POLAND TODAY magazine #10 by Poland Today

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Poland Today presents a special supplement on the booming business services sector. page 27

Primetime Warsaw III: What are the opportunities and challenges facing Poland’s capital? page 39

Russia’s information war: What are the risks for Poland, and how should the country respond? page 60

A picture of tomorrow’s Polish economy What are the sectors Poland should focus on to ensure an innovative future? page 16 Magazine • Portal • Conferences • find out more at www.poland-today.pl

Q3 2015 issue No. 10

table of contents

editorial

in focus

08-15 leader

16-26

Economy of tomorrow

Picture of the future: The priority for Poland’s economy as it continues to move closer to Western European levels is innovation – but in what sectors does the country have the best chance to make technological leaps? Poland Today explores this question and asks experts and business leaders what the picture of Poland’s economic future will look like

The next transformation

What sectors should Poland focus on to modernise its economy?

Future transformed: industry by industry

Companies sound off on the challenges and opportunities in their industries over the next 10 years

Table of contents

Setting business free

Poland Today editor Andrew Kureth sits down with Andrzej Malinowski, president of advocacy group Employers of Poland, to talk about the challenges facing Polish businesses

A brand waiting to happen

How is ‘Brand Poland’ perceived around the world? Poland Today editor in chief Richard Stephens asks two top executives at global brand valuation consultancy Brand Finance

BUSINESS SERVICES IN FOCUS

27-38

Booming business services: The business services industry, which includes everything from business process outsourcing (BPO) to shared service centres (SSCs) to research and development operations (R&D) has become one of the fastest-growing sectors in Poland’s economy. It is now estimated that it is the second largest employer in the country. But to keep the flow of investment coming, Poland will have to move up the value chain, providing complex, knowledge-intensive services

URBAN ISSUES: PRIMETIME WARSAW III

39-51

Poland Today’s Primetime Warsaw III conference brought together decision makers from the public and private sectors to hash out the opportunities and challenges facing urban development in Poland’s capital. Warsaw Mayor Hanna Gronkiewicz-Waltz, former Prime Minister Jan Krzysztof Bielecki and editor-in-chief of fDi Magazine Courteny Fingar were among the attendees of the event, held in the National Stadium in Warsaw. In this edition of Urban Issues, we provide in-depth coverage of the major themes that were explored at the event

Lost and found

A Kraków start-up is creating solutions to help you find all of the things you have left behind

INTERNATIONAL

Weapon of choice

Russia has been waging an information war in Poland and across the region. How should the country respond?

SCIENCE & TECHNOLOGY

Fuel to spare

Young Polish engineers are building ultra-efficient cars – and getting plenty of educational mileage out of the experience

HISTORY

It happened in ... July

13 July 2000. Holocaust chronicler Jan Karski dies

Eyewitness: Władysław Bartoszewski

Władysław Bartoszewski was never officially a professor. But he had plenty to teach us

BUSINESS

Banking on a challenging year

The past several years have been good to Poland’s lenders. But lower interest rates and new regulations could mean that will change in 2015

Transformational expertise

The story of Elzab, a Polish IT company whose business model has undergone several successful transitions, offers lessons for how other Polish firms can meet future challenges

Investment in Warsaw’s Praga district. pages 46 & 51

Young Poles are building ultra-efficient cars. page 62

The lessons of Władysław Bartoszewski. page 66

Weaver of a tangled web

The tale of the ‘dangerous’ Polish-American immigrant leader Louis Hammerling is wild, convoluted and fascinating

SPORT

Size matters

Poland won the world junior volleyball gold, a record number of athletes from Poland attended the European Championships, a huge Pole signs with the NFL’s Minnesota Vikings, and Poland drew with Ireland in a thrilling Euro 2016 qualifier

A new chapter for local government

Lublin: inspiring business

Business leaders and economic experts evaluated the eastern city of Lublin’s strategy for creating investment incentives

Gliwice shines for logistics investment

What are the factors influencing Poland’s logistics market? Sector firms large and small gathered with city decision makers and economic experts to explore that question

IMPRESSIONS

Experts expect a BPO boom to come to Warsaw – but can the city capitalise on it?

Good things are on the way

Paul Chen, originally from the United States, talks about his personal experience as a foreigner living in Poland

Kraków getting in the innovation game

How should Poland’s second city tackle the challenges it faces as a rapidly developing knowledge-based economy?

Can Europe lead?

Leaders from business and politics discussed Europe’s role on the increasingly unpredictable global stage

How to boost the business services sector. page 29

table of contents

How should local authorities manage the distribution of EU funds, and spur innovation?

EVENT REVIEW

Warsaw in focus at MIPIM

Russia’s information war. page 60

This issue of Poland Today, our 10th, includes an interview with the president of the Employers of Poland (Pracodawcy RP), the influential organization which represents around 10,000 businesses across the country. In the interview he talks about the adversarial attitude of the tax authorities towards entrepreneurs and says he wishes that they “would finally stop treating entrepreneurs as potential fraudsters. I wish their rights were respected, so that they can concentrate on running their businesses, developing them and creating new jobs.” Trying to run a young business here, as I do, I can only endorse his opinion. Poland is a nation of entrepreneurs, but the tax authorities seem to be on a mission to counteract this spirit of enterprise. And the government, it often seems, doesn’t much want to help. Where are the initiatives to help new businesses (not only high-tech start-ups)? Where are the tax breaks for young companies? Ruling party Civic Platform had the opportunity to enact comprehensive, business friendly measures but, for the most part, played it safe and did the minimum necessary. And now it looks like their time could be passing. There’s clearly a message there for new governments: be bold, as you’ll get voted out sooner rather than later anyway. Meanwhile, Poland Today is turning its head in a more international direction. In the second half of the year we will be organizing an event in London, bringing several of the country’s leading businesses in selected sectors to Europe’s financial capital and showcasing the country’s investment potential. The intention is that this will be the first of several forays abroad, with the objective of bringing Poland’s strengths and opportunities to as many potential investors as possible. We will report on our progress in upcoming issues. I would like to wish all our clients and readers a relaxing summer break.

Richard Stephens

Publisher Poland Today

Publisher’s Note

BOOKS & ARTS

editorial

‘Poland already has a head start in many industries. The question is how the country can leverage its advantages to create innovation. ’ Poland Today Sp. z o. o.

ul. Złota 61 lok. 100, 00–819 Warsaw, Poland tel/fax: +48 224648269 mobile: +48 694922898, +48 602214603 www.poland-today.pl

Poland’s economy is moving forward. Simple manufac-

Andrew Kureth

Editor’s note

is editor of Poland Today. Originally from the United States, Andrew has been living in Poland since 2001 and has covered the major political, economic, business and social stories in the country for over a decade. He has written for numerous global media, including the Financial Times. Andrew graduated from Kenyon College in Ohio.

turing and low-cost services are making way for complex, value-added operations and high-tech products. But the going, so far, is slow and often haphazard. It doesn’t have to be that way. Poland already has a head start in many industries, from agriculture to mining and from energy to pharmaceuticals. The question is how the country can leverage its advantages to create innovation. In our leader section about Poland’s Economy of Tomorrow, we explore that question and others (see pages 16-26). For one, consolidation will allow some efficiencies of scale to appear, enabling the larger companies to invest more in research and development while creating home-grown technologies and advanced processes. Those, in turn, could be sold around the world. Another industry that holds significant potential is business services. Previously, the sector was referred to as business process outsourcing, or BPO – but in Poland it has evolved into much more than cheap accounting or human resources services. Polish employees are completing ever more complicated operations, often performing critical R&D. This evolution must speed up if investment in the sector is to continue. In our Business Services in Focus section (see pages 27-38) we explore how the country can make that happen. The business services sector has transformed the economies of many cities in Poland, but Warsaw, particularly, may be in for a business services boom (see pages 33 and 74). This will spur even more development in the capital, which will bring with it new challenges. In Poland Today’s third annual Primetime Warsaw conference, participants including Warsaw Mayor Hanna Gronkiewicz-Waltz and former Prime Minister Jan Krzysztof Bielecki debated how the city should face the future. One message came through loud and clear: Warsaw must do more to tell its story to the rest of the world. The number of foreign investments in the city has been declining steadily, as Asian cities rise up the ranks. In this issue’s edition of Urban Issues, we present a special feature with several stories covering all of the major themes and debates during the conference (see pages 39-51). Poles, however, aren’t waiting for the country to get its act together. For example, a Kraków start-up that makes it nearly impossible for you to lose your wallet beat its fundraising goal by over 2,000% (see page 59), while students from the Warsaw University of Technology are setting records for fuelefficient cars (see page 62). Forward, indeed.

Founder & Editor in Chief Financial Director Business Development Director Creative Director New Business Consultant International Client Director Business Strategist

Richard Stephens Arkadiusz Jamski James Anderson-Hanney Bartosz Stefaniak Tomasz Andryszczyk Toby Hancock Ana Hermoso

Editor Marketing & Communications Director New Business Partner

Andrew Kureth Sylwia Ziemacka Aneta Kłodaś

Business Editor Real Estate Editor

Lech Kaczanowski Adam Zdrodowski

Key Account Manager Event Coordinator

Magda Gawlikowska Maja Sorochtej

Contributing Journalists

Wojciech Brzeziński Annabelle Chapman Gabriel Rom Kamila Wajszczuk Yoni Wilkenfeld

Photographs

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Associated Press Poland makes payout to alleged victims of CIA renditions

IN FOCUS

Poland is paying a quarter of a million dollars o two terror suspects allegedly tortured by the CIA in a secret facility in the country – prompting outrage among many in Poland who feel they are being punished for American wrongdoing. Last July, the European court of human rights ruled that Poland violated the rights of suspects Abu Zubaydah and Abd al-Rahim al-Nashiri by allowing the CIA to imprison and torture them. The court ordered Poland to pay €130,000 to Zubaydah, a Palestinian, and €100,000 to Nashiri, a Saudi national charged with orchestrating the 2000 USS Cole terrorist attack.

compiled by Gabriel Rom

Financial Times UK warned by Eastern Europe not to meddle with migrant rights

Poland announced plans to purchase Patriot missiles from US company Raytheon and helicopters from France’s Airbus. The two tenders, valued together at approximately 29bn złoty (€7bn), come amid a rapid modernisation effort from the Polish military. “For the armed forces’ technical modernisation and the Polish armed forces’ resilience to be effective, the so-called anti-missile shield ... had to become the priority of priorities,” said Polish President Bronisław Komorowski.

Herald Scotland Scottish police in Warsaw for talks over secondments

Scottish police officers visited Warsaw in April to discuss with the Polish National Police plans to increase cooperation between the two countries’ police forces. The meeting helped Scottish police learn how to better engage with Polish communities in their country. As part of the proposed plan, a small number of Polish officers may be seconded to Scotland. At 55,000, Poles are the largest migrant group in Scotland, according to 2011 census figures.

Washington Post Jeb Bush planning to visit Germany, Estonia and Poland in June

Jeb Bush, an expected US presidential candidate and former governor of Florida, plans to visit Poland along with Estonia and Germany in June. According to an itinerary released by his press office, Bush will speak on the United States’ defence alliance with Poland, issues pertaining to NATO, as well as meeting with Polish business leaders. The trip to Poland will be Bush’s first.

The Guardian Russian biker gang Night Wolves refused entry into Poland

In April, a group of 10 bikers from the Russian group Night Wolves were refused entry at the Polish-Belarus border. The Night Wolves are outspoken in their support for Russian President Vladimir Putin. The group planned to take a ‘victory ride’ across Europe, ending in Berlin to commemorate the Red Army’s victory in World War II. The tour raised hackles especially in Poland, where politicians decried it as unnecessarily provocative. In the end, at least 30 members of the group made it to Berlin in time for the 9 May anniversary.

Newsweek Europe Poland to build 24-hour surveillance watchtowers on Russian border

Poland is further fortifying its 200km land border with Russia as it constructs a series of hightech watchtowers. The project is expected to become fully operational in June, and will see six observation towers between 35 and 50 metres in height. The towers will provide the Polish military with increased intelligence on activity in the border region with the Russian exclave of Kaliningrad. The project will cost 14m złoty (€3.4 million), the majority of which will be paid by the EU’s External Borders Fund.

Boston Globe Basketball star Paul Pierce gets Gulf News a vote for president of Poland A professional American basketball player has Trade relations between shown up in an unlikely place: a Polish ballot UAE, Poland to grow box. Paul Pierce, a member of the Washington New York Times Poland: FBI director regrets remarks

photos: Brian Snyder (Reuters), Wikipedia

Global news review

A group of Eastern European countries has voiced concerns with the United Kingdom’s recently re-elected Conservative government over its immigration policy. In his election manifesto, British Prime Minister David Cameron promised a four-year waiting period for migrant workers claiming UK benefits. Polish officials stressed that the policy could lead to de-facto discrimination against migrant citizens. According to recent census estimates, there are over a million Polish migrants living in the United Kingdom.

Reuters Poland to buy US Patriot missiles, French helicopters

FBI director James Comey told the Polish ambassador to the United States that he regretted recent remarks that Polish officials had said amounted to an accusation of complicity in the Holocaust. Comey’s remarks, published in The Washington Post in mid-April, prompted an outcry in Poland. “In their minds, the murderers and accomplices of Germany, and Poland and Hungary, and so many, many other places didn’t do something evil,” he said. “They convinced themselves it was the right thing to do, the thing they had to do.” Poland said the passage wrongly implied it was complicit in the Nazi genocide of European Jews. In a letter to the Polish ambassador released by the Polish Foreign Ministry, Comey said: “The Polish state bears no responsibility for the horrors imposed by the Nazis.” Poland now considers the matter settled, a Foreign Ministry spokesperson said.

Wizards and teammate of Pole Marcin Gortat, was added to a ballot in Poland’s recent election by Wizard super-fan Bartosz Bielecki. Bielecki, the Polish correspondent for ESPN’s Washington Wizards fan-site, explained that he voted for Pierce “due to the lack of better candidates”.

Associated Press Poland declares Russian journalist a danger to country’s security

Polish authorities accused a Russian journalist living in Poland who works for Rossiya Segodnya, a pro-Kremlin news agency, with threatening Poland’s national security. Authorities claim that the journalist, Leonid Sviridov, should lose his right to reside in Poland and the European Union. Specifics on the case remain secret, but Sviridov was accused by the government of being a spy in 2014. He plans to contest all charges.

Officials speaking at the UAE-Poland Business Forum pledged to increase economic cooperation between the United Arab Emirates and Poland. Sultan Al Mansouri, the UAE’s minister of economy and Janusz Piechociński, Poland’s deputy prime minister, highlighted plans for further cooperation between in the pharmaceutical, agricultural and biochemical industries. In 2014, bilateral trade between the UAE and Poland stood at over 4.7bn złoty (€1.2 billion), making the country one of Poland’s largest trade partners in the Middle East.

The Guardian Board game focuses on Polish heroics

A 25-year-old Polish game designer has created a board game that attempts to capture Poland’s war-time heroism. ‘Seven Days of Westerplatte’, invented by Łukasz Woźniak, transports players to 1939 as commander of a small Polish force under siege from waves of German infantry and artillery. “We need to remember such events to honour them and to learn,” Woźniak told the Guardian.

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Something to teach us: Władysław

Bartoszewski was never officially a professor, though many referred to him as such due to his long career as a university lecturer. In fact, he had much to teach humanity: sent to Auschwitz by the Nazis, he later went on to champion reconciliation between Poland and Germany. see page 66

New revelations as fifth anniversary of Smolensk tragedy observed

Paweł Kukiz surprises with 20% support in first round of presidential election

On 10 April, Polish leaders and government representatives gathered to commemorate the death of former President Lech Kaczyński, his wife and 94 others who perished in a plane crash near Smolensk, Russia five years ago. According to a new transcript of cockpit recordings leaked in April to Poland’s RMF FM radio station, top government officials on board appeared to have pressured the plane’s pilots to land in thick fog. “The fact is, we have to get it [the landing] done,” General Andrzej Błasik reportedly told the pilots six minutes before the crash. The pilots can then be heard attempting to get Błasik and other unidentified government officials out of the cockpit, but with no success. Polish military prosecutors, who are still investigating the crash, claim that the leaked transcripts are “imprecise”. The leak comes as Poland prepares for autumn parliamentary elections in which the late president’s brother Jarosław Kaczyński will lead the opposition party PiS. Some members of PiS contend that the crash may have been caused by Russian foul play. The party has boycotted the official commemoration of the crash for the past four years. Adding to growing tensions between the two countries, Poland charged two Russian air traffic controllers with negligence in March. Russia and Poland are conducting two parallel investigations into the crash, but with little apparent cooperation. Russians officials contend that they cannot reach a final conclusion to their investigation because Poland has refused their requests for additional information.

Rock musician Paweł Kukiz struck a chord with Polish voters in the first round of Poland’s presidential election, which was held in early May. He came in third place, taking more than 20% of the vote – a huge surprise, considering he had not been taken seriously by the media or other politicians until a few weeks before the election. Support for the 51-year-old Kukiz was fuelled by anti-establishment sentiment in Poland, especially among young people. Kukiz, who once played in a band called ‘The Breasts’ is a social conservative and ardent Catholic. However, his economic views are a bit harder to pin down: he has said he favours low taxes, but also heavy state involvement in tackling poverty. He has called himself a “right-winger with a left-wing heart”. His signature proposal was the introduction of single-mandate voting districts (also known as the ‘firstpast-the-post’ system), similar to those in the US or UK, rather than the current list system. This, he said, would allow Poles to hold their elected politicians more directly accountable. Though he didn’t make it into the second round (which was won by Andrzej Duda, see page 14), Kukiz is expected to remain active in Polish politics. A strong critic of political parties, Kukiz has said his ‘movement’ will bring together his supporters to run for parliament in elections set for October. “We have already won,” said Kukiz after the results of the first round of the presidential election were released. “We will win in autumn, we will change the constitution and we will return Poland to its citizens.”

by Gabriel Rom

Government gains authority to order compulsory military training Under new regulations, the Polish government has the authority to draft men with no prior military experience for military training. Poland ended compulsory national service in 2008, in favour of a professional force. According to prior rules, the military could only call up personnel who had previously served in the armed forces. Now, any able-bodied man can be drafted, either during a crisis or for any peace-time training deemed necessary. Though the legislation was signed by Prime Minister Ewa Kopacz, the government is not expected to make use of this authority in the near future. The new rules come at a time when Poles have become increasingly worried about Russian aggression to their east. Since the outbreak of war in Ukraine early last year, Poland has revealed plans to significantly increase its military spending. In late April, Poland announced that it would buy eight patriot missile batteries from US firm Raytheon at a cost of around €3bn and 50 military helicopters from France-based Airbus for about €3.2bn. In total, Warsaw plans to spend some €34bn on military upgrades over the next decade. by Gabriel Rom

by Andrew Kureth

photos: Kuba Dąbrowski (Die Zeit / Forum), Maciej Biedrzycki (Forum), Maciej Jarzębiński (Forum), Piotr Wojnarowski (Forum)

in focus

conference & cockTail parTy

Spotlight Hotel Investment Poland II 16 June 2015, The Westin Warsaw Hotel (conference), Hotel Sofitel Warsaw Victoria (cocktail party)

The Spotlight Hotel Investment Poland conference brings together investors, developers, hotel operators and finance providers to discuss the issues affecting the hotel sector, including development, finance, management and acquisition potential www.poland-today.pl

CE NTURY HOTELS GROUP TM

in focus

Agata Kulesza

by Gabriel Rom

Jan Żyliński

Fuel to spare:

Young Polish engineers are building super-efficient cars for educational mileage. We talk to a team from the Warsaw University of Technology as they prepare for the Shell Eco-Marathon with ‘Kropelka’, an ultra-light vehicle that can travel nearly 700 km on a litre of fuel. “We’lll never learn more than by working all night on something that will actually run and compete,” said one student. see page 62

Sword duels in Hyde Park could be making a comeback. That is, if Jan Żyliński, a Polish aristocrat and businessman living in London, has his way. In a widely publicised YouTube video that has received over 365,000 views, Żyliński challenges Nigel Farage, a British politician and leader of the right-wing UK Independence Party (UKIP), to a duel. UKIP is known for its strong stance in favour of limiting immigration to the UK. It is estimated that over a million Poles have moved to the UK since 2004. Żyliński explains in the video that he takes issue with discrimination against Poles in the United Kingdom – discrimination he believes is being fanned by Farage and his party. “I’ve had enough of the discrimination against Polish people in this country,” Żyliński says. “The most idiotic example I’ve heard of has been Mr Nigel Farage blaming migrants for traffic jams on the M40.” Żyliński’s father was cavalry officer and Polish war hero Captain Andrzej Żyliński, who led a famous charge against the Nazis during the Battle of Kałuszyn. The video opens with Jan Żyliński pointing to a gold statue of his father on horseback, holding his sword aloft. “I am his son, I have his blood and I have realised that now what I have to do is stand up in defence of my people in the United Kingdom,” he says. Żyliński claims a duel is what any selfrespecting 18th century Polish aristocrat and English gentleman would do to settle such a disagreement. He qualified his challenge, however, saying that if Mr Farage’s sword-fighting skills are “rusty” then he would gladly engage in a duel of words – a debate. Farage declined. “I’ve been trying to keep violence out of the election,” he said.

Actress Agata Kulesza, co-star of Paweł Pawlikowski’s Oscar-winning film ‘Ida’, may be a new name to her international audiences. In Poland, however, the veteran actress has been performing on stage and in the movies for over two decades. Kulesza first gained widespread popularity as a contestant on the popular show ‘Taniec z Gwiazdami’ (‘Dancing with Stars’), and since 2011 she has performed regularly at the Bohdan Tomaszewski Ateneum Theatre in Warsaw. In 2012 she received the Polish Academy Award Bohdan Tomaszewski, the distinctive for Best Actress for her leading role in voice of Polish sports for more than 50 the film ‘Róża’, directed by Wojciech years, died 27 February in Warsaw at Smarzowski. the age of 93. Generations of Poles fol However, her performance in ‘Ida’ ele- lowed important global sporting events vated Kulesza from a domestic star to through the images he painted with his international fame. In the film, Kulesza voice. “Radio is immortal,” he told Press plays Wanda Gruz, a Communist Party magazine in a 2007 interview. “It stimufunctionary and the aunt of the title lates the human imagination.” Considered a legend of Polish sport character, Ida. Wanda is a hard-drinking woman with a bitter edge who repre- journalism, Tomaszewski spent decades sents a cruel regime. As a Jew, Wanda’s working in radio, covering 12 Olympic family suffered tremendously during Games. During that time he commenWorld War II, yet as a Party member tated on some of Poland’s greatest she is a part of an oppressive system. sporting triumphs, including the dual What gives Wanda depth, and where gold medals of Władysław Kozakiewicz Kulesza shines, is that she is both victim and Bronisław Malinowski at the 1980 and perpetrator, both sympathetic and Moscow Summer Olympics. Tomaszewski also had a strong politicontemptible, and Kulesza plays out the contradiction with skill. “I had to accept cal conscience. He fought with the the fact that there were real women Home Army during the Nazi occupa– as in this case – who did evil things, tion during World War II and refused but who could also remain charismatic to work with regime-associated media and very easy to relate to,” Kulesza said during the imposition of martial law in an interview with The Varsovian, an from 1981 to 1983. internet portal. Before dedicating himself to journalFor her performance, Kulesza ism, Tomaszewski was a highly ranked won both “Best Supporting Actress” youth tennis player. His first broadcast from the Los Angeles Film Critics assignment was the 1947 Poland-Great Association (LAFCA) and “Best Actress” Britain Davis Cup match. From that at the Gdynia Film Festival in 2013. time, he had worked to popularise the Pawlikowski refers to her simply as sport in Poland. In 1968 he established “Kulesza the virtuoso”. an annual tennis tournament called Due to the worldwide success of ‘Ida’ the Tomaszewski Cup, where the nowand Kulesza’s impressive performance famous Radwańska sisters – Urszula in the film, her career has taken on a and Wimbledon finalist Agnieszka second life. She is now a sought-after – launched their careers. actress for international directors and Tomaszewski continued freelancis currently working on a movie called ing late into his life, and he is widely ‘Innocent’, which is directed by Anne reported as saying at age 90 that “the Fontaine and features a joint Polish and microphone is like a drug”. For his French cast. “I am always looking for a final assignment he covered the 2013 powerful story ... one that moves some- Wimbledon Championships, a fitting thing in me and hopefully something in goodbye to the sport he had always the viewers,” Kulesza said. loved.

