WBJ Observer #1

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20 PAGES FEBRUARY 2014 Vol. 01 • No. 01

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

20 PAGES OF REAL ESTATE N EWS

REAL EST A NEWS TE

Poland: 1989-2014

A quarter century after Poland’s bold economic reforms began, it’s time for Chapter 2

February 2014

Wine Wars

The Polish Soul

Discount grocers battling it out to quench Poles’ growing thirst 47

Do celebrities affect your purchasing decisions? Do you drink just to get drunk? 13

PLUS: Wonder Years | Greasy palms | Top 10 EU funding consultants | Facebook fading

A new gallery in Bydgoszcz

Galeria Dominikańska, Wrocław, 2001

Galeria Łódzka, Łódź, 2002

Galeria Krakowska, Kraków, 2006

Alfa Centrum, Gdańsk, 2006

Galeria Bałtycka, Gdańsk, 2007

Galeria Kaskada, Szczecin, 2011

ECE Projektmanagement Polska Sp. z o.o. ul. Fabryczna 5a, 00-446 Warszawa, Poland Phone +48 22 310 60 00, fax: +48 22 310 60 02 www.ece.pl, info@ece.pl

May you build up numberless achievements in the upcoming 2014!

IN THIS ISSUE

In a year of major anniversaries, the most remarkable is the upcoming 25th anniversary of the fall of communism, which in 1989 set the nation on its current path to prosperity. Where are we now, and what’s ahead? – p. 23

DEFENSE

ENERGY

EXPORTS

The Polish Soul

Do celebrities influence your purchasing decisions? And other burning questions, p. 13

24 Wonder Years

Here’s a quick glance at how it looked 25 years ago, where we are today, and how things might be 25 years from now: Shopping, entertainment, home, transportation, p. 14

The government plans expenditures of PLN 131 billion over the next decade. Is it enough to truly modernize the nation’s future fighting forces?

30 36 40

The IT sector in Poland is set to take off over the coming years. What's needed to speed up the development?

Try these:

After years of neglect and exhaustive debate, it appears nuclear will play a key role in the nation's energy future.

Polish exporters drove GDP growth in 2013. Which firms are the industry leaders and what are their perspectives for the future?

Mr. Gomułka’s straight talk

News Review ��6 Verbatim: Top quotations of 2013 �� 8 Commentary Politics: Expect drama �� 17 Law: Sunday work rules �� 18 IT: Year of the ‘Big Budget’ �� 19 Media: Facebook fading �� 20 Hot: The procurement scandal �� 21

A humble man

Polish composer Wojciech Kilar felt blessed to have made Katowice home, p. 16

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

Entrepreneurs The local cinema �� 43 The shoe seems to fit �� 45 Cityscape: Katowice �� 76 Top 10: EU funding advisers �� 78 Zuckerman: Dining in NY, 1981 �� 84

“We need better universities, more efficient research centers, increased FDI.” – p. 50

prasa gdanskiGBC_84x231.pdf

1/22/14

11:54 AM

The war over wine Discount retailers Lidl and Biedronka are conquering Poland’s rapidly growing wine market with rock bottom prices, p. 47

WITH

20 PAGES OF REAL ESTATE NEWS

Real estate outlook

2013 will be tough to beat.

CMY

News CA Immo sells Lipowy Office Park �� 56 GTC fails to sell Galeria Jurajska �� 58 Polimex will not build A1, A4 Highways �� 60

Features Developers look to second-tier markets �� 63 2014 looks like the year for outlet centers �� 65 High Streets: Part 1 of a series – ul. Chmielna �� 69 Pension funds: No real estate for old men �� 71

Banging the gavel Need cash fast? Some real estate buyers just might be ready to help you, and themselves at the same time.

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

Market intelligence from WBJ Group Kehrt Reyher Editor and publisher kreyher@wbj.pl Jacek Ciesnowski Managing Editor, Observer jciesnowski@wbj.pl Beata Socha Managing Editor, Lokale Immobilia bsocha@wbj.pl Remi Adekoya Politics Editor radekoya@wbj.pl

made in poland

investing in poland

Profile: A guide to Polish exporters and Poland’s fastest growing export industries with macroeconomic and legal analysis. Multi-lingual. Targeted at: Foreign firms seeking Polish goods.

book of lists

Profile: Investment calling card for Poland in cooperation with major institutions and consultancies. Analysis of key opportunities, with legal and tax advice. Multi-lingual.

Profile: Extensive database tracking more than 70 Polish industries/sectors, 3,000+ firms; English, Polish

Targeted at: Direct foreign investors.

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Distribution: 10,000 copies to foreign chambers, Polish diplomatic outposts, conferences, trade fairs

Next edition: April 2014

Next edition: September 2014

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f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

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wbj.pl Coming in March:

Analysis

BEATA SOCHA ON REAL ESTATE

Daily reports March 11-14 from the MIPIM international property show Top stories 10 most-read articles on wbj.pl Dec. 15–Jan. 15 1. Graphene production launched in Poland 2. Poles could travel visa-free to US by Christmas 3. Polish smoked sausage threatened by new EU rules 4. Poland facing demographic catastrophe 5. Gant declared bankrupt 6. Eurolot to expand its flight network 7. Conflicting reports of Russian missiles on Poland’s doorstep 8. Volkswagen to open logistics center in Poland 9. Bolivian tycoon mulls buying LOT 10. Russia halts Polish cheese imports

With: POLAND AM • FINANCIAL MINUTE • LOKALE IMMOBILIA

How much does Poland owe and does it really matter?

Real Estate

Demanding apartment dwellers will have it all 'smart' at Złota 44

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

Inreview

News highlights of the past month from WBJ.pl Boeing to compensate LOT with PLN 90 mln

Image of the month

As part of its compensation from Boeing for the grounding of Dreamliner planes, Polish state-owned air-carrier LOT will receive PLN 60 million in cash and other incentives to total PLN 90 million, according to Puls Biznesu. Neverthless, LOT can’t add any new routes because after it received financial aid from the Treasury, it has to curb its flight network rather than expand it – and is still in desperate need of money. The company estimates that in 2013 it will post a PLN 20 million loss. LOT currently has five Dreamliners, with the sixth scheduled to join the fleet in March. The plane will most likely have to be leased out as the reduction in routes means the Polish air carrier will have no use for it.

PKN Orlen cashes in on Lukoil deal

Poland’s largest fuel holding PKN Orlen signed a contract with fuel retailer Lukoil Polska worth PLN 1.55 billion. The refiner will sell gasoline and diesel oil to Lukoil Polska until the end of the year. The total value of contracts signed by the two companies so far in January amounts to PLN 2.37 billion.

NIK blasts Poland’s shale gas exploration

Poland’s Supreme Audit Office (NIK) has issued a report criticizing the progress on shale gas exploration in the country. NIK said that work on the legal framework for shale gas exploration and extraction was started with a considerable delay in 2011. Further delays in legislative work may result in

A reveler at the Great Orchestra of Christmas Charity, an annual countrywide fundraiser, which supplies hospitals with new medical equipment, has raised over PLN 35 million this year. businesses limiting their activity in this area, the audit office said. License issuing processes were unreliable and did not promote equality, and took more time than was necessary, the report also said. The office was also skeptical of the progress in estimating the size of Poland’s shale gas reserves. If the current rate of test drilling is maintained, it may take about 12 years to complete the process, according to the report.

Sales of Polish dailies slump

Most Polish daily newspapers recorded a sales decline in November 2013 compared to

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

the same month a year before, with the biggest drop noted by Gazeta Polska Codziennie, whose sales slumped by 24.8 percent to 62,796 copies. Tabloid Fakt remained the top-selling daily with 335,134 copies sold – a 3.36 percent decline over the period. Gazeta Wyborcza was the second best-selling paper with 190,383 copies, a 16.59 percent drop compared to 2012, while Rzeczpospolita sold on average 62,796 copies, a 14.36 percent decrease year-on-year. Only one out of nine dailies saw a sales increase over the period: business daily Parkiet sales grew by 13.27 percent to a total of 4,600 copies.

IMF: Govt. deficit to be 4.6% of GDP in 2014

Poland’s general government deficit stood at some 0.75 percent of GDP in 2013 and is expected to grow to 4.6 percent in 2014, the International Monetary Fund said in a report. As a result of fiscal deficit growth in 2014, the debt-to-GDP ratio will also grow, the IMF said, adding that changes to Poland’s pension system will bring a decline in public debt by about 9 percent of the country’s GDP. It will also cause the deficit to fall by 0.5 percent of GDP in 2014.

Images: Jacek Marczewski / Agencja Gazeta, KPRM, LOT

Poland to join G20 by 2022 – PM Tusk

Poland will “most certainly” join the G20 group of largest economies in the world by 2022, Prime Minister Donald Tusk said. The comment came as the PM was laying out spending plans over the coming years thanks to the latest EU budget, which came in effect on Jan. 1. “In this time we will have reached 80 percent of the EU average in terms of GDP,” Tusk said, adding that currently the figure stands at around 67-68 percent. Speaking to journalists, Tusk said that by 2020 – when the latest EU multi-annual financial framework comes to a close – Poland will be below the EU average in terms of poverty, with an expected 1.5 million citizens to be helped in this respect.

Eurolot to expand its flight network

to the law, we will not see results quickly,” Tusk said, adding that “For us, the most important thing is to make people realize that very soon tolerance for such actions will change.” The PM would also like to introduce breathalyzers as mandatory car equipment.

Privatization brings PLN 4.4 billion in 2013

Privatization proceeds amounted to PLN 4.4 billion in 2013 and proceeds from dividends in state-owned companies stood at PLN 6.4 billion, Poland’s Treasury Ministry announced. The government had earlier set the privatization revenue target for 2013 at PLN 5 billion. The final result accounted for 87 percent of the plan, the ministry said. For 2014, the Treasury plans to bring in PLN 1.2 billion from direct privatization and another PLN 2.5 billion from stock market transactions.

PGE to start Opole plant extension

Eurolot wants to have 500,000 of its own passengers this year, compared to 190,000 in 2013 (plus the additional 1 million it flew under its agreement with LOT), and as such is extending its route network. Last year, Eurolot – whose majority stakeholder is the state treasury – had an agreement with state-controlled LOT to transport the latter’s passengers on national routes. The deal closes at the end of January. In 2012, Eurolot recorded a PLN 57 million loss from sales.

Poland’s biggest utility PGE announced that on Feb. 1 it will start the construction on two new power units in its Opole coal-fired power plant, with 900 MWh capacity each. The PGE management board decided to earmark PLN 11.6 billion to fund the construction project and plans the first unit to be operational within 54 months after construction starts, while the second one will go online after 62 months. Currently, the Opole facility has four units with a combined capacity of 1,492 MWh.

Tusk cracks down on drunk drivers

Sikorski says Ukraine headed towards regime

Prime Minister Donald Tusk said he wants to impose harsher punishment on drivers caught driving under the influence of alcohol. The minimum fine for drunk driving would be PLN 5,000 as well as a driver’s license suspension for three years, instead of one as per current regulations. Repeat offenders can expect a minimum PLN 10,000 fine and a loss of license for at least five years. “Without some drastic changes

Laws on public gatherings adopted in January by Ukraine’s parliament are bringing the country towards a regime like the one in Belarus, Poland’s Foreign Affairs Minister Radosław Sikorski has said. The comment comes after the approval by Kiev on Jan. 16 of a set of laws that limits the freedom of public gatherings and introduces penalties for related actions. u

Postępu prasa2_84_231.indd 1

W B J O B S ER V ER • f e b r u a r y1/22/14 2 0 1 412:18 PM7

Verbatim 2013 “ Compromise is like sharing a cake. You have to make sure everybody thinks he’s got the biggest slice.” MP and ex-Civic Platform Former Justice Minister islative efforts leg on ng nti me com Krzysztof Kwiatkowski, in Poland. to sanction civil unions

“ Who knows? Maybe I’ll even make some g.” money on this thin

Former Polish President Lech Wałęsa on TVN24, referring to the fact that while he had two scheduled lectures in the US called off due to his anti-gay statements, he received four new offers for speaking engagements.

r e v o s i t s r o w e “Th mb, “ He is like a time bo you never know when it will explode and what it will destroy .”

“ It may be that Wanda Nowicka wants to be raped, but not by me. I’m not the type of person who is suited to that type of work.” of Your Janusz Palikot, leader led his cal he at wh ing giv Move, ka’s wic No “psychoanalysis” of ty pu de as n dow p refusal to ste though n eve r ake spe ry nta parliame d been a his party, which she ha n its supraw hd wit d member of, ha port for her. 8

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

me Minister Senator and former Pri icz about ew Włodzimierz Cimosz nister Mi ry asu now-former Tre interan in ki ws no dza Mikołaj Bu . view with Polish Radio

“ The worst is over for Poland’s economy.” t of the Marek Belka, presiden d and chairlan Po of nk Ba l Nationa licy Council, Po man of the Monetary ncil had cou the g after announcin cycle. ing eas y tar ne mo ended its

Images: International Monetary Fund, Ministry of Justice, Shutterstock, European Parliament, WIkimedia

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“ If my suggestions have helped someone change their mind, or “ There wasn’t a ed reflection, single year when I prompt ve cause en we ha did not think about th me small for so leaving the post [of satisfaction.” ].” er ist in m ce an fin

“ There is no point in pretending that the law on OFEs is a desired solution. This reform is necessary mainly from a budgetary point of view.”

Jacek Rostowski on his tenure as finance minister

“ We can say that Poles have managed to fend off the crisis. It was banging on our door but didn’t break it open.” Tusk Prime Minister Donald Economic a nic speaking at the Kry ced the un no an he Forum, where r. ove s wa sis cri c mi econo

ław Foreign Minister Rados interto se pon res Sikorski, in t tha s ort rep dia me al nation find in he played a key role ian Syr the to ing a solution . chemical weapons crisis

morowski President Bronisław Ko system on on the planned pensi reform.

” . y m o n o c e s ’ d f or pol a n

Images: World Economic Forum, LOT, Foreign Ministry, KPRM

“ In the case of this recall vote, not participating does not mean a boycott, it is a position that a citizen takes.”

“Having a Dreamliner is a bit like being married to Paris Hilton. Everything you do, ever y slightest delay, is in the media.”

“ My daughter generally does not listen to me, especially on financial matters. But I will advise her ... to choose ZUS.” ing why PM Donald Tusk explain yor Hanna Ma w rsa Wa of supporters is o deputy Gronkiewicz-Waltz, wh k heads, Tus Mr leader of the party take part t no uld sho , Civic Platform in october. in the recall vote held

Rostowski Finance Minister Jacek RMF FM, h wit in a radio interview he would e vic ad at wh when asked w of the vie in r hte ug da his give to vate penpri future choice between ged ZUS. na ma testa sion funds and

ef executive Sebastian Mikosz, chi on his comof LOT Polish Airlines, Boeing 787 ng usi ce pany’s experien s. ne pla er Dreamlin

“It might be better to just stop torturing e ach other .” MP from Eugeniusz Kłopotek, an lition coa ior jun s nt’ me the govern Party, le’s op member, the Polish Pe ion rat pe coo for on the prospects Civic er, mb me on liti coa with senior 9 Platform.

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5 years ago

10 years ago

15 years ago

FEBRUARY 2009 – Poland’s newspapers are influential and reach a broad audience, but how long will this last? Circulation is dropping, employees are being fired, and the war for ad revenues is growing more brutal by the day.

JANUARY 2004 – The Warsaw Stock Exchange might finally have found a clever way of internationalizing and modernizing operations, announcing plans to float WSE shares within the year.

FEBRUARY 2009 – According to Regus Group, the demand for short-term office lease is rising as companies seek to reduce costs. “The number of questions from companies that want to limit costs connected with renting office space has been growing for a couple of months,” Garry Gurtler, Regus general director, said. u

FEBRUARY 2004 – A PLN 13 billion ($350 million) pact to last until 2013 was signed between Israel and Poland to allow the Polish arms manufacturer Mesko to produce the “Spike” anti-tank missile under license from Israel’s state-owned Rafael munitions firm. u

FEBRUARY 1999 – Tchibo is aiming to be the Starbucks of Central Europe. Its first coffee bar was recently unveiled along with the Klif shopping center, “and it has been nonstop since the doors opened,” said manager Phil Price. MARCH 1999 – President Aleksander Kwaśniewski is expected to veto the new radio and television law, which many say fails to better define basic broadcasting regulations, and violates the principles of free speech and the open marketplace. u

I INNVVI ITTAATTI IOONN

INTRODUCING: INTRODUCING:

INTRODUCING:

‘NewBeginnings’ Beginnings’ ‘New Conference Conference ‘New Beginnings’ Conference

Focusing Poland’s Focusing onon Poland’s hottest sectors, with leading hottest sectors, with leading panelists and speakers. panelists and speakers. Focusing on Poland’s

sectors, with leading Military • Information Technology • Energy • Real Estate Military •hottest Information Technology • Energy • Real Estate panelists and speakers. Twenty-ﬁve years later, where After Twenty-ﬁve years later, where areare we?we? After

weathering great recession, Poland now sees Military • Information Technology •now Energy • Real Estate weathering thethe great recession, Poland sees

February 12, 2014, 9:30 am February 12, 2014, 9:30 am

Villa Foksal, Foksal 3/5, Warsaw Villa Foksal, ul.ul. Foksal 3/5, Warsaw

February 12, 2014, 9:30 am

Villa Foksal, ul.•Foksal Warsaw Accreditation limited • Sign up today! Accreditation limited Sign up3/5, today! Send email to: rsvp@wbj.pl Send email to: rsvp@wbj.pl Accreditations limited • Sign up today! or Send call 7500 ext. 213 or call 22 22 265 7500 ext. 213 an265 email to: rsvp@wbj.pl by February by February 5. 5. or call 22 639 85 67 ext. 213

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

wages GDP rising; a hot cadre of young techies wages andand GDP rising; a hot cadre of young techies Twenty-five yearsgrowing later, where are we? After weatherstartups in international stature andand startups areare growing in international stature by by ing the great recession, Poland now sees wages and exporting ideas products, outlays exporting ideas andand products, andand outlays for for a a GDP rising; a hot cadre of young techies and startups powered military sure to boost fortunes powered up up military areare sure to boost thethe fortunes of of are growing inforeign international stature byhere. exporting both Polish foreign ﬁrms with bases here. ideas both Polish andand ﬁrms with bases and products, anddebates outlays forits a energy powered upever military Meanwhile, Poland debates future ever Meanwhile, Poland its energy future are sure to boost the fortunes of both Polish and mindful of the challenge of meeting EU requirements, mindful of the challenge of meeting EU requirements, firms with bases real here. Meanwhile, Poland deand Polish commercial real estate market andforeign thethe Polish commercial estate market bates itsanenergy future ever mindful of the challenge of continues an upward swing. continues upward swing.

meeting EU requirements, and the Polish commercial real estate market continues an upward swing.

Organizers: Organizers: Organizers:

Images: Shutterstock

TIMEMACHINE From our pages . . .

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Gofers for the rich folk

ou make heaps of money without lifting a finger. You are chauffeured from one glitzy Warsaw cigar club to the next, as you sip Svarovski Alize vodka while nestled in the downy leather VIP section of your Bentley, shielded from the hoi polloi by smoky gray bulletproof windows. When the holidays roll around you fly off on your private jet to your vacation homes in Maui, Cannes, Phuket. Champagne! On ice! Let’s face it: Life is hectic and you need some help with mundane chores like copping a case of champagne

at midnight, or arranging a romantic meal with (one of) your girlfriend(s) – let’s say – on an iceberg. At long last, you and your well-heeled friends have Quintessentially Lifestyle, “the ultimate luxury lifestyle group . . . now available in Poland,” as the “wish fulfillment Empire (their capital ‘E’)” informed the media in a recent bubbly

press release. Twenty-four hours a day, 365 days per year, QL caters to your “lifestyle requests.” Want to set up a Batman-style bat cave in your private residence? Arrange a small party for 300 of your closest friends at the pyramids in Egypt? Not a problem, Sir.

Distant relative Co-founders Aaron Simpson, Paul Drummond and Ben Elliot (The Nephew of Prince Charles!) had you in mind when they started QL back in 2000. And now they’re here, encamped “on the Vistula” – Warsaw being only the newest office among those in “a staggering 60 cities around the world.” QL is so exclusive, in fact, they don’t even offer up a phone number, email address, web site or street name and number. You’ll have to ring up your personal private detective to track down the local CEO, William Devine. Divine! u

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

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Who’s hot, who’s not, according to the Polish media Robert Lewandowski: The Polish striker signed a deal with current German champions and Champions League kings Bayern Munich. Lewandowski will join his new teammates in July when his current deal with Borussia Dortmund expires. The five-year contract is said to be worth €11 million per year, which would make Lewandowski the highest paid Polish athlete. Elżbieta Bieńkowska: In November, Bieńkowska was appointed Poland’s Deputy PM and head of the new "super-ministry," which combines the former Regional Development and Infrastructure ministries. This makes Bieńkowska the second most important politician in the government after Prime Minister Donald Tusk. Marek Woszczyk: Woszczyk was appointed CEO of Poland’s largest utility, PGE, on December 23, 2013. Previously, he held a number of different positions, including President, at the Energy Regulatory Office (URE). Woszczyk was also a member of the ACER Board of Regulators, as well as deputy chair of the Council of European Energy Regulators (CEER). Rafał Blechacz: Blechacz is the recipient of the prestigious and secretive Gilmore Artist Award which is given out every four years to a top pianist. Applications are not accepted for the $300,000 award, the selection process is confidential and takes several years, as anonymous judges observe potential winners for a sustained period of time.

Jan Bury: The Polish People’s Party (PSL) MP called for a boycott of British owned retail chain Tesco after British PM David Cameron singled out Poles as recipients of “unfair” child benefits paid out to family members that remained in Poland. Tesco responded by saying it has invested PLN 10 billion in Poland so far and employs some 30,000 people here. Sławomir Nowak: The former transport minister was charged with filing misleading information on his financial declaration while still in office. According to prosecutors, between November 2011 and March 2013 Nowak did not declare a watch worth over PLN 17,000 on his financial declaration. Regulations state that any object deemed worth over PLN 10,000 be itemized on the declaration. Nowak pled not guilty to the charges, saying “I feel innocent, because I am.” He faces up to three years in prison if found guilty of providing false information. Andrzej Wajda: After a huge media campaign and many international screenings, including one in the US Congress, his latest movie, “Wałęsa. Man of Hope,” failed to get a nomination for “Best Foreign Language Film” at this year’s Academy Awards. Despite favorable reviews, the academy decided that there are better movies than the biopic about Poland’s former president. Still, Wajda shouldn’t be too disappointed as he already has an Oscar statuette on his shelf. In 2000 he received the academy’s Lifetime Achievement award.

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

The first face transplant operation in Poland has been named the world’s best example of reconstructive surgery for 2013. The honor comes from the American Society for Reconstructive Microsurgery. The operation, performed in May Grzegorz last year, was the world’s first face transplant carried out under life-threatening conditions. A team of doctors led by professor Adam Maciejewski at the Institute of Oncology in Gliwice, where the operation was performed, had to act quickly as the patient’s life was in danger. The operation took over 24-hours and involved reconstructing the majority of the patient’s face, and a large part of his facial skeleton. The patient, identified only as Grzegorz, was injured in an accident while cleaning a stone-cutting machine, which left most of his face torn off. Within a few weeks of the procedure he was able to breathe on his own, see, eat, taste and speak.

Bagiński directs BBC Olympics ad

Tomasz Bagiński, who was nominated for an Academy Award for his short film “The Cathedral” in 2003, directed the promotional video for BBC Sports advertising the upcoming Winter Olympics in Sochi. The spot, which created buzz worldwide, was filmed in the style of the popular TV show “Game of Thrones” It’s narrated by Charles Dance, one of the series’ actors. u

Images: Shutterstock, PSL, Ministry of Infrastructure, Ministry of Transport, PGE, BBC Sports, Institute of Oncology in Gliwice, Universal Music

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Face transplant procedure awarded

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The polish soul

Burning issues: What theyâ&#x20AC;&#x2122;re thinking out there

We usually have a family meal on Sundays

38.6 %

29 %

5.8

10.4

2.3

13.9

De fin ag itel Te re y e nd to ag re Ne e ith no er r d ag is re Te ag e nd re e to di sa De gr fin ee ite ly di sa gr ee No ta pp lic ab le

A good daily walk is as much exercise as you need

I am a TV addict

4.0 %

10.4 %

17.0 %

25 %

24 %

18.7 %

I always choose not to be included on a mailing list

19.5 24.6 % %

20.9 %

11.7 %

Images: Shutterstock, dodaqueen.com

31 %

22 %

9.2 %

26.3 %

21.1 %

17.5

7.0 %

13.7

6.3 %

17.0 %

3.9 %

13.7

38.4 %

7.6 %

7.4 %

13.4 %

20.7 %

32.1 %

23.8

2.2

15.3

22.6

19.0

I spend money more carefully than I used to

26.4 %

5.8 %

1.0 %

14.1

16.9 %

17.9 %

15.3 %

13.4 %

22.6 35.1 %

17.2 %

7.6 %

Celebrities influence my purchasing decisions

I love the idea of traveling abroad

14.9

2.7

I have good taste

I buy goods produced by my own country whenever I can

18.9

14.4

The point of drinking is to get drunk

28.9

3.3 %

10.5 %

19.0 %

25.7 %

From TARGET GROUP INDEX, by Millward Brown Poland. TGI surveys consumers about several groups of fast moving consumer goods (FMCG) and a sizeable group of products from the durable goods category. The Polish version of TGI consists of individual surveys for men and women, with particular emphasis on the individual product groups for each sex. (Data: 2013)

W B J O B S ER V ER â&#x20AC;˘ f e b r u a r y 2 0 1 4

start - up

Wonder Years Shopping

Entertainment

Perpetual shortages and seemingly endless lines in shops spawned a new job: the line holder. Sometimes it took several days to get to the front of the line.

