Investor

Vol. XXI, No. 8 • ISSN 1506-3240

American

NOVEMBER-DECEMBER 2011

© American Chamber of Commerce in Poland 2011

www.amcham.pl

CEERES Marathon Oil Corporation

Company Profile:

Experts: Deloitte Ernst & Young Łaszczuk & Partners Salans Wardyński & Partners

Monthly Meeting: Mark Allen, Witold Orłowski and Ryszard Petru in September; Krzysztof Bobiński, Łukasz Warzecha and Tomasz Wróblewski in October

Focus: Outsourcing in Silesia AmCham Survey: Data Safety Westin's Janusz Korzyński

Image: Idea go / FreeDigitalPhotos.net

The future is here and now
A leading study plots Poland's position on the global innovation map, but the coordinates are not quite where they could be

AmCham online

Do not miss the opportunity to sponsor AmCham events in 2012!

Investor COVER STORY: The future is here and now
American
NOVEMBER-DECEMBER 2011 Vol. XXI, No. 8

what’s on

Your online guide to AmCham activities

www.amcham.pl

Download this magazine!
American Investor is available in full as a pdf for download from the www.amcham.pl website. Go to "About Us" in the horizontal menu, and choose American Investor Magazine from the pop-up menu. You can download past issues of American Investor dating back to October 2010.

A leading study plots Poland's position on the global innovation map, but the coordinates are not quite where they could be, page 14.

Calendar
By clicking on red links in the Calendar you may visit photo coverage of our past events. Blue links will take you to the announcements of upcoming events.

MONTHLY MEETING in September Facing the music…in an orchestrated fashion Poland is relatively wellpositioned to withstand the negative effects of the global economic crisis, but only if the eurozone keeps its act together, p. 18 MONTHLY MEETING in October A joker in the deck A prehash of the 2011 parliamentary elections raised questions about the political landscape in Poland for the years to come, as rabble-rouser Janusz Palikot adds leaven to the leftist loaf, p. 20 FOCUS Back-office romance Silesia and the outsourcing industry have got a special thing going on, p. 22 Neglect is the order of the day An AmCham survey finds that Polish subsidiaries of global companies do not have proper procedures for erasing computer files, p. 23 Dishing up the avant-garde How a skinny kid under communism became a world-class foodie, p. 24 COMPANY PROFILE An exciting new business American Investor’s Tomasz Ćwiok talks with Carl Hubacher, Marathon Oil Corporation’s country manager for Poland, about the company’s business prospects and challenges, p. 26 Reaching critical (bio)mass American Investor’s Tomasz Ćwiok talks with Randy M. Mott, Managing Director of CEERS, a company that specializes in planning and implementing green energy projects across Poland, p. 27 EXPERTS Nature bites back Managers may face criminal sanctions for violating environmental laws, p. 28 Don’t look back in anger Companies may get a refund of transaction tax on shareholder loans, p. 29 Let them live Incentives for investment in distressed areas have proved their worth and should continue past their legal sunset of 2020, p. 30 Seed money Poland has an interesting package to support R&D, p. 32 Gold in garbage New municipal waste management regulations create business opportunities, p. 33 EVENTS Oktoberfest 2011, p. 34 Monthly Meeting in September, p. 36 Outsourcing conference in Katowice, p. 37 Monthly Meeting in October, p. 38 AmCham Conference in Muszyna, p. 39 DEPARTMENTS Newsline, p. 2, Agenda, p. 6, Guide to AmCham Committees, p. 12, Content summaries in Polish, p. 40.
NOVEMBER-DECEMBER 2011 AMERICAN INVESTOR 1

Events
AmCham Monthly Meetings are one of the flagship events organized by the chamber. While American Investor covers each Monthly Meeting extensively, including full-page pictorials, you can search through picture archives of past events that include never previously printed material. Just go to Events and Activities, pick Monthly Meetings and scroll down for links to archived events.

We encourage companies to sponsor our Business Mixers, CEO Forums, 4th of July Picnic and other events.  Business Mixers You can sponsor AmCham Business Mixers throughout 2012. To find out more about sponsoring Business Mixers, visit www.amcham.pl, click on the Events & Activities link on the horizontal menu bar, and choose Business Mixers. CEO Forums A high-level discussion panel followed by a cocktail reception, for AmCham CEOs only, held just 3 times a year. To find out more about AmCham CEO Forums, visit www.amcham.com.pl, click on the Events & Activities link on the horizontal menu bar, and choose CEO Forums. 4th of July Picnic To see pictures from last year’s picnic, go to www.amcham.com.pl, click on the Events & Activities link on the horizontal menu bar, and choose 4th of July Picnic. Annual General Meeting & Christmas Reception in December To see pictures from the last AGM & Christmas Reception, go to www.amcham.com.pl, click on the Events & Activities link on the horizontal menu bar, and choose Annual General Meeting. Regional events In addition to Warsaw events, your company can also support AmCham activities in Kraków, Wrocław and Katowice. We are open for sponsorship of the following events:  Our events in Kraków include two Business Mixers, IT Giants Conference, AmCham Academy Project; in Katowice, one Business Mixer and the Manufacturers’ Forum. For more information, please contact Monika Pilarska at +48 608 027 172 or krakow@amcham.com.pl. Our events in Wrocław include AmCham Breakfast, two Business Mixers, Oktoberfest, and International Christmas Mixer. For more information, please contact Joanna Bensz at +48 605 678 817 or amcham.wroclaw@pmg.pl. For additional information contact Anita Kowalska at +48 22520 5994.

Regions
AmCham may be closer than you think. Apart from Warsaw, AmCham has two regional branches which are active all year long and offer many exciting opportunities to interface with regional business leaders and politicians. To find out more about our activities in Kraków and the region of southern Poland, and Wrocław, go to Regions in the horizontal menu bar, and pick your region of interest.

Policy Watch
Intelligence: For AmCham position papers, policy statements, official letters to government ministers and research papers, visit the Advocacy link on the horizontal menu to download the latest AmCham position papers.

Other useful sites
US Chamber of Commerce http://www.uschamber.com American Chamber of Commerce to the European Union http://www.amchameu.be AmChams in Europe http://www.amchamseurope.com

YOUR AMCHAM

The American Chamber of Commerce in Poland

BOARD OF DIRECTORS

Newsline
AmCham
In September, AmCham Kraków and US Consul General in Kraków Allen Greenberg hosted a lunch meeting with Henryka Bochniarz, president of Boeing International Central & Eastern Europe and president of the Polish Confederation of Private Employers Lewiatan. The meeting was attended by representatives of AmCham member companies. AmCham was also a supporting partner of the European Forum for New Ideas 2011, held by Lewiatan in September in Sopot to discuss issues related to Poland’s Presidency of the Council of the European Union. AmCham Chairman Joseph Wancer represented the banking sector at the roundtable discussion entitled “Energy Landscape of Poland 2020–2030.” AmCham member companies Fluor and Westinghouse also participated in the forum. At the forum, AmCham organized a meeting to discuss the business community’s views on Polish-US relations, to fine-tune the agenda for the US-Poland Business Summit, a high-level roundtable meeting to be held in spring 2012. Among the participants were US Ambassador to Poland Lee Feinstein, Deputy Minister of Foreign Affairs Beata Stelmach, President of the US-Poland Business Council Eric Steward, and Lewiatan President Henryka Bochniarz. In cooperation with the City of Katowice, the Association of Business Service Leaders in Poland, and the Katowice Special Economic Zone, AmCham organized a conference in October entitled “Clean, Green and Talent-Driven SSC/BPO/ITO Hub in Central Europe” at the recently refurbished Monopol Hotel in Katowice. More about the event on page 22. Also in October, the chamber cohosted a conference in Muszyna, southern Poland, highlighting the tourist attractions of the Poprad Valley. The conference was attended by local government officials from Muszyna and the neighboring town of Stara Lubovna, Slovakia. One of the brains behind the conference was Ryszard Kruk of Enterprise Investors, who prepared a tour of the region for attendees. As of January 2012, AmCham will suspend its Business Visa Program with the US Embassy, because the process of obtaining US visas has improved so much that fast-tracking is no longer needed. Visa applicants must schedule a visa appointment through the embassy’s call center (703 700 120) and bring all the required documents. For more information, visit the embassy website at poland.usembassy.gov. For the fifth year since 2006, AmCham is holding the American Chamber of Commerce Student Essay Contest, with a grand prize of USD 500 for the best essay and 3 runner-up prizes of USD 150

News from AmCham and its members

Paula Wąsowska from Cisco Poland and Alexander King from Monitor Group are co-chairs of the newly established AmCham Innovation Committee.
Index, a survey of more than 1,000 of the world’s largest law firm clients by Acritas, an independent research firm. The law firm was recognized for its professional approach to clients as well as the way it handles court cases in multiple jurisdictions. In other news, the Nencki Institute of Experimental Biology, part of the Polish Academy of Sciences, has built an IT platform based on the Cisco Unified Computing System technology which enables consolidation of the institute’s physical servers on a virtual platform and protection of the system’s data. It uses an integrated, high-performance, scalable data center infrastructure with centrally managed components.

Małgorzata Urbańska from CMS Cameron McKenna is the new co-chair of the AmCham Consumer Products Committee.

Joseph Wancer – Deloitte
Chairman

Judith Y. Gliniecki – Wierzbowski Eversheds
Vice Chair

richard lada – Telesto
Vice Chairman

each. The contest is open to all high school students affiliated with an AmCham member company. Winners will be selected by the Board and the Awards Committee. The winner will be invited to our Annual General Meeting on December 16, 2011, at the Westin Hotel, to read the essay to the assembly. The deadline for submissions is November 14.

Members on the move
Cushman & Wakefield
Tom Listowski has been appointed as partner and director of Industrial in Poland & CEE Corporate Relations. Listowski started his professional career in Sydney. He has worked In Poland since 2006. Listowski is a graduate of the University of Technology in Sydney where he completed Property Economics degree. He is also accredited by the Royal Institute of Chartered Surveyors. Cushman & Wakefield has appointed capital markets specialist Søren Rodian Olsen as head of Office Investment in the Polish Capital Markets Group. He will be responsible for office developments, establishing and managing relationships with foreign investors in Poland. He was previously with Aberdeen Asset Management.