IN FOCUS

Victory celebration:

Andrzej Duda shocked Poland’s political scene by beating incumbent Bronisław Komorowski in the second round of the country’s presidential elections on 24 May. Duda won with 51.55% of the vote to Komorowski's 48.45%. Turnout was 55.34%. Duda was backed by opposition party PiS and ran on a platform of social conservatism and greater state involvement in the economy. He is due to take office in August.

Photo by

Snapshot

Krystian Maj (Forum)

photo: Avalon Studio

Economy of tomorrow

17 leader

18 leader

The next transformation What sectors should Poland focus on to modernise its economy?

The idea that Poland needs to innovate

Andrew Kureth is

editor of Poland Today. Originally from the United States, Andrew has been living in Poland since 2001 and has covered the major political, economic, business and social stories in the country for over a decade. He writes frequently on Poland’s relations with other countries, notably reporting from France, Georgia and the United Arab Emirates. He has written for numerous global media, including the Financial Times. Andrew graduated from Kenyon College in Ohio.

in order to ensure its economy catches up to Western European levels seems to be slowly but surely filtering through with policy makers. At both national and local levels, politicians in Poland are beginning to talk about attracting more high-tech investments or R&D centres. They express their desire to create a Polish ‘Silicon Valley’ and show interest in building on Poland’s strong IT skill set and entrepreneurial spirit. All of that is fine. But while R&D investments from foreign investors are welcome and high-tech IT clusters could greatly benefit Poland, innovation doesn’t have to come from outside or be built from scratch. Innovation can happen, and should be encouraged, in sectors where Poland is already strong. The country has several industries ripe for an innovation jump that could propel the economy into the future. These include sectors in which Poland has so far held an advantage on the low-tech side, such as agriculture or manufacturing. Other industries that have long been dismissed as perpetually inefficient, such as mining and energy, can leapfrog into the 21st century. Technologically advanced industries where Poland already has a strong knowledge base and a cost advantage, such as pharmaceuticals, could also inject innovation into the Polish economy. The benefits are clear: “Poland could achieve GDP growth above 4% each year between 2015 and 2025. This level of growth would put Polish per-capita GDP (PPP) in 2025 at 85% of the projected Western Europe (EU-15) average. This performance would see Poland attain the per capita GDP levels of Portugal, Spain, or even Italy, and be a globally competitive advanced economy,” said Tomasz Marciniak, a local partner at the Warsaw office of consultancy McKinsey & Co. McKinsey recently published a 96-page report called ‘Poland 2025: Europe’s new growth engine’ that explored how the country could accelerate its growth. Here, Poland Today takes an in-depth look into the report to find out precisely what can be done.

around 40% lower than in comparable countries, such as Germany. Consolidation – both of food processing companies and farms themselves – could go a long way to bridging the divide. The average Polish farm size is 10 hectares, compared to 50 hectares in France or 90 in the UK. The fragmentation has led to inefficiencies, such as an oversupply of farming equipment: Poland now has 13 tractors for every 100 hectares of arable land. In Denmark the figure is just five. “Any significant improvement in productivity would require first increasing the size of the average Polish farm,” says the report. To help along the consolidation process, authorities could encourage a few different solutions. One is contract farming, which allows processing companies to hire farmers as suppliers and set prices contractually. Another is producer co-operatives, which are already being promoted by the European Union and the Polish government. Co-operatives enable agricultural producers to integrate horizontally, while retaining land ownership and a measure of independence.

‘Foreign acquisitions would allow Polish firms to bring on the experience and technology they haven’t yet acquired’

Agriculture: growing productivity No one disputes that Poland’s agricultural sector is strong. The country is one of the world’s largest producers of apples, blueberries and raspberries, while its meat products enjoy popularity as far afield as Asia. Potential is high: Poland ranks fourth in the European Union in arable land, while over 200 million people live within 1,000 kilometres of the country. “Poland has more advantages than any other country for becoming Europe’s major food production and processing hub,” McKinsey said in the report. However, the sector still has a productivity gap of about 59% compared with the rest of the EU. Average yields for its main crops (except sugar beets, where Poland leads) are

Advanced manufacturing: building a winner

Poland’s advanced manufacturing and high-tech sector has grown between 7% and 10% annually since 2004, though as a share of the economy it remains small, at only 2%. Growing this sector could have powerful knock-on effects for the whole economy: innovation in advanced industries often filters down to other sectors in the form of processes and technologies. However, growth in technologyintensive industries depends heavily on scientific advances that require high risk investments. This can be overcome by encouraging high-tech manufacturing clusters, through which Polish firms could gain the scale required to have a significant footprint in the global market. “Clusters attract a qualified workforce, support knowledge development and knowledge sharing, and enable the consolidation of the supply chain, while raising the investment profile of the industry,” argues the report. There are already some models in Poland to follow. Aviation Valley, for example, is one of the strongest. Based in the country’s south-east, 90% of Polish aerospace production is concentrated there, including 119 companies and 23,000 workers. Foreign acquisitions would allow Polish firms to bring on the experience and technology they haven’t yet acquired. Promotion of advanced manufacturing could boost exports, which is key due to Poland’s relatively small domestic market. There are several Polish examples that can be followed. These include Solaris, which produces electric buses that are exported to 28 countries, and the Polish Defence Holding, which recently raised R&D investment by a third – it now has 1,000 designers and engineers working on over 100 projects.

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Aspirational nation In its ‘Poland 2025’ report, McKinsey set out two potential growth scenarios – the first under a ‘business as usual’ scenario, where Poland doesn’t make any economic reforms, and the second where it makes a concerted effort to catch up with advanced economies. The differences are stark.

Size of economy – Real GDP –G DP per capita in PPP –G DP per capita in PPP as % of EU-15 average –P osition in EU-28 GDP per capita in PPP

Mining: digging for treasure In coal mining, huge losses and mountains of unsold product are piling up for the industry in Poland, which is cursed with high labour costs and geologically difficult mines. However, it is blessed with large, deep reserves and a skilled, experienced workforce, as well as support from academic institutions such as the AGH University of Science and Technology and the Silesian University of Technology. Rather than allow the industry to die under a mountain of debt or keep it on life support through payouts from the national budget, Poland could reinvigorate it by improving efficiency and basing an R&D hub around the sector. While more labour flexibility would be welcome, not all of the inefficiencies in Poland’s mines comes from intransigent workers. The report suggests using data analytics to enhance equipment availability and improved operating procedures to raise productivity. Automation doesn’t always have to mean reductions in the workforce either – the industry could improve both productivity and safety by introducing more remote-controlled processes. Mines could also improve utility efficiencies (using less water and energy) and raise safety standards. Shutting down unprofitable mines and increasing production in profitable ones would also help. When it comes to R&D, Poland stands to benefit from the global trend toward automated mining technologies. “Poland’s mining industry has very strong foundations for world-class R&D capabilities in mining technologies,” reads the report. Academic resources, active mining equipment companies and significant demand from domestic mines offer a core around which an innovation cluster could be developed.

Energy: investment in the future Poland’s energy sector is desperate for investment to upgrade its generation technology, revamp its outdated grid and develop renewable energy capabilities. Along with finding the financing for these projects, “efficient operations will be critical to provide the solid financial foundation needed to avoid putting pressure on energy prices and suppressing economic competitiveness,” says the report. Poland’s energy firms will have to go through some consolidation, and then maximise the efficiencies of their generation portfolios, perhaps upgrading hard coal burning facilities and waiting on riskier investments such as nuclear power and natural gas. The report also suggests revamping the market support system, so that it would subsidise only the lowest-cost renewable technologies. The effects of such reforms would

Today (2013)

Business as usual 2025

Aspirational 2025

517bn USD 23,000 USD 60%

700bn USD 32,000 USD 70%

850bn USD 40,000 USD 85%

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be multiplied if they were coordinated with the European Union. “Development of European transmission capacities for electric power and gas would enhance interconnectivity while European coordination would boost security of supply,” the report adds.

Pharmaceuticals: prescription for innovation Poland’s pharmaceutical industry is on a 10-year growth streak and by itself accounts for about 1% of GDP. Poland’s pharma market is the largest in the region and the sixth largest in the EU. Exports, especially to Western Europe, have been strong, as Polish producers focus on advanced-medicine markets. “Poland has established a solid reputation and fundamentals in the manufacture and marketing of pharmaceutical products,” says the report. The country’s strongest points include generic prescription drugs and branded over-the-counter (OTC) products. The sector boasts several modern manufacturing plants, with plenty of skilled labour. According to the report, Poland could create its own hightech pharma hub by becoming a European manufacturing centre for complex generics and biosimilars, by strengthening its role as a manufacturing contractor for European generics products and by becoming a packaging and logistics centre for European pharmaceutical companies. Here it can use its lower cost labour force, its familiarity with EU norms and its geography to its advantage. “Should Poland succeed in strengthening exports and becoming a European hub for generics manufacturing and logistics, manufacturing capacity as well as sales could nearly double,” predicts McKinsey.

Pieces in place Agriculture, advanced manufacturing, mining, energy and pharmaceuticals are all sectors that could help form a foundation for a knowledge-based economy in Poland. Though no one is ready to dub them with a sexy (but hackneyed) moniker like ‘Silicon Valley’, they are sectors where Poland already has many of the pieces in place. And while very different, there are several common areas of focus that will help them become more innovative: clustering, consolidation, technological advancement and increased efficiency. Achieving some of those goals will be harder than others, but that’s no excuse not to begin. The McKinsey report makes it clear: if Poland plays its cards right, by 2025 it could reach GDP levels on par with some Western European countries. That would be welcome news to Polish citizens, who long to reach the economic levels of their peers. by Andrew Kureth

Sources: International Monetary Fund; McKinsey Growth Model

Growth industry:

It is well known that Poland boasts high quality agricultural products and plenty of customers for them close by. But Polish agriculture has a productivity gap of 59% when compared with the rest of the EU. To close it, the experts at consultancy McKinsey & Co say Polish farms need to consolidate. “Any significant improvement in productivity would require first increasing the size of the average Polish farm,” says a recent report from the firm.

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Economy of tomorrow: industry by industry Companies sound off on the challenges and opportunities in their industries over the next 10 years

We asked companies from a wide range of sectors to tell us what the future holds for their industries in Poland and how businesses will have to react to them. Below is a selection of the answers firms gave us. compiled by Lech Kaczanowski

Boryszew

Solaris

Cezary Pyszkowski, member of the management board at Boryszew:

Marcin Napierała, spokesperson for Solaris:

In the next 10 years the automotive sector will continue to be one of the most important branches of the Polish economy – one that generates significant revenue and creates sustainable jobs for thousands of Poles. The automotive sector in Poland is not just factories producing cars, but also manufacturers of components constituting an increasing percentage of players in the industry, employing about 150,000 employees across the country. Development centres will increase in importance, replacing the currently dominant assembly plants. Domestic components manufacturers will gain new competencies, expand production facilities and allocate more resources to growth and innovation. We definitely want to fit into this trend and grow our R&D – we see the opportunity to build a sustainable competitive advantage and the basis for future growth.

Arctic Paper Wolfgang Lübbert, CEO of Arctic Paper: Over the next 10 years, the paper sector will most probably see an increasing number of areas where the digital and analogue media converge to create new and positive synergies. The nearest future may bring even stronger necessity to create new products both within the packaging and the digital printing segments. Also, there will be a need for more specialised and non-wood papers. There will also be an increase in investments in new technology to protect the environment. Arctic Paper plans to further concentrate on finding new solutions to fill or even to create new demand for specialised products.

The bus industry, although it is part of the automotive industry, is specific. In its scope, we see an increasingly strong trend gaining in the popularity of zero-emission solutions, such as electric buses. We anticipate that emissionfree solutions will gain in importance, and in the near future electric buses on the streets of European cities will not be uncommon.

DB Schenker Marek Staszek, CEO of DB Schenker Rail Polska: The transport and logistics market followed customers’ needs beyond the borders of one country a long time ago. When we talk about its development, we should look at the market not only from a national but at least from a European perspective. Here we can see five trends which will shape the market in the near future: globalisation, deregulation, demographic changes, climate protection and digitalisation. Moreover, the emerging new concepts in the management and organisation of production – such as lean management – will strongly influence the development of the transportation and logistics sector.

Can-Pack Stanislaw Wasko, vice president of the management board at Can-Pack: Poland is one of the largest packaging markets in Europe. The packaging industry is equipped with modern means of production and the latest technology, and the offer of packaging manufacturers is fully competitive in foreign markets. In light of the current economic situation in Poland, the packaging market continues to grow and has good prospects – it has a chance to achieve a level comparable to the developed markets of Western Europe over the next decade. We intend to play a significant role in metal and glass packaging, mainly by changing production technology resulting in: increased productivity, reduced costs, innovative printing solutions, product quality improvement and usability improvement.

DCT Gdańsk Maciek Kwiatkowski, CEO of DCT Gdańsk: To see the full picture of the Central and Eastern European container market one must remember the unstable and unpredictable situation in Russia. Part of container flow through Polish ports is dependent on the situation in and around Russia, which recently is very difficult. Weak domestic economy, collapsing currency, European Union’s embargoes and Russian counter-embargoes have influenced not only the direct cargo flows to Russia but also the economic situation of the Russians. This means changes in the structure of Russian cargo flow and it directly affects the condition of container terminals serving the Russian market.

Fakro Anna Korczyk, spokesperson for Fakro: Recent years have brought rapid development of the construction sector in Poland. Polish companies have invested substantial financial resources in production facilities and advanced technologies. As a result, today domestic Polish companies successfully compete in foreign markets. We offer excellent quality and competitive solutions. We expect that in the coming years the Polish building materials sector will be associated with a strong name brand.

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Ciech Dariusz Krawczyk, CEO of Ciech: Polish chemical companies are often listed among the largest in the European market, and their position in the world is continuously getting stronger. The Polish chemical sector has a large potential for further growth. The positive development of consolidation, privatisation and restructuring processes in the sector will have a good influence on the financial condition and liquidity of large companies. Thanks to increasing productivity, innovative solutions and competitiveness, Polish chemical companies should continue their dynamic expansion to foreign markets in the long-term perspective. In order to achieve this, it will be necessary to maintain Polish products’ high level of quality and invest boldly in new technologies and production capacity. However, we have to keep in mind larger obstacles, such as the climate policy of the European Union, which may hinder the competitiveness of Poland and Europe on the global market.

Comarch Janusz Filipiak, founder and CEO of Comarch:

Ericpol Jan Malkiewicz, communication & marketing department manager at Ericpol: I think that the IT services sector will continue to grow, but without the fireworks and spectacular successes. A few companies will strengthen their presence abroad, but not much, because the key problem is that the state is not able to support the export of technology and therefore we have not been able to achieve mass presence on the global market. Another problem will be demographics. The demand for qualified engineers and science graduates continues to increase while their number in Poland is falling. If more students go into humanities than into computer science, electrical engineering, mathematics, physics or even chemistry, it will have a decisive impact on the price of services and the quality of our solutions on the Polish market.

Before 2020, each hospital and clinic in Poland will have an implemented IT system enabling the secure electronic processing of patient data. Services such as e-registration, e-referrals and e-ordering will be common and patients will have access to their medical records remotely, via the internet. Experience from other markets shows that the absorption of ICT leads to considerable cost reduction, for example by shortening the duration of hospitalisation. There are many applications for ‘telemedicine’ – from care for the chronically ill to extreme sports. Our ambition is to pave the way for the idea of a fully computerised medical facility of the future, where the use of information systems can be much more efficient.

Goodman Maciej Madejak, head of business development Poland at Goodman: Logistics, as well as the warehouse market, have good prospects in Poland. Thanks to progress in infrastructure development, access to a qualified workforce and strong internal demand, Poland is becoming more attractive for foreign companies year by year. E-commerce will remain one of the sectors that has the greatest influence on the growth of demand for warehouse space. Secondly, Poland will attract production companies seeking highquality space designated for production and warehousing, and often for office space as well. At the same time, competition among developers is growing. The Polish warehouse market is maturing, so only the strongest players, with access to financing, will survive.

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IKEA Industry Poland

Integer

Wojciech Waligóra, chairman of the management board at IKEA Industry Poland:

Rafał Brzoska, CEO of Integer.pl Group:

We believe that Poland has good conditions for further development in the wood and furniture industry, including skilled employees and know-how, good quality raw materials and long-term sustainable forest management, as well as a stable overall economy. We also believe that the growth will come not only from exports but also from the national market, where consumers will be more likely to exchange their furniture in a shorter periods of time. There are several trends that will probably have an impact on the Polish wood industry’s competitiveness: improved efficiency and quality through automation and the growing importance of safety and sustainability.

In the near future we can certainly expect the development of services for the food industry – an increasing number of e-retailers offer customers bread, fruit, vegetables and delicatessen products. The e-commerce market is evolving very rapidly, consumer expectations are rising – they want to buy products online in virtually every sector. Delivery service providers will have to adapt to this trend. In addition, crossborder services are still thriving. Cross-border deliveries in the future will play an increasingly important role in the e-commerce market. Drones are another interesting direction some companies are going. However, there are still a lot of difficulties related to security and legal issues. We believe the most proven solution in the market will continue to be machines for sending and receiving packages independently. That is why we continually strive to develop our network of automated parcel lockers.

Skanska Katarzyna Zawodna, managing director at Skanska Property Poland:

Prologis Ben Bannatyne, managing director and regional head at Prologis Central and Eastern Europe: We believe there are strong growth opportunities for the warehouse and industrial sector in Poland. According to estimates, the warehouse sector in Poland could grow by 50-60% by 2020, and reach close to 13m sqm. This shows that there is still a lot of room for development in this sector. The market recovery in 2014 has allowed developers to return to a conservative amount of speculative development and this is likely to continue and increase in the core markets where levels of vacant supply are falling to all time low. Certainly the popularity of build-to-suit facilities is unlikely to fall, particularly for the light assembly and production companies that due to the specifics of their activity, prefer a tailor made solution.

The real estate market will be driven mostly by the sector of modern business services, which is expected to grow by 15,000 to 20,000 new jobs annually. From the outsourcing centres alone we will see high demand for modern office space. The increasing demand will also be driven by the public sector and growing Polish companies. Polish GDP is expected to amount to 70% of the EU15 countries’ average by 2025. Presumably, this will also result in a growing demand for office space. It is significant that numerous companies are locating their offices outside Warsaw, because they are finding skilled workers in regional markets, while reducing costs.

ArcelorMittal Poland Sylwia Winiarek, spokesperson for ArcelorMittal Poland: The development of Poland’s steel market in the next few years will be driven by a number of infrastructure projects that will be implemented within the new financial perspective of the European Union. However, there are a number of challenges that the steel industry in Poland is facing at the moment and which make it impossible for it to compete against imports from countries in which market conditions are more favourable. We need to have a level playing field. For this to be achieved, the issue of energy cost needs to be addressed immediately: the excise tax on electricity should be abandoned and the gas market should be fully liberated.

Panattoni Robert Dobrzycki, managing partner Europe at Panattoni Europe: The next 10 years will see the emergence of Eastern Poland, which has appeared on investors’ radar only recently, due to a number of newly completed and ongoing infrastructure projects, most importantly the A4 highway. The latter has brought places like Rzeszów and Lublin so much closer to Western Europe. The eastern parts of Poland are a huge reservoir of labour, which is becoming increasingly hard to find in areas near Wrocław and Poznań. One can expect an influx of manufacturing investments to Eastern Poland precisely because of the availability of workers. The labour intensive projects will move there, while logistics businesses that prioritise short delivery times to Germany and beyond will remain near the Western border.

Asseco Poland Ewa Kryj, press spokesperson for Asseco Poland:

PKO BP

The chemical sector currently accounts for a smaller portion of industrial production in Poland than in other countries. While Europe’s share in global production is 24%, Poland’s is only 2%. Furthermore, with Poland’s foreign trade deficit at some €7bn annually, the sector offers considerable potential for growth. In terms of competition, the situation in the industry will also improve as new products and technologies are created thanks to the EU Horizon 2020 programme and other dedicated financial support schemes. We believe that the petrochemical industry has considerable potential for growth, and so we are consistently pursuing our petrochemical investment projects.

Łukasz Świerżewski , spokesperson for PKO BP: The Polish banking sector over the next 10 years will consistently support the development of the economy, which will systematically close the gap with Western Europe. In parallel, there will be a process of consolidation of the banking sector. As a result, some small banks with small market shares will disappear from the market if they don’t find a lucrative niche. They will be taken over by larger institutions. We also see changes in customer behaviour and preferences. It will be important to build and develop modern communication and customer service tools.

PolskiBus.com Piotr Pogonowski, director of marketing and communications at PolskiBus.com: The rapid development of infrastructure, specifically more and better local road connections, will be an incentive for us to add new routes and extend current ones. Our research shows that an increasing number of people will decide to travel as prices become more affordable connections between individual cities improve.

Gerard Bourland, general director at Veolia Group in Poland: European climate policy will significantly influence the Polish energy and utilities market within the next 10 years. Even though coal will remain the dominant fuel in Poland for a long time yet, gas and renewable energy will have an increasingly larger share of the market. I also believe that district heating will be recognised as a very efficient tool to tackle both energy efficiency and lower emissions. Nevertheless, the changes won’t be revolutionary. It is not possible to completely transform the energy sector of a country within 10 years. The direction of change will be toward a low emission economy, but the pace of change will largely depend on regional conditions.

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We develop technologies that are not only able to satisfy current market demands, but can also create future trends. This is particularly important in times of a global economy where we need to face the competition from both Polish and international IT vendors. The expectations of companies and institutions that buy our software solutions are increasingly higher as they become better educated in information technology and are able to determine precisely what they need.