A late 1980s home entertainment system: a 30’’ Neptun TV, reel-to-reel tape recorder and a slide projector.

1989

2014 1989 Slowly but surely online shopping is replacing brick-and-mortar shops. In Poland internet shopping still makes up a mere 3-4 percent, while in Western European countries it captures 10 percent or more of all retail.

2039 1989

3D printing already allows you to manufacture solid objects of various shapes and sizes. What if you could buy blueprints in online stores, download them in under 15 seconds and print them in a little over 5 minutes? Will anyone even remember what a shopping mall is in 25 years?

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

Today, more than 90 percent of people watch video content over the internet on either a PC, a laptop, a tablet, a mobile phone or a smartphone, according to a recent Accenture survey. Who needs TV anymore?

Personalized, fully integrated entertainment service you can enjoy all day long. It remembers your preferences, knows your favorite actors, and “TiVos” shows you’d probably not want to miss. Google is probably already working on it.

ver ridden a trolleybus? Maybe your friends still have one of those old-fashioned communist-era wall units in the attic? How long would you be willing to wait in a line to get one of those? Fast forward to today. Been through the dizzying maze at IKEA lately? Or to one of those Tesco Extras, where you can get everything from soup to flat screen TVs? How far has Poland come in the last 25 years and, more intriguingly, where are we headed? Here’s a quick glance at how it looked 25 years ago, where we are today, and how things might be in 2039

Home

Transportation

A wall unit in one of four styles available at the time. A must-have for a fashionable and practical family.

A trolleybus – a combination of bus and tram. Slower than a bus, it needed overhead power lines, was prone to breakdowns, and often caused traffic jams. Despite all these faults, they were quite popular in Poland.

Poles commute on average 45 minutes per day, less than people in the US or in the OECD. Still, plenty of room for improvement here. On the upside, the recently purchased Pendolino trains will shave a few hours off long-distance travel time.

Smart, ergonomic and preferably entirely solar-powered homes. And with the precious little time we spend in them, they’d better clean and restock themselves.

An electric car with solar panels that drives and parks itself. And yes, Google is already working on it.

Images: PAP/Ryszard Janowski, Wikimedia, Shutterstock, PKP

Central ventilation and air conditioning, programmable lights and blinds, motion sensors linked to security cameras, automatic door locks – not standard in every home, but increasingly in use.

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STA RT-U P

MI L E S T ONE S

‘You need to live in Katowice’

is scores for movies such as “Bram Stoker’s Dracula,” “Portrait of a Lady,” and “The Pianist” are internationally acclaimed. In Poland, almost anyone can hum the tune from the “Przygody Pana Michała” television series, and many younger Poles danced to his polonaise from “Pan Tadeusz” at their studniówka, a ball traditionally organized before high school graduation. But Wojciech Kilar, who died last December, was much more than just a composer of film scores.

Early years

Born in 1932 in Lviv, then part of Poland, now in Ukraine, he was the offspring of a doctor and an actress, and was taught to play the piano as a child. But, as he told Polish Radio reporters much later, the lessons did not really go well. Luckily, he did not give up and continued his musical education in Rzeszów, where his family moved during World War II, and later in Kraków. He then studied piano and composition at the State Higher School of Music in Katowice. And it was in Katowice, a city in southern Poland known mostly for its coal mines and heavy industry, where he spent most of the rest of his life. He greatly valued the city and the region, Silesia. An anecdote has it that when one Hollywood director asked Kilar how he wrote such beautiful music, the composer replied: “You need to live in Katowice.” He started his musical career as a pianist in 1947. In composing, he first took to neoclassicism, inspired by the works of Igor Stravinsky and Béla Bartók. Avant-garde to tradition

In the 1960s, Kilar turned to avant-garde music, producing such pieces as “Riff 62,” which became a highlight of the 1962 Warsaw Autumn contemporary music festival. He was then especially attached to sonorism, a movement that developed from Polish experimental 1950s music and which focused on using various, often

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

1932 – 2013

unusual, types of sound. Another breakthrough came in 1974, again at Warsaw Autumn, Poland’s most prestigious contemporary music event. After the orchestra gave the first-ever performance of Kilar’s “Krzesany,” the audience was divided. Many critics were disappointed by Kilar’s sudden shift to folk inspirations. Others, such as conductor Jan Krenz, called it a “breath of fresh air in Polish music.” “Krzesany” bears the name of a traditional dance from the Tatra Mountains region and is clearly inspired by the music of the Tatra highlanders. So are several other works later composed by Kilar, such as “Orawa” and “Kościelec 1909.” The artist enjoyed spending time in the Tatras and was encouraged by a friend to start climbing mountains. The higher you climb, the better the people you meet, he would later tell others, enthusiastic about this new experience. It was also in the 1970s that Kilar started writing music inspired by religion. He called himself a devout Roman Catholic and was proud of it. What he later recalled as the happiest moment of his life was when his “Missa pro pace” was performed for the pope at the Vatican. Kilar and the movies

His experience in writing music for cinematography began in 1958 with a documentary on skiing. He then went on to compose scores for more than 130 movies, television films and series. He worked with

some of the most renowned Polish directors – Andrzej Wajda, Krzysztof Kieślowski, Kazimierz Kutz and Krzysztof Zanussi. Kilar’s cooperation with Zanussi started in a rather unusual way, as the director recalled. “As a young director I wanted to turn the world upside down,” Zanussi told Polish Radio recently. “I wanted the music written first and then I would make the movie.” This did not work out, but in the end Kilar did compose music for that film, “The Structure of Crystal,” and for all movies that Zanussi made thereafter. “Bram Stoker’s Dracula,” a film by Francis Ford Coppola, which features Kilar’s score, premiered in 1992. This set the Polish composer’s international career going. He later cooperated with Jane Campion (“Portrait of a Lady”), James Gray (“We Own the Night”) and Roman Polański (“Death and the Maiden,” “The Ninth Gate,” “The Pianist”). Pangs of guilt

Kilar, however, preferred his symphonic works and was not fully convinced about composing for films. “I don’t know how to write bland music and that is what a movie sometimes requires,” he said in a 2000 interview, adding that sometimes a few simple sounds are enough. “If film schools focused more on teaching music, directors could even write scores for their own movies.” He remained a modest person despite his success. “I feel guilty thinking that people work hard and risk their lives doing their jobs – miners, soldiers, firefighters, doctors. Their occupations require responsibility and we just play with sounds, words, film stock,” he said. He said he was only proud of about eight pieces of all the music he had written throughout his life, most of them symphonic works. The composer was buried in Katowice in early January next to his beloved wife Barbara, who died in 2007.

– Kamila Wajszczuk

Image: Wikimedia/ Cezary Piwowarski

Polish composer Wojciech Kilar drew inspiration from an unlikely place

c o m m e n tar y

remi adekoya on politics

more drama

his year will be an eventful one in Polish politics. Politicians are already working on their campaign themes for the European Parliament elections, which will take place this May. This time it will be more than just a scramble for the sweet salaries and perks associated with being an MEP: the May election could set the tone for both the upcoming local government elections in the autumn of this year and for the all-important parliamentary and presidential elections scheduled for 2015. In 2013, for the first time in many years, the conservative nationalist opposition party Law and Justice (PiS) outdid the center-right ruling Civic Platform (PO) in successive voter surveys, as Poles seemed to tire of Prime Minister Donald Tusk and his often lackluster government. The internal squabbling in PO throughout last year didn’t help either.

wear since 2007, when Tusk and PO first swept to power. Kaczyński the “winner” would be a much more dangerous rival for Donald Tusk in the parliamentary elections next year. Tusk is of course well aware of this, and thus will fight tooth and nail to win in May. And so the campaign for the European Parliament, which seldom stirs up fierce passions in most European countries, is likely to be a heated one in Poland. The anniversary year. Another reason why Polish politics is bound to be a particularly emotional affair in 2014 is the number of symbolic anniversaries awaiting us. This year marks the 10th anniversary of Poland joining the European Union, the 15th anniversary of it becoming a NATO member and the 25th anniversary of the country’s first partially-free elections held in 1989. All these anniversaries will spark heated debate about where Poland currently stands. Tusk and PO will argue that Poland today is richer and safer than it has ever been, and that it is a fully independent country, free from Sovietstyle influence on its domestic affairs. They will point to the successes of the past two decades and insist that while the country still has many problems to tackle, it is in essence a success story. Kaczyński and PiS will say that is all hogwash, and that Poland today is an unequal society where the rich and powerful enjoy all the privileges of life while ordinary Poles are increasingly being squeezed by low wages and rising prices. They will also point to Vladimir Putin’s recent muscle-flexing, as well as the EU’s fiasco in Ukraine, as proof that while Poland may be in NATO today, the Russian bear hasn’t stepped back an inch and is still a realistic threat that Polish people need to be wary of. The Polish government needs to be “tougher” in its relations with Moscow, Kaczyński will thunder, without specifically explaining how exactly to go about that. The question is: whose story will Poles buy? The answer to that will determine which party ends this year looking the favorites to win the parliamentary vote in 2015. u

The campaign for the European Parliament is likely to be a heated one in Poland.

I’m a winner. PiS, which has lost six major elections in a row to PO, is now hoping to use the EP vote in May to reverse that trend as well as lend credibility to the narrative they are trying to push, namely that all the political momentum is currently on their side. A defeat for PO, which prides itself on being a pro-European political grouping, would be a severe blow both to party morale and to the prime minister himself. Meanwhile, it would make the PiS leader, Jarosław Kaczyński – who has had to content himself with being a perpetual runner-up in recent years – look like a winner. This is something Kaczyński and his supporters need very badly after all the years of disappointments. If PiS does win the European Parliament elections, as the polls suggest they well may, Kaczyński and his party are likely to receive a strong boost in voter support going into the local government elections later in the year. In my opinion, Kaczyński’s nationalist slogans and essentially socialist economic program appeal to the natural instincts of many more Poles than those who currently declare support for his party (roughly 30 percent). His problem up till now has been the “loser” label he has had to

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

c o m m e n tar y

judith gliniecki it’s the law

turning the page Proposed changes to Sunday work rules already stirring the pot

hen I was asked to be a contributing writer for the new WBJ Observer, I knew it was time to end my writing hiatus. Hopefully you, dear readers, will enjoy the return of something old. My column that is. Not me. I’m looking forward to 2014 if only because it has to be better than last year. Although I’m not superstitious, 2013 did its best to convince me of the ill influence of the number 13. The early proclamations of an economic turnaround in Poland in 2013 never quite materialized. Last year’s legislation was a mixed bag. And, to top it all off, several of my major appliances decided to give up the ghost in the last days of December. Enough about the year that was. In the spirit of in-with-the-new, businesses should keep their eyes on several legal developments in the offing for 2014. The proposed changes to Sunday and holiday work-time for companies exporting e-services are already stirring up controversy. The initial proposal would make Sundays and holidays regular working days for these e-service firms. Thus, no overtime would be due just because an employee worked on these days. An extreme counter-proposal would ban all work on Sundays and holidays. The outcome of this battle will be crucial in determining whether Poland remains an attractive destination for the business process outsourcing sector.

Not all changes are controversial, however. The Polish competition office is sponsoring a widely acclaimed bill to allow for fast-track pre-merger clearance on simple transactions. If adopted, this would reduce the waiting time for UOKiK watchdog clearance from several months to one month. Faster closing means less inter-regnum time for the company to be acquired, and should simplify the transaction process. Investors in the energy sector are hoping that 2014 will herald more than one change. Most likely, Poland finally will adopt a scheme to support the implementation of Directive 2009/28/EC on Promoting Renewable Sources. As proposed, the scheme would involve an auction process to allow renewable energy producers to sell their power at a set price for a specific amount of time. Even more strategically, it remains to be seen whether the long-hoped-for spin-off of gas and renewables from the current energy law into separate, specialized laws will come to fruition this year. The list could go on. In fact, my tax partner seems to be only person not looking forward to legislative change in 2014. Given the major tax changes implemented in 2013, she wants 2014 to be boring. Hopefully, a stable tax regime and the proposed changes in law will create a foundation for an up-swing in business in 2014. u

No overtime would be due just because an employee worked on these days.

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

Judith Gliniecki is a partner in Wierzbowski Eversheds Poland

c o m m e n tar y

john beauchamp ON INFORMATION TECHNOLOGY

‘BIG BUDGET’ SMARTS As EU funds flow in, let’s steer a good chunk to promoting high tech

Image: Shutterstock

t’s the new year, and with it has come the new EU budget for 2014-2020, the much-hyped “big budget” which turned so many heads during 2013. Poland is set to be a major beneficiary of the cash, with some €105.8 billion set to stream in over the next seven years. All this money raises the question – where’s it going? Some of it will go to innovation, research and development. The Civic Platform government has a lot to do in order to get that money to the right people in the right place, and its new operational program, perhaps amusingly entitled “Intelligent Development” sets its sights on getting Poland to become an innovation powerhouse in a matter of years. According to the latest blurb about the program, spending on R&D in relation to GDP between 2007-2011 grew from 0.57 percent to 0.77 percent, still a far cry from the government target of around 2 percent, which is currently the EU average. Yet to get up to the 2 percent it may be more the dragging of feet than getting on your bike. Among the many challenges facing Poland’s budding high-tech industry are the actual places where the many start-ups across the land set up shop, be they incubators, tech parks, or your neighbor’s garage. Towards the end of last year, I was at a meeting of

technology park representatives from across Poland. Most, if not all of these parks, have seen successful businesses take off in their premises. But one point stuck out – the lack of awareness by certain government departments and perhaps the lack of understanding that these R&D centers are a boon for the Polish economy, both in terms of technology transfer and the resulting exports that these parks can produce. In my article on IT this month (page 30), one of the charts shows the percentage of high-tech exports. In 2012, Polish high-tech exports amounted to 5.9 percent of the country’s total. This number will go up as the new “Intelligent Development” is rolled out. Hopefully. However, if there were a way not just to plow more money into R&D but also to find a better way to market it, then Polish R&D will not just benefit, it will finally hold the key to break through to foreign markets. Because while Polish innovative companies obviously need to build on their reputation and become competitive in the global marketplace, a little promotion wouldn’t go amiss. I just hope that the money spent in the upcoming perspective will also lead to more focused promotion of the Polish high-tech sector and the burgeoning potential it has to offer. u

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c o m m e n tar y

jacek ciesnowski ON the media

WHAT’S COOL NOW?

or Facebook, Poland could prove to be a canary in a coal mine. Here, the young crowd is flocking to Latvia-based Ask.fm, which last year increased its user base ten-fold and is more popular than Twitter, with 2.5 million young Polish users. What’s more, 500,000 of them haven’t turned 14 yet. “Facebook Is ‘Dead and Buried’ to Teens” screamed headlines at the end of December, after Daniel Miller of University College London released a 15-month study on social media. “What we’ve learned from working with 16-18 year olds in the UK is that Facebook is not just on the slide, it is basically dead and buried. Most of them feel embarrassed even to be associated with it,” Miller said in the report. As we all know, teens decide what’s cool. Now that the younger, much-sought-after demographic is starting to leak away from Facebook to other social marketing destinations, who knows what’s around the corner. Meanwhile, social media have only one real income leg to stand on – advertising, which brings Facebook 89 percent of its revenue and Twitter 87 percent. With millions (billions?) of users already turned off by intrusive ads, Facebook, meanwhile, has taken a bite out of the hand that feeds it. In December the company changed the algorithm it uses to display posts in users’ news feeds. These are the posts that come from companies users have decided to follow. Before the change, a company’s followers

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

could see everything these firms posted. It was a “free” platform for the advertisers, who could boost their exposure under an optional pay scheme. Under the changed algorithm, the free news feed service is gone – only “highest quality” “free” posts show up – cutting advertisers’ exposure unless, of course, they…pay, pay, pay. Some advertisers have had enough already. “We as brands have the ability to take our money elsewhere. It’s not like there’s a lack of social networks for us to take our business to,” Jim Tobin from social media marketing agency Ignite recently told website Business Insider. The potential problem Facebook now faces could soon be a bigger problem for Twitter. In November, its stock debuted on NYSE priced at $45.10 apiece and reached about $60 in January. Not a bad return for only three months of investment. Even better when you’re talking about a company that has never earned any money. In the first six months of 2013 the company lost some $69 million, yet is still currently valued at around $25 billion. So it’s earning ad money, but unlike Facebook, it’s yet to turn a profit. If Facebook falters, it won’t be the first time a social media site has been inflated to humongous proportions by advertising sales potential, only to later fall into oblivion. In 2008 MySpace took in $900 million in ad revenue. In 2011 it was bought for a mere $35 million, and is currently worth even less. u

Image: Shutterstock

For teens, it doesn’t seem to be Facebook anymore

c o m m e n tar y

remi adekoya hot stuff – on corruption

The grease Big firms have slush funds to bribe officials because ... it pays

Image: Shutterstock

three-year investigation wrapped up last year by Poland’s Central Anti-Corruption Bureau (CBA) revealed a gigantic network of fun-and-games, including slush funds used by several international IT firms to bribe Polish ministry officials responsible for awarding government tenders. The bribes ran into the millions while the tenders affected were worth billions of złoty. The CBA’s head has described the scandal as “the biggest corruption affair in Poland’s history.” Those greasing ministry officials’ palms included employees of IT giants HP and IBM, and Polish investigators have asked their American counterparts for help in investigating just how much the mother companies knew about what was going on in Poland. Apparently, the corrupt practices were part of a complex and coercive process in which ministry officials who refused to take the bribes were transferred to other departments or simply fired. Of course, the bosses in America will claim they knew nothing about the goodies used to bribe Polish officials. But the situation could prove embarrassing if the Poles arrested for bribing officials on behalf of IBM and HP cooperate with police and provide details on how such funds were created and maintained. Ultimately though, nobody high up in the firms is likely to be prosecuted. At worst, HP and IBM will be given a slap on the wrist in the form of a fine, and asked to behave themselves in the future.

Still, it's the kind of thing that could get media traction internationally, and that won’t help Poland’s reputation. The country had been creeping up Transparency International's “Corruption Perception Index” – a country-by-country ranking based on perceived graft in the public sector – moving from 41st in 2012 to 38th last year, not exactly a position to brag about anyway. Big firms have slush funds with which they bribe officials in order to win contracts because it pays. The benefits far outweigh the risks and possible negative consequences for those who actually run the show. When did we last hear of the CEO of a major company being thrown in jail because his company was discovered to have dished out bribes? Meanwhile, although consumers of HP and IBM products might voice outrage at the scandal, they are hardly going to stop buying those companies’ products. So in essence, apart from moral considerations – hardly the driving force behind most business activity – why should big, wealthy companies stop bribing officials in order to win juicy contracts that make them even bigger and wealthier? Companies, like humans, tend to make decisions based on a cost-benefit analysis regarding their interests. As long as the justice system remains benign in its treatment of big companies and their bosses, we can be sure they will continue to bribe their way to huge contracts. It simply makes good business sense. u

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

DISCOVER AVIS FLEX WITH NEW NISSAN NOTE FOR ONLY 72 PLN NET PER DAY. ENJOY COMFORT AND SAFETY DELIVERED BY AVIS.

Find out more at www.avis.pl or dial +48 22 572 65 04 * New Nissan Note net price per day, min. 30 days, 2000 km free.

c o v e r st o r y

In the winter of 1989,

after decades of social unrest and constant civil upheaval, the ruling communist party bends under pressure and votes to legalize the “Solidarity” independent workers’ union on Jan. 18. The scene is finally set for formal talks between the socialist government and its people, which are held for the first time in almost a decade, on Feb. 6. Shortly thereafter, the first market reforms are introduced – Poles are finally allowed to exchange the złoty for other currencies. It’s a proverbial gold mine for those canny enough to profit from Poles’ insatiable thirst for the dollar and the Deutsche Mark. Aleksander Gawronik, a businessman and senator, opens currency exchange points all along the German border on March 16, three days after the law is passed. He makes an instant fortune, becoming the wealthiest Pole in a 1990 ranking by the weekly magazine Wprost. The early days of Poland’s market economy may not have been smooth sailing for everyone, but there is no denying the nation has seen remarkable progress over the past 25 years, during which it has grown to be the biggest economy in the CEE region. The country’s GDP per capita has nearly quadrupled, growing from $6,100 in 1989 to $21,100 in 2013. 2014 is a year of anniversaries. Fifteen years ago Poland joined NATO, while 2004 marks the country’s EU accession. However, the most memorable date in Poland’s recent history is the fall of communism, which set Poland on its current path to prosperity. So where are we now, and what’s ahead? First of all, national security: Poland has boosted defense spending by 50 percent in the last decade, and the bonanza continues as the constitution calls for nearly 2 percent of GDP to go to security. Meanwhile, a growing nation needs energy – meaning that Poland’s nuclear ambitions and its obligations toward EU compliance will also drive economic development. Also in the economic limelight: information technology. Poland’s pent-up tech entrepreneurs are still looking for recognition in the form of investment. The potential is there. The only question is how to realize it. If they can equal the success of Poland’s furniture (and other) exporters, there’s no question that the “economic miracle” of the last 25 years will continue its forward march. Meanwhile, we at Warsaw Business Journal also have reason to celebrate. This year marks the 20th anniversary of WBJ’s first issue. Over the years we have kept tabs on all the changes occurring in Poland (see “Time Machine,” p. 10). And we are no strangers to change ourselves. Behold the first issue of WBJ Observer, a new monthly that will provide you with insight into Poland’s strengths and weaknesses, its ups and downs, as well as the many quirks that make living here bearable. We hope you enjoy reading it. u

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

cover story

DEFENSE

battle ready? STORY BY remi adekoya

Against the backdrop of Polandâ&#x20AC;&#x2122;s tragic military history, the government plans expenditures of PLN 131 billion over the next decade. But is the modernization plan realistic?

f e b r u a r y 2 0 1 4 â&#x20AC;˘ W B J O B S ER V ER

cover sto ry

defense

Image: Polish Defence Holding

n June 6, 1794, Polish forces waged a battle in Szczekociny against a combined Russian and Prussian army. Legendary Polish freedom fighter Tadeusz Kościuszko, back in Poland after lending a hand to the American revolutionaries, commanded an outnumbered Polish force in a futile effort that ended after a few hours. While the lack of manpower was a contributing factor in the defeat, the Poles took only 33 cannons into battle, while the Russians and Prussians faced off behind 134. The defeat ultimately led to a final partitioning in 1795 by the Russians, Prussians and Austrians, as Poland disappeared from the map for the next 123 years – perhaps the most bitter of many bitter experiences in the history of Poland’s security. Small wonder, then, that modern, independent Poland takes defense matters seriously. In contrast to the general trend in Europe, Poland’s military spending has increased by roughly 50 percent over the last decade, according to figures from the Stockholm International Peace Research Institute. One of the reasons is that the Polish constitution stipulates the country spend no less than 1.95 percent of its GDP on the military, and thus, as the economy has grown over the years, so has the defense budget. Along with the budget increases comes a shift in strategy, as outlined by President Bronisław Komorowski in August of last year. “[We want to] end an overzealous, reckless . . . expeditionary policy of sending our troops to the other side of the world,” Komorowski said – no oblique reference to Poland’s having sent troops into operations like those in Iraq and Afghanistan during the past decade. Instead, Poland’s military will concentrate on national security, pursuing a defense policy that will “not exceed Polish capacities, Polish interests and Polish needs.” In 2014, the Polish defense ministry will have a budget of PLN 32 billion and has announced it will spend over PLN 8 billion of this money on

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

cover story

DEFENSE

a general modernization of the army, the highest amount in the last two decades. Meanwhile, Defense Minister Tomasz Siemoniak announced that PLN 131 billion has been earmarked for the next decade to replace outdated weaponry, much of which dates back to the communist era. Planned purchases include tanks, a missiledefense system, ships for the navy, military training aircraft, helicopters, unmanned aerial vehicles and modern equipment for ground troops.

POLAND’S FIGHTING FORCE Calling all able men Many things about the Polish Army have changed over the years, but the one thing that never changes is the need for constant recruitment. Between 1918 and 1921, just after Poland regained its independence, there were six different armed conflicts on Polish territory, including one with Bolshevik Russia. That’s why, back then, the army needed every volunteer who could carry a gun (or a sword). Nowadays with the army being fully professional, candidates must pass a series of exams and evaluations, and the army’s biggest selling point is that it can provide a stable income.