Boeing

peter kaY – KPMG Polska
Secretary

AmCham Committees

stan popoW – Finacorp
Treasurer

MEMBERS Tony Housh
APCO Worldwide

John Lynch
Lynka

Paul Fogo
Miller Canfield

Mac Raczkiewicz
Ex officio

Piotr Jucha
McDonald’s

Roman Rewald
Ex officio

Thomas Kolaja
Alvarez and Marsal

Anna Sienko
IBM

Robert L. Koński
Kulczyk Investments

SPONSORS

The Innovation Committee and the Travel & Tourism Committee are the two new additions to the AmCham network of committees. The Innovation Committee, established to monitor innovation initiatives within the Polish government and across industries and commercial organizations, while advocating best practice across innovation approach, discipline, creativity, dimensions, and systems for member companies and local government and business ecosystems, is co-chaired by Paula Wąsowska from Cisco and Alexander King from Monitor Group. The Travel & Tourism Committee, whose mission is to provide a platform for discussing issues and problems related to travel, leisure and the hospitality industry and to provide networking opportunities as well as to discuss trends and standards in the industry, is co-chaired by Stijn Oyen from the Sheraton Kraków and Pamela Gmiter from Staffer Hospitality. Małgorzata Urbańska from CMS Cameron McKenna replaced Małgorzata Surdek as cochair of the AmCham Consumer Products Committee. Meanwhile, the AmCham Health Committee has been suspended. For the third consecutive year, Baker & McKenzie has been named the strongest global law firm brand in the sharplegal Global Elite Brand

Boeing has unveiled the 737 MAX, a new range of the 737 aircraft equipped with new jet engines. The engines, codenamed CFM International LEAP-1B, improve fuel efficiency by 7%, a desired feature for airlines. According to Nicole Piasecki, VP for Business Development and Strategic Integration at Boeing Commercial Airplanes, the 737 MAX offers the highest efficiency among all commercial aircraft in its class today. Outsourcing and telecom infrastructure specialist Cisco has announced plans to open a support center in Kraków for Cisco clients in Europe, the Middle East, Africa and Russia. The new center will be a part of the existing support center network and will provide services for Cisco’s internal and external clients in servers and financial services. The new center will also support Cisco’s internal operations. The Kraków center is scheduled to open in mid2012.

CB Richard Ellis

Cisco

Security concerns remain the biggest obstacle to the further development of online shopping in Europe, despite ever-increasing use of consumer technology products and advances made in the security of credit card payment methods, such as Chip and PIN, according to new research by global property consultancy CBRE. It was the first study of its kind, polling more than 10,000 people to understand consumer attitudes to online shopping in 10 European countries. CBRE asked consumers what prevented them from shopping online. Security emerged as the top issue—more important than delivery cost and convenience or lack of a credit card. For consumers who frequently buy products online, payment security remained a key issue. People in Spain (48%), Italy (36%), Germany (35%), the UK (32%),

Baker & McKenzie

Members on the move
CB Richard Ellis
Marcus Berger has been named Chief Operating Officer of CBRE for Central & Eastern Europe. He has over 12 years of international experience in commercial real estate, in both asset management and general company management. Patrick Kurowski has been named to head the Industrial & Logistics Department at CBRE Poland. He joined the Warsaw team last year as Senior Property Negotiator, in which role he was responsible for leasing and marketing strategies, property acquisitions and disposals, and consultancy for BRE’s international client base.

AmCham Auditor:

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AMERICAN INVESTOR NOVEMBER-DECEMBER 2011

YOUR AMCHAM

Newsline
France (30%) and Sweden (29%) who were most concerned about internet security identified this as one of their top three issues. In Poland, where only 15% of people regularly buy online (compared to 69% in Sweden and 66% in Germany), security concerns were at the lowest level, the same as in Hungary (where 17% are regular online buyers) and Russia (5%).

News from AmCham and its members

Pamela Gmiter from Staffer Hospitality and Stijn Oyen from Sheraton Kraków co-chair the new AmCham Travel & Tourism Committee.
dering Survey 2011,” KPMG found that preventing money laundering is no longer a priority for commercial banks. The change comes as a result of the global financial crisis, which made bank managers refocus their attention on more pressing issues. In 2011, only 62% of bank managers said preventing money laundry was a top priority for them, down from 71% in 2010. KPMG also found that the costs of implementing anti-money laundering policies have risen by 45% since 2007, and are expected to grow 28% within the next three years. Despite the growing costs, only 10% of respondents said they took measures to cut costs by outsourcing part of the money laundering prevention process to third parties or by establishing shared services centers in low-cost countries. Notably, 80% of the sample said they never looked into cost-cutting options. positions in project management (a problem for 39% of companies surveyed). The talent shortage hits small and medium-sized companies especially hard. The study revealed that 87% of larger logistics companies hire temporary workers, compared to 40% for SMEs in the sector.

AMCHAM STAFF
Executive Director director@amcham.pl

Dorota Dabrowski Marzena Drela

GE

Deputy Director marzena.drela@amcham.pl

Events & Media Manager anita.kowalska@amcham.pl

Anita Kowalska

Three wind turbines delivered by General Electric were put into operation at a wind farm in Żeńsk, northwest Poland. The project is developed by KSM Energia and Renpro. Each 2.5 MW turbine has a fan with a diameter of 100 m. They were produced at a GE factory in Salzbergen, Germany. GE Hitachi Nuclear Energy has signed on Fluor Corporation for engineering, procurement and construction in the anticipated delivery of a nuclear reactor to PGE, which is building Poland’s first nuclear power plant. PGE will award the nuclear reactor construction business in the first half of 2013. In September, GEH signed a letter of intent with AGH University of Science and Technology for help training engineers and technicians to staff the nuclear power plant. GEH will support AGH’s nuclear-related curricula with knowhow and certification sharing programs. HP is celebrating 20 years in Poland. The company says it is proud to have contributed to Poland’s economic growth by providing IT solutions to some of the most spectacular projects in both public and private sectors. In the early 1990s HP was strong on medical equipment and business solutions, but it used acquisitions to expand its portfolio into outsourcing. HP’s largest investment in Poland so far is the Global Business Center in Wrocław, which now supports over 2,000 jobs delivering services to HP customers in Europe, the Middle East and Africa. The InterContinental Warsaw has won titles for “Poland’s Leading Hotel” and “Poland’s Leading Business Hotel” in the 2011 World Travel Awards. The awards, launched in 1993 to recognize excellence in the world’s travel and tourism industry, are among the industry’s most established and prestigious. Poland is one of the three top countries for financial investments in commercial real estate, according to a KPMG report entitled “CEE Property Lending Barometer 2011.” Despite the reluctance of commercial banks in Central & Eastern Europe to provide financing for investments in real estate, there was growth in financial transactions in real estate from September 2010 to September 2011. The largest number of deals took place in Austria, the Czech Republic and Poland. In Poland office space is the most popular with investors. KPMG polled over 50 banks in the region. The study found that banks have very restrictive criteria for issuing loans to real estate developers, which impedes growth. In market trends, the greatest interest is in blue-chip projects that secure predictable returns. During the period, the percentage of bad debts did not increase, but banks are not certain whether this is a stable trend or only a short-term situation. In another study, “Global Anti-Money Laun-

Salans

Cushman & Wakefield

GE and Fluor

Panattoni

Salans has won the title “Law Firm of the Year: Central Europe” in The Lawyer European Awards 2011 organized by the UK-based trade magazine The Lawyer. This year Salans was also shortlisted for “European Law Firm of the Year,” an award it won in 2010.

Office Manager robert.kruszyna@amcham.pl

Robert Kruszyna

Membership and Committees Coordinator barbara.pocialik@amcham.pl

Barbara Pocialik-Malinowska Marta Pawlak

Research and Policy Coordinator marta.pawlak@amcham.pl

Project Assistant and Committee Coordinator robert.chomik@amcham.pl

Robert Chomik

AmCham in Kraków
krakow@amcham.pl

Monika Pilarska

AmCham in Wrocław
amchm.wroclaw@pmg.pl

Joanna Bensz

Published by the American Chamber of Commerce in Poland EDITOR-IN-CHIEF, ART & DTP

Investor

American

tomasz ĆWiok
tomasz.cwiok@amcham.pl

christopher smith
christopher.smith@neostrada.pl

EDITOR-AT-LARGE

Printing

According to commercial real estate agency Cushman & Wakefield, the first six months of 2011 confirmed the interest in modern industrial properties among companies present in the Czech Republic, Hungary, Poland and Slovakia. Strong demand and few new developments have resulted in fairly limited alternatives for companies interested in leasing facilities. The average vacancy rate for industrial property in the region now stands at 11.8%, but in some locations it has dropped under 5%. Vacancy rates of 10–12% are considered healthy. This year, 198,000 sq m of new industrial stock has been developed for lease in the region. Poland and the Czech Republic have recorded an increase as against last year, but the figures still remain very low as developers continue to build on the basis of pre-letting and are reluctant to launch any speculative developments due to limited access to financing. According to another report by Cushman & Wakefield, while London, Paris and Frankfurt remain the top three European cities in which to do business overall, Warsaw is the top location for “value for money of office space.” The European Cities Monitor report, based on interviews with managers at 501 of the largest companies in Europe, includes an overall ranking of which city is considered to be “best for business” and the “best city in which to locate a business today.” The ranking includes 36 cities, measured against such criteria as quality of life, access to markets, availability and quality of staff, cost of office space, telecommunications and transport links.

Kulczyk Investments

Hewlett-Packard

Kulczyk Oil Ventures, a subsidiary of Kulczyk Holding, has completed testing at the Olgovskoye 18 well in Ukraine, owned by KUB-Gas, in which KOV holds a 70% ownership interest. It is the fifth new well drilled on the Olgovskoye License since KOV acquired its interest in KUB-Gas in June 2010. Well 9 recently commenced commercial production at a rate of about 2 million cubic feet per day, resulting in an increase in total production from the Ukrainian assets to more than 12 million cf/d. Well 12 is expected to be tied in for commercial production later in 4Q 2011. Łaszczuk & Partners’ skills and commitment to arbitration have been recognized by Corporate INTL Magazine, which awarded the firm its 2011 Global Award for Arbitration Law Firm of the Year in Poland, based on a survey of advisers in over 100 countries specializing in 60+ practice areas and sectors. In September the law firm co-organized the 3rd Annual Arbitration Seminar of the International Association of Young Lawyers (AIJA) at the University of Warsaw. The speakers included noted arbitration scholars and practitioners such as Stefano Azzali, W. Laurence Craig, Bartosz Krużewski, Barton Legum, Prof. Filip de Ly, Wendy J. Miles, Rafał Morek, Ilya Nikiforov, Wojciech Sadowski, Prof. Stanisław Sołtysiński and Tomasz Wardyński. HR specialist Manpower Polska has found that 19% of companies in the logistics sector are outsourcing their HR needs as they face increasing cost pressures and price competition that stem from market consolidation as well as a talent shortage on the market. “There has been an increase in outsourcing recruitment procedures,” said Tomasz Walczak, regional director for Manpower Polska. “There is a change in the way companies approach paying for the service, which is evolving from paying for the time it takes to recruit to paying for the effectiveness of the process, which is a fee paid per person hired.” Logistics companies find it especially hard to find people to staff

Panattoni Europe, a developer of industrial real estate, has begun construction of its second distribution center at Święcice, in the Warsaw area. The target space at Panattoni Park Święcice II is 20,000 sq m. The first building is built-to-suit for a customer in the logistics sector. In southern Poland, Panattoni has expanded its Panattoni Park Mysłowice with a sixth building of 17,500 sq m, which is fully let by press distributor Ruch and fashion company Adesso. In northern Poland, the second building at Panattoni Park Gdańsk has been let to logistics operator Pekaes SA, which will occupy more than 3,000 sq m. Both of the existing buildings there are now occupied.