PKN Orlen

Veolia

Warsaw Stock Exchange If the Polish capital market is to thrive, everyone needs to be made aware that the capital market is an important part of the economy. There are many examples that confirm a strong relationship between the capital market and a fast-growing economy. Therefore, it should be permanently inscribed in Polish economic policy. All related entities should be engaged and specific actions should be taken in order to support the dynamic development of the capital market. Steps to promote the success of the Polish economy on the international stage, for example, would give a positive stimulus to the development of the market. It is also necessary to simplify procedures and to introduce changes in tax regulations to promote market transparency and stock market investment, such as incentives for investors and issuers. In addition, the Warsaw Stock Exchange sees the need for regulatory changes facilitating access to the Polish capital market, which would increase competitiveness.

Wizz Air József Váradi, CEO of Wizz Air Poland has a great future in air transport. Over 50% of Polish air transport capacity is now attributed to low-cost airlines, and this trend will continue to develop in the next 10 years. Economic convergence is one of the drivers of long-term transport prospects and as a result air transport should grow disproportionately fast compared to Western Europe – here it’s growing at about two times the growth of GDP. There’s a lot of growth capacity on existing routes, as some routes are flown with a very tight capacity. There’s scope for adding more frequency to those routes. Many of the drivers will happen because we’re stepping up, with 6 million passengers expected this year compared to 4.7 million last year. So we will be driving this growth.

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Setting business free Poland Today editor Andrew Kureth sits down with Andrzej Malinowski, president of advocacy group Employers of Poland, to talk about the challenges facing Polish businesses

Employers of Poland (Pracodawcy RP) is campaigning to change how tax authorities treat entrepreneurs and taxpayers in general. What would you like to see changed and how would such changes benefit Poland’s economy?

Andrzej Malinowski has been presi-

dent of the Employers of Poland (Pracodawcy RP) since 2001. The group brings together 10,000 companies that altogether employ about five million people. He is one of the co-creators of Poland’s Ministry of Economy, serving later as its secretary of state. He also served as a member of parliament and held other ministerial positions. In parliament, he was vice-chair of the Committee of Foreign Economic Relations. He holds a PhD from the Poznań University of Economics.

Changing tax policy in Poland is one of the priorities of Employers of Poland. It would be unfair to say that policy-makers are not doing anything to rectify the tax system. However, the changes are often only temporary and occur far too slowly. In addition, solutions favourable to taxpayers are often adopted only because we are obliged to implement directives and recommendations of the European Union. There is no will and courage to make bold changes. I wish that, after 25 years of a market economy in Poland, the tax authorities would finally stop treating entrepreneurs as potential fraudsters. I wish their rights were respected, so that they could concentrate on running their businesses, developing them and creating new jobs. Simplifying the tax system and changing the tax administration’s approach to taxpayers would enable existing businesses to develop and new ones to be established. This would be a win-win, since it would benefit the Treasury, entrepreneurs and ordinary citizens. We are an extremely entrepreneurial nation and therefore the state should introduce legal and tax solutions creating conditions in which Poles could spread their wings, pursue their goals and dreams, which obviously will affect the public welfare.

Other than taxation issues, what do you consider the biggest challenge currently facing employers in Poland? One of the biggest challenges facing employers in Poland is an increasing

difficulty in recruiting suitably qualified staff. This is a matter of changing the education model so that it meets labour market needs. Otherwise, graduates will be unemployed while employers still struggle to find staff they need. To grow and to be competitive, we need to treat financial expenditures on personnel primarily as an investment, not just costs. We really need broader and closer cooperation between business and schools, especially vocational schools. It is also necessary to support the development of human capital and increase awareness of how important good human resources management is.

What is the most important change you would like to see made in Polish regulations? All of the changes expected by Polish businesses concern reducing pervasive formalism, taming bureaucracy, and enacting rules that are not highly questionable in their application. The degree of complexity in Polish law is not conducive to building mutual trust between the state and entrepreneurs.

What can be done to encourage Polish companies to invest more in R&D and innovation? Ratings clearly show that the Polish economy as a whole and individual companies are not as innova-

Employers of Poland Employers of Poland (Pracodawcy RP)

is the oldest and largest organisation of employers in Poland, according to its website. The group has accompanied Poland’s political and economic transformation since 1989 by representing the interests of Polish entrepreneurs from all sectors and businesses. The orgainisation brings together more than 10,000 companies employing around five million people.

tive as we would like them to be. In the European Commission’s Innovation Union Scoreboard we are only ahead of Romania, Bulgaria, Latvia, and Lithuania. That is bad. We need an overhaul of the playing field. I am talking both about changes in the law that will make investment in research and development attractive in terms of taxation and about facilitating access to financing for micro and small companies. We have many start-ups with great business ideas and all they need are the right conditions. We have to create a whole ecosystem for innovation, focusing in particular on commercialization and cooperation between science and business. These are grassroots processes now as policy makers have not fully grasped how serious the problem of our low innovation level is. They should bear in mind that innovation allows you to sell your goods or services with a higher margin, which then enables moving up to the next stage of economic development. This has a fundamental impact on the whole economy, providing not only for its dynamic development but also a significant increase in wages, and therefore in the wealth of the society. The advancement of civilisation depends on innovation. We hope the new EU budgetary perspective will enforce some processes even against the administration. In 2007 few people believed that Poland would manage to build any highways, and today some of them are of better quality than the German ones. I hope the same process will take place in terms of innovation and strengthening cooperation between business and science, so that by 2020 we will be proud of the number of new patents. One thing I know for sure – Polish entrepreneurs have huge potential

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‘I wish that, after 25 years of a market economy in Poland, the tax authorities would finally stop treating entrepreneurs as potential fraudsters’ and they can unlock it by themselves as long as the administration does not get in the way.

You have criticized the government for not choosing Poland-based manufacturers to provide 70 new helicopters for the Polish military. Are quality of equipment and Poland-based production the only criteria the government should use, or should geopolitical concerns be taken into account as well?

the planned process of modernisation. The aim of this action is that in a few years, perhaps a decade, Polish companies will be able to not only to meet most needs of the Polish armed forces but also effectively compete for contracts abroad. It is simply a matter of our national interest. Such is contemporary patriotism.

Is the emigration of so many young, educated Poles an overall negative or an overall positive? The government plans about 130bn How should this issue be addressed złoty in expenditures on armaments. from the side of policymakers? This is a huge amount of money that Do Polish employers have a role should go to Polish industry if possible. to play in stemming the tide? Buying foreign products with Polish taxpayers’ money when the same – or better – quality products can be made in Polish plants, is acting to the detriment of the economy. Most Poles agree with that, as opinion polls show. In countries such as France or Germany it is inconceivable that domestic companies are not the first to be considered. Of course, we should also take into account the geopolitical situation and our membership in NATO. I am convinced, however, that there is no contradiction here, and you can reconcile those two criteria – geopolitical and economic factors. Without a doubt, we should increase the potential of Polish armaments companies during

At the end of 2013 the number of Poles temporarily residing outside Poland was estimated at approximately 2.2 million people, not counting emigration prior to joining the EU. At the same time the number of immigrants in relation to the total Polish population remains at one of the lowest levels in the EU and is approximately 200,000 people. If emigration and immigration balanced each other, we would consider them as enriching our labour market with international experience and stimulating entrepreneurship. Unfortunately, at the moment there is no indication that we might expect massive returns of Poles. And no one has an idea how to change this situation.

There are at least a couple of prob- Taxing attitude: lems stacked together here, so there is “I wish that, after 25 years of a market no single solution. Poles aren’t leaving economy in Poland, because they can’t find a job in Poland, the tax authorities but rather because they want a job would finally stop that is better paid and better suited to treating entrepreneurs as potential their qualifications, and because they fraudsters. I wish want a higher standard of living. With their rights were this in mind, we must conduct reforms respected, so that in many areas. We need a comprehen- they could concentrate on running their sive and rational family policy, housing businesses, developpolicy, regulations conducive to coop- ing them and creating eration between science and business, new jobs. Simplifying investment in human capital and entre- the tax system and changing the tax preneurship, real support for entrepreadministration’s apneurs from state institutions, and health proach to taxpayers care reform. would enable existing Additionally, it is important to businesses to develop and new ones to be remember about a proper migration established,” says policy, which in our situation should Andrzej Malinowfocus on the labour market. ski, president of Employers of Poland (Pracodawcy RP).

What do you think will be Poland’s greatest economic advantage over the next several years?

Poland has many strengths, but uses them poorly. In my opinion, our greatest asset is our absolutely remarkable entrepreneurial spirit. Its explosion could be seen best a quarter of a century ago, when we began the transformation. Despite many obstacles, Poles are still one of the most creative and entrepreneurial nations in the world. If in fairly difficult legal and regulatory conditions we can surprise the world with interesting ideas, imagine what we would be capable of in a more friendly environment. If we free entrepreneurship from the fetters of bureaucracy and provisions incompatible with the socioeconomic conditions of the 21st century, if the tax administration does not persecute brave people running their own businesses, we can – as the saying goes – move mountains.

interview by Andrew Kureth

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A brand waiting to happen How is ‘Brand Poland’ perceived around the world? Poland Today editor in chief Richard Stephens asks two top executives at global brand valuation consultancy Brand Finance

What is Poland’s reputation abroad at the moment?

David Haigh (top) and Brynn Anderson (bottom)

are CEO and COO, respectively, of Brand Finance, a brand valuation company. We asked them to evaluate Poland’s brand. They said that Poland still needs to do more to improve its image abroad. However, they also said that Polish companies should still identify themselves as such: “Poland could be a very powerful nation brand” they said.

Brynn Anderson, Brand Finance COO: According to our study, the Polish brand comes in at about the middle of the scale. The reputation of Poland in overseas markets is very much a mixed bag. The gulf between perception and reality is enormous. There are some key segments which are relatively negative, which are wrapped up with other Eastern European nations – that it was under Soviet control, that it’s grey and bleak, when in fact it’s completely different. David Haigh, Brand Finance Founder & CEO: The keys are tourism, FDI, products and services, and people. When it comes to tourism, it’s either negative or niche – Poland’s treasures are not well known. Concerning companies from Poland, a number of Polish brands have given themselves names which sound German, English or Japanese. From a products and services point of view it’s not great. Aldi and Lidl source a lot of products from Poland but they don’t want to admit it. Concerning people, foreigners know Poles are Catholic, hard-working and honest. People are probably Poland’s most positive asset. Finally, concerning FDI, there’s the residual fear of what’s happening in Ukraine, which may be unfair, but it’s the case. So it’s a bit of a mixed picture. BA: But it’s also positive in comparison with Ukraine. Poland has good fiscal and political management and the economy is growing reasonably well. It’s on a stable footing. In our nation brand study, Poland did best in people and skills, as well as in goods and products. Polish products are of good quality – Poland’s biggest exports are in heavy machinery and electrical equipment. DH: Business to business it’s doing OK, but name recognition is not there.

What advice would you give Poland in terms of improving its brand? DH: The country has to list the things it’s good at and rank them. Concerning Polish brands and products, they have to think about where they are likely to be positively received – and in my opinion it’s where Poles have emigrated. So prioritise where Poland has a comparative advantage, and then target

the right products to these places. The world is so big and crowded that you can’t do everything – you have to use your resources carefully.

Poles find it hard to agree on what face to show. BA: That’s the hard part. Every organization faces this. You have to come up with something and then bring people along with you – people have to get behind it or it won’t gain traction. Poles are fun, tolerant and artistic – that would fit with a series of festivals. DH: It has to be believable. For example the alcohol industry is where Poland could have a comparative advantage. My understanding is that lots of filmmakers have come from Poland. If there’s a major film festival in Poland, I’ve never heard of it. BA: It’s all about communication. In my experience Poles don’t shout about what they’re good at.

Is there a country or countries whose example Poland should follow? DH: Peru has done a great job, as has Britain, with its ‘great’ campaign. Spain has done a good job with its ‘Marka España’, which is coordinated by the government. Spain is similar to Poland in some ways – they’re both Catholic countries, agriculture is big for them both, but unfortunately Poland doesn’t have the beaches.

But Poland has great beaches, actually. DH: That illustrates the point. I didn’t know that. When you talk about Poland, people’s faces are often a bit blank. BA: Poland is a perfect candidate to host the World Cup or Olympics. DH: Countries which want to change perceptions of their country have to develop their tourism industries, so the government needs to put resources

‘I think it would be a big mistake for businesses not to emphasize their Polishness’

about Brand Finance Brand Finance is a brand valuation consul-

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there. I understand Poland has lots of natural wild beauty – people can go there for horse riding or outdoor holidays. BA: It has to be managed very well so people leave with a positive opinion.

When Polish companies operate abroad, should they emphasise that they are Polish, or rather only that they are from the European Union? DH: I think it would be a big mistake not to emphasise their Polishness. Poland could be a very powerful nation brand. It’s not a dump, it’s just not well known. It would be an admission of defeat and it would be wrong to go under the EU brand. Most people would look at the product and would say: “What do you mean it comes from the EU? Where in the EU?” BA: You’ve got to have confidence. Poland is a brand waiting to happen.

What should Polish companies do to improve their chances of success in foreign markets? DH: If the Poland brand is not very strong, they will have to do their own marketing. The government has a responsibility to help their companies. You can’t wait 50 years for it to happen organically. The government has to act now – it’s imperative.

interview by Richard Stephens

Business services in focus

business services in focus

Booming business services: The busi-

ness services industry, which includes everything from business process outsourcing (BPO) to shared service centres (SSCs) to research and development (R&D) operations, has become one of the fastest-growing sectors in Polandâ&#x20AC;&#x2122;s economy. It is now estimated that it is the second largest employer in the country. But to keep the flow of investment coming, Poland will have to move up the value chain, providing complex, knowledge-intensive services.

How to sustain the boom page 29

Diving into Warsawâ&#x20AC;&#x2122;s deep talent pool page 33

Regional earthquake page 37

business services in focus

The booming business services sector in Poland The employment rate in the business

services sector in Poland is increasing. Compared with the beginning of 2012, the number of employees in service centres with foreign capital increased by over 50% – from 83,000 to 128,000. From April 2013 to April 2014, at least 18,000 new jobs were created, most of them in Kraków.

The average annual increase in

employment in Poland over the last few years (since early 2009) stands at about 15,000. Taking into account the sector’s current development, it should be assumed that, by the end of 2015, foreign business service centres in Poland may already have at least 150,000 employees (according to a modest scenario).

150,000-170,000

‘Warsaw is the second-biggest location for business service centres in Poland. I think that Warsaw hasn’t been perceived as a location for shared service centres and BPOs until now, because those operations were located within big organisations. Now we have a few good examples of the more complex operations. Samsung is one. Its R&D centre in Warsaw is one of its biggest in the world.’

Arkadkiusz Rudzki, leasing & asset

13-18%

average turnover rate in SSC/BPO centres

8-13%

average turnover rate in ITO/R&D centres

450,000

number of graduates in Poland (2012/2013)

management director, Skanska Property Poland

‘In the last 14 years, this sector has created more jobs than in the whole mining industry – coal mining, copper mining, salt mining, there are 90,000 people involved. In business services, just within the companies with at least 10% foreign capital, it’s 150,000 people.’

Paweł Panczyj, managing director,

Association of Business Services Leaders in Poland

forecasted employment in the sector in Poland by the end of 2015

Knowledge of foreign languages among welleducated job candidates English: 90% German: 46% Russian: 38% French: 20% Spanish: 15% Italian: 9%

470

number of service centres in Poland with foreign capital (2014)

foreign capital service centres (2014)

>50%

City

Number of employees

Average employment

Kraków Warsaw Wrocław Tri-City Łódź Katowice Agglomeration Poznań

30,600 22,300 20,500 11,500 10,800 10,000 7,500

360 266 360 244 224 243 200

increase in employment in the sector in Poland since early 2012

new service centres were established in Poland between 2013 and 2014

60%

Business services in focus

of those were created by new investors with no service centres previously established in Poland

87%

percentage of service centres that have expanded their scope of services in recent years

273

Examples of new investments in the main locations for business service centres in Poland (2013-2014)

average size of workforce in business service centres in Poland

Location

Selected new business service centres

Katowice Agglomeration Kraków Łódź Lublin Poznań Szczecin Tri-City

85% of SSC/BPO employees will consider moving to

Warsaw Wrocław

– IBM, Sii, PERFORM – GE Healthcare, Lundbeck, RWE, Samsung – Clariant, McCormick, Veolia, Samsung – Convergys, Mobica, Sii – DFDS, Mars, Newell Rubbermaid, Propex – Netto, Genpact, Mobica – Competence Call Center, Kemira, Powel AS, ThyssenKrupp – Linklaters, Procter & Gamble, TNT Express – Merck, Parker Hannifin, Unic Group, Viessmann

another city for work, provided that they receive an attractive employment offer

There are 325 investors from 28 countries in

Poland’s business services sector

Sources: ABSL, Hays Poland, Central Statistical Office

How to sustain the boom The business services industry has been one of the great positive surprises for the Polish economy over the last 10 years. Here’s how Poland can keep investment in the sector flowing

business services in focus

In a little over a decade the busi-

Super-charged sector Poland is now a well established location for investment from this sector – Kraków, Warsaw and Wrocław are frequently ranked within the top 100 business services investment destinations worldwide. Kraków is regularly ranked within the top 10 in the world and first in Europe. The list of investors reads like a who’s who of major global technology, financial and consulting firms. The sector pays well, too. Estimates put the average wage for mid-level jobs in the sector in Poland at around 6,000 złoty per month, nearly twice the national average. As tens of thousands of Poles leave their home country to work in other parts of Europe – mainly to find higher wages and a better standard of living – the sector offers hope of creating the high-paying jobs that Poles yearn for. However, it was the

Geographic advantage Though Asian locations are gaining momentum for business services investment, Poland holds some important geographic advantages. For one, it is closer to many of the firms that are making such investments – it can be much more convenient for Europe-based firms to locate their business services operations close to home. Also, since Poland is a member of the European Union, companies know that the legal and regulatory framework will be in line with the bloc’s norms. Finally, cultural similarity means management is easier. “We have close cultural relationships with Western countries. It’s quite easy to adapt an employee here in Poland,” said Jacek Brzozowski, an advisor at business advocacy group Employers of Poland (Pracodawcy RP).

low wages here in Poland that originally drew business services investment to the country in the first place. Now, in places like Kraków, the Polish city with the highest number of employees in the industry, employers complain that the labour market is becoming overheated. Wages are beginning to rise to Western European levels, especially when it comes to workers in advanced ICT services or with rare language skills. At the same time, Asian locations continue to move up the ranks for business services investment locations. Poland already can’t compete with wages in most of those countries – as salaries rise, it will become even less labour-cost competitive. Poland must therefore continue to move up the business services value chain, say experts. The future of the industry in the country does not lie in payroll processing and call

photo: Londoneye

ness services sector has exploded in Poland, creating over 160,000 jobs and accounting for millions in investment. The sector is now the country’s second biggest, having surpassed mining, with only the automotive industry employing more people in Poland. The wave of foreign investment has transformed economies in Poland’s regional cities (see page 37), while an increasing number of investors are looking at the capital, Warsaw, as a location for their more complex operations (see page 33). Business services is a term adopted by the industry which includes business process outsourcing (BPO), and shared services centres (SSC). BPO/ SSC operations are usually associated with simple back-office activities, such as payroll processing, human resources management and accounting functions, as well as customer service services, usually in call centres. Those were indeed the first types of investments that came to Poland, but businesses soon learned that the country’s well educated, hard working, polyglot labour force offered the talent they needed to complete more complex operations. These include research and development (R&D) and information and communications technology (ICT) services. Together all of these types of operations come under the ‘business services’ umbrella.

business services in focus

‘The future of the industry in the country does not lie in payroll processing and call centres. Instead, Poland will need to attract more R&D and ICT operations’ SOURCES OF GROWTH Areas that are expected to be the richest sources of growth in advanced business services: – Middle-office for banks and insurance companies – Advanced IT programming – Supply-chain and logistics coordination centres – Business research and analytics – Research and development – Remote health diagnostics and data storage – Advanced administrative business support Source: McKinsey & Co

centres. Instead, Poland will need to attract more R&D and ICT operations – the kind that pay high wages and add intellectual capital. If it does, the sector could take the lead in finally transforming Poland into a knowledgebased economy. “We have an overproduction of highly educated young people,” said Jacek Brzozowski, an advisor at business advocacy group Employers of Poland (Pracodawcy RP). “The business services sector absorbs these people, and in the future can do so on a larger scale. These Poles are adaptable, they can speak foreign languages, they are well educated. We won’t become a second Germany – we don’t have huge conglomerates like VW or Siemens. So services should be a key element of future growth.”

