 74-75 Events Economic Forum in Krynica

lll LIFESTYLE

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76-77 Gadgets 78 Book review 80 Warsaw film festival

LOKALE IMMOBILIA

SEPTEMBER 2015 • WBJ OBSERVER

WBJ OBSERVER • OCTOBER 2015

lll INREVIEW NEWS

News highlights of the past month

he European Commission wants Poland to resettle 11,946 asylum-seekers from Italy, Greece and Hungary and an additional 962 from non-EU European countries, making it 12,908 in total, according to an official document released by the EC. President of the EC, Jean-Claude Juncker said during his State of the Union address that European history has been marked by refugees fleeing

OCTOBER 2015 • WBJ OBSERVER

from political and religious persecution. “Have we forgotten that 20 million people of Polish ancestry live outside Poland as a direct result of political and economic emigration after the many border shifts, forced expulsions and resettlements during Poland’s often painful history?" Juncker asked. He acknowledged that “Europe cannot house all the misery of the world, but let us be honest and put things into perspective,” arguing that refugees

currently represent just 0.11 percent of the total population of the EU. He also said that “Europe had made the mistake in the past of distinguishing between Jews, Christians and Muslims.” Polish daily Rzeczpospolita stated that, in justified cases, a country may opt out of taking in refugees for a period of one year, but will have to pay 0.002 percent of its GDP, which amounts to PLN 35 million in Poland's case.

Image: Shutterstock

EC: Poland to resettle nearly 13,000 migrants T

NEWS

WBJ OBSERVER • OCTOBER 2015

NEWS

Shorts

Nazi gold train found in Poland?

Poland's upper chamber of parliament has decided to revert to the original version of the bill on foreign currency mortgage conversion, which stipulates that the cost of such conversions would be split equally between banks and borrowers. Previously, the lower chamber of parliament had proposed a bill, which placed the burden mainly with banks, who would have been responsible for covering 90 percent of the cost. Now the bill will return to the lower house where it will be discussed further by the financial panel. The head of the panel told Reuters in early September that it may take a long time before the bill is passed. MERLIN.PL PUT UP FOR SALE Ailing retail group Czerwona Torebka is set to sell its main asset, e-store Merlin.pl, Puls Biznesu informed quoting a few "independent sources." The daily said that the company is abound with problems: it posts losses each quarter, the CEO has just stepped down and the main shareholder Mariusz Świtalski remains unavailable for comment. Czerwona Torebka has recently sold its retail chain Małpka and now is preparing to sell Merlin.pl. Puls Biznesu said that bookstore chain Matras may be interested in the takeover.

Goldman Sachs to expand Warsaw branch

American investment giant Goldman Sachs plans to develop its Warsaw branch. There is currently a small team of investment bankers employed in the Polish Capital headed by director Artur Tomala. Recruitment of IT specialists has already been underway for several months. Over the next three years, the company plans to increase activity and hire between 200 and 500 new employees, particularly in the technology and operations departments. The technology department will be tasked with designing, implementing and offering technical support concerning the bank's IT systems. The operations department will provide support for Goldman's services in the scope of banking, brokerage, trading and asset management.

19% 6

OCTOBER 2015 • WBJ OBSERVER

is the amount of Poles who fear losing their job

In August, two men said that they had found a Nazi train full of gold, gems and guns that had disappeared during World War II, Polish media reported. The train is believed to have gone missing near what is now the Polish city of Wałbrzych. At the end of August, the city's authorities announced at a press conference that the train had indeed been found. "The find is within the administrative borders of the city. In line with the law, we are obliged to inform specific ministries, which are responsible for undertaking appropriate steps," said Zbigniew Nowaczyk, vice president of Wałbrzych. A few days later, however, the governor said that "based on the documents received, it is inconclusive whether the train really exists." The media said the men have demanded ten percent of the value of the train's contents. Image: Shutterstock,

SENATE CHANGES ACT ON FX MORTGAGE LOANS

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NEWS

Orlen to spend nearly PLN 11 bln by 2017 P

oland's largest oil company is planning to invest some PLN 10.8 billion on its continued development within the company's strategy between 2014-2017, according to its Integrated Report. Orlen believes that this year "will see further significant fluctuations of crude oil market prices," a report indicated. The refiner enumerated some market risks that it may face in the near future, such as changes in refining and petrochemical margins on products sold, changes in the Brent/ Urals differential, changes in the prices of CO2 emission allowances and changes in crude oil and refining product prices. What is more, the company evaluated that it is "exposed to the risk of cash flow changes caused by interest rate movements. Certain assets and liabilities held by the group generate interest income and expense based on floating interest rates." Through the construction of two CCGT (combined-cycle gas turbine) units in Płock and Włocławek, Orlen will

establish "a strong position in the power generation market, and with the group’s modern assets, the investment will generate significant profits, " the report also read. By 2017, Orlen plans to carry out a number of initiatives involving the use of advanced technologies related to its current value chain.

28–29 October 2015 The Westin Warsaw Hotel Recent and upcoming trends in the world of Big Data

STRATEGIC PARTNERS

PARTNER

www.en.bigdatacongress.pl

OCTOBER 2015 • WBJ OBSERVER

NEWS

PPL willing to acquire Modlin airport S

tate-controlled Państwowe Porty Lotnicze (PPL) which owns a 30.99 percent stake in Modlin Airport, has approached the rest of the shareholders with an offer to purchase the entire holding with a view to creating a duoport in conjunction with Chopin Airport, Puls Biznesu daily reported. Military Property Agency (34.43 percent), the Marshall of the Mazowieckie voivodship (30.37 percent) and the

mayor of Nowy Dwór Mazowiecki (4.81 percent) received letters from PPL in May. However, the spokesman at Military Property Agency said that the document does not meet legal requirements and simply shows "willingness" to buy the holding. Nevertheless, "talks between the shareholders regarding the legal feasibilities of the sale are ongoing," she stressed.

€10.000 will be granted by the EU for each refugee resettled

81,2%

Images: Orlen, Port Lotniczy Modlin

of Poles are satisfied with their lives, according to the Social Diagnosis 2015 survey ADVERTISEMENT

SALE OF IMMOVABLE PROPERTY – TAXED OR EXEMPT? VAT payers who have dealt with sale of immovable property, already know that Polish VAT regulations in this respect are highly complicated. But it seems that determining status of sale of immovable property might become even more difficult now since Polish Supreme Administrative Court (NSA) has ruled that provisions related to the sale of immovable property are inconsistent with UE law. As a general, sale of immovable property is taxed at 23% VAT rate. However, at the same time VAT Act exempts sale of immovable property whenever: * sale is performed after “first occupation”, * a period between “first occupation” and sale of immovable property is longer than 2 years. Nevertheless, when the sale meets conditions for applying the exemption, the parties may choose to tax transaction, but only if they notify competent tax office before the transaction. Until now tax authorities have presented the opinion that “first occupation” of immovable property can be conducted only by performing activities which are subject to VAT or exempt from VAT e.g. sale, lease or tenancy. However, in the judgment of 14 May 2015 NSA ruled that first occupation of real property takes place also in case where company uses immovable property for the purposes of its own business activity, which gives new possibility of applying exemption to sale of self-built immovable property used for taxpayer’s own purposes longer than 2 years. Nevertheless, since judgments do not have legally binding effect in Poland for security purposes application of exemption should be confirmed by obtaining tax ruling. Unfortunately NSA judgment has also a dark side, as it put into question already performed immovable properties sales, taxed at 23% VAT despite the possibility of applying exemption (in respect of which tax office has not been informed about choosing taxation option). It may appear now that tax authorities would like to question deducting VAT input in such cases. Therefore also acquirers should think about clarifying status of immovable property transactions by obtaining tax rulings. Kinga Baran, Manager in Mazars Tax Advisory Department, Tax Adviser Malwina Dąbrowska, Senior Tax Consultant in Mazars Tax Advisory Department, Tax Adviser

www.mazars.pl

WBJ OBSERVER • OCTOBER 2015

NEWS

PKN ORLEN TO EMBARK ON RECORD PROJECT IN THE CZECH REPUBLIC Unipetrol, a subsidiary of PKN Orlen and Italian Technip reached an agreement regarding construction of a new polyethylene unit (PE3) at the Litvínov plant in the Czech Republic, a company press release read. According to PKN Orlen, the unit will be "among the most advanced units of this type in Europe." The project is Orlen's largest investment in the Czech market and the biggest in the history of the petrochemical sector in the country, the Polish refiner added. The contract is valued at €213 million and costs are expected to total €314 million. The unit will be launched in 2018. Since entering the market, Orlen has spent €1 billion in the Czech Republic.

200,000 cubic meters of

LNG gas is to be received by Poland in the third quarter of 2015

SEPTEMBER'S REFERENDUM INVALID Voter turnout in the referendum held in September amounted to 7.8 percent, which means that it failed to reach the required threshold of 50 percent to be legally binding. Over 30 million Poles were eligible to make their voices heard on whether they support single-member constituencies, on whether to continue financing political parties from the state budget and if they want to introduce a presumption in favor of the taxpayer in disputes over tax law. As many as 78.75 percent backed the idea of introducing single-member constituencies, 82.63 percent were against financing political parties from the state budget and 94.51 percent said yes to the question on tax law.

PLN 54.6 bln

is the planned budget deficit for 2016

No referendum on October 25 With 35 votes for and 53 votes against, the Senate has rejected President Andrzej Duda's motion for a second referendum on October 25, the same day as the general election in Poland. He wanted to ask the nation, whether they want to lower the retirement age to 65 (for men) and 60 (for women) from the current threshold set at 67 for both sexes. He also proposed asking Poles whether they want to reverse the government’s decision to reduce the mandatory school age to six from seven as well as whether the country should ban the sale of state-owned forests. "I believe that the nation is the supreme sovereign, and the voice of society. The voice of Poles must be heard," said Duda.

21-22 October 2015 The Westin Warsaw Hotel

Establishing Joint Financing Strategy For The Future X Warsaw International Banking Summit – Banking Forum

III Receivables Management Forum

VI Insurance Forum

strategic partners meeting of leaders

strategic partners warsaw international banking summit

strategic partners insurance forum

partner warsaw international banking summit

merit partner

partner insurance forum

www.en.bankowosciubezpieczenia.pl

OCTOBER 2015 • WBJ OBSERVER

Images: Shutterstock,

Shorts

NEWS

Tesco to leave CEE? Following the sale of its South Korean division, Tesco is considering offloading its Central East European business in order to reduce debt, according to a Bloomberg anonymous source, although no decisions have yet been made. The business, valued by Sanford C. Bernstein at £1.9 billion includes over 1,110 stores that generate revenue of £6.45 billion. However, sales have been on the decline for the past three consecutive years amid intense competition from low-cost retailers, the agency pointed out. "In its central and eastern European markets, economic conditions have been tough," Bryan Roberts, an analyst with Kantar Retail, told Bloomberg.

LNG terminal in Świnoujście to be completed this year Świnoujście terminal, which is intended to reduce Poland's dependence on importing natural gas from Russia, will be completed by the end of the year, Polskie LNG, a company formed to secure the investment, informed in a press release. The organization reached an agreement with Italian company Saipem, the main contractor of the scheme, which was due to be carried out last year. In line with the deal, Saipem will not receive a higher payment which stands at PLN 2.4 billion, and will incur severe fines in the case of any irregularities. The first supplies of LNG are expected this year. What is more, an additional technological audit will take place.

FIGURE OF THE MONTH

PLN 10 bln

THE POSSIBLE COST TO POLAND DUE TO CORPORATE TAX EVASION, ACCORDING TO KLUB JAGIELLOŃSKI

WBJ OBSERVER • OCTOBER 2015

COMMENTARY / LAW

ANNA FLAGA-MARTYNEK

MARTA MIDLOCH

LEGAL COUNSEL, COUNSEL AT WKB WIERCIŃSKI, KWIECIŃSKI, BAEHR

LEGAL COUNSEL AT WKB WIERCIŃSKI, KWIECIŃSKI, BAEHR

s a result of the obligations imposed on Poland by EU law, the Ministry of Infrastructure and Development established a committee, whose work has led to the creation of the draft Construction Code (the “Code”). The primary objective of the proposed regulation, apart from the need to implement EU rules, was to increase the transparency and stability of construction law and consequently eliminate uncertainties, systematize provisions of law scattered in different acts, and simplify the construction process. The draft code is currently at the public consultation stage, during which, 53 posts with comments have been reported as so far. The new regulation will replace the current Building Law, which has until now been amended more than 70 times, as well as the Act on Building Products. Among the comments submitted to the draft Code, the main issue centers on the definition of “structure” (in Polish: “budowla”) and “civil structure” (in Polish: “obiekt budowlany”). The definitions contained in current legislation provide the basis for determining property tax, in accordance with the Act on Local Taxes and Fees. The detailed meaning of these definitions has been shaped by extensive case law. Moreover, the current definition of structure is a combination of a negative definition and an extensive list of exemplary structures with diverse features (“any civil structure, which is not a building or small architecture, such as: (…)”).

OCTOBER 2015 • WBJ OBSERVER

In the new legislation, a structure is defined as any civil structure, which is neither a building nor elements of so-called “small architecture”, and construction elements of machinery. A civil structure is defined as a building, structure or an element of small architecture [...]. Even though it is stated in the explanatory memorandum to the Code that the change in both definitions is purely editorial, it entails a risk concerning the interpretation of tax provisions. The risk is compounded by the fact that the proposed wording of the definitions is imprecise. Both definitions define each other mutually, which poses additional difficulties in understanding their meaning. The current definition of structure, supported by case law, facilitates the use of a uniform interpretation. Although the concept of simplifying definitions seems to be sensible, defining “unknown by unknown” creates doubts with very costly possible consequences. Notes on the discussed issue can, so far, be found in seven comments to the draft Code. This makes it the main issue raised in the course of public consultation. Keeping the proposed wording of the above definitions in the final version of the Code may result in lengthy proceedings with tax authorities with a view to rebuilding what has already been built, which seems to be contrary to the leading objective of the proposed regulation, i.e. transparency and simplification of the construction process. u

Image: Shutterstock

Reflections on the draft Construction Code

COMMENTARY / CAR FLEET MANAGEMENT

ARTUR SULEWSKI SALES DIRECTOR, LEASEPLAN POLSKA

Risk-free leasing

he long-term car lease market has been growing exponentially (10 percent annually) for a long time now. This has been particularly evident during the last year, after the economic slowdown ended, every 5th car in Polish company car fleets is on long-term lease. Full service leasing (FSL) is the most popular form of car leasing, thanks to it being a significant money and time saver. Such services are considerably more popular than standard leasing or purchasing car fleets through loans. By implementing economies of scale, CFM partner can help optimize car fleet management. The majority of companies, in the current competitive age, need to focus on core operations and are witness to the positives of outsourcing activities such as car fleet management. Having one partner who can oversee this department, releases employees from time-consuming non-core activities.

The alternative to long-term lease is a mid-term lease. This form combines elements of the long-term lease with a more flexible contract. If a company is involved in seasonal activities or operates from contract to contract, the number of employees can change dynamically which means the size of the car fleet also fluctuates. New start-up companies face similar problems, when they grow, so grows the car fleet. Midterm leases are perfect for fast-growing companies, who have to manage their expenses reasonably. Mid-term leasing allows entrepreneurs flexibility in their activities, as you can lease a car for a short period. This allows you to either expand or reduce your car fleet in an instant. All cars are insured and come with a service package, just as with vehicles leased long-term. Flexibility and freedom in their business activities is what entrepreneurs are looking for today. u

WBJ OBSERVER â&#x20AC;˘ OCTOBER 2015

COMMENTARY / SMART CITIES

MAGDA TACZANOWSKA PUBLIC SECTOR LEAD AT MICROSOFT IN POLAND

mart cities are more than just a high-tech vision of the future, there are numerous solutions currently being implemented in Poland. The residents contact center in Wroclaw, video consultations for cardiac diagnosis at the Silesian Center for Heart Diseases, the School in the Cloud in Ząbki near Warsaw or assisting the deaf in Bolesławiec and Wrocław city offices – these are only a few examples of how technology can improve residents’ quality of life on a variety of levels. According to a United Nations forecast, by 2050, urban areas will be home to 66 percent of the world’s population. Between 2010 and 2025, the 600 largest cities in the world will generate nearly two thirds of global GDP. This implies the need for constant modernization and new ways of enhancing living conditions in urban spaces. The dynamic development of modern technology provides a myriad of new possibilities which can be implemented to meet the diverse needs of citizens and city leaders. At the same time, it is important to adjust the scale of the solutions in order to be able to achieve more with less. As a result, cities implementing “smart” solutions are able to compete more effectively on the global market, promote civic engagement, and foster economic, social and environmental sustainability. In order to make cities smarter, the Internet and dedicated computer systems are increasingly used in key areas such as communications, energy, finance and civic services. In 2016, it is estimated that there will be 8 ZB of data in the world, three times more than in 2011. At the same time, we are witness to the constant growth in the popularity and importance of mobile devices (globally, device manufacturers have sold 11.6 percent more smartphones compared to 2014), which

OCTOBER 2015 • WBJ OBSERVER

drives the need to accommodate growing network traffic (by the end of 2020, 3.7 billion subscribers around the world will be using fast LTE internet services). This is why the security data stored online or in the cloud becomes critical. To counter threats, it is necessary to realize the need for organizational transformation, from changing user habits, through to basic processes such as software updates and finding trusted vendors who are able to provide the best security – e.g. through complete and integrated cloud platforms. To properly implement the smart city strategy, Poland must adhere to the EU’s Digital Single Market strategy. This means that local governments have to look for trusted partners, who will be able to ensure the security and appropriate integration of their services. This is extremely important, especially when faced with increasing threats to digital city spaces. With secure IT solutions, cities will be able to pursue the interests and security of their citizens more efficiently and effectively. u

Images: Shutterstock, Microsoft

Are Polish cities already smart?

