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The Warsaw Voice » Other » June 11, 2008
Warsaw - CEE Financial Hub Conference
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Big Chance for the Capital
June 11, 2008   
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Warsaw has a major chance of becoming a financial hub of Central and Eastern Europe. The city is now considered to be one of the most attractive business locations in Europe. The Warsaw Stock Exchange (WSE) is according to many indicators the largest market in the region. And the capital of Poland may soon become the most important financial center in this part of Europe. But for this to happen, many conditions still need to be met.

Warsaw's chances of becoming a regional financial center were the topic of discussions during the Warsaw-CEE Financial Hub conference May 29. Organized by the WSE, the International Herald Tribune and The Warsaw Voice in conjunction with the Warsaw city authorities as the host, the conference was attended by government officials, City Hall officials, finance experts, and Polish and foreign investors and issuers.

Warsaw is and will remain the business capital of Poland. Thanks to its investor-friendly climate, Warsaw generates over 13 percent of Poland's GDP and one in five companies in Poland is based in the capital. Most banks and other important financial institutions have their head offices here. Warsaw is also well regarded by foreign investors-it has moved into the top 20 in the European Cities Monitor league table of Europe's best business locations. "There is great interest in Warsaw from international investors," Hanna Gronkiewicz-Waltz, mayor of Warsaw, said at the conference.

There are also many other factors that make Warsaw attractive. One of them is the city's geographical and geopolitical location. Warsaw is the largest capital of all new EU member states. It is inhabited by 1.7 million people, most of them young and well educated. An important factor, both for the local residents and investors, is personal safety. And Warsaw is one of the safest cities in Poland.

Under the city's development strategy until 2020, Warsaw is to strengthen its role as a major financial and business center in Central and Eastern Europe. The city has already taken measures designed to help it achieve this goal. These include road building and public transport projects, smoother construction permit procedures, and promotion initiatives at home and abroad. "Some 1,200 investment projects, on which the city is going to spend zl.15 billion, are planned for Warsaw for the coming four years," Gronkiewicz-Waltz said.

Investors' interest in Warsaw would have been smaller if it had not been for the rapid growth of the Polish economy. Poland is not only the largest country in Central and Eastern Europe, but it also has one of the fastest growing economies, with GDP growth at 6.5 percent in 2007 and 6.1 percent in the first quarter of this year. "Such factors as the size of the local economy and population, access to and supply of capital, and EU membership contribute to Warsaw's position as the most important financial center in the region," Ludwik Sobolewski, WSE president, said.

The Warsaw stock market has a key role in plans to make the capital a regional financial hub. The WSE, which has been successfully competing internationally, is in many respects the largest market in the region and ranks second in the whole of Europe in terms of the number of IPOs. The WSE's latest offspring, the NewConnect market, has been successfully competing with Europe's largest alternative market-London's AIM. In the first quarter of this year, the number of IPOs on the two markets was the same at 14. The WSE is now one of the most developed markets in Central Europe in many respects, including in capitalization, turnover, number and type of instruments listed, and also in terms of organizational and technical solutions.

At the end of May, 364 companies, including 25 foreign ones, were listed on the WSE's main market. Their total capitalization was over zl.813 billion. At the end of last year, when the market situation was better, the WSE's total capitalization exceeded zl.1 trillion. The NewConnect alternative market has attracted 54 companies to its floor in less than nine months since it was launched. The companies' total capitalization is almost zl.1.4 billion.

For some time now the WSE has been more than a local market. The largest companies in Central and Eastern Europe have come to the Warsaw floor with their stock. Immoeast's IPO, worth zl.10.7 billion, has been the largest in the WSE's history. For many years a third of the WSE's turnover has been generated by foreign investors and foreign shareholders have considerable stakes in many of the listed companies. The WSE's position as a international market has been strengthened through the arrival of new foreign companies and foreign remote members, that is foreign brokerage houses operating on the Warsaw stock market without the need to be physically present in Poland or use the services of local intermediaries.

The WSE's main goal for the coming years is building a regional financial hub around the stock market. The WSE will be trying to attract companies from neighboring countries and to achieve a critical mass that would secure its role as the leading market in Central and Eastern Europe.

"For Warsaw to become a financial hub, the WSE has to be open to investors, intermediaries and issuers. A symbol of the WSE's openness will be turning it into a public company," Sobolewski said.

The WSE has been included in the list of state-run companies and institutions which are to be privatized in the near future. Under the Treasury Ministry's privatization plans, more than 10 Treasury-owned companies will be floated on the stock exchange by 2011. "Most of them are large and prospering companies, whose entrance onto the WSE will increase its capitalization and importance in the region," Michał Chyczewski, deputy Treasury minister, said at the conference. He said floatation on the stock market will continue to be the preferred privatization path because this ensures an objective valuation of assets and broad public approval.

The magnet that draws investors to Poland and Warsaw is the country's rapidly growing economy, which has not faltered despite the recent turbulence on global financial markets. The economy has been helped by such factors as the availability of the largest amount of EU structural funds in the region and preparations for the Euro 2012 European soccer championship to be hosted jointly by the region's two largest countries, Poland and Ukraine.

"Having been awarded the right to stage the Euro championships, the third most important sporting event in the world after the Olympic games and world soccer championships, Poland has received a positive boost to development because this involves not only the construction of sports facilities but also huge investment in infrastructure, roads, airports, hotels and so on," said Marcin Herra, president of PL 2012, the company which is coordinating the Euro 2012 preparations in Poland. "Part of this investment will be in Warsaw."

According to Jarosław Pawłowski, deputy minister for regional development, European integration and access to European funds is the crucial factor behind Poland's economic success. "It is now important to use the funds to the maximum and in the best way," Pawłowski said. But according to Anna Nietyksza, president of EFICOM, a company listed on the WSE, this will not be possible unless procedures are simplified because they pose a major barrier to those who seek EU subsidies. "It is necessary to simplify not only procedures, but also the law because it still hampers entrepreneurs in many areas," said Robert Jędrzejczyk, legal adviser and partner at the Gide Loyrette Nouel (GLN) law firm.

Paweł Wojciechowski, president of the Polish Information and Foreign Investment Agency, said that legal issues, especially tax law, are among the most important factors taken into account by investors. "And it is not only about tax levels, but also about the stability and predictability of tax policy," he said.

Most participants in the conference agreed that, despite legal and infrastructure problems, Poland and Warsaw were attractive locations for business. "Poland has never had such development opportunities as are now unfolding," said Alex Kloszewski, president of the Warsaw Destination Alliance.
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