Prescription for growth Industry initiatives The business services sector itself can-

Business services in focus

not sit back and wait for the government and academia to implement initiatives to boost the industry in Poland. According to McKinsey, industry associations should adopt a 10-year plan that includes the following points: – Develop a vision for how the industry should look in 2025, to highlight the growing services and the resources needed to feed their growth – Train government and local authorities to understand the value of the business services sector to the Polish economy and task them with establishing strong global awareness of Poland’s services provision – Develop a model for the constructive and mutually cooperative engagement of the three core ministries involved in sector growth: Economy, Science and Higher Education, and Labour and Social Policy – Develop a world-class ‘front desk’ to serve all foreign investors considering establishing centres in Poland, in cooperation with the Polish Information and Foreign Investment Agency and local authorities of the 16 largest metropolitan areas – Develop an education program and standards to help the less experienced among the 16 municipalities attract and retain outsourcing centres in their local areas – Help Polish universities and the Ministry of Science and Higher Education connect with the important outsourcing companies, so that new specialised education programs can be developed to meet their professional needs in such areas as insurance and financial services, IT, business research, and marketing and sales

The potential is eye-popping. Consulting firm McKinsey predicts that with the right mix of incentives, the sector could expand four-fold, to 600,000 jobs, over the next 10 years. That could bring with it up to 150,000 additional jobs in related support services. The advantages don’t end with more workplaces, either. “Potential benefits include rising management capabilities in areas such as multicultural and dispersed team management, more niche specialists ... and greater availability of world-class management processes,” the company wrote in a recent report. So what needs to be done? “First we have to assess our potential, and then sell that potential,” said Brzozowski. For some years now, Polish cities have been marketing themselves abroad as excellent destinations for business services investments, but experts agree a national promotion strategy is in order. The McKinsey report calls on Poland to “develop and finance a broad international promotion campaign for Poland as a European champion of outsourced business services.” Just as important, the industry and academia need to start working more closely together to ensure that the graduates coming out of Polish universities have the skills investors will be looking for. “Universities should engage more with business, get more

information about businesses’ needs and include that in their curricula,” said Brzozowski. Possible courses of study could focus on anti-money laundering services, financial fraud detection, corporate compliance, big data business analytics, advanced software programming and supply-chain optimisation, according to McKinsey. The cooperation is already happening on a small scale in some places. For example, the private Kozminski University in Warsaw offers an internationally recognised certificate of specialisation in anti-money laundering processes. Universities also need to help develop skills in management, teamwork and leadership. Other recommendations include raising the level of foreign-language proficiency throughout Poland’s educational system. Schools should encourage students to learn more than one foreign language, the report says. It predicts that French, Spanish and Nordic language skills will prove particularly valuable. Finally, entrepreneurship in the industry should be fostered. So far, the growth in Poland’s business services sector has come almost exclusively from foreign investment. In places like India, domestic companies that offer business services have sprung up, allowing international firms that don’t want or need their own centre to simply hire out those processes. But this segment is only still in its nascent stages in Poland. “For Poland to become an international leader in the provision of business services, new international private companies will have to be created here,” says the report. It suggests consolidation and acquisition of mid-scale, international business services companies from Western Europe. “It is high time for local companies to start providing their services all over the world,” agreed Brzozowski. “There are more and more people with great experience in the sector, so the local firms should appear soon. However, it will only be possible in the case of simple services – the more advanced ones seem to be too important for the companies to outsource them to external providers.” Nevertheless, a robust cadre of home-grown providers will further solidify Poland’s position as the premier business services location in Europe. If academia can be brought more in tune with the sector’s needs and a national programme promoting the country’s potential in business services can be initiated, the industry will be poised to reach the growth and sophistication necessary to drive Poland’s development to the next level.

by Andrew Kureth

Diving into Warsaw’s deep talent pool The capital’s huge supply of well educated, skilled labour is the key advantage that will make it a European hub for complex business services in coming years

Kraków currently rules the roost when it comes to business services Where Warsaw investments in Poland – but that could placed in key fDi Magazine rankings change soon. Warsaw is not far behind, and its sheer size gives it a distinct – Global Cities 2014/15 #23 Overall advantage. The smaller regional cit#10 Major City Overall ies that have previously garnered the #5 Major City – Business Friendliness attention of international investors are becoming saturated and less competi- – European Cities 2014/15 #6 Major City – Business Friendliness tive. Warsaw, for its part, still offers plenty of potential employees and Source: fDi Magazine office space. At Primetime Warsaw III (see pages 39-51), Poland Today held a that they have prepared. So they go to round table discussion on the future of a location that gives them that proof the industry in the capital. – Warsaw is that location. Taking part in the discussion were: Courtney Fingar, editor-in-chief of fDi MoneyGram has a business Magazine; Paweł Panczyj, managing services centre in Warsaw. director of the Association of Business What exactly does it do and Services Leaders in Poland (ABSL); why did you choose Warsaw? Arkadiusz Rudzki, leasing & asset manAndrzej Wilk, MoneyGram: Within agement director at Skanska Property three quarters we’ve managed to put Poland; Jakub Sylwestrowicz, head together a workforce of 550 people, of tenant representation at JLL; and and they speak 25 languages. Right Andrzej Wilk, senior vice president at now we deliver 45 processes to every MoneyGram Payment Systems Poland. MoneyGram location globally. At the Poland Today editor Andrew Kureth moment we employ 25% of the global moderated the discussion. workforce of MoneyGram here. Warsaw plays a significant role on our map. Why did we choose Warsaw? At the Andrew Kureth, Poland Today: beginning, finding a low-cost location What does the future hold for the was at the core of the discussion. But I business services sector in Warsaw? Paweł Panczyj, ABSL: It all started think the most important element is the with Warsaw. In the 1997-2000 period, talent pool. Obviously, the infrastrucWarsaw, Prague and Budapest were the ture exists here. Also, we were able to most popular destinations in the region secure a location that will finally host for business services investments. The 800 people on one floor – that was an smaller cities in Poland, especially important element that differentiated Kraków, came later. Just taking into Warsaw from Kraków or Wrocław or account companies with foreign capital, Łódź – which we also analysed. But the this business has created nearly 30,000 talent pool is something which is key. jobs in Warsaw in the last 10 years. I have just recently come back to At the moment we have the seventh Poland. I spent the last three years in or eighth wave of investors from loca- Budapest with my previous company. tions like Scandinavia, Germany, Austria, One thing that really surprised me is that Switzerland, France, the UK and the US. Warsaw has become an international The recent trend shows that the com- centre. And when I talk about it – I see panies coming to Central and Eastern people joining my company right now Europe are coming with more and who come from Spain, Portugal, Greece more complex processes. When you – Warsaw is becoming this European think about the analytics, complex data centre where it not only offers jobs, but – companies don’t want to take much it offers everything else: entertainment, risk. The more traditional businesses – reasonable costs of living, great conheavy industry, pharma, medical, and nections to the rest of Europe. the financial industry – these companies do not want to take the risk of Wrocław and Kraków also have great going somewhere where their invest- talent pools, great recreation, low ment may not work. They want proof costs of living and so on. So what that it will work within the time frame is it that differentiates Warsaw?

AW: When it comes to the talent pool, Wrocław and Kraków are cities of approximately 700,000 people. Warsaw has an agglomeration that hosts close to 2 million. That’s a big difference. The second thing is that while Kraków is the number-one business services location in Poland, that is exactly why we didn’t want to be there. I would guess that those markets are a bit saturated at this moment. When it comes to the labour, when it comes to the ability to attract great people, you immediately enter into very strong competition with the players that are already established there. So for us, Warsaw was a less-penetrated market when it comes to talent.

That’s interesting, because some of the biggest global brands are here in Warsaw too. But what I understand is that the talent pool in Warsaw is simply deeper than in other Polish cities. Is that right? AW: I think it’s deeper. Moreover, we see the contracting of the financial sector that started in 2008 and has not yet finished. So it’s a natural feed to our industry. Warsaw is the centre of financial services industry in Poland. Great – that’s exactly why we are here, because we can source from this pool. PP: Occasionally you will hear that the Wrocław or Kraków markets are saturated. Have you ever heard that said about Warsaw? No. Not because things weren’t happening here, but because it is so huge. So that’s the difference: it will not get saturated. 300,000 students in Warsaw, 200,000 students in Kraków. It’s just one of the data points that makes the difference.

Obviously, business services has driven a lot of the development of office space throughout Poland. How does Skanska, as a developer, see the industry on a Poland-wide scale? Arkadiusz Rudzki, Skanska Property Poland: We were the first developer who really believed in the sector. We were first to develop the tailor-made solutions, to be supportive for those companies’ operations. It was a really big boost for us to look for other locations in Poland and right now around 90% of our business is outside of Warsaw,

business services in focus

Polish Cities of the Future 2015/16 ranking 1. Warsaw 2. Kraków 3. Poznań 4. Wrocław 5. Łódź 6. Gdańsk 7. Katowice 8. Szczecin 9. Gdynia 10. Gliwice Source: fDi Magazine

due to the fact that the regional cities in Poland are really booming and are supported by the business services sector.

Does that indicate that maybe the trend will then come back toward Warsaw? AR: I really believe that will happen, especially considering the turn toward specificity of services – it will be much more complex. Taking that into account, Warsaw seems to be the natural choice. One thing is the depth of the market, in terms of the labour force, and also the attractiveness of the city itself. This is truly an international place right now.

What is the view from the real estate advisory side in terms of business services? Jakub Sylwestrowicz, JLL: I can only repeat and add to what Paweł and Andrzej have already said about the great abundance of skills, the labour market and so on. But I would do so using the example of our company, because JLL has its shared services centre in Warsaw. It’s not huge in terms of headcount, but it is really doing well, and the team has grown by 20 people. A couple of weeks ago they moved to another building. The fact that we have been very successful and we are still growing this team, the fact that they are looking for people using different languages, from Hebrew to Hungarian, from Russian to Romanian, and the fact that we can find these people, it speaks to the quality of Warsaw as a place to run this business. Real estate is not the essential element for business services investors. Once you are sure that you will find the people that you are looking for, that you will be able to pay the salaries they expect, only then do you have to find the place where these people will be working. In this respect, Warsaw not only has a large office market, but it has a market that is driven by speculative development. You simply go and collect the offers from landlords who are building in anticipation for tenants. This fact, plus the fact that the rental rates are very attractive compared to other CEE locations, all of these factors speak for the advantages of making such investments in Warsaw.

It is widely known that Warsaw’s high vacancy rate has been putting pressure on rental rates. How important a factor is that? JS: I think it is important, but I wouldn’t go so far as to say it would make a big difference between whether a company chooses Warsaw, Wrocław or Kraków. At this stage I think it’s more about being in the city centre and the Wola district or a more peripheral district. So it is important, but not in the

‘If a company wants to put a business services centre in Europe, Poland has one of the strongest hands to play’ sense that it will distinguish between cities. It will distinguish between different sub-markets within the city.

Courtney, where does business services stand in terms of the ranking of the number of foreign investments in Warsaw? Courtney Fingar, Editor-in-chief, fDi Magazine: Business services is third. Financial services is number one, software and IT services is number two, and then business services. But they all fit together, so that just shows the dominance of the industry.

Do you see that continuing? CF: I think so. Having strengths in business services, from the perspective of foreign direct investment [FDI], is handy, because business services is the number-two sector globally for creating FDI projects, and it’s number one for capital expenditure. It’s a healthy sector. There a lot of projects around, so that’s good. The other handy thing is that the top two source countries for business services projects are the US and the UK, and these are two markets in which Poland can compete for investments really well. In particular the UK, where Poland is clearly the regional leader. Looking at our data, Poland is ahead of Romania, ahead of the Czech Republic, and ahead of Hungary for these projects. At the city level, Warsaw is ahead of Bucharest, Budapest and Prague, so it has clearly sown up the business services market in Central and Eastern Europe, which is encouraging. However, if you look at the data over the past five years, compared to the data over the past 10 or 15 years, it has declined a little bit on the destination list, as destinations in Asia have risen. So the competition is coming from there, rather that from some other regional players.

I’ve heard that it tends to be the more simple processes that are going to Asia, whereas the more complex process are coming to Poland. Do you think that’s the case? CF: Possibly. There is a value chain and it is true that there is a role for all of these markets to play and as I said, business services projects are abundant,

business services in focus

more so than some other sectors that generate FDI. So it’s not necessarily a zero-sum game. However, some other locations are rising up the ranks.

You mentioned some of the positives of business services investments. Are there negatives? CF: To be honest, there are not huge negatives for Poland or for Warsaw in this particular sector. It’s not the cheapest location going, but it offers a really good mix of cost and quality and the skills are really high. In some cases, maybe it makes sense for various reasons for a company to put a centre in Asia to deal with that market, and another in Europe for that market. If they’re going to put a centre in Europe, Poland has one of the strongest hands to play. It’s really just more about keeping up that competitiveness, adding to the skills and keep moving up the value chain rather than overcoming some glaring negatives, because it doesn’t have a lot in this area.

What are the other challenges it faces when it comes to the business services industry? AR: We need to concentrate on making sure there is consultation between education and business. I’m not sure if this is happening in Warsaw. How Warsaw could improve is to have really specific vision of how to set up a programme for graduates. JS: I would say that the traditional locations for business services operations – namely locations in the Służewiec Przemysłowy neighbourhood of the Mokotów district – are saturated in terms of the transport infrastructure. It is not aligned with the number of office blocks or the number of employees working there. It’s not a threat to the sector, but in certain instances it makes some investors less prone to decide to go to these locations. Another challenge is whether companies want to follow the flock or be pioneers. Andrzej mentioned that they indeed were thinking about other cities such as Kraków, but found that it was saturated. Instead, they wanted to make a bold decision and be pioneers. However, I think Warsaw faces that challenge of whether companies have the guts to make that bold decision.

Regional benefit: While Warsaw still holds plenty of potential for business services, the sector has already reshaped the economic landscape in Poland’s secondary cities. Poland Today takes a close look at how the economies in Kraków and Łódź have been transformed by this industry. see page 37

business services in focus

Thirdly, going back to the more micro out what gaps there are in the skills and level, it’s about making a decision if they what skills they think they might need want to be in a more economical loca- five or 10 years from now, and being tion within the city, and then maybe ahead of the curve and making sure struggle to recruit people, or maybe that either the technical colleges or the they would like to go to locations like universities are offering those courses. the Wola district which is booming That happens a lot anecdotally, but it’s and which has a lot of pipeline pro- very hard to measure in any real terms. jects underway, where they can take the benefit of the subway and the tram So many of Poland’s students are lines, but pay slightly higher rents. going abroad for their education. AW: Commuting to work is one of the While some come back, many biggest issues. We see this in Służewiec do not. At what point does Przemysłowy. I think it requires the that affect the talent pool? immediate attention of the city. That’s PP: It’s true that there is this decline one thing and it’s going to hinder in the number of people. It’s no longer Warsaw’s development and growth. 2 million students, it’s 1.8 million. It’s no I cannot imagine that my CEO would put longer 500,000 graduates, it’s somemoney behind Służewiec Przemysłowy thing like 420,000. We can try to conif she saw employees would have vince them to stay in Poland, but that to spend an hour and a half in traffic won’t work if we don’t have the argueach morning. ments to keep them, and right now There’s another thing which I thought we do not. Now companies are talking about and that is the talent pool. Today to the Ministry of Labour, Ministry of it is true that we are enjoying a time Foreign Affairs and Ministry of Economy when we can attract pretty much eve- to open the Polish market and Polish rybody. But I’m thinking that in five, universities for people that may fill in seven years from now, we will need a the gap that was created by Poles leavstrategy for how we are going to ensure ing: students from Ukraine, from Serbia, that the talent pool can be redeployed from Croatia, from Montenegro. There to different sectors. Today what I see was even a campaign for students from is that all the business services oper- India and from China to study in Poland. ations are hiring people who are very These efforts won’t lead to a complete ambitious and well educated. The replacement of the number of peoproblem is that if all of your employ- ple who left, but we need a structural ees are very ambitious people, turno- approach to this question, and we need ver is going kill you at some point. So to test something. how can we ensure that people can be redeployed? A structural approach Andrzej, I know that a lot of to education is critical. foreigners work at MoneyGram.

Business services in focus

A good education system is always an important factor. Courtney, how does education factor in to your rankings?

Could you tell us a bit about that?

AW: We have 18 different nationalities, and we didn’t really do any recruitment outside of Poland. We only advertised CF: There are several data points here in Warsaw. So there is a certain within the rankings that are focused traffic of students, as well as young proon education at all levels. Warsaw fessionals, coming this direction. comes top in Poland. But in that catThere is another interesting thing to egory, it didn’t come in the top 10 in note when considering all of this. When the European rankings at the city level. we look at the history of Poland, when it Poland suffers a little bit just because was a really powerful nation and when there are so many cities. Things are the economy was growing, this was also a bit spread out – in many other coun- a time when we as a nation were edutries, most of the main universities are cating our kids in the best universities concentrated in one city. of Europe: Prague, Italy, etc. So I don’t But the education system in Poland see this, at least the students moving is well regarded, and that’s at the heart abroad, as a danger but rather as an of the skills here being so well regarded, opportunity. We don’t need hundreds along with some characteristics to do of thousands of identically educated with the work ethic and the way people people, we need people who will chalare. But it gets top marks from inves- lenge the status quo here. Now is the tors and is widely considered a good time when we have to figure out how educational system, both by numbers to be very attractive for them in four or five years when they come back. and also perception. AR : Education is one thing, but we do have a lot of foreigners coming to Is there some kind of measurement Poland to work – especially from Spain, of how education cooperates Greece, Italy, Portugal, for example. So with the business community? CF: That’s hard to measure. The thing we are attractive as a country, I think. is for the local authorities and those The question is whether business will be looking to talk to the companies to find here. by Andrew Kureth

‘We don’t need hundreds of thousands of identically educated people, we need people who will challenge the status quo’

FDI: projects breakdown. According to fDi Magazine, between January 2010 and January 2015, Warsaw attracted 215 FDI projects amounting to an estimated $840m. The top sectors were financial services, software & IT services, business services, real estate and communications. Source: fDi Magazine

Regional earthquake

business services in focus

The wave of investment in business services has reshaped the economic landscape in Poland’s secondary cities

For years

after Poland’s economic transition, Warsaw was far and away the Polish city that attracted the most attention from foreign investors. Major multinationals would establish their Polish headquarters in Warsaw, which would absorb the investment and gain the new workplaces. That picture, however, has changed dramatically: Poland’s secondary cities are now the beneficiaries of a wave of foreign investment, mainly from the business services industry. The sector has become one of the country’s largest employers, putting around 160,000 people to work. “This is a very large segment of the workforce that did not exist eight to 10 years ago,” said Wojciech Bogdan, partner at McKinsey & Company, a consulting firm. An increasing number of cities are becoming desirable locations for services centres. “The first wave was Kraków, Warsaw and Wrocław,” said Bogdan. “Over time a second wave came with Poznań, Łódź, Katowice and Tri-City. Now we already see the third wave with cities such as Bydgoszcz, Toruń, Szczecin, Lublin, Rzeszów and Białystok.” Further locations may come as business services providers move into smaller Polish cities. “This sector is poised to be well established in all agglomerations in Poland within 10 years, and it has the potential to be one of the largest sectors in the country,” Bogdan added. Among the cities most affected by the influx are Kraków and Łódź. Poland Today took a deeper look at the change in these two cities’ economies, specifically.

photo: Piotr Guzik (Forum)

Kraków: Poland’s business services capital One of the biggest beneficiaries of the wave of business services investment is Kraków, the country’s second largest city. Known mostly for its rich history, the city now boasts more inhabitants employed in the business services industry than any other in Poland. In the most recent edition of Tholons’ Top 100 Outsourcing Destinations ranking, Kraków came ninth worldwide and first in Europe. The next highest ranked Polish city, Warsaw, came 30th, while Wrocław ranked 62nd. According to Małopolska Regional Development Agency data, the business services

sector in the Małopolskie voivodship includes 103 companies and employs some 37,000-40,000 people – mostly in the region’s capital, Kraków. The investment from the sector has led to other benefits. “For every 1,000 workplaces in Kraków’s service centres, 267 jobs are created in the local economy,” said Beata Górska-Nieć from the Business in Małopolska Centre. The city has also seen growing demand for high quality goods and services, as well as greater interest in services such as catering, healthcare and education, she added. Kraków now has one of the lowest unemployment rates in Poland, at around 5.3%. The Małopolskie voivodship has an unemployment rate of 10.1%, while for the country overall it is 11.2%. Companies in the sector also offer competitive remuneration. “Salaries in the business services sector stand at about 80-90% of the Polish average for the lower and medium-ranked employees group. There are only higher [salaries] in Silesia and in Warsaw,” Górska-Nieć said. With a major contribution from the business services sector (which now occupies some 627,500 sqm in the city), Kraków has also become an increasingly important location for commercial real estate. According to Górska-Nieć, developers deliver some 70,000 sqm of modern office space annually.

Education for business Linguistics for business is what high school

graduates may choose if they wish to continue their education at the University of Łódź. The first three-year bachelor-level course was opened in 2013 and is co-managed by the philology and management faculties. Students are required to learn English and a chosen second language at advanced levels as part of the curriculum. So far, French, German, Italian, Spanish and Russian have been offered as options. The course also includes classes held by business services managers and internships in sector companies. The university will soon open a second such course – on digital banking and finance – in cooperation with Accenture and mBank.

Kraków Business Park (above) is one

of the locations in Poland’s second city that has attracted a number of companies from the business services sector. Kraków is routinely ranked in the top 10 locations for business services investments worldwide, and boasts the largest number of people employed in the sector of any city in Poland.

‘Over the past few years, shared service centres have become some of the most attractive employers in terms of salary levels, not to mention non-wage benefits’

business services in focus

South Korean Ambassador to Poland Paek YoungSun (above right) attended the opening of Samsung’s R&D centre in the city in 2013.

Potential for further growth City

Employment in business services

Estimated no. of graduates of relevant university studies

Kraków Warsaw Wrocław Tri-City Łódź Katowice Poznań Bydgoszcz Szczecin Lublin

30,600 22,300 20,500 11,500 10,800 10,000 7,500 3,800 2,800 2,000

104,000 156,000 77,000 55,000 54,000 90,000 81,000 43,000* 32,000 52,000

Business services in focus

*includes graduates from Toruń Source: McKinsey & Co, based on ABSL and GUS data

Łódź: services in a post-industrial landscape Łódź, located about 130 kilometres south-west of Warsaw, is a post-industrial city that saw intense development in the late 19th and early 20th centuries with the growth of the textile industry. But after the collapse of communism its economy was never able to fully recover. Now, however, the business services sector has entered and changed the landscape. “At the moment some 15,000 qualified employees work in 60 companies in the business services sector in Łódź. They specialize in IT, financial services, accounting and customer service, with the use of more than 21 languages,” said Marcin Masłowski, spokesperson for Łódź City Hall. “Over the past few years, shared service centres have become some of the most attractive employers in terms of salary levels, not

to mention non-wage benefits, such as healthcare packages and fitness offers,” he added. Companies from the sector are also active locally, and some have engaged in cooperation with the city’s main university in educating future employees. Like Kraków, Łódź has also observed a revival of its real estate market. “New investments in the business services sector translate into higher demand for office space in our city,” Masłowski said. “As a result we see the construction of new, high-standard office buildings.” Developers are working on projects that will add some 40,000 sqm of office space in Łódź.

New awakening Polish regional cities have awakened to the opportunities from the boom in business services. “Almost every large agglomeration today has a specialized

department or person who is the first line of contact for potential partners interested in locating their business services activities there,” said McKinsey’s Bogdan. “Cities learn from each other but they also compete for new jobs and investments.” The Business in Małopolska Centre pays special attention to the business services sector in its promotional activity. “The presentation of local potential, including higher education, language skills, the quality of life, the real estate offer and infrastructure development are a regular part of the business promotion activities of city and regional units,” Górska-Nieć said. Łódź, for its part, focuses largely on cooperation between academia and business. It devised a programme called Młodzi w Łodzi (The Young in Łódź) that, among other things, encourages the youth of the city to take part in companies’ recruitment processes. “First and second wave cities are already moving towards locating more advanced business processes and hence even further creating very attractive growth opportunities for young talents in the country,” Bogdan said. This is true of Kraków, which is especially interested in attracting IT companies and R&D centres. Regional authorities have earmarked a pool of funds for supporting such investment from the new EU-funded regional operational programme. “McKinsey forecasts that by 2025 Poland’s business services sector will have some 450,000-600,000 employees and an additional 90-150,000 jobs will be created in cooperating adjacent services sectors,” Bogdan said. That rapid growth will undoubtedly contribute to the further economic development of many Polish regional cities.

by Kamila Wajszczuk

photos: Marian Zubrzycki (Forum),

Infosys, a consulting, IT and software engineering firm, opened its Green Horizon building (above) in Łódź in 2012, where it located its business process outsourcing operations.

Primetime Warsaw III

Conference

urban issues

Poland Today’s Primetime Warsaw III conference brought

together decision makers from the public and private sectors to hash out the opportunities and challenges facing urban development in Poland’s capital. Warsaw Mayor Hanna GronkiewiczWaltz, former Prime Minister Jan Krzysztof Bielecki and editor-in-chief of fDi Magazine Courteny Fingar were among the speakers at the event, held in the National Stadium in Warsaw. In this edition of Urban Issues, we provide in-depth coverage of the major themes that were explored.