Do the figures add up? So what do industry experts think of the modernization program? “This is only a plan, not an obligation. The ministry exploits the fact that the public doesn’t really know how its budget is structured to pull the wool over their eyes,” said Maksymilian Dura, a former naval officer and now a journalist for the military online portal Defence24.pl. “The ministry’s budget is divided into two parts: operational expenditure and capital expenditure, so when the ministry says that PLN 8.1 billion will be spent on modernization and new equipment in 2014, that is misleading. In actual effect, just over PLN 3 billion has been guaranteed this year for that purpose,” said Dura. “To realize the announced program, the ministry should be spending at least PLN 9 billion a year on modernization,” he added. However, Krzysztof Krystowski, former head of Polish Defence Holding, the biggest producer and supplier of arms in Poland, is more upbeat on the army’s financial capacity to carry out the program. “I think the feasibility of the program depends on many elements, but is realistic. However, it is based on the assumption that the 1.95 percent of GDP rule will be adhered to and that GDP grows in line with forecasts, in which case the funds could be available,” he said. A second assumption is that the share

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

Polish army troop count 1990

260,900

1991

215,700

1992

224,900

1993

226,690

1994

228,900

1995

218,260

1996

214,850

1997

201,170

1998

200,950

1999

194,480

2000

1920s

186,707

2001

177,257

2002

137,939

2004

137,990

2005

137,803

2006

133,255

2007

132,646

2008

132,362

PASJA • ROZWÓJ • WYZWANIE

2009

129,232

•

2010

99,170

2011

100,000

2012

100,000

2013

100,000

w w w. w o j s k o - p o l s k i e . p l

•

w w w. m o n . g o v. p l

Odwiedź Wojskową Komendę Uzupełnień i dowiedz się więcej

w w w. w o j s k o - p o l s k i e . p l

161,811

2003

w w w. m o n . g o v. p l

SZEREGOWI ZAWODOWI SIŁA CHARAKTERU MOC MOŻLIWOŚCI ODWIEDŹ WOJSKOWĄ KOMENDĘ UZUPEŁNIEŃ I DOWIEDZ SIĘ WIĘCEJ

2000s

of the defense ministry’s budget currently earmarked for personnel costs will shrink while the share of the budget destined for modernization will increase, Krystowski added. “My biggest concern is the defense ministry’s capacity to spend that money. The administrative efficiency of the people in charge of tenders and negotiations has not been up to par for many years now,” said Krystowski. Meanwhile, the defense ministry confirmed to WBJ Observer that in the upcoming years at least 20 percent of its annual budget is going to be devoted to capital investments, including the “technical modernization of the Polish armed forces and the development of military infrastructure.” It also pointed out that the PLN 8.1 billion it will be spending on capital investments

Source: Ministry of Defense

this year represents 26 percent of its total budget, although it did admit that the amount which would actually be spent on “new” equipment in 2014 would amount to “just” PLN 3.5 billion. Who’ll get the money? The ministry, however, has not had the best track record in recent years when it comes to efficiency in spending the money it has, Krystowski said. At the end of 2012, it had to return funds allocated at the beginning of the year to state coffers because it was unable to spend them. The same happened in 2011, and in 2010. And so, if the officials at Poland’s defense ministry don’t get their act together, irrespective of whether the money is available or not, the modernization push will remain largely on paper.

THE HIGH-TECH SOLDIER

Live from the battlefield.

Helmet-mounted camera will stream live video to headquarters. A wide arrange of sights and scopes including night vision, collimator sight, laser rangefinder and a system that helps distinguish enemy targets from friendly ones. Thermal imaging sight SCT Rubin allows soldiers to keep an eye on their target without having to lean from behind a wall.

Images: Polish Defence Holding, Polish Army Museum, Polish Army

The army’s program to equip ground forces with the latest technological advances will feature the most up-to-date personal military gear. Polish Defence Holding is currently developing the system.

All-terrain armor.

Light durable armor for maneuverability in varying terrains while keeping soldiers safe and supporting integration of a wide range of equipment. Monitors vital signs from heart rate to bloodsugar levels. In extreme situations has capability to remotely inject medicine into soldier’s body to save his life. The equipment includes comfortable and ergonomic helmets, bulletproof vests and gas masks. Weight: 20 kilograms

Switch, and fire! Adjustable assault rifle. Easy to use, safe, light; Can be assembled in multiple ways according to soldier’s needs. Sight, adapter, grenade launcher, bayonet and other similar devices can be mounted on it.

So what are the criteria for selecting who gets to win the juicy military tenders that are already – or soon will be – up for grabs? Many European countries now practice the concept of Best Value, which is a procurement system that looks at factors other than just price, such as quality and expertise, when selecting vendors or contractors. “Poland doesn’t always go for best value, it goes for the cheapest price. The procurement law is written in a way that favors the cheapest bidder,” said Adam Kapitan Bergmann, the COO of IN2KNO and former Director of the Polish office of Lockheed Martin for Poland’s F-16 program. “There is a lot of concern about corruption, and determining Best Value is generally considered too difficult to quantify. This is not unique to Poland” he added. Asked whether politics is a factor in

determining who wins major contracts, Bergmann said, “in defense procurements in every country, and specifically Poland, politics is involved because we are talking about a national security issue with geo-political implications.” There are skeptics According to Krystowski , while Polish defense companies stand a chance to benefit from the planned military shopping spree, some of the key acquisitions such as a missile-defense system “cannot be handled by Polish firms alone, but they must forge partnerships with foreign partners.” Dura remains skeptical about the feasibil-

ity of much of the spending. Though the ministry is likely to realize the programs that are “easy,” such as the acquisition of used Leopard tanks from the German army, “there will be a problem with the helicopters and submarines, because there is conflict in the ministry on what kind exactly to buy,” he said. Krystowski echoed this opinion, saying the disagreement is “not only over who supplies the helicopters, but also over what kind of product is needed.” Currently, three companies are still in the running for the tender to supply 70 helicopters: the American Sikorsky Aircraft Corporation with its S-70i Black Hawks; British-Italian AugustaWestland with its AW149; and Eurocopter of France, which makes the EC 725. The tender requires that the winning

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

DEFENSE

supplier “cooperate” with Poland’s defense industry, meaning the entire aircraft or its parts must be manufactured in Poland. Regarding the planned missile defense system, Dura said this will “definitely” be realized “because there will be pressure to do that from politicians and the media.” “But the Russians will be watching closely as they do not want the status quo to change, so this will be both a technical and political challenge,” he added. Don’t expect Robocop Then there is the program meant to create a new generation of battle uniforms and tactical equipment. It also aims to develop new electronics and optics technologies and new communication systems, along with modernizing existing equipment and conducting research on new-generation ballistic shields. The sum of PLN 40 million has been set aside for research on the equipment program this year, with the development phase expected to wrap up in 2016. The army will spend some PLN 600 million on modern equipment for soldiers between 2016 and 2018. Dura is optimistic about this particular program, saying “its elements can be built in Poland by domestic firms so there will be plenty of pressure from the ministry to realize the program, but we are not about to produce a Robocop, as some might think.” “The program will be realized in stages,” Dura added. US President Barack Obama has cited the need for Europe to transform itself into a “security provider” rather than just continue being a “security consumer.” Today, most of Western, and increasingly Eastern Europe (with the notable exception of Poland) are fully dependent on the NATO alliance for their security. But NATO is an example of European freeloading at the expense of the American taxpayer. Without US firepower, the alliance would be the archetypical toothless tiger. But with the US government and ordinary Americans increasingly focused on America reducing its own debt burdens, the status quo seems politically untenable in the long-term.

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

SHOPPING SPREE

Planned purchases by the Polish military

TANKS Poland will buy more used Leopard tanks from German Bundeswehr, with plans to spend over PLN 1 billion this year on 119 tanks to add to a current fleet of 128. The army also plans to buy some 300 Rosomak Armored Modular Vehicles (built in Poland under license from Finland-based Patria). The Army is also developing its Artillery Battalion of self-propelled howitzers (“Regina”) which are made by Huta Stalowa Wola. It plans to have five full divisions by 2025.

JET TRAINERS

The army plans to spend PLN 250 million on eight Advanced Jet Trainers in 2014. Italian maker FinmeccanicaAlenia Aermacchi with its M-346 training planes is the frontrunner to get this deal. Also in the budget after 2014: about100 multipurpose drones.

NAVAL VESSELS

This sector of the Polish military needs the most upgrades. New patrol ships, coastal defense vessels, mine destroyers and three new submarines are on the shopping list. The military plans to spend more than PLN 800 million on building, modernizing and refurbishing its ships this year. By 2015 it plans to refurbish one of the Oliver Hazard Perry-class frigates it received from the US Army back in 2002-03. In 2016 it also plans to finish building a patrol ship “Ślązak,” which has been in construction since 2001.

HELICOPTERS The army will buy 70 new multipurpose utility aircraft. There are only three companies still in the running: US-based Sikorsky with its S-70i Black Hawks; British-Italian Agusta Westland with its AW149; and Eurocopter of France, which makes the EC 725. The tender requires that the winning supplier “cooperate” with Poland’s defense industry, meaning the entire aircraft or the vast majority its parts must be manufactured here. The army is also looking to find a replacement for its Mi-24 attack helicopters.

MISSILES Poland’s army plans to upgrade its missile defenses with a number of short- and mediumrange weapons, and hopes to acquire AGM-158 JASSM (Joint Air-to-Surface Standoff Missiles) for its F16 fighters, but such a deal would need approval from the US Congress. The army also wants to have its own Multiple Launch Rocket System, and is working on a new system (codename “Homar”). The launchers are likely to be built in Poland in Huta Stalowa Wola, while the missiles will be ordered from an international partner. It’s also looking for a short-range rocket system (“Narew”) and mid-range (“Wisła”), however these programs are in the early development stages, although they will most likely be ordered abroad.

Images: Shutterstock, Finmeccanica-Alenia Aermacchi, Wikimedia

cover story

The cost of defense

Polish army expenditures for 2014 are pegged at PLN 32 billion. Here’s how it breaks down: 3 bln 2 bln

8.2 bln

4.5 bln

6.5 bln

7.8 bln

Modernization

Maintenance

Wages

Training and education

Pensions

Others (logistics, real estate, administrative costs etc)

Source: Ministry of Defense

Hence, Obama’s urging that Europe spend more to beef up its defense capabilities. It is good that Poland, at least, is heeding that call. Although it is a fully-fledged NATO member, it still has a rather difficult and often aggressive neighbor in the shape of the Russian Federation. And the mindset of the Russian leadership has not changed all that much since the Soviet era, when Poland was one of its satellite nations. After all, this is the same country that attacked Georgia in 2008 and still occupies large chunks of Georgian territory. The Kremlin has now embarked on a massive $640 billion rearmament program planned to run up until 2020. In 2014 alone, Russian military spending will rise by 25 percent to some $52 billion. Poland cannot match Russian defense spending dollar-for-dollar, but that Othersdoesn’t (logistics, realitestate, costs etc) mean shouldadministrative fold its arms and stake the future of its sovereignty solely onand American security guarantees. Training education If, knock on wood, Poland ever has to take part in another large-scale war Modernization Maintenance to defend its sovereignty, having a Wages 7.8 modern, well-equipped army would Pensions 6.5 certainly come in useful. u Pensions Wages

THE DEFINITIVE GUIDE TO POLISH EXPORTS

8.2

PUBLICATION: APRIL 2014 To advertise: Agnieszka Brejwo, abrejwo@wbj.pl, ph. 504 201 007

Maintenance 4.5 Training and education 2 Others (logistics, real estate, administrative costs etc)

3 W B J O B S ER V ER • f e b r u a r y 2 0 1 4

Modernization

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coming of Image: Shutterstock

STORY BY John beauchamp

From its humble beginnings, the IT sector in Poland is now set to take off over the coming years. WBJ Observer takes a look at the history of information technology in the country and where itâ&#x20AC;&#x2122;s headed

f e b r u a r y 2 0 1 4 â&#x20AC;˘ W B J O B S ER V ER

age

t’s a cold winter evening in Warsaw and the shriek of the modem on my friend’s IBM 486 is going into overdrive. We had just booted up a simple terminal program on DOS – an operating system known all too well to pubescent youths such as ourselves, who were growing up with what was to become a revolution in communications – and now came the moment of truth. Will we manage to achieve a connection? We sit there in anticipation. The modem’s screeching comes abruptly to a deafening halt, and as we draw a deep breath a menu appears. We’re in! But this wasn’t a connection to the internet as we now know it. This was BBS – the bulletin board system, a precursor of peer-to-peer file sharing, as well as a destination where like-minded geeks could trade information on the latest tech wizardry. After all, this was 1995. But a revolution was on the horizon. The introduction by then Poland’s only telecoms operator, Telekomunikacja Polska, of its nationwide access number in April 1996 heralded a new era for the internet in Poland. Many Poles still remember the number – 020-2122 – which gave mind-boggling speeds up to 56 kbps hitherto unparalleled, with many opting to set up their first e-mail addresses with Poland’s first free provider, Polbox, or the Krakówbased kki.net.pl. And so, with this new era of technology, every weekend hundreds of tech geeks in Warsaw would flock to the computer markets on ul. Grzybowska, as well as its bigger brother on ul. Batorego, which still exists to this day. Rich history Yet while the internet came to be marked as a turning point for bringing IT to the masses, computers and computer science have been around in Poland for a lot longer. In fact, the first experimental computer – the GAM-1 – was constructed in 1950, and by 1958 Poland had its first universal computer, the XYZ. Much like their counterparts across the world at the time, these machines were the size of a walk-in closet. A year later in 1959, the Elwro plant in Wrocław was opened by ministerial decree, and it went on to become one of Poland’s major computer producers, including the series of Odra machines. Meanwhile, computer science became

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

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Slowly does it Despite sustained growth, there is still room for more business in the sector. Value (in PLN billions) and growth dynamics (in %) of the Polish IT market between 2005-2012. 30.00

29.6 (6.3%) 27.9 (7.6%)

26.9 (12.2%) 26.75

25.9 (5.8%) 24.5 (-9.2%)

24.0 (16.5%)

23.50

40 20.6 (13.8%)

17.00

18.1 (13.0%) Source: PMR

20.25

2005

2006

more widespread across technical universities across Poland. The 1960s and 1970s ushered in a whole new era in computer science, with technical universities opening up specialized departments. One of the most renowned of these was the creation of Cyfronet in Kraków in 1973, which still provides supercomputing and networking capabilities for academics across southern Poland, as well as hosting Zeus, the country’s fastest supercomputer. Back to the future Spring forward to modern-day Poland, and the story has developed beyond recognition. According to figures from Poland’s Central Statistical Office, in 2012, 73 percent of Polish households had one computer or more, while 70.5 percent of Polish homes had access to the internet, with the number of households able to connect to broadband internet at 67 percent. In Great Britain, by comparison, 80 percent of homes had internet access in 2012, figures from the UK’s Office for National Statistics reveal. So where is all this IT that’s going on in Poland? After all, the value of the IT market in Poland grew by 6.3 percent year-on-year to land at PLN 29.6 billion in 2012. All this money couldn’t have been generated by a bunch of tech geeks, surely. You’d be surprised. From the public sector to the private sector, from big corporations to small start-ups, IT is everywhere, and it is not just prevalent in the IT sector per se, but across all spheres of industry. From small beginnings… For many 30-somethings working in IT up and down the Vistula, it all began with small-scale operations. “When I started

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

2007

2008

2009

The link between academia and business is one of the keys to a successful IT sector in Poland. “When I was the chair of the AmCham high tech committee I sponsored a paper on the state of cooperation between academia and business, and one of the findings was that when the cooperation happens, it can be intense and productive but unfortunately, across Poland it is not systematic or pervasive. I believe companies often identify a Ramon Tancinco, need then seek out a Cisco university partner and the cooperation succeeds or fails based on the personalities involved. I believe that the process needs to be more systematic and universities particularly need to see business as integral to both their success and the success of their students. Cisco has been extremely pleased with our collaboration with AGH University over the years and I definitely am eager to see that model expand, both for Cisco as well as for other firms.”

2010

2011

2012

university, I set up an ISP [Internet Service Provider] with a friend for people living in small towns, and by the end of the 1990s we had built one of the largest radio-driven networks in Poland,” said Andrzej Targosz, who now heads Proidea, an independent non-profit based in Kraków which provides training courses and organizes IT conferences across the country. The story is similar for Jakub Rutkowski, a team leader at Asseco, ranked Europe’s sixth-largest IT firm in 2012, according to Truffle 100, a ranking of European software vendors. “You could say I’ve been involved with IT since 2000,” he said, adding that “As a student, I would earn extra cash as a system administrator at a small company. “My first full-time job came in 2005, when I was with ABG – then part of the Prokom capital group – and then with Asseco when the companies merged in 2008,” Rutkowski said. And he is probably not alone in his career path among the many thousands of people working in IT across Poland today. From school to start-up What has visibly boomed in Poland over the past few years, however, is the rising number of small-scale startups across the country. This has been commonly attributed to the quality of education graduates obtain from leading technological universities. “We still have a very high standard of scientific education, and are taught how to tackle all sorts of problems – this really does help,” Targosz said. Furthermore, “we shouldn’t talk about talent, as it only makes up a few percent of what is needed to achieve success as a programmer: it is a good education, diligence and the will to

10 0

Poland’s high-tech exports have a lot of room for growth. High-tech exports as a percentage of total Polish exports.

80 80

66 67 67

70 70

50 50

5.1 5.1

5.9 5.9

55 44

41 41

40 40

30 30

20 20 10 10 00

6.0 6.0

72 72

59 59

60 60

5.7 5.7

2007 2007

2009 2009

2011 2011

widen your competences,” said Rutkowski. Many cities across Poland now host at least one academic institution which caters to budding IT workers. “I believe we have a group of very good universities at a world-class level,” said Rutkowski, adding that “academic establishments in Warsaw take the lead, but also Wrocław, Kraków, Gdańsk, Poznań and Łódź have very good technical universities, and you can see that cooperation with local business also spurs the development of academic centers.” Targosz concurs. “The internet now breaks down localization barriers,” he said, noting that centers which were once avoided, such as Białystok on Poland’s eastern frontier, now also have a burgeoning IT scene as a result of increased connectivity. However, “there are numerous outstanding research centers in Poland but characterizing the best is comparing apples to oranges. Each one has specializations which makes them unique unto themselves,” said Ramon Tancinco, Senior Manager, Strategy, IT, Operations and Business Development in the CEE region and Russia at Cisco Systems. The model which sees business partnering with academic institutions is one which is championed across the board. “It goes without saying that development is very important for academic establishments, although it is important to be able to apply the knowledge to business,” said Rutkowski. “A number of instruments come into play here, from local entrepreneurship incubators, which allow capable and ambitious students to start getting their first commercial ideas, to working with leading Polish and foreign companies.” Kraków in particular has taken an entrepreneurial leap since the first start-ups

2013 2013

11 00

2009 2009

For many people working professionally in the IT sector, the first steps were taken while still at school. “There was only one time when I had the chance to be hired as an employee. It was when I was a teenager, I had a job doing data-entry and updating databases before the redenomination [of the PLZ to the PLN, see p. 14,

Warsaw Business Journal Vol. 1, No. 1, December 1994]. The job lasted for one or two years. Andrzej I treated it more Targosz, Proidea as an interesting experience for which I would get paid (although this wasn’t a prerequisite). At high school I worked in installing IT infrastructure (tokenring and ethernet networks), and I was also an adviser on company management.”

2010 2010

2011 2011

2012 2012

Source: Eurostat

12 12

Flat lined

Polish households are rapidly growing in internet connectivity. Percentage of dwellings with access to the web.

Source: Eurostat

.3%) 6.3%)

Wired up

started cropping up in the city towards the end of the previous decade. “The start-up scene in Poland is explosive right now,” said Tancinco, “and what is amazing is the combination of both grass-roots with organized initiatives. On the grass-roots side, every year I learn about more start-ups who go to Silicon Valley to immerse themselves in the entrepreneurial culture and many of them are even returning with venture capital funding, never easy when the market of ideas is global.” “The pace of development is quite fast, as should be expected from a community with such a high caliber of tech talent,” said Paul Chen, a technical English teacher at AGH University and a blogger on the start-up scene in Kraków, although he has his reservations on purely tech start-ups, lamenting the fact that other sectors aren’t incorporated so easily. “I am worried about the fact that so much attention is focused on the tech side of the market. I would like to see a more diversified portfolio of start-ups in terms of sectors. I would like to see [a greater] spotlight on biotech, food, environmental protection, social promotion, and community servicebased start-ups,” Chen said. Nevertheless, there have already been some major success stories to come out of Kraków. In 2013, the start-up Estimote, which found an innovative application for retail tagging, managed to receive $3.1 million in funding “from some of the most well-known VCs in [Silicon] Valley,” Tancinco said, adding that “they are adding jobs in Poland and in the US, a huge winwin across two continents.” The support doesn’t just come in the form of the private sector. Public initiatives also play an important role. “On the organized

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

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IT Ranking Poland

Despite its growth, Poland is a European laggard when it comes to . . . initiative side, the Top 500 innovators program sends top Polish scientists to Stanford University, [while] the US Consulate in Krakow recently sponsored the PolishAmerican Innovation Bridge,” Tancinco said, adding that the “government is starting to realize that collaboration with grass roots initiatives, like the TEDx phenomenon [the rapidly rising number of independent conferences linked to TED on technology and design] truly pays dividends in connecting with Poland’s next generation of leaders.” Other cities are also getting a piece of the action. The first Polish cloud computing service, Poznań-based e24cloud, has been on the Polish market for more than two years. The service has seen dynamic growth in a sub-sector that is now the fastest growing segment of the industry, holding a market value of over PLN 216 million. Furthermore, just in 2012, the company saw 39 percent growth. Foreign capital Poland is fast becoming a destination for foreign IT investments. Cisco is one of the major players, but a number of global tech firms are firmly positioned in the country. Google is a big player in three cities across Poland – Warsaw, Wrocław and Kraków – while HP, Microsoft, Dell, Motorola and many other big corporations prop Poland up as a major destination. “In addition to hosting such companies as Cisco, Google, IBM, Akamai, and Oracle, in 2013 Kraków also welcomed a GE Healthcare IT and a Samsung R&D center,” said Tancinco. “Foreign investors are beginning to spend money in Poland, and we are providing wide-ranging schooling on the matter,” said Targosz. “This process is ongoing, but you can already see the positive effects. We have a lot of firms in Poland, but their quality is not up to scratch yet. What is interesting is that the most promising companies are SMEs which have not been tainted by ʻconservative business,’” he added. Elbow room There is always room for more activity, however. “I think that investments in the IT market in Poland by foreign companies are still lagging. There are big foreign players

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

. . . Percentage of households hooked up to the internet 2007

2009

2011

2013

EU 27/28

Belgium

Bulgaria*

Czech Republic

Germany

Estonia

France

Luxembourg**

Poland

* Lowest percentage of households with internet access ** Highest percentage of households with internet access

Source: Eurostat

. . . High-tech exports as a percentage of total exports 2009

2010

2011

2012

EU 27

16.1

15.4

15.6

Belgium

8.8

8.4

7.7

8.6

Bulgaria

4.6

4.1

3.7

3.8

Germany

13.5

13.9

Estonia

6.9

10.4

14.8

14.1

France

19.7

20.4

18.7

Luxembourg

41.9

29.4

24.8

26.2

Malta**

35.2

32.9

30.1

31.8

Poland

5.7

5.1

5.9

Portugal*

3.7

3.2

17.6

16.5

17.4

* Lowest percentage of high-tech exports ** Highest percentage of high-tech exports

present which have branch offices scattered worldwide, and there’s no possibility to leave out the biggest country in the CEE region,” said Rutkowski, who laments that “foreign companies prefer to pick up the best programming talent and ship them off to head office instead of setting up shop in Poland.” Rutkowski blames barriers, such as red tape, as a major reason foreign companies put off investing in Poland. Nevertheless, “it is not simply a question of multinationals but the development of the entire ecosystem,” said Cisco’s Tancinco. As such, most cities in Poland now host

Source: Eurostat

tech parks, which try to foster innovation, although these centers complain that they’re not getting the visibility they need in order to attract funding and talent. The country still lags far behind the rest of the EU. In 2013, the European Commission’s Innovation Union Scoreboard placed Poland 24th out of the EU’s then 27 countries, beating only Latvia, Romania and Bulgaria. According to the EC, Poland’s “relative strengths are in human resources,” while “relative weaknesses are in linkages and entrepreneurship and innovators,” stated the report, which was released in March 2013. Furthermore, an article in Foreign Af-

fairs wrote that Poland should concentrate on developing its high-tech market. “At the moment, Poland does not invest much in research and development relative to its more developed neighbors – only 0.7 percent of GDP, compared with about 2.0 percent in the EU as a whole,” the policy journal wrote. What next? There is no doubt that IT in Poland is becoming a huge market, but what of the future? If the synergy between academia and business is going so well, and the climate is becoming better for entrepreneurial start-ups, where do we go from here? “The Polish market is at a stage of construction through acquisitions, with dominating companies buying out smaller firms in order to get more market traction and new clients, and this can be clearly seen since 2000,” Rutkowski said. “However, we are approaching the next stage, which will see the incorporation of companies dependent on the [market] dominators in each capital group,” he added, saying that, “in order to survive as independent entities, Polish companies must cut operating costs and raise the bar on productivity through unifying internal processes.” “Consolidation is unavoidable,” said Andrzej Targosz. “It will happen first across certain sectors, and then we’ll see the merging of companies working in different areas. In five years’ time we’ll have large firms and a whole array of satellites, which will be bought up at the moment they mature.” “I will admit that I am bullish on Polish IT over the next two decades, but my bullish-

ness is founded on a steely eyed focus on several fundamentals,” said Tancinco. “First of all, the fact that multinationals continue to flock to Poland despite the fact that there are cheaper places in the world to operate means that Poland is regarded as a location where quality trumps cost.” “Secondly, if I look at both the number of start-ups and venture capital funds which have emerged like proverbial mushrooms after the rain in the last four years, I believe that it is simply a matter of a few years before Poland experiences its first Skype moment,” said Tancinco, referring to when Estonia was put on the map after the success of Skype, an internet communicator. Poland’s IT industry may still have to wait to see a global breakthrough, but with the right climate in place and certain barriers which will eventually be crossed, the future is bright, even if for some it is something of an unknown. “There is no point in predicting anything for the next one or two decades,” said Targosz. “10 years ago not many people had mobile phones, and 20 years ago most of us were still using IBM 386 machines.” To log on to the BBS services, no doubt. u John Beauchamp’s first PC computer was built from parts assembled from the Grzybowska computer market and a small computer shop in Salisbury, UK. Brought up on BBC BASIC (Acorn) and HTML. Managed a website in the mid-1990s, hosting it on Geocities. The site listed Polish and Russian vodka websites – still uncommon in 1997-98 – as well as some bizarre CD reviews.

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

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ENERGY

STORY BY jacek ciesnowski

nuclear

RISING A dream deferred: The abandoned Żarnowiec complex in Poland's northern reaches.