COMMENTARY / LOGISTICS

AGNIESZKA WALAWENDER MARKETING & PR MANAGER, FM LOGISTIC POLSKA

The future of logistics

ogistics has entered a new stage. Now an established industry, all the efforts of its scientific community and business operators are directed towards the improvement of existing processes, in order to eliminate unnecessary activities and wastage and to further promote the efficiency of goods flow. Customers are increasingly aware and demanding, expecting better quality and faster services whether buying in a traditional shop or online. They also demand satisfactory post-sale support. They practically expect vegetables harvested in the morning to hit their tables in the afternoon. FM Logistic has implemented many innovative solutions, such as new technologies regarding human labor, including automated guided vehicles, robots used in co packing or put-to-light trolleys allowing for the fulfillment of many orders simultaneously and error reduction. The purpose is to improve productivity and service quality, rather than eliminate the human factor, which is irreplaceable in monitoring task implementation by machines and devices. Logistics companies team up with scientists, searching for unique solutions with a competitive edge. Their collaboration is mutually beneficial. Furthermore, young people engaged in projects can test their knowledge within the real-world operations of a company. The need to reconcile development strategies with environmental issues constitutes a legitimate challenge. Sustainable development, translating into reduced negative environmental impacts, is also crucial in leading logistics operatorsâ&#x20AC;&#x2122; investments and explorations. Fully aware of our tangible impact on the planet, we have long pursued the idea of sustainable development. In 2013, the FM Group joined the Green Freight Europe initiative which promotes European standards relating to calculating, collecting, analyzing and monitoring data on CO2 emissions from transport operations for the sake of the natural environment in Europe. Therefore, FM Logistic requires the use of Euro5

standard vehicles as a minimum from its carriers. Our Italian operation has engaged in the CITYlogin project, delivering goods by electric, zero-emissions vehicles to 1,100 shops throughout the historic center of Rome. This solution will be implemented in other European citiesâ&#x20AC;&#x2122; protected areas. The technology of electric utility vehicles with docking stations on FM platforms is another unique project already implemented on one of our platforms in France. The lean management philosophy is another way of caring about the future, facilitating processes by eliminating unnecessary activities, errors and waste. Most of the market players need to face this challenge in order to maintain their market position and reputation. FM Logistic introduced lean management strategies in its daily operations several years ago, in almost every warehouse and transport process. A dedicated team of experts monitor their implementation at every possible level. By definition, lean management is a permanent process and a specific outlook on services, projects, processes, etc. As one of the largest logistics operators, we intend to invest in the aforementioned fields in the coming years, in order to develop naturally and efficiently, influencing logistics industry standards. u WBJ OBSERVER â&#x20AC;˘ OCTOBER 2015

COMMENTARY / INVESTMENT

JOANNA MAZURKIEWICZ OFFICE DIRECTOR OF INDO-POLISH CHAMBER OF COMMERCE & INDUSTRIES

he Make in India program includes major new initiatives designed to facilitate investment, foster innovation, protect intellectual property and build best-in-class manufacturing infrastructure. Doing business in India just got easier – new de-licensing and deregulation measures are reducing complexity, and significantly increasing speed and transparency. India’s manufacturing infrastructure and capacity for innovation is poised for phenomenal growth: new smart cities and industrial clusters are being developed in identified industrial corridors featuring connectivity, new youth-focused programs and institutions dedicated to developing specialized skills. With the easing of investment caps and controls, India’s high-value industrial sectors – defense, construction and railways are now open to global participation. Policy in the defense sector has been liberalized and the FDI cap raised from 26 percent to 49 percent. Portfolio investment in the defense sector is permitted up to 24 percent under the automatic route. FDIs are now allowed in the defense sector for modern and state-of-the-art technology on a case to case basis. When it comes to rail infrastructure, FDIs up to 100 percent are now allowed in projects such as: suburban corridor projects through PPP, high speed train projects, dedicated freight lines, rolling stock including train sets and locomotive/coach manufacturing and maintenance facili-

OCTOBER 2015 • WBJ OBSERVER

ties, railway electrification, signaling systems, freight and passenger terminals, infrastructure in industrial parks, mass rapid transport systems. Most importantly, the Make in India program represents an attitudinal shift in how India relates to investors: not as a permit-issuing authority, but as a true business partner. That’s why dedicated teams will guide and assist first-time investors, from the point of arrival. There are 25 sectors which have been bookmarked for investments which include, construction, automobiles, tourism, defense, pharma, mining, renewable energy, food processing etc. Poland can collaborate with India in mining, renewable energy, food processing and pharma. There is a lot of interest from Polish companies and there are two business delegations planned in October. One is to Bangalore at the beginning of October and the second is around October 25 to Mumbai and Punjab focused on Agriculture and Food Processing. IPCCI (Indo Polish Chamber of Commerce & Industries ) in conjunction with the Embassy of India and Ministries of economy, agriculture and foreign affairs are quite active in promoting ties between the countries and have two more planned visits on the agenda up to the end of 2015. There is huge momentum between the two countries and most can be gained by SMEs from both countries as they are the ones behind the success of trade and industry between India and Poland. u

Images: Shutterstock

Make in India

COMMENTARY / IT

MICHAŁ GEMBAL CMO ARCUS S.A.

Why is the number of printers decreasing?

ccording to data from Context, deliveries of printing devices throughout the EMEA region (Europe, ME and Africa) decreased by 8 percent in Q1 2015 compared to Q1 2014. The Western European market has entered a period of stagnation (sales are not growing), while demand in the Middle East has decreased considerably. Such data may suggest that digital document flow has ousted printing devices from offices, just as electronic mail and SMSs marginalized traditional mail. Are printers obsolete? No, but other data must be analyzed to see the bigger picture. The numbers are not growing for two reasons. First, multifunction devices (MFDs) are more widely used. MFDs incorporate the functionalities of a printer, scanner, fax and a photocopier. Consequently, the number of devices is not growing – instead of a separate copier and printer, one device is often used. Secondly, companies are increasingly cost-conscious. Rather than buying many small printers, which are expensive to use due to the their low quality, they choose larger devices. Although more expensive to buy, they are much faster, more efficient, and offer advanced

functionalities, such as secure or follow-me print. The initial investment soon pays off due to lower expenditures on consumables and lower servicing costs. Designed to produce numerous printouts, large devices are less prone to developing faults. How do we know that the volume of printouts in companies is not decreasing? According to Convergence Consulting, an average office worker uses about 10,000 sheets (about 20 reams) annually. And according to Gartner, printout volume is growing by 11 percent annually (B/W – 9 percent, color – 19 percent). A growing number of our customers outsource printing, paying us per each printed page. Therefore, we know their print volume is not decreasing. But why, since office digitalisation and new means of communication are progressing? A growing volume of data is collected and processed electronically. However, the total number of data collection systems is also growing. And although many analysis processes are done digitally, at a certain stage printouts are required, e.g. corporate reports to the board. Public administration requirements add to printing more documents. Although regulations allow for a larger variety of documents to be submitted electronically, the option of having a piece of paper stamped is still very important to individuals long accustomed to it. Another reason for the growing number of printouts is… their growing quality. While color laser printouts used to be very expensive due to the high prices of both printers and consumables, nowadays, even small businesses can afford high quality color printing. Hence the popularity of attractive color offers. Does the decrease in the number of printing devices mean that we no longer need print? Paraphrasing Mark Twain’s famous quote, “Reports of print’s death have been greatly exaggerated.” u

WBJ OBSERVER • OCTOBER 2015

INTERVIEW / JANUSZ LEWANDOWSKI

POLAND JOINS THE SUPERLEAGUE I N T E R V I E W B Y E WA B O N I E C K A

WBJ Observer: There is an ongoing debate in the European Union regarding further development of the market economy in our part of the world. Christine Lagarde has said, “we should fix current capitalism.” Meanwhile, in Poland, Marek Belka has said that we must end “exploitative capitalism.” And economists are saying that our economic success, which is based on cheap labor, is coming to an end and we need a new development strategy. What is your reaction to this as the chief of our Prime Minister’s Economic Council?

end up being corrected by the taxpayer. This does not concern Poland, which has a well-regulated financial system. Poland owes its GDP growth, which has risen by some 100 percent since 1989, to the market economy. Likewise, Poles’ standard of living has risen from one-third of the EU average to two-thirds. Instead of criticizing the system, we need to resolve specific issues. One of them is the competitive advantage built on cheap labor, typical for economies that are catching up in the developmental race. Our Economic Council is working on solutions to the problems facing us.

Janusz Lewandowski: There is no reason for our country to yield to pessimistic estimates and forecasts regarding the future of the market economy. There is a fashion for Cassandran prophecies and this is a post-traumatic legacy of the economic crisis which started in the US, but hit Europe hardest after 2008. The source of the crisis was in financial markets that strayed away from the real economy. Hence, the proper reaction is to regulate financial operations, that have little to do with the quality of life of regular citizens. These operations create problems (such as bank failures) which

What is the most essential and viable strategy for Poland and the EU in the current economic climate? How would you describe Civic Platform’s (PO) policy to Polish voters?

OCTOBER 2015 • WBJ OBSERVER

Donald Tusk’s “Warm Water” policy and Mazowiecki’s “Thick Line” have both been misinterpreted. Tusk told Poles that after the “shock therapy” of 1989 and 1990, which drastically changed our country and became a huge challenge for Polish families raised in communist Poland. Tusk meant to say that Poles were due for a time of stabilization, not

Image: Janusz Lewandowski

JANUSZ LEWANDOWSKI, CHAIRMAN OF THE ECONOMIC COUNCIL TO THE PRIME MINISTER OF POLAND TALKS WITH WBJ OBSERVER ABOUT NOT BUYING INTO PESSIMISTIC VIEWS REGARDING THE FUTURE OF THE MARKET ECONOMY IN DEMOCRATIC COUNTRIES

INTERVIEW / JANUSZ LEWANDOWSKI

“THE EURO ZONE IS PART OF THE EUROPEAN UNION AND, UNDER THE INFLUENCE OF THE CRISIS, IT IS CHANGING FASTER THAN THE REST OF THE UNION.

WBJ OBSERVER • OCTOBER 2015

another revolution. The “Warm Water” metaphor was misinterpreted as a failure. Actually, considering that Tusk’s government was in power during the biggest economic crisis since World War II, its time in office was not a failure at all. Effective policies that defended Poland against the crisis were commended around the world. “Warm Water,” in other words – stability in unstable times, will be appreciated only when irresponsible policy decisions cut short the warm water in the faucet – which, I certainly hope doesn’t happen. In effect, we have been witness to an extraordinary modernization of Poland in the last few years. It is apparent to anyone who is not blinded by ideology. We will not be able to convince the blind. Our program is addressed to people who are proud of our common successes in the last quarter century, but understand that the “reconstruction of Poland” is an ongoing concern.

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You are an influential person in the EU. Which policy directions in the EU and the euro zone’s strategy do you support and how will these effect our future economic development?

Union while being outside the core of it, which is the monetary union? I doubt it, but the election campaign is not the right time for serious discussion on the topic.

The euro zone is part of the European Union and, under the influence of the crisis, it is changing faster than the rest of the Union. The common currency zone must change in order to survive. Today, this new architecture – fiscal discipline, stringent demands of security in banking, limits on financial speculation – all of this is in response to the Greek crisis. It is the correct path. Spain, Ireland and Portugal have regained their credibility and today, the entire euro zone offers a favorable economic environment for Poland. At the same time, this is a challenge, which suggests a “double-sided Europe.” We are faced with a strategic decision – what is Poland’s role here, is it possible to co-manage the fate of the

During the current election campaign, confrontations between the main political parties seem to be taking precedence over economic reality. Discussions on economic strategies for Poland are nonexistent. Rather, both parties seem to be focused on making pre-election promises of social aid. Law and Justice (PiS) seem to be the most inclined to this, but the current Prime Minister is also making generous promises about the construction of affordable housing for rent, or the lowering of personal income tax for the poorest. Is Civic Platform making a shift towards social issues and the role of the government in a free market economy?

Image: Senate of Poland

INTERVIEW / JANUSZ LEWANDOWSKI

important for the media to differentiate PiS empty promises from the activity of PO. Today, we are implementing the Prime Minister’s policy plans, while the autumn program will be within the possibilities of our budget. The Sejm may be on its way to accepting a ban on temporary work contracts, but many economists say that a flexible employment market is best for the Polish economy, stating that employers want to improve work culture. This in turn may result in higher pay. What is your opinion on the matter? Civil law contracts, misnamed as “trash contracts,” stabilized our labor market during the crisis. The alternative would be illegal employment or the lack of work. Temporary work contracts are not the problem, but their misuse is, as is the lack of social protection for workers. One of the weaknesses of the Polish labor market is disproportionate nonwage costs (i.e. tax wedge) in the lowpay group, which affects our youth.

It is not right to place the promises of PiS and the proposals of PO in the same basket. They are worlds apart in the sense of practicality and responsibility. I’m deeply concerned when it comes to the bandying about of election promises, which were evident in the presidential campaign of President Duda. These initiatives are already predicted to cost PLN 50 billion annually, which would result in the doubling of the budget deficit. They’re also disastrous with regard to the retirement system in our country, which is aging very fast, and the banking system. In the event that a conversion of franc-denominated mortgage loans at the initial loan exchange rate will take place it would result in the ruining of the state’s public finances, which recently saw a lifting of the Union’s excessive deficit procedure. To my surprise, these senseless promises are maintained during parliamentary campaigns. It is

“SPAIN, IRELAND AND PORTUGAL HAVE REGAINED THEIR CREDIBILITY AND TODAY, THE ENTIRE EURO ZONE OFFERS A FAVORABLE ECONOMIC ENVIRONMENT FOR POLAND. OUR ECONOMY. These problems are easier to solve now, as unemployment is low and the economy is picking up speed. This is the direction of PO’s program. We are not throwing the baby out with the bathwater. We can raise standards of employment and salaries without losing elasticity in the labor market. We are civilizing the market, which includes various forms of employment. The “Intelligent Development” program has been launched. It aims to

unite science with business. The Union’s fund for these programs is also growing. How can we make sure that our administration is able to use this wisely? The allocation of funds of the European financial framework for 20142020 shows that we are trying to reach for new resources of Polish economic growth. Low cost labor will remain our main asset in the coming years, but it’s not a major premise for consistent competitiveness. Hence, our engagement in broadly-defined innovation, which is not only about new technology, but may also result in improved business models, production organization as well as more effective distribution and sales channels. Such innovation is not lacking in Poland, since we’ve noted an increase in exports to western markets, which tend to be more demanding. Implementation of technological innovation requires cooperation between academia and business and such is the condition of receiving €8.6 billion in funds from the “Intelligent Development” EU program. Additional possibilities are available within regional programs, which amount to €31.2 billion. Supporting innovation is not just done through public funds, but also in the form of tax breaks for innovation or quicker amortization claims. Another significant issue is the restructurization of mining and financing the coal mining company Kompania Węglowa. Poland is a coalburning country, which conflicts with the EU’s climate policy. How will we reach a compromise? Poland is seeking a rebalancing of the climate and energy policies of the EU. Other countries, which have similar interests, are hiding behind our back. Tensions between Warsaw and Brussels are unavoidable. These will surface with an increase in the Union’s ecological and climate ambitions over and above industrial competitiveness, which can be seen in interventions that undermine previously agreed upon rules (i.e. ETS – the Emissions Trading System). We are consistently forced to reach for new special concessions and solutions which allow for modernization of our

WBJ OBSERVER • OCTOBER 2015

INTERVIEW / JANUSZ LEWANDOWSKI

What tax law changes is the government implementing and how do you evaluate Law and Justice’s proposal for a tax on banks and large supermarkets? Can significant funds be raised through such measures and how will this affect the condition of banks and prices on supermarket shelves? The new tax legislation and the act on business activity form the legal foundations on which we should build a new quality of relations between administration and business. Not only are we aim-

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ing for resolutions of conflicts in favor of the taxpayer, but a general approach that posits the taxpayer’s honesty and, consequently, a proper approach for tax offices in auditing and dealing with entrepreneurs. Law and Justice’s proposals have nothing to do with favorable conditions for business. It is, of course, possible to exploit banks and large supermarkets for tax revenue, but one should take heed of the side effects. That would influence the banking system, which should remain a safe depository for Polish savings and its main source of credit for economic activity. Likewise, there may be side effects for supermarkets, which may pass on the costs to Polish suppliers, employees or raise prices. Populist moves are usually positive initiatives that lead to unhappy endings. Economically speaking, in what league do you see Poland in four to five years? Poland will probably not enter the euro zone in that time, so we must be active on multiple platforms. Will pessimism prevail in Eu-

rope regarding the Union? Or will the desire to work collectively in favor of strengthening Europe, with Poland’s active role in this, prevail? Poland has reached Europe’s superleague. This is proven by EU posts held by our politicians – the European Council President, a strong zone of influence in Parliament, the European Commission and other institutions – in addition to the effective defense of Polish interests in the budget battle or efforts in forming an energy union. It is the result of many years of effort, of building trust in Poland as a solid and positive member of the European community. It’s easy to destroy these hardwon successes. The consolidation of our position requires continuity in our foreign policies and further efforts at European solidarity in the face of unfavorable geopolitics. Our biggest challenge in the next few years will be to retain our superleague status with the rather foggy perspective of entering the euro zone, which we are obliged to do according to the EU treaty. u

Images: Flick/European Parliament, Shutterstock, Alicja Ciszewska/WBJ

energy sector, which happens to be based on coal. With the perspective of low coal prices, restructurization of our mining sector is not needed. The compromise we have put in place at Kompania Węglowa is a step in this direction, but also shows the strength of labor unions and the tendency of the opposition to politicize this issue. I’m not in favor of unconditionally tying coal mining with our energy sector, as the latter is due for reorganization.