Time for Warsaw to stop resting on its laurels page 42

The ‘right’ side of the river page 46

Optimism vs oversupply page 48

Praga: revitalise, but be wise

photo: Robert Krzyżewski (Forum)

page 51

urban issues

Partners of Primetime Warsaw III

Above: Krzysztof Fijałkowski,

development manager, ECE Projektmanagement

included: ABSL, Amstar, BBI Development, ECE Projektmanagement, EY, fDi Magazine, ITKeyple, Koneser Centrum Praskie, MIPIM, the National Stadium in Warsaw, Nowa Warszawa and Skanska Property Poland.

Below: Tomasz Andryszczyk, part-

ner, Primo Corporate Advisory

Left: Paweł Panczyj, managing

Below: Hanna Gronkiewicz-Waltz, mayor of Warsaw

photos: Piotr Dziubak

Conference

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director, ABSL

Right: Richard Stephens, editor in chief, Poland Today

Below: Courtney Fingar, editor-in-

chief, fDi Magazine, Financial Times Group

Above: Małgorzata Dybaś, managing director, Hotels Asset Management

Left: Michał Olszewski, deputy mayor of Warsaw

Above: Arkadiusz Rudzki, leasing & asset management director, Skanska Property Poland

Left: Anna Kicińska, Partner and

Leader for the CSE Region, EY Real Estate Advisory Group

URBAN ISSUES

Time for Warsaw to stop resting on its laurels Authorities could do much more to promote Warsaw and help it compete for FDI against the world’s leading cities

International investors

still consider Warsaw an attractive destination, with the city ranking high among potential investment locations among international investors. However, according to participants at Poland Today’s Primetime Warsaw III conference, held in April at the National Stadium, city officials could do much more to promote Warsaw abroad, especially when it comes to reaching potential Asian investors.

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A competitive market According to data service fDi Markets, part of the fDi Intelligence division of the Financial Times, between January 2010 and January 2015 Warsaw attracted 215 greenfield foreign direct investment (FDI) projects whose combined value amounted to an estimated $840m. Distressingly however, the figures showed a constant trend of fewer projects each year – Warsaw attracted 23 FDI projects in 2014, compared with 30 in 2013, 48 in 2012, 50 in 2011 and 61 in 2010. In her keynote address at the conference, Courtney Fingar, the editorin-chief of fDi Magazine, a specialist publication from the Financial Times, noted that FDI in Central and Eastern Europe had been hit hard by the outbreak of the global financial crisis. Greenfield FDI peaked in 2008 and has never really recovered, Fingar said. The downward trend in the region continued last year, pulled down by worries connected with the Russia-Ukraine crisis, she added. Nevertheless, in the challenging global economic situation, when “flat is the new up”, as Fingar phrased it, Poland has proved to be more resilient than some of the other countries in Central and Eastern Europe. According to fDi Markets data, the country attracted an estimated $6bn in capital investment in 2014, securing a 5% market share among European countries. Poland ranked fifth in Europe last year for the number of FDI projects received, Fingar said.

The Warsaw story According to Fingar, Warsaw retains a strong attraction for international investment and remains the clear leader in Poland. She called the Polish capi-

tal a “very positive city” with “a good buzz in the air.” Fingar pointed out that despite its difficult 20th century experience, Warsaw has emerged in recent years as a successful city that should tout its success abroad. “The Warsaw story needs to be told,” she said. Asked what exactly constitutes Warsaw’s success story, Warsaw Mayor Hanna Gronkiewicz-Waltz pointed to the massive infrastructure improvements that have taken place in the city in recent years. “We have managed to use the European Union funds well,” she said. In the coming years, Warsaw City Hall plans to continue its focus on the further development of transport infrastructure. The completion of the second Warsaw subway line will be one of the priorities, Gronkiewicz-Waltz said. She admitted that the ubiquitous claims to plots of land across Warsaw are a major problem for private investors in the city. Jan Krzysztof Bielecki, chairman of the partners board at EY Poland and former prime minister of Poland, pointed out that the country’s economic success over recent years has also helped build Warsaw’s position. He pointed out that Poland has now seen 24 years of uninterrupted economic growth, which is, apart from Germany, the best result in Europe. Karol Półtorak, vice president of the Warsaw Stock Exchange, said he could confirm that international investors who are considering listing their firms on the bourse see the Polish capital in a positive light. Warsaw has already become the unquestioned financial centre of Central and Eastern Europe, he said, adding that closer cooperation between capital markets and city authorities would greatly benefit the city.

‘Many other Polish cities simply seem to try harder’

Warsaw in FDI rankings Warsaw was named the Polish City of the Future 2015/2016 earlier this year in an inaugural ranking of Polish cities prepared by fDi Intelligence. Kraków and Poznań came in the second and third place, respectively. Warsaw performed best in the categories of Economic Potential, Human Capital & Lifestyle, Connectivity and Business Friendliness. The city was absent from the subjective category FDI Strategy, because it did not submit an entry. Warsaw also did well in the Global Cities of the Future 2014/2015 ranking which fDi Intelligence published in December last year. It ranked 23rd among cities of all sizes worldwide. The European cities that were ranked higher than Warsaw were London, Dublin, Bucharest, Zurich, Frankfurt, Amsterdam, Stockholm, Munich and Geneva. Interestingly, Moscow came in after Warsaw, in 25th place.

Better messaging needed For all its positive performance in attracting global capital in recent years, Warsaw could certainly do more to better appeal to international investors and to take its international image up a notch. The best performing FDI cities have professional promotion strategies. According to Fingar, Warsaw has strong fundamentals for attracting foreign investment, but it must become more proactive and aggressive about attracting investment. “Many other Polish cities simply seem to try harder,” Fingar said, adding that Warsaw seems to be suffering from what she calls “the capital city syndrome” – taking its investment attractiveness for granted. She added that Warsaw City Hall could make better use of the Polish diaspora, with the millions of Poles living abroad being potential ambassadors for the city. Last but not least, Warsaw, already the established business leader of the CEE region, should not rest on its laurels. The Polish capital should measure against the best in the world, not just the neighbours, Fingar said. Warsaw should do its best to attract investment from foreign markets that have not yet begun to invest heavily in the city, including markets to the far east. “Go hard on Asia,” Fingar suggested.

by Adam Zdrodowski

URBAN ISSUES

Global Cities of the Future 2014/2015 Ranking:

1. Singapore 2. London 3. Hong Kong 4. Dublin 5. Dubai 6. New York City 7. Tokyo 8. Shanghai 9. Bucharest 10. Beijing 11. Paris 12. Zurich 13. Seoul 14. San Francisco 15. Frankfurt 16. Amsterdam 17. Stockholm 18. Atlanta 19. Munich 20. Geneva 21. Abu Dhabi 22. Houston 23. Warsaw 24. Sydney 25. Moscow

photo: Andrzej Bogacz (Forum)

Source: fDi Intelligence

Left: Andrzej Wilk,

senior vice president, Global Business Center, MoneyGram Payment Systems Poland

urban issues

Below: Jan Krzysztof Bielecki,

chairman of the board of partners, EY Poland, former prime minister

Partners of Primetime Warsaw III

Left: RafaĹ&#x201A; Rosiejak, head of confer-

ence centre & MICE, National Stadium

photos: Piotr Dziubak

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included: ABSL, Amstar, BBI Development, ECE Projektmanagement, EY, fDi Magazine, ITKeyple, Koneser Centrum Praskie, MIPIM, the National Stadium in Warsaw, Nowa Warszawa and Skanska Property Poland.

Left: Krzysztof Wilczek, regional director of region north at Skanska Property Poland

Above: Karol Półtorak, vice

president, Warsaw Stock Exchange

Left: Jakub Sylwestrowicz,

head of tenant representation, JLL

Above: Rafał Szczepański,

vice president of the management board, BBI Development

urban issues

The ‘right’ side of the river New development based on revitalisation, the new subway line and the National Stadium is spurring Praga’s comeback

The long-neglected Praga

Północ and Praga Południe districts located on the east side of the Vistula, just across the river from the centre of Warsaw, are rich with opportunities for further real estate investment, said participants at Poland Today’s Primetime Warsaw III conference, held at the National Stadium in April. Recent infrastructure improvements, notably the opening of the central stretch of the second subway line, have given new life to the area, collectively known simply as ‘Praga’. However, for this potential-laden portion of the Polish capital to fully bloom, it will need to continue to combat its negative reputation.

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An authentic city Conference participants pointed out that Praga was not nearly as heavily damaged in World War II as the districts of Warsaw located on the left bank of the Vistula – many of the historic prewar buildings in Praga have been preserved. Therefore its architecture, along with its location just across the river from the city centre, make this densely built-up area attractive for both investment and daily life, said Warsaw Deputy Mayor Michał Olszewski. He admitted, however, that Praga still is not receiving the attention it deserves. According to Rafał Szczepański, vice president of the management board at developer BBI Development, Praga possesses the fundamentals that will enable it to develop rapidly in the coming years. For example it already boasts authentic urban tissue – with its streets and public squares – one of the most difficult elements of a city to develop. Within 10 years, revitalized historic tenement houses in Praga will be attracting plenty of interest, Szczepański argued. The first major changes have already taken place. The National Stadium, which was built as part of the preparations for the 2012 European football championships that Poland co-hosted with Ukraine, has become a new landmark of eastern Warsaw. Rafał Rosiejak, head of conferencing and exhibitions at the National Stadium, said that the hundreds of business events held at the facility last year attracted about a million people in total. Warsaw City Hall is now planning a huge revitalization scheme for Praga

which is valued at about 1.4bn zloty and will cover a number of neglected neighbourhoods located in the Praga Północ, Praga Południe and Targówek districts. Many of the existing residential buildings in those neighbourhoods will be modernized. Szczepański said he hopes there will be various types of housing developed in Praga, so that it will see a return of the middle class.

Room for more

New projects coming to Praga Praga does not offer as many easily rede-

veloped vacant or post-industrial plots of land as the popular Wola district does. Nonetheless, there are a number of very attractive sites there that are expected to soon house new residential, office and retail projects. The Port Praski area of the Praga Północ district is already seeing the development of new housing schemes. However, the real changes will come in a few years when construction launches on new office towers next to the new subway stop near the National Stadium. BBI Development and Liebrecht & Wood are already working on their Centrum Praskie Koneser mixed-use project, which will involve the revitalization of a former vodka factory and will include residential, office, retail and cultural space. A similar development is currently being planned by developer OKAM Capital, which has recently purchased the former Pollena factory site in Praga Północ. A project called Bohema will involve the delivery of new retail, cultural and residential space there.

Anna Kicińska, a partner and Central European real estate expert at EY, said she believes Praga could become a major office market. According to EY data, there is now only around 200,000 sqm of office space in the eastern part of Warsaw, which accounts for around 5% of the combined office stock in the city. Most of the space is located in relatively old buildings, Kicińska said. She added that a few years ago, one of the banks in Poland was considering moving its headquarters to Praga. In the end traffic problems that afflict the popular however, the company had to aban- Służewiec Przemysłowy business area don the idea because it could not find of the Mokotów district of Warsaw. According to Krzysztof Fijałkowski, a proper office building there. Tenants from the creative services a development manager at developer sector, including publishing firms and ECE Projektmanagement Polska, there PR agencies, could be interested in is also the potential for the develophaving their offices in Praga. Also, ment of new retail projects, including companies from the business pro- high-street retail schemes. Fijałkowski cess outsourcing and shared service noted that Praga has a long tradicentre sectors could help fill office tion of retail trade, especially when it space in new buildings there, Kicińska comes to streets such as Targowa and said. Large-scale office projects are Ząbkowska. expected to be developed in the near future in the Port Praski area of Praga Challenging the stereotype Północ. Construction on the Centrum To attract new real estate investments Praskie Koneser mixed-use scheme is and new middle-class residents to the already underway in the district. More eastern bank, city authorities, residents developments will likely appear as the and the area’s current investors will have process of revitalizing Praga proceeds. to battle the stereotype that Praga is Krzysztof Wilczek, a regional director the ‘bad side of town’. Wilczek said that at developer Skanska Property Poland, new landmark investments in Praga, said that while his company was not including the National Stadium and the considering building offices there now, second subway line, are already helping it would be interested in doing so in the to challenge that image. Kicińska added medium-term. that the revitalisation process will be Both Wilczek and Szczepański crucial for generating investor interest. stressed the importance of the second So development is moving forward subway line for the future development and a positive image of Praga is gainof new real estate projects in Praga. The ing momentum. With that in mind, recently delivered central stretch of the Szczepański concluded on an optimisline connects Praga Północ to the Wola tic note. “The money invested in Praga district, which lies to the west of the city will bring return,” he said. The only centre. Wilczek pointed out that due to question is how big that return will be. by Adam Zdrodowski the subway line, Praga can avoid the

urban issues

Revitalisation plans: At Różycki

Bazaar (left) traders meet with the author of the revitalisation project, architect Aleksandra Wasilkowska.

Development train: The new,

second line of the Warsaw subway is expected to bring new development to the eastern side of Warsaw. Below, the Dworzec Wileński Metro station in Praga.

Bohemian atmosphere:

Below, a view of the courtyard of 11 Listopada 22, where several bars are considered the hub of Praga’s nightlife.

photos: Grażyna Myślińska (Forum), Piotr Malecki (Napo / Forum), Krzysztof Zuczkowski (Forum)

‘Warsaw City Hall is now planning a huge revitalization scheme for Praga which is valued at about 1.4bn zloty’

urban issues

Praga: revitalise, but be wise While Warsaw’s right bank desperately needs a makeover, authorities must be careful not to ruin the area’s specific atmosphere

Conference

Primetime Warsaw III

Warsaw City Hall

‘The process will involve a number of major challenges and will require Warsaw authorities to be shrewd in combining old with new’

plans an extensive revitalisation programme for the neglected neighbourhoods of eastern Warsaw. The changes are highly anticipated and will go a long way toward attracting more real estate investment to the right bank – but at the same time they must be made prudently and with forethought, so as to ensure Praga’s particular character is not lost, said guests at the Primetime Warsaw III conference held by Poland Today at the National Stadium in April. The process will involve a number of major challenges and will require Warsaw authorities to be shrewd in combining old with new. Praga has long had its own specific atmosphere, characterised by the presence of historic architecture and a distinctive local folklore. In recent years, it has taken on a more bohemian personality, as artists move in and work there. A City Hall official pointed out that Warsaw, which was almost completely destroyed The potential demographic shifts also during World War II, suffers from the raise questions: If apartment prices in lack of a proper urban tissue. For that Praga continue to rise and more afflureason Praga, with its preserved pre- ent inhabitants begin moving there in war buildings and natural authentic- large numbers, will part of the local, ity, has become increasingly appealing low-income population of that area of to Varsovians. Warsaw be displaced? How can the With the revitalisation scheme about city ensure that the old and new inhabto get underway and a new subway line itants become integrated? Participants providing easy travel between Praga pointed out that the education system and the centre of Warsaw, middle-class could be a source of conflict – new Varsovians are increasingly interested in upper- and middle-class residents in moving to the east side of the Vistula. the area may not want to send their The revitalisation process planned by children to schools there. Warsaw City Hall will impact approxiParticipants also voiced concern mately 1,500 hectares of land located in about retail space that is expected to the Praga Północ, Praga Południe and go in on the ground floors of Praga’s Targówek districts. The area is inhabited revitalised tenement houses. Maciej by around 7.5% of the total population Mąka, an architect from the Mąka Sojka Architekci architectural studio, of the city. expressed disappointment at how Plac Finding the right balance Wilsona – one of the most highly trafParticipants agreed that Praga has ficked portions of the capital’s prestiglong deserved such a programme. ious Żoliborz district – saw traditional Patryk Zaremba, from Forum Rozwoju cafes and grocery stores gradually Warszawy (The Warsaw Development replaced by bank outlets. He argued Forum), an NGO, joked that he wished that Warsaw City Hall should be wiser Warsaw City Hall could be moved about leasing policies in Praga so that to Praga, if only so that officials it avoids the same fate. would pay more attention to the area. Organisational changes could help However, he also raised concerns over officials tackle the challenges lying the extent of Praga’s planned transfor- ahead. City Hall should establish a dedmation. The area could be “over-revi- icated unit to better coordinate Praga’s talised”, he said, resulting in the loss revitalisation process, participants said. of its unique character. by Adam Zdrodowski

photo: Jerzy Kosnik (Forum)

Housing, culture and sports According to Warsaw City Hall plans,

Praga’s revitalisation will involve the delivery of around 1,700 apartments, and the renovation of more than 3,000 existing housing units. The process will also include investments in culture (including the construction of a new concert hall for the Sinfonia Varsovia orchestra) and sports infrastructure, such as the construction of a new swimming pool.

Optimism vs oversupply

urban issues

Investors worry about the capital’s huge pipeline of office space, but the market’s potential for growth also keeps many upbeat

Too much room?

The amount of office space in Warsaw’s development pipeline has investors wary. However, it’s a boon to potential tenants, who now have a wider spectrum of locations to choose from. For their part, developers point out that Warsaw still has far less office space than cities of comparable size. Will the market absorb all of the offices currently being built? Only time will tell.

The prospects

for the office property market in Warsaw in the coming years was one of the main issues discussed during the real estate open forum at Poland Today’s Primetime Warsaw III conference, held at the National Stadium in the capital at the end of April. While the participants in the discussion agreed that there will be room for much more office space in the Polish capital in the long-term, many also expressed worry about the spate of new office space which is currently in the pipeline.

Cautious investors More than 700,000 sqm of office space is currently under construction in Warsaw, with approximately 300,000 sqm scheduled to be completed this year. Another 300,000 sqm is expected to be delivered in 2016. The market has seen a number of large lease transactions in recent months, but one broker pointed out that some of those deals happened as a result of consolidation processes, which does not necessarily indicate that net absorption of office space is on the rise. Karol Bartos, executive director for portfolio and asset management at investor Tristan Capital Partners, said that some office developers have been too optimistic about the chances their newly launched projects have for suc-

‘How developers are doing their maths is a mystery for investors’ cess. “How developers are doing their maths is a mystery for investors,” Bartos said. With rents falling and a considerable amount of new space expected to be vacant when it comes on line, investors will examine projects carefully, he said. In his view , if developers continue flooding the market with new space, investors may become cautious and think twice before buying office property in the centre of Warsaw again.

Residential records During the same real estate open forum, participants pointed to the excellent performance of the residential property market in Warsaw, which last year saw the best new apartment sales results since the boom years. According to Maximilian Mendel, director of the transaction advisory, at REAS, the housing sector still has plenty of potential, especially since investment in the residential market is growing.

But Bartos was clear: none of this has to mean that the market is in any trouble. It may be that in the coming years Warsaw’s office market will remain stable, with relatively low rents and a relatively high vacancy rate.

Growth fundamentals Alan Colquhoun, head of Central and Eastern Europe at DTZ, acknowledged the worries about the potential oversupply of new office space in Warsaw, but he was also very optimistic about Warsaw’s long-term development prospects. There are always going to be cycles in the market, but fundamental demand for new office space in Warsaw will continue, because the market is still relatively small compared other similar size European cities, he said. Colquhoun pointed out that there is now approximately 19m sqm of office space in Munich, whereas in Warsaw the figure stands at about 4m sqm. The cities are similar in population: Munich has 1.4 million people while Warsaw has 1.7 million. So the question is when, not if, new space will be developed in Warsaw, he said. While one should not draw straight comparisons between the cities, the discrepancy shows that there is definitely room for more office space in Warsaw. “I am really positive about the future of this city,” Colquhoun said.

by Adam Zdrodowski

52 Banking on a Business

challenging year

The past several years have been good to Poland’s lenders. But lower interest rates and new regulations could mean that will change in 2015

Judging by the overall sentiment in the banking sector and the results Poland’s lenders have recently reported, banks in the country are riding high. Assets and net income have grown while equity levels and capital adequacy ratios meet regulators’ requirements. In 2014, banks’ total net profits in Poland grew by 7.1% from the previous year to 16.2bn złoty, according to data from the country’s statistics office. Total assets in the sector grew by 8.0% to 1.53tn złoty. To add to the rosy picture, last year, Poland’s financial regulator, the KNF, carried out stress tests of 15 lenders in Poland which together accounted for 72% of the sector’s assets. All but two of the banks passed, and the pair that failed quickly increased their capital positions to satisfactory levels, the regulator said. This year, however, financial results could change significantly. According to a recent KNF survey, the aggregated net profit of the banking sector is expected to decline by as much as 10.3% in 2015.

Difficult environment Though it has shown strength over the last several years, experts share the view that 2015 may be a difficult year for the sector. “Despite positive forecasts for the economy and consumption, low interest rates and higher Bank Guarantee Fund contributions will have a negative impact on banks’ profits this year,” said Stefan Kawalec, president at Capital Strategy and a former finance minister responsible for the reform of the sector in the early 1990s. A reduction of the Lombard rate (the rate Poland’s central bank charges on loans to other banks) to 2.5% last year cut the maximum interest rate a bank can charge on consumer loans to 10%, limiting banks’ revenues from credit cards and consumer loans. A further decline could result from new regulations on bancassurance (insurance sold by banks) and a cut in the rates banks can charge for cardbased transactions (called interchange fees) to a limit of 0.2% for debit card payments and 0.3% for credit card payments, Kawalec pointed out. Piotr Sadza, financial services industry propositions leader at Deloitte Central Europe, stressed that while retail banking has been the growth driver for the sector over the last few years, the corporate segment is now more likely to drive further expansion. “After years of limiting their indebtedness, Polish companies are now declaring an increase of both investments and employment, which should directly translate into higher revenues for banks,” he said, stressing that revenue from corporate banking activities is less sensitive to interest rate fluctuations.

Swiss franc mortgages: Before

Financial results change as expected by banks surveyed by the KNF Net financial result Net interest income Net fees and commissions Total assets Income from corporate loans Income from consumer loans Income from mortgage loans Total deposits

2014

+6.76% +6.89% +2.78% +9.39% +8.21% +3.85% +5.51% +7.1%

2015 (forecast)

-10.33% -0.47% +5.70% +5.06% +14.38% +13.60% +3.55% +7.2%

Source: KNF. Based on data from banks holding 86.9% of the sector’s assets

the global financial crisis especially, many Poles took out mortgages in Swiss francs, since the interest rate on such loans was much lower than on złoty-denominated mortgages. However, currency fluctuations have caused borrowers some headaches. So far, however, defaults have not become an issue for Poland’s banks.

‘A significant Swiss franc loan portfolio is an important economic and political risk factor for Polish banks, though not a dramatic one’

Polish mobile payment system In a bid to remain attractive to retail customers in an ever-changing environment, six Polish banks, including the country’s biggest lender, PKO BP, have launched a mobile payment application named BLIK. The app allows for payments, cash withdrawals and transfers with the help of codes generated by a mobile phone. The move makes sense in a country with an estimated 3.5 million mobile banking customers. Alior Bank, Bank Millennium, BZ WBK, ING Bank Śląski and mBank have joined PKO BP in the BLIK system. A month after its launch in early February, BLIK had 500,000 users. Poland’s second largest lender, Bank Pekao, is developing its own mobile payment app.