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

For decades Poland’s nuclear power ambitions lay in ruins. Now, after years of neglect and exhaustive debate, it appears the atom will play a key role in the nation’s energy future

Image: Shutterstock

hole in the ground and some dilapidated ruins. That’s all there is left of Poland’s nuclear program. Between 1982-1990, the complex in Żarnowiec in northern Poland was bustling with life as Poland’s first nuclear power plant was under construction. Workers and engineers would live in a hotel especially built for them, a building which was quite modern by communist standards, where they had their own rec-rooms, gym and even a cinema. But after the program was halted, the village quickly became deserted. Everything valuable from the hotel was stolen. After scrap merchants peeled away parts of the hotel’s metal construction, the structure fell down. A few years ago, the remains of what was left were demolished. Dawn of a new era There were a few reasons the Żarnowiec project came to a halt. First, after the Chernobyl disaster in Ukraine, Poles grew wary of having a nuclear facility on their soil, fearing that such a disaster could happen here. Then, after the fall of communism, new governments had more pressing issues on their minds and their wafer-thin budgets couldn’t afford the financing of such a controversial project. Until 1990, the communist government had spent some $500 million on Żarnowiec, but the first two (of the four planned) blocks were only 40 percent ready.

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

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ENERGY Nuclear Neighbors

After 25 years, a lot has changed here. The transition to a free economy was painful but successful, so Poland decided to reboot its nuclear energy program. Society’s sentiment toward nuclear energy has also changed, and despite the Fukushima disaster in 2011, some 56 percent of Poles favor building a nuclear facility (with 40 percent against it). Poland, which still bases its economy on industrial production, has an increasing demand for electricity but its outdated power grid means actual capacity has been falling. The economy ministry warned recently that the country faces a risk of power supply deficits in 2016-2017, and pointed out that Poland’s power capacity deficit in peak periods could amount to as much as 1,100 MW in the winter of 2017. The ministry also said 4.4 GW of existing capacity will have to be shut down by the end of 2017. Building a nuclear power plant obviously takes more than couple of years, so there’s no chance that one will be finished three years from now. But when it comes to longterm planning, it clearly makes sense for the country to have one, and the government knows it. A study ordered in 2013 revealed that going nuclear is the cheapest way to cut the country’s rising CO2 emissions, although that would come at a price. The scientists behind the study estimate that Poland would need to increase its spending on power infrastructure to PLN 26-37 billion annually from the current PLN 18 billion in order to boost the efficiency of the sector. Rome wasn’t built in a day “Poland could really use nuclear energy,” said Wojciech Jakóbik, an analyst at the Jagielloński Institute. In addition to adding capacity, nuclear sources would be completely independent from outside interference, as it wouldn’t need imported gas or coal to be operational, Jakóbik explained. “We should diversify our energy mix as much as we can, having up to 20 percent of it coming from nuclear, some from renewables, shale gas if we will be able to commercially extract it, and the rest from coal,” Jakóbik added. The current plan, which so far has changed a number of times and will probably change

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

Sweden

Oskarshamn

Nuclear power stations around Central Europe

Lithuania Ignalina Choczewo Żarnowiec

Krümel

Germany Poland Rivne Temelin Khmelnytskyi

the Czech Republic Dukovany Slovakia Bohunice Mochovice

Nuclear power plants Proposed locations for nuclear power plant

Ukraine

Hungary Paks

in the future as well – Poland still hasn’t confirmed its energy strategy going forward – stipulates that the country will have two nuclear power plants, each with 3,000 MW capacity. The first one would come online in 2025 at the latest, while the second one would be finished by 2035. The International Atomic Energy Agency stipulates that the whole process of introducing nuclear energy in a country takes between 10-15 years. For Poland, which has to build everything from scratch, the latter date seems more realistic. Looking for money Where do the challenges over nuclear energy in Poland start? Money. For a few years now, Polish officials have been heavily promoting the idea to restart a nuclear effort, even going as far as to call the decision to scrap the program back in 1990 a “fundamental error.” But so far, Poland is sticking with coal and lignite as its main energy fuel for many different reasons, but here’s the main one: It’s much cheaper to build a coal-fired power plant than a nuclear facility. And Poland has tons and tons of coal. Meanwhile, lignite deposits are estimated at 13 billion metric tons, only 14 percent of which is being mined. Coal-based power is also the cheapest kind of electricity to produce. That’s part of the reason the European Union’s efforts to curb carbon emissions and raise

the prices of carbon permits have failed miserably so far. EU carbon permits have lost over half their value over the past year, and have fallen to below €3 per ton of CO2 produced. Under current EU regulations, energy producers have to buy a permit for each ton of carbon dioxide they emit. But these permits would have to cost around €45 to make burning natural gas more profitable for them than hard coal. Lignite coal sourced domestically would require an even higher carbon price. The EU has tried to force through the socalled “backloading” scheme, which would delay the auction of 900 million emissions permits, and as a result raise their price. After a huge amount of lobbying against the scheme by the EU’s biggest polluters, including Poland, the first attempt to pass the regulations failed in the European Parliament. However, a second attempt was successful. Still, the measure lacks sufficient support to become law, since it has to be accepted by the governments of all EU states, a highly unlikely scenario given the current political and economic situation, especially in Poland. Going nuclear “Poland is still an industrial country, and as such needs a source of constant energy supply,” said Piotr Maciążek, an energy expert from the Energy for Europe Founda-

Poland’s energy mix

8% Ga s

ge ot h

W ind

an d

Hy d

er m al

88% Coal

Clearing the roadblocks Some recent personnel reshuffles also indicate that nuclear energy has been green-lit by the government. Krzysztof Kilian, CEO of PGE, Poland’s largest utility, resigned in November last year. He was not a big proponent of nuclear energy and was constantly at loggerheads with Aleksander Grad, who heads the company’s nuclear program. Furthermore, in November last year Prime Minister Donald Tusk dismissed Environment Minister Marcin Korolec, who was often criticized for a tendency to forget that energy regulations need to be business-friendly. He was replaced by an

Image: Centrum Atomistyki

tion. He argues that renewable energy is not the way to go for the country for two reasons: economic, as it’s simply too expensive to produce; and because wind farms and solar panels cannot provide a constant supply of energy that Polish factories need. “Unlike Germany, Poland can’t afford to switch to renewables,” Maciążek added. Besides renewables, however, there are only two other ways to curb CO2 emissions – shale gas or nuclear energy. At first it looked like shale – also a fossil fuel – would be the way to go, as Poland was hoping that its vast shale resources would result in tons of cheap, easily available energy. However, exploration for shale gas has faced a number of challenges, from the lack of a legal framework to hugely varied estimates of how much shale gas actually lies beneath Poland’s surface. A switch in the mindset on shale could be seen early this year. Three state-owned utilities, PGE, Tauron and Energa, as well as copper giant KGHM (also state-owned) signed two different deals. One pertained to cooperation in shale gas extraction, while the other was about the development of the nuclear facility. Both agreements ran out at the end of 2013, with only the latter extended.

Bi om as

Oi l

Electricity generation in Poland by source

MEET MARIA Poland is not a nuclear desert. It currently has one working nu-

clear reactor – MARIA with 30 MW capacity. Named after Nobel prize winner Maria Skłodowska-Curie and built in 1974, it’s used for research purposes and produces radioactive isotopes which are used in medicine. It’s located in Otwock, some 25 kilometers from Warsaw. Between 1958-1995 there was a second nuclear reactor operating on Polish soil – EWA (10 MW capacity), also used for research purposes.

economist, Maciej Grabowski, with energy companies welcoming the news. Jakóbik doesn’t think that personnel changes are important when it comes to such important projects, however. “What nuclear energy needs is consistency. The current government has flip-flopped on this matter in the past saying everything from ‘nuclear energy is a priority’ to ‘we don’t need it at all.’” Like moths to flames Building such a complex, intricate and sensitive installation is out of reach for Polish companies. Yes, they can build its structure, the buildings themselves, but the reactor and the technology will have to be supplied by an international experts who can assure its safety. Firms from all over the world are lining up, hoping for a multibillion złoty contract. Russia’s Rosatom, France’s Areva, Japan’s Hitachi and Toshiba, as well as USA’s Westinghouse are among those in the running. It’s way too early to tell which one will be chosen, as Poland doesn’t even have its nuclear program adopted yet (it’s being currently discussed within the government), but most of the candidates are already offering various incentives to Polish companies that could produce the parts necessary to build a nuclear reactor, obviously only after all the necessary contracts for the construction are signed first. Location, location, location The only remaining question is where Poland should build such a power plant. From the initial 92 potential locations, only two remain: Choczewo and… Żarnowiec, which looks to be a frontrunner, as PGE has already purchased over 100 hectares of land there. This would bring Poland’s nuclear program full circle. It’s likely to be two years or more until the exact location of the plant is set, as environmental studies need to be done first and – in what will perhaps be the most difficult problem to overcome – a local residents need to agree to a nuclear facility on their doorstep. Despite all the challenges, Poland’s path to nuclear energy never had so few roadblocks as in recent history. u

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EXPORTS

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

STORY BY remi adekoya

SHIP IT!

Polish exporters are powering ahead, and drove GDP growth in 2013. But which companies are the industry leaders and what are their perspectives for the future?

Image: Shutterstock

n 1989, when communism collapsed in Poland (and started crumbling elsewhere), it meant the 35 percent of Polish exports which had previously found ready markets in the Soviet Union and its satellite states, suddenly had nowhere to go. What had passed for a quality product in the Soviet Union was usually met with scant enthusiasm in Western Europe and other developed markets. Many Polish firms suddenly found themselves in a rut. A massive reorientation and modernization push was needed. Some firms did not survive the transformation process and legendary brands like the Polonez, a Polish-made car, simply ceased to exist. Blood, sweat, tears But thanks to technological know-how acquired via privatizations, plus a lot of blood, sweat and tears, Polish companies are now firmly back in the game. In 2002, Polish exports were worth $40 billion. By 2012 that number had swollen to $184 billion and it’s estimated that some $200 billion worth of Polish products were exported last year. That trend is expected to continue.

In October 2013, HSBC released a report in which it stated that after years of weak economic activity among many of Poland’s major trading partners (which are almost all in the European Union), “these partner countries are beginning to stabilize and eke out a gradual recovery, meaning the outlook for Polish trade is brighter now than for some time.” Continued growth ahead It is also expected that Poland will increase its trade with developing countries in the coming years. Between 2016 and 2020, Polish exports will increase by a total of 55 percent, gaining an average of 9.1 percent per year, according to analysts at HSBC and Oxford Economics. So which companies are driving this growth? The top five Polish exporters in terms of revenue in 2012 include three of Poland’s industrial giants: oil-firms PKN Orlen and Lotos, as well as copper and silver producer KGHM. But these are state-controlled behemoths that largely thrive because of their monopolistic positions on the Polish market. It is the smaller, privately-owned companies that have really refined and gotten their act

together in the past two decades and are making Poland proud today. Poland is now the fourth-largest exporter of furniture in Europe and the seventh largest in the world. In 2013, $9.4 billion of Polish furniture headed abroad, while that figure is expected to hit $10 billion this year, according to B+R Studio, a sector analyst. Which firms are leading the way? Biggest winners “Companies like Black Red White, Forte, Nowy Styl, Fabryka Mebli, Meble Wójcik and Szynaka are among the biggest players and exporters on the scene. Their competitive advantage is their quality to price ratio, flexible delivery capabilities and payment arrangements,” said B+R’s Tomasz Wiktorski. Another advantage Polish furniture companies have is that their production capacity is unequalled anywhere in Western Europe. When it comes to sheer volume, Poland is second only to China in terms of furniture production. It produces some 3 million metric tons of furniture every year compared to the 2 million tons German or Italian firms manufacture. Some 83 percent of Poland’s exported furniture goes to EU markets because as Wiktorski said, “Europeans spend much more on furniture than anybody else, including Americans, and that situation is likely to continue in the near future.” Family affair Furniture maker Nowy Styl, whose chairs can be found in South African football stadiums, Greece’s Summer Olympics games venues and the French finance ministry, was established by two brothers in 1992. “When we first started our business, we simply wanted to make a living,” Adam Krzanowski, the company’s founder and co-owner said. In the beginning, the whole

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EXPORTS

Krzanowski family used to be engaged in the production process supervising everything from the assembling of the chairs to their loading and delivery coordination. Profits were reinvested and the family lived modestly. In 1995, Nowy Styl presented its first offer to an international audience at a trade fair in Moscow. By 2011, what had started as a small family business was now producing 8 million chairs a year and selling them all over the world, and to some pretty demanding clients at that. For example, Nowy Styl provided chairs for the VIPs at the 2011 G20 summit in Cannes. Although Wiktorski said Polish furniture companies are going to face some very stiff competition on the European market from Chinese firms (and not only) in the coming years, if they continue developing their product range and quality as they have in recent years, they should still do well.

“vast majority” of its revenue from exports. “They offer outsourcing services mostly for the telecoms sector. They have a very professional staff with good software development skills and they can compete on price, as is the case for most CEE companies,” Olszynka said. “Like most of the other successful Polish exporters they delivered on their first big foreign contract. Most Western companies would never award a big contract to a Polish firm without references from other Western companies so that first break is key,” he added. Then there is Talex, which specializes in financial and banking outsourcing services, and cooperates with the likes of Credit Agricole. Talex has also set up its own data center in Poznań and have very good perspectives for the future, according to Olszynka.

“They roll out their own data centers in countries like Germany and France, develop their own software platform systems for telecoms operators as well as CRM and ERP solutions,” he added. Comarch was set up in 1993 by Janusz Filipiak, a former engineering professor and IT specialist, who is now one of the richest

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

Source: Central Statistics Office

187,300

184,661

190,247

159,758

136,641

109,584

89,378

73,781

53,450

138,785

171,860

Image: Nowy Styl

Exports Paradoxically, the financial and economic crisis that swept through Western Europe Hi-Tech from 2008-09 gave Polish firms the opAlthough HSBC expects industrial machinportunity to get in on the ground floor ery and transport equipment to remain at with their products, which were often of the forefront of Polish exports from now till good quality and sold at lower prices than 2030, the most significant jump in export their Western competitors were offering. volume is expected to come from InformaHowever, Poland must work on diversifying tion and Communications Technology its export destinations, which it appears to (ICT), which is expected to overtake textile be doing, as being dependent only on EU Products from Polish furniture maker Nowy and woods manufacturers, and processors of markets carries too much risk. The governStyl, which exports 8 million chairs a year. animal products to become the third-biggest ment of Donald Tusk realizes this, which source of Polish exports by 2030. is why it has embarked on Its contribution to the overall ambitious programs to boost Polish exports in the last decade growth of Polish exports is exports to developing markets 200,000 expected to stand at 12 percent especially in Asia, the Middle between 2013 and 2015. East and Africa. Poland already has some strong Another issue Polish 150,000 exporters in this sector. companies need to tackle is 2003rRight now, 53,450 there are “Software producer Comarch branding. 2004r 73,781 is already well-known abroad many Polish which 2005r companies 89,378 100,000 2006r 109,584 for its products of which about a export2007r products138,785 but under third are destined for exports. It foreign2008r brands in171,860 fear that the 136,641 has already carried out a series of 50,000 “Made2009r in Poland” label would 2010r 159,758 2011rharm than 190,247 contracts abroad and delivered do more good. 184,661 successfully,” said Paweł OlWhile2012r that may be true today, 2013r* 187,300 $ mln szynka, industry analyst at PMR this also adds to Poland’s 7r2008r2009r2010r 2011r2012r 2013r* 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013* Research. dependence on*I-XI its 2013 Western *I-XI 2013 Delivering on the first big partners. There are too few foreign contract is a must for strong Polish brands on global Polish companies who want to export their markets and companies must invest the men in Poland. Comarch is largely Filipiak’s products. It’s only after this that they have necessary resources to change this. one-man show and there is no denying he the necessary “references” to convince After all, the aim should be for a “Made in has built Comarch into one of Poland’s most others abroad that they are up to the task. Poland” label to one day represent added impressive software companies to date. Comarch has proven to be a particularly Another ICT company Olszynka menvalue and not something to be ashamed ambitious company. tions is Ericpol, which he says receives a of. u

EN TEN R E TP RR EENE U R SU R S P R ENE

A Kino za Rogiem arrangement at Cafe La Ruina, Poznan. Venues are limited to 60 seats maximum.

Images: KIGEiT

S Flicks, around the corner

urveys published by pollsters such as CBOS and Ipsos last year showed that 57 percent of Poles don’t go to the movies at all. Aside from the expense (about PLN 25 to see a film at a Warsaw multiplex, for example), Poland is still mostly rural, putting cinemas physically out of reach for many people. Grzegorz Molewski is out to change that. “We can’t allow for our society to be alienated in its access to culture,” he said. That’s why Molewski is leading a small team coordinated by Poland’s Electronics and Communication Chamber of Commerce (KIGEiT) in setting up Kino za Rogiem (Cinema Around the Corner), aimed at spreading the movie-going experience to Poland’s small cities and towns. “Today’s technology allows for unlimited access to . . . culture, if you only have internet access,” Molewski said. “But you’re on your own, just with your

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computer,” he said. Kino za Rogiem’s idea is to create “space where a group of people could watch a movie together” – and do so affordably by making the films available to the venues via internet downloads from one central server. Classic Polish films as well as recently released international blockbusters are in Kino za Rogiem’s catalog, based on deals with copyright ownership organizations and movie distributors. Venues – local cultural centers, libraries, private cafes – pay a monthly fee and are charged separately for each screening, depending on their size, Molewski said. The fee is calculated in such a way as to make screenings possible even if only four people show up and pay no more than PLN 5 per ticket.

Experiences vary So far, Kino za Rogiem has lined up nine venues across Poland, and is about to include new ones. Candidate venues must file applications to join the program, and Molewski said the project has a growing number of candidates. At Cafe Kontynenty in Kraków movies have been screened under the Kino za Rogiem logo since last summer. There is one movie shown each Sunday and for now the plan is to continue testing the project until February and then decide what’s next, Małgorzata Zając from the cafe’s management said. So far, she said, the project does not

“

People are happy to be able to watch a movie in a unique atmosphere, in a comfortable space, sipping coffee or a drink .

Makeshift, small “We’re aware that running a standalone cinema in a small town would not be a profitable business,” Molewski said. “That’s why we offer the concept of adding a small theater to an existing place.” The makeshift theaters must be in a separate room, are required to have basic cinema equipment, and can have a maximum 60 seats. Theater owners cover the costs of Hanna Polanowska, managing a cinema in the Kino za Klub Dragon, Poznań Rogiem project, and have responsibility for adapting their space to fulfill the project’s requirements. Molewski’s generate extra costs, but it did not bring a team offers assistance and, in some cases, surge in revenue either. “The offer proved co-financing after it has obtained a submuch more attractive for children than sidy from the EU’s European Regional for adults,” she added, “possibly because Development Fund, with the help of the Cafe Kontynenty is known as a childMazowieckie voivodship authorities. friendly place.” So parents bring their Molewski, 60, knows something about children to watch a movie in the cinema the movies. He ran a movie distribution room and then sit down to a coffee with company in the 1990s and he was the friends at the cafe itself, Zając said. Zając was a bit skeptical about attracting brain behind the Kino Polska television adult viewers. “There were situations when channel, created in 2003, which features nobody came,” she said. “It all depends classic Polish films and television series. on many factors, including the weather, He is also involved in a digital remasterespecially in the summer,” she said. ing project and the creation of a digital Meanwhile in Poznań one of the locarepository of Polish films.

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

”

tions is Klub Dragon, a place where you can meet friends, eat out, listen to music, attend an arts workshop and, since May last year, watch a movie in the Kino za Rogiem project. Hanna Polanowska, who runs the project there, said that the movie screenings have nicely fitted into the club’s scope of activity. “Quite a lot of people come to see the indie movies that we usually have on offer,” she said. “People are happy to be able to watch a movie in a unique atmosphere,” Polanowska said, “in a comfortable place, sipping a coffee or a drink.” And the tickets are priced at only PLN 5, which may be the cheapest ticket in Poznań. “I am sure we will continue to run the project in the future,” Polanowska said. Plans for the future In a recent competition announced by KIGEiT, 25 venues filed applications and as many as 20 of them met the project’s strict criteria, but the committee was only able to financially support six of them. However there are big plans for expansion. By the end of 2015 there should be 200 cinemas in the project and as many as 700 two years later. To realize his vision, Molewski said, his team plans to cooperate with other voivodships similar to its partnership with Mazowsze, in order to help finance new venues. He believes there is huge potential for small cinemas in Poland, with the key being good venues run by good managers, he said. Kino za Rogiem has already received a lot of support, both from Poland’s cinematography business and from local authorities in areas where it is already present, Molewski said. He hopes the project will not need outside financing in the future. “In a few years’ time it should be a strong entity, well balanced in financial terms, and not needing to beg for support from authorities,” he said.

– Kamila Wajszczuk

EN T R E P R ENE U R S

21st century cobbler A trip to Japan and a look into a high-tech mirror eventually gave Aleksandra Jarośkiewicz a start-up idea. After ditching her day job and getting together with some partners, she was off and running in a shoe design business

hoe design was the furthest thing from Aleksandra Jarośkiewicz’s mind when she headed for a holiday after finishing her studies in Japanese language and culture. “I basically sat at a table and talked about Poland,” she said of a job she found in a night club after landing in Japan. “Overworked Japanese people love to hear stories of far-away exotic places, particularly when a white woman tells these stories,” Jarośkiewicz said. But in Kyoto she came across a gadget called the “magic mirror,” a seemingly regular mirror with a computer generated layer that allows you to “try on” clothes, and then tweak them to your liking. “I didn’t think much of it at the time, at least not business-wise, but a few years later, when I was searching for an idea for a startup, it came back to me,” said Jarośkiewicz, the founder of Fun in Design, a Warsawbased start-up that lets customers design their own footwear. Ever wanted your shoes to pop? Fun in Design’s customers can create customized footwear online or at the firm’s retail shop

on their own, head first,” she said of the company’s formative days. In the beginning there were six partners, but that number was quickly halved. “You need to realize early on that your idea can

Images: Łukasz Mazurek/WBJ

Taking the plunge “I talked to a bunch of people who were at the point in their life where they were tired of their 9-to-5 jobs and were ready to go it

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in fact pan out. And then you are left with a decision whether to take the plunge . . . and put all your effort into turning your idea into something real,” Jarośkiewicz said. Jarośkiewicz jumped in with both feet. She and her remaining partners invested all their savings in the company, but soon found they needed outside investment. “A company that produces shoes requires much more start-up capital, so we started looking for an outside investor,” she said. Raising capital Winning PLN 50,000 from Agora Startup Fest, an entrepreneurship competition co-funded by the Ministry of Economy, allowed Fun in Design to develop a new, fully professional website in place of an old “home-made” one. Once the shop came online, talking to investors was much easier, Jarośkiewicz said, and the firm nailed down PLN 500,000 from Skyline Venture, a venture capital fund specializing in SMEs. “We decided to invest in Fun in Design because we believe in these people. They left corporations to pursue this idea, and proved to be very determined,” said Paweł Maj, fund manager. “What made our decision to get involved easier, was that their business was not a ‘power-point company’ but it was already up-and-running at the time, albeit on a small scale. It had won Agora Startup Fest. The media had already picked it up,” Maj added.

“

Looking for a business partner when you run a start-up firm is really tricky. Suppliers were very distrustful at first, afraid of ending up with an unreliable partner who doesn’t pay invoices.

”

Aleksandra Jarośkiewicz,

co-founder, Fun in Design Overcoming barriers Another major challenge was finding an contracting out production in Poland to a open-minded supplier. “We were looking local manufacturer from the Mazowieckie for nearly a year before we came across ours. voivodship, where bright, shiny, colorful When we talked to one shoe producer after shoes, boots and loafers soon started rolling another, people who had been in the busioff the production line. ness for decades, we saw we weren’t getting “Looking for a business partner when you our idea across,” Jarośkiewicz said. run a start-up firm is really tricky. Suppliers “Once you tell them it’s an internet store, were very distrustful at first, afraid of ending they start looking at you weird. And when up with an unreliable partner who doesn’t you tell them that each pair will be different pay invoices,” she explained. – what you hear is: ‘That’s just not posMeanwhile, Fun in Design soon found that sible.’” Jarośkiewicz eventually overcame an online shop was not enough. “People feel that obstacle by looking close to home,

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lost on the internet. They like to come to the shop, even just to talk to us, and then they sit down with one of our tablets and design their very own high heels,” Jarośkiewicz said. Fun in Design now operates its own store on ul. Zgoda, one of Warsaw’s high streets. “The company needed a showroom to make a virtual idea become more tangible. The purpose of the store is not to sell shoes off the shelf but to help the client visualize what she wants,” Maj explained. The company’s shoes range in price from PLN 230 to PLN 490, placing them on a par with regular mid-range brands. “This is a completely new market, one we are still in the process of creating,” Jarośkiewicz said. “People look for originality, for something other than run-of-the mill black leather high-heels. And they want to have fun making their dream shoes. That’s what Fun in Design is all about.” Keeping ahead The best piece of confirmation that your business is taking off is when others follow in your footsteps. “When we were starting out, there was only one other company doing what we do. They started at the same time as we did. Now we have three competitors, but we try to stay on the cutting edge.” The company is about to launch a 3D shoe design service, one that will make the design-to-buy process even more experiential . . . and therefore even more fun. “No one uses this technology for virtual design yet, so again we will be the first ones,” Jarośkiewicz said. According to the Skyline Venture, the business has seen a 100 percent revenue increase since the capital injection it received in June. The firm is also toying with the idea of international expansion. “We see a lot of potential abroad, particularly Western Europe,” Maj said. “I always knew I wanted to run my own business. It was just a matter of finding one that would work,” Jarośkiewicz said. For Jarośkiewicz, the shoe seems to fit.