COVER STORY / XXXXXXXXXXXXXXXX

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

On Chinese track

JUST ONE MONTH AGO, LOCAL CIDER, BEER, MINERAL WATER AND CONFECTIONERY PRODUCTS DEPARTED FROM A CARGO TERMINAL IN ŁÓDŹ AND SET OUT FOR THE WORLD'S LARGEST MARKET, CHINA. IN LAUNCHING ITS “ONE BELT, ONE ROAD” STRATEGY CHINA INTENDS TO CONQUER EUROPEAN MARKETS MORE COMPREHENSIVELY. POLAND JUST HAPPENS TO BE ON THE CHINESE PATH TO EXPANSION

I n On June 18, the first cargo train to Chengdu left Łódź packed wth Polish goods

2013, China’s authorities came up with the idea of establishing a new infrastructural project dubbed “One belt, one road” (or “New Silk Road” in reference to the Silk Road) in line with which, among others a web of cargo routes connecting Asia and Europe will be made. This new strategy is crucial in the continuation of the Chinese economy’s growth, “today, a conversation in Beijing is beginning on the topic of the New Silk Road,” Sławomir Majman, the president at Polish Information and Foreign Investment Agency (PAIiIZ) stressed. Central and Eastern Europe is considered by Chinese geo-political analytics as a sort of “introduction to the European Union, an area of political and economic influence,” Marcin Kaczmarski, an expert at the Center of Eastern Studies said. Poland is located in the center of Europe and is the largest econ-

WBJ OBSERVER • OCTOBER 2015

COVER STORY / NEW SILK ROAD

The two connections from Łódź to Chengdu and Xiamen are among other several rail routes that bind China and Europe together within the framework of the “One belt, one road” project, which is China’s most strategic initiative including 65 countries and 4.4 billion people. In September 2013, Xi Jinping, the president of the People’s Republic of China, suggested that China and other Central Asian countries should establish an “economic belt along the Silk Road,” a trans-Eurasian project spanning from the Pacific Ocean to the Baltic Sea. A month later, in Indonesia, he proposed a new maritime silk road. Jinping’s proposal is said to be the most significant and far-reaching initiative that China has ever put forward. Silk Road projects will connect countries that represent 55 percent of the world’s GDP, 70 percent of global population, and 75 percent of known energy reserves. The Chinese government has already launched a five year strategic plan, with implementation expected to begin in 2021. European Council of Foreign Relations estimates that the Silk Road investments will be fully delivered in approximately 35 years, in 2049, the 100th anniversary of the foundation of the People’s Republic of China.

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omy in the CEE region, neighboring with the engine of the EU, Germany. Which means the Chinese have chosen Poland from a strategic point of view. “It would be difficult to implement this project without Poland, which is a great location for the Chinese, a door to the European market,” Radosław Pyffel, the president of the Poland-Asia Research Center admitted. Only 3.5 percent of the total exports from China to Europe are carried over land, despite the fact that it is three times quicker than by sea. A network of rail connections is an essential element of the Chinese project, because the government is convinced that transportation by train will be more attractive for traders than via ships and speed will compensate for higher costs. “Railway transport is significantly faster, yet more expensive than by sea. According to our analysis, the price of the transportation of one container from Europe to China accounts for 30-40 percent of the value of the transported goods. And this is the main drawback for this kind of transportation,” Szymon Mikołajczak, the member of the board of managers at Carsped, a subsidiary of PKP Cargo, explained on promare.pl web portal.

Łódź takes it all Łódzkie voivodship has been attempting to attract Chinese businesses for a while. Łódź came up with the idea of establishing a regional Poland-China forum after former president Bronisław Komorowski paid a visit to Beijing in 2011, when a mutual strategic partnership was forged. Since then, three editions of the event have taken place, uniting the representatives of local authorities and businessmen from all over the two countries. Furthermore, there have been several business and political missions to China, undertaken by local authorities. Barbara Ochcika, a specialist in the field of logistics from the University of Łódź, claimed that the region’s location, convenient access to rail and road infrastructure, the prospect of developing multimodal connections and growing warehouse space are “the pillars of its logistics potential.” In 2012, the city of Łódź opened its office in Chengdu, Sichuan province. Chengdu is a city of 14 million and the capital of the Sichuan province, it plays a role in the logistics, financial and technological centers of the western part of the country. The city specializes in wood

Images: Shutterstock

>> One belt, one road

COVER STORY / NEW SILK ROAD

and the electro-tech industry. The turning point in relations between Chengdu and Łódź was in launching the first ever, China-Poland cargo connection in April 2013. Each cargo train holds 41 containers and travels through Belarus, Kazakhstan and Russia for 14 days before it reaches the terminal in Chengdu. The first “export train” left Łódź on August 17 this year, the second departed from Łódź, Olechów terminal nine days later heading to Xiamen. Xiamen is a major city on the southeastern Chinese coast, its population stands at over 3.5 million. The journey from Łódź to the city lasts a bit longer than to Chengdu, but it is quicker to pass through customs clearance because the city is in a sub-district of the Fujian Free Trade Zone. The trains to Chengdu and Xiamen will operate every week, thus 25 more convoys will have departed from the terminal in Olechów by the end of the year, according to Grzelak.

“RAILWAY TRANSPORT IS SIGNIFICANTLY FASTER, YET MORE EXPENSIVE THAN BY SEA

Monika Konsor-Fąferek, marketing and development manager at PCC Intermodal, was slightly less enthusiastic, “taking into account current freight rates, the Chinese are focused on sales, they attach less importance to importing via railways, which would be the jewel in Europe’s crown.” The Chinese would like to play a considerable part in the transformation of the Polish city, Xiamen would be a good introduction from which to expand to the other parts of the region. “We express our eagerness to create a common logistics platform with Łódź , which would service the transportation of goods from Europe to SouthEast Asia, including China and Taiwan,” said Zheng Yunfeng, the deputy mayor of Xiamen. A continuation of Chinese involvement in the region is a plan to construct a second cargo terminal somewhere in Łódź. A similar terminal, valued at a few hundred million USD, has been operating in Chengdu. The Polish city aspires to achieve the same capacity. A joint venture has already been established, comprising Chinese and Polish companies enlisted to develop the project. There are more than two and less than five locations on the table, Grzelak said, adding that the choice will most likely be finalized in October. Witold Stępień, the marshal of the voivodship informed that the

scheme is expected to be completed within three years, “the draft is ready and the investors have funds at their disposal,” Grzelak asserted, and Ochcicka suggested possible EU financing may be involved in the investment. Milk shopping spree Since the spring of 2013, 70,000 metric tons of goods including household appliances, electronics and textiles have been exported from China to Poland (with 20 percent of goods being exported further to other European countries) via the rail link, its operator, Hatrans Logistics estimated. In 2013, China was Poland’s third largest trade partner as concerns exports, a year later it had advanced up to second spot. Two years ago, China accounted for 9.3 percent of total Polish imports, last year, the share reached 10.4 percent. When it comes to exports, China is not listed in the top ten recipients of Polish goods (GUS). The share of Poland’s exports stands between 1-3 percent of China’s total imports. Undoubtedly, the cargo connection has influenced the mutual exchange negatively from Poland’s standpoint and widened the trade deficit. It took over two years for the containers to be filled with Polish products. Some media reports suggested that Polish companies would require subsidiaries from the government (like their

WBJ OBSERVER • OCTOBER 2015

COVER STORY / NEW SILK ROAD

Chinese counterparts), but these demands are against WTO regulations, Bartosz Michalak, the president at the Polish-Chinese Cooperation Forum stressed. Apparently, the problem lies elsewhere, “it was really hard to organize the cargo, and Polish companies had to meet strict Chinese requirements,” Tomasz Grzelak, the CEO at Hatrans Logistics admitted. It has to be noted, that it is currently prohibited to import certain goods to the Chinese market, e.g. pork (trade with Poland is suspended, however ten Polish firms have been certified) and beef (governmental talks are ongoing). The other issue is the Russian embargo imposed on numerous products from the EU, that is why Polish fruit and dairy cannot be transported via the rail link. Grzelak stated that his company along with Chinese partners have been negotiating with Russia in the hope of establishing a system which will allow the Russians to examine the train to ensure it is adequately secured. Grzelak believes that the Chinese will have some political influence over Russia, that is one of the reasons why the Chinese delegation to Łódź was so sizeable on the days of the trains’ departure. Polish producers believe that exporting domestic liquors and dairy products,

OCTOBER 2015 • WBJ OBSERVER

PART OF CHINA’S NEW STRATEGY WAS ALSO IN ESTABLISHING THE ASIAN INFRASTRUCTURE INVESTMENT BANK, DESIGNED TO SUPPORT INFRASTRUCTURE PROJECTS IN THE REGION, WHERE INVESTMENT REQUIREMENTS ARE ESTIMATED TO REACH $8 BILLION BY 2020 (PWC). A MEMORANDUM REGARDING THE CREATION OF THE BANK WAS SIGNED BY 21 ASIAN COUNTRIES IN OCTOBER LAST YEAR. CHINA INVITED NONREGIONAL COUNTRIES TO JOIN THE INITIATIVE. UP TO THIS POINT, 56 HAVE DECIDED TO JOIN THE BANK (EXCLUDING THE US AND JAPAN), BUT THE CHINESE PREDICT THE NUMBER MAY INCREASE TO 70. THE POLISH GOVERNMENT HAS RECENTLY DISCLOSED THAT POLAND WILL BE AMONG THE FOUNDING MEMBERS AND AN AGREEMENT WILL BE SIGNED BY THE END OF THE YEAR. CHINA OWNS OVER 26 PERCENT OF VOTES AT THE GENERAL MEETING OF THE INSTITUTION WHICH WILL HAVE $100 BILLION AT ITS DISPOSAL. THE POLISH SHARE OF THE ENTIRE BANK’S BUDGET WILL AMOUNT TO $831.8 MILLION. POLISH INFORMATION AND FOREIGN INVESTMENT AGENCY (PAIIIZ) HAS ALREADY ORGANIZED AN INFORMATIVE MEETING FOR POLISH ENTREPRENEURS, AND STATECONTROLLED BGK HAS LAUNCHED A SPECIAL FUND.

including milk is the appropriate strategy with which to enter the Chinese market and gradually begin to make inroads. Train transportation is suitable for small cargos consisting of products with a limited shelf life. Polish milk and powdered milk have been highly successful with Chinese consumers and exporters agreed. “The Chinese are very interested in our products, especially dairy,” Michał Brzeziński, Deputy Head of Promotion and International Cooperation Unit of Łódź regional Development Agency. Łowickie, Mlekovita and other brands are available in supermarkets in Shanghai, there is this huge enthusiasm for Polish milk in China, Grzegorz Marciniak, managing partner at VMIX consultancy, pointed out. The Chinese prefer Polish milk to Chinese, because they find it healthier and safer, Pyffel said, adding that Chinese customers remain wary about domestic dairy products after the milk scandal that shocked the public in 2008 in which 300,000 childrn were taken ill due to contaminated milk powder. Exporters who sent their products via the rail connection operated by Hatrans have high hopes regarding their presence on the Chinese market, one of them, Andrzej Pawelec, the owner at Chociszew-based +H20, a cider

Images: Shutterstock

ASIAN INFRASTRUCTURE INVESTMENT BANK (AIIB)

COVER STORY / NEW SILK ROAD

producer, said the Chinese liked our alcohol very much. They conducted research and they chose what they wanted in China. Another liquor producer, Sulimar from Piotrków Trybunalski shares the same hopes for a fruitful cooperation with the Chinese. “Talks were very long, but our samples were evaluated very well. We think that this is just the beginning of our mutual trade exchange,” said Grzegorz Szafran, the CEO at Sulimar, which sent Cornelius and Trybunał Eksport beers to Xiamen. Pawelec also believes that Poland should start selling vodka to China. Big plans for a small town Besides Hatrans, there is another player on the scene looking to take advantage of China’s new international infrastructure. State-controlled PKP Cargo is responsible for the operation of the European section of the connection with China, i.e. PolandGermany. Since October 2013, trains from Suzhou, Jiangsu province have been arriving into Warsaw. Transportation services were organized by PKP Cargo Logistics. The ultimate goal is to establish a daily connection, which the company hopes to implement next year. Hatrans seems to be ahead of its competitor, because PKP Cargo is still

in talks with potential firms who would be interested in transporting their products to China via the connection. In June, PKP Cargo signed a letter of intent to establish a joint venture with Zhengzhou International Hub (ZIH) from Henan province in China. The parties will cooperate to expand a handling terminal near the Polish border with Belarus, in Małaszewicze. Chinese Zhengzhou International Hub will own a 51 percent stake in the project. The company was to be established within three months, however, according to its press office, “talks are still ongoing.” ZIH seeks to find new markets for goods manufactured in Henan and Poland is to be crucial in expanding access to Germany, where cargo will be handled before exporting it further west. Barbara Dunaszewska, President of the Management Board of Cargosped, informed that PKP Cargo is currently servicing three trains a week arriving from Henan province. Furthermore, it has signed additional contracts that will enable the railway company to provide comprehensive intermodal rail freight services from China to Europe for seven trains a week with the prospect of extending it to 10 trains a week (from Henan, Sichuan and Yunnan provinces). “The new connections will form a link not only between Poland and China

(through our logistic depot in Malaszewicze near the Poland-Belarus border) but also leading to Germany and the Netherlands,” she stressed. The company is also holding talks on providing postal services to and from Asia, with state-controlled Poczta Polska. Furthermore, they plan to incorporate a specialized distribution center for e-commerce shipments into the Malaszewicze terminal and Zhengzhou International Hub is currently working on a similar terminal in Henan province. During the first stage of their mutual cooperation they will invest $5 million combined, according to Adam Purwin, the CEO of PKP Cargo. It is easy to condemn the entire project, to question why Poland is trying to conquer China with such cheap and unsophisticated products. One needs to realize that, firstly, every cargo has limited capacity, secondly, it is hard to impress the world’s largest producer of almost everything. Moreover, China is not lacking in electronics, it needs high quality food. Hopefully, it will soon get it if Hatrans Logistics and its Chinese partners can reach a consensus with Russia. In addition, the construction of the multimodal terminal is definitely worth observing, because the Chinese may eventually spend millions on greenfield investment in Poland. u

WBJ OBSERVER • OCTOBER 2015

FEATURE / MODERN BANKING

B Y WOJ C I E C H R Y LU KOW S K I

Breaking the banking rules THE POLISH BANKING SECTOR IS STRIVING TO TRIUMPH IN THE MARKET WITH GROUNDBREAKING, INTERNATIONALLY RECOGNIZED INNOVATIONS. THE WORLD IS LEARNING FROM POLISH BANKS AND WANTS TO EMULATE THEIR SUCCESSES

OCTOBER 2015 • WBJ OBSERVER

Innovation establishes position When Poland’s first virtual bank was launched in 2000, there were few who actually believed it could pose a threat to major retail lenders, not to mention becoming a trendsetter. mBank offered services through various channels of communication, including the internet, fixed phone and mobile phone (back then through WAP), but had no “physical” branches. Fifteen years later, the bank, now owned by German Commerzbank, is operational in Slovakia and the Czech Republic, and is contemplating expanding into Austria and Hungary. In addition to forming joint ventures and licensing its technology to developing markets. Two years ago, its online service underwent a major overhaul and the Even though Poland is still struggling to effort has been internationally recogbreak into the group of countries whose economies are considered innovative, its nized. The bank won the Best of Show banking sector is one of the most cutting- award at Finovate London 2013, one of edge in the world. Barely 25 years after the the world’s most important conferences on banking and technology. Having country had only two state-owned retail banks, no ATMs and few branches, Polish the internet in its blood, the lender has lenders are setting international standards managed to capture the youth market, as 70 percent of its customers are under in digital operations and are spearhead40 and 30 percent of mobile application ing worldwide innovation. Alior Bank, mBank and Idea Bank, among others, are users are mBank customers, which is all the more surprising in that the bank’s creating a new era in banking services, share in the market doesn’t account for coming up with novelties that are later adopted by their peers in foreign markets. that much. Within barely fifteen years, the bank has grown to become the fourth

FEATURE / MODERN BANKING

Images: Shutterstock, Idea Bank

biggest retail lender, a position it has earned by employing a disruptive strategy. Mbank’s story is not an isolated case. Idea Bank, a lender focused on micro and small sized enterprises, introduced Idea Cloud in 2013, an application that combines traditional internet banking with accountancy services. The system collects all the information on inflow, outflow or invoices of the user, monitors balances, payment dates and learns consumer activities. It can predict future cash flow and when there’s a deficit on the account, the application proposes a loan or video call with a consultant. One year later, the lender was awarded with one of the most prestigious prizes in the world - the Disruptive Innovation of the Year at the global contest BAI - Finacle Global Banking Innovations Awards. International successes confirm what recent reports by market research company Forrester Research have asserted: that digital banking is what Poles do better than anyone else in Europe.

