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The Warsaw Voice » Business » September 29, 2014
Economic forum
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Leadership in a Changing World
September 29, 2014   
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More than 3,000 prominent politicians, financiers, businessmen and scientists from across the world, accompanied by crowds of journalists, flocked to the southern Polish resort of Krynica in early September to discuss the most pressing problems in Europe and further afield.

The annual Economic Forum in Krynica, organized by the Warsaw-based Institute of Eastern Studies, has an established reputation as one of the most important economic conferences in Central and Eastern Europe. The event attracts those who want to discuss the future and use their expertise to help build a secure Europe based on solidarity and to turn the European Union into the most competitive economy in the world.

This year’s forum was held under the motto “The Post-Crisis World: Time for New Leaders.”

A panel discussion opening the forum featured speakers including former Polish President Aleksander Kwaśniewski. “Leadership can be exercised through dialogue, argumentation, persuasion, and to a very limited extent through imposing decisions that a leader considers to be important,” Kwaśniewski said. “A leader, through his approach, core values, consistency, and ethical conduct, builds credibility, which makes it possible to encourage people to follow him.”

According to Kwaśniewski, one of the greatest challenges for today’s leaders is that the world is rapidly changing. This makes it difficult to predict anything. Another challenge is that information spreads almost instantly. This causes a huge pile-up of information, on the one hand, and requires a fast response on the other, Kwaśniewski said.
Andrzej Klesyk, CEO of PZU SA, Poland’s largest insurance company, said that it was no longer possible to divide leaders into political and economic categories. “These two worlds are now closely linked to each other. And a leader is expected to be predictable so that it’s clear what they will do,” said Klesyk.

Meanwhile, Pedro Pereira da Silva, CEO of the Portugal-based Jeronimo Martins group and country manager for Poland, said that leadership is impossible without building trust. Ninety percent of the products sold in Biedronka stores, which are owned by Jeronimo Martins, are produced in Poland “because that’s the decision we’ve made—and this builds trust,” Pereira da Silva said. “This can take years, but once you’ve built confidence, you can achieve great things. This also applies to leaders worldwide.”

Forum participants at Krynica also discussed the situation in Ukraine. They noted that the implications of the conflict in Ukraine are already being felt in Central and Eastern Europe, and the region is preparing for further economic shocks. Jan Krzysztof Bielecki, once prime minister of Poland now chief advisor to the prime minister on economic affairs, said, “The situation in Ukraine is very serious. We are in a danger zone in many ways.” He added that the Ukraine crisis is beginning to have an impact on Europe as a whole. This is evidenced, for example, by the deteriorating performance of Germany, Europe’s largest economy, which decelerated in the second quarter, Bielecki said, in part due to reduced exports to Russia following an escalation of sanctions.

According to some business practitioners, regardless of the public’s worries related to the events beyond Poland’s eastern border, Poland has yet to feel the real fallout of this crisis. Krzysztof Kalicki, CEO of Deutsche Bank in Poland, said he was afraid the inflow of foreign direct investment to Poland would decelerate. “Looking at the map, foreign investors from outside Europe perceive Poland and Ukraine as one and the same region,” said Kalicki.

Deputy Prime Minister and Economy Minister Janusz Piechociński was more optimistic. He said that Poland’s 3.4 percent GDP growth target adopted in the draft budget for next year is a source of pride and satisfaction. The government adopted this target despite tensions in Europe and around the world, Piechociński said. But, it is necessary to be aware that for catching-up countries such as those in Central and Eastern Europe medium-fast growth is a dangerous trap, Piechociński added. GDP growth of 1.5-2 percent statistically does not mean that an economy is becoming more competitive, that new jobs are being created, that new-economy industries are emerging, Piechociński said. He added that it is necessary to continue increasing the role of exports in Poland’s GDP so that they contribute around 60 percent a few years from now, up from 40 percent last year.

Central and Eastern Europe is recording above-average economic growth, Piechociński said. Although this growth is faster than in the eurozone and among “old” EU countries, it is still far slower than in China and the United States, for example. According to Piechociński, Europe has felt the negative impact of U.S. economic policies thanks to which the American economy has expanded while European economies have lost out. Moreover, Europe has been left behind in terms of the development of new-generation industries, Piechociński said.