– Beata Socha

Image: Łukasz Mazurek/WBJ

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Vintage, vidi, vici By Jacek Ciesnowski

How discount stores are conquering Polandâ&#x20AC;&#x2122;s rapidly growing wine market with quality imports at rock-bottom prices

Image: Shutterstock

alk into a Polish discount store these days and you might be surprised at a particular dissonance: next to oversized bags of potato chips and generic energy drinks sit bottles of some of the worldâ&#x20AC;&#x2122;s best wines encased in wooden boxes and accompanied by information on serving temperatures and complementary dishes. Westerners might be used to paying top dollar for quality wines, but in Poland, where alcohol consumption is falling but wine-drinking is rising, the phenomenon is part of a trend by which just about everybody is looking to get on the great grape gravy train. Discount stores such as Germany-based Lidl and Portuguese-owned Biedronka are taking over the wine sector by storm. According to various studies, the discount chains sell between 30 and 40 percent of wines on the Polish market, worth some PLN 2 billion. Biedronka is in the lead with about a 15 percent share of the market, with Lidl in second place at 10 percent.

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BIEDRON

Another app is Winspiracje (for Android), which allows you to scan a wine’s bar code or its label and gives you more information about the wine and its rating. Vivino (for Android and iPhone) is a similar app: take a snapshot of the wine’s label and it will pull up a description and tell you where you can buy it nearby.

which wine deserves his money and attention. And wine sellers – not only discount stores – will use the customer’s lack of knowledge to their advantage. Recently Biedronka promoted the Monasterio de las Viñas wine from Spain, whose bottles featured a large sticker proclaiming that the wine had received 89 points on the famous 100-point Robert Parker scale. Check the label At a price point of just PLN 17, the deal seemed too good to be true. Indeed, most wine critics were disappointed with its taste, and no wonder: wines that earn between 80-89 points are, according to Parker, only “barely above average.” There was more confusion when Biedronka recently promoted a number of wines in its offer that had been awarded various medals. A Polish wine blog investigated, finding that some of the wines had indeed won medals, but under different brand names. In some cases, the wines had

been awarded, but for a completely different vintage. Another reason why good wines can be bought in Poland at lower prices than elsewhere is that the discount stores buy in bulk. With orders much larger than those of other importers, they can negotiate a better price. And rebranding the wine can benefit both the retailer and the producer: the retailer can sell it cheaply while the producer doesn’t risk hurting its brand’s reputation as a budget product. Low price, high quality? While Biedronka mostly sells wines below PLN 30, Lidl has a slightly different approach. While it also sells many bottles within that price range, it has also recently introduced three that cost PLN 199 each. This is mostly a marketing tool – the company doesn’t expect to sell many such bottles, but it sends a message to customers that they will sometimes have to shell out more than PLN 30 for a good wine. The average price for a wine in Lidl this past November was PLN 44 (PLN 36 if you exclude those PLN 199 wines), while in Biedronka the average price was PLN 18. But can such cheap wines really be good? Tomasz Budyta, a wine expert who runs the Mondovino restaurant and wine shop in Warsaw claims they can, but he also warns that they won’t be anything extraordinary. “You can find some good wines for everyday use in discount stores – simple wines for simple tastes, for customers that aren’t looking for anything special,” he said. “More exceptional wines won’t be sold there, because the customers won’t buy them. Even if Biedronka was selling Pinot noir from Burgundy for PLN 25 per bottle, no one would buy it because it wouldn’t fit the average customer’s taste.” Pinot noir is considered one of the best varieties in the world, but can taste sour. Budyta isn’t worried about discount stores moving in on his turf. He thinks that both specialist wine stores and discount stores have their place in the market, though he believes change is coming. “Traditional wholesalers are becoming a

Images: Shutterstock

Educating customers Lidl and Biedronka have a similar approach to marketing their wines. They have both hired well-known Polish sommeliers and regularly present new wine lists. Every few weeks the offer rotates: Lidl might feature French wines while Biedronka has a special offer on Portuguese vintages one week, while the next week the stores could have a special on wines from South America and Italy. To boost their sales, the chains are also trying to educate their clients in wine etiquette, which is still lacking in Poland. According to a TNS Polska poll, only 25 percent of Poles drink wine with a meal, 60 percent don’t know why white-wine glasses differ from red-wine glasses and only 5 percent can name a grape variety from which wines are made. Both chains also invite bloggers to tasting events or send the bottles to them with the hope that they will post favorable reviews. The wine market is huge: there are so many brands, vintages and grape varieties that it seems only an expert could know

Lost between the shelves fully stacked with various wines? No worry, there are plenty of apps that can help you choose the right bottle. One such app is dotrzechdych.pl (available for Android and Windows phones). You canPorganize wines according to RICE AR can be bought, stores AVin whichWthey ERAGE PRICE TWO PEthem star ratings and the app LARGgives EST DIS R BOTTLE IN POLAN COUNT D’S Cchoice. HAINS to help you make your Its disadvantage is the limited number of wines it has in its database. Only a few PLN 4each 4 store’s offer usually bottles from finds its way in. PLN 18

: LIDL,

A thirst for wine International Wine & Spirit Research predicts that in the coming years, the sales of alcohol products in Poland will actually drop slightly (0.5 percent per year until 2018). But that won’t affect wine importers and producers – wine sales are set to rise by some 4-5 percent, the research firm has found. “The growth will depend on the economic conditions in Poland and other European markets,” said Piotr Poznański, senior analyst at IWSR. “Nevertheless, the average annual growth rate of 4.5 percent over the past five years is likely to remain unchanged during the next five-year period thanks to the growing popularity of wines, a wider selection of wines, as well as tastings and promotions.” This presents an opportunity for discount stores, which have the ability to import large quantities of wine directly and sell it at low prices.

There’s an app for that!

SOURCE

Soon, every other bottle of wine sold in Poland will be purchased at a discount store.

While alcohol comprises a huge segment of Poland’s production of foodstuffs, wines are still not commonly produced here. In 2010, there were some 500 hectoliters of wine made in Poland, although that number has been gradually growing. The most popular appellations in Poland are German (Traminer, Riesling Regent, Rondo) and French (Pinot noir, Seyval blanc). But production in Poland is hampered by the climate, which is not conducive to making wine. In the first half of 2013, Polish wineries exported products worth €13 million mostly to China, the US and Nigeria. However that figure includes all kinds of wines, not only grape and mead varieties.

Taste test

A typical wine bought by Poles: PRICE WAR

Red, sweet wine Average price: PLN 16 Top-seller: Carlo Rossi (USA)

AVERAGE PRICE PER BOTTLE IN POLAND’S TWO LARGEST DISCOUNT CHAINS

PLN 44

PLN 18 SOURCE: LIDL, BIEDRONKA

Changing tastes Discount stores’ strategy to educate customers seems to be working – the rise in wine consumption in Poland over the last few years has been significant. Even in 2009 the majority of wines sold in the country were low-cost fruit wines bought by poorer consumers looking for cheap alcohol. Now the trend has switched, with Poles buying more still, grape wines, that can be bought at competitive prices (the average Pole spends PLN 16 on a bottle of wine). The change in drinking habits can be seen in the wine’s origin. In 2001, 20 percent of wine sold in Poland was imported from Bulgaria, while now the most popular wines are from the US (over 9 million liters sold per year). Most other popular wine countries, such as France, Italy and Chile sell around 5 million liters annually each (out of some 90 million liters combined). u

Wine country

Price war

Average price per bottle PRICE WAR in Poland’s two largest AVERAGE PRICE PER BOTTLE IN POLAND’S discount chains TWO LARGEST DISCOUNT CHAINS

PLN 44

PLN 18 SOURCE: LIDL, BIEDRONKA

thing of the past,” he said. “To compete on price, restaurants and wine shops often import wines on their own. Prices in Germany can be 30 percent lower than in Polish distribution chains, so many are cutting out the middle man.” Budyta expects that most importers will open their own wine shops to offload stock, and that producers will begin selling the same wine under two different brands: one for discount retailers and one for specialist shops. But his confidence is not shared by others. According to market research company Dun & Bradstreet, 46 percent of Polish wine sellers are in poor financial condition. In the wholesale sector the figure is similar, at 44.6 percent.

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

observer interview

Straight shooter

73, Polish economist Stanisław Gomułka shows no signs of slowing down. Nor has he tempered his strong views on how to make the Polish economy work. As one of the architects of Poland’s historic reforms launched in 1989, he lost the philosophical battle to hold down pensions as the nation entered the uncharted waters of the free market – a factor he says has hampered economic progress ever since. While sanguine on Poland’s general economic progress, he’s been unimpressed by the fiscal performance of Prime Minister Donald Tusk’s government, and says the country urgently needs better universities and research centers and an aggressive push to attract more foreign direct investment. Having retired from the London School of Economics in 2005, after 35 years, Gomułka is currently chief economist at the Business Centre Club and is a frequent presence on the conference and seminar circuit. In the meantime, he’s built a vast archive from his time as adviser to the government in 1989-2002 – a 3,500-page treasure trove he recently handed over to the University of Warsaw library. A former deputy minister of finance, Gomułka has also served as a consultant to the IMF, the OECD and the European Commission, and worked as an adviser to the Russian government in the 1990s. He spends his spare time gardening at his residence near Warsaw, and visiting his grandsons in London.

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

WBJ Observer: You were part of the team that prepared the economic transformation plan for Poland after the collapse of communism. What made you believe then that the plan would work? Stanisław Gomułka: Somehow I didn’t have any doubt that it would work. The most important thing was total agreement among the people regarding the collapse of the old economic and political order. The former communist elite also agreed the system had failed and so they collaborated with us in the transformation to a new one. This widespread agreement led to the general opinion that in Poland we had to have the economic system which had won the competition, namely a marketbased system. I expected the human cost to be quite significant. In this I differed from most of our foreign advisers and institutions. Schumpeterian creative destruction was unavoidable under the large impact of two inevitable developments: a massive change in relative prices and a destruction of the close trade links with the former Soviet Union and its satellite countries.

Image: Bartosz Bajerski/WBJ

Interview by Remi Adekoya

Tusk “Mr has allowed

the budget deficit to swell significantly.

”

Stanisław Gomułka

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

observer interview

It was clear that a substantial part of the old capital stock would not survive the competition and be put out of use, many state firms would have to be initially downsized or even closed down. On balance I thought it would be a success if in the initial phase of transformation unemployment was limited to 20 percent. What was unclear to me was how fast the new private sector would emerge. The biggest surprise was how quickly it appeared in Poland. In the years 1989-1992, some 2 million new companies were established. I was also an adviser to the Russian government at the time and there it took some 1012 years for a private sector of that size to emerge. Reforms in Poland were also more acceptable thanks to the fact that state companies were not run by ministers but by supervisory boards which were largely appointed by the Solidarity trade union. In no other country in the CEE region did trade unions have such power. So you were confident Poles would cope? Yes, but not entirely confident that the cost would be low enough for people to accept the results. However, we had no alternative. We knew that the cost of transformation would not be borne by foreigners. We asked the West to reduce our debt. I was part of the team that negotiated a 50 percent debt-relief from Western governments and banks. This was probably the most we could achieve then. Looking back now, is there anything you would have done differently? Yes, the government then was too generous toward pensioners. After communism collapsed, pensions increased to more than 70 percent of the average wage, up from about 50 percent in the old system. The government’s inability to keep that part of the reform under control had a devastating impact on public finances, the repercussions of which are still being felt today. One of the first confrontations we had was when the boss of FSO, an automotive company in Warsaw, wrote in the early 1990s to the finance minister saying if they didn’t receive immediate help, the company would go bankrupt and half a million people would lose their livelihoods. We knew if we entered into such negotiations with one factory, there would immediately be others asking for the same. So our answer had to be a strong no. And it was.

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How did the Polish economy do in 2013 and what do you expect for this year? There was a strong slowdown but no recession in 2013. The growth of net exports kept things going last year even though domestic demand was weak and even declined for several quarters. Poland’s economy grew at an annual rate of about 1.5 percent for the whole year. This is not very impressive, especially for an economy which is catching up to the more developed economies. Poland’s GDP growth rate is sometimes compared to those of Germany or France, but such comparisons are not appropriate. Poland should be compared to Turkey, Brazil, India or China, as their emerging economies are all at a similar level of development, trying to take advantage of the catch-up factor in their pursuit of the most

“

We need better universities, more efficient research centers, increased FDI.

”

developed countries. Such a comparison would show that Poland is not doing as well as those countries. Still, in the last two decades, Poland has grown in terms of GDP per capita at 4 percent a year while the most developed European economies grew at about 1.5 percent. In those twenty years the speed at which we were catching up was quite rapid. In 1990 our GDP per capita was about 30 percent of West Germany’s level, while today that figure stands at about 50 percent. The question is whether that pace of catching up can be maintained over the next two decades. Do you agree with those who expect faster GDP growth this year? Yes, data which we saw for Q3 and Q4 of 2013 indicate that a growth rate of 3 percent is possible this year. What will drive that growth? Domestic demand will play a much bigger part than in recent quarters. In Q3

2013, after 5 quarters of decline, domestic demand started to grow at roughly 0.5 percent on a yearly basis. Investment also started to grow, though very modestly, at something like a tenth of the standard rate of growth. This indicates that the room for improved performance this year and next is substantial. Economic conditions are improving in Germany and the UK, so this and low wage costs should help our exports. At this early stage of recovery, one should also expect a contribution to growth from investments in inventories. Wage pressure will be modest, hence inflation will remain low and so will interest rates. This should help to sustain the growth recovery process. Talking about wages and consumption, even though the rate of productivity is rising in Poland by about 5 percent a year, according to Eurostat there has hardly been a budge in real wage growth. So where are consumers to get the money to spend? Bank loans. Isn’t it paradoxical that governments are being told to live within their means whereas households are encouraged to borrow money in order to keep consumption demand going? There is a big difference between Poland and Western Europe in this respect. In the years before the crisis in 2008, monetary policy in Poland was fairly restrictive. The ratio of total private credit to GDP was low. Mortgages represented only 10 percent of our GDP whereas in the US they were about 100 percent of GDP. As a result, in the years 2008-2009 there was no crisis in the financial sector in Poland. Today, the debt of our household sector in relation to GDP is still relatively modest. At what level is it exactly? At roughly a third of our GDP. This is quite modest by western standards, especially as low interest rates mean that the cost of servicing these loans is low. So what is a safe debt threshold? In advanced countries households are much more indebted than in Poland. The total public and private debt in those countries stands at some 200 to 400 percent of GDP, more than twice the level in Poland. The maximum level of our household debt should be, in my estimation, around 60

percent of GDP. It is now roughly 35 percent, so there is still room for an increase. Of course, if we were to have a sharp increase in interest rates, then the loans would be more costly to service and we would probably see an increase in nonperforming loans. But we are expecting no such rate hike.

Not for unemployment benefits. Only a few of those out of work get unemployment benefits. But many are registered as unemployed so they can have free public healthcare. That is the actual benefit they are after. Still, the 10 percent Eurostat unemployment rate in Poland is high in comparison to many European Union economies.

At the height of the last boom in Poland, 2007-08, the official unemployment rate was roughly 10 percent. Today it is over 13 percent. On what basis is the government assuming an improvement in the labor market when no one is expecting a boom this time around? The Eurostat figures, which show people actually out of work and not just those registered as unemployed, have the unemployment rate in Poland lower by about three percentage points than the official Polish figures.

Even though most of them are currently in stagnation while Poland apparently isn’t? That’s right. Clearly, the so-called natural unemployment rate in Poland is too high. There are big cities, forming to the socalled Poland A [the west of Poland, which is significantly more developed economically than Poland B due to political, and cultural distinctions linked to the country’s history], where the unemployment rate is low and comparable to those observed in developed Western countries. But we also have the so-called Poland B, where the unemployment rate may in some areas exceed 20 percent.

Are you saying people who have jobs in Poland apply for unemployment benefits?

This despite the fact that over 2 million Poles emigrated after Poland joined the EU. If they had stayed, the unemployment picture would look much worse. Yes, that’s true. Unemployment would be worse now if not for that factor. What is interesting is that young people from Poland B often find it easier to get jobs in London than in Warsaw. In Warsaw there are substantial barriers for them, such as high rent rates. Warsaw rent rates are hardly higher than those in London… Yes, but in London you can rent a room and share it with several people. You don’t have that kind of flexibility in Poland. Also, London wages are definitely higher than Warsaw wages. However, in the future, the government should try to do something to bring back those Poles, especially as we are facing a serious decline in our working population. There should be a better utilization of the workforce that exists, by reducing the barriers to employment between Poland A

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W B J O B S ER V ER • f e b r u a r y 2 0 1 4

observer interview

and Poland B. The supply of workers may also be increased by the injection of some immigrants from Slavic countries. Immigrants tend to be more skilled than average, more mobile and some of them are quite entrepreneurial. Every year 500,000 people graduate from Polish universities. But in 2012, fewer than 70,000 net jobs were created by the Polish economy as a whole. What has to happen for more workplaces to be created, especially for graduates? The creation of new jobs is related to investment and investment has been really modest in Poland in recent years. Investment as a percentage of Polish GDP has been in the range of 15-25 percent in the last two decades. In China, it’s been about 40 percent. In Japan, South Korea and Singapore, it’s also been much higher than in Poland, as national savings and investments in those countries make up 30-50 percent of their GDP. In Poland, national savings are low, one reason is the government deficit. Poland needs the fiscal deficit of the general government to be close to zero. If this were to happen, private investment should increase. What is the correlation between government spending and private savings or investments? If the government deficit is reduced, then that of itself will have little impact on private savings. But public dissaving will be reduced, so total national savings will go up. This should also permit higher investment. If, in addition, reforms made in the public sector result in reduced tax burdens, then this could encourage some people to save more. To reduce the so-called natural rate of unemployment, we need more and better vocational schools in Poland. I am advising authorities to adopt the German system of that type of education, widely considered as the best in Europe. If these structural changes take place, there could be a better match of supply and demand on the labor market. Polish government figures put the public debt-to-GDP ratio at 53 percent. However, Leszek Balcerowicz has said with the hidden debt it holds, Poland’s public debt burden is closer to 250 percent of GDP. Where do you stand on this issue?

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

It is unfortunate that in the public domain there are a number of competing definitions of the official public debt. The difference between Eurostat and Polish estimates was insignificant six years ago. But the then Finance Minister, Jacek Rostowski, started to innovate, basically manipulating figures, and now the difference is more than three percentage points in relation to GDP. The issue of so-called hidden debt is another potential source of confusion. Poland’s hidden debt is similar to that of Italy, France or Germany, where it is estimated to be between 100 and 300 percent of GDP. In Poland, it is according to some unofficial estimates about 200 percent of GDP.

“

From now on we will have to rely on our own innovative solutions to a greater extent.

”

What could be the consequences of this hidden debt? How long is everybody just going to pretend it doesn’t exist? There is a big difference between official and unofficial (hidden) debt. Official debt is internationally traded on financial markets, whereas unofficial debt is not traded. Unofficial debt is the duty of the state to meet its obligations, such as pensions, towards citizens, at some later stage. Financial markets and ratings agencies are not concerned by this type of debt. If, at some point in the future, the government has difficulty meeting its obligations, there will be no crisis involving international investors but rather a domestic crisis involving just households. One possible resolution of the crisis is to tell households that past governments were foolish, the current government cannot meet the obligations they were dumped with, and has to reduce them by appropriate legislation. Has the government of Prime Minister Donald Tusk done enough to improve Poland’s fiscal situation?

During the last six years, Mr Tusk’s government has done very little to improve things on this front. The budget deficit increased from 1.8 percent of GDP in 2007 to 7-8 percent in 2009-10. This increase was higher on average than in recessionhit euro zone economies, which often had to bail out their banking sectors. And so in much better circumstances, Mr Tusk has allowed the budget deficit to swell significantly. Much has been made of the middleincome trap threatening Poland. What can be done to avoid it? This trap will become reality if the rate of growth in Poland is not 4 percent per annum but remains at about 2 percent. At a level of some 60 percent of the average GDP levels in the richest countries, the catch-up process sometimes comes to an end. Unless something is done to support it, a country will enter the middle-income trap. For example, the Czech Republic, which is more developed than Poland, seems to have entered that trap now. So has the eastern part of Germany, southern Italy and northern England. I already noted that too few people are economically active in Poland. In Poland B, as well as in agriculture in general, there is a fairly large unemployed and underemployed labor force. Up till now Poland’s contribution to technical know-how in the world has been close to zero. We have been growing relatively fast thanks to a transfer of technology from the West, but from now on we will have to rely on our own innovative solutions to a greater extent. We need better universities, more efficient research centers, increased FDI. We need to be more integrated with the most advanced economies. Joining the euro zone would help, as it would increase competition while eliminating the exchange rate risk in trade and investment projects. Ultimately though, we should realize that we may never eliminate the gap between Poland and western Germany. The growth slowdown is ultimately inevitable for us. We could postpone it somewhat, but that would take a lot of mobilization in terms of policies, institutional reforms, eliminating the various barriers which companies now face. However, if we were to achieve a level of 80-90 percent of German GDP per capita, that in itself would be a big success. u

February 2014

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header

WITH

20 PAGES OF REAL ESTATE NEWS

HIGH Streets Warsaw’s heart beats on Chmielna FIRST IN A SERIES

EMERGING CITIES With Warsaw and major Polish regional cities maturing, developers are looking to fill office void in developing and emerging markets p. 63

p. 69

REAL ESTATE AUCTIONS 101 p. 73

Eastern appeal Three new outlet centers are scheduled to open in 2014, all along Poland’s eastern border. Is there room for more?

p. 65

Images: LHI, CBRE, Shutterstock, Skyres

2013: tough to beat After a very good 2013, with over PLN 3 billion in real estate transactions, this year there may not be enough assets to sell p. 61

PLUS:

Lipowy Office Park sold �� 56 TK picks Erbud to build mall �� 58 GTC’s Galeria Jurajska sale bid fails �� 58 Polimex won't build highways �� 60 Real estate off-limits to pension funds �� 71

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office

Sky Development to build Poznań scheme

Katowice-based developer Sky Development will construct a 1,900-sqm office project with a retail portion in Poznań, according to propertynews.pl. The company has received the land development decision for a 1,000-sqm plot on ul. Fabryczna in the city, where it wants to build the project. The scheme will comprise five storeys.

news

Office

CA Immo sells Lipowy Office Park

Images: Ghelamco, CA Immo

Citibank leases in T-Mobile Office Park

Citibank International, a shared service center of Citi Group, has signed a five-year lease for 4,600 sqm of office space in Ghelamco’s T-Mobile Office Park in Warsaw’s Mokotów district. The deal was brokered by advisory DTZ. The new tenant will move its service center into the new building in Q3 2014. T-Mobile Office Park, completed in May 2013, features 40,000 sqm of office space and is currently 80 percent leased. Citibank International is the scheme’s second tenant, after mobile operator T-Mobile moved its headquarters to the new building in July 2013, occupying 27,000 sqm of space.

Lipowy Office Park offers 40,000 sqm of office space in Warsaw’s Ochota district

nvestor CA Immo has sold its Lipowy Office Park complex for €108 million to a company named Kimberly, part of a US-listed REIT. The transaction is to be closed in the first quarter of 2014. The complex, located in Warsaw’s Ochota district, offers 40,000 sqm of office space with Bank Pekao SA as one of its major long-term tenants. Lipowy Office park was completed in 2009 and had been owned by Europolis AG until CA Immo acquired the scheme in early 2011. “The successful sale of Lipowy Office Park is evidence that we are able to sell properties at attractive prices and above book value

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

in Eastern Europe as well,” said Bruno Ettenauer, CEO of CA Immo. Ettenauer added that the sale of the complex was another step aimed at balancing the company’s asset portfolio in Warsaw, after a recent takeover of the AXA portfolio shares in Warsaw. In December 2013, the Austrian fund acquired AXA’s 49 percent stake in the “P1” portfolio in Warsaw, consisting of five office properties, thus becoming its sole owner. The sum of the transaction was not revealed, but the assets are valued at some €280 million. u

O Bk S al ERe V Ei Rm m P Ro Eb Si l E iNaT S lo

Q&A

news

Jarosław Kujawa Warsaw director Buro Happold

Jaroslaw Kujawa, Buro Happold’s Warsaw director, has more than 30 years experience as a building services engineer. He has been involved in many prestigious projects in Poland and internationally, and is a graduate of the Warsaw University of Technology, Faculty of Environmental Engineering, and a chartered engineer. He joined Buro Happold in January 2013, and was previously with WSP Group, where he was managing director and co-founder of the Polish office. Reflect back on the year since you joined Buro Happold? I see joining Buro Happold as a very positive move for my personal and professional development. It has been a very interesting year, full of new challenges and it has given me an opportunity to build excellent working relationships with new people and lead the team to spread their wings on new and exciting projects. The year has passed very quickly, which is a reflection of how busy we have been. The relationships that have grown include JEMS Architekci, Kuryłowicz & Associates or PRC Architekci among others.

Echo Investment; Plac Defilad in Warsaw; the first BREEAM Outstanding office building in Poland, in GPP Business Park in Katowice; Hala Koszyki in Warsaw; Galeria Pomorska; Alfa Centrum in Olsztyn for Balmain Asset Management; ECE’s Zielone Arkady in Bydgoszcz or Chmielna Tower Project for HB Reavis Group together with our long-term partner Benoy. Buro Happold has also been involved in a number of projects outside Poland that include the prestigious business center in Skolkovo in Russia; the Opera House in Shanghai; Library of Birmingham; Intercontinental Hotel in Prague; One Angel Square in Manchester; Msheireb Downtown Doha in Quatar and strategic consulting services for Lighting Technologies in Russia. What interesting new projects are on the horizon in coming year for Buro Happold in Warsaw and elsewhere? As part of Buro Happold’s global network of offices, our team delivers projects across central Europe, eastern Europe, Russia and beyond. The most interesting new wins in the region are: The Polish Embassy in Berlin; Hala Koszyki in Warsaw; The Museum of the Polish Army in Warsaw; highrise office developments in Warsaw that are confidential at this stage; the hockey stadium in Moscow; Hammershus Castle visitor center in Denmark; Zaryadye Park in Moscow; Moscow Agglomeration development; Glostrup Hospital Neurological Center in Denmark and a prestigious hotel development in Venice. Globally Buro Happold looks forward to a very busy and rewarding year by delivering projects such as the Penang coastal masterplan, the Louvre Abu Dhabi and the Tower at PNC Plaza in the USA.