“THERE ARE SEVERAL HUNDRED BANKS IN THE WORLD THAT WANT TO CATCH UP WITH POLAND OR TURKEY. THE WHOLE WORLD SEEMS TO BE OUR AREA OF EXPANSION. The backbone of success Why has Poland become so successful in the field? Experts say that there are numerous reasons: the Polish market is still a fledgling system, economic growth is dynamic and institutions are stable. Mieczysław Groszek, deputy chair of the Polish Bank Association has identified a few factors that have helped in establishing Poland’s position. Firstly, local managers were given a certain amount of leeway by foreign owners to achieve their ambitions. The second reason

is the fact that local banks used the advantage of their backwardness that allowed them to leapfrog a few stages. “Checks, for example, have never gained popularity in Poland, because there was technology that allowed for non-cash settlements in a more user-friendly manner. Americans have very modern technology, but they will use more obsolete solutions if those devices don’t earn their value. They are paying the price for being at the technological forefront some time ago,” Groszek said. The third reason, according to him, is the fact that the Polish banking sector has achieved a sufficiently critical dimension. Huge profits were recorded thanks to technological upgrades, and the improvements brought in additional profits. Another factor stems from fierce competition: one innovator is very quickly followed by others. The dawdlers are pushed to introduced similar novelties so they are not left behind. Bartłomiej Wyszyński, a strategy director at Artegence, a digital agency that worked with mBank and Idea bank on their disruptive solutions, said the situation with banking is similar to that related to telecommunications. After the fall of communism, both sectors had to be created from scratch, which presented many opportunities. Experts responsible for the introduction of innovative solutions in telecommunications were offered contracts in the UK, because they had experience in something that was just about to be introduced over there. The same occurs now in banking, as Poles, who crafted new systems here, are eagerly employed by foreign lenders. “I remember that when we won the award for mBank at Finovate London, CEOs of various, foreign banks were approaching us, saying that Polish lenders need to become competitors in their domestic markets so that they could implement changes in their systems. They needed an incentive to upgrade their obsolete solutions,” Wyszyński said.

WBJ OBSERVER • OCTOBER 2015

FEATURE / MODERN BANKING

Only in Poland Apart from all these structural reasons, Poles just seem to have a drive for technological novelties and they quickly fall in love with new solutions. This is the case with contactless payments, in which Poland is a global leader in terms of the number of such cards issued and growth dynamic. Banks strive to tap into Poles’ fondness for originality and race to offer new products and services. Since Idea Bank targets entrepreneurs, it has launched Idea Hub, a branch that also serves as a shared working space. The coworking area offers Wi-Fi, office devices, free newspapers and coffee. Businesspeople can use a conference room or meet with a client in modern office surroundings. The solution is aimed at micro and small sized companies, which oftentimes suffer from a lack of their own facilities of this kind. As entrepreneurs are not the type of people whose biggest headache is what to do with free time, Idea Bank has

OCTOBER 2015 • WBJ OBSERVER

Trinkets or new quality of service? One may argue that some of these are just transitory gadgets, designed by the marketing department to position the lender as innovative. Groszek partly agrees with this critique, saying that innovations are centered around payments and payment methods and not on core banking activities like calculating credit. He added that as the market becomes more and more saturated, gadgets will cease to be

What the future holds In which direction will the Polish innovators head? Groszek claimed that tools such as Idea Cloud, which go beyond core banking services will play a more decisive role. In two years, the law will have changed and non-banking entities will be able to service payments and check credit history. Using their large client bases, banks would have to offer something extra, for example, services related to accountancy or legal advice. Banks are also expected to license their systems abroad. “There are several hundred banks in the world that want to catch up with Poland or Turkey. The whole world seems to be our area of expansion,” said Wyszyński, as for him and his company the world is his oyster. Nevertheless, Groszek warned that innovation may be hindered by a tax on banking profits orchestrated by the main opposition party or by over-regulation of the sector by the financial watchdog KNF. But considering the large profits banks post each year and fierce competition between lenders, it isn’t an exaggeration to say that we may expect new solutions which will make the digital banking experience even more friendly. u

Images: shutterstock, Idea Bank

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“INNOVATIONS MAKE SENSE, THEY BOOST PROFITS AND MAKES PEOPLE’S LIVES EASIER.

decided to facilitate access to ATMs and offers its clients on demand cash deliveries. With the swipe of a finger on a smartphone, a customer is able to summon an ATM laden BMW i3. Four of these are out on Warsaw’s streets, sparing customers the extra effort of a trip to a cash machine. It may sound like something invented for those too lazy to go to the nearest ATM, however, surveys suggest that many businessmen make nightly cash deposits. It is therefore a matter of safety, rather than comfort. Another interesting innovation originating in Poland is a debit card that displays your account balance. Introduced by Getin Bank, the card requires two different PIN codes, the standard one to access your account at a cash machine, the other to activate the display. It may also be used as a token to validate your online banking transactions. Bank Millenium has offered the possibility of applying for a loan via an ATM. Instead of applying for credit at a branch or on-line, the lender’s customers may proceed with the operation at a cash machine. Within minutes, the sum will become available in their bank account. What's more, several banks now offer the chance to send money by telephone or e-mail, while a few are experimenting with enabling money transfers via Facebook.

so well-received and what will really matter is the ease of functionality. However, it is not that these innovations are just trinkets. “Consider the money transferred to pensioners - if we didn't have modern electronic banking, the money would be withdrawn the next day. But a bank that serves 5 million retired Poles is able to entice clients to use its on-line banking features and thus convince them to keep the money in their account.” There are various banks and various strategies and indeed, some lenders just blindly follow fashion, Wyszyński said. But, in his opinion, innovations are economically justified. For example, Real Time Marketing (RTM) can boost sales by crafting an offer fitting the needs of a client. “Imagine a man who tries to pay for his groceries with his credit card towards the end of the month. The transaction is declined. The next week when he logs into his online account, there’s a pre-approved overdraft offer with a message: With our current account loan, you will never run out of money at the end of the month,” Wyszyński gave as an example. New solutions also decrease costs - expansive on-line platforms are so all-encapsulating that a customer can fully exploit the service. But he has to be taught how to use it, that’s why banks harness learning tools such as the gamification of interface design. “Trust me, innovations make sense, they boost profits and make people’s lives easier,” Wyszyński assured.

FEATURE / ENTREPRENEURSHIP

CONCERNED LIKE A POLISH ENTREPRENEUR NO CAPITAL, HIGH DEBT REPAYMENTS, TOO FEW ORDERS, LOW DEMAND, A POORLY QUALIFIED WORKFORCE OR SIMPLY INADEQUATE INFRASTRUCTURE? WHICH OF THESE FACTORS COULD POSSIBLY BE CAUSING THE PESSIMISM OF SMALL AND MEDIUM BUSINESS OWNERS IN POLAND? THE ANSWER? NONE OF THEM. THE GREATEST HINDRANCE TO BUSINESS DEVELOPMENT IS BUREAUCRACY AND AN ERRATIC LEGAL SYSTEM B Y S E R G I U S Z P R O K U R AT

WBJ OBSERVER • OCTOBER 2015

ntrepreneurship is considered to be one of the main factors that promotes financial growth and economic competition. Some economists describe it as the fourth factor of production besides labor, capital and land. It’s hard to disagree with the hypothesis of renowned Austrian economist Joseph Schumpeter, that for entrepreneurs to be able to work effectively and benefit society, they need favorable conditions. The government is responsible for creating those conditions, while bureaucrats oversee the verification and execution of such provisions. However, it is often the case that it is the bureaucrats who coerce the government. Absurd as it may seem, there are many cases of the tail wagging the dog. For example, in 2014, the Inter-Ministry Team for Domicile Rule Lifting Preparation stated that… it would be better to leave the reporting duty as is. “Reporting”, i.e. reporting the official residence of a citizen, should be long gone as a relic of socialism. This administrative procedure associated with the obligation to register an entrepreneur or even a normal citizen’s residence is understood to be his declared address, and not an administrative inscription. It’s mandatory. For bureaucrats or courts this is a comfortable fiction. They don’t have to search for citizens, they don’t even have to move from behind their desks, because they can always send a letter to the given address. There is also the “fiction of delivery,” i.e. a letter sent twice is deemed delivered, even if it has not in fact been read. This is how entrepreneurs are informed

OCTOBER 2015 • WBJ OBSERVER

about decisions which may spell trouble, such as court hearings, tax or administrative decisions. The perpetuation of “reporting” releases the bureaucrat from any responsibility to look for the person in question. In Poland, small and medium businesses, which create nearly 67 percent of GDP and 75 percent of jobs, struggle to survive on the market. As it turns out, 97 percent of Polish entrepreneurs complain about the absurd nature of Polish law, as revealed by a report published by Tax Care in 2015. In the Paying Taxes 2013 report from the World Bank and PwC, Poles spend as much as 286 hours annually doing their taxes. On this front they come out worse than Russia, France, the Netherlands or the US to name but a few. Entrepreneurs complain about red tape, endless paperwork and the limited expertise of bureaucrats, but also legal absurdities when filing their taxes. According to company owners, the biggest obstacle to running a business is useless bureaucracy and the rarity of online processing utilized in public administration. They point out that it remains impossible to process even the most basic of cases via the internet in Poland, having to actually visit the relevant office in person. And complaining isn’t the end of it.

This isn’t passive complaining, but active seeking. Poles are simply doing their thing. Polish entrepreneurs are electing to register their companies abroad rather than in Poland. Bureaucracy, erratic laws, legal barriers, excessive taxes and labor costs – these are the main reasons Polish business is fleeing abroad – said Andrzej Sadowski from the Adam Smith Center. It certainly seems to be true. For a few years now we have been observing the “flight” of Polish firms abroad. Most commonly to the UK, the Czech Republic, Slovakia and Cyprus. The majority are registered in the UK. Their number is estimated at 60,000. But why there? Because, according to statistics, the UK is number one in Europe in terms of the ease of doing business. The system is much friendlier than in Poland, tax free earnings amount to around PLN 40,000, with the equivalent in Poland being 3,000. In the UK an entrepreneur pays around PLN 60 a month for social and retirement insurance, while in Poland it’s closer to PLN 1,200. In the Netherlands, Polish run businesses number nearly 8,000. So too in Norway. Sadowski also states that Poles have become leaders in establishing businesses in Germany, overtaking Turks, “After the wave of emigration of average citizens, which took place after Poland’s accession into the EU, we are seeing the migration of entrepreneurs. We are seeing a phenomenon of competition in systemic solutions in Europe and Poland, by continuing to resist economic reforms, it is leading, I dare say, to

Images: Shutterstock

FEATURE / ENTREPRENEURSHIP

COMMENTARY / FMCG

FEATURE / ENTREPRENEURSHIP

Tax offices not respecting courts’ decisions As far as the pace of VAT refund is concerned, Poland ranks at the very end of the list of countries surveyed by OECD. The standard deadline by which a tax office should refund VAT payments amounts to 60 days. In reality, the statutory deadline is often extended. As an EU member state PoRobert Nogacki land is obliged to follow EuroFounder and Owner pean law. The Court of Justice of Skarbiec Law Firm is of the opinion the taxpayer cannot be denied the right to deduct the once calculated amount of tax arising from the invoices issued by a supplier for the only reason that the supplier has happened to infringe VAT regulations. Moreover, the taxpayer should not be expected to undertake any actions aimed at checking whether his supplier has committed infringements, as this does not fall within his scope of responsibilities. The right to make deductions may only be waived when the transaction was, in fact, an act of fraud and the buyer has been substantiated to have known or that he should have known that the transaction was being made in order to commit fraud. However, the practice of Polish tax offices assumes that the taxpayer was perfectly aware of the fact that his contractor infringes the VAT act. There exists therefore a sort of “bad faith” presumption towards the entrepreneur in this respect.

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There are numerous examples to prove that tax authorities do get carried away and tend to forget about the fundamental rule of the tax procedure which is the rule of law. An example of the infringement of this rule is to conduct, as part of audit activities, crosscontrols of the contractors of the taxpayer who is applying for VAT refund. According to the Voivodeship Administrative Court there are no legal grounds to require the taxpayer’s contractors to produce any documents in order to verify the legitimacy of a VAT return only as part of audit activities without initiating a tax procedure or control. Frequently ignoring the EU decisions by tax authorities may result from the circumstance that tax authorities prefer satisfying themselves from the estate of an honest entrepreneur to undertaking complicated actions to search for non-existent taxpayers infringing VAT regulations. It does not, however, justify tax authorities which, infringing the community law, attempt to enforce the guidelines included in the budgetary act concerning the expected revenues. Verification activities conducted in this way are far too burdensome for entrepreneurs and too often conducted blindly, without justified premises. Thus, entrepreneurs should fight for their rights. One may be successful, the proof of which can be the above quoted practices of the Supreme Administrative Court. Skarbiec Law Firm – we have been advising entrepreneurs on effective VAT refund for ten years already.

WBJ OBSERVER • OCTOBER 2015

FEATURE / ENTREPRENEURSHIP

What’s interesting is that on paper the situation for Polish business owners doesn’t look that bad, or at least better than during communism, which strangled economic activity. The question is whether it is also better than the period immediately after the fall of communism? According to Sadowski this isn’t a sure thing, “In 1988 the Wilczek law was passed, which freed economic activity previously enslaved by communism. Now we have an over regulated economy. Polish entrepreneurs need a new Wilczek law,” Sadowski explained. On the other hand, numerous organizations publish reports on the ease of conducting business and institutional conditions in countries all over the world. Each country is rated by how existing and effective legislation boosts entrepreneurship and the free market. These are troublesome institutional constructs, because it is difficult to incorporate various qualitative measures and reduce them to a common denominator. Nevertheless, the World Bank rates the Polish tax system at 113 (out of 200 countries), whereas in the general classification of the Doing Business report, Poland ranks at 32. In the report we read that starting a business takes 30 days, its cost is 12.9 percent of annual per capita income.

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A report from the Heritage Foundation, the Index of Economic Freedom, stresses that despite the fact that trade policy is basically the same as the EU’s, biotechnological and pharmaceutical regulations exceed even EU standards. Personal tax is high, business tax is low. Privatization and deregulation have slowed down, and the government’s size can’t be described as small. Poland was also rated negatively for the regulation of taxi prices and pharmaceuticals. The same goes for the labor market, where a huge stumbling block is high labor costs. Credit and investment markets are not that bad, and property is relatively well protected. The key analysis of leading global research institutes rate the Polish economy as rather slow, placing it in the top 50 countries where it’s easiest to do business.

In the last 25 years many reforms have been implemented, but that does not mean that entrepreneurship in Poland is free of problems. Limited bureaucratic responsibility, liberal interpretations of regulations and protracted litigation are the largest barriers in administrative and bureaucratic rules – as found by GfK Polonia for the Business Center Club in a representative sample of Polish business people in 2014. Without a doubt Poland should increase the competitiveness of its economy by increasing innovation, which is low compared to its effectiveness. But this is hard to do if entrepreneurs have to waste their time on absurd regulations. Time is precious – said Sadowski – we can see its value by looking at Ukraine. u

TAX SYSTEM IN POLAND

HOW MANY HOURS PER YEAR ENTREPRENEURS SPEND ON FILING VARIOUS TAXES YEAR HOURS 2008 418 2009 418 2010 395 2011 325 2012 296 2013 286 2014 286 SOURCE: DOING BUSINESS REPORT

Image: Shutterstock

an, ’economic apartheid.’ We are losing our most valuable resource: educated, dynamic Poles,” said Sadowski.