Sheraton Warsaw

Prologis

Aprochet Inboom, chef of the Oriental at the Sheraton Warsaw, has added beef dishes from different parts of the world to the restaurant’s menu. One of the new dishes includes Kobe beef, made from a breed of cattle raised in Japan under a special regimen that includes beer and massage, which distributes the fat evenly under the skin and enhances the flavor experience when the animal reaches the table. The Oriental also offers more conventionally farmed beef from Australia, Brazil, New Zealand, Poland and the US. In other news, the hotel has expanded the training programs at Warsaw Sheraton Fitness to cater to skiers just before the opening of the new season. Every Wednesday at 7:30 pm coach Mariusz Szmagała, head of the fitness club, oversees TRX training, which enhances upper- and lower-body musculature.

New Members
Consulting, technology and outsourcing specialist Accenture (www.accenture.pl) has joined AmCham. The company is represented in Poland by Jarosław Kroc, Country Managing Director. Oil and gas exploration and production specialist BNK Polska (www.bnkpetroleum.com) has joined AmCham. It is represented in Poland by Jacek Wróblewski, Country Manager. Consulting, engineering and transportation company CDM (www.cdm.com) has joined AmCham. It is represented by program manager Magdalena Pavlak-Chiaradia. Real estate specialist Kulczyk Silverstein Properties (www.ksprop.com) has joined AmCham. The company is represented by board member Piotr Krawczyński. Flexible packaging manufacturer Printpack Poland (www.printpack.com) has joined AmCham. It is represented by Steve Snowden, site director in Kutno. Accounting and auditing specialist Sony Pictures Global Business Services Sp. z o.o. has joined AmCham. It is represented by Michał Gryglewski, Executive Director. Pharmaceutical company Unipharm Sp. z o.o. (www.unipharm.pl) has joined AmCham. It is represented by Tomasz Albinowski, CEO & Country Manager. The Polish branch of petroleum and gas company Viking Petrol Sahasi Hizmetleri AŞ (www.viking-intl.com) has joined AmCham. It is represented by Rob Dunn, Country Manager

Łaszczuk & Partners

InterContinental

Q Invest Ltd +48 22 424 6600 To contact AmCham please write or call: ul. Emilii Plater 53, WFC 00-113 Warsaw tel: +48 22 520 5999 fax: +48 22 520 5998 e-mail: office@amcham.pl www.amcham.pl

KPMG

Members on the move
K&L Gates
Piotr Sitarski has joined K&L Gates to focus on capital market transactions. He has extensive experience advising on M&A and private equity deals.

Logistics space developer and operator Prologis has announced the winners of a talent competition the company has been running for six consecutive years for students at the Poznań School of Logistics. Pictured: Marcin Czajczyk (winner of the award for best graduate), Katarzyna Jesionkowska (best master’s thesis), Marta Tęsiorowska (Prologis VP for Marketing & Communications in Central & Eastern Europe), and Mateusz Bronowicz (best bachelor’s thesis). Each winner took home PLN 4,000.

Manpower

PwC

© American Chamber of Commerce in Poland 2011. All rights reserved.

American Investor is the official publication of the American Chamber of Commerce in Poland. It is a voice for foreign investors and the business community in Poland. The magazine strives to keep our members and other readers up to date by following chamber news and reporting on the leading trends in business and policy. letters to the editor should be e-mailed to tomasz.cwiok@amcham.pl

Filip Urbaniak has joined K&L Gates in the law firm’s M&A and capital markets practice. He has over 10 years of experience advising on IPOs, private placements, debt issues and corporate governance.

The global network of business consulting giant PwC generated income of USD 29.2 billion in the fiscal year ended June 30, 2011, up 10% from the year before and a record for recent years. Audit services generated USD 14.1 billion globally (up 7% year-on-year), consulting over USD 7.5 billion, and tax advisory USD 7.6 billion (+8%). PwC had growth in all global regions, led by Asia and Oceania at +38% and Central and South America +23%. CEE revenue was up 7%. In the new fiscal year PwC plans to train and hire approximately 20,000 graduates worldwide and offer 10,000 internships.

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AMERICAN INVESTOR NOVEMBER-DECEMBER 2011

NOVEMBER-DECEMBER 2011 AMERICAN INVESTOR

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Agenda
Innovation Committee
Photo: Tomasz Ćwiok

HOT DATE

Dec.16.11
Energy & Environment Committee
taxed differently depending on how consumers are going to use it,” Pigal said. This regulation, he explained, promotes energy-efficient car engines and, hopefully, will help reduce the intensity of private car usage in the EU. “This is about stimulating a behavioral change when it comes to the use of energy,” Pigal said. Pigal noted that while the Energy Taxation Directive does not impose specific taxation quotas, it does set minimum levels of taxation for each type of energy and its content. It is up to the EU member states to come up with their own taxes on coal, diesel fuel for home heating and for cars, gasoline and other energy types. However, while EU member states are free to set up their own system for taxing those types of energy, they will be required to maintain the proportion of taxation between the different types of fuels defined by the directive. “Every type of energy will be taxed proportionally to the amount of CO2 emissions it produces,” Pigal explained. “Coal, because it produces relatively high amounts of CO2, will be taxed relatively highly as compared to natural gas. Nuclear energy will not be taxed because it does not produce CO2.” The exact tax numbers regarding each type of energy are included in the appendices to the proposed new directive. Pigal noted that when the directive is implemented here, Poland will have to make sure that the taxation system for energy complies with the proportions set forth in the directive: “Poland might not increase the tax on coal, for example, but to respect this proportion it will have to increase the tax on diesel fuel.” Under the new directive, EU member states will have to focus their attention on sustainable economic growth. “The directive is supposed to encourage the development of the green economy and investment in green energy innovation,” Pigal said, “and to boost competitiveness in the green energy sector.” Pigal explained further that the new directive is meant to replace taxation on labor in EU countries, to stimulate economic growth and new job creation. “The idea is to tax energy instead of taxing labor,” he said. Yet another goal of the new Energy Taxation Directive is to harmonize taxation on energy across different EU countries. This harmonization is best exemplified by how the directive will complement the EU’s Emission Trading System, which is not a tax system but a levy system imposed on companies that produce CO2. There are some industries that are exempt from the Emission Trading System, but now they will be subject to taxation under the Energy Taxation Directive. “These two systems seem to be well-integrated,” Pigal said. “An energy producer cannot be taxed doubly by the ETD and ETS systems. If a company pays for CO2 emissions under ETS than it will be exempted from ETD.” While the system looks good at a distance, there were a number of issues raised by AmCham members that Pigal could not answer. For instance, what type of taxation will the directive apply to energy purchased from producers outside of the EU who are not subject to either the Energy Taxation Directive or the Emission Trading System? It seems that before the directive becomes law it will be the subject of heated debate among EU member states.

Intelligence from AmCham and its committees

Conference: AmCham Annual General Meeting & Christmas Reception Place: Westin Warsaw Time: 5:30 P.M.

Energy & Environment Committee

Sensitive drill

The shale gas business must be kind to nature
n September, members of the American business community had an opportunity to meet with Michał Kiełsznia, General Director for Environmental Protection, who oversees development processes in Poland for compliance with environmental regulations. Another expert from the General Directorate for Environmental Protection at the meeting was deputy director Piotr Otawski. The meeting was organized by Adam de Sola Pool, co-chair of the Energy & Environment Committee, to discuss the needs of the emerging shale gas industry. Dariusz Łątka, HSE Manager at Talisman Energy Polska, a company that has a concession for shale gas exploration in northern Poland, spoke for private business at the meeting. The directorate officials gave an overview of how certain environmental laws are implemented in practice and how they affect the development process. They also referred to specific laws governing development in areas that have the status of natural preserves, natural parks and areas included in the EU’s Natura 2000 environmental program.

Gazing into the silicon ball

The keyboard as we know it will be gone by 2025

Speaker Eric Pigal with committee co-chair Adam de Sola Pool

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A Cisco/Monitor Group study maps the evolution of the Internet through 2025
different path of Internet development will occur if technological advancements are rapid, as was the case with the iPad and the iPhone, or if they are linear and incremental. Taking into consideration all of these technical and technological aspects to draw a picture of the Internet circa AD 2025, the researchers came to the conclusion that one of the wildest of wild cards is user behavior. We do not know now how new users, especially those coming from emerging markets, will act online: Will they be restrained, or will they have unlimited access to content? Will they prefer to limit the range of personal data they make available online, or will the Internet continue to chip away at privacy unchecked? And what about the generation gap? Another black hole. “It is unknown what proportion generation-wide may impact our workforce in the way we interact and collaborate,” Wąsowska said. “The suspicion is that the impact is going to be vastly beyond what we understand and how we tend to work today within our organizations and with one another.” The future of cloud computing is yet another issue that will have a pivotal impact on how the whole Internet develops. Factors at play here are the capacity of the infrastructure to support as many computer connections as it will take to make the cloud available to end users. Finally, online content and the way it develops will have a critical impact on the environment in which the entire global network evolves. Wąsowska concluded by saying that the research conducted by Monitor Group and Cisco is an effort to contribute to the ongoing discussion about how the Internet fuels social and economic growth and inspire companies to embrace new business models and innovate: “It may inspire business leaders and policy makers to look longterm at potential scenarios and act today.” The report is available for download at amcham.pl/innovation.

Emissions must be taxed

he second-ever meeting of AmCham’s Innovation Committee focused on four possible scenarios for development of the Internet, based on phenomena we know are already occurring on the World Wide Web. The meeting was chaired by Paula Wąsowska of Cisco and Alex King of Monitor Group. In the discussion, these facts of online life were juxtaposed with theoretical issues that may or may not affect the process. The touchstone for the discussion was a study by Monitor Group and Cisco on potential internet development scenarios through 2025. One aspect Wąsowska identified is that emerging markets will be the driving force for development of the global network going forward. Wąsowska said that a third of the world’s population uses the Internet now, and a fifth do so intensively. This means that in the future, new paid access models will have to emerge. “Flat-fee schemes are a relic of the past,” Wąsowska said. “The researchers say and more and more contentbased and user-based pricing schemes are going to be put in place.” Wąsowska said that based on what we know about the trends in interface applications and what can be achieved technically to make them more user-friendly, in the Western world the computer keyboard as we know it will disappear. “With new demographics in emerging markets,” she explained, “we will have different ways of interacting with the web, such as touch monitors, bio-recognition, voice recognition and so on.” The keyboard has already given way on some devices. There are more surprises ahead. Forecasters from Monitor Group developed four scenarios for how the Internet will evolve in the next decade and a half, based on 14 areas of uncertainty that they identified. One of them is the direction of network access. Development of the Internet will be radically different if network access is limited or if it is extensive. The potential for creation of public-private partnerships to build the Internet infrastructure of the future will be critical. A