At the same time, banks could have the obligatory conversion of foreigna tough time maintaining profits from currency loans to złoty at non-market retail activities, especially with lower rates may have a detrimental impact profitability from consumer loans, on the financial results and stability decreased interchange fees and a of the banks,” he explained. “However, potentially troublesome Swiss franc I don’t expect such radical solutions mortgage-loan portfolio. “Banks will to be implemented in Poland.” not only increase fees and commisCompetition and consolidation sions, but also evaluate consolidation and further cost optimisation opportuA challenging market environment nities, especially in their retail networks,” usually fuels consolidation. M&A activSadza explained. ity continues in Poland’s banking sec“This year the sector is subject to tor and more deals are in store. Alior much stronger negative pressure than Bank’s owners have been looking for an last year,” said Józef Wancer, CEO investor for more than two years (Polish of BGŻ. “Net interest income may insurer PZU recently agreed to buy be affected by lower interest rates, 25% of the company). Other possible while net fees and commissions may targets include Raiffeisen Polbank and, decline due to a reduction of interaccording to reports, the Polish unit of change fees and the implementation of Deutsche Bank. Andrzej Jakubiak, head Recommendation U [which limits banof the KNF, has spoken out against furcassurance activity].” More negative ther consolidation, saying it has already factors may be linked to Swiss francreached an “optimal” level in Poland. denominated mortgages. However, Most market players do not “However, it is the almost doubling of banks’ contributions share his view, insisting that consolidation is in the cards. to the Bank Guarantee Fund that could have the most severe “The level of consolidation in the Polish banking sector is well effect,” Wancer stressed. Each year, banks make contribu- below the European average,” said Sadza. “It is also worth tions to the fund, which operates Poland’s deposit guarantee remembering that a number of smaller market players genscheme. In 2015 banks may be forced to earmark some 1bn erate relatively low revenues, which will be subject to a lot złoty more for such contributions than they did in 2014. of pressure. This may force further consolidation.” “From the point of view of banks and their results, further Swiss franc troubles consolidation would be justified. However, the participation When the Swiss National Bank decided to unpeg the franc of the largest lenders in consolidation would not be desirable from the euro early this year, concerns were raised about how in view of the banking system’s stability and the interest of Polish lenders – and borrowers – would cope with the situ- customers,” Kawalec said. “The KNF opposes further mergation. So far, however, there has been no significant impact. ers among the biggest banks and hopefully it will be able According to the KNF, at the end of 2013 there were some to withstand the pressure,” he added. 562,500 Swiss franc-denominated mortgage loans adminis“One of the prerequisites for future consolidation is a possitered by Polish banks, accounting for 31.8% of the total num- ble decline in profitability, which may also result from stricter ber of mortgage loans. Their average value at the time was regulation – the EU’s capital requirements directive for exam241,200 złoty. “The impact will depend on the solutions that ple,” Wancer said. He also stressed that the level of consolidaare adopted,” Kawalec said. “A significant Swiss franc loan tion in Poland is low and that some foreign entities could be portfolio is an important economic and political risk factor forced to leave the Polish market as part of their restructuring for Polish banks, though not a dramatic one.” processes. Whatever happens, it is clear that 2015 will prove Sadza agreed that future legal solutions will be crucial. much more difficult for banks in Poland. Whether the sector “The impact on the sector’s results should be limited. However, will remain one of Poland’s most profitable will depend on potential supervisory decisions or legal actions leading to how well they meet those challenges. by Kamila Wajszczuk

53 Business

Kamila Wajszczuk

is a journalist at buisness news agency ISBnews. Her previous experience includes work for Warsaw Business Journal and EMIS DealWatch. In her spare time she enjoys travelling, with a special focus on Central and Eastern Europe.

54 business

Transformational expertise The story of Elzab, a Polish IT company whose business model has undergone several successful transitions, offers lessons for how other Polish firms can meet future challenges

If you’re interested

in Polish companies that have weathered transformation, look no further than Elzab, a maker of cash registers and retail sales supporting solutions. The company has survived three revolutions in its business model, all while dealing with such earth-shattering events as the fall of the Soviet Bloc and the global financial crisis. Poland Today sat down with Krzysztof Urbanowicz, the company’s CEO (who as of 28 April left that position to become vice president of Elzab’s parent company, Comp). We asked him about the company’s past, and what firms can learn from its experience as they look to meet the challenges of the future. Elzab is the oldest company in Poland combining production with software development. Under communism, as many as 200 similar companies were established, but only Elzab managed to survive Poland’s transition after 1989. The company originated in 1969, when the Polish Communist Party’s politburo decided to create a Polish IT cluster in Silesia in order to add some white-collar jobs to the blue-collar mining region. The Elzab plant was established with 1,500 work places to produce electronic devices compatible with the Eastern Bloc’s mainframe. The company enjoyed a long, successful run, and in 1983 was even behind one of the first computers to be produced in Central and Eastern Europe. However, 1991 brought with it the collapse of Comecon – a trade and economic cooperation organisation comprised of countries within the Soviet sphere. Overnight, Elzab was left with a warehouse full of products and no one to sell them to. “That’s when Elzab made its first successful shift,” said Urbanowicz. The company decided to focus on small monitors, particularly for the medical sector, as well as small computers. But Poland’s transformation opened the country up to foreign competition, and Elzab’s products became obsolete. Elzab had to quickly change tack again. The country’s economic transition also brought with it modern taxation regimes: personal income tax, corporate income tax and value added tax (VAT). Suddenly, there was demand for devices that could calculate and

record transactions involving VAT, and Poland Today sits down Elzab stepped in to fill the gap. with Krzysztof Urbanowicz, “Elzab got a model of a cash regis- CEO of Elzab (now vice ter developed for the UK market which president of Comp) very quickly it transformed into a fiscal device for the Polish market. At that What are some lessons that time we were the only player in the we can draw from Elzab’s market, but since then it has become most recent transition? very competitive. Currently we hold The main lesson is that you must a market share of around 25%,” said be equipped from the very beginning Urbanowicz. “Throughout our transfor- with a very strong management team. mations we have changed the product Profit streams and cost drivers must be portfolio, the technology, the size of the identified at the earliest stage. Proper company and the customers – but not due diligence, identifying problems the people. There are still families with from the past – this is a must. three generations working at the same plant,” he added. Do you think that the ability of Nevertheless, history had placed the company to manage change a large burden on Elzab. When it was so well comes down to specific created, the company was expected to qualities of Elzab, or is it somebe completely self-sufficient. It had its thing in the Polish character? own power plant, its own heating plant, It’s a combination of both. In Elzab its own telephone network and its own we’ve made our transitions the most metallurgical units. It also had a huge difficult way: without changing a lot of factory, scaled for 1,500 people, and a people. The easiest way to transform large piece of land adjacent the plant. a company is to change top manageBy the time private Polish IT com- ment and half of middle management. pany Comp took over Elzab in 2010, the We made some changes, but the bulk of company only employed 270 people. In employees remained the same, which the beginning of 2011, when the results can make transition more difficult. It’s were published “it was a shock to eve- usually harder to change company culrybody,” said Urbanowicz. Elzab’s profit ture without changing the people, too. But indeed Polish people are very had turned to zero. That’s when Elzab made another important transition. entrepreneurial. I’ve seen it in many Urbanowicz, who had been brought on different sectors, but I’ll give you one with the Comp takeover, implemented example from Elzab. We currently work a restructuring plan that saw the com- with a German company. When we pany completely revamp its product started working together, we could tell portfolio, as well as sell off or lease that they were highly sceptical of our out all of the company’s fixed assets, abilities, just because we were Polish. reduce fixed costs and negotiate with Then, we found a lot of mistakes in a suppliers. “At that time we received project they gave us. When we came tremendous support from our supervi- back to them, not only did we point out sory board chairman, Jacek Papaj,” said the mistakes, but we also suggested Urbanowicz. “He believed in our factory solutions. Their eyes widened – it’s not what they were expecting. Since then when no one else did.” The first results of the restructur- we have been cooperating as equals. ing were visible by the end of 2012. Improvement in the bottom line con- How will Polish companies need tinued in 2013, when Elzab made a to adapt for future challenges? record profit. By the time 2014 was The first key to success is having a half over, it had already beat the full- good R&D department. Second, have a year figure from 2013. “Our success is good team. Flexibility will not guaranalso reflected in our share price,” said tee success if you don’t combine it with Urbanowicz. “Over the last 24 months, high technical expertise. For example, our share price has risen by over Chinese companies are very flexible, 1,000%. I would say that’s not exactly but their level of technical expertise typical for a long-established company.” is too low. Their traditional strategy of creating a single product and coming by Andrew Kureth

55 Business

in with below-market prices does not work here in our segment of the market. Customers want products that are reliable. Even if the price of the Chinese firm’s product is much lower, customers choose our product. Customers are beginning to understand that paying a higher price for a quality product is better than buying a cheaper, low-quality product.

Isn’t that a big change in the Polish mindset? I believe people have gained enough experience with products that break and are then expensive to fix. When it comes to products like white goods and electronic consumer goods, people are more careful.

Elzab has a robust expansion strategy. How is that going? We are present in over 20 markets worldwide. This year we achieved a tremendous success in the Hungarian market. Hungary implemented a so-called ‘central fiscal system’ whereby every cash register and fiscal device is connected online to the Hungarian Ministry of Finance’s central server. Every transaction is reported over the internet to that server. That created a huge demand and a huge challenge for manufacturers of fiscal devices, because Hungary chose a very technologically sophisticated solution. So we had to create a product for the Hungarian market from scratch. At the time, our company there had just a 3% share of the market. After introducing our advanced technological solution our market share rose to 40%, while at the same time we gained significant positive brand recognition in the Hungarian market.

What does the Polish market for fiscal devices look like at the moment? The government is requiring the use of cash registers in more sectors. This year, doctors, veterinarians, beauty salons, tyre businesses, car garages and barbers all have to make that transition. However, we believe that the future of the fiscal market in Poland will be the implementation of a central system. We are the only company in Poland prepared for such a system – we have a developed product and we’ve tested it in the market very successfully.

‘Customers are beginning to understand that paying a higher price for a quality product is better than buying a cheaper, low-quality product’ Krzysztof Urbanowicz, formerly CEO

of Elzab and now vice president of its parent company, Comp, led a remarkable turnaround of Elzab that in three years brought it from zero profit to record profit. The firm’s share price rose by over 1,000%. Elzab, a maker of cash registers and fiscal recording devices, believes the future of the Polish fiscal market lies in the implementation of a ‘central system’ such as that in Hungary, where the company’s innovative products found significant success.

Ghelamco sees ‘wider horizon’ with urban space projects

business

The firm believes it is setting a trend by integrating public areas into its developments

The agreement with Samsung is one of the most significant for the Warsaw market – it is the largest office lease deal ever for a building in the city centre. Samsung chose Warsaw Spire and will consolidate its R&D functions there, from three separate locations in Warsaw. Currently Warsaw Spire is about 60% leased out. We have gained a second institutional tenant, our first being the EU agency Frontex. The new tenant is the Centre for EU Transport Projects, whose head office will take up 6,200 sqm in building C. We have also signed the first lease agreement for premises available on Plac Europejski – Stixx, a restaurant, will occupy the former warehouse on Wronia street. Thanks to a number of unique features, the project has met the needs of the most demanding tenants. We are particularly proud of the fact that the concept, in its inclusion of Plac Europejski, has received recognition for its integration of office space with public urban space. Negotiations are under way with new tenants, both for office space and for commercial space between the Warsaw Spire buildings. We expect that by the end of the year, 70-75% of the entire complex will be leased out.

Do you plan to include urban space development in future developments in Poland? Do you see other developers following this trend? The Plac Europejski development sets a precedent not only due to the fact that we are, as a commercial developer, creating public space. It is also unique in that it is the first consistently and thoughtfully designed urban, pedestrian square of its scale to be built in Warsaw in decades. In the neighbourhood between Towarowa, Grzybowska, Wronia and Łucka streets, we will create a completely new urban landscape and a new place to spend free time. On those 4,000 sqm we’ll have 140 trees along with fountains that children will be able to play in on hot days. Aside from the greenery and water, restau-

‘We take the view that many actors are responsible for co-creating the urban environment – as a developer, that includes us’

rants placed around the square and on the ground floors of the Warsaw Spire buildings will add to the ‘microclimate’. So will the Art Walk, an outdoor exhibition space. The solution we have offered in our investment goes far beyond the traditional framework of development activity, confined as it usually is to a few elements of small architecture or modest greenery around the building. Our project is part of a much wider horizon of sustainable development. Beyond Warsaw Spire, you have In this approach, we take the view that several other developments many actors are responsible for co- in the pipeline in the capital. creating the urban environment – as a What is the status of these? developer, that includes us. I hope that In addition to Warszawa Gdańska, this approach will find followers in the we have several ready office projects future and that more ‘urban-space-ori- in attractive locations in our portfoented’ projects emerge. The vision, the lio that we will begin when the time is creative potential and the functionality right. Some of them will be built close of the square have received very posi- to Rondo Daszyńskiego, like Sienna tive reviews from Warsaw Spire tenants Towers, which will combine office and and local community members. retail space, and will rival Warsaw Certainly, the Warsaw Spire project Spire in scale. has given us experience that we will Our flagship project in this respect bring to bear in further endeavours. was pioneering – it defined the area A project that will have a similar sig- around Rondo Daszyńskiego as a new nificance for the city is the Warszawa business centre in the capital. Gdańska development. It will be the first time commercial and office space will What, in your view, are the trends be integrated with so many different that will shape the real estate modes of transport (rail, subway, buses market in Poland going forward? and trams) on such a scale. It will be a Building design that responds to modern railway station and office build- changing tenant needs and is best ing complex with retail space and ser- adapted to contemporary Poles’ new vice industries – and the whole area will living patterns will play a key role. On the other side, the requirements undergo a revitalisation. for future investments will certainly continue to grow – the priorities will Warsaw Spire just recently remain functionality and maximum held its topping-out ceremony. When is the entire building energy self-sufficiency. expected to be finished? Green certificates will become the Indeed, at the end of April we closed standard across the industry, not only a very important stage in the construc- for office buildings. I am also convinced tion – at an altitude of 180 metres, the that the industry will become increasconcrete works on the last floor of ingly conscious of the value of creating building A were completed. The build- urban public spaces. ing’s height will rise to 220 metres The condition of the sector very after the installation of two spires much remains dependent on the quality in autumn this year. of infrastructure, both between cities We still have a year of construction and within the cities themselves. I hope and work on many fronts: the elevation that public-private partnership projects assembly, installation and finishing in will play an increasingly important role buildings A and C, as well as the devel- in this regard, because from the peropment of Plac Europejski. We plan to spective of the real estate sector, the complete the whole complex in April future will belong only to those locanext year, although the last trees will tions in Poland that will provide people the highest mobility. be planted a bit later, in June 2016.

Poland Today talks with Jarosław Zagórski, director

of sales and development and member of the board at Ghelamco.

Ghelamco is a partner of Poland Today issue no. 10

photos: Ghelamco

You signed a lease deal with Samsung for 22,000 sqm in Warsaw Spire earlier this year. What will the company be doing there and how is leasing out the remaining space progressing?

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Lost and found A Kraków start-up is creating solutions to help you find all of the things you have left behind

photo: Woolet

Have you ever lost your wallet? Or maybe you’ve been late for a meeting because you had to search your house for it? A Kraków-based start-up is looking to make such inconveniences a thing of the past. Woolet is a young company – its founders, led by serial entrepreneur and tech businessman Marek Cieśla – came up with the idea only last November. In March they launched a campaign on crowdfunding website Kickstarter with a goal of raising $15,000. The company crushed that goal by over 2,000%, earning nearly a third of a million dollars in just a month. Woolet, evidently, has struck a nerve. The technology connects your wallet to your smartphone, notifying you if you’ve left your wallet behind (or if your wallet is moving away from you – potentially in a pickpocket’s hands) by signalling your phone when you exceed a certain distance from it. The technology also works in the opposite direction, with your wallet letting you know if you’ve left your phone behind. The idea, in itself, isn’t terribly new. Companies have been working on such notification technologies for years. But Woolet differentiates itself with several features. First is a distinctive sound, instead of simple buzzing or beeping, so you don’t mistake the notification for a text message. Second, the telephone application informs you just how far away your wallet is, and shows you when you are getting closer or farther away. Finally, the wallet’s battery is ultra-thin and self-charging. Technology is easy to replicate though, and in some places, where intellectual property isn’t always well respected, it can be copied and produced more cheaply. That’s why Cieśla and his team decided to make Woolet a wallet-maker, rather than just a tech firm. The wallets are hand-crafted using ecological, high quality materials and are thinner than your typical wallet. The combination of innovative technology with quality design and clever branding has obviously excited potential customers. The Woolet team is working on creating an entire ‘ecosystem’ of such products, including key chains and phone covers. Eventually, the company hopes to fully integrate these products into

the ‘internet of things’ allowing them to help you with other everyday necessities, such as opening your garage door or turning off the iron. Apart from the batteries, all of the parts are made in Poland. The firm has signed distribution agreements in several markets across the globe, where Woolet will be available soon. Cieśla told Poland Today that the company has signed an agreement with a major European retailer, though it isn’t ready to reveal which one just yet.

by Andrew Kureth

Poland Today talks with Marek Cieśla, CEO and founder of Woolet You shattered your initial Kickstarter funding goal of $15,000, finally raising more than $330,000. Why do you think the response was so enthusiastic? My team is not new to this. We learned how to do it in previous campaigns. It isn’t as simple as just setting up the website and waiting for the money to roll in. There is a lot that needs to be done ahead of time, including promotion. But we also focused on design. We actually turned the philosophy of the internet of things on its head. Companies like Apple, they create hardware and then hope people begin using it. We did the opposite. We took something that people already make use of every day and solved a problem people have with it.

How will you use all of that extra capital? What has happened is that the users have demanded features that we didn’t plan on initially, and we are working on those. One is wireless charging, where we have two types of technologies planned. First, you will be able put the wallet on your charging pad and it will charge there. Second, we are working on photogenic charging: using artificial light to power the battery. You can put it close to your lamp and it turns the energy from its light into electricity. With these technologies, the battery will last years. I think the leather on the wallet will wear out quicker than the battery.

business

Won’t the app be a drain on the battery in users’ phones? No, the technology uses Bluetooth low energy – it’s always on. You don’t have to turn on the regular Bluetooth on your phone, which helps save energy.

The idea isn’t particularly original. How do you differentiate yourselves? There are some other gadgets out there that help people find things. But the major issue with those devices is the battery and the sound. Usually, such products are encased inside plastic. There is a small hole where the sound emits from. That has some serious limits: it is often hard to hear, and you can’t tell exactly how far away it is. Imagine trying to find your keys when you’re next to a busy street. Moreover, most of these technologies’ batteries last just two or three months. Plus, if someone steals your wallet, you are better off just seeing where the wallet is than having it set off some kind of alarm – the thief could easily block out the sound.

Why make a wallet too? Why not just the technology, and sell that to wallet makers? Because the technology can be made anywhere. So the first thing is the branding. The other thing is the cloud – if we create a product where users set up accounts, then we can use that data to help create all sorts of solutions. Imagine that you are approaching your house in your car. Your Woolet key chain could notify the garage door and open it automatically. We’re also working on technology that would, for example, allow you to cancel your credit cards automatically if someone steals your wallet. There are many such possibilities with an integrated product.

What are the next steps for the company? In June we will ship the early bird products, and by July we’ll have the first retail products from the factory. We have already signed 12 distribution agreements, in the US, UK, Canada, Brazil, Germany and some other markets. Of course, it will also be available on our website. Geographically, we have covered all of the markets we wanted to.

Woolet’s wallet

will let you know if you have left it behind – but it is also a designer product, made with high quality materials, all of which (except the battery) are made in Poland. The company is now working on several different charging solutions and technology that will tell you in exactly which direction your wallet is in.

60 Weapon of choice INTERNATIONAL

Russia has been waging an information war in Poland and across the region. How should the country respond?

Annabelle Chapman is a Warsaw-

photo: Antonio

based journalist. Her articles from Poland and Ukraine have featured in TheÂ EcoÂ nomist, Foreign Policy, Newsweek and Foreign Affairs, among others. In Warsaw, she is also English-language editor at Polityka Insight, a think-tank. She has a degree in Politics, Philosophy and Economics and a masters in Russian and East European Studies, both from Oxford University.

As Russia flexes its muscles in the east, Warsaw has been emphasising security. This includes plans to spend an additional 800m złoty on defence in 2016, reaching the 2% of GDP recommended by NATO (from the current 1.95%). At the same time, it is becoming clear that investing in military equipment is not enough. A Russian offensive need not involve battered Soviet tanks trundling across the border – or even any kind of physical contact. “Russia has engaged in a rather remarkable period of the most overt and extensive propaganda exercise that I’ve seen since the very height of the Cold War,” the US Secretary of State, John Kerry, told a Senate subcommittee earlier this year. The combination of military force and information warfare used in Russia’s annexation of Crimea – and in eastern Ukraine since then – is known as ‘hybrid war’. A glossary on the website of Poland’s National Security Bureau (BBN) defines this as “a war combining different means of violence, including regular and irregular armed action, operations in cyberspace, economic and psychological actions, and information campaigns (propaganda)”.

Strategic move Russia is taking “psychological warfare” and the “war of perceptions” seriously. Its strategy has moved “from direct annihilation of the opponent to its inner decay” and “from war with weapons and technology to a culture war”, writes Janis Berzins in a policy paper for the National Defence Academy of Latvia. In theory, a country could be brought to its knees without Russian arms or soldiers so much as touching it. Russia’s information war efforts tend to be ongoing, without a clear start or finish. Yet this kind of warfare works best “when different tools are used in concert over a short period of time to achieve a limited number of goals,” according to a new analysis on Russia’s infowar by the European Union Institute for Security Studies. The Polish government is well aware of the key role Russia ascribes to information warfare. In a policy speech in April, Foreign Minister Grzegorz Schetyna emphasised Russia’s “information war to mask its own role in the conflict in Ukraine and to caricature the Western reaction to Russian aggression”. Poland is also being targeted. In his speech, Schetyna warned of “slander campaigns or actions intended to stir confusion in the Polish information space”. He declined to list them, “so as not to play a role in this scenario”.

cyberattack surge CERT, Poland’s Governmental Computer

Security Incident Response Team, found that Poland came under a record number of cyberattacks last year – 7,498, compared to 5,670 in 2013, 457 in 2012, and 249 in 2011. In addition to a marked escalation in cases, the threat and level of sophistication of the registered cyber attacks also increased compared to previous years, in many cases pointing to state backing.

fascinating chapter on the role of the radio – “the era’s most powerful form of mass communication” – in the communisation of Poland, East Germany, and Hungary. Now propagandists simply have new channels at their disposal, from the internet and social media, to good old television. When it comes to Russian television, the Baltic States face a bigger challenge than Poland does. Latvia and Estonia are both home to sizeable Russian-speaking minorities, who account for around a third and a quarter of the population respectively. But Russian television is not just popular among members of the countries’ Russian minorities. In Lithuania, the Polish minority – the country’s largest, at almost 7% of the population – is known for its reliance on Russian television. The only Polish channel readily available is TV Polonia, geared toward the diaspora around the world. “It might be interesting for a retiree in Chicago, but not for me,” said a 20-something Pole from Vilnius. Members of Lithuania’s Polish minority could cross the border and buy a Polish decoder, but not all of them bother.