October 2015

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l H O S P I TA L I T Y

Warsaw hotels attain high occupancy in H1 – C&W

n the first six months of the year, hotels in the CEE region recorded a significant increase in key performance indicators compared to the corresponding period last year, according to a report compiled by Cushman & Wakefield. The value of transactions exceeded €265 million, in H1. Overall, Average Daily Rate (ADR) rose by 8 percent to €112 , occupancy to 68 percent (65 percent in the same period of 2014) and Revenue per Available Room (RevPar) by 11 percent to €76. “The main factors driving growth in 2015 include the continued strength of inbound international tourism into Europe supported by Asian travelers, the strength of the dollar driving demand from Americans and the challenges in North Africa that have prompted leisure travelers to stay in Europe,” said Frédéric Le Fichoux, Head of Cushman & Wakefield’s CEE Hospitality Team.

Fabryka Wołomin

l R E TA I L

New retail projects in Warsaw pick up momentum

round 108,000 sqm of retail space was under construction as of the end of H1 2015 in Warsaw, according to a report by JLL. The largest investment on the list was Fabryka Wołomin, while in Warsaw itself it was the extension of Wola Park. Additionally, GTC has recently obtained a building permit for Galeria Północna (64,000 sqm of GLA). The cornerstone of this flagship investment will be laid this September. Moreover, construction works on the historic CEDET department store have just begun. Therefore, the Warsaw retail market will experience a major awakening in the next few years with various types of retail schemes entering the market. "The city of Warsaw represents the largest Polish retail market in terms of supply, accommodating over 1.11 million sqm of shopping center space. In addition, the spending

power of its inhabitants exceeds the national average by 68 percent. However, with respect to shopping center density per 1,000 inhabitants, Warsaw's ratio of 437 sqm makes it one of the least saturated markets in Poland and continues to lag behind other major conurbations such as Wrocław, Poznań, the Tri-City, Łódź, and Kraków. So it comes as no surprise that demand is high for new retail projects in the capital, especially in dynamically developing residential areas," said Anna Bartoszewicz-Wnuk, Head of Research and Consulting at JLL Poland. Available retail stock has been well absorbed by the Warsaw market and is reflected in one of the lowest vacancy rates countrywide. Monthly prime rents per sqm in leading shopping centers are €95 - €110, in retail parks €8 - €9 while on the main high streets they are around €80 - €90. u

l OFFICE

Prague, Budapest, Bratislava and Warsaw are among the cities in the CEE region that have benefited most from these macroeconomic factors. Of those cities mentioned, Warsaw recorded the best occupancy rate (72.7 percent) and second best in RevPar, which amounted to €50.8 (growing by 10.4 percent y/y). The city's ADR stood at €69.8 (growing by 3.3% year on year). What is more, by 2016 a further 764 rooms are to be opened in 3 to 5 star hotels. u

University Business Park to be delivered next year

University Business Park office scheme will offer 38,800 sqm

ódź-based University Business Park office scheme will be completed by April 2016, its developer Globe Trade Center (GTC) announced this month. Strabag is to be the general contractor of the second

building included in the complex, University Business Park II. The project will feature 38,800 sqm of GLA, the second building alone will encompass 19,400 sqm of GLA. u

Images: Eiffage, GTC

There were almost 600 million international visitors and 2.7 billion overnight stays recorded in Europe, representing a new record, with these figures expected to increase further this year.

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l R E TA I L

Riviera officially sold

onciere Euris and its subsidiary Rallye, have signed a deal with Union Investment Real Estate to sell the Riviera shopping center located in Gdynia for a value of €291 million. "The transaction will be concluded for a value of €291 million, which could potentially increase to a maximum amount of €300 million over three years through earn-outs based on performance," Reuters informed earlier. Riviera was opened to the public in October 2013 and comprises 231 units over 70,470 sqm GLA of retail and entertainment space. u

Riviera shopping center comprises 231 units over 70,470 sqm GLA

l INVESTMENT

l C O M PA N I E S

Eurocentrum office complex on sale

CBRE closes in on acquisition of Global Workplace Solutions

In line with recent media reports, real estate developer Capital Park has put Eurocentrum office scheme on sale. The total book value of the investment stands at PLN 724 million. Eurocentrum features Alfa, Beta, Gamma and Delta buildings located in Warsaw on Aleje Jerozolimskie. Eurocentrum Beta and Gamma were commissioned in 2014, feature 43,000 sqm of total space and are 70 percent leased. Eurocentrum Alfa has 15,000 sqm and is 72 percent leased. The three buildings are valued at PLN 517 million. Eurocentrum Delta is currently under construction. It will have 27,240 sqm of total space. Capital Park is a real estate developer and an investor which has been operating on the Polish market since 2003. u

CBRE, a commercial property and real estate service adviser, is to acquire Global Workplace Solutions, a real estate branch of Johnson Controls, for some $1.5 billion, the firm has announced.

60%

OF THE RETAIL SPACE UNDER CONSTRUCTION IS LOCATED IN THE 8 LARGEST POLISH CITIES, ACCORDING TO COLLIERS

Images: Union Investment, Grupa Waryński, Immochan

In addition to the takeover, CBRE and Johnson Controls have forged a 10-year strategic partnership, as part of which, CBRE will provide Johnson Controls with a full suite of integrated corporate real estate services. Johnson Controls has joined CBREs network of suppliers and partners, and will offer its lowest available commercial pricing on HVAC, building automation, security, fire and related services to CBRE clients and CBRE managed properties worldwide.

Global Workplace Solutions is a provider of enterprise facilities management solutions for global corporations and other large occupiers of commercial real estate. It posted revenues of over $3 billion last year. u

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LOKALE IMMOBILIA / NEWS

l R E TA I L

Immochan to develop Ossów Park shopping center

I EQlibrium office scheme

l OFFICE

Grupa Waryński launches EQlibrium scheme in Warsaw

mmochan real estate developer is to develop the Ossów Park scheme near Warsaw, in the suburbs of Kobyłka and Wołomin, the media reported. The modern "All in one" shopping center will feature 55,000 sqm of GLA and house some 150 units, including a cinema and Auchan supermarket. The scheme is currently at the architectural design stage. Immochan currently has 22 Auchan stores in its portfolio in Poland.

eal estate developer Grupa Waryński has selected Budimex as the general contractor for its EQlibrium office scheme, a press release read. The value of the contract with Budimex stands at PLN 56 million. The complex, located in the Wola district of Warsaw will feature 10,500 sqm of GLA. Construction work will begin on September 16. The first tenants will be welcomed during the first quarter of 2017, the press release added.

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l LO G I S T I C S / C O M PA N I E S

Prologis exits Romania

Nowa Fabryczna scheme will offer 21,500 sqm

l OFFICE

rologis has sold Prologis Park Bucharest A1 to Czech group CTP, meaning the industrial space developer has left the Romanian market, the media informed. According to local reports, the deal was close to €50 million. The complex was constructed in 2007 and 2008. It features four A class buildings, comprising 107,770 sqm. Czech group CTP has purchased three other logistics parks in Romania in recent months: Mercury Logistics Park near Bucharest, Cefin Logistic Park near Arad, and Deva Logistic Park.

Skanska launches Nowa Fabryczna scheme

kanska Property Poland has launched its second office investment in Łódź. The Nowa Fabryczna scheme will be located in the vicinity of the New Center of Łódź (Nowe Centrum Łodzi). The building will offer approximately 21,500 sqm of modern service space. Its completion is scheduled for Q2/ Q3 2017. The Nowa Fabryczna project will comprise seven floors above ground and two below with 210 parking spaces available for tenants. The building is designed to meet the needs of approximately 2,200 employees. Skanska's investment will be located just a few minutes' walk from Dworzec Fabryczny railway station which, after its re-modernization, will become one of the most modern public transportation hubs in Poland. u

Waimea to launch cargo terminal at Rzeszów airport I

ndustrial space developer Waimea Holding will begin construction work on the Waimea Cargo Terminal Rzeszów-Jasionka scheme this year, the media reported. The 5,310 sqm building will be located within the grounds of Rzeszów-Jasionka

OCTOBER 2015 • WBJ OBSERVER

Airport. The general contractor will be selected at the turn of 2015 and 2016. The scheme is scheduled for completion at the turn of Q2 and Q3 of 2016. Waimea has earmarked PLN 25 million for development of the scheme. u

Images: Skanska, Prologis. Goodman

l LOGISTICS

LOKALE IMMOBILIA / NEWS

l O F F I C E/ C O M PA N I E S

ThyssenKrupp grows in Gdańsk

l WAREHOUSE

Goodman leases warehouse in Kraków

oodman Group, a leading global owner, developer and manager of industrial property, has leased 6,000 sqm of warehouse space at Kraków Airport Logistics Centre to Tajmax. The facility will be operated by its subsidiary, the retail chain, Partner AGD RTV. This move to a more modern, spacious warehouse will make it possible for Tajmax to increase the scale of its operations. “The move to Goodman Kraków Airport Logistics Centre is in response to the grow-

ing number of orders and rising sales at our stores. We are convinced that Goodman’s Kraków center is the best location to ensure effective distribution in the Małopolskie region,” said Tomasz Gracz, CEO at Tajmax. The group is planning to expand the logistics center by 12,000 sqm. The investment will be launched later this year. Goodman closed the fiscal year of 2015 (ending on August 31) having doubled the size of its portfolio in Poland, which reached AUM of 607,000 sqm. u

erman ThyssenKrupp will sign a 5,000 sqm lease with Olivia Six, part of Olivia Business Center, as it is expanding its global shared service center in Gdańsk, a company press release read. The German company launched its Global Service Center in Gdańsk in October last year. The shared service center will ultimately employ 700 people, it currently hires 46 employees. It provides finance and accounting, HR and payroll in addition to real estate management services. u

Investing in Poland available October 2015 featuring

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l INVESTMENT/HOUSING

Eiffage selected as contractor for Przy Bażantarni project

is responsible for the investment, is a venture of Volumetric Polska and RK Investment, both of which are housing construction companies. Eiffage Polska Budownictwo is a general contractor. Since 2001 the company has been a part of French Eiffage, one of the largest construction groups in Europe.u

Images: Eiffage. Shutterstock

iffage Polska Budownictwo has signed a contract for the construction of a housing estate near ul. Przy Bażantarni in Warsaw.Three buildings of five to nine stories will offer a total of 214 apartments. All construction work is due to be completed by April 2017. Przy Bażantarni, the entity which

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LOKALE IMMOBILIA / NEWS

l C O M PA N I E S

DTZ and C&W finalize merger

Real estate developer YIT enters Poland

wo of the world's largest consulting companies, DTZ and Cushman & Wakefield have completed their merger. DTZ finalized the purchase of its competitor for $2 billion at the turn of April and May. As a result of the deal, a firm with combined revenues of over $5.5 billion and $191 billion in transaction value has been established. DTZ was supported by a consortium of investors including private equity company TPG, PAG Asia Capital, an alternative investment manager, as well as the Ontario Teachers' Pension Plan. C&W has announced that it will operate under the Cushman & Wakefield brand. The combined firm, led globally by Chairman and Chief Executive Officer Brett White and President Tod Lickerman, now operates in more than 60 countries around the world and employs 43,000 people. u

innish real estate developer and construction company YIT is entering the Polish market. They are currently researching possible development land for housing schemes in Warsaw. "Poland is an extremely important market for us in terms of the geographical development of our business in Europe. ...We have been preparing ourselves to develop housing schemes. Throughout the first few years of operating in the

Czech Republic and Slovakia we managed to make it into the top five biggest real estate developers in those markets. We have ambitious plans regarding Poland as well," said Head of Central Eastern Europe business division, Tom Sandvik. YIT employs some 6,000 people in seven countries. It is Finland's largest real estate developer and one of the biggest construction companies in Finland. u

WBJ OBSERVER â&#x20AC;˘ OCTOBER 2015

LOKALE IMMOBILIA / OFFICE SPACE

B Y A L E X H AY E S

Watch this space A HIGH SUPPLY OF OFFICE SPACE WILL LIKELY KEEP WARSAW RENTS LOW FOR THE FORESEEABLE FUTURE, BUT UNUSUALLY FOR POLAND NOBODY SEEMS TO BE COMPLAINING

Images: Shutterstock

2013, Piotr Gromniak, the president of the board of Echo Investment stated “We are starting the construction of the tallest and the largest project in the history of Echo Investment. It is a unique project. Not only because of its excellent location but also thanks to an unusual architectural design developed by Stefan Kuryłowicz. I am convinced that Q22 will set a new standard for business in Warsaw.” The Q22 office tower is now scheduled for completion in the first quarter of 2016. It will add 50,000 sqm to the Warsaw office market with an investment cost of around PLN 500 million. However, Echo investment is not the only developer looking to add space to the Warsaw office market. Ghelamco is also looking to complete its Warsaw Spire project in the second quarter of 2016. The complex will offer a total of 100,000 sqm to the office market in three buildings (Building B is already open, with the first tenant of Building C scheduled to move in at the end of December). A total of 129,000 sqm is scheduled to be added to the Warsaw market by the end of 2017. With the big boys playing at developing big buildings it comes as no surprise that Warsaw rents are plummeting. In Q1 2015, Warsaw prime rents fell by 4.7 percent to €24.5 per square meter per month, the seventh largest decline globally, according to figures from CBRE’s Global Prime Office Occupancy Costs report. The report makes no bones about what has caused this situation: “new supply continues to exert downward pressure on rents.”

OCTOBER 2015 • WBJ OBSERVER

LOKALE IMMOBILIA / OFFICE SPACE

Images: Shutterstock

total of 129,000 sqm is scheduled to be added to the Warsaw market by the end of 2017. With the big boys playing at developing big buildings it comes as no surprise that Warsaw rents are plummeting.

WBJ OBSERVER â&#x20AC;˘ OCTOBER 2015

LOKALE IMMOBILIA / OFFICE SPACE

Just part of the cycle

But are the big developers concerned? GTC isn’t. “Warsaw is becoming a developed office market and as such it tends to go through specific market cycles. This is not the first cycle that the Warsaw office market has gone through,” stated Jacek Wachowicz, chief investment officer for GTC. He admitted that supply outstrips demand at present but added that, “the situation as it is today will eventually change.” Jaroslaw Zagórski, development director at Ghelamco, seems even more blasé about the current low-rent situation. “It is nothing new,” he said; “I think it’s typical for Warsaw, which has such

agency at Cushman & Wakefield pointed out, a “Developers’ core goal is to build and then sell, hence they will keep adding more space to the market.” As far as he is concerned the market is far from being in crisis. “Currently, developers still see opportunities on the market, the main players have a wide range of projects in different districts and are simply waiting for a convenient moment which will ensure that the leasing process will be fast and profitable,” he explained. Indeed he believes that office space in Warsaw is still highly attractive to international investors. He also pointed out a number of reasons for this: Warsaw offices remain

great potential in terms of investment. There are sites in relatively good locations that are still empty. We need to get used to the fact that the supply pressure on rent will be a lasting phenomenon in the nearest future.” He went on to compare Warsaw with other capitals such as London where if you want to build something you have to knock something else down. Supply in Warsaw is something that will always be high and this is just something that, according to Ghelamco, developers have to live with. You cannot forget, however, as Paweł Strzemecki a senior consultant for office

attractive from the point of view of risk diversification because Poland remains one of the fastest growing economies in the CEE region. Because most of the office stock is relatively young, a large proportion of Warsaw’s office buildings have been built to high technical specifications. Many of the buildings have multinational tenants, which lowers the perceived rental risk. And finally, office yields remain attractive: Strzemecki stated that, “In Q2 2015 the prime yield in Warsaw was 5.85 percent and in non-central locations yields varied from 7.5 percent to 9 percent. In comparison

OCTOBER 2015 • WBJ OBSERVER

ou need to be prepared for good times and bad times with such a project (Warsaw Spire): the project needs to be designed in such a way that it defends itself in both,” Jarosław Zagórski, development director at Ghelamco

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to other European cities, Warsaw offers high yields.” If anything there seems to be a lack of office product on the market.