The Energy Taxation Directive promises to be controversial
he new Energy Taxation Directive now being drafted by the European Commission will have a major impact on the energy market—or so the authors hope, according to Eric Pigal from the European Economic and Social Committee, a consultative body to the European Commission. Pigal spoke at a meeting with the AmCham Energy & Environment Committee in September. Pigal, who conveys the EESC’s opinion on the new directive to the European Commission, explained that the directive seeks to synchronize taxation on CO2 emissions across different EU member states and to change “behavioral patterns” regarding the consumption of energy. As a result, EU citizens should save more energy, especially in such areas as the use of cars. The Energy Taxation Directive now under development is not a brand-new directive, but a revision of the 2003 directive that goes by the same name (2003/96/EC). The new directive will address EU 2020 targets, under which the EU seeks to cut CO2 emissions by 20%, have 20% of energy produced from renewable sources, and increase energy efficiency by 20%—all by 2020. In order to help achieve these goals, the Energy Taxation Directive introduces a twofold system of taxes on energy. The first, applicable to energy producers, is a tax on CO2 emissions. “This type of taxation is quite clear,” Pigal said. “CO2 is a pollutant. The minimal taxation of CO2 emissions is EUR 20 per tonne of CO2 emitted.” Member states would be able to charge more, however. The second type of taxation is on “energy content,” which is a tax on energy but differs depending on what the energy is actually used for. “Energy content is about promoting efficient use of energy,” Pigal said. The idea is that energy used for cars should be taxed more heavily than energy used for other activities, such as heating homes. The same type of energy, for instance diesel fuel, would be taxed differently when it is used for cars and for home heating. “The same energy will be

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Otawski said that while more areas are still being added to Natura 2000, the process will be finished next year and the sites that are on the waiting list for inclusion in the program are small and will not have any significant impact on the total acreage of Natura 2000. Poland now has special environmental protection laws governing nearly 20% of the country’s landmass. Otawski also said that while special natural preserves are under strict environmental protection, there may be instances where development is allowed to take place within protected areas. Łątka presented some practical issues that may affect the quality of environmental compliance of a company exploring for shale gas in Poland. Among many issues ranging from transportation to water and waste management, he said shale gas companies should pay special attention to the environmental compliance level of their subcontractors. He advised auditing prospective subcontractors in this respect. He said that a company that holds a license for shale gas exploration is responsible for how well its subcontractors adhere to the environmental regulatory regime, as they are part of the entire development process. He also said that companies exploring for shale gas, and those that are eventually granted licenses for commercial use of shale gas, will have to be transparent in every aspect of their business, because, unlike in some other parts of the world, this is what is required of the energy sector in Europe.

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Agenda
Energy & Environment Committee

Intelligence from AmCham and its committees

Helping renewable energy grow
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oland has relatively few facilities that produce electricity from plant-waste biogas, but at least, after years of upgrading, investors in plant-waste biogas facilities may rely on coherent regulations governing the state aid they may take advantage of, according to Zdzisław Muras, director of the Department of Energy Enterprises at the Energy Regulatory Office (www.ure.gov.pl), who met with the AmCham Energy & Environment Committee in September. Muras gave an overview of the regulations that govern the licensing process that producers of electricity from plant-waste biogas undergo to obtain energy certification in Poland, as well as energy trading systems. Muras said that while the system serves well the purposes of producers who are capable of generating more than one megawatt of electricity, it does not take into account the specifics of small producers, who can generate enough electricity to satisfy a relatively limited range of needs. “Without a major overhaul of the system of

Producers of electricity from plant-waste biogas at last have a clear—if imperfect—set of regulations governing the state aid they are entitled to
registration and concession of renewable energy producers, there are no chances in Poland for the development of such a niche of small energy producers,” Muras admitted. He added that a reform of the existing system should seek to create two separate systems for certifying renewable energy producers: one for big producers for whom producing electricity is their core business, and a separate system for small, niche producers of renewable energy that play a supporting role in the enterprises they are part of. Mleczko also discussed the Anti-Crisis Act, which allows companies who suffer a steep decline in business to change the reference period for calculation of employees’ wages to a maximum of 12 months. Mleczko said that by early September, there were 1,169 companies in Poland who had taken advantage of this regulation. Of this number, 105 companies employed 9 workers or fewer, 300 companies employed between 10 and 149 workers, 450 companies employed between 150 and 249 workers and 314 companies employed 250 workers or more. Mleczko said that while these numbers may suggest the regulation was not pivotal, because it seems that not very many companies resorted to it, companies in Poland generally dealt with the crisis well. The important thing, according to Mleczko, is that the anti-crisis regulation is in place for companies, and it has been tested. “Companies know what to expect and know how the mechanism works,” Mleczko said. “Over a 1,000 companies is a lot of jobs, after all.” Mleczko added that after the Anti-Crisis Act expires at the end of this year, it should become a permanent feature of employment law in Poland. He said that there is a positive outlook for agreement on this issue between employers’ organizations and labor unions. Discussing employment issues, Mleczko said that there is a need to popularize different types of work contracts other than fulltime, open-end contracts. He said he regretted the fact that the public tends to refer to other types of employment as “junk contracts”—as if the open-end contract is the only real bargain for the employee. According to Mleczko, a true “junk contract” is one in which either party does not live up to its side of the bargain, and regular employment contracts can fall into this group as well. He said that when it comes to building a flexible workforce in Poland, more employees should come to see that fixed-term work contracts and other forms of employment are just as valid as the full-time, openend contracts that are now the most popular

Employee & Labor Relations Committee

and desirable among employees. Mleczko said that the ministry will continue to work toward creating more flexible forms of employment in the future. Mleczko expressed concern about the many cases where employers simply abuse the law by offering fixed-term work contracts with provisions that should not be a part of such contracts because they create legal pathologies. Due to the increasing number of such instances, the ministry may consider applying special measures to crack down on these practices. The AmCham members at the meeting pointed out that the problem with such divergent perceptions of different types of work contracts among the general public is that open-end work contracts give disproportionately greater protection to employees than other types of contracts. This contributes to the universal feeling that once an individual is hired on an open-end work contract, he or she has a guarantee of continued employment, no matter what, and that is wrong. Mleczko said he will take this position into consideration when the ministry drafts future legislative initiatives dealing with new types of employment contracts.

European Union Affairs Committee
The EU offers diverse financial aid programs at the regional level

Plenty of money

ompanies in the province of Mazovia may obtain financial aid from EU funds through programs carried out at the regional level, according to Paweł Sitek, deputy director of the EU Programs Implementation Unit in the province, who spoke at a meeting with the AmCham EU Affairs Committee in October. The aid is available under two operational programs: Human Capital, for training programs, and Infrastructure Development, for construction of transportation networks, renewable energy generation, urban renewal and tourism infrastructure. So far the agency has contracted over 5,000 projects worth a total of more than PLN 14 billion. The agency’s total budget for 2013 is PLN 2 billion. Companies can now apply for aid under Action 1.5, which encourages development of entrepreneurship. The aim of the program is to increase the competitiveness of micro enterprises by helping them obtain access to new technologies and certification and quality

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systems. Companies from traditional sectors as well as innovative firms can take part in the competition. Companies that seek to create new jobs in low-employment areas will get bonus points in the final score. In the mix of funded projects, the agency also hopes to see a heavier concentration of projects involving renewable energy, innovation in products and services, and improved corporate governance, which are also given bonus points in the selection process. While the programs look very attractive, there are bumps along the road. Sitek said that the European Commission, which oversees program execution, would not approve of financing expenditures that are not necessary to achieve the goals of the project. For instance, if an applicant plans to buy offices because it needs more space to sustain its business operations, the Commission is likely to advise renting an office instead of buying it and therefore would not approve funding for the acquisition. This is just one example that demonstrates the complex considerations that lie behind a successful application for EU aid. Sitek advised companies not to wait. He said that that the earlier companies apply for aid the better, because even if they do not win a grant they will acquire some knowledge and experience for a successful application later. More information at http://mazowia.eu/en

Reclaiming capital duty
ompanies that paid transaction tax in Poland on loans from shareholders (including parent companies) in 2007–2008 may now seek a refund of the tax, according to Adrian Branny, manager at Deloitte Tax Advisory. Branny and Hubert Cichoń, senior manager at Deloitte Tax Advisory, conducted a presentation on the topic at a meeting of the AmCham Tax & Financial Services Committee in September. The European Court of Justice has held that Poland had no right to charge the tax (known in Polish as the “tax on civil-law transactions”) on shareholder loans because it was an unlawful form of capital duty (Logstor ROR Polska sp. z o.o. v. Director of the Ka- Deloitte’s Hubert Cichoń and Adrian Branny ued with little chance of reaching a suctowice Tax Chamber, Case C-212/10, judgcessful conclusion in Poland, the company ment of June 16, 2011). decided to take the matter to the ECJ. AlThe case involved a Polish company that though shareholder loans were subject to had received a loan from its parent comcapital duty before Poland joined the EU on pany and argued to the Polish tax authoriMay 1, 2004, when Poland joined the EU ties that Poland could not charge transacthe tax on shareholder loans was repealed. tion tax on the loan. As the dispute contin-

Tax & Financial Services Committee

A judgment by the European Court of Justice paves the way to a tax refund for some companies

Small steps to a better law

Guests from the Ministry of Labor and Social Policy, Robert Lisicki, chief expert in the labor law department, and Radosław Mleczko, deputy minister.

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A lasting code requires input from both management and labor

t a meeting with the AmCham Employee & Labor Relations Committee in September, Deputy Minister of Labor and Social Policy Radosław Mleczko gave an overview of the ministry’s legislative initiatives over the last four years—including a set of regulations extending paid maternity leave to 20 weeks, and paid paternal leave to one week in 2011 and two weeks next year, as well as a plan to enact paid leave by 2014 for parents adopting children. Other accomplishments of the ministry underlined by Mleczko included cutting the period in which employers cover the salary of staff on sick leave from 33 days to 14 days in the case of employees who are over 50 years of age. Another important change was lowering the minimum age for hiring minors from 16 to 15. Mleczko also referred to regulations that

in practice have not lived up to the expectations of the proponents. One involves employee training, which now by the letter of the law has to be paid for by the employer in full, with no negotiation of the extent of financial coverage allowed between the employer and the employee. With such a lack of flexibility in how they may finance employee training, employers prefer not to send their employees for training at all. Mleczko said the law is a dead letter, which was obviously not the intention, and that this issue will have to be revisited. Another regulation that does not work in practice, as noted by the meeting participants, is that governing prenatal care. Due to red tape between doctors and the Social Insurance Institution, in practice women are not receiving paid leave before delivery. Mleczko said he would take a look at this.

The taxpayer successfully argued that once the tax was repealed, Poland had no right to reinstate it, as it did for 2007–2008. (It was subsequently repealed again.) A related issue discussed at the committee meeting was that while companies should find it easy to reclaim the principal amount of the transaction tax on shareholder loans paid in 2007–2008, some of them may find it difficult to claim interest. Cichoń said that according to the regulations governing tax refunds in Poland, companies wishing to claim interest on the amount had 30 days following the publication of the ECJ judgment to do so. The deadline was September 5, 2011. If companies apply for a refund after that date, they may receive a refund of the tax, but without interest. Branny said companies who seek a refund after that deadline can make a good argument that they are entitled to interest from the date they paid the tax until September 5, 2011, but there are counterarguments and it may be difficult to prevail on this point against the Polish tax authorities. The ECJ ruling is discussed in more detail in the Expert article on page 29.