What have been the significant challenges for Buro Happold? Buro Happold, as well as all our competitors and partners, is still operating in a very difficult and demanding market with small profit margins. The market continues to be competitive, however the main players and investors have a growing desire and appreciation for the quality of the engineers they wish to work with. From our experience these are companies such as Skanska, Griffin Real Estate or Hines to name just a few. We need to make sure that we offer and provide added value for our clients and investors. Specialised skills such as BIM allow us to differentiate and offer more than our competitors and our clients clearly see the value in this. We constantly challenge ourselves to provide optimization on projects and increased efficiency in the design process. Buro Happold started introducing technologies for integrated design and sustainable solutions to the Polish market a couple of years ago and we are now truly benefiting from this experience. We have recently been awarded Green Services Provider of the Year 2013 by Eurobuild Awards.

a highly specialized, bespoke scope. The Warsaw office has grown approximately by 30% in the last year to meet the market needs.

What changes have you seen in the company and in the market? The portfolio of our projects is growing. Our service offer has widened over the last 12 months and this has resulted in a number of commissions beyond core design where we focus on problem solving, for example peer review, technical opinions or contract engineering. In addition, we won a public competition for the preparation of the concept design for Plac Defilad in Warsaw. Sustainability continues to grow in importance and we offer

What are the most interesting projects that Buro Happold has worked on? The Warsaw office has worked on a big variety of projects from the private and public sectors. I am very proud that we have been given the privilege to contribute to the developments that significantly improve the quality of life in many cities in Poland and abroad. We can name: The Copernicus Science Centre; Warsaw Metro Station; The new venue of the Polish National Radio Symphony Orchestra, Katowice; Warsaw Skyscraper Q22 from

“ I am very proud that we have been given the privilege to contribute to the developments that significantly improve the quality of life in Polish cities. ”

How do you see 2014 shaping up? The economists say that 2014 will be full of dichotomy: on one hand the EU economy is back on the growing curve, but on the other the US Federal Reserve is going to slow down its quantative easing program, which may affect the stock market. In addition, there is a dispute in Poland about OFE and its potential impact on the planned national budget for 2014. Also, a new round of EU funding will become available for distribution. All these economic factors may influence the construction market and building industry. We expect the commercial office and retail sectors to grow. Public buildings, due to the new EU requirements, are worth keeping an eye on. The trend towards green and sustainable solutions will continue to become standard requirements for any building. We hope that the trust we have built with our clients and investors will allow us to serve a significant part of the Polish and regional market using our international potential. I would like to take the opportunity to thank all our clients and investors for the confidence they have in us and their foresight to embark on a very interesting journey with us that will not only shape individual buildings but also the built environment globally. u

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

news

Retail

GTC fails to sell Galeria Jurajska

Galeria Jurajska comprises 40,000 sqm of retail space

eveloper Globe Trade Centre has failed to negotiate an agreement to sell its Galeria Jurajska shopping center in Częstochowa. According to the company’s earlier statements, it had received a purchase offer from Heitman International LLC back in June 2013. Despite unsuccessful negotiations, the company hasn’t abandoned its plans for the scheme. “Galeria Jurajska is a very good asset. After the recent raise of share capital, the company’s financial situation is stable, but we are not excluding the possibility that Galeria Jurajska will be sold in the future,” Małgorzata Czaplicka, director at GTC, told PAP. GTC was counting on netting €45-50 million on the sale, which was to be used to repurchase the company’s bonds maturing in April this year worth some €100 million.

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

The company, however, had a back-up plan. In January, GTC’s shareholders agreed to an ex-rights issue of 31,937,298 J-series shares at PLN 7 apiece via bookbuilding. The firm’s management board said the PLN 224 million in proceeds will be used to lower the company’s debt. Meanwhile, the developer wants to keep selling off its mature and non-core assets. “We are continuing to refresh the company’s portfolio by selling maturing assets and replacing them with new developments that offer attractive yields,” said Alain Ickovics, president of GTC’s management board. In late 2013 the company closed the sale of its 40,000-sqm Galeria Kazimierz in Kraków to Invesco Group. GTC sold its 50 percent stake in the investment for €90.2 million. (The other 50 percent stake was sold by Avestus, GTC’s business partner). The entire transaction was worth €180.2 million. u

TK selects Erbud as mall general contractor

Developer TK Development has selected Erbud to be its general contractor for the construction of the Nowy Rynek shopping mall in Jelenia Góra. The scheme has been granted a building permit. The contract is worth PLN 133 million, with the center set to adjoin the city’s coach station. “The agreement with Erbud has been signed on schedule and is another milestone for the Nowy Rynek shopping center,” said Jarosław Lipiński, head of leasing and development at TK Development. The investor behind the scheme, Heitman, owns 70 percent of the project, while 30 percent will be held by TK Development. The entire scheme is valued at €55 million. The mall is scheduled to open in October 2015 and is currently 50 percent leased, anchored by supermarket Intermarché. The list of tenants to date includes: electronics store Avans, drugstore Rossman, jeweler’s Apart, footwear retailers CCC and Deichmann, fashion brands H&M, Reserved, Mohito, Cropp Town, Stradivarius, Bershka, Sinsay and House, as well as furnishings store Home&You.

Cinema City sells theaters to Cineworld

Warsaw Stock Exchange-listed Cinema City International signed a preliminary agreement to sell its movie theater business to UK sector firm Cineworld Group, the company said in a statement. Cinema City agreed to transfer the business to Cinema City Holding B.V., which will be sold to Cineworld. In exchange, it will receive £272 million in cash and a 24.9 percent stake in the

Images: TK Development, GTC

l o k al e i m m o b i l i a

entire 2013

Robyg

550

1,731

Dom Development

466

1,605

Atal

373

1,301

Polnord

401

1,096

272

941

Budimex

248

742

Ronson

154

572

Marvipol

161

552

Inpro

158

419

J.W. Construction (gross sales)

Wikana

data not available

162 Source: Emmerson

2012, while Gant was declared bankrupt at the beginning of 2014. Developers are quite optimistic about 2014 and most expect their sales figures to continue increasing, riding on the back of improving macroeconomic conditions, as well as two government initiatives, “Mieszkanie dla Młodych” (“Apartments for the Youth”) subsidy program and the state-controlled “Fundusz Mieszkań na Wynajem” (“Apartments for Rent Fund”).

Strong Q4 performance has Polnord on rebound

Developer Polnord has managed to lower its net debt to PLN 499.4 million from PLN 591.5 million, where it stood at the end of 2012. The PLN 92.1 million decrease in debt was better than the company had an-

Hospitality

Holiday Inn to open first hotel in Silesia

Polnord sales 2013 200

150

100

Companies

Treasury expects offers for PHN in March

Poland’s Treasury Ministry is counting on investors bidding for shares in real estate group Polski Holding Nieruchomości in March, Deputy Treasury Minister Paweł Tamborski said. If the price offered in a given tender appears attractive, the Treasury is prepared to sell its entire stake (almost 73 percent) in PHN, Tamborski added. The group’s asset portfolio is made up of 171 properties together valued at PLN 2.23 billion as of December 31, 2013. PHN is a holding company, with stakes in 16 companies, including Warszawski Holding Nieruchomości, Agroman, Intraco, Budexpo and Dalmor. The company debuted on the Warsaw Stock Exchange in February last year.

Source: Polnord

Most developers saw double-digit sales growth last year, with Marvipol recording the highest surge, by 83 percent. The ten WSE-listed developers together sold 9,121 apartments in 2013. Four of them exceeded the 1,000 apartment threshold. Robyg was the top seller out of the group with 1,731 units sold, 550 of which it managed to sell in the last quarter. Dom Development came in second with sales at 1,605 apartments, followed by Atal with 1,301 units and Polnord with 1,096 apartments sold. However, some developers did not fare so well last year. Wikana sold roughly 50 percent fewer apartments in 2013 than in

Sales for the

2013

November December

Developers see strong results in 2013

Sales in Q4

Developer

August

Residential developer Gant was declared bankrupt in a court ruling in early January. The company will have three months to undergo reorganization and reach a settlement with its creditors. The company could not make its debt payments, despite the maturity date of its bonds being pushed back several times. When the firm’s creditors did not agree to postpone the repayment yet again, the developer filed for bankruptcy in midOctober.

ticipated. In November last year, Polnord said it expected its net debt to decrease to some PLN 550 million by the end of 2013. However, in Q4 alone, Polnord’s debt fell by as much as PLN 82.6 million. The better-than-expected result can be mainly attributed to the developer’s good sales in the last quarter of 2013. In Q4 alone, the developer sold 401 apartments, compared to 695 in the first nine months of the year. As of December 31, 2013, the developer had PLN 245.2 million debt in bank loans. Together with the firm’s own bonds its total debt stood at PLN 555.2 million. At the same time the company had PLN 55.8 million in cash.

Residential developers sales results (number of apartments sold)

September October

Residential

Gant declared bankrupt, gets 3 months to reorganize

Apartment sales

January

buyer company. Upon the deal’s closing, Cinema City is entitled to about €14.5 million in cash plus and earnings consideration of €25.9 million, if the closing takes place in February, and of €28.9 million if it takes place in March or later. The transaction is subject to approval from the companies’ governance bodies and from the Office of Competition and Consumer Protection. Cinema City International is the largest movie theater operator in Central and Eastern Europe. It has 99 multiplex cinemas in Poland, the Czech Republic, Slovakia, Hungary, Romania, Bulgaria and Israel. After the deal is completed it will continue to be traded on Warsaw Stock Exchange. Cinema City will keep its real estate assets and lease it back to Cineworld.

news

February March April May June July

Image: Cinema City

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InterContinental Hotels Group (IHG) has signed a franchise agreement with Hotel Commercial Investment to open a Holiday Inn hotel in Dąbrowa Górnicza, near Katowice in southern Poland. The hotel will feature 160 rooms and is scheduled to open in 2015. The investment is estimated to cost some PLN 60 million, PLN 33 million of which will be financed with a loan. This will be the first Holiday Inn hotel in the area. It will be located close to the EXPO Silesia exhibition center, which houses over 50 fairs and exhibitions a year. As of September 30, 2013 there were 281 Holiday Inn hotels in Europe, with another 25 set to open within the next three to five years. u

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news

Construction

Image: Wikimedia

Polimex will not build A1 and A4 highways

The missing sections of A1 and A4 highways may be delayed until 2016

olimex-Mostostal will not complete the construction of two sections of the A1 and A4 highways, the General Directorate of National Roads and Motorways (GDDKiA) announced. The reason for dissolving the contract were major delays the company has had with the construction. “New contractors will be selected for both roads,” Krzysztof Nalewajko of the GDDKiA told PAP. Polimex-Mostostal won a tender back in 2010 to build 45 km of A4 highway between Rzeszów and Jarosław in southeastern Poland, currently 70 percent complete, and 40 km of A1 highway between Stryków and Tuszyn in central Poland. The construction of these roads will likely be delayed even further, until 2016. In December, the directorate also dissolved a contract with PolimexMostostal to build a section of S69 expressway between Bielsko-Biała and

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Żywiec in southern Poland, also due to a major delay. Last year the troubled construction firm managed to reach an agreement with its creditors, which helped save the company from bankruptcy. As of June 2013 Polimex-Mostostal had PLN 800 million in debt. The group is undergoing restructuring, selling non-essential assets and attempting to lower its debt. As Polimex-Mostostal is a key player in several major energy projects, including a PLN 6 billion power block in Kozienice, government agencies have also come to the group’s rescue. The Industry Development Agency (ARP) has bought PLN 150 million worth of the firm’s newly issued shares. On February 1 the firm is set to commence the construction of another major energy project – two power blocks in Opole for PGE worth PLN 11.6 billion, in consortium with Rafako and Mostostal Warszawa. u

who ’ s news Waldemar Olbryk has been appointed senior vice president for business development at Skanska Infrastructure Development. He will be responsible for initializing local and regional infrastructure projects. Olbryk joined Skanska Property Poland as regional director in 2008. In 2011 he was appointed managing director of the company, as the first Pole to hold this position. Olbryk is an economics graduate from the University of Łódź and holds an MBA from his alma mater and the College of Maryland. “We have been observing Poland’s growing potential for some time. Waldemar Olbryk’s joining Skanska Infrastructure Development will strengthen our presence in Poland and his experience with project development will increase our outlook for winning new contracts,” said Steve Cooper, deputy CEO at Skanska Infrastructure Development. Piotr Kaszyński has been appointed head of capital markets at Cushman & Wakefield. He will be responsible for investment sales and acquisitions in

Poland. Previously he held the position of head of retail. Kaszyński joined Cushman & Wakefield in 1998 and was promoted to head of retail a year later. He graduated from Florida Atlantic University in the US. Kaszyński has been involved in leasing space in over 40 retail schemes in Poland, including the main shopping centers in Warsaw (Galeria Mokotów, Złote Tarasy, Wola Park, Promenada, Klif, Reduta) and in other cities across Poland, such as Stary Browar and Galeria Malta in Poznań, Galeria Kazimierz in Kraków, IKEA Bielany and Arkady Wrocławskie in Wrocław, Forum Radunia in Gdańsk and Atrium Felicity in Lublin. u

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i n v e st m e n t

2013:

TOUGH TO BEAT Image: Skanska

One of the largest transactions in the office market was the sale of the Atrium 1 complex in Warsaw for €94 million

The volume of real estate transactions stood at €3.4 billion in 2013, the highest figure since before the crisis. The score may be hard to repeat

ransaction volume on the real estate market reached €3.4 billion in 2013, 26 percent higher than in 2012 when the volume came in at €2.75 billion, according to a report by Jones Lang LaSalle. “This is the highest value since 2006, when the transaction volume reached €5 billion,” Agata Sekuła, JLL’s head of retail investment CEE said. Big foreign input Foreign investors accounted for some 94 percent of total volume in 2013, with the majority of them being global funds, e.g. Blackstone, Atrium and Allianz. German investors (RREEF, Union Investment, Invesco, IVG, Allianz) came in second followed by British (LCP, Tristan Capital Partners, SEGRO) and US capital (WP Carey, Hines, KSP and Lone Star).

This year will likely see lower real estate transaction volumes than in 2013. “Last year set the bar really high and this year’s transaction volume could be slightly lower,” Michał Stanisławski, capital markets consultant at CBRE said. “Investor sentiment and their appetite is strong. The influx of capital will not go down, particularly from the Far East and the US,” Stanisławski added. According to Michał Puch, head of office & industrial investment at JLL, “Taking into account transactions already in progress, we expect that this year’s transaction volume on the Polish commercial real estate market can be close to last year’s result and reach around €3 billion.” Smaller cities There is no doubt that money is coming to Poland but is there anything left to sell?

“We have seen a number of high-volume transactions in 2013. There are few large schemes left on the market which may shift focus to other opportunities,” Stanisławski explained. With limited supply, the demand for Polish real estate may well put smaller cities on the map, particularly in the retail segment, which continues to attract capital. “Smaller cities used to be outside the scope of interest for core investors. But that has changed. Now, they are looking at them,” Stanisławski added. Yields compressing Prime office yields are currently estimated at around 6.25 percent, but could see some downward pressure throughout 2014. Similarly, warehouse yields are expected to inch down over the course of the year from their current value of a little under 7.75 percent for prime assets in the segment. Meanwhile, retail properties are expected to maintain their current yields, with 5.75 percent for the best class properties. – Beata Socha

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

INVE S T MEN T

OBSERVER PRESENTS

Prime locations in demand

The supply of office space in Poland continues to increase, raising the expectations of office tenants. Companies which value prestige put an increasing emphasis not only on the quality of space, including office furnishings and latest technologies, but also on unique locations.

Polski Holding Nieruchomości (PHN) offers prime properties in prestigious locations in the heart of the city and in the rapidly developing business center in Warsaw’s Służewiec. Its three class-A office schemes: Foksal City, Rakowiecka City and Domaniewska Office Hub offer luxury, elegance and comfort. “It is no longer enough to deliver high-quality office space. Tenants want the business address to be prestigious and to offer unique atmosphere. To meet their requirements we offer them our boutique investments under the “City” brand on ul. Foksal and Rakowiecka under the guide “Hub”surveys brand on Ourul. annual “Made in and Poland” export ul. Domaniewska,” said Rafał PHN’s management the industries, firms andKrzemień, organizations fueling board member. Polish exports: Foksal City is a small office scheme located right next to the Royal Route. Conservative and tastefully designed • Boosts Polish firmsarchitecture and products art deco interiors, equipped with modern technologies, form • Profiles fastest-growing Polish export industries an integral part of the historic surroundings. • Expert macroeconomic and legalhouse analysis Rakowiecka City is an office tenement located in the Targeted foreign firms seeking Polishclose goodsto numernorthern•part of theatMokotów district, situated ous embassies and in state institutions. This historic building has • Published multiple languages been entirely refurbished and transformed into a class-A • Distributed to subscribers of other WBJ.pl, WBJ office scheme. It Observer is equipped with spacious archive members, rooms, which magazine, Foreign chamber makes it not onlyembassies/consulates an attractive offer forabroad, companies but also for Polish Regional state institutions. development agencies, Key Polish and foreign Both investments areand welltrade connected conferences fairs. to other parts of Warsaw by public transport: subway station, tram and bus stops. Domaniewska Office Hub is a modern, seven-storey office building, designed to comply with sustainable development standards, located in the Służewiec Przemysłowy district, one of the most prominent business centers of Warsaw. The company’s strategy is to offer space tailored to the needs of the Agnieszka most demanding clients. The “City” To advertise: Brejwo, abrejwo@wbj.pl, ph.and 504 “Hub” 201 007 brands offered by PHN will be expanded by new projects in the future.

How the cake was cut

“The dominant position of retail transactions (Silesia City Center, Charter Hall portfolio, Wola Park, Galeria Kazimierz and Galeria Dominikańska) is a noticeable change compared to 2012, when the sector was outperformed, albeit slightly, by the office sector,” the JLL report said. As much as €1.32 billion worth of retail real estate was sold last year, which stood for 40 percent of the entire transaction value. “The retail sector in 2013 was dominated by prime, large volume shopping center transactions,” Tomasz Puch from JLL said.

The value of office deals stood at €1.06 billion, with the bulk of the deals concentrated in Poland’s capital. The largest transactions in the office market were the sale of the New City complex in Warsaw for €127 million and CA Immo’s acquisition of Axa’s remaining 49 percent stake in the former Europolis office portfolio, also in Warsaw, including schemes like Saski Crescent, Saski Point, Sienna Center and Warsaw Towers. In the industrial segment, the largest transaction was the purchase of 50 percent of the SEGRO industrial platform by PSP Investments. The entire segment recorded transaction volume of some €656 million.

THE DEFINITIVE GUIDE TO POLISH EXPORTS

PUBLICATION: APRIL 2014

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Multi-segment portfolio deals came in at over €280 million. Some of the biggest portfolios that changed hands in 2013 were the PointPark Properties (P3) portfolio, 50 percent of SEGRO industrial platform, and a 49 percent stake in the Europolis portfolio. There was also an increased activity on the hotel market, particularly towards the end of the year. The volume of hotel transactions was over €113 million.

Images: Starwood Hotels, CA Immo, Segro, GTC

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Emerging cities With Warsaw and major Polish regional cities maturing, developers are looking to fill office void in developing and emerging markets

Image: Developres

arsaw will see over 200,000 sqm of new office space delivered 2014, mainly in the Ochota district and the CBD area. The city already has over 4 million sqm of office stock and the undisputed top office market in the country. Warsaw’s stock is twice as big as the total modern office space in six main regional cities combined. The 2 million sqm in regional cities is still the bulk of all office stock outside of Warsaw (83 percent). The top four developing cities in terms of office space – Szczecin, Lublin, Kielce and Bydgoszcz – each with populations of 200,000-400,000, altogether offer less than 300,000 sqm. This goes a long way in illustrating how little space there is in cities with populations below 400,000 in Poland. This is

about to change, however. “Cities like Szczecin and Bydgoszcz already have shared service centers with foreign capital involvement. New companies in the BPO/SSC sector are also looking for locations outside the main business centers of the country,” said Monika Dębska-Pastakia, a partner at Knight Frank who also chairs RICS Poland. Construction activity in these cities is very strong, particularly in Szczecin, northwestern Poland, where 29,400 sqm of space was added to the market in 2013 putting the total stock at some 100,000 sqm. Bydgoszcz, located in central Poland, has also seen a major increase in available office stock, which after the 14,100 sqm was completed in 2013 now stands at 50,000 sqm. Developing cities usually have a high vacancy rate of 15-18 percent, except for

Regional office stock 5% 12%

83%

Mature regional markets (Kraków, Wrocław, Poznań, Tri-City, Katowice and Łódź) Developing markets (Szczecin, Lublin, Kielce and Bydgoszcz) Emerging markets (Rzeszów, Białystok, Toruń, Zielona Góra, Olsztyn and Legnica) Source: Knight Frank

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office

Kielce in southern Poland, where vacant space accounts for only 8 percent of the total stock. Rent rates are significantly lower than in mature markets, at €7-13/sqm/month, with the exception of Szczecin, where rent rates are close to mature regional cities, at €11-15/sqm/month. Chicken and egg There is, however, a handful of Polish cities between 100,000 and 300,000 where office construction activity is only beginning to emerge, such as Rzeszów, Olsztyn, Toruń, Białystok, Zielona Góra and Legnica. These cities altogether offer less than 200,000 sqm and have found themselves in a certain “investment deadlock.” The existing office stock seems insufficient to attract potential investors from the BPO/SSC sector. On the other hand, without more companies looking for space there, developers are reluctant to launch large-scale speculative office construction. Rzeszów, in southeastern Poland, is the only city in the group which has managed to break the stalemate. Local developer Developres is currently building a 26,000 sqm class-A office scheme there, while Irish Boxelder is planning to launch construction on several more.

– Beata Socha

Office 2014: What to expect Good rent rates “This year will bring further growth of the office segment in Warsaw as well as major regional cities in Poland. It will be another year of a tenant’s market, who will be able to choose from a number of new office projects and negotiate better rent rates. Prime investments will maintain a high level of rents, particularly small office schemes in the most prestigious parts of the city center. These schemes will attract the most demanding tenants who appreciate the prestige and the uniqueness of such locations as well as the quality of the space.” Robert Mandżunowski, CEO of LHI

As usual, location “Due to increased developers’ activity, the market is increasingly favorable for tenants. In Warsaw, the demand for office space is high. However, company preferences are changing. They are usually looking for high-quality schemes in the best locations. The smaller the city and the less popular the location, the more we will see a tenant’s market.” Joanna Mroczek, director, head of consultancy & research, CBRE

Mature cities Key data for Poland’s top office markets City

Total stock (sqm)

Vacancy (%)

Monthly rent rates (€/sqm)

Warsaw

4,071,500

10.9

17-25 (city center) 12-16 (outside city center)

Kraków

501,000

3.3

Wrocław

442,000

13.8

11-16

Tri-City

333,300

12.8

12.75-15

Poznań

263,400

14.2

13-16

Łódź

232,200

19.5

11.50-14

Katowice

218,300

9.3

13-15

12-14 Source: Colliers, Q3 2013

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Eastern appeal

2014 will be a year of outlet centers. In addition to the existing 10 in major regional cities, three new will open soon, all located in Poland’s eastern cities. But is the current rate of development wise?

Images: CBRE

iałystok, a city of 290,000, seems to be the hot spot for retail space investors this year. The Blue Ocean Investment Group (BOIG) is currently nearing the completion of its Outlet Białystok center, a revamp of the Galeria Podlaska shopping mall, offering some 13,000 sqm of retail space. Meanwhile, Outlet Center Retail Management, part of ADV POR Property Investment, is developing its own 14,500sqm outlet scheme in the city, due to be completed at the end of 2014. And this is just the outlet segment. Białystok already has two large-format shopping centers, with strong emphasis on the fashion segment: Galeria Biała and Galeria Alfa. One more shopping mall, Galeria Jurowiecka, is currently under construction in the city center and is scheduled to deliver 25,000 sqm in Q3 2014. These developers are looking to capitalize on the city’s location, just 50 km away from the Belarusian border. Eastern wall “Statistical data show that customers from Russia and Belarus spend an increasing amount of money in Poland. If you look at cars parked on mall parking lots, you will see than many of them are

Outlet Center Lublin will be the first outlet scheme in the city. It will deliver 12,500 sqm of retail space with 100 stores

from Poland’s eastern neighbors,” said Małgorzata Gęca from CBRE, which is the leasing agent for the scheme. BOIG is also counting on cross-border trade. “Outlet Białystok will become one of the most interesting shopping destinations for the entire region, including customers from Belarus, Lithuania and Russia, who already make up a large portion of the footfall in Białystok’s shopping centers,” said Tomasz Rydlewski, deputy CEO of BOIG. Lublin too Another city in eastern Poland, Lublin, with a population of 350,000, is also seeing a major retail expansion. Atrium’s Felicity mall, due to be completed in Q1 2014, will offer 74,000 sqm, while the Tarasy Zamkowe shopping center, with 37,000 sqm of GLA, will be delivered in October this year. The two new malls will altogether feature nearly 300 stores, many of them housing fashion brands. The expected slew of new retail space

has not discouraged investors. Outlet Center Retail Management is scheduled to deliver 12,500 sqm of retail space in a new scheme, Outlet Center Lublin in Q3 2014. Poland now has 10 outlet centers, with the Białystok and Lublin projects bringing the tally to 13. “Currently, the outlet market is quite well-developed in major Polish cities. We have at least one outlet center in each regional city, while the Warsaw agglomeration has three at present,” said Agata Sekuła, head of retail investment CEE at Jones Lang LaSalle. And . . . Toruń The three new schemes scheduled for 2014 are by no means the end of the pipeline. BOIG is already working on another outlet, located in Toruń, central Poland. In 2015 the developer is set to deliver 13,500 sqm of GLA in its Outlet Toruń project, right next to a new 10,000-sqm retail park, also under construction.