Images: Shutterstock, Ghelamco

A project for all seasons

Strangely enough, Ghelamco does not seem to be in a selling mood. Zagórski admitted that, “Everyone wants to invest in Poland. It’s considered a country with a stable market,” but he categorically denied rumors that Warsaw Spire had been pre-sold to a fund. “We haven’t even started serious discussions about selling the project yet. And in my personal opinion it’s a bit too early.” He argued that there is no way that investors can see the true worth of the project before it is fully operational and although he did not rule out the project being sold early, he clearly believes that now is not the time. Part of this reluctance to sell might be due to a sentimental attachment to the project. He referred to it as his baby, pointing out that the imminent delivery of the project is the culmination of seven years’ hard work and he refused point blank to accept that the project is ‘huge’. “The main word here with Warsaw Spire is ‘coherent’. It is the most coherent project I have ever worked on,” he said, describing it as a business park in the city center that has

been built on a transport hub. He also explained that since the project has been seven years in its execution, there was no way that Ghelamco could have predicted at the planning stage what the situation on the market would be at the time of its delivery. “You need to be prepared for good times and bad times with such a project: the project needs to be designed in such a way that it defends itself in both,” he explained, saying that Warsaw Spire was designed to be profitable even in adverse market conditions. Developers seem to believe that current conditions are the opposite of adverse and both Ghelamco and GTC believe that capital on the market remains readily available. “Nowadays, unique projects attract many lenders who would like to focus on quality lending,” stated Erez Boniel, the chief financial officer of GTC. However, it does appear that project financing is becoming harder for some. According to Cushman & Wakefield, in Q2 2015 more than 14 percent of all modern office space was vacant and this figure is not expected to decrease any time soon. Strzemecki explained that from the banks’ point of view, “This shows that it is harder to obtain new tenants for buildings, and loan repayments

WBJ OBSERVER • OCTOBER 2015

may be postponed or even defaulted.” According to Michael Sternicki, the general manager for Poland of Aareal Bank, the banks are indeed beginning to pull back from the Warsaw market, “New projects are being analyzed in much more detail and increased margins, lower LTVs and imposing letting criteria on developers can only to some extent mitigate the risk of oversupply,” he explained. But despite this, Sternicki sees opportunities and trends that could offset the high office supply on the market. He points out that tenants such as government and city authorities are now moving into commercial offices; he also points out that shared service centers, startups and IT companies are now entering Warsaw. Despite all this, he stated that, “New office projects in Warsaw certainly constitute an increased risk compared to 1-2 years ago.” If it ain’t broke don’t fix it

For Zagórski, an increased unwillingness on the part of the banks to lend is just a sign of a healthy self-regulated market. “It is the role of the financial market to control this. If access to easy money is not limited

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then it is not good for the market,” he explained, he also pointed out that this is difficult for smaller developers, but the larger, more-professional players will continue to be able to access financing for their projects. He would not admit that more expensive financing might result in more expensive projects. For him, the most important factor for accessing capital is an anchor tenant. “Being a developer, if you don’t have a pre-lease agreement you cannot get financing to commence the project – this is the natural way of regulating the market,” he said. (Warsaw Spire is already 80 percent leased.) Low rents might be terrible for developers, but they are a godsend for tenants. Poland’s GDP is growing at approximately 3 percent per year and cheaper rents are making Warsaw more attractive to the BPO sector, an industry that is particularly price sensitive and which Poland is beginning to

attract. There are also other factors such as the turmoil in Ukraine which has (at least temporarily) resulted in some businesses relocating westward. There is one other risk worth mentioning. Poland is facing an election, in which it is highly likely it will change its government. According to Strzemecki, “If the current party fails to secure another term, then the uncertainty will continue as everyone will be awaiting new reform programs and the predictions of which sectors will be influenced and how much the change will affect a company’s bottom line.” But this can hardly be considered an abnormal risk. Generally speaking, the Warsaw office market is healthy, and barring unforeseen events, it is likely to stay that way. As Strzemecki stated, “As for now, developers are still ready to build and new tenants are willing to lease office space, which means that Warsaw’s office market is still growing in terms of supply and demand.” u

Image: Shutterstock

LOKALE IMMOBILIA / OFFICE SPACE

WBJ OBSERVER • OCTOBER 2015

LOKALE IMMOBILIA / RETAIL

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

Station synergy

ienna and Warsaw Stock Exchange-listed developer and investor Immofinanz Group is expected to finalize its negotiations with Polish State Railways (PKP) regarding the redevelopment of the former Warszawa Główna railway station site in the Polish capital. The entities are planning a large-scale, mixed-use project that will combine transport, residential, office and retail functions, and is valued at approximately €700 million. Construction on the scheme is scheduled to commence within the next two to three years. The planned shopping center development is not the only new mall located near a railway or bus station which will be developed in Poland in the near future, with 52

OCTOBER 2015 • WBJ OBSERVER

a number of other investments of this kind now under construction and in the pipeline across the country. Real estate market experts are saying that the number of new projects which combine retail and transport functions are, and will continue to be on the rise as such schemes help create synergy and are beneficial in both the private and the public sectors. Projects galore Since the beginning of this century, a number of large, well-known shopping center developments located next to and connected to railway and bus stations have already been completed in Warsaw and other major regional cities across Poland. One of the first investments of this kind in the country was Galeria Wileńska which was

constructed in the Praga area of Warsaw in 2002. Four years later, Galeria Krakowska, located near the main railway station in Kraków, was opened for business. In 2013, investors TriGranit Development Corporation, Europa Capital and PKP completed the Poznań City Center project in downtown Poznań which provided 58,000 sqm of leasable retail space, located just next to the main railway station in the city. In the same year, the main railway station in Katowice was integrated into a new shopping center scheme called Galeria Katowicka. The development was completed by Neinver Polska, Meyer Bergman and PKP and delivered 48,000 sqm of GLA. The growing number of new shopping malls that are built next to, and incorpo-

Image: Immofinanz Group

THE COOPERATION BETWEEN RETAIL DEVELOPERS AND TRANSPORT COMPANIES IS THRIVING

LOKALE IMMOBILIA / RETAIL

Image: Immofinanz Group

The planned Warszawa Główna development is valued at €700 million

rated into railway stations is mostly the result of the PKP policy of making railway areas available for development which the company has increasingly been implementing in recent years. “We are the manager of one of the largest land banks in Poland. We offer land which has huge potential and is in very good locations – both in large cities and in small urban centers,” said Jarosław Bator, member of the management board at PKP. The previously unused PKP sites are now being redeveloped, providing new residential, office and retail functions. At the beginning of this year, PKP established a dedicated entity called Xcity Investment that is designed to develop PKP owned land in cooperation with outside investors. Bator argued that the completed Poznań and Katowice investments testify to the consider-

able developer interest in the cooperation. He added that the total value of the ongoing and planned real estate projects that PKP is involved in is estimated at more than €8 billion. According to Renata Kusznierska, senior director, head of retail, CEE, at DTZ, the growing availability of PKP-owned land and the rising significance of rail transport will lead to the development of new shopping centers integrated with railway stations in the coming years. The schemes currently under construction include Galeria Metropolia in Gdańsk, a development which is located close to the Gdańsk Wrzeszcz railway station and will offer approximately 33,000 sqm of retail space next year. In Wrocław, the ongoing Wroclavia investment is expected to comprise 64,000

sqm of retail space connected to a bus station. Another shopping center project integrated with a bus station (Nowy Rynek, 24,400 sqm of leasable space) is under construction in Jelenia Góra. Also the ongoing Nowe Centrum Sopotu scheme in the Tri-city will combine retail, office, hotel and transport functions, noted Agnieszka Luścińska, an analyst at the consultancy and research department of Colliers International. Luścińska pointed out that besides the Warszawa Główna development in Warsaw, planned developments of this kind also include an integrated transport center investment in Olsztyn which will comprise a railway station, a bus station and a shopping mall. The project will probably be developed by Retail Provider and PKP. Another integrated transport center scheme is being enviWBJ OBSERVER • OCTOBER 2015

LOKALE IMMOBILIA / RETAIL

Industrial Targówek

OCTOBER 2015 • WBJ OBSERVER

sioned for Bydgoszcz. The developer-PKP cooperation can also be seen in smaller cities, Luścińska said. Earlier this year, Dekada Realty signed a cooperation agreement with Xcity Investment regarding the joint development of convenience shopping center projects integrated with new railway stations in Konin and Mińsk Mazowiecki. The planned Konin and Mińsk Mazowiecki schemes will comprise approximately 5,400 sqm and around 4,300 sqm of leasable retail space respectively. Construction on the developments is expected to begin in 2016 or in 2017 and take more than a year. Mutual benefits Shopping center projects developed in cooperation with PKP and bus operating companies have proved to be very attractive for retail developers as railway and bus stations are usually located on some of the best sites in a given city. “Historically, train stations were always built in the centers of cities, and the cities themselves grew around them,” said Jacek Wesołowski, country manager of development Poland at Immofinanz Group. He added that his company recognizes the potential of such locations. The locations in the immediate vicinity of railway stations are particularly appealing to developers as they provide so-called natural footfall, Wesołowski

said. Other developers are voicing similar opinions. “Our experience shows that bus and railway stations are often the best retail locations in a city,” said Dekada Realty management board president Aleksander Walczak. Unfortunately, the sites are often neglected due to the financial problems of transport companies, he added. According to real estate market analysts, schemes involving the integration of a shopping center with a railway station are usually very successful and beneficial for the developer, the station operator and the visitors of the complexes alike. Compared to other retail initiatives, shopping centers developed close to railway stations distinguish themselves through their huge footfall, which translates into an increased turnover in stores and points of services located in them, Kusznierska said. On the one hand, the fact that the developments in question are located in the downtowns of cities ensures their prominent visibility. On the other hand, the railway and bus station components of those investments invariably provide additional footfall, generated by travelers. The Złote Tarasy shopping center in Warsaw, located just next to the Warszawa Centralna railway station, illustrates the trend nicely. Many of the visitors to the mall are people waiting for trains departing from the largest railway station in the Polish capital. Also from the perspective of PKP and

Image: BOIG

SCHEMES INVOLVING THE INTEGRATION OF A SHOPPING CENTER WITH A RAILWAY STATION ARE USUALLY VERY SUCCESSFUL AND BENEFICIAL FOR THE DEVELOPER, THE STATION OPERATOR AND THE VISITORS OF THE COMPLEXES ALIKE.

Construction of the Mińsk Mazowiecki scheme is due to start in 2016/17

LO A LI EM M I MO M E T IACI L LOK AK LE BO I LBI IAL I/ AL O/ GRI S S

WBJ OBW S EBRJ V OE B R S•E R O VCET R O B• E M R A2R0C1 H 5

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AGNIESZKA LUŚCIŃSKA, ANALYST AT COLLIERS INTERNATIONAL.

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bus operating companies, cooperation with a private partner is highly favorable in that the partnership results in the construction of new railway and bus stations or at least in the extensive refurbishment of existing facilities. Many of the railway and bus station buildings in Poland were built during communism and are currently in poor condition. By providing developers with the adjacent land, the managers of those buildings facilitate the thorough revitalization of their property. Due to their central location, these investments are usually also very important for the cities in which they are developed. It can be argued that Poznań City Center and Galeria Katowicka have already become new landmarks in those respective cities. “It is worth bearing in mind that railway stations represent some of the main visiting cards of cities,” Luścińska said. She added that their revitalization can contribute to the process of improving the public perception of cities and of building their prestige.

While being very attractive to developers, investments combining retail and transport functions can also pose serious challenges resulting from the very fact that the sites on which they are developed are located close to railway infrastructure. “These include both technical issues, related to the development [of new structures] over railway tracks, and the lack of proper air rights regulations,” said Wioleta Wojtczak, a senior consultant at the research and consultancy department of Savills. According to Kusznierska, another major challenge is the appropriate interconnection of the shopping center and the railway station which will ensure that the visitors can smoothly move from one building to another and thus create synergy between them. In the opinion of Luścińska, synergy also needs to be reflected in the proper selection of tenants for the retail areas located in the shopping center and the railway station itself. “Thus, it is important that the tenant mixes in both locations harmonize with each other,” she said. u

Image: Immofinanz

“RAILWAY STATIONS REPRESENT SOME OF THE MAIN VISITING CARDS OF CITIES, THEIR REVITALIZATION CAN CONTRIBUTE TO THE PROCESS OF IMPROVING THE PUBLIC PERCEPTION OF CITIES AND OF BUILDING THEIR PRESTIGE.

Warszawa Główna will combine transport, residential, office and retail functions

WBJ Observer presents DESIGN AND BUILD What are the ramifications of the merger between Tétris and Neo-Świat which took place in May this year? Tétris is a well-established, fast-growing fit-out company on the European market and a wholly owned subsidiary of global real estate firm, JLL. The recent merger of Tétris with Neo-Świat presents a wide range of possibilities for growth on the Polish market. Since both companies share similar values, the synergy of knowledge and experience enables distinct business opportunities. The recognized brand, knowhow and global support provided by Tétris, combined with the local experience of Neo-Świat, will certainly allow for the broadening of the service scope and adapting them to the specifics of the Polish market constraints.

BROUGHT TO YOU BY TÉTRIS

What is the Design & Build model? Design & Build is a fit-out model introduced, developed and globally implemented by Tétris, which combines two important stages of the fit-out process. In the design phase, a visual concept of the interior design is created in conjunction with functional architecture, including mechanical and electrical engineering solutions. During the execution stage, specialized construction teams, supported by procurement and logistics departments, transform the design into unique, modern and functional interiors. Both phases are supervised by a skilled project manager to ensure effective control over the quality, time management and budget targets. This model works well in all areas of the interior design market, no matter whether they are office space, residential or other commercial buildings. It can be argued that this is nothing extraordinary and that the Tétris model is similar to the traditional approach employed by most fit-out companies. The question is why others don’t succeed, or why it proves difficult to achieve consistency and efficiency on a wider scale - when you have to rise to the challenge and execute several dozen projects of varying size and complexity in different locations. What is the difference between your model and the traditional approach with several, independent design and finishing companies? Primarily, the Tétris Design and Build model ensures synergy between project manager, designer and contractor. In the traditional model practiced on the Polish market, these three elements are usually done by three independent agents. Consequently, each of them may hinder the others’ involvement by safeguarding their own interests. The Tétris model ensures team-work at every single stage of the project. In the traditional model, teamwork is not necessarily excluded, but it remains uncertain if a team is efficient and whether there is ”chemistry” between its members. A close-knit team draws on its previous experiences and is able to quickly eliminate errors in order to meet customers’ demands. It is worth mentioning that Tétris has a remarkable database of clients and references. Therefore, in many cases the experience of a local team complements the global expertise of the entire company. As a result, Tétris

PAWEŁ BRODZIK, MANAGING DIRECTOR AT TÉTRIS BY NEO-ŚWIAT

Design & Build is a more flexible and efficient model, which protects customers’ interests at a higher level. What can clients expect to gain? The fit-out projects are characterized by uniqueness, comprehensiveness, huge dynamics and by the fact that they are implemented under time pressure , particularly in their final phase. The advantage of the Design and Build model is the positive impact on fit-out execution time. The flow of information is quicker and more precise and the service is more comprehensive. Operations, which are often impossible to perform in the traditional model, can be done in parallel and are not mutually exclusive. For example, long-term orders can be placed at the design stage, and not after a contractor is selected. At the critical phase of the project, execution time can be reduced by up to 30 percent. By choosing the Design and Build model, a client is acquiring safety and a guarantee that a service is provided by a reliable and professional partner. Comprehensive cooperation also raises the possibility of generating the desired savings and added value engineering benefits. Moreover, design faults, contradictory technical solutions, and hindered communication processes are eliminated. Finally, and certainly to the benefit of each client, we eliminate the ever-present and typical “tug-of-war” between the aforementioned parties, whose aim - among other things - is to mask their own mistakes.

LOKALE IMMOBILIA / INVESTMENTS

Revival is just a B Y B E ATA S O C H A

With investment volumes dropping 40 percent on last year’s results, one can’t help but wonder if Poland still has what it takes to attract serious capital. Experts claim it does. They also say that new sources of money are looking in Poland’s direction

oland’s real estate investment volume in the first half of the year could be described as disappointing: it fell by over 40 percent compared to H1 2014, according to data compiled by Colliers International. Market analysts are however, certain that full-year figures will turn out at least as good as last year’s. According to Colliers, deals worth a total of €1.5 billion were at the due diligence stage at the end of June. Those in the know point out that the lower volumes are the product of smaller lot sizes of this year’s transactions: the market was dominated by transactions within the €50-100 million price range in H1 2015, accounting for 72 percent of the total volume. As a result, the average transaction value fell in H1 2015 to €40 million, down by a third compared to the corresponding period in 2014, according to DTZ. “The lower value of real estate

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investment deals compared to 2014 in the first half of the year is not, in my opinion, a signal of a slowdown. The number of transactions concluded between January and June is larger, however, their scale and value are lower,” said Tomasz Trzósło, managing director of JLL Poland, head of Capital Markets, JLL Poland. Market analysts also seem confident that volumes will rise in H2 2015, bringing it on par with the previous two years, both of which saw over €3 billion worth of real estate change hands. “We are launching a number of high profile, landmark assets for sale in the coming weeks. Demand and activity is there and the investment volumes will show that by the end of the year,” assured James Chapman, partner, CE Capital Markets at Cushman & Wakefield. Others concur. “We can expect a few much larger transactions in the second

LOKALE IMMOBILIA / INVESTMENTS

around the corner half of the year. One such example is the sale of the Riviera shopping center in Gdynia, finalized in late August and early September – thus far the biggest transaction across all real estate segments this year,” said Trzósło. He admitted, however, that the supply of A-class office schemes in Warsaw, which always generate the highest transaction volumes, is limited. Regional markets thrive Office transactions represented the biggest share of all deals (€362 million and 45 percent of the entire deal volume, as per DTZ data) but notably it isn’t Warsaw that has been attracting the most attention. “The overall volume of office investment transactions outside Warsaw could potentially reach even €750 million in 2015, up 70 percent on last year,” said Tomasz Puch, regional director, head of Office and Industrial Investment at JLL. Regional office markets, mainly Kraków and Wrocław, but also Gdańsk, Łódź, Katowice and Poznań, are increasingly hot for investors. Two of the biggest office deals concluded lately were the sale of the Enterprise Park complex in Kraków, Green Horizon in Łódź. Many more are expected to close by the end of the year. “The regional office markets are experiencing their strongest year ever for both leasing and investment activity. … Investors have found comfort in strong tenants, long leases and high-quality assets in these cities and there is a constantly growing liquidity for best-in-class properties,” said Chapman. Warsaw is expected to see a comeback by the end of the year, though. “We are about to see a major uplift in activity to key Warsaw offices due to some new deals being introduced to the market,” he added.