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Agenda
Innovation Committee

Intelligence from AmCham and its committees
will hit 70%. The biggest cities in the world will grow enormously, while they will have to have access to energy, sewage treatment, and transportation. This is a huge area for innovation.” Innovative crooks All of these issues are forcing innovators to think differently. But this applies not only to official centers of education, but also to criminal masterminds, who also innovate and oftentimes outperform state-sponsored innovators. “Unfortunately,” said Schwartz, “what we find is that bad guys out in the world are doing a good job of innovating too. One of the biggest trials we had going in the US, with the war in Iraq, was to discover that they can come at us in a way we never expected. It can be remarkably effective: improvised explosives. We have no answer for it. So they have a cheap solution, and we have expensive responses that do not work. This is a very bad ratio. They spend one dollar for every million dollars we have to spend.” Meanwhile, in Colombia, criminal networks interested in bringing cocaine into the US produce their own submarines to achieve that goal. Although it is a very risky enterprise, the premium they get for selling cocaine in the US is so high that they try anyway and as a result create a new class of innovators down the line. For Schwartz these examples only demonstrate the nature of innovations: “They spring from the bottom up and evolve into very interesting ideas.” Schwartz said that the best example of that was the invention of Napster, the peerto-peer file exchange system. “Napster was essentially a criminal activity of stealing intellectual property, but it innovated a whole new model of digital distribution. So it is not enough to visit universities. You need to have a much wider feel for the sources of innovation.” Schwartz added that for a country like Poland, there is no reason it should not invest in its universities so they produce open-minded graduates who can go work for innovative industries. The sooner we do it, the better for all the stakeholders.

A good pro-innovation policy should target development of human resources
new industry. Noyce said there were two eter Schwartz, a partner at Monitor things he needed: excellent education, beGroup, and founder of the Global Busicause the industry wanted lots of smart peoness Network, met with the AmCham Inple, and for the government of California to get novation Committee in October to talk about the importance of liberal education and proper out of the way. While it was easy enough for the state not management in the output of innovative solutions that change the way people live, work and solve problems. Schwartz is perhaps best known as a development theoretician, with professional involvements ranging from the Apollo space program to the Hollywood movie industry. Schwartz told AmCham members that for the last 100 years, most inventions have come from the United States because the US was able to offer a critically important culture for boosting entrepreneurship—a culture that not only advocates entrepreneurship, but does not discourage entrepreneurs when they fail—as well as a diverse business environment with venture capital industries. But the innovation potential of America’s universities is equally important. “The Shanghai list of the best universities in the world has six universities in California,” he said, “including three in the Bay Area alone.” But there is a historical reason why the San Francisco area stands out so strongly on the map of innovation and academic excellence. In the early 1970s there was no Silicon Valley as we know it today, but there was an ailing space industry in California. Following a steep growth period in the space race between the US and the Soviet Union, the region had to reinvent itself to serve a society that no longer needed missions to the moon. Unemployment around Palo Alto was 40%. Thousands of engineers in space-related industries lost their jobs as companies that worked on space-related programs closed their operations. But a side effect of the space boom was cybernetics. Many of those unemployed engineers retrained and learned Futurologist Peter Schwartz how to write computer programs. On the to interfere with the fledgling industry, other end of the new business paradigm there Schwartz said that California did a great job were entrepreneurial companies who decided building an educational system that supplies to build microchips, hoping that they would lots of people with open minds who can grasp find applications in consumer products. concepts nobody ever thought of before. They were right. Around 1976 the name Sili“Human capital is the most essential thing to con Valley began to take on its modern meandeveloping innovations,” Schwartz said. ing. By 1980, Silicon Valley was in the middle “Today, US universities deliver education to of an unprecedented business boom. people from all around the world. Those people do not stay in the US after graduation, but Quality education take their knowledge with them to other counBut the entrepreneurial spirit was not the only important aspect of the Silicon Valley phenom- tries, where new pockets of innovation start booming.” enon. Another was the supply of talented young people eager to work for the emerging The next Silicon Valley industry. Schwartz said that in 1979, California Gover- The Silicon Valley example is hard to replicate, but one country that has reinvented itself in nor Jerry Brown asked Bob Noyce, one of the the last 10 years, from a sweatshop nation to a founders of Intel, what help Noyce needed regional leader in innovation, is Singapore. from the state to boost the development of the
Photo: www.gbn.com Used by permission

Make it happen!

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Schwartz is a member of the Research, Innovation and Enterprise Council of Singapore, a committee chaired by the country’s prime minister, with five cabinet ministers and a few outsiders, including IT heads of major technology companies. Singapore understood that it had to capture the value of intellectual property if it were to move forward economically. While the country had good technical schools and basic universities, it was not a source of major R&D and innovation. Following the establishment of RIEC, Singapore invested USD 13 billion in universities. That program changed Singapore’s economic reality. Singapore now has a high economic output based on R&D, and it has become a regional leader in the innovative economy. In 2010, RIEC was granted a further USD 16 billion to continue investing in universities. “Singapore’s RIEC is the best example of how a nation can successfully undertake a major challenge in innovation, put the right resources behind it and see the fruits of it,” Schwartz said. “Many countries have tried, but Singapore, it seems, is the only country that has been successful so far.” Innovation frontiers While Singapore has done a good job creating an innovation-based economy, other countries are trying as well. “There are places in the world that are trying to drive innovation on a regional level or even a city level,” Schwartz said. “Most of the efforts are not concentrated on the national level.” The need for innovation and innovative thinking in solving problems is especially hard currency in such countries as Brazil, India, China and Indonesia. “When you look at housing you will see that countries that have huge populations do really innovative things in housing construction,” Schwartz said. “The same goes for energy, infrastructure, and other things that are necessary for people to live and prosper in today’s world. People in those areas now have the money and access to knowledge.” However, the game of driving innovation has changed. “What was once our game, because we were the ones who had the money, the knowledge and the motivation, is now the game of the new emerging economies that have these qualities. This is how the world has changed.” According to Schwartz, the new frontiers of innovation will emerge around the big challenges that our civilization faces, such as the aging population, climate change, renewable energy, infectious diseases, and availability of fresh water. On demographics, Schwartz said, “Last year we passed the threshold with more than 50% of humans living in cities instead of villages. Within the next 25 years the number

Real Estate Committee

The Renaissance is the newest five-star hotel in Warsaw

A room for the night
he development potential of the hotel market in Poland was the focus at the AmCham Real Estate Committee meeting in September. According to guest speaker Adam Konieczny from DTZ, commercial real estate advisers, the market is in for some big events, such as the Euro 2012 soccer championship and the events associated with Wrocław’s holding the title of European Capital of Culture in 2016, that are likely to boost the influx of tourists into Poland. Konieczny said that Warsaw and Wrocław are taking advantage of the Polish Presidency of the Council of the European Union, as both cities are hosting numerous Presidency events.

Estimates put the organic growth of the hotel market in Poland at 1,200 rooms per year

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But even without those events, the hotel market in Poland has room for growth, primarily in the mid-price range. “Poland has one of the lowest rates of hotel beds per 10,000 population: 50,” said Konieczny. “Compare it with Germany, 200, and France, 300, and you will see the potential for growth.” Konieczny also said that because the economic crisis had a negative impact on office development in third-tier cities, hotel projects are becoming an alternative for investors. Among investors active in the market today, Konieczny mentioned the third-largest French chain of budget hotels, B&B, which has one hotel under construction in Warsaw

and another in the planning stage in Wrocław. “B&B plans to operate at least 10 hotels in Poland in 5–6 years,” he said. Other investors in the economy class who are entering Poland are the Luft Hotel Group, with the Tulip, Luft and Campanile brands, the Puro Hotel chain, and the Polish group Focus. Investors who are not present in Poland yet but Konieczny says are considering it include citizenM hotels, Motel One, and Aloft, a Starwood brand. Konieczny mentioned some of the obstacles for investors, including banks’ disinclination to finance hotel developments in the upscale sector and the fact that construction costs are almost as high as in the West. “High prices of land are also an obstacle, especially in the city centers, where hotels compete with office developments,” Konieczny said. Another speaker, Alex Kloszewski from Colliers International, said that luxury brands continue to develop hotels in Poland, including the Hilton in Warsaw, which will offer 367 rooms and 4,000 sq m of conference space upon completion and will be the largest branded conference hotel center in Poland. A Hilton with 260 rooms and over 2,000 sq m of conference space will also appear in Kraków, operated by PPL. A Hilton Garden has already opened in Szczecin, and Łódź will have a Hilton next year. According to Kloszewski, Wrocław is a good place for investors in hotels, because the city has a good administration, which helps facilitate investment projects, plus there are a lot of business events going on in the city. On the other hand, Kloszewski expressed moderate enthusiasm about the prospects for the four- and five-star hotel market in Kraków, because of the unavailability of sites in the city center. “Although Kraków will have some opportunities,” he said, “they will be peripheral, outside the central area.” Kloszewski estimated the pace of organic growth of the hotel market in the next 3–5 years at about 1,200 rooms a year, which translates to approximately eight new hotels per year. “The demand is directly connected to the country’s GDP growth,” Kloszewski said. “If we are going to have an average of 3.5% GDP growth for the next few years, that is what the demand is going to be.”

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Guide to AmCham Committees

For the most recent information about the work of AmCham Committees and upcoming events:

AmCham Charity Drive 2011
or the 16th consecutive year, we are organizing the AmCham Charity Drive to help children from eight orphanages across the country and one single mothers’ shelter in Słomczyn. All gifts are welcome; however, as these organizations struggle for everyday items, we encourage you to read the list below before making a decision on your donation. Please note that the single mothers’ shelter needs and appreciates basic articles, especially clothing and shoes for the winter. The items in bold are the most important. In order to deliver the goods for Christmas we must have them by Friday, December 9, at the AmCham office, ul. Emilii Plater 53, 19th floor, 00-113 Warsaw. We are open from 9:00 am to 5:00 pm. It is also possible to make cash donations to our Charity fund, which is used to purchase items on your behalf that we cannot deliver ourselves (e.g. coal and natural gas).  Our account number is: Fundacja Amerykańskiej Izby Handlowej w Polsce 29 1030 1508 0000 0005 0093 8005  All companies that participate in this project will be listed on the AmCham web site (www.amcham.pl) and featured in the next issue of our magazine, American Investor. Here is the list of needed items:  • Clothing (winter clothing, jeans, sweatpants, sweaters, coats, jackets, skirts and dresses)  • Shoes (winter and sports) • Coal and gas for winter heating • Cosmetics for toddlers (baby oil, nursing cream, moist tissues and diapers) • Toiletries (deodorant for girls and boys, shampoo, body wash, toothpaste, etc.) and cleaning supplies (floor and bathroom cleaner, detergents, etc.) • Food and candy • Educational items (books, computer programs, computers/laptops and backpacks) • Beds and bedding, blankets, duvets and pillows • Sports gear (sleeping bags, soccer balls, volleyballs and tourist equipment) • Toys

www.amcham.pl
Mission: To discuss issues of the development of infrastructure; to promote infrastructure solutions for cooperation between private and public Co-Chairs: partners. Krzysztof Wierzbowski, Wierzbowski Eversheds; Andrew C. Kapusto, Raytheon Homeland Security. More at www.amcham.pl/infrastructure

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Agri & Food

Mission: To provide a platform for discussing and solving issues and identifying opportunities in the agricultural and food sector by creating a base for dialogue and expertise. Co-Chairs: Andrzej Pawelczak, Animex; Maciej Łubieński, Universal Leaf Tobacco Poland. More at ww.amcham.pl/agri_food