‘Russia has engaged in ... the most overt and extensive propaganda exercise that I’ve seen since the very height of the Cold War’

At the ready? Poland needs to be ready for hybrid war, said General Stanisław Koziej, head of Poland’s National Security Council, speaking to journalists in Lublin in March. This includes convincing Poland’s NATO allies to prepare for it. But that may not be enough: in cases of hybrid warfare, when it is “unclear whether it is war or not”, it may be difficult to get a consensus within NATO, he added. This makes it particularly important that Poland raise “the interest of all society”, including citizens as well as social and paramilitary organisations who want to help strengthen its security, he explained. This is not the first time Moscow has used propaganda to try and undermine Poland and other countries to its west. These tactics were honed in the first years after World War II, as Anne Applebaum describes in ‘Iron Curtain: The Crushing of Eastern Europe 1944-1956’ (2012). Her book contains a

Shifting strategy

Russia’s military strategy has moved “from direct annihilation of the opponent to its inner decay” and “from war with weapons and technology to a culture war”, according to a policy paper for the National Defence Academy of Latvia.

Sowing doubt

Yet Russian television channels have been reaching further west, with RT (which stands for ‘Russia Today’) in the lead. There is also Sputnik International, a news service launched in late 2014 by an agency owned and run by the Russian government. Sputnik, which calls itself a “provider of alternative news”, has websites a handful of European languages, including Spanish, Finnish and Czech. In February, it launched a Polish version. Sputnik’s coverage of the conflict in eastern Ukraine is predictably pro-Kremlin, anti-Ukrainian and anti-Western. But the real danger posed by media like Sputnik is not that it will make the Poles, Spaniards and Finns who read it love Vladimir Putin. It is these Russian outlets’ venturing into domestic coverage – the Polish version of Sputnik has a “Polska” section. Bit by bit, it aims to discredit the Polish leadership, spreading half-truths and sowing doubt. “Where are European democracy and law?” opens an indignant article on Poland’s decision in April to refuse the Night Wolves, a pro-Kremlin group of bikers, entrance into the country. Identifying the threat posed by information warfare is one step, dealing with it is another. General Koziej has suggested that Poland could respond to information war with a “national doctrine of information security.” Polish news outlets also have a role to play. In his speech, Schetyna appealed to them “to show moderation and common sense when covering topics that are present more in the media than in real life”. Yet the risk is that if foreign capitals, from Kiev to Brussels, try to beat Moscow at its own propaganda game, they will become just like it. That is a trap that the Russian leadership would love for them to fall into. by Annabelle Chapman

INTERNATIONAL

Changing the channel? Russian

television channels have been reaching further west, with RT in the lead. There is also Sputnik International, a news service launched in late 2014 by an agency owned and run by the Russian government. Sputnik, which calls itself a “provider of alternative news”, has websites a handful of European languages, including Spanish, Finnish and Czech. In February, it launched a Polish version.

science & technology

Kropelka: Students

photos: www.skappw.pl

from the Warsaw University of Technology have built a super fuel efficient car out of materials normally used in avaition. So far, they have set the Polish record for mileage: Kropelka travelled 659 km on a single litre of fuel.

Fuel to spare Young Polish engineers are building ultra-efficient cars, and getting plenty of educational mileage out of the experience

It looks like

a white bullet, with its sleek lines and pointy beak. Even lying on the ground, it looks fast. But despite its aggressive styling and razor-like wheels, don’t expect Kropelka to go “vroom” – it’s more like a “purr”. But its creators like it that way. The Kropelka team are getting ready to take part in the Shell Eco-Marathon, a racing series with all the technical chops of Formula One, but none of the speed. Unlike the ravenous roaring racers, these vehicles are designed for efficiency. And efficient they are – last year’s winner managed to drive for 3,300 kilometres on just one litre of fuel. Imagine going from Warsaw to Kuwait on a pickle jar’s worth of ethanol. But don’t imagine commuting to work in a similar vehicle. At least not any time soon. “That would be difficult,” laughed Paweł Radziszewski, who heads the Kropelka team, a group of several dozen students from the Warsaw University of Technology who work in several makeshift workshops scattered around the campus. “First of all, it’s extremely light, at just 100 kilograms. We don’t use any non-essential parts like lights or mirrors. And secondly, the engine’s been designed for efficiency, not power.” That means that you could probably outrun Kropelka with an effortless trot. But try to keep trotting for 659 kilometres – that’s the current Polish record set by the Warsaw Tech students. Part of the trick is to make the vehicle as light as possible. “We’re using materials that are virtually unheard of in automobile construction, save in a few super-expensive supercars,” said Radziszewski. “But they are quite common in aviation, like Kevlar or duraluminium. We’re using ceramic bearings that are 10 times more efficient than metal ones. We’re using extremely thin wheels in a tricycle arrangement,” he added. “And we’ve spent a lot of time perfecting the aerodynamics. At low speed, drag accounts for about 40% of a vehicle’s energy expenditure. The faster you go, the more that matters. And then there’s the engine, designed by one of our colleagues as his master’s thesis and manufactured to our specifications,” he said. Of course, creating a prototype vehicle is neither easy nor cheap. By its nature, a vehicle like Kropelka will cost about 10 times more than a comparable, mass-produced vehicle. In this case, SKAP, or the Student Vehicular Aerodynamics Club – the association behind the construction effort – resorted to crowdfunding. Their campaign was successful, with 147% of the asking donations level reached. “We’re up against teams with ten times the money and 30 years of

experience in the competition,” said Adrianna Kaźmierczak, who heads SKAP. “They’ve been coming since 1985. I can’t imagine any Polish team competing on the world stage in 1985,” she added.

Obstacle course The Warsaw Tech team isn’t the only one trying to bridge the gap, though. Nine years ago they became the first Polish team to take part in the Shell contest. Since then, a number of Polish technical universities have created their own teams. In most cases it was the students themselves who drove the efforts home, with the universities offering varying levels of support. Their motivations were simple: for future engineers nothing beats the challenge, the thrill, and the handson education of an actual, cuttingedge project. “It was never our goal to turn this into a business project,” said Kaźmierczak. “We want to learn. And we’ll never learn more than by working all night on something that will actually run and compete.” “It’s fun, of course, but it’s also an amazing feeling to witness something like this being created from scratch,” added Radziszewski. “Plus, most technical courses focus on theory. The result of that is engineering graduates who have never seen a power drill or a sander with their own eyes,” he said. They’re not alone in that sentiment. Over the last couple of years thousands of Polish students have entered similar, international competitions, facing off against the likes of the US’s MIT or France’s EPFL: teams supported by world-class universities, with top facilities and, inevitably, incomparable budgets. They lost, time and time again, to their Western counterparts – but every loss was a win. Their experience and self-confidence grew. Their results improved. And their technical competence soared. Often it took more than technical knowledge. With funding scarce, most teams had to fight for every penny and work out inventive ways of circumventing problems that other teams could buy their way out of. And it took moxie. When a Polish team’s Husar rover, meant for a NASA lunar digger competition held at the Kennedy Space Center in 2014, was misplaced by their airline, the team worked to scrounge up spare parts from their competitors and used them to build a replacement vehicle, effectively designing, building, and testing a brand new lunar rover within 48 hours. They didn’t win, but the NASA judges made a point of recognising their effort.

Kropelka Weight: Under 100 kg Engine: Single cylinder 58cm3, 1 HP Fuel economy: 659 km/l Wheels: Low-drag ceramic bearings

High pressure tyres – 5-6 bar pressure, compared to 2.3 bar in a standard vehicle Body: 0.098 drag coefficient; aerodynamics are the result of a computer analysis of over 150 models

‘We’re using materials that are virtually unheard of in automobile construction, save in a few super-expensive supercars’

Polish student engineer success stories Magma: Built by a team from the Białystok University of Technology, this spidery-looking robot took third place in the University Rover Challenge in 2010 and won it in 2011. In 2013 and 2014 Polish teams took two of the three top spots. Husar: Built by a team from the Warsaw University of Technology, the machine was meant as a prototype of a device that might, in the future, assist lunar astronauts by mining lunar dust. Instead the team was forced to build the robot from scratch using spare parts donated by their competitors after an airline misplaced the robot. PW-Sat: A tiny, cube-shaped satellite meant to test technologies useful for clearing space debris from orbit. It became the first Polish satellite in orbit on 13 February 2012. San Francisco Fire Department Headquarters: Two Polish student teams took the top

two spots in the 2013 competition to design the new headquarters for the SFFD. The winning proposal by Gdańsk University of Technology students is unlikely to be built in its current form, but the judges appreciated its grandeur – the design included a fire department aircraft carrier for rapid deployment of fire-fighting teams in the San Francisco Bay Area.

Talent in the tank In time, more and more young Polish engineers have proved they could be more than a match for top teams from the US and Western Europe. The poster boys for those Polish success stories were Białystok University of Technology students whose Magma 2 rover won the University Rover Challenge – an international competition for prototype Mars rovers held in Utah by the Planetary Society. They became a media sensation and Martian robots started popping up at technical institutes across the country. Last year, Poland hosted its own rover challenge, a licensed version of the US competition. Held in the shadow of a Medieval castle in Chęciny, the event attracted teams from Asia, Africa and South America, but, more interestingly, thousands of spectators – a first for student engineering competitions. Suddenly, engineering became something of a national sport. “We might be the best in the world at complaining,” said the European Space Foundation’s Łukasz Wilczyński, the man behind the Chęciny competition, “but we also have some of the most talented engineers in the world. The Apollo Program’s lunar rover was designed by a Pole, Mieczysław Bekker. Poles built one of the main instruments for the Rosetta mission. We brought the competition here to increase the visibility of the Polish space industry and to give more young engineers a chance to show off their skills.” Back at SKAP, the team is putting the finishing touches on Kropelka’s successor. “We’re hoping to hit 1,000 kilometres per litre,” said Radziszewski, the team leader. “Far more than anyone ever managed in Poland. But the next design is supposed to have far more in common with everyday vehicles. Unlike Kropelka and its fellow prototypes, the cars competing within the Urban Concept class should, in theory, be capable of safely moving down city streets. They must have windscreen wipers, a relatively normal seat, headlights, brake lights – all the things thrown out of prototype class vehicles as dead weight. Oh, and they must have a trunk big enough for a briefcase. They’re still a long way from your regular Fords or Fiats, but they look less like bicycles and more like real, tiny, urban cars. “The commercialisation of these vehicles is a possibility,” mused Radziszewski. “You can imagine them being used in urban car rental networks, similar to ones that are operational in France.” And, with gasoline prices creeping closer to the 5 złoty mark, it’s hard not to look at Kropelka and its successors and hope that perhaps, one day...

by Wojciech Brzeziński

science & technology

Wojciech Brzeziński is

a journalist with Polsat News, and a proud geek. He’s the creator of ‘Horyzont Zdarzeń’, the first weekly science and technology news show on Polish TV and the author of a number of technology-related articles in weekly newspaper Tygodnik Powszechny and monthly magazine Logo.

It happened in ... July

HISTORY

13 July 2000. Holocaust chronicler Jan Karski dies

Jan Karski,

Jan Karski risked

his life to personally witness and document conditions for Jews in Poland during the Holocaust. ‘The Mass Extermination of Jews in German Occupied Poland’, pictured above, was written by Polish Foreign Minister Edward Raczyński for the United Nations and relied heavily on information provided by Karski.

photo: United States Holocaust Memorial Museum

one of the most courageous observers and chroniclers of the Holocaust, died on 13 July 2000. Forced to live with personal experience of unspeakable tragedy, Karski carried the first eyewitness accounts of the Holocaust to the West. At his funeral in Washington DC, his casket was wrapped in the Polish and American flags and adorned with the Star of David. In the summer of 1942 Karski, then a 28-year-old clandestine diplomat working in Warsaw for the Polish government-in-exile in London, was visited by two leaders of the Jewish underground who reported on the conditions of Jews in Warsaw. Shortly thereafter, Karski was smuggled into the Ghetto where he witnessed the day-to-day lives of its inhabitants. What he saw during this and a subsequent visit to the Bełżec extermination camp affected him deeply, “This sin will haunt humanity until the end of time and I want it to be so,” Karski said. In the hopes of eliciting support for the plight of European Jews, Karski met with various Western leaders, including US President Franklin Delano Roosevelt, British Foreign Minister Anthony Eden, and Supreme Court Justice Felix Frankfurter. In an interview from the Claude Lanzmann film ‘Shoah’, Karski claimed that during a personal meeting that lasted more than an hour, Roosevelt showed absolutely no interest in the suffering of Jews in Poland. In 1944 Karski published the first of his five books, ‘Story of a Secret State: My Report to the World’, an unflinching chronicle of his experiences during the War, Poland’s place in the world, and the destruction of Polish Jewry. After the war, Karski moved to the US, studying and then teaching at Georgetown University in Washington, DC. He became a naturalised US citizen in 1954. In 1994 Karski was made an honorary citizen of Israel, calling it one of the happiest moments of his life. Today, near the Yad Vashem Holocaust Memorial Museum in Jerusalem, a tree bears Karski’s name, while in Warsaw, near the newly opened POLIN Museum of the History of Polish Jews, a statue of Karski smiles broadly in the museum’s direction. by Gabriel Rom

HISTORY

Eyewitness: Władysław Bartoszewski Władysław Bartoszewski was never officially a professor, but he had plenty to teach us

Władysław Bartoszewski,

Yoni Wilkenfeld is

a regular contributor to Poland Today. He also writes on finance, technology and foreign affairs for Iambic, a communications firm. Based in New York City, he holds a degree in political science from Kenyon College in Ohio.

one of Poland’s most respected statesmen and academics, died in April at 93 years of age. By just about anybody’s standards, that’s a long life, though the always quipping Bartoszewski pointed out that longevity, in itself, doesn’t mean much. “A man can live a while, which doesn’t always mean wisely – but also not entirely stupidly,” he once said. But Bartoszewski, a prisoner of two dictatorships, cabinet minister for two prime ministers and honorary citizen of Israel, filled his many years with wisdom and then some, becoming one of his country’s most powerful moral voices for over seven decades. As he wrote in one of his books, Bartoszewski led a “difficult, but not boring” life. Just 17 years old when the Nazis invaded Poland, he was sent to Auschwitz in 1940 for joining the Polish resistance in his home town of Warsaw. After he was released in 1941 with the help of the Polish Red Cross, Bartoszewski was active in the Home Army and the Catholic underground, and eventually fought in the Warsaw Uprising. As a member of the Polish government-in-exile, Bartoszewski was also a leader of Żegota, the Council for the Aid to Jews, which saved the lives of some 4,000 Polish Jews and helped tens of thousands more by secur-

ing hiding places, food, and financial Bartoszewski was known for his witty support. turns of phrase. At an exhibit last year While imprisoned at Auschwitz, in Wrocław honouring his 92nd birthBartoszewski began what would day, prominent artists celebrated some become a long career of influential of his best-known quotations, including writing, producing some of the first one about his fellow Poles: “I love my written eyewitness accounts from compatriots, even though they drive the Nazi death camp. Following the me up the wall.” war, he was jailed again by the new His work led him to the highest echregime for having served in the Home elons of political office. Bartoszewski Army and joining the anti-communist served twice as foreign minister (for Polish People’s Party. Bartoszewski prime ministers Józef Oleksy and served nearly seven years on fabri- Jerzy Buzek), and was a member of the cated espionage charges, after which Senate, Ambassador to Austria, and a he returned to journalism, writing for a special envoy to Prime Minister Donald prominent Catholic weekly, Radio Free Tusk on international dialogue. But Europe, and others. His support for the not even high office could restrain his Solidarity movement in the early 1980s sharp tongue. In a 2007 interview with earned him another stint in prison, Der Spiegel, Bartoszewski cautioned underscoring his consistent activism against worrying too much about the on behalf of the democratic opposition. conservative Law and Justice party. “I An expert on European history who am almost 85, but the government will authored several dozen books and not be in office for more than another countless more essays and articles, two years and seven months,” he said. “I’m certain that – God willing – I will die under a different government.” Indeed, Bartoszewski lived to see the Civic Platform win the following two parliamentary elections, and help bring about a new era of Polish-German relations for which he had worked so hard. Following the path of European leaders like Karl Adenauer, Charles de Gaulle and Robert Schuman, Bartoszewski committed himself to mending the

‘I love my compatriots, even though they drive me up the wall’

photos: Piotr Malecki (Forum), Jerzy Dudek (Forum)

aWARDS AND HONOURS FOR Władysław Bartoszewski Władysław Bartoszewski’s unrelenting work for peace and reconciliation earned him a number of distinctions, including knighthoods in several countries ’ national orders and various honorary doctorates. In 1965 the government of Israel named him Righteous Among the Nations, as a non-Jew who risked his life to save Jews from the Nazis during World War II.

wounds of war. “There is no better way, no better alternative,” he told Deutsche Welle in 2012. “The only way is that of a common future with each other.” Writing his condolences on Twitter the day of Bartoszewski’s passing, his former boss, Donald Tusk, now president of the European Council, addressed him as many did: “Panie Profesorze,” or, “Professor”. Bartoszewski lectured throughout his life in Polish and German universities, though he lacked the formal qualifications for the title, causing him some minor controversy over the years. Nevertheless, through his witticisms, writings, and most of all through his actions, Bartoszewski was a wonderful teacher indeed. A first-hand witness to the worst of humanity, he taught his country to respond with courage, honesty and an open heart.

by Yoni Wilkenfeld

Weaver of a tangled web

BOOKS & ARTS

The tale of the ‘dangerous’ Polish-American immigrant leader Louis Hammerling is wild, convoluted and fascinating

He was a correspondent of two American presidents, at least one of whom he met and advised personally. He was also an advisor to cabinet officials, a key figure in the Republican party, a media mogul, a wealthy businessman, a union leader and a Polish senator. He used bribery, extortion and intimidation to pressure his wide network of foreign-language newspapers to print whatever the highest bidder asked him to. He was arguably the most influential immigrant leader in America spies gripped the country, and he was in the early 20th century, and probably questioned before Congress. He was the most fascinating Polish-American eventually denounced as a German you have never heard of. “agent” and lost most of his influence. Louis Hammerling – born Ludwik He moved back to Poland and began Mikołaj Hammerling into a poor Jewish a political career there as a native son family in Austria-controlled southern who had made it big in America. His Poland in the 1870s – faced grim pros- time in Poland’s Senate was unsucpects as a child. But he moved to the cessful though, and he returned to New United States, toiled in Hawaiian sugar York where he died – either by accident fields and then in Pennsylvania coal or suicide – as the result of a fall from mines, working up the union ranks until the 19th-story window of his apartment. he was leading strikes and negotiating This wonderfully tangled and bizarre with the most powerful mining mag- story is one that deserved to be told nates in the country. and Dr MBB Biskupski, in his new book He organised his immigrant com- ‘The Most Dangerous German Agent munity, converted to Catholicism and in America – The Many Lives of Louis got involved in newspapers and poli- N. Hammerling’, does so with grace, tics. The Republican party paid him to humour and enthusiasm. The book sway immigrant votes and by 1910 he is a quick read and one that, hopewas meeting personally with President fully, will lead to more study of – and William Howard Taft. popular familiarity with – this most Nevertheless, Hammerling’s moral enigmatic character. compass was too often pulled in the Biskupski is a professor of hisdirection of money. In the initial years tory, not a novelist, and his academic of World War I – before the US had instincts come through in the story. It is entered the conflict – his connec- meticulously researched, fact-checked tions with German steamship and beer and end-noted. The reader can be conadvertisers led him to force the many fident that Biskupski gets the details newspapers under his control to write right. At times however, the narrative pro-German editorials or print canned suffers. Biskupski does his best to piece propaganda pieces. together Hammerling’s “many lives”, but It is questionable how effective these the story’s time line can remain confusarticles were, but when America finally ing, no less because so much remains did enter the war, a fear of German unclear or undocumented. Biskupski’s tendency for using ten-dollar words when simple vocabulary would do can add to the frustration. Overall, however, this is an excellent beginning to popularising the story of one of Poland’s most complex and captivating sons. In the preface, Biskupski informs us that those who hear Hammerling’s story usually respond that it should be made into a film. Here’s to hoping that one day, it is.

‘This wonderfully tangled and bizarre story is one that deserved to be told’

by Andrew Kureth

About the author Dr MBB Biskupski is the Stanislaus A. Blejwas Endowed Chair in Polish and Polish American Studies and coordinator of the Polish studies programme at Central Connecticut State University. Since 2011 he has served as president of the Polish Institute of Arts and Sciences of America. Dr Biskupski is the recipient of many awards, including the Honour Roll of Polish Science by the Polish Ministry of Education and the Officer’s Cross of the Order of Merit of the Republic of Poland. He has written numerous books on Poland, including ‘The History of Poland’ (2000), ‘Hollywood’s War with Poland, 1939-1945’ (2009), ‘The United States and the Rebirth of Poland, 1914-1918’ (2012) and ‘Independence Day: Myth, Symbol, and the Creation of Modern Poland’ (2012).

sport

compiled by Gabriel Rom

Poland have put in another dominant performance in international volleyball. In April, Poland’s junior national volleyball team won the 2015 under-19 European Volleyball Championship held in Sakarya, Turkey. In the championship match Poland handily defeated Italy 3 sets to 1 (25-15, 25-13, 25-27, 25-21). The win capped off an undefeated tournament campaign. The youth squad’s victory follows Poland’s adult men’s side triumphing in the Volleyball World Championship in September. “I don’t know what to say and can find no words for it,” said captain Jakub Kochanowski after taking the title. “To win this European championship is a great success for volleyball in Poland,” added Poland’s coach, Sebastian Pawlik. “I think many people were watching us.” This is Poland’s second title in the competition, having also won the gold in 2005. Since the under-19 championship was established in 1995, the Poles have won silver four times and bronze twice.