Image: Shutterstock

Retail and industrial At €260 million, retail deals accounted for 32 percent of the entire volume. Some of the biggest transactions were the sale of the Sarni Stok shopping center in Bielsko-Biała, Focus Park in Rybnik and the Solaris Center in Opole.

WBJ OBSERVER • OCTOBER 2015

“The retail market is undergoing a major resurgence with growing demand for strong centers across the country. Some of the best opportunities are currently in catchments of 200,000 - 400,000 people where single shopping centers can absolutely dominate,” explained Chapman. Meanwhile, industrial assets, which were a hot zone in 2014, also failed to impress in H1of the year. Warehouse deals totaled a meager €149 million in deals, corresponding to 19 percent of the total volume. Only three transactions closed in H1, two of which were generated in 2014. But, again, more deals are in the works. “We won’t beat last year’s record of €744 million in the warehouse sector. However, provided that all the ongoing transactions are closed on schedule by the end of the year, we should see a volume of €600 million or more, which will be another great result, comparable to that recorded in 2013,” said Trzósło. Chapman claims investor interest is there, but, similarly to the Warsaw office market, the product for sale has yet to arrive on the shelves. “There is still a huge amount of capital looking at the industrial sector. However, the quality of the available assets is generally not at the prime end. Most activity during H2 will involve older assets with the exception of a significant, single tenant long-lease opportunity. The latter will see record bidding but it is an anomaly within the context of the wider market,” he explained. He added that we will see the return of new prime assets and portfolios in H1 2016 with the completion of new construction. Still interested Regardless of what may or may not be concluded this year, experts are also quite positive that investor interest in Polish real estate is not on the decline. According to “CEE Investor Survey” published by DTZ, Polish offices and retail are among two out of the top three segments which investors find the most attractive in the CEE region. In “Investor market update” DTZ analysts also claim that the non-prime sector is seeing increased investor activity.

OCTOBER 2015 • WBJ OBSERVER

“THE RETAIL MARKET IS UNDERGOING A MAJOR RESURGENCE WITH GROWING DEMAND FOR STRONG CENTERS ACROSS THE COUNTRY. SOME OF THE BEST OPPORTUNITIES ARE CURRENTLY IN CATCHMENTS OF 200,000 - 400,000 PEOPLE WHERE SINGLE SHOPPING CENTERS CAN ABSOLUTELY DOMINATE.

Image: Shutterstock

LOKALE IMMOBILIA / INVESTMENTS

L O K A L E I M M O B I L I A / I NSupporting V E S T M Partner: ENTS

5th Annual

CEE INVESTMENT &

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October 29th 2015, InterContinental Hotel, Warsaw, Poland

#CEEInvestmentAwards

www.CEEInvestmentAwards.com Sponsors 2015

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BELARUS COUNCIL OF SHOPPING CENTRES

For further information contact: Craig Smith / +48 792 308 221 / craig@europaproperty.com WBJ OBSERVER â&#x20AC;˘ OCTOBER Anna Kaliszewska / +48 601 382 667 / anna@europaproperty.com

2015

Besides, why shouldn’t managers of real estate funds be interested in the Polish property market, given that it remains one of the most liquid markets in Europe? In DTZ’s latest liquidity ranking, Poland was the sixth most liquid market in Europe in 2014. Granted, it fell from the second position it had occupied in 2013. However, it was still the next best thing after the UK market for non-European capital. “Last year, Poland was Europe’s second most liquid market when it comes to investors based outside our continent, whose share in the transaction volume amounted to 55 percent,” said Craig Maguire, head of Capital Markets, DTZ. “The Polish investment market continues to be dominated by global funds: these are American and Canadian funds, but also Asian and South African. German and British capital remains active as well,” explained Trzósło. Even though the sources of capital remain the same, the profile of the investors is changing. “The global appetite has changed in 2015. It had been primarily USbased opportunistic capital but now we can see long-term investors looking to make Poland a strategic part of their investment portfolios. Such investors are able to pay higher prices for assets that offer long-term value,” said Chapman. Where to next? On the one hand, investors remain highly interested in Poland and value its liquidity and size, but on the other hand, the scarcity of available assets may have turned their gaze towards other CEE markets. Can other markets in the region outperform Poland in terms of investment volumes? The Czech Republic already has. With €1.2 billion in deals closed in H1 2015 it accounted for some 47 percent of the entire CEE investment volume, beating Poland by nearly €400 million. Hungary (with €280 million and 11 percent) and Romania (7.5 percent) were next in line. “There are some very strong pull factors that are attracting investors to the Czech Republic, Slovakia, Hungary and Romania. Investors see good value in these markets with strong fundamentals. The Czech Republic has the highest GDP growth in Europe at the moment, Hungary has had positive occupational stories and limited new supply,” said Chapman. He assured, however that Poland remains a priority for most money managers and that it shouldn't fear competition from other CEE countries. On the contrary, any attraction towards CEE is good for Poland. “Overall, the effect is positive because many investors consider CEE as a region and it generates more interest and focus,” said Chapman.

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Trzósło also added that Poland’s undeniable and inherent advantage is its size. “The scale of the market is very important – there is and always will be a concern in the case of smaller markets as to their liquidity and potentially limited ability to divest. There are no such concerns in the case of the Polish market,” he explained. One cannot forget however, that while being more secure, Poland is becoming increasingly expensive. “The expected and actual yields for the best office schemes in Warsaw are significantly lower than in Budapest and Bucharest,” he added. The overall appeal of Poland therefore, continues to lie in a unique combination of being less mature than Western countries but more liquid than other CEE markets. Let’s hope it remains right there in the middle. u

Image: Shutterstock

LOKALE IMMOBILIA / INVESTMENTS

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LOKALE IMMOBILIA / INTERVIEW

Warehouse market

Poland, Germany or the Czech Republic? Which of the three Central European markets is the most attractive when it comes to e-commerce, which offers the best conditions for warehouse developers and investors and how will each of them develop in the future? I N T E R V I E W B Y A L I CJ A C I S Z E W S K A

What about Poland and the Czech Republic? Is it possible to develop such projects in these countries? Yes and they are being carried out. The three schemes we developed for Amazon are good examples of that. Each of the projects features some 100,000 sqm, which is very rare in the Polish market. Additionally, they were developed for e-commerce, so we are aware that the sector is growing. Naturally, Polish e-commerce largely services western markets, Germany in particular. However, the Polish market alongside Polish retailers are investing in e-commerce, and the space is expanding because of increasing needs as a result of e-shopping. Amazon is the world leader in e-commerce, hence it sets the trends, leading to a growing demand for space in Poland and the Czech Republic. So, is Poland competitive as a potential destination for large logistics centers?

OCTOBER 2015 â&#x20AC;˘ WBJ OBSERVER

Images: Panattoni

WBJ Observer: Recently, it has been announced that Panattoni is going to construct the largest logistics center in Germany for e-commerce company, Jago, encompassing 120,000 sqm. This is another big BTS (Built-To-Suit) scheme developed by Panattoni. Can we expect more in the future? Robert Dobrzycki: We are always making plans, but it all depends on the market. We hope that we will be developing such projects and signing big contracts. We have a very ambitious plan regarding Germany, we would like to grow significantly in the market, therefore we believe that this transaction is just the beginning. The German market is very attractive in terms of e-commerce, because of its large customer base, and we have very high hopes regarding the sector.

â&#x20AC;&#x153;THE GERMAN MARKET IS MORE EXPENSIVE WHEN IT COMES TO CONSTRUCTION COSTS, YET FINANCING COSTS ARE LOWER THAN IN CENTRAL EUROPE. FURTHERMORE, ACCESS TO LAND IS LIMITED, ESPECIALLY ON THE SPECULATIVE MARKET. Robert Dobrzycki,

CEO for Europe of Panattoni Europe

LOKALE IMMOBILIA / INTERVIEW

It surely is, due to the fact that such complexes need a huge labor force. Some 3,000 people are employed at each of Amazon’s logistics centers, and during the Christmas period the number reaches 5,000. The flexibility of the labor market and the labor law is also a very important factor. Poland’s problem is our customer base, which is not yet as strong as Germany’s. As a consequence, we have to serve the German market which is not convenient in terms of location, because it is obviously easier to serve Germany from the country’s central regions. Nevertheless, there are other factors that persuade firms to locate in western Poland and in western parts of the Czech Republic. If our customer market grows, Poland will serve itself, but as for now, the western part of the country handles the big German market. Is the Czech Republic positioned higher than Poland in terms of optimal locations? When it comes to the depth of the labor market and the transparency of procedures, Poland does better, yet the Czech Republic has better access to wealthy German regions. Still, in my opinion, it is much easier to invest in Poland than in our southern neighbor, taking into account the law. What are the factors that impact an investor’s choice when it selects a particular country? The three main factors are the following: the depth of the labor market, the condition of a country’s infrastructure and access to markets. Currently, the costs of building new units are much lower than a few years ago. What does it mean for old facilities and their owners? The units with leases about to expire will be under pressure to lower rents, as the costs of developing new space is much lower than in 2007 or 2008, just before the financial crisis. Construction costs were higher back then due to cost inflation. One has to adjust rent to the costs, when a renewal is to be signed.

Won't it increase the vacancy rate? It will not happen, I believe, because companies’ net profits are constantly rising, especially in the e-commerce sector. Firms are transferring their businesses to Central Europe taking into account low labor costs, therefore I am not expecting an increase in the vacancy rate. Do the Czech and German markets differ so much from Poland in terms of costs and vacancy rates? The costs are not so different in the Czech Republic, however legal procedures are more complicated than in Poland. In addition, fewer plots of lands are available in the Czech Republic. The German market is more expensive when it comes to construction costs, yet financing costs are lower than in Central Europe. Furthermore, access to land is limited, especially on the speculative market. The majority of plots are owned by local municipalities and they are not interested in selling them on the speculative market. They always look at the number of jobs created through the sale of the land. Overall, labor costs are the main factor which differentiates Poland from the Czech Republic and Germany. According

to a report compiled by JLL, the average vacancy rate in the Czech Republic dropped to 6.9 percent in Q2, and the vacancy rate for warehouses featuring equalling 5,000 sqm or more for Germany does not exceed 5 percent, the company estimated. In comparison, in Poland, the vacancy rate stood at 7.4 percent by the end of the first half of the year. Our market seems to perform poorer than the other two, but still the rate is the lowest since 2007. Can the German and the Czech warehouse markets expect as much development as the Polish market in the near future? Those markets are quite similar, but the Czech one is more saturated, so the increase of space in Poland should be bigger than in the Czech Republic. There are more warehouses per capita in the Czech Republic, than in Poland. So, I believe that we should expect a higher increase in warehouse stock in Poland than in our southern neighbor. When it comes to Germany, the growth of warehouse space is to be lowest among the three countries, because the market is the most highly developed. u

WBJ OBSERVER •OCTOBER 2015

LOKALE IMMOBILIA / URBAN PLANNING

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

On the waterfront

Image: Port Praski

WAITING FOR THE WATERFRONT REVOLUTION IN WARSAW. THE NEGLECTED BANKS OF THE VISTULA RIVER ARE FINALLY SEEING MORE INVESTMENT

OCTOBER 2015 • WBJ OBSERVER

LOKALE IMMOBILIA / URBAN PLANNING

ome of the most attractive, but hitherto neglected riverside areas of Warsaw are currently getting new investor attention, with a number of major public and private waterfront developments scheduled to be completed on the banks of the Vistula in the coming years. The municipal authorities are now developing new boulevards along the downtown stretch of the river close to the Old Town. In the opposite-lying Port Praski neighbourhood of the Praga Północ district, construction is proceeding apace on a huge mixed-use real estate project. More building activity can be expected in the near future, as the Polish capital is finally making up for years of bad urban planning and urban neglect. Unlike in many other large cities across Europe, riverfront areas in Warsaw have hardly been developed to date. Environmental factors have been playing a role here, but in the case of a number of unprotected areas it is thoroughfares and disused post-industrial sites that have effectively been separating urbanized neighborhoods from the Vistula.

Real estate experts point to the paradox of the situation. While Warsaw has a very long waterfront, the city has practically turned its back on the river, said Mikołaj Martynuska, senior director, development consultancy, at CBRE. Admittedly, throughout much of modern history, the centrally located riverside neighborhoods of the Polish capital have been dominated by industry and inhabited by an impoverished population, which has prevented the waterfront from being properly developed. However, according to Martynuska, “there are very strong reasons for Warsaw to embrace the Vistula” and “the need for change is obvious.” Recent public investments including the boulevards and new public beaches are now attracting more and more citizens to the river. In the opinion of Martynuska, the lack of modern urban fabric at the riverside can be seen as an opportunity: it means that there are still great areas with room for substantial improvement and the creation of a “new Warsaw” along the Vistula and towards the interior of the city.

WBJ OBSERVER • OCTOBER 2015

LOKALE IMMOBILIA / URBAN PLANNING

Renewed public interest in the Vistula and the recent municipal projects on the riverfront are expected to attract more private capital to the riverside areas. C

OCTOBER 2015 • WBJ OBSERVER

riverside areas of Warsaw are in the pipeline. Piwowarski mentioned the planned projects located in the Port Czerniakowski area of downtown Warsaw which will include a new marina. Another marina is already being developed in the Młociny neighborhood of the Bielany district in the north of the city. Besides this, Warsaw City Hall is developing new pedestrian paths and bicycle lanes along the Vistula, as well as planning a floating swimming pool on the river. Asked whether Warsaw City Hall sees room for private investments near the boulevards, Piwowarski mentioned large roofed premises that are envisioned for the Świętokrzyski Bridge area which will house cultural, education and service functions. “This is potentially one of the most attractive urban areas [in Warsaw] and the most interesting investment on the Warsaw waterfront,” Piwowarski said. He added that there is room for public-private partnership but the decision in this regard has yet to be made. Developer interest Meanwhile, renewed public interest in

the Vistula and the recent municipal projects on the riverfront are expected to attract more private capital to the riverside areas. Construction on the first office and residential schemes located very close to the river are currently underway. Tides Property Group is now developing an office investment, called The Tides, on the left bank of the Vistula, which will be the first office project in Warsaw offering direct access to the river. The development will deliver almost 13,000 sqm of A+-class space in Q1 next year. Slightly north of The Tides and across the Vistula, Port Praski is developing the first residential phases of an eponymous, mixed-use scheme which will comprise a total of approximately one million sqm of usable housing and commercial space upon completion. Another large-scale development is being envisioned for over 27 hectares of post-industrial land located along the Vistula in the northern part of the Praga Północ district. Mennica Polska plans to build a total of around 270,000 sqm of residential and commercial space on the plot. According to Mateusz Polkowski, as-

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Images: Filip Kwiatkowski, JEMS Architekci

Municipal makeover Warsaw City Hall is now developing and planning a number of infrastructural projects on stretches of public land located along the Vistula which are designed to make the waterfront more attractive and draw more people to the riverside areas.The first phase of the flagship scheme of the municipal authorities – the Vistula boulevards – was completed earlier this year and involved the renovation of the part of the waterfront which stretches from the Śląsko-Dąbrowski Bridge up to the Gdański Bridge. A general contractor for the second phase of the development, which will involve the modernization of the part of the waterfront that stretches between the Śląsko-Dąbrowski Bridge and the Świętokrzyski Bridge, should be selected soon. The modernization of the other parts of the boulevards, lying south of the Świętokrzyski Bridge, is now being planned, with an architectural competition scheduled to be announced later this year, said Marek Piwowarski, the Warsaw City Hall plenipotentiary for the Vistula River. Many other public investments in the

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LOKALE IMMOBILIA / URBAN PLANNING

sociate director, research and consulting, at JLL, the trend will undoubtedly develop in the coming years, with Warsaw already following in the footsteps of other European cities, such as Berlin, and “getting closer to” its river. While The Tides is currently the only office project under construction located directly on the banks of the Vistula, both residential and commercial space developers will be interested in the development of new waterfront

Warsaw is already following in the footsteps of other European cities, such as Berlin, and “getting closer to” its river

schemes in the Polish capital in the near future, he said. Polkowski pointed out that new waterfront developments have recently been delivered or are now in the pipeline in some of the major regional markets in Poland, including the TriCity where many post-industrial sites that used to house shipyard facilities offer direct access to water. Developer Vastint, for one, has already completed the first phase of its Gdynia Waterfront office and hotel investment in Gdynia. In Wrocław, developer Nacarat delivered an office project earlier this year called Dubois 41 which is located on the bank of the Oder River. Difficult investments In the opinion of Emil Domeracki, senior associate, investment services/ land, at Colliers International, in Warsaw there are also sites which, when developed, would undoubtedly contribute to the creation of a proper waterfront. “The Żoliborz stretch of the Vistula is worth attention,” Domeracki said. He added that the premises of the Spójnia sports club in that district could potentially house a project

OCTOBER 2015 • WBJ OBSERVER

combining retail, residential, office and sports functions, and offer direct access to the river. Why is it taking so long to revitalize neglected riverside areas? According to Domeracki, drawing up proper zoning plans and coming up with a formula for the cooperation between the city and potential investors has been a major challenge. Besides, waterfront developments tend to be difficult investments because of all kinds of technical and legal problems. “The city should be getting closer to the Vistula, but one cannot forget about ecology and sustainable development,” Domeracki said. Piotr Capiga, a negotiator in the office department of Cushman & Wakefield, argued that office developers have until recently not been willing to take additional risks and invest in projects in non-standard locations such as riverside areas. Additionally, the changing water levels and the threat of flooding still remain a challenge. While modern technology allows investors to minimize risks, the need to provide anti-flood protection makes riverfront schemes significantly more expensive.