Infrastructure

Pharmaceutical

Mission: To discuss and identify common interests and exchange information regarding Poland’s pharmaceutical market; to act as a representative body and collective voice of pharmaceutical companies before governmental institutions. Co-Chairs: Jarosław Oleszczuk, Abbott Laboratories; Roberto Servi, Eli Lilly Polska. More at www.amcham.pl/pharmaceutical Mission: To build relationships with key players in Polish politics, regardless of whether within the government or not, in small groups and in private settings, to serve as a vehicle into the world of Polish politics behind official curtains. Co-Chairs: Robert Koński, Kulczyk Holding; Marek Matraszek, CEC Government Relations. More at www.amcham.pl/pdf

Mission: To provide a forum to share knowledge and exchange experience in all areas common and relevant to manufacturers and distributors of goods. Co-Chairs: Małgorzata Urbańska, CMS Cameron McKenna; Agnieszka Dzięgielewska-Jończyk, HP Polska. More at www.amcham.pl/consumer

Consumer Products

Mission: To serve as a platform for defense industry issues and exchange relevant information. The committee creates a networking forum and fosters a positive working relationship with the government and people of Poland. Co-Chairs: Paul Zalucky; Stan Prusiński, Sikorsky Europe. More at www.amcham.pl/defense

Defense & Security

Mission: To monitor innovation initiatives within the Polish government and across industries and commercial organizations, while advocating best practice across innovation approach, discipline, creativity, dimensions, and systems for member companies and the local government and business ecosystems. Co-Chairs: Alexander King, Monitor Group; Paula Wąsowska, Cisco. More at www.amcham.pl/innovation

Innovation

Political Discussion Forum

Real Estate

Employee & Labor Relations

Mission: To create an information exchange forum of HR professionals to share, discuss and learn about the latest trends in HR management and influence local policy and decision-makers. Co-Chairs: Jolanta Jaworska, IBM Poland; Peter Strupp, United Business Development. More at www.amcham.pl/labor

Mission: To advocate for IPR protection and provide leadership that will bring together interested partners; to share information with decision-makers and law enforcement. The police, judiciary, prosecutors, customs officials, legislators and journalists are among the target groups, while the curriculum of law schools should have more emphasis on IPR. Co-Chairs: Agnieszka WyszyńskaSzulc, Philip Morris; Anna Lasocka, Łaszczuk & Partners. More at www.amcham.pl/ipr

Intellectual Property Rights

Mission: To discuss issues regarding the complexities of the real estate market in Poland, and exchange information. To be an educational and networking forum for members and to lobby and influence legislative departments of the Polish government. CoChairs: Halina Więckowska, K&L Gates; John Bańka, Colliers International. More at www.amcham.pl/real_estate

Small & Medium-Sized Enterprises

Mission: To help members develop their energy and environmental business in Poland. By helping members work collectively to overcome any systemic difficulties encountered in their business the committee aims to increase the level and quality of investment and activity in these sectors. CoChairs: Adam de Sola Pool; Jerzy Chlebowski, Mitsubishi. More at www.amcham.pl/environmental Mission: To provide members with relevant information on EU-related issues, including EU funds, and to represent American investors before the Commission and the Polish government. Co-Chairs: Magdalena Burnat Mikosz, Deloitte; Jerzy Thieme. More at www.amcham.pl/eu

Energy & Environment

Mission: To provide a forum for member firms to share knowledge and exchange experiences in marketing, communications and PR; provide educational and networking opportunities for member firms interested in these areas; and serve as an advisory body for AmCham. Co-Chairs: Anya Ogorkiewicz; Tadeusz Dulian, Deloitte. More at www.amcham.pl/marketing

Marketing & Communications

Mission: To provide a forum for exchange of ideas/best practices to improve the performance of SMEs; to identify and promote solutions to facilitate and support the managerial and operational efforts of SMEs through educational, networking or lobbying efforts that leverage the resources and knowledge of AmCham and its membership. CoChairs: Alain Bobet; Cezary Krasodomski, Cisco Systems. More at www.amcham.pl/sme

European Union Affairs

Mission: To provide a platform for discussing, identifying and addressing common SSC/BPO issues related to high-tech operations; to maintain contact with local authorities, educational and governmental institutions to present a unified business perspective and to suggest ways of possible cooperation. Co-Chairs: Marek Suczyk, Kroll Ontrack; Jacek Stryczyński, Lionbridge. More at www.amcham.pl/outsourcing

Outsourcing/High Tech

Mission: To provide a platform for discussing issues and problems related to travel, leisure and the hospitality industry and to provide networking opportunities and to discuss trends and standards in the industry that will allow them to fully benefit from membership in AmCham. Co-Chairs: Stijn Oyen, Sheraton Kraków; Pamela Gmiter, Staffer Hospitality. More at www.amcham.pl/travel_tourism Mission: To provide a platform for identifying tax and financial issues and create an educational forum to keep AmCham members informed on current and upcoming legislation. CoChairs: Piotr Bartuzi, Bank BPH; Andrew Hope. More at www.amcham.pl/tax

Travel & Tourism

Tax & Financial Services

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COVER STORY: Innovation barometer

The future is here and now
n 2007, Tad Witkowicz, a USbased Polish engineer and scientist who had founded a successful IT firm and established Otago Capital, a venture-capital fund for IT startups, conducted a competition for business plans to launch innovative products on the marketplace. Innovators from Poland submitted over 150 entries, but none of them were feasible, according to Witkowicz. He told your reporter that Polish innovators were rather immature about the commercial potential of their inventions. Witkowicz said that the typical mistake these would-be innovators make is that they realize their “innovative ideas” first and then look for real problems that their ideas might perhaps solve. “None of the projects would pass the initial, filtering-out phase in the US,” he said. “Those were not ideas for start-

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ups. They were ideas for incubation.” Witkowicz also said that the submissions did not display an adequate understanding of how venture capital works. As a result, none of the projects submitted would have survived the first two years as startups. old sins Four years on, the story continues. This summer the media in Poland heralded “a breakthrough innovation in the internal combustion engine” by young Polish academics at AGH University of Science and Technology, who had designed a system that redistributes part of the exhaust gas back to the carburetor. Thanks to the heat it delivered, the system decreased fuel consumption by an estimated 8%. While there may be easier ways of delivering heat to the carburetor than

by bringing in exhaust gas from the engine, the bottom line is that the internal combustion engine is dead in a few decades anyway because oil is running out. A real breakthrough in the automotive business would be to invent a new gasoline. Meanwhile the industry has placed its bets on a completely new form of propulsion—the electric motor—and is inventing around it, including new, more powerful batteries and faster ways of charging them, as well as new forms of power storage not based on batteries. Around the same time the media were heralding the “breakthrough” invention at AGH, at another polytechnic in Poland a team of programmers were slowly developing new picture-analyzing software, which could be applied in surveillance camera systems, among other uses. The team worked slowly because they had been granted several million zloty in EU aid and had a comfortable timeframe to finish the project. Their pioneering conscience was not bothered by the fact that such picture-analyzing software was already available from commercial vendors. a lot to think about Although talk of innovation is itself nothing new, the phenomenon of innovation is still hard to grasp. GE’s Innovation Barometer, an annual survey of company executives around the world on their attitudes toward innovation, sheds some

Making the world a better place
How optimistic respondents in each country are that innovation could successfully improve citizens’ lives (Maximum: 100)

Image: Idea go / FreeDigitalPhotos.net

A leading study plots Poland's position on the global innovation map, but the coordinates are not quite where they could be

light on the issue. The 2011 edition of the survey, delivered by StrategyOne, a market research company, included Poland for the first time. The study revealed that Polish businesspeople have diverse attitudes when it comes to the role of innovation as a part of the world we live in. When it comes to a general belief in innovation as a way of moving the economy forward, Polish executives do not differ much from their peers in other countries. Their faith in innovation is strong. They see innovation as a motor for dragging the economy out of the crisis (88% of respondents in Poland said innovation is the main tool to create a more competitive economy here), and they also perceive it as a tool for making commercial activities more accessible to people (81% said innovation is one of the best ways to create new jobs) and greener (98% said innovation is the way to make the economy more environment-friendly). But when asked whether they believe that innovation will go beyond generating profit for innovative companies and contribute to the general welfare by solving social and economic problems, the opinions were much less enthusiastic towards innovation. On the “innovation optimism index,” one measure included in the Innovation Barometer 2011, Poland scored 70 out of 100 points, which placed the country in the same league as Germany. Antoine Harary, Director for Europe at StrategyOne, who presented the report at a press conference in October, explained that the moderate enthusiasm about the power of innovation to change life for the better revealed a belief among respondents that some social problems are too big to be solved by innovation. Nonetheless, Harary said, “In Poland respondents are very optimistic about improving nearly all aspects of life, except health conditions for citizens.” Paradoxically, while the sample in Poland pointed to energy and construction as the sectors that could benefit the most from innovation, healthcare was third. When this finding is juxtaposed with skepticism that innovation can solve healthcare problems in Poland, it reveals a perception that innovation may benefit the particular business sector but not necessarily benefit the society at large. In most other branches of the economy, Poles had limited faith in innovation. For instance, 9% of the sample pointed to media industries as being in the position to benefit from innovation, 6% distribution and retail, and 11% “other.” One of the speakers at the press conference, Paula Wąsowska, market development director at Cisco Polska, explained that a large proportion of executives in Poland do not see innovation be-

yond the notion of an “innovative product.” As she explained, “Most executives do not know that innovations can apply not only to products, but also to management and business models.” Another speaker at the conference, Małgorzata Starczewska-Krzysztoszek, chief economist at the Polish Confederation of Private Employers Lewiatan, cited a Lewiatan poll of small and mediumsized companies which revealed that nearly 40% of SMEs in Poland understand innovation exclusively in technological terms. “They said they do not need innovation in their business,” she said. “They do not believe, for instance, that a shoemaker can be innovative. They actually said a shoemaker does not need to be innovative.” reality check While the belief among Polish executives in innovation as a way to make the world a better place is mediocre at best in the global picture, they scored well below the global average in another index: the overall appreciation of the innovation context—in other words, how executives evaluate the conditions their country offers to companies for being innovative. In this measure, Poland ranked fifth from the bottom. Somewhat surprisingly, the countries below it were Sweden, Brazil, South Korea and Japan. According to Harary, business executives in countries as well-known for innovation as

No satisfaction?
How satisfied respondents are about the innovation framework in their country (Maximum: 100)

Source: GE Global Innovation Barometer 2011

Source: GE Global Innovation Barometer 2011

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COVER STORY: Innovation barometer