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Poland’s outlets

Warsaw

Gdańsk Center

Investor

GLA (sqm)

Fashion House Outlet Centre Gdańsk (Szadółki)

Polonia Property Fund II

16,400

Year completed 2005

Center

Investor

GLA (sqm)

Year completed

Factory Warszawa Ursus

Neinver

13,500

2002

Polonia Property Fund II

17,300

2005

Neinver

19,800

2013

Fashion House Outlet Centre Warsaw (Piaseczno) Factory Warszawa Annopol

Szczecin Center

Investor

GLA (sqm)

Year completed

Outlet Park Szczecin

Echo Investment

24,200

2012

Center

Investor

GLA (sqm)

Year completed

Outlet Toruń

Blue Ocean Investment 13,500 Group

Toruń

2015

Poznań Center

Investor

GLA (sqm)

Year completed

Factory Poznań (Luboń)

Neinver

14,800

2007

Białystok Wrocław Center

Investor

Factory Wrocław Neinver

GLA (sqm)

Year completed

13,800

2006

Łódź Center

Investor

GLA (sqm)

Year completed

Ptak Outlet (Rzgów)

Ptak

27,000

2012

Investor

GLA (sqm)

Year completed

Outlet Białystok

Blue Ocean Investment Group

13,000

H1 2014

Outlet Center Białystok

Outlet Center 14,500 Retail Management

Q4 2014

Lublin Center

Investor

GLA (sqm)

Year completed

Outlet Center Lublin

Outlet Center Retail Management

12,500

Q3 2014

Kraków

Sosnowiec

Center

Investor

Fashion House Outlet Centre Sosnowiec

Polonia Property Fund II

GLA (sqm)

Year completed 2004, 17,000 expanded 2008

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Center

Investor

GLA (sqm)

Year completed

Factory Kraków

Neinver

22,000

2011

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Until now, Poland has seen on average one or two new outlet centers open their doors per year, with a gap in the 20082010 period. Why are so many interested in building outlets this year? Can the market absorb a 30 percent supply bump? BOIG seems confident they will find tenants interested in leasing their new space. “Rent rates are much lower in an outlet than in shopping malls and their tenants often earn much higher revenues than those in regular malls, despite selling at 30-70 percent discounts,” said Rydlewski. Crisis-driven Interestingly, outlet construction seems to have picked up since 2011, with the construction of the 22,000-sqm Factory Kraków, while 2012 saw the delivery of two outlet centers: the 24,200-sqm Outlet Park Szczecin and the 27,000-sqm Ptak

r e ta i l

Outlet in central Poland. Last year, despite ongoing lackluster retail figures, a third outlet center was added to the Warsaw market, Neinver’s 19,800-sqm Factory Warszawa Annopol. “The market for outlets develops even more quickly in a crisis environment, when customers become more price sensitive,” Sekuła explained. Price sensitive – yes, but not insensitive to fashion. “Poles are becoming increasingly brand aware, which means that there are fewer customers looking to buy unbranded clothes these days. An increasing number of consumers want to buy branded apparel but still cannot afford the most recent collection,” Sekuła said. What makes outlet centers even more attractive in the eye of the investor is the conversion rate, typically much higher than in shopping malls, which means that a person’s visit converts into much more

cash for outlet center stores. Also, “outlets have much larger catchment areas than shopping centers. People are willing to drive longer distances to get to an outlet center, which is seen more as a destination,” Sekuła explained. The fact that Belarusian customers already cram in to long-distance coaches and flock to do their shopping in Białystok on a regular basis makes a strong argument in favor of building outlets in the city. Too soon? There are skeptics, though. “We believe there is still potential for an outlet somewhere around Warsaw but for more of them to appear we’d need some good outlet operators to enter the Polish market,” said Anna Malarczyk-Arcidiacono, managing director at Futureal. MalarczykArcidiacono thinks it’s still too soon for

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more outlets, because people are still not wealthy enough to shop for luxury brands, even at bargain prices, and there are too few operators to fill the space. “When we look at Western European outlets, we see that the majority of brands operating there are the likes of Armani, Gucci, Lacoste, Ermenegildo Zegna,” Malarczyk-Arcidiacono said, adding that these upmarket brands in Poland do not have enough merchandise to supply outlets. Moreover, leftover items from recent collections are not the way to go. In Germany, Italy or France, outlet stores carry collections dedicated to outlets. “An outlet store is not a poorer quality store where the scraps unsold in a regular store are sent and sold at a bargain. Hilfiger, for instance, makes its own collections dedicated specifically for outlets, and it simply sells them at different prices than at its high-street stores,” Malarczyk-Arcidiacono explained.

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Merchandise shortage is not necessarily an insurmountable obstacle and many outlet space operators have already learned to deal with it. “About 60 percent of the merchandise in Polish outlets comes from Poland, while the remaining 40 percent comes from Italy, Germany, Holland etc.,” said Brendon O’Reilly, managing director of Fashion House Group. “If you only took the merchandise surplus from regular stores and wanted to sell them at outlet centers, these stores would be completely fragmented, there would be nothing to buy. If you don’t have any jeans, and you need them in your store, you bring them in from abroad,” O’Reilly added. So yes, maybe the current outlet construction level is akin to hype, but there is definitely some market up for grabs in eastern Poland. The question is who will come out on top and who will have to cut – Beata Socha their losses?

The Blue Ocean Investment Group, scheduled to open its Outlet Białystok in the first half of 2014, hopes to draw shoppers from Belarus, Lithuania and Russia

Image: BOIG

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h i g h str e e ts

The High Streets: ul. Chmielna First in a series

oles are not particularly outdoorsy people. It’s hard to blame them given that up to seven months a year, temperatures drop below freezing. Yet they do love the shopping experience and are no strangers even to outdoor shopping. Even in the cold of winter, Varsovians flock to the capital’s top meeting places. Located in the very heart of the city, ul. Chmielna has seen a long transition to being one such destination. It has a pretty impressive catchment area, with 10,500 people living and 83,000 people working within a 10-minute walk of the street, according to a study by Millward Brown. Extend that to a 15-minute walk, and you get 22,500 residents and 175,000 people working in the area. The same study has shown that as many as 12 million people visit ul. Chmielna each year, more than half of whom say they come to shop. Its visitors are predominantly young, with the 20-39 age group making up 63 percent of all the pedestrians on weekdays and 73 percent at the weekend. It is also a highly “feminized” street, particularly at weekends, when 73 percent of all visitors are female. u

Foot traffic: Where they go on ul. Chmielna 100

* clothing, sportswear, children’s clothing ** mobile phones, tablets, laptops

80 60 40 20

r he

e nc

cy In

or st

ian

tic

vic

or tw

ile

Source: Millward Brown

ile

vic

tri ile

nic

tro ec

oc Gr

The most recent development on ul. Chmielna added 3,800 sqm of office space and 1,700 sqm of retail space

hin

Image: LHI

‘A key location for new-inner city retail investments’ “Chmielna is one of Warsaw’s main high streets. It is an exclusively pedestrian area, connecting ul. Marszałkowska and ul. Nowy Śwat. Together these streets form an inner-city retail cluster. Many tourists and young people frequent the street. Its offer is mainly gastronomy – restaurants,

cafes and bars, followed by popular clothing and accessories brands such as Tatuum, Orsay and Vero Moda. It is noteworthy that ul. Chmielna also features many small stores run by local merchants. The street has seen several positive changes over the past few months. The Chmielna 25 office/

retail scheme has recently been delivered. Towards the end of 2013 children’s clothing and toys chain Smyk opened its flagship 1,600sqm store in the building. Both these events show ul. Chmielna’s potential for further development as one of key locations for new inner-city retail investments.” u

Edyta Potera, national director Retail Agency, Jones Lang LaSalle

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

h i g h str e e ts

Getting around From coffee to couture in the city center

MARSZAŁKOWSKA

WARS

SAWA

Sioux

Loft

Pixel

Bordo

Yves Rocher

AmyGee Green Cafe Nero

Coffee Heaven

Calzedonia

Atlantic cinema

CK Oberża

Goldmark

Bubbleology Zielony Kot

Wzorcownia

KeeKaa bags

Chmiel Cafe

Triumph

Smyk

Intimissimi Renato Nucci

ZG OD A

Fendo

The Pictures

InMedio Subway Grycan Plus

Sphinx

A ALN SZPIT

CKA BRA

ries 27

Tatuum Twoje Soczewki Hiker Thomas LiParie Cukiernia Pawłowicz Cevap Parfois Tbilisi Wine store Cukiernia Sowa Karmello Malinowe Obcasy Thomas Charms Minus G. Edgaro Furs Elizabeth Ryłko Chillout Factory Równonoc Aroma Espresso Vero Moda Rossmann Douglas Orsay

Dedalus books

Cactus Ice Cream

‘A true European high street’

Why did LHI choose ul. Chmielna as the location for its investments? Chmielna is an exceptional location with its long tradition as a place of trade and services. It is the only connection between ul. Marszałkowska and ul. Nowy Świat, with as many as 12 million people visiting it each year. We believe this place has tremendous investRobert Mandżunowski, ment potential. CEO of LHI We are pioneers on ul. Chmielna but we believe others will soon follow in our footsteps. I’m convinced that in a few years ul. Chmielna will become a true European high street. One thing that needs to be dealt with is the ever-present cars, which shouldn’t be here at all. Chmielna is a pedestrian area but there are still cars driving next to people walking. How is the commercialization going for your latest

Chmielna was a popular meeting place for Varsovians as far back as 1920s

investment: Chmielna 25? The building is already 50 percent leased. Similarly to our previous investment, Nowy Dom Jabłkowskich, Chmielna 25 is garnering a lot of interest. What are your plans for ul. Chmielna? We’ve been working on future projects on ul. Chmielna for three years now. It is a difficult and time-consuming process. There are many

Dining and clothing Organic Farma Zdrowia

Gastronomy Mela Verde Cepelia InFashion Jan Kielman Ars Christiana Lilian Taurus Styloskop Stara Mydlarnia BubbleTea 4Eyes Luka Bandita Town Burger

Recently . . .

ul Chmielna retail units by category Vacant units

JULIANA TUWIMA

Clothing, footwear and accessories Health & Beauty

34%

35%

11%

Jewelery & accessories Multimedia Groceries Household goods and accessories Services Banks Other

27%

NOWY ŚWIAT Source: Jones Lang LaSalle, 2013

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

legal and logistic problems to overcome. We need to build relations with the owners, property managers, residents and investors. I’d like to launch one of these projects this year and another one in 2015. We are also interested in developing the second row of buildings on ul. Chmielna, but for this we need to work with city authorities, which makes the process much longer. u

Chmielna 25 delivered 3,800 sqm of office and 1,700 sqm of retail space in late 2013. Retail segment: Mainstream brands and local shops, smaller shops. Top tenants: Smyk Atlantic cinema Douglas Triumph Orsay

Image: from “Warszawa nieodbudowana. Lata Dwudzieste” by J.S. Majewski

l o k al e i m m o b i l i a

o keal e mi m l o klal im o bmi ol b i ai l i a

v emst i n vienst e nmte n t

Real estate may be off limits to Polish pension funds, but foreign funds have invested in projects such as Galeria Kaskada in Szczecin

No real estate for old men Poland is one of few countries where pension funds cannot invest in real estate directly, much to the chagrin of their managers, and pensioners

Images: ECE Projektmanagement

ll over the world pension funds look for safe and stable forms of investment. Despite real estate taking a plunge in many parts of the world, it is still far safer than the stock exchange. And with record low interest rates both in Poland and the EU, real estate is a pretty lucrative opportunity compared to treasury bonds, which soon will also be off limits for Polish pension funds (OFEs) anyway. Japanese pension funds, for instance, now account for 14 percent of over ¥10 trillion (roughly $96 billion) in private real estate funds, a marked increase from 4.8 percent in 2006, according to data by Japan’s Association for Real Estate Securitization. As many as 43 percent of Japanese pension funds have some real estate involvement, compared to 31 percent in 2009, according to another ARES survey. Many European pension funds have also

taken to real estate, particularly in Finland and Portugal, where pension funds’ direct investment in the real estate market is at 11 percent and 12.2 percent respectively, according to data from Lion’s Bank. A strong asset Even though in the trough of the crisis it seemed that the Polish real estate market might go underwater, it managed to get through relatively unscathed. The Warsaw Stock Exchange’s bluechip WIG 20 index dropped by over 66 percent between October 2007 and February 2009, when it started to recover some of that loss. Meanwhile, residential real estate, which was hit the hardest among real estate segments, devalued by 27 percent in its five-year period of decline in 2008-2013. Commercial real estate is even more attractive for major long-term investors. According to data from Knight Frank, the expected yields in Poland’s office segment

has decreased from 7.25 percent in 2009 to 6 percent. This change, with all other conditions unchanged, makes the real value of Warsaw office schemes some 21 percent higher than five years ago, according to Lion’s Bank analysts. Up for grabs Unsurprisingly, European and US real estate funds, with high pension fund involvement, have been actively pursuing Polish real estate for years. The ECE group holds several retail schemes in its portfolio, including Galeria Bałtycka in Gdańsk, Galeria Krakowska in Kraków and Galeria Kaskada in Szczecin. British Resolution Property, originally founded in 1998 and backed by pension funds, private equity investors and major US foundations, is also looking for returns in the Polish real estate market. In 2010 it purchased Galeria Pomorska

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

l o k al e i m m o b i l i a

i n v e st m e n t 12 15

2.5

6,000

Poland

Israel

Poland Poland

Spain

Belgium

Spain Spain

Czech Republic

Israel Israel

Denmark

Czech Republic Czech Republic

Netherlands

Belgium Belgium

Italy

Norway

Germany

Netherlands

Denmark

Austria

Sweden

Canada

Australia

Finland

Germany

Italy

Norway

Sweden

Austria

Canada

Australia

Source: Lion’s Bank

2012

Netherlands

2011

2010

Denmark

2009

2008

2007

2006

2005

Germany

2004

Italy

2003

Norway

Sweden

Austria

Canada

Australia

4.0 3,250

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2.0 2,500

Poland

Spain

Israel

Belgium

2007

Czech Republic

2006

Netherlands

Denmark

3.0

2,000

2008

2009

2010

institutional investors, such as funds, to use the so-called ‘occasional lease,’ which makes leasing residential property much safer for owners,” Turek explained. Occasional 2.0 lease lets landlords evict tenants that aren’t paying in a matter of 3-4 months instead of years, as used to be the case before. “This instrument guarantees owners stable returns from residential investments, at 4-5 percent net a year,” Turek said, adding that “residential property is also constantly increasing in value, at 1-2 percentage points above inflation. Transaction prices for new apartments in Poland’s”10 biggest cities 2012

2011

2010

2009

2008

2007

2006

2005

2003

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

2004

2.5

Source: Lion’s Bank

Residential opportunity The opportunity that residential real estate offers, however, missed 2009 2010 has not been2011 by the government. State-controlled

2011

2012

2013

1,000

Source: NBP, WSE

1,750

Transaction prices for new apartments in Poland’s 10 biggest cities

2012

2011

2010

2009

2008

2007

4,000

3,000

2008 2006

WIG 20 index

Transaction prices for new apartments in Poland’s 10 biggest cities

Residential market vs. stock exchange

5,000

2.5

2005

Switzerland

A stable investment

3.5

6,000

2004

Finland

Portugal

0 3.0

3,000

2003

Switzerland

2.5

2.0

3.0

3 3.5

4,000

2007

Finland

4.0 6

3.5

2006 2.0

4.0

3.5

5,000

4,000

Average real estate direct investment of pension funds in 24 OECD countries (%)

5,000

Pension funds’ direct investment in real estate (%)

Portugal

4.0

2,000

Around the OECD 6,000

Around the world

Switzerland

4,000

Germany

Italy

Norway

Sweden

Portugal

Interested? The question is – if permitted, would they be interested? “With 100 percent certainty – yes,” Turek said. “A new law in force since 2014 allows Austria

Canada

Australia

Switzerland

Finland

Indirect investment With so much working in favor of Polish real estate, why are Polish pension funds not pursuing it? The answer is simple – they can’t. Polish law, which regulates their scope of investment, does not allow them to invest in real estate directly. The reason for this is probably not ill will, but simple oversight. “If you introduce laws on OFEs in such a hurry, it’s impossible not to miss some things,” said Bartosz Turek, an analyst at Lion’s Bank. OFEs can, of course, invest in the market indirectly by investing in funds with real estate involvement or in debt securities issued by real estate funds. But direct involvement is prohibited. According to estimates, Polish pension funds’ indirect investment in real estate may be up to 1-2 percent. But no official statistics are available.

Portugal

in Bydgoszcz, a 20,000-sqm scheme, for €50.75 million. In 2013 the fund launched construction on a 10,000-sqm extension with €55.8 million financing from pbb Deutsche Pfandbriefbank.

WIG 20 index 4,000 lender BGK is working on establishing an “Apartments for Rent Fund,” which will purchase entire apartment blocks with the purpose of renting them out. 3,250 Furthermore, the government has said that the fund will look for a secondary investor, which means it wants to sell the fund once its asset portfolio is 2,500 up and running. “All that remains then is cutting off the coupons and pension funds would be very interested in that,” Turek said. 1,750 Who then WIG will20buy index the “Apartments for Rent Fund” once it’s up for sale? “Prob4,000 ably another foreign investment fund,” Turek said. Apparently, Polish pension1,000 ers are just not meant to benefit from it. 2012 2013

- Beata Socha 3,250

2,500

l o k al e i m m o b i l i a

pr o p e rt y au c t i o n s

Auctions

101 Absolute auction – when the property is sold regardless of the price reached during bidding. These are perceived by Poles as very risky. Sellers are afraid they might not get a price they would be satisfied with. In the UK and other countries where auctions have been commonplace for centuries, these are quite popular. Interestingly, these auctions usually result in the highest overbids, as buyers are certain that the property will be sold here and now, which provides them with an incentive to move their limit price. In extreme cases, transaction prices are higher than offered prices. Last year, the Yukos Oil office building was sold with a 2,000 percent overbid. Reserve price auction – the most common type of auction, where the property is sold if the reservation price is reached. The reservation price is kept secret from the bidders, only the offerer, the auctioneer and the person responsible for preparing the offer know it. Unfortunately, in Poland the reservation price is often set at the opening price, which makes it unattractive for bidders. The whole idea of this type of auction is to make the buyers look for the reservation price, as is the case at Christie’s auctions where the reservation price is somewhere between the offered price and the opening price. Sometimes, the reservation price is not reached. But the seller can still try to negotiate with all the offerers a so-called “post-auction sale.” The seller lowers his expectations and often meets the buyer half-way. Seller’s discretion/caveat auction – this is when the seller can reject the highest offer they receive at the auction. This is the least effective and the least used type of auction, only suitable for very rare properties, whose market price is impossible to determine. Like in the case of old railway stations, which Polish Railways PKP is now selling all around Poland. The appraisal of these properties is extremely hard and depends greatly on the zoning plan and what the buyer wants to do with the building, like turning an old water tower into a hostel, for instance.

Image: Shutterstock

Public auction – accessible to anyone who registers and places a bid bond. A bid bond is a guarantee that the buyer will go through with the sale. It’s not a big sum, about PLN 5,000 to PLN 10,000, a small fraction of the price. Restricted-access auctions – only selected people and companies are invited to this type of auction, the procedures are also slightly different. The bid bond is also usually set higher, at 10 percent.

Going once, going twice . . . A

uctioning is relatively uncommon in Poland. Usually it involves works of art or pedigree animals, such as horses. But real estate auctions? These are still predominantly associated with mortgage foreclosures and repossessions. Meanwhile, an increasing number of developers and individuals decide on this form of sale through auction houses. Golden opportunity Buying an auctioned apartment can be nothing short of a golden opportunity, provided you can keep your cool while bidding. Let’s consider one of hundreds of offers on a court receiver’s website. The asking price on a 56-sqm two-room apartment in Ursynów is set at PLN 290,000, which translates into a little over PLN 5,100 per sqm. Meanwhile, comparable apartments in the same area rarely sell below PLN 9,000 per sqm. People who buy on foreclosure auctions are often speculative investors, looking to either flip the property quickly at a 10-15 percent profit, or hold on to it and resell when market conditions improve. Naturally, there are some limitations to purchasing real estate through auctioning. You have to place a bond on the auction, so you need at least some front money. However, with the price on an auctioned apartment, say, 20-30 percent

lower than on the regular market, you can always find someone interested. Market forces at play But why would an apartment owner with no looming foreclosure even consider selling his property through an auction? For individuals, this can be the quickest way of swapping a piece of real estate for cash, which is something to be considered given that the average time an apartment remains listed is three months, with many ads over a year old. And there is also the advantage of the venue. With a real estate agency as the intermediary, the seller bides his time waiting to receive a single offer, while buyers have plenty of time to research, compare and negotiate. At some point you want to offload the property so badly that you are tempted to cut your losses and take whatever the buyer is offering. It is no wonder then that transaction prices are usually 12-20 percent below the asking price, according to NBP data. At an auction, the tables are turned, in a way. It is no longer one buyer browsing through thousands of offers, but rather several bidders sitting next to one another, all of whom came to buy the same piece of property. And the results can be staggering.

–Beata Socha

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

l o k al e i m m o b i l i a

pr o p e rt y au c t i o n s

Can you purchase an auctioned apartment with a bank loan? Yes. The auction house makes all documents available to the interested parties so they can check if their bank will finance the purchase. It is somewhat reversed to what we see on the traditional market, where first you pick the property, sign a pre-sale agreement and then go to the bank to see if you can afford it.

On the block

INTERVIEW: Przemysław Wojtysiak is vice-president of Emmerson Auction House, which is only one of two auction houses that deals in real estate.

WBJ Observer: What kind of properties do you sell at auctions? Przemysław Wojtysiak: Real estate is a specific kind of product, because it is repetitive. We try to look for interesting, unique properties, for instance with one-of-a-kind floor plans and interior design. Manor houses are unique by nature, but apartments usually are not. Our last auction was entirely based on developers’ offers. What does a typical auction look like? It all depends on the auction model, on how many properties are auctioned, on whether the property is unique in some way or if it’s a mass market property. Usually we invite individual people, but many auctions are open to the public. There are between a few and several dozen people. They receive an auction catalog with all the available properties. The first step is a mock round of bidding, where we usually “auction” some famous piece of real estate. At the end there is a small gift to the highest bidder. This is done to ease the tension in the room and to show people how to place their bids. Bidders are under a lot of pressure due to time constraints and the competi-

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

tion they face. Often they don’t know how to bid or are too stressed to even raise their paddles. What happens next? Usually the auctioneer follows the order in the catalog but he is not bound by it. If he sees that one type of property is particularly attractive, he may move similar items up the list. This allows bidders to immediately compare these offers and also reduces stress. Imagine that you just passed up on a property and then had to sit through 20 different ones to get another shot? That’s extremely stressful. The auctioneer waits for bids or suggests them himself. The auction ends when there are no more bids and the hammer falls with the auctioneer saying “Sold!” Or if the bids were too low, he says, “Pass, the reservation price has not been reached.” Does it happen that a person wins an auction and then realizes that they bid too high? Yes, it happens. The time and place of the auction is supposed to make people decide in a matter of seconds instead of hours or days. They sometimes get carried away.

How are your auctions different from foreclosure auctions? While an auction’s aim is to sell a property on profitable terms, a foreclosure auction aims at turning an asset into cash, marginalizing the profitability of the transaction. A property seller is far better off selling it through a regular auction rather than through foreclosure, mainly because court receivers charge 15 percent of the selling price as execution costs, five times what an auction house charges. Usually only about 20 percent of these properties find a buyer first time around, anyway. Most of them sell at the second auction at the minimum price, which is set at two-thirds of the market value. How many auction houses deal with real estate? Currently there are only two: Emmerson Dom Aukcyjny and Bydgoski Dom Aukcyjny. This truly is a budding market then? In Poland auctions are a popular form of sale only for works of art and pedigree animals. It didn’t use to be this way, though. Auctions used to be quite commonplace in Poland in the 1920s, but the 50 years of communism almost entirely eradicated them. Now Poles are learning what the Brits or Germans have known for years.

–Beata Socha

Image: Piotr Szymczak

Real estate auctions are still a novelty in Poland

Do people purchasing properties on auctions buy them for their own use or as an investment? Currently, most people who buy apartments buy them for their own use. With the exception of restricted-access auctions which are addressed to funds, banks and other investors. When investors buy apartments they usually do so at foreclosure auctions. Because their goal is different: to maximize profit, which is much easier at foreclosure auctions.

HOTEL**** GNIEW CASTLE

c i t y s c ap e

k at o w i c e

Did you know?

1953

Katowice was renamed Stalinogród (“Stalin City”) by the Polish communist government but the new name was never accepted by the population and in 1956 the former name was restored.

1987

The city population peaked at 368,621 and has been declining ever since. Statistics office GUS projects the city population will drop to 248,455 in 2035.