Brownfields first According to Martynuska, it is extremely important how the process of developing the waterfront in Warsaw is managed. “It is crucial for the city to drive development hand in hand with investors and landowners,” he said. “The interest of the investment market is clear, but money should be channeled wisely,” Martynuska added. In his opinion, it is the development of brownfield areas such as Port Praski and Mennica Polska sites that should be seen as the priority. On the one hand, the development of the sites will create value for the city as industry is no longer needed within the city borders. On the other hand, only the commercial development of the sites can make their transformation financially viable, Martynuska said. Martynuska added that greenfield waterfront sites should, for the time being, be left alone. “There will always be time to intensify development over there, but now the flow of funds should rather be directed towards brownfield developments,” he said. u

Image: The Tides Property Group

Nevertheless, according to Capiga, recent changes on the office property market, which have resulted in a shift in the balance of power in favor of tenants, have encouraged developers to look at new, less obvious locations which means that they may also start considering waterfront projects. In the opinion of Capiga, much will depend on the successful commercialization of The Tides. “If the investment proves to be popular with tenants, we can expect more investments along the Vistula,” Capiga said.

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OBSERVER RANKING

OBSERVER TOP 10

Banks

RANKED BY NET ASSETS (2014)

1PKO BANK POLSKI Net assets:

PLN 248.7 billion Total revenue (PLN billion): 15.54 Net profit (PLN million): 3,254 Revenue from interests and fees (PLN billion): 14.73 Gross profit on banking operations (PLN billion): 11.14

2 BANK PEKAO Net assets:

PLN 167.6 billion Total revenue (PLN billion): WND Net profit (PLN million): 2,715 Revenue from interests and fees (PLN billion): 8.76 Gross profit on banking operations (PLN billion): 7.34

Bank Zachodni WBK Net assets:

PLN 134.5 billion Total revenue (PLN billion): 6.26 Net profit (PLN million): 2,047 Revenue from interests and fees (PLN billion): 7.93 Gross profit on banking operations (PLN billion): 6.26

OCTOBER 2015 â&#x20AC;˘ WBJ OBSERVER

OBSERVER RANKING

Net assets:

mBank

Getin Noble Bank

PLN 117.9 billion

PLN 51.1 billion

Total revenue (PLN billion): WND Net profit (PLN million): WND Revenue from interests and fees (PLN billion): WND Gross profit on banking operations (PLN billion): WND

Total revenue (PLN billion): 4.25 Net profit (PLN million): 360 Revenue from interests and fees (PLN billion): 4.24 Gross profit on banking operations (PLN billion): 2.01

Net assets:

ING Bank Śląski

Bank BGŻ (1)

PLN 104.5 billion

PLN 40.5 billion

Total revenue (PLN million): 5,032 Net profit (PLN million): 1,040 Revenue from interests and fees (PLN billion): 4.89 Gross profit on banking operations (PLN billion): 3.53

Total revenue (PLN billion): 2.28 Net profit (PLN million): 138 Revenue from interests and fees (PLN billion): 2.15 Gross profit on banking operations (PLN billion): 1.52

Net assets:

Bank Millennium

Alior Bank

PLN 60.7 billion

PLN 30.1 billion

Total revenue (PLN billion): 3.52 Net profit (PLN million): 651 Revenue from interests and fees (PLN billion): 3.27 Gross profit on banking operations (PLN billion): 2.30

Total revenue (PLN billion): 2.57 Net profit (PLN million): 322 Revenue from interests and fees (PLN billion): 2.24 Gross profit on banking operations (PLN billion): 1.84

7 Images: PKO BP, WP Carey, Shutterstock

Raiffeisen Polbank Net assets:

PLN 58.6 billion Total revenue (PLN billion): 2.65 Net profit (PLN million): 314 Revenue from interests and fees (PLN billion): 2.53 Gross profit on banking operations (PLN billion): 1.76 WND: Would Not Disclose; Data source: Warsaw Business Journal Book of Lists; www.bookoflists.pl

This ranking is based on a survey conducted by the Book of Lists team. Companies not responding to our survey are not listed.

(1) Presently BGŻ BNP Paribas

WBJ OBSERVER • OCTOBER 2015

EVENTS / ECONOMIC FORUM IN KRYNICA

BACK TO FORM? This year’s edition of the Economic Forum in Krynica seemed like a big deal. Again

OCTOBER 2015 • WBJ OBSERVER

Images: XXV Economic Forum in Krynica

articipants of last year’s forum might have been a bit worried that the event is losing its prestige, at least when it comes to politics. In 2014, major politicians from Poland and abroad were nowhere to be seen at Krynica. This year it was a different story. Both President Andrzej Duda, PM Ewa Kopacz, as well as opposition leaders were present. You could attribute this to the upcoming parliamentary elections and you would be correct. But foreign politicians, including the presidents of Croatia and Macedonia were there as well. In fact the biggest media buzz emanating from the forum was in reaction to opposition leader Jarosław Kaczyński being awarded the man of the year award. This decision, albeit controversial to some, really shouldn’t be, just take a look at the other nominees. The Polish national volleyball team came in third after all. While this was a positive, it could be viewed unfavorably by others, especially foreign guests. After all, when you want to be regarded as a regional event, you should stay away from local issues such as electoral campaigning.

Images: XXV Economic Forum in Krynica

But with 3,000 guests from 60 countries, it was clear that the forum is still an important event on a European scale. One attendee even said that it's second only to Davos when it comes to importance. With politicians aplenty, business people did not disappoint as well. All major state-owned companies sent their CEOs, the private sector was also present, although only one person from the Wprost list of the top 10 richest Poles attended (Michał Sowołow). With the current global political climate, the forum put more emphasis on international topics. Just like last year, a whole thematic path was dedicated to the situation in Ukraine,

Baltic states and Russia. There was also a number of panels devoted to the ongoing migration crisis and the situation in the Middle East. Panels also focused on local issues including energy, defense, health care and many others. The only complaint was the choice of panelists, or rather what some of them had to say. It’s understandable that big names garner the largest audiences, but do we really need to hear Leszek Balcerowicz talking about how privatization is the cure for everything? Maybe ask some lesserknown names who can actually say something new and unique instead of well-worn banality.

WBJ OBSERVER • OCTOBER 2015

GADGETS >>

TECHNOLOGY TO MAKE YOUR LIFE EASIER

WE LIVE IN AN AGE OF GADGETS: Wifi iKettle It's freezing outside and the only thing you can some are useful, but most are just think about is a hot cup of tea that will instantly a waste of time and money. We sift warm you up. But first you have to get home, turn on your kettle and wait for another 10 minutes for through the latest available tech water to boil. Designed by Smarter, the new to pick those that we believe will help the Wifi iKettle will switch itself on with one click on your phone via the product app, available for both you live your life more comfortably iPhone and Android, and boiling water will be and confidently. waiting for you at home. You have to quickly stop by your local supermarket? No problem, the app will inform you that the water is ready to brew and will ask you whether you want it to be kept hot for the next 30 minutes. Its elegant stainless steel design will blend into any kitchen, for those who prefer a splash of color there are five different iKettle skins to choose from. Price: $99,99

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Price: PLN 532

lampynaowady.eu

OCTOBER 2015 • WBJ OBSERVER

Price: $299

thync.com

Images: lampynaowady, Thync, Sony, Smarter, Lunasleep, Wacaco, Eyelock

With rising temperatures the mosquito season is getting longer every year. This time the pesky insects will most likely annoy us until winter comes. So there is still plenty of time to justify buying a mosquito lamp. The device attracts mosquitoes with the UV light and traps them. With its modern design, the lamp looks slick and you can put it inside your house (or outside) without worrying that it will cramp your style. According to the producer it covers up to 450 sqm.

How wonderful it would be if we could change our mood in a fraction of a second! Now it is possible thanks to Thync. This device uses waves, or as they call them “vibes”, in orders to make you calm or energetic. The calm vibes make you unwind, chill out and relax, whereas the energy vibes should motivate, boost and focus your mind. Thync is a small, white, irregular shaped gadget that you wear on your forehead to enjoy its effects for hours. What is more, Thync is the Digital Trends Top Tech of 2015 CES Award Winner in the Cool Tech category.

Moon Mosquito lamp

Thync

>> >>

Minipresso

Myris

Are you tired of thinking up new passwords, struggling to remember them and still being unsure as to whether your accounts are secure? Eyelock has come up with the perfect solution: myris. It is a small hand-sized device that connects to your computer via USB and makes logging into your accounts easy and secure. How secure? Myris uses your eye to check your identity. Everybody's iris is unique and there is a 1 in 1.5 million chance of false ID, the producer assures. Thus, your accounts are significantly safer than when using voice, face or fingerprint recognition, never mind usernames and passwords. Price: $279,99

eyelock.com

Smart Bluetooth Speaker BSP60

Price: $59

wacaco.com

Luna Sleep

We spend approximately half of our lives sleeping, so why not make it as pleasant as possible? Luna is a smart mattress cover, which will dramatically alter the way you fall asleep and wake up. It learns your average bedtime and greets you with a nicely warmed or cooled mattress, the temperature adjusted to perfectly suit your needs. Moreover, Luna tracks your sleeping patterns, your heart and breathing rates are recorded and the appropriate sleeping conditions are created. In the morning, the mattress cover gently wakes you up via a smart built-in alarm precisely during the lightest phase of sleep, thus, you feel fresh and awake and ready to start the day. In line with the newest trend of connecting everything to your phone, Luna sends recommendations regarding your sleeping habits directly to your phone. Price: $265 - $305

lunasleep.com

“Meet your personal assistant”- that is how Sony describes this device on their website. The Sony Bluetooth Speaker is a 10cm multifunctional ball, which will change your everyday life. First of all it can be used as an alarm clock, however it is not set manually but via voice control. Actually you do not have to touch the clock at all. You ask for the weather – you've got it. You ask for your daily schedule – it tells you. Why use your phone to make calls? Talk to friends via the Bluetooth speaker. You do not even have to buy special loudspeakers when you want to throw a party, all you do is set up your speaker, which features a 2.5W stereo.

Espresso lover? Love taking long walks in the woods? You definitely need the Minipresso in your backpack. At only 360 grams and 175 mm it fits into any backpack, purse or other bag. You simply have to put hot water and coffee separately into this small machine and whenever you desire it you will get freshly brewed espresso by pumping the semiautomatic piston. The device is designed by Wacaco and is produced in two models. One uses regular ground coffee, the second requires capsules such as Tchibo Cafissimo.

Price: $319

sonymobile.com

LIFESTYLE / BOOK REVIEW

POLAND’S CULINARY TREASURE B Y V E D I K A LU T H R A

Cookbooks today tend to fall under two categories: those that spew out recipes like a fast-food restaurant churns out burgers - conventional, ordinary, and all much the same. Then, there are those put together by well-known chefs- the recipes are exotic, artistic and too unrealistic for the average home kitchen. Rare is the cookbook you inhale page by page, the cookbook that tells a story - that you read for pleasure

result of its wartime and communist past. “Driving around rural Poland was a revelation to me,” said Target. “I thought it was an incredibly beautiful country, and it was great fun to photograph- not just the places but the food as well.”

The cookbooks tell the story of Zatorska’s childhood in Poland. For her, crafting them was a hobby combined with a desire to return to her cultural heritage. "I feel that growing up in Poland is part of my life," Zatorska said. “[Writing the books] was true nostalgia on my part, missing my family, my home and missing the country that I grew up in.”

The book successfully lures people in to provide an experience of a culture that extends beyond Poland’s role in World War II. “When we wrote the book, Poland was not a very popular tourist destination - and the food was not very popular outside Poland, so most publishers thought we were crazy,” Target explained. “But because we both have other jobs and our lives didn’t depend on it, we kept doing it the way we wanted and it really worked.”

Target’s photographs paired with Zatorska’s writing reveal a side of Poland that focuses on the country’s beauty rather than its destruction, a common association with Poland as a

Rose Petal Jam, their first book, was a success with people scattered across the globe. “It is a gentle introduction to Polish family traditions and to Polish food,” said Zatorska. “Hopefully

OCTOBER 2015 • WBJ OBSERVER

I’ll play my little part in encouraging people to travel there.” Because Rose Petal Jam covers summer while Sugared Orange is winter-themed, Zatorska and Target plan to release one for each season. Lilac Honey, their next project, focuses on Poland during the springtime, set to be released sometime next year. “Lilacs are a symbol of Polish spring, the time of matriculation exams, your first love and the time of first honey,” Zatorska described. “Again this goes back to my childhood in Poland, my grandmother, and Easter in Poland as well." “Beata really wanted to make a very special book that you treasure,” Target said. And a treasure it truly is. The books are available in English and Polish from Empik stores or in various other languages online through Amazon.

Images: Tabula Books

eata Zatorska, a Polish-born doctor working in Australia teamed up with her husband, Simon Target, a filmmaker and photographer to create two Polish cookbooks that shine within this latter group: Rose Petal Jam, based on Polish summer and her sister publication, Sugared Orange for the winter months.

Images: Tabula Books

LIFESTYLE / SUMMER CONCERTS

LIFESTYLE / WFF

WARSAW FILM FESTIVAL B Y V E D I K A LU T H R A

OCTOBER 2015 • WBJ OBSERVER

interview. “This is the first feature movie about immigrants in Polandthe first feature movie about transsexuals in Poland.” Because of the somewhat political nature of the story, several actors declined acting roles. In addition, the crew faced numerous difficulties while producing the film, for instance, due to government regulations at the Poland-Ukraine border. Many movies aspire to instill a seed of contemplation in the minds of the audience. Nowy Świat does. “I want this movie to be viewed by as many people as possible, because it is a very small, very intimate movie made by three young directors who really wanted to touch on something profound in their environment,” said Kwieciński. “The situation in Europe is changing so rapidly, and the amount of hatred is so overwhelming, that it is becoming a more and more important movie every day.” The film has already premiered in Gdynia and will enter the competition for the 1-2 Category at the Warsaw Film Festival. For more information on the festival program, visit: http://www.wff.pl/en/

Images: Akson Studio

oland is known for its cinematic heritage- and while Łódź is where filmmakers learn their trade, Warsaw is where they come to show it off. The 31st Warsaw Film Festival will take place from October 9-18 in Złote Tarasy’s Multikino, and at Kinoteka in the Palace of Culture. Along with Cannes, Venice and Berlin, the event is recognized by the International Federation of Film Producers Associations, attracting filmmakers, film critics and film lovers from across the globe. This year, 111 feature films and 66 short films will be showcased from 57 different countries- the majority of these films will premiere at the festival. In addition to foreign features, notable Polish films are also screened at this annual event. These are often films that go on to receive worldwide recognition- for instance, two years ago, Paweł Pawlikowski’s Ida (Poland’s first Oscar-winning movie) won the grand prize at the festival. “Our aim is to show a film before it wins an Oscar, to introduce a director to Warsaw audiences before he or she wins an award at Cannes,” wrote Stefan Laudyn, the festival’s director, in his introduction. Nowy Świat (New World) highlights Laudyn’s words. The story follows the journey of three immigrants, a Belarusian, Ukrainian and an Afghan, who leave their old lives behind in order to begin afresh in Poland, hoping the country will serve as a “new world”. In today’s Europe, the concept of the film evokes sensitive issues. “It’s a very controversial movie in a way,” Jan Kwieciński, the film’s producer told me during a phone

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European Square construction site August 2015