Record number of athletes from Poland attend European Championships Poland sent 42 competitors to the the European Athletics Indoor Championships in Prague at the beginning of March. Of the 48 participating countries, the number of Polish athletes was the second highest, below only the host country Czech Republic’s 47. Poland ranked 7th on the medals table, with one gold, two silvers and four bronzes. Marcin Lewandowski won the country’s only gold in the 800 metres. The 17-year-old sprinter Ewa Swoboda, Poland’s youngest athlete at the games, placed eighth in the 60 metre sprint at 7.20 seconds, setting a European junior record in the process. As many as 363 male athletes and 280 female athletes from 49 countries participated in the event.

photos: www.european-athletics.org, www.cev.lu, Minnesota Vikings, Tomasz Jastrzębowski (Forum)

Poland win world junior volleyball championship

sport

Huge Pole signs with NFL’s Minnesota Vikings It can be hard to stand out in the National Football League (NFL), but at 2.1 metres and 159 kilograms, Babatunde ‘Babs’ Aiyegbusi is large even by the league’s gargantuan standards. Less than a week after leaving Poland to be evaluated by American scouts, Aiyegbusi signed a three-year, $1.6m (5.8m złoty) contract with the Minnesota Vikings. The agreement officially makes him the largest player on the team and one of only five Polish-born players ever signed by an NFL team. Aiyegbusi began playing American football just six years ago. The 27-year-old native of Oleśnica, born to a Polish mother and a Nigerian father, didn’t commit to the sport until 2010, originally trying his hand at basketball. Naturally a dominating physical presence, he quickly realised football was where he could use his size best. Aiyegbusi has impressed his American scouts. While it is unclear whether he will stay on the team for the 2015-2016 NFL season, the fact that he has come so far, so fast is special enough. “This is my week. This is all great stuff. What can I say? I’m actually still a little surprised with everything, how fast everything goes,” Aiyegbusi told FoxSports.com. Aiyegbusi’s meteoric rise has brought the spotlight to Poland’s burgeoning American football league, the PLFA (Polska Liga Futbolu Amerykańskiego), which is now in its tenth season and features over 70 teams competing in five divisions. In 2013 Aiyegbusi helped lead the Wrocław Giants to the league championship. Aiyegbusi is the first member of the league to reach the NFL, though hopefully not the last. “This is great for Polish football and for the Polish league,” he said.

Poland draw with Ireland in thrilling Euro 2016 qualifier Ireland and Poland drew 1-1 in a thrilling 2016 European football championship qualifying match in Dublin at the beginning of March. Poland started in convincing fashion, with striker Sławomir Peszko scoring in the 26th minute to give Poland a lead that they held for most of the match. By the second half, however, the momentum had swung in favour of the Irish side. For 45 minutes the Irish threatened but were turned away time and again by the fine play of Polish goal keeper Łukasz Fabiański. Ireland eventually earned their reward, however, as Shane Long scored a stoppage-time equaliser, stunning a Polish side minutes from victory. “We didn’t do ourselves justice in the first half, but we knew we could. We domi-

nated the game from the 45th minute,” Lost and found: said Ireland’s manager Martin O’Neil in A Kraków-based start-up is producing a post-match interview. a new kind of wallet Poland’s skipper Adam Nawałka that you can never agreed, conceding that Poland “lost lose. Connected to control of the central areas in the your phone via an app, Woolet will tell you second half.” when you leave your With the draw, the Poles remained wallet or keys behind unbeaten in qualifying play and sat atop – but more than that, the fiercely competitive Group D, while once you know you have forgotten your Ireland fell to fourth place. items, the technolPoland, with 11 points, are just one ogy helps you find point ahead of Germany and Scotland them again. The firm in the group, while Ireland have eight crushed its fundraising goal on Kickstartpoints. er by over 2,000%. Poland’s next group match is due What does the future to be held in the National Stadium in hold for this innovaWarsaw in June against Gibraltar, who tive company? see page 59 sit at the bottom of the Group D table with zero points. The final tournament of the European soccer championship will begin in June 2016 and will be held in France.

EVENT rEVIEW As part of our mission to bring Poland to the world and the world to Poland, Poland Today initiates, organises and grants media patronage to conferences that we believe help us achieve that goal. In this section, we provide a round-up of the conferences we have been a part of, with a view to providing an international perspective on Poland’s story. In this issue, we review Poland Today’s conference at MIPIM, the worldrenowned real estate fair, as well as the Spotlight on Kraków & Małopolska – ‘The Brain Gain’ event. We also provide reports from the Executive Club’s annual forum on business and politics Europe, a congress of European local governments, as well as from conferences on investment in Gliwice and Lublin.

CONFERENCE

Warsaw in focus at MIPIM

table of contents

Join us for our

upcoming events. For more information, visit poland-today.pl/events

Experts expect a BPO boom to come to Warsaw – but can the city capitalise on it? see page 74

CONFERENCE

Kraków getting in the innovation game How should Poland’s second city tackle the challenges it faces as a rapidly developing knowledge-based economy? see page 76

MEDIA PATRONAGE

Can Europe fulfil its potential? Leaders from business and politics discussed Europe’s role on the increasingly unpredictable global stage. see page 78

MEDIA PATRONAGE

A new chapter for local government How should local authorities manage the distribution of EU funds and spur innovation? see page 79

MEDIA PATRONAGE

Lublin: inspiring business Business leaders and economic experts evaluated the eastern city of Lublin’s strategy for creating investment incentives. see page 80

MEDIA PATRONAGE

Gliwice shines for logistics investment Andrew Kureth

writes on Poland Today’s conference at MIPIM, where Warsaw was the focus of discussion, as well as on the Spotlight on Kraków & Małopolska – ‘The Brain Gain’ event, where innovation and infrastructure were the hot topics.

see pages 74 and 76

Richard Stephens

writes on The Executive Club’s conference on Europe’s role in the world, as well as on the European Congress of Local Authorities in Kraków, which discussed EU funding and innovation, and honoured local government leaders.

see pages 78 and 79

What are the factors influencing Poland’s logistics market? Sector firms large and small gathered with city decision makers and economic experts to explore that question. see page 81

Kraków is getting into the innovation game: Poland’s

second city boasts one of the country’s lowest unemployment rates largely due to a flood of BPO/SSC investments in recent years. But if it wants to continue growing, it will have to move up the value chain.

see page 76.

Warsaw is in for a business services boom. The question is whether it will be able to capitalise on the interest. The city offers a labour force ready to take on complex processes, but promotion and urban planning still leave much to be desired. see page 74.

eVent reView

CONFERENCE

Warsaw in focus at MIPIM Experts expect a BPO boom to come to Warsaw – but can the city capitalise on it?

Poland Today hosted a conference at the MIPIM real estate fair in Cannes, France in March that included a networking lunch and two panel discussions. Warsaw took centre stage in the conversations: hot topics included the business services sector, international promotion and urban planning.

Business services is driving office demand in Poland, but until recently the phenomenon had mostly been limited to the country’s regional cities. However, within the next five years Warsaw is set to emerge as a major BPO hub, said experts at Poland Today’s Primetime Poland conference at the MIPIM real estate fair in Cannes, France. As a result, the city’s oversized vacancy rate – currently at 13.3% – will likely drop to levels that will make developers more comfortable.

Can the capital capitalise? The question is whether the city of Warsaw can make the most of it. On a panel discussion at the Primetime Poland conference that focused on Warsaw, Deputy Mayor Michał Olszewski had to go slightly on the defensive when it came to two aspects: city promotion and urban planning. While most of the panelists agreed that Warsaw had gone a long way to promote itself internationally, Olszewski agreed that more still needs to be done, saying: “Promotion of Warsaw is a long-term job.”

“In five years, Warsaw will be the leader when it comes to complex services, with support from regional cities,” said Paweł Jeroen van der Toolen, managing director Panczyj, managing director of ABSL, for CEE at Ghelamco, said the city needed a business services advocacy group. a comprehensive master plan for urban Throughout the country, he expects the space planning, complaining Warsaw was industry to grow at a rate of about 20% allowing a hotchpotch of architectural annually over the next five years, he said. styles in sections of the city. In off-theThis prompted Martin Erbe, managing record conversations after the conference, director at Helaba, a bank that invests in another Warsaw-based real estate profesreal estate in the region, to ask whether sional echoed these comments, saying rental levels – which have been under Warsaw was allowing “crappy” buildings pressure in Warsaw – would be the big- to go up in some of the most prestigious gest factor in attracting companies to the locations in the city. Speaking on condicity. Panczyj answered that it was more tion of anonymity because he feared it the availability of educated workers able would affect his firm’s ability to receive regulatory approval for buildings in cities to do more knowledge-intensive work. in the future, the professional said that the Wojciech Popławski, director at Accenture officials in Warsaw who dole out building Operations Poland, which has service cen- permits are too old and bureaucratic, with tres in both Warsaw and Kraków, agreed. “no modern vision”. “The services needed will be more complex, and Warsaw can be a home for com- Nevertheless, the potential is there. panies that haven’t yet come to Poland, Katarzyna Zawodna, managing direcor who need more than what the other tor at Skanska Property Poland, said she cities can offer,” he said. In a discussion had “no doubt” that Warsaw was the after the conference Stanislav Frnka and region’s clear leader in terms of investGrzegorz Strutyński, HB Reavis’ coun- ment attractiveness. Richard Stephens (above middle), try manager and commercial director for Poland respectively, said that tenants of Jason Lucas, managing director at Amstar, editor in chief of Poland Today, led a their buildings had told them that while which recently partnered with BBI to buy panel at MIPIM that other Polish cities also offer workers who the Złota 44 residential tower in the cen- focused on Warsaw. can perform such tasks, the Warsaw mar- tre of Warsaw, agreed, saying the city was ket is “deeper” – there are simply more of a very business-friendly location. “For us them in the capital, making it more attrac- it was a very obvious investment,” he said. by Andrew Kureth tive to investors.

photos: courtesy of MiPiM

Primetime Poland:

Jason Lucas (directly above),

managing director at Amstar, which recently partnered with BBI to buy the Złota 44 residential tower in the centre of Warsaw.

eVent reView

Michał Olszewski (above), deputy mayor of Warsaw, agreed with other panelists that more still needs to be done to promote Warsaw internationally. “Promotion of Warsaw is a long-term job,” he said.

Martin Erbe,

managing director at Helaba, wondered whether Warsaw’s under-pressure rental levels would be the biggest factor in attracting business services firms to Warsaw.

Robert Dobrzycki (above), managing

partner for Europe at Panattoni, talked up the potential of eastern Poland for logistics investments.

CONFERENCE

Kraków getting in the innovation game

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How should Poland’s second city tackle the challenges it faces as a rapidly developing knowledge-based economy?

Kraków is booming – a tidal wave of business services investments over the past 10 years has spurred the local economy, bringing in over 30,000 new jobs. The unemployment rate in the city is just 5.3%, according to GUS, Poland’s statistical office, while the country’s national average is 11.2%. Nevertheless, the city faces plenty of challenges ahead. An increasing number of cities around Poland are jumping on the business services bandwagon. Kraków is finding itself not only competing with them, but also with other cities in Europe and even around the world. As low labourcost Asian cities rise up the ranks of BPO investment attractiveness, Kraków is seeing its wages inflate, making it less competitive. Moreover, its former industrial district, Nowa Huta, still lies disused, without any significant investment. There are competing visions for how the authorities should address the issue. The city might be able to find some solutions in its fast-growing IT sector. Such was one conclusion of the discussions at Poland Today’s conference Spotlight on Kraków & Małopolska – ‘The Brain Gain’, held in late March.

Participation focused: Poland

Today’s Spotlight on Kraków & Małopolska – ‘The Brain Gain’ conference ensured audience participation with open forum discussions (right) instead of closed panels, and a future forecasting session led by foresight firm 4CF (below). The results of the forecasting session can be found at poland-today.pl/ events.

The conference opened with a future forecasting session led by foresight firm 4CF. During this session, participants broke up into groups and attempted to predict both probable and desirable futures for the Nowa Huta district in 10 years’ time. Both futures that the participants envisioned included improvement on the current situation, while the desirable scenario included a much younger population, an influx of middle class residents and high-tech businesses, with a thriving cultural scene.

photos: oskar boral

The chief differentiator between the two scenarios was a clear strategy from the local government, which included well thought-out zoning plans and heavy investment in infrastructure. The session came to the conclusion that to avoid a scenario where such plans go awry, the government would have to be smart about its incentives, make sure the tenders for infrastructure investments were not to bureaucracy-laden and that the arrival of middle class inhabitants didn’t lead to the exclusion of less wealthy residents. ‘Create the growth yourself’ The afternoon session included two open forums, one on real estate and one on innovation. The real estate session focused on the impact the business services boom has had on the office sector, where the vacancy rate currently stands at 3.6%. While some developers on the panel said they thought such conditions could hold

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up for three or four years, experts from the advisories said that was too optimistic. Instead, they said that with office development in the city moving ahead rapidly, vacancy rates were set to remain low for only two or three more years, at most. Quickly, however, the discussion turned from real estate to how the city could sustain its economic growth in general. Participants agreed that the city could not depend on a single industry – business services – to create its growth indefinitely. “Depending on outsourcing is a bit like depending on Russian gas,” said John Banka, a partner in the development advisory services business at Colliers. “Sooner or later it’s going to run out. The city has to be in the innovation game. You have to create the growth yourself.” This discussion continued during the second open forum, during which participants were joined by Małopolskie Voivode Jerzy Miller. Miller spoke at length about his vision for the region, and answered questions from the audience regarding his strategy for encouraging innovation in the city and voivodship. He said he favoured using public funds to create infrastructure that could be used by firms to innovate, rather than subsidising innovation itself. Explaining that market forces would determine the direction innovation in the region takes, he said, “I think we should follow the rule that the customer is always right – also in innovation.” by Andrew Kureth

Rafał Kulczycki (above left),

director of Kraków’s development department, answers a question during one of the forum discussions.

Małopolskie Voivode Jerzy Miller and Poland

Today editor in chief Richard Stephens (below) pose for a photo together at the conference.

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MEDIA PATRONAGE

Can Europe fulfil its potential? Leaders from business and politics discussed Europe’s role on the increasingly unpredictable global stage.

Big names: (left to

right) CEO of PKN Orlen Jacek Krawiec, former President of Poland Aleksander Kwaśniewski, former European Commissioner for Financial Programming and the Budget Janusz Lewandowski, and Member of the European Parliament Dariusz Rosati.

“The EU should be particularly strong in the face of growing geopolitical tensions,” said Jacek Krawiec, CEO of PKN Orlen. But the European Union has its own problems, as Tomáš Sedláček from Charles University in Prague memorably put it: “Europeans are trying to milk a cow that has no more milk.” He presented European societies as mired in a “fulfilment depression”. “The objective that led the founders of the European Union, namely peace and free trade, has been completed. There is no new target, and this is the main reason for the current crisis,” said Sedláček. What was his prescription? “Enjoy what we have and be aware of the fact that we are the greatest threat to ourselves,” he said.

Under the grand title of ‘The New Order in Europe and the World – Consequences for Business’, leading figures from the world of politics, business, economics and academia in Poland and Europe met at the third edition of the European Executive Forum in Warsaw to discuss how the changing world is impacting business, and how business can adapt to these changes. “The moment in which we live is not easy,” said former President Aleksander Kwaśniewski, whose Amicus Europae For professor Dariusz Rosati, a forfoundation co-hosted the conference. mer Polish minister of foreign affairs, “You can call it chaos, a process which the answer to the EU’s future is clear: is unfolding, which has led us to a new “Where does the future of Europe lie? In architecture of the world. The coming innovation, education and research and years will be full of uncertainty, unpre- development, with economies led by dictability, risks in decision-making and strong leaders.” If only it were so simple. stress associated with it.” by Richard Stephens

photos: Piotr Dziubak

With that sobering opening remark in mind, the various speakers set out to explain how they saw the future for business, although business soon took a back seat to the future of the European Union in the discussions. If one overriding theme came out of the event, it was the question of whether the European Union could carve out a leading role in the new world order and fulfil its potential as a force for good.

Richard Stephens,

editor in chief of Poland Today, moderated the event.

Jacek Krawiec,

CEO of PKN Orlen, Poland’s largest refiner.

MEDIA PATRONAGE

A new chapter for local government

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photos: courtesy of the economic forum

How should local authorities manage the distribution of EU funds and spur innovation?

Debate (above):

How to Enhance Investment Attractiveness of Cities and Regions?

Zbigniew Jagiełło

(right), president of PKO BP.

Jacek Majchrowski (left), mayor of Kraków.

Under rules set out in the Treaty of Lisbon, the European Commission is now obliged to consult regional and local governments across Europe in the early stages of EU legislative processes, thereby increasing the importance of local governments in European integration. Consequently, the first day of the two-day European Congress of Local Authorities, which attracted over 1,000 local government and business figures from across Europe to Kraków, was under the theme of ‘Europe of regions – a new opening’. The allocation of resources under the 2014-2020 EU financial perspective was the dominant topic at the event: the congress heard that the main challenge facing local governments is the effective use of EU funds while maintaining budgetary discipline.

One highlight was a debate featuring the fostering it, particularly when it comes mayors of some key Polish cities. Taking to EU funds. Marc Bovenschulte, direcpart in the panel were Jacek Majchrowski tor of the German Institute of Innovations of Kraków, Tadeusz Truskolaski of and Technology, noted the importance Białystok and Zygmunt Frankiewicz of harnessing the upside of ‘megatrends’ of Gliwice. Though courting outsourc- such as migration to use the potential of ing investments has been en vogue of late, migrants in communities. Mayor Frankiewicz argued that cities should concentrate on attracting manu- The event provided a fitting occasion facturing, since outsourcing operations to recognize the leaders of local govcan quickly move on to other locations. ernment over the last 25 years through Mayor Majchrowski advocated for greater a competition organized by newspaautonomy for cities from the national gov- per Rzeczpospolita and the Institute ernment, while Mayor Truskolaski urged for Eastern Studies. The winners were: cities to work together to keep more Grzegorz Czapla, Ożarowice commune; income tax in local government hands. Jerzy Godlewski, the mayor of the town and commune of Glinojeck; and Tomasz Another much-discussed topic was Malepszy, the mayor of Leszno from 1998 innovation and local authorities’ role in to 2014. by Richard Stephens

Luiz de Mello

(above, with microphone), deputy director of the Public Governance and Territorial Development Directorate at the Organisation for Economic Co-operation and Development (OECD) talks with Bogusław Chrabota, editor in chief of daily newspaper Rzeczpospolita.

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MEDIA PATRONAGE

Lublin: inspiring business Business leaders and economic experts evaluated the eastern city of Lublin’s strategy for creating investment incentives

Looking at Lublin:

(left to right) CEO of PZL-Świdnik Krzysztof Krystowski, vice president of AVIO Paweł Poncyljusz and economist Marek Zuber debate Lublin’s investment potential.

The How Lublin Inspires Business conference was packed with business leaders and decision makers interested in the city’s strategy for attracting investment.

Lublin’s strategy for attracting investment consists of four pillars: openness, friendliness, entrepreneurship and academic quality. In late April investors, economists and business experts gathered at the How Lublin Inspires Business conference to discuss how the city’s strategy works in practice. Participants at the conference discussed how they saw the city’s business pro- Artur Szymczyk, file – sectors that were often mentioned deputy mayor of included agriculture, biotechnology, avia- Lublin responsible for investment and tion and logistics. Mariusz Sagan, director development. of the city’s investor services department and co-author of the ‘Lublin 2020’ strategy, argued that in 10 years Lublin would be among the top-tier investment locations in Poland. by Andrew Kureth

Mariusz Sagan,

director of Lublin’s strategy and investor services department.

photos: courtesy of bluevine consulting

Full house:

MEDIA PATRONAGE

Gliwice shines for logistics investment

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photos: courtesy of bluevine consulting

What are the drivers factors influencing Poland’s logistics market? Sector firms large and small gathered with city decision makers and economic experts to explore that question

Economist Ryszard Petru (above), was one

of the main speakers at the Logistics, Investment, Future conference in Gliwice.

What are the factors influencing Poland’s logistics market? Sector firms large and small gathered with city decision makers and economic experts in Gliwice in March to explore that question at the fourth annual Logistics, Investment, Future’ conference. Gliwice itself was held up as an example of a city that has implemented a consistent development policy which has included investment in infrastructure. Its potential as a logisitics Joanna Bensz hub is obvious – it is one of only two cities and Paweł Kowal in Poland where there is an intersection of (above), country manager of CH2M two major national highways. HILL in Poland, and Gliwice’s strong position in the logistics market is not an accident, said the city’s Deputy Mayor Adam Neumann, pointing out that authorities have put forth a consistent vision for the city as a wellconnected ‘Silicon Valley’, with concrete plans for investment in infrastructure. Participants agreed that public investment in roads, rail and internet connections is key for the sector. “Infrastructure, infrastructure, infrastructure,” said Martin Kamola of DCT Gdańsk. “Let’s make sure the state invests in it.” by Andrew Kureth

Member of the European Parliament, respectively.

Impressions

Good things are on the way Poland Today sits down with Paul Chen, an American living in Poland, to ask him about his unique perspective on the country

How closely did your preconceptions of Poland match your first impressions? To be honest, I didn’t have any concrete preconceptions of Poland prior to that visit. I just heard a lot of good opinions from my friends who had come here before me. Having had some Polish-American friends, I had the idea that Polish people were nice and intelligent, and that the food was really pretty tasty.

Looking back, have those first impressions proved right or wrong? In general, the food is pretty tasty. I love racuchy (a type of pastry) with apples. In general, people are nice and intelligent, but as with everywhere, you do get some dodgy characters as well.

What about Poland was unexpected? I didn’t expect how much red tape was involved in every aspect of life. I am up to my neck with paperwork! However, the cost of living is relatively low. You don’t have to earn a lot of money to remain sheltered, clothed and fed.

Was anything surprisingly familiar? photo: Oskar Boral

Did you know that you can get American style hamburgers in places other than McDonald’s now?

‘The lack of good customer service was hard to swallow at first’ Paul Chen is an American who has been living in Poland since 2010. He teaches at a major technical university in Kraków and blogs about start-ups in the city. He says he was surprised at the level of bureaucracy he encountered when he came to the country, but would love it if Polish-style milk bars began springing up in the United States.

What was the thing that was hardest to adjust to when you moved to Poland? The lack of good customer service was hard to swallow at first. It is getting better – very slowly though.

What has been the strangest or most memorable experience from your time in Poland? Something that sticks out was the border crossing between Ukraine and Poland on foot. I did not expect there would be so many Ukrainians trying to get into Poland to sell their goods. Having to deal with such a large crowd and getting squeezed and crushed was definitely something I will remember – trying to get across the border in time to catch a late train made things exciting.

What Polish thing do you wish they had in the United States, and vice-versa?

I would like to have one of those Polish milk bars where you can get good food cheaply. And I wish they had American style diners here where you can get a Lumberjack Breakfast any time of the day.

What are the most striking similarities between Poles and people from the United States, and what are the most striking differences? I think that like Americans, Poles can be pretty clever in coming up with different ways of achieving a target. I guess the biggest difference is that Poles have a hard time walking a mile in another person’s shoes.

What advice would you give someone from the United States coming to live in Poland? I would advise them to have a lot of patience and keep an open mind. If you haven’t done so already, having a Polish companion or best friend will prove to be very helpful when trying to manoeuvre through the little everyday things.

What advice would you give a Pole going to live in the United States? Save up before you get there; just about everything costs money. Maintain an open mind, and expect that things from one part of the country can be quite different from another part.

In what ways has Poland changed you for the better or for the worse? It made me more resourceful and assertive, on the other hand it has made me even more cynical than I had been.

What keeps you here now? At the moment, I am a journalist for the website web.gov.pl. I also blog about start-ups. You can find me at www.ksup.co. I see a lot of potential in Polish start-ups. I feel that I am part of a movement and good things are on the way. I am also a member of the American Chamber of Commerce, so I am trying to make more meaningful connections between the Polish business community and their counterparts in the US. I teach at the AGH, a major technical university in Kraków. I see my job as a university teacher as a chance to change the future of Poland for the better.