Spodek (“saucer”), a multi-purpose civic center, is a Katowice landmark

ong considered a historic capital of Polish heavy industry and mining, Katowice has a relatively short but hectic history. The first mention of its name dates back to 1598. Since then it changed hands continuously – as evidenced by a range of different names the city has known, such as Kattowitz and Stalinogród. Until the late 19th century Katowice was a privately owned village. Its expansion started in the mid-1800s when the city was connected to the Upper Silesian Railway. Soon afterward it was granted municipal rights. It gained the Kattowitz moniker while it was under Prussian rule through most of the 19th century. Despite Poland regaining its independence in 1918, the city and its surrounding Upper Silesia region did not become a part of the country until 1922. Because the region’s population was fairly evenly divided between Poles and Germans, the decision to become a part of Poland wasn’t an easy

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

and obvious one. It took three Silesian uprisings to finally push the region towards Warsaw. For years Silesia was a key industrial region, home to many coal mines and some of the most modern steel mills in Europe. Between 1953 and 1956 the city was officially known as Stalinogród, as Polish communist authorities sought to honor Soviet dictator Joseph Stalin, who died two days before the name change. This decision did not sit well with the local population, however, and nobody used it outside of official documents. As late as 1981, Katowice suffered yet another sad chapter, during the communist regime, when nine workers from the Wujek mine were killed by the ZOMO riot police during protests after the imposition of martial law. After the fall of communism, many mines were closed and local industries shuttered. Currently more than 70 percent of Katowice’s residents work in the services sector. u

Images: NOSPR, Shutterstock

A Silesian city’s tortured history

Silesian Insurgents’ Monument

Polish Radio symphony orchestra hall

Piotr Uszok, IBM, Capgemini, Oracle, Skanska, PwC, Rockwell Automation, Sferia

LONDON 1,550 KM PARIS 1,460 KM BERLIN 520 KM

MOSCOW 1,540 KM PRAGUE ROME 450 KM 1,500 KM

MAYOR: PIOTR USZOK AREA CODE: 32 AREA: 164.64 sq km NEAREST AIRPORT Katowice-Pyrzowice

POPULATION (DEC. 2012) 307,233 / 2,000,000 *

DISTANCE TO THE CITY CENTER 30 km

HIGHWAY A1

WORKING-AGE POPULATION (DEC. 2011)

198,770

UNEMPLOYMENT RATE (OCTOBER 2013)

5.4%

MEDIAN PAY (2012)

PLN 3,700 MODERN OFFICE SPACE 220,000 sqm

NUMBER OF UNIVERSITIES*

NUMBER OF STUDENTS*

NUMBER OF GRADUATES A YEAR*

123,000 33,000 * Silesia agglomeration

PERCENTAGE OF CITY COVERED BY ZONING PLANS: 20.61% MAJOR INDUSTRIES: BPO/ICT, steelworks, trade fairs, coal mining RECENT MAJOR INVESTORS IBM Capgemini Oracle Skanska PwC Rockwell Automation Steria

OFFICE VACANCY RATE 9%

SPECIAL ECONOMIC ZONES Katowice Special Economic Zone (KSEZ)

PRIME HEADLINE RENTS €12 to €14 /sqm/month

INDUSTRIAL AND TECHNOLOGY PARKS Upper Silesian Industrial Park gppkatowice.pl Euro-Center Industrial Park euro-centrum.com.pl Euro-Center Science and Technology Park euro-centrum.com.pl Synergy Park synergypark.pl

REPORT CARD

OBSERVER TOP 10 1

DGA

RANKING EU FUNDING CONSULTANTS

Andrzej Głowacki President

Subsidies captured:

2,972.4 mln. 91 qualified projects

2 Building on experience DGA recently got funding for client Polonia Aero’s Cold Flow Turbine Test Facility

DGA brings track record, seasoned advisers to EU projects EU funding has spawned a sizable cottage industry. But while the choices for those with fundable projects are many, selecting an adviser is a key step to success. “Before you decide to cooperate with a company on EU funding, you should check its references and credibility,” said Mirosław Marek, deputy CEO at the consultancy and investment group DGA, which recorded the highest subsidies captured among EU consultancies in the most recent Book of Lists from Warsaw Business Journal Group. That success is based on a high level of competence among its individual consultants, who bring long-term experience and an individual approach to every project, Marek said. DGA, which dates back to 1990, handles 50-100 EU funding projects every year, depending on the funding available, developing its own projects, and advising clients. For example, DGA recently

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

got funding for client Polonia Aero from the EU’s Innovative Economy program for the Cold Flow Turbine Test Facility, developing a laboratory that is one of the most modern of its kind in the world. No EU funding application prepared by DGA has ever been rejected for formal reasons, Deputy CEO Anna Szymańska said. In some cases, if a client’s original idea does not fit with a particular funding option, DGA works around it to find another possibility in line with the given firm’s goals. Clear goal setting is also critical to any project, Szymańska said, noting that long-term economic goals and future profitability are other key considerations. Finally, getting started early on any project is crucial, Marek noted, as some take as long as a year to prepare. Data source: Warsaw Business Journal Book of Lists; www.bookoflists.pl

Polinvest

Wiesław Samitowski President

Subsidies captured:

2,440.0 mln. 32 qualified projects

Projects completed: Construction of Regasification Terminal for Liquified Natural Gas in Świnoujście; Wierzchowice Underground Gas Storage; Waste Incineration Plant in Kraków; opening and equipping a trauma center at the University Hospital in Kraków; Ełk and Olecko adjustment from propanebutane gas to E gas using LNG technology

No. employees: 20 Founded: 1989

Images: Polonia Aero, ranked companies

Projects completed: “Towards a new job - outplacement program in Łódzkie voivodship”; “Energy efficiency in practice”; creation of Chorzów Information and Communication Technologies Park; construction of a new manufacturing plant and purchase of innovative technology by Curtis Healthcare; modernization of alternative power infrastructure in Polish Mother’s Memorial Hospital- Research Institute in Łódź No. Employees: 19 Founded: 1990

REPORT CARD

Michał Gwizda; Andrzej Puncewicz; Paweł Toński Board Members

EGC Consulting Group

Tomasz Chmielecki; Tomasz Kęcerski; Przemysław Mazurek,

KPPM Doradztwo

PNO Consultants

Krzysztof Dadej

Managing Partners

Tomasz Hoffmann President

President

Subsidies captured:

98 qualified projects

525 qualified projects

82 qualified projects

110 qualified projects

2,285.1 mln. Projects completed: Construction of car windows production plant; construction of innovative tires production plant; logistics center for clothing industry; construction of innovative paper production plant; extention of innovative rail vehicles production plant

No. employees: 74 Founded: 2005

2,039.7 mln. Projects completed:

Technology for hydrothermal liquefaction of biomass using microwave radiation; development of R&D infrastructure for research of food quality, health and safety; production of two-layer nano-copper paving; cushion packaging production; method for producing electricity and heat in the thermal waste treatment

No. employees: 16 Founded: 2004

PWB

Przemysław Kowalski

Managing Partner

Metropolis

Bartosz Janc; Wojciech Nawrocki, Łukasz Bartkiewicz

President; Board Members

1,386.0 mln. Projects completed: Con-

struction of building for Center for Advanced Systems Studies in Military University of Technology; improving the functionality of the Grand Theatre-National Opera in Warsaw; “Ochota” Center of New Technologies for University of Warsaw; building of the Faculty of Engineering and Environment - Water Centre for Warsaw University of Life Sciences; “The new adventure paths” in the Wieliczka Salt Mine

1,150.0 mln. Projects completed: Creation of Research and Development Center for airline industry; construction of Glass Recycling Center; creation of Ceramic Materials Research and Development Center; implementation of production technology of innovative profiles and panels for sectional doors No. employees: 30 Founded: 2005

No. employees: 11 Founded: 2004

Europejskie Centrum Przedsiębiorczości

Piotr Stefaniak President

A1 Europe

Przemysław Sulich President

Subsidies captured:

181 qualified projects

182 qualified projects

WND qualified projects

150 qualified projects

Projects completed: Use of innovative solutions in order to start production of container glass; starting production of converters for wind turbines; QR Shopper - e-services supporting the sale of products and services with access via QR code

Projects completed: Construction of denitrification installation for boiler K7 and K8 in Rybnik Power Plant; conversion of OP 140 for a biomass fueled CFB boiler in Dalkia Poznań ZEC; construction of biogas plant in Działyń; implementation of the patented technology of nanocopper production; construction of denitrification installation in Gdańsk Power Plant

1,026.0 mln.

No. employees: 10 Founded: 2002

780.6 mln.

No. employees: 20 Founded: 2005

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

753.9 mln.

Projects completed: “Start Your Own Business”; “General Motors Academy”; Improving the skills and competences of Deutsche Bank PBC’s staff; House of Senior Musician in Kąty; Innovative production of synthetic fuel from bioethanol

No. employees: 16 Founded: 2003

510.2 mln.

Projects completed: Diversification of production for Lakma; implementation of innovative technologies for data security and processing in Polcom Data Center; film studio and movie set for Alvernia Studios in Nieporaz; modern dental implant center; B2B platform for sharing remote work; IT services outsourcing

No. employees: 16 Founded: 2003

Images: ranked companies

Crido Taxand

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Michelin Guide Recommendation

index

companies A A1 Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Aaron Simpson . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 ABG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ADV POR Property Investment. . . . . . . . . . . . . . . . . 65 Akamai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Allianz. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Areva. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39 Ask.fm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Asseco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Atal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Atrium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 AugustaWestland. . . . . . . . . . . . . . . . . . . . . . . . . . 27 Avestus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Axa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56, 62 B Bank Pekao SA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Bentley. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 BGK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Biedronka . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47, 48 Black Red White. . . . . . . . . . . . . . . . . . . . . . . . . . .40 Blackstone. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 Blue Ocean Investment Group (BOIG) . . . . . . . . 65, 67 Boeing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 B+R Studio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 Buro Happold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Bydgoski Dom Aukcyjny. . . . . . . . . . . . . . . . . . . . . 74 C CA Immo. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56, 62 Capgemini. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 CBRE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61, 64, 65 Christie’s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73 Cinema City. . . . . . . . . . . . . . . . . . . . . . . . . . . 58, 59 Cineworld. . . . . . . . . . . . . . . . . . . . . . . . . . . . 58, 59 Cisco . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32, 33, 34 Citi Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Colliers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Comarch. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Commercial Investment. . . . . . . . . . . . . . . . . . . . . 59 Credit Agricole . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Crido Taxand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Cushman & Wakefield . . . . . . . . . . . . . . . . . . . . . . 60 Cyfronet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 D Dell. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Developres . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 DGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Dom Development. . . . . . . . . . . . . . . . . . . . . . . . . 59 Dun & Bradstreet. . . . . . . . . . . . . . . . . . . . . . . . . . 49

people B Bagiński, Tomasz . . . . . . . . . . . . . . . . . . . . . . . . . 12 Balcerowicz, Leszek . . . . . . . . . . . . . . . . . . . . . . . .54 Bartkiewicz, Łukasz . . . . . . . . . . . . . . . . . . . . . . . . 80 Bartók, Béla . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Belka, Marek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Bergmann, Adam . . . . . . . . . . . . . . . . . . . . . . . . . 27 Bieńkowska, Elżbieta . . . . . . . . . . . . . . . . . . . . . . . 12 Blechacz, Rafał . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Budyta, Tomasz . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Bury, Jan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 C Cameron, David . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Campion, Jane . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Chen, Paul . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Chmielecki, Tomasz . . . . . . . . . . . . . . . . . . . . . . . 80 Cimoszewicz, Włodzimierz . . . . . . . . . . . . . . . . . . . .8 Cooper, Steve . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Coppola, Francis Ford . . . . . . . . . . . . . . . . . . . . . . 16 Czaplicka, Małgorzata . . . . . . . . . . . . . . . . . . . . . . 58 D Dadej, Krzysztof . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Dance, Charles . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Dębska-Pastakia, Monika . . . . . . . . . . . . . . . . . . . . 63 Devine, William . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Drummond, Paul . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Dura, Maksymilian . . . . . . . . . . . . . . . . . . . . . . . . 26 E Elliot, Ben . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Ettenauer, Bruno . . . . . . . . . . . . . . . . . . . . . . . . . . 56 G Gawronik, Aleksander . . . . . . . . . . . . . . . . . . . . . . 23 Gęca, Małgorzata . . . . . . . . . . . . . . . . . . . . . . . . . 65

E ECE Projektmanagement. . . . . . . . . . . . . . . . . . . . . 71 EGC Consulting wGroup. . . . . . . . . . . . . . . . . . . . . 80 Elwro. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 Emmerson Auction House. . . . . . . . . . . . . . . . . . . .74 Energa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Erbud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Ericpol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Estimote. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Eurocopter. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27, 28 Eurolot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Europejskie Centrum Przedsiębiorczości. . . . . . . . . . . . . . . . . . 80 Europolis AG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Kino za Rogiem. . . . . . . . . . . . . . . . . . . . . . . . 43, 44 Knight Frank . . . . . . . . . . . . . . . . . . . . . . . . . . 63, 71 KPPM Doradztwo. . . . . . . . . . . . . . . . . . . . . . . . . . 80 Kulczyk Silverstein Properties. . . . . . . . . . . . . . . . . 61

F Fabryka Mebli. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Facebook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Fashion House Group. . . . . . . . . . . . . . . . . . . . . . . 68 Finmeccanica-Alenia Aermacchi. . . . . . . . . . . . . . . 28 Forte. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 FSO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Fun in Design . . . . . . . . . . . . . . . . . . . . . . . . . 45, 46 Futureal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

M Marvipol. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Meble Wójcik . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Mesko. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Metropolis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Microsoft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Millward Brown. . . . . . . . . . . . . . . . . . . . . . . . 13, 69 Mostostal Warszawa. . . . . . . . . . . . . . . . . . . . . . . . 60 Motorola. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 MySpace. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

G Gant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Ghelamco. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Globe Trade Centre. . . . . . . . . . . . . . . . . . . . . . 55, 58 Google . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 15, 34 H Heitman International LLC . . . . . . . . . . . . . . . . . . . 58 Hines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Hitachi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 HP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 34 HSBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41, 42 Huta Stalowa Wola. . . . . . . . . . . . . . . . . . . . . . . . . 28 I IBM. . . . . . . . . . . . . . . . . . . . . . . . 21, 31, 34, 35, 77 Ignite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 IKEA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Infrastructure Development. . . . . . . . . . . . . . . . . . . 60 InterContinental Hotels Group. . . . . . . . . . . . . . . . . 59 International Wine & Spirit Research. . . . . . . . . . . . 48 Invesco. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58, 61 IVG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 J Jones Lang LaSalle . . . . . . . . . . . . . . . 61, 65, 69, 70 K KGHM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39, 41 Kimberly. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

L LCP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 LHI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64, 69, 70 Lidl. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47, 48 Lion’s Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . 71, 72 Lone Star. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 LOT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 7 Lotos. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Lukoil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

N Neinver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66, 67 NOWA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Nowy Styl. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41, 42 O Olszynka. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Oracle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34, 77 Outlet Center Retail Management . . . . . . . . . . . 65, 66 Oxford Economics. . . . . . . . . . . . . . . . . . . . . . . . . 41 P Patria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 pbb Deutsche Pfandbriefbank. . . . . . . . . . . . . . . . . 72 PGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 12, 39, 60 PKN Orlen. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 41 PKP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73 PMR Research. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 PNO Consultants. . . . . . . . . . . . . . . . . . . . . . . . . . 80 PointPark Properties. . . . . . . . . . . . . . . . . . . . . . . . 62 Polbox. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Polimex-Mostostal. . . . . . . . . . . . . . . . . . . . . . 55, 60 Polinvest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Polish Defence Holding . . . . . . . . . . . . . . . . . . 26, 27 Polnord. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Polski Holding Nieruchomości . . . . . . . . . . . . . . . . 59 Prokom. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 PSP Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 62 PWB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

I Ickovics, Alain . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Lipiński, Jarosław . . . . . . . . . . . . . . . . . . . . . . . . . 58 M Maciążek, Piotr . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Maciejewski, Adam . . . . . . . . . . . . . . . . . . . . . . . . 12 Maj, Paweł . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Malarczyk-Arcidiacono, Anna . . . . . . . . . . . . . . . . . 67 Mandżunowski, Robert . . . . . . . . . . . . . . . . . . 64, 70 Marek, Mirosław . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Mazurek, Przemysław . . . . . . . . . . . . . . . . . . . . . . 80 Mikosz, Sebastian . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Miller, Daniel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Molewski, Grzegorz . . . . . . . . . . . . . . . . . . . . . . . . 43 Mroczek, Joanna . . . . . . . . . . . . . . . . . . . . . . . . . . 64

J Jakóbik, Wojciech . . . . . . . . . . . . . . . . . . . . . . . . . 38 Janc, Bartosz . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Jarośkiewicz, Aleksandra . . . . . . . . . . . . . . . . . 45, 46

N Nalewajko, Krzysztof . . . . . . . . . . . . . . . . . . . . . . . 60 Nawrocki, Wojciech . . . . . . . . . . . . . . . . . . . . . . . . 80 Nowak, Sławomir . . . . . . . . . . . . . . . . . . . . . . . . . 12

K Kaczyński, Jarosław . . . . . . . . . . . . . . . . . . . . . . . 17 Kęcerski, Tomasz . . . . . . . . . . . . . . . . . . . . . . . . . 80 Kieślowski, Krzysztof . . . . . . . . . . . . . . . . . . . . . . . 16 Kilar, Wojciech . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Kilian, Krzysztof . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Kłopotek, Eugeniusz . . . . . . . . . . . . . . . . . . . . . . . . 9 Komorowski, Bronisław . . . . . . . . . . . . . . . . . . . 9, 25 Korolec, Marcin . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Kościuszko, Tadeusz . . . . . . . . . . . . . . . . . . . . . . . 25 Kowalski, Przemysław . . . . . . . . . . . . . . . . . . . . . . 80 Krenz, Jan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Krystowski, Krzysztof . . . . . . . . . . . . . . . . . . . . . . . 26 Krzanowski, Adam . . . . . . . . . . . . . . . . . . . . . . . . . 41 Kujawa, Jarosław . . . . . . . . . . . . . . . . . . . . . . . . . 57 Kutz, Kazimierz . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Kwaśniewski, Aleksander . . . . . . . . . . . . . . . . . . . . 10 Kwiatkowski, Krzysztof . . . . . . . . . . . . . . . . . . . . . . . 8

O Obama, Barack . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 O’Reilly, Brendon. . . . . . . . . . . . . . . . . . . . . . . . . . 68 Olbryk, Waldemar . . . . . . . . . . . . . . . . . . . . . . . . . 60 Olszynka, Paweł . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Głowacki, Andrzej . . . . . . . . . . . . . . . . . . . . . . . . . 78 Gomułka, Stanisław . . . . . . . . . . . . . . . . . . . . . 50, 51 Grabowski, Maciej . . . . . . . . . . . . . . . . . . . . . . . . 39 Grad, Aleksander . . . . . . . . . . . . . . . . . . . . . . . . . .39 Gray, James . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Gurtler, Garry . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Gwizda, Michał . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 H Hoffmann, Tomasz . . . . . . . . . . . . . . . . . . . . . . . . . 80

L Lewandowski, Robert . . . . . . . . . . . . . . . . . . . . . . . 12

PwC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Q Quintessentially Lifestyle. . . . . . . . . . . . . . . . . . . . 11 R Rafael. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Rafako. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Regus Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Resolution Property. . . . . . . . . . . . . . . . . . . . . . . . 71 RICS Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Robyg. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Rockwell Automation. . . . . . . . . . . . . . . . . . . . . . . 77 Rosatom. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 RREEF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 S Samsung. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SEGRO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61, 62 Sferia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Sikorsky Aircraft Corporation . . . . . . . . . . . . . . . . . 27 Skanska. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60, 77 Sky Development. . . . . . . . . . . . . . . . . . . . . . . . . . 56 Skyline Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Skype. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Starbucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Szynaka. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 T Talex. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Tauron. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Tchibo. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Telekomunikacja Polska . . . . . . . . . . . . . . . . . . . . . 31 Tesco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 15 TK Development . . . . . . . . . . . . . . . . . . . . . . . . . . 58 T-Mobile. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 TNS Polska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Toshiba. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Tristan Capital Partners. . . . . . . . . . . . . . . . . . . . . . 61 U Union Investment. . . . . . . . . . . . . . . . . . . . . . . . . . 61 W Warsaw Stock Exchange. . . . . . . . . . . . 10, 58, 59, 71 Westinghouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Wierzbowski Eversheds Poland. . . . . . . . . . . . . . . . 18 Wikana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 WP Carey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Y Yukos Oil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Rydlewski, Tomasz . . . . . . . . . . . . . . . . . . . . . . . . 65 S Samitowski, Wiesław . . . . . . . . . . . . . . . . . . . . . . . 78 Sekuła, Agata . . . . . . . . . . . . . . . . . . . . . . . . . 61, 65 Siemoniak, Tomasz . . . . . . . . . . . . . . . . . . . . . . . . 26 Sikorski, Radosław . . . . . . . . . . . . . . . . . . . . . . . . . 9 Skłodowska-Curie, Maria. . . . . . . . . . . . . . . . . . . . 39 Stalin, Joseph . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Stanisławski, Michał . . . . . . . . . . . . . . . . . . . . . . . 61 Stefaniak, Piotr . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Stoker, Bram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Stravinsky, Igor . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Sulich, Przemysław . . . . . . . . . . . . . . . . . . . . . . . . 80 Szymańska, Anna . . . . . . . . . . . . . . . . . . . . . . . . . 78 T Tamborski, Paweł . . . . . . . . . . . . . . . . . . . . . . . . . 59 Tancinco, Ramon . . . . . . . . . . . . . . . . . . . . . . 32, 33 Targosz, Andrzej . . . . . . . . . . . . . . . . . . . . 32, 33, 35 Tobin, Jim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Toński, Paweł . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Turek, Bartosz . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Tusk, Donald . . . . . . . . . . . 7, 9, 12, 17, 39, 42, 50, 54

P Palikot, Janusz . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Parker, Robert . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Polanowska, Hanna . . . . . . . . . . . . . . . . . . . . . . . . 44 Polański, Roman . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Potera, Edyta . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Poznański, Piotr . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Price, Phil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Puch, Michał . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Puncewicz, Andrzej . . . . . . . . . . . . . . . . . . . . . . . . 80 Putin, Vladimir . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

U Uszok, Piotr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

R Rostowski, Jacek . . . . . . . . . . . . . . . . . . . . . . . .9, 54 Rutkowski, Jakub . . . . . . . . . . . . . . . . . . . . . . . . . 32

Z Zając, Małgorzata . . . . . . . . . . . . . . . . . . . . . . . . . 44 Zanussi, Krzysztof . . . . . . . . . . . . . . . . . . . . . . . . . 16

W Wajda, Andrzej . . . . . . . . . . . . . . . . . . . . . . . . 12, 16 Wałęsa, Lech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Wiktorski, Tomasz . . . . . . . . . . . . . . . . . . . . . . . . . 41 Wojtysiak, Przemysław . . . . . . . . . . . . . . . . . . . . . 74 Woszczyk, Marek . . . . . . . . . . . . . . . . . . . . . . . . . . 12

W B J O B S ER V ER • f e b r u a r y 2 0 1 4

Zuckerman

yszard busted out in 1981, after years spent stirring up trouble for the old Commie authorities. Drank a lot on the flight to New York and, upon arrival, made it to some friends’ apartment where more drinks were waiting. Finally everyone went to bed and when Ryszard got up the next morning, late, his friends had gone to work. Hung over and hungry, he went out into the streets of the big city to look for something to eat. Once at the supermarket, he wandered the aisles, amazed. The colors. The sheer abundance of it all. In Poland, they were standing in line for toilet paper… and, look at this! His English wasn’t very good, but the packaging made everything look tasty, so he just grabbed a short blue and silver can with a sparkling tuna fish on it, picked up a loaf of bread and a bottle of water, paid for it all and went back to his friends’ apartment. He found the bread a bit on the spongy side but opened the can and made a couple of sandwich spreads anyway. Wow. Not so good, he thought, after taking the first bite. He took a second bite before deciding he’d had the bad luck to pick a can with spoiled contents. “The label was so beautiful,” he told me when he first related the story. “But it was cat food!” he said, roaring with laughter. Ryszard was not a guy to let his pride get in the way of a funny story – even if he turned out to be the goof. And he never wore the heroic dissident stripes on his sleeve, even though he had earned them. In fact, until he passed away near the end of last year, I’d never known of his activities in the 1970s Polish underground, as one of the founders of the legendary NOWA “uncensored publishing house.”

One of Ryszard’s roles with the publisher was distribution, which got him detained several times by the political police (Służba Bezpieczeństwa), who badgered him to become an informant. Declining, he took back to NOWA’s editors a transcript of his exchange with the cops, which ended up being printed in one of the group’s publications. Once settled in the US, he became “Richard,” and spent the next 10 years in high finance on Wall Street – while Poland worked its way through that long, dark decade of the 1980s. By 1992, Richard was back in Poland, and quickly got his fingers in several pies. He was on the board at TVN, was managing director and vice chairman of the Luxembourg Cambridge Holding Group, was active in the American Chamber of Commerce in Poland and founded the Polish chapter of YPO, a global network of young chief executives. When I met him, he was chairman and CEO at PWN, the academic publishing house. I don’t remember why I ended up in his office, but he showed an extraordinary interest in the small media company where I was president and an owner. He asked a lot of questions. The final one: Are you interested in having a partner? The fact was that we’d struggled in recent years, after the first dot-com bust. We were fighting to cover expenses and there was a lot of uncertainty in the business. Still, we had ideas, and Richard liked them. I wouldn’t say it was the smoothest partnership, but in the end, Richard doubled his money when we bought back his interest four years later. From my perspective, the buyback was well worth the value he added to our company. He’s the only one who ever invested in one of my hare-brained business schemes. So, for me, Richard came along at the right time. At 66, he left this world far too soon. u

Ryszard was not a guy to let his pride get in the way of a funny story – even if he turned out to be the goof.

f e b r u a r y 2 0 1 4 • W B J O B S ER V ER

Image: Korek

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