As in previous years, the energy and fuel sector was an important topic of debate at Krynica. This year, special attention was paid to the security of energy supplies. According to Paweł Olechnowicz, head of fuel giant Grupa Lotos, one of the key problems facing the European energy sector is finding a way to become independent of gas imports from Russia. “There’s increasing talk about building a common energy market. However, in order for such a market to emerge, it is necessary to talk about a community in the European Union. If a common position is worked out, we will become a serious and big player on the market for energy supplies, and will then have a better position to set raw material prices,” said Olechnowicz during a debate entitled “An energy union for Europe—competitiveness, growth, security and solidarity.”

Meanwhile, Guenter Verheugen, a German politician and former EU Commissioner for Enlargement, said that in the short term Europe would continue to be dependent on Russian gas, but after the introduction of a common policy and strengthening the system, for example through a European network of pipelines, it would be possible to diversify the network of suppliers.

Those taking part in a discussion on common energy markets agreed that the integration of gas markets in Visegrad Group countries—Poland, the Czech Republic, Hungary and Slovakia—continues to encounter obstacles, but may be speeded up as a result of the conflict in Ukraine. A starting point for the discussion was a recent report by the Warsaw-based Center for Eastern Studies that states that the Russian-Ukrainian conflict has exposed differences between Central European countries, instead of deepening cooperation between them because of the threat of disrupted gas supplies from Russia.

The Center for Eastern Studies is a Polish state-run institution based in Warsaw that monitors and analyzes the political, economic and social situation in Central and Eastern Europe as well as Northern Europe, the Balkans, the Caucasus, Turkey and Central Asia. According to the report, individual countries in the region are pursuing divergent strategies whereby some of these countries are seeking to maintain good relations with Russia on their own, which may limit the chances of creating a common trade area and ensuring multiple sources of raw material supply.

Jan Chadam, CEO of Polish gas transmission pipeline operator Gaz-System, said progress has been made in the so-called interconnectedness process and the problem should be resolved five to six years from now. Gas pipelines are being built, and all other problems are easier to solve, because they are bureaucratic and political in nature, Chadam said.

Maciej Bando, head of the Polish Energy Regulatory Office, said that real liberalization is not when many retailers sell raw material from a single source, but when there are many sources of supplies. However, in the case of some countries, it is not entirely clear if they want to be headed in this direction, Bando said. He voiced doubts over whether the establishment of a common gas purchasing group by the EU would improve the bloc’s position against Russia, which is its dominant supplier. This is because Russia is building an alternative route for exports: it is eyeing Asia, China in particular.

There was also a lot of discussion about nuclear power during the Krynica forum. Conference participants were especially interested when the Enea, KGHM Polska Miedź and Tauron Polska Energia companies announced that they would each buy from Polish energy corporation PGE Polska Grupa Energetyczna 10 percent (30 percent in total) of the stock in PGE EJ 1, the company responsible for the construction of Poland’s first nuclear power plant with a capacity of around 3,000 MW. Under an agreement signed in early September, the partners will jointly, in proportion to the shares they hold, finance activities related to investment projects in the next three years. The partners say they expect the total costs of these activities will amount to around zl.1 billion.

In particular there are plans to select a strategic partner during this time as well as the technology provider and the contractor for the nuclear power plant, which will be built on a turnkey basis as part of a so-called engineering, procurement, construction (EPC) package. The partners will also select a supplier of nuclear fuel and secure financing for the project. To this end, an integrated procedure will be carried out that will combine all the key elements of the nuclear project in one tender.

Deputy Treasury Minister Zdzisław Gawlik said, “The nuclear program, which was until now being carried out by PGE Polska Grupa Energetyczna, is now national in nature. Cooperation between four companies increases the possibility of building a nuclear power plant in Poland.”

Central Europe Energy Partners (CEEP) is an association formed by energy and energy-intensive industries that aims to unite the energy sector in Central Europe and strengthen the position of this sector in the European Union. This is the first industry-specific organization from Central Europe of a regional character. The association represents the Central European energy sector (for example coal, oil, renewables, grids) as well as energy-intensive industries (steel, chemicals and others). Its main aim is to support the integration of this energy sector within the framework of a common EU energy and security policy. At present, CEEP has 23 members—companies and research institutions from countries including the Czech Republic, Lithuania, Poland, Romania and Slovakia—employing 300,000 in total and with combined sales totaling 42 billion euros. In June 2014 CEEP celebrates its fourth birthday.
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