Sweden (think Tetra Pak and IKEA), South Korea and Japan (consumer electronics and automotive), think their countries do not do enough to support innovativeness because they now see the limits of their old innovation models, which were based on large companies and one-size-fits-all solutions. There is no danger of Poland falling into this category of “exhausted innovators.” More like Brazil, perhaps, the challenges in Poland appear overwhelming compared to the conditions for encouraging innovation. The executives who appeared the most optimistic about conditions for stimulating innovation come from countries that have not seen much innovation yet, led by Saudi Arabia, the United Arab Emirates and China. The two Arab nations are facing the end of their wealth-generating resource—crude oil—and may feel they have no choice but to innovate to create other industries that will generate wealth for them in the future. One thing that is certain is that they have the money to do that. China, on the other hand, is perceived as a global sweatshop but is desperate to use innovation to move up the economic value chain. partnering with business... When looking in-depth at the areas evaluated for their pro-innovative potential, Harary noted that globally most business executives appreciate the chaining model for innovation, in which partnerships are important, because innovations can come from big companies as well as small ones or individuals. In Poland this model does not seem to be appreciated, however. “One factor that is very low in Poland and quite high in other markets is the issue of partners,” said Harary. “Only 19% of the sample in Poland said they needed partners to bring innovation to

the market.” In other countries, respondents identified this condition as critical to successful innovation. Lewiatan’s Starczewska-Krzysztoszek said this reflects the old-fashioned “industrial” way of thinking about innovating. “It is not open-minded,” she said, quoting from the findings of the Lewiatan poll of 1,500 SMEs. “Big companies do not think they need to cooperate with small companies, as this requires being innovative in new ways.” But this is all wrong thinking, according to Magdalena Nizik, managing director of the GE Engineering Design Center in Warsaw. She said a small organization and a global industrial giant can mutually benefit from cooperation. “Our Engineering Design Center in Warsaw has been in a public-private partnership with the Polish Aviation Institute for 11 years,” she said. “Because of this partnership, we gained access to the Polish scientific sector and could access a lot of great talent at the beginning of our existence. On the other hand, we help the institute understand the global trends in innovation, products and technology. We also give them access to innovative and modern management processes and practices, which is visible in the way they cooperate with GE but also in other areas.” Nizik added that when the partnership started, the institute employed around 100 engineers. Today the number is over 1,300—a clear indicator of how fruitful the cooperation has been. ... and academia While partnering between companies is a problem, the GE Innovation Barometer revealed that partnering between business and academia is an even bigger problem. “Only 44% of Polish respondents believe it is easy for companies to partner with universities for R&D,” Harary said. “That

is almost 40% lower than the global average.” Harary noted that while it is important for universities to offer a quality education, being a partner to business is something different. Here Poland is not doing the greatest job of working for the benefit of business by educating future innovation leaders. Nizik, who manages a company where 95% of the engineers are products of the Polish technical education system, said that Polish universities are regarded as providing their graduates a good understanding of basic sciences, which is highly important in such industries as nuclear or aviation. “However, we see that they do not teach risk-taking and collaboration skills, which are absolutely necessary in order to produce innovative engineers,” Nizik said. “Innovation does not happen when you work alone. You need a team globally, not only in one country, to innovate in jet engines today.” Cooperation between business and academia is a complex issue. According to Tomasz Perkowski, vice president of the Foundation for Polish Science, who spoke at the conference, there are not too many countries where such cooperation works well: “There are some good examples in the US around big academic centers, such as Silicon Valley, but it is not widespread.” Perkowski said that in theory a lot is known about how academia should cooperate with business: “We know about the ties between academia and business, that the students should be trained how to cooperate with the private sector, that there should be brokers who sell innovations made by universities to business. But there is something else—an X factor— which makes those models work in some places and not work in other places.” Perkowski said that in Poland all those missing elements will be in place in time. “There is a special government agency, the National Center for Research and Development, which will directly support selected research programs,” he explained. “There are high-risk venture-capital funds supported by the National Capital Fund, which will invest in innovative solutions. University curricula are being changed so they embrace all the aspects the private sector is talking about. There are spinoff companies set up by university students or researchers appearing around academic centers in Poland, too. So slowly we are seeing all the elements that the model pro-innovation infrastructure requires. But those elements are in place in other countries as well. In some the system works, and in others it doesn’t.” time is money While the GE Innovation Barometer signaled the critical attitude of business executives in Poland when it comes to busi-

ness-academia cooperation, the study also revealed that most of them believe creativity and research are the key factors in innovation. But the most negative perception in Poland is of how innovation is brought to the marketplace, with only 31% of the sample saying this happens quickly enough—30% below the global average. According to Tomasz Perkowski, the problem is excess bureaucracy. “If a young entrepreneur wants some advice from me about how to start a new venture, I tell them it is easier to swim with the sharks than to start up an innovative venture in Poland, because of the legal system in the country.” Perkowski said that the private sector and NGOs who work to improve the pro-innovation framework in Poland should put more pressure on lawmakers to simplify procedures governing patenting and product approvals from different licensing agencies. ... and more money In the GE study, most executives globally complained that the governments of their countries do not spend enough money on innovation. Poland is no exception. According to Perkowski, part of the problem is that instead of funding innovation, the government spends a lot of EU funds on infrastructure and other projects that it sees as more urgent. “Infrastructure is very important,” Perkowski said, “but we do not know if in the next EU Financial Perspective so much money will be allocated to Poland again. We may end up like Spain, where they spent the EU funds on infrastructure development, which was necessary, but not on innovations. As a result, many young people chose to steer their careers in the direction of brick-and-mortar companies, because they saw there was money there, instead of innovative businesses. That is why the Spaniards have not produced any innovative products despite huge funds from the EU.”

But apart from spending money, Poland can also offer incentives for innovative companies—something it does not really do. According to Magdalena Nizik, “Fiscal incentives are one of the key areas in helping innovative companies. However, our engineering center in Warsaw is the only one of our engineering centers in Europe that pays corporate income tax.” priorities for change Along with measuring weaknesses in the pro-innovation framework, the GE Innovation Barometer asked questions probing the most immediate problems as viewed by executives. In Poland, one of the top priorities for change voiced by executives was to encourage financial incentives for innovative companies and companies that invest in innovation. Another priority is to promote the appetite for innovation and entrepreneurship among students, so that students who want to be entrepreneurs—even if they are not necessarily the most academic-minded students—will have the guts to take risks in business. The executives also said it is important to encourage collaboration on the international level with innovative projects, because cross-border collaboration fosters potential. Less pressing priorities, as signaled by the GE Innovation Barometer, were enhancement of public-private partnership, a model for cooperation perceived as having huge potential for innovative projects, and enhancing the protection of intellectual property, which is a must so that companies are not afraid to come out with innovative products and ideas. creativity in demand When it comes to the overall policy framework that business leaders globally expect of their countries, protection of creative ideas and money to support development of innovation were mentioned evenly around the world. But above all, the sample raised the

need for talent that can think outside the box—a responsibility of educational institutions. As Antoine Harary put it, “There is a clear understanding that creativity is as important as A-level science capability in the overall innovation process. To have more creative people who think outside the box is the first demand from Polish businesses when it comes to innovation on a day-to-day basis.” Another demand in Poland is for more people with technical expertise. “This demand is not as strong as it is globally,” Harary said. “Again, working with universities is a stronger priority in Poland than globally, as is less bureaucracy when applying for financial aid.” the future is today Commenting on the findings of the GE Innovation Barometer, Lesław Kuzaj, GE CEO for Central and Eastern Europe, said that investing in innovation is a process in which countries have to gradually mature before they can see why they need to invest in it: “First you invest in what looks like the most urgent needs: road infrastructure, buildings, etc. So the first phase of economic and political transformation is not perhaps the best time to focus on innovation, as you try to meet your society’s basic standards of living. But once you enter a totally new era and fix the major technological gaps, that is the time to focus on innovation.” Kuzaj mentioned that GE has several engineering centers in Central & Eastern Europe, but the one in Poland is one of the most successful, and there is no reason to think Poles cannot innovate. He added that the next 10 years will be a period of technological development in Poland. “This will spur innovations as well,” he said. After the conference, Tomasz Perkowski from the Foundation for Polish Science observed that it is private companies like GE, IBM, Microsoft and Cisco, or the Polish software developer Asseco, who know what they want to achieve and how to get there and who can financially back up their plans, who will be the leaders of innovation in Poland. Otherwise, as Cisco’s Paula Wąsowska said at the conference, inventors and entrepreneurs from Poland may turn first to Silicon Valley, rather than discussing those models here in Poland. “This is too bad,” she said, “We do not want to experience brain drain. We want entrepreneurs and innovators to stay here.”

First things first
The most pressing reforms Poland should undertake to spur innovation in the economy as viewed by Polish executives

Source: GE Global Innovation Barometer 2011

Tomasz Ćwiok

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AMCHAM: Monthly Meeting in September

Facing the music… in an orchestrated fashion
Poland is relatively well-positioned to withstand the negative effects of the global economic crisis, but only if the eurozone keeps its act together
t is not often that the panelists at an AmCham Monthly Breakfast agree about the main issue on the agenda, but at the September meeting Mark Allen from the IMF, Prof. Witold Orłowski from PwC, and Ryszard Petru, an independent economist, expressed no doubt about the gravity of the situation in the international banking system. They differed on where the most immediate problem is located. trouble every day According to Prof. Orłowski, the most difficult problem to solve is in the US, where the government apparently has not yet found the way to get the economy out of stagnation and back on the growth path. “The Obama government resorted to the old Keynesian economics,” Orłowski said. “It says that when there is a lack of confidence in the economy, the government takes over a part of the debt and starts to spend money, which in turn makes people believe the worst in the economy is over and results in an overall investment and spending boost. But it seems that the federal government has failed to make the US economy regain confidence. It seems that the old economic school just does not work.” Orłowski added that without a stunning economic revival, the amount of the US public debt is becoming a problem, as it has reached 100% of the country’s yearly gross domestic product. This is what really stunts market confidence, he said. In turn, the aggregated public debt of the eurozone countries is only 80% of their GDP which is a , different story altogether. According to Mark Allen from the International Monetary Fund, the eurozone is where the most immediate problem lies when it comes to financial market stability. This is because economic growth in the US is going to be higher than in the EU this year. “We do not see any recession yet,” Allen said, “but Europe is in a much more

