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The Warsaw Voice » Conferences » December 30, 2010
Warsaw CEE Financial Hub
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International Conference of Investors and Issuers
December 30, 2010   
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Warsaw is now rated among the most attractive business locations in Europe while the Warsaw Stock Exchange (WSE) has in many respects become the largest market in the region. There are many signs indicating that in the near future the Polish capital will become the most important financial center in this part of Europe.

Participants in the Warsaw—CEE Financial Hub conference held in the Polish capital Nov. 29 discussed the city’s chances of becoming a regional financial center. The conference was organized by The Warsaw Voice, the International Herald Tribune and the Warsaw Stock Exchange in conjunction with Warsaw City Hall. Held for the third time, the conference was attended by government and City Hall officials, experts on finance, investors and issuers.

Warsaw is and will remain the capital of Polish business. Thanks to its favorable investment conditions, the city generates more than 13 percent of the country’s GDP. One in five companies operating in Poland is based in Warsaw. Most banks and other important financial institutions have their headquarters in the city. Warsaw is perceived as a good business location by foreign investors, which is reflected in its high rankings in league tables of the best business locations in Europe.

Under the strategy for the development of Warsaw until 2020, the city’s role as an important business and financial center in Central and Eastern Europe is to be strengthened. The municipal authorities have already taken measures to turn the city into such a center. “These measures include investing in roads and urban transport, and the construction of the second metro line,” said Jarosław Kochaniak, deputy mayor of Warsaw, who attended the conference. Infrastructure projects are largely funded by the European Union.

The Warsaw Stock Exchange – which is already one of the best developed markets in Central Europe in terms of capitalization, turnover, the number and type of instruments listed, organization and technology – is to be the leading component of the Central European financial hub.

The appearance of successive foreign companies and foreign brokerage houses has strengthened the status of the Warsaw exchange as a supranational market. “The more companies there are on the exchange, the higher the interest from investors and issuers,” said Tomasz Zganiacz, director of the Department for Capital Markets at the Treasury Ministry. “But it is also important that the largest investment banks have opened their offices in Warsaw. These institutions not only advise investors, but also bring capital to Poland.”

The Warsaw exchange aims to attract the largest possible number of companies from neighboring countries to its floor in order to secure a leading role for the WSE in Central and Eastern Europe in the future. “The WSE is already a leader in Europe. But being a leader and being a financial hub are two different things,” said Ludwik Sobolewski, president of the WSE. “The latter task is more ambitious. This is why I would hesitate to say today that WSE is a regional financial center, but I am convinced that this moment is very close.”

The goal of the WSE management is to ensure that as many companies operating in the CEE region as possible acquire capital through the stock market in Warsaw. To this end, an index of foreign companies is to be launched on WSE to make foreign companies more visible. “The point is for the WSE to become a bridge between eastern markets and the European Union,” Sobolewski said.

Investors would not be so interested in Warsaw if the Polish economy were not expanding. Last year, with GDP growth of 1.7 percent, Poland was the only EU country to avoid recession. This year, the Polish economy has grown even faster. The 2010 growth rate is likely to be 3.4-3.6 percent. “Stable conditions for business operations are needed for Warsaw to develop as a regional financial hub,” Finance Minister Jacek Rostowski told the conference. “These conditions will improve in 2011 thanks to measures already carried out or planned by the government.”

Rostowski said that in 2011 Poland would for the first time have a balanced budget, which means that new expenditure will not rise more than 1 percentage point above inflation. “This is the beginning of a road to fully repairing public finances, which have in any case suffered relatively little compared to most EU countries,” Rostowski said. The government wants to reduce the general government deficit to less than 3 percent of GDP in 2013 at the latest.

Deputy Treasury Minister Mikołaj Budzanowski said Poland had a stable and predictable economy, and this made it an attractive country for investors. The successful privatizations in 2010 prove that the Polish market is attractive. The most important of them are the IPOs of PZU, Tauron and the Warsaw Stock Exchange itself, which attracted much interest from foreign investors.

“Foreign investors appreciate Poland’s stable growth and its favorable prospects,” said Rafał Baniak, deputy minister of the economy. More than 9.9 billion euros in foreign direct investment (FDI) flowed into Poland in 2009. This was only 2 percent less than in 2008, while most countries in the region recorded a double-digit drop in FDI of up to 40 percent. “We expect that FDI will reach 10 billion euros in 2010 and will remain at a similar level in 2011,” Baniak said. He believes that the Polish economy owes its strong performance to Polish businesses, which have been able to cope with difficult market conditions.

Gyorgy Kovacs, UBS executive director for emerging markets, also thinks that Poland meets most of the conditions needed for stable growth, while the main risk is associated with external factors. Roman Durka, president of Fujitsu Technology Solutions, said that Poland was an attractive investment market for companies like his for reasons including its well-educated pool of engineers. But Durka added that conditions for business operations were not perfect in Poland. Investors still complain of excessive red tape and hidden taxes. “Additionally, I have doubts as to whether reforms needed to sustain economic growth in the future have been prepared sufficiently well in Poland,” Durka said.

Polish business is catching up with Europe and the world not only in terms of production development but also through adopting business ethics principles. An example are corporate social responsibility (CSR) practices, which are gaining in popularity in Poland. “However, there are still many Polish companies which regard CSR as something which supports social goals but does not translate directly into business,” said Bolesław Rok of the Business Ethics Center at Ko¶miński University. “Meanwhile, large global corporations have adopted CSR programs as part of their business strategies. This strengthens companies’ competitive edge.”

The largest structural funding in the region from the EU and preparations for the UEFA Euro 2012 soccer championships to be hosted by Poland and Ukraine, the two largest countries in the region, have contributed to sustaining positive economic conditions in Poland in recent years.

“The decision to award Euro 2012 to Poland gave a development boost to the country,” said Marcin Herra, president of the PL2012 company, which is coordinating preparations for Euro 2012 in Poland. “216 projects, of which sports facilities are only a small part, are the object of our interest. Most of them are huge infrastructure, road, airport and hotel projects. It is estimated that thanks to Euro 2012 some of the infrastructure projects that Poland badly needs will be completed three or five years earlier than planned.”

Apart from Euro 2012 projects, the noticeable improvement on the property market may be a driver behind economic growth. “In 2010, we have recorded an upswing in deals on the commercial property market,” said Joanna Kowalska-Szymczak, director of the Investment Advisory Department at DTZ Polska. Investors are interested especially in Warsaw because investment risk in the city is the lowest.

Although Warsaw is undeniably the most attractive place to invest in Poland, other Polish regions also have large economic potential. One such region is eastern Poland, which is now enjoying an investment boom thanks to EU funding. More than 2.2 billion euros from the European Fund for Regional Development has been set aside for the development of Poland’s five least developed regions – the Warmia and Mazuria, Podlasie, Podkarpacie, Lublin and ¦więtokrzyskie provinces. The Development of Eastern Poland 2007-2013 Operational Program has been drawn up with these in mind. “Its goal is to speed up the pace of social and economic development in eastern Poland in keeping with the principle of sustainable development,” said Bożena Lublińska-Kasprzak, president of the Polish Agency for Enterprise Development (PARP).

The Polish Information and Foreign Investment Agency (PAIiIZ) is carrying out a project aimed at promoting the five provinces of eastern Poland. “We want to overcome the existing stereotyped perception of eastern Poland and show the potential of this area,” said Bożena Czaja, a member of the PAIiIZ board. “These activities are aimed at improving the image of eastern Poland and to encourage investment.”
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