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difficult position to get its economy off the ground. Instead, there is a huge threat of financial instability coming out of the eurozone. This may negatively affect the global financial system. Something needs to be done to resolve the eurozone crisis as soon as possible.” For Ryszard Petru, the real threat is not the numbers, but the lack of political cooperation among the governments of the eurozone countries to tackle the problem of Greece’s debt. In this respect, in the US, with its two-party political system, it is much easier to find a political consensus. “When you look at US history, you will see that they eventually come together and take all necessary steps to cover their debt and cut spending,” Petru said. “But it is much easier in the US to handle the crisis because there are only two parties there. In the eurozone you have 17 representatives of member states at the table, and all they can do is postpone decisions.” Orłowski said that Europeans have always believed that the public sector would find a way to pay its debts. “But governments act irresponsibly by postponing the payment of their debts now,” he said. “Germany tries to make other countries cut their budget expenditures. In turn, other countries do their best to postpone the introduction of such measures and water down the problems.” Orłowski said that such lack of coordination in handling the public debt in the eurozone may lead to the emergence of much stronger economic tensions that will ultimately give way to the breakup of the eurozone. “Now I can imagine it,” Orłowski said. “The problem is more and more severe, week after week. We need to find a common language to talk about this issue in Europe.” eurozone in jeopardy? A common language for politicians may not be enough, however. According to Allen, while the financial adjustment programs

work for such indebted countries as Ireland extremely well, they do not seem to deliver in other countries like Greece and Portugal. “There is no particular mystery about the strategy that is being followed in Greece,” Allen said. “The government has too large a deficit, and to make things worse has a huge debt, of which a large part needs to be rolled over. The markets have lost confidence and are factoring in a 95% probability of default by Greece over the next five years. As time goes on, there are increasing problems with putting back confidence in the Greek economy.” Allen noted that there are two factors at work in Greece. One is the political difficulties inside of the adjusting country. The amount of adjustment that Greece is being called upon to make in terms of reducing its fiscal deficit is very large, at 5–6% of GDP in the first year of the program. But subsequent measures present certain difficulties. “When countries are over-indebted and this happens after a financial crisis, it may be necessary to have some form of debt restructuring,” Allen said. “We have come to that point in Greece, and for that matter in some of the other countries.” Allen admitted that defaulting on debt is always a painful process. There are financial institutions, however—the IMF one of them—whose job is to give the country the support it needs after restructuring to rebuild prosperity and ultimately return to the markets. Such a policy is going to work with Greece only if it does not need to be applied to other eurozone countries. Greece is in need of an estimated EUR 100 billion. “If the problem spreads to Italy, for instance, would there be the financial resources to follow a similar strategy there?” Allen wondered. “That is more difficult.” According to Petru, there are economists who already suggest that excluding Greece from the eurozone would save the zone

from breaking up further: “Many economists see it that way. They say there should be a way for a country like Greece to be forced out of the eurozone.” But for Petru this is not the best of ideas for solving the eurozone’s problems. He noted that if Greece left the eurozone there would be pressure from international financial markets on other indebted countries, such as Ireland, Portugal, Spain and Italy, to leave the eurozone also. “There will be significant increases of yields, and devaluation of the future currencies of those countries, and they will not be able to sell their debt,” Petru said. “They will be much cheaper at first, but on the other hand their purchasing power will be lower. They will have to pay more for imports, and many of their companies who get components from the eurozone—mostly Germany—will have to face the music.” Petru concluded that while there is a need for a major budgetary reform in the eurozone countries and very little cohesive activity to tackle that problem on the part of political elites in the affected countries, there perhaps need to be some “shocking developments,” such as Greece leaving the eurozone, which would then make politicians act in a more orchestrated fashion. But Petru repeated, “A breakup of the eurozone is the biggest disaster that we may face.” poor banks The indebtedness of the governments of some of the eurozone countries, such as Greece, Ireland and Portugal, is not the only problem faced today. Another is the indebtedness of banks in continental Europe. Allen explained that European banks have less capital and are more reliant on wholesale funding than banks in either the UK or the US. “Since 2007, UK and US banks have had far greater progress in raising capital and reducing funding than the European banks have had,” Allen said. “European banks are now facing a liquidity crisis of the sort that was faced by the international banking system in 2007 following the Lehman Brothers collapse, when banks just refused to lend to each other.” A part of the problem is that the sovereigns they have been lending to are looking less solvent today as well. “We have a vicious interaction in the sovereign finances in Europe and the banking finances,” Allen said. He noted that the IMF did some simple calculations, looking at the balance of assets versus liabilities of each bank in Europe to define whether or not it is a creditworthy institution. “The crude calculation showed there is some EUR 200 billion needed in the market,” Allen said.

In terms of amounts of money, Allen noted the EUR 200 billion is not the critical thing: “It is a relatively small amount of money compared to the pool of capital waiting to be invested around the world.” But rapid recapitalization of European banks is easier said than done. Since the start of 2011, European banks have lost 40% of their market capitalization because of financial problems. “The issue is that the current owners of the banks, and their political friends, do not want to see their shareholdings diluted,” Allen said. “If you go for a big recapitalization, the existing shareholders will lose control of the banks. This is the obstacle.” Petru added that eventually it will be governments—acting through their central banks—that will cover the financial needs of troubled banks to avoid spectacular bankruptcies and disruptions to the financial system. This in turn will lead to an increase of government debt. For some countries that may be a problem. “There are countries were government debt has reached a level that is highly problematic,” Allen said. “It is problematic for countries like Belgium, Italy, Greece and Ireland. But for most countries in Europe their debt is much lower than that.” poland—a safe haven? Apparently, Poland is not a country that should worry about the debt of its government or its banks. In fact, Petru said, even with economic stagnation in Germany, Poland’s largest trading partner, Poland’s economy is growing at a rate of 3% of GDP this year, mostly thanks to internal consumption. Prof. Orłowski also believes that Poland is relatively well-prepared to face the problems that may come its way because of the troubles in the eurozone. “There is a lot of financial stability in Poland,” he said, “although it could have been better, especially when it comes to public finance. The Polish government has managed to put finances under much more control than ever before. If Minister of Finance Jacek Rostowski retains his position after the parliamentary elections in the fall, he will be on a good way to finishing his budgetary plan for the next two-three years.” But Poland is “a small boat sailing over a big ocean where the waves are really tall,” as Orłowski put it. “Even if the small boat is well-prepared for sailing, you never know what may happen if a big wave hits.”

Meet the speakers

MARK ALLEN is the former director of the Policy Development and Review Department at the International Monetary Fund (2003–2008). His earlier assignments included Senior IMF Resident Representative in Poland (1990– 1993) and Hungary (1996–1998). He is currently Senior Resident Representative, and since June 2009 heads the IMF’s Regional Office for Central and Eastern Europe.

Prof. WITOLD ORŁOWSKI is chief economic adviser to PwC. Orłowski is former Chief Economist to the President of Poland. He continues his academic and scientific activities within the Independent Center for Economic Studies and as the director of the Warsaw University of Technology Business School.

Tomasz Ćwiok

RYSZARD PETRU is an independent economist. Previously chief economist of BRE Bank and chief economist of Bank BPH, Petru was responsible for macroeconomic analysis and research on monetary policy and economic development. Prior to BPH, Petru worked as a country economist for Poland and Hungary at the World Bank.

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AMCHAM: Monthly Meeting in October

A joker in the deck
A prehash of the 2011 parliamentary elections raised many questions about the political landscape in Poland for the years to come, as rabble-rouser Janusz Palikot adds leaven to the leftist loaf
Civic Platform, led by Prime Minister Donald Tusk, was the clear winner of the AmCham straw poll ifferent scenarios for the Polish political scene going forward after the 2011 parliamentary elections were in the spotlight at the AmCham October Monthly Meeting just a few days before the elections. The guest speakers, political commentators Krzysztof Bobiński, Łukasz Warzecha and Tomasz Wróblewski, agreed that the largest governing party, Civic Platform (PO), would secure a dominant position in the next Parliament. They were right: PO won 207 seats in the Sejm, the lower house of Parliament, followed by Law & Justice (PiS) with 157 seats, Palikot’s Movement (RP) with 40, the Polish People’s Party (PSL) with 28, and the Democratic Left Alliance (SLD) with 27. With no major disagreement about who would run the show, the speakers’ views diverged when it came to their assessment of the political potential of the other parties. Łukasz Warzecha was of the opinion that RP organized this year as an anti-establish, ment grass-roots movement by former PO MP Janusz Palikot, will not be a solid party and will disintegrate within a few years, losing its constituency and failing to rationalize its agenda in the Parliament beyond the loose anti-clerical, pro-gay and anti-big-government slogans on their campaign posters. “RP is a dysfunctional party,” Warzecha said, referring to the diverse mix of candidates put forward by the party in the elections. “RP runs for Parliament with the purpose of entering the Sejm, but not entering the government. And when it does enter the Parliament, the party will have enough money from the state budget to continue some political activity. It will continue to be active for four years at the most, but more likely the party will disintegrate before that.” For Tomasz Wróblewski, however, RP could be a serious political force in the future. “The party’s agenda is about women’s rights, ecology, and other very typical leftist issues in Europe,” he said. “Those issues are becoming more and more important, and therefore the constituency behind those issues is also growing.” Wróblewski predicted that RP would use the next four years in the Parliament to consolidate its political support and mature, with an eye to the 2015 parliamentary elections, and therefore the party will not try to become a partner in a governing coalition led by PO.

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But as Wróblewski underlined, this strategy will require a consistent approach from its political leadership, and this is one of the weakest points of party leader Janusz Palikot. Wróblewski said that Palikot had already been on the radical right and at the political center, and now he has reinvented himself as a politician to the left of the political spectrum. “It is a big question mark how well Palikot will be able to maintain and develop in the years to come his current political vision,” Wróblewski said. “Consistency is not one of his strong points.” Krzysztof Bobiński sees Palikot differently. For him, Palikot is a modernizer and a person who touches on issues that other parties avoid, which in fact are real issues in the country. “Janusz Palikot is a very serious person in whatever he has done,” Bobiński said. “What he has done politically so far was done well. He has eaten into the electorate of SLD. He could well be a coalition partner for PO, although he does not want to be a government minister himself.” What coalition? Another point of the discussion was the scenarios for building a government coalition, which will be the immediate challenge for PO. All the speakers had a gut feeling, which later proved right, that although PO would emerge from the elections as the largest party in the Parliament, it would not be able to secure a majority. While PO has had a successful coalition government over the past four years with PSL, it was not clear before the elections how well PSL would do in the voting booth. But other potential coalition partners seemed even more unlikely. According to Wróblewski, PO would not venture into a coalition with RP because in Poland its anticlerical stance is a serious drawback to successful governing. “A coalition with RP would be the most risky coalition I can imagine,” Wróblewski said. “It would be very risky for PO to have a partner like RP be, cause it would mean the coalition would be subject to numerous attacks from many different places within the society.” Warzecha noted, however, that Prime Minister Donald Tusk did not exclude a coalition with Palikot’s party. If that materialized, the relationship between Tusk and Palikot, two politicians who have exchanged very critical views of each other in the past, would be pivotal for the future of such a government. “It would be a very difficult partnership,” Warzecha said. “I doubt if this can work.” Warzecha added that quite likely a PO-RP coalition would work to the benefit of the largest opposition party, PiS: “It would mean that the coalition government would be very weak and fragile, while the opposition, with SLD and PSL, would be very strong.”

sld’s blurred image None of the speakers was in a position to foresee the dramatic slump in popular backing delivered to the post-communist Democratic Left Alliance in the 2011 parliamentary elections. Warzecha did not exclude the possibility that SLD would be the third-largest party in the Parliament: “If this is the case, PO may replace its coalition partner PSL with SLD. Both parties are for strong government and share synergies. It is quite possible that they will work together.” At the same time, however, Warzecha pointed to SLD’s weaknesses that surfaced during the election campaign, arguing that some SLD politicians may actually change their party affiliation after the election. “The party does not have a political program,” Warzecha said. “The SLD politicians have only aspirations, and are desperate to get into first-league politics.” But Warzecha also noted that SLD apparently has problems with its left-wing integrity, an important aspect for the party’s core supporters, who seek ideological values. As Warzecha pointed out, SLD even managed to appeal to the arch-capitalist lobby: “The Business Centre Club has given its support to SLD in this election—something unheard of.” Best for business In a straw poll among AmCham members attending the meeting, the governing PO won overwhelmingly, followed by RP which re, ceived half as many votes as PO. The largest opposition party in the Parliament, PiS, got just a single vote at the AmCham meeting, as did SLD and a PiS breakaway group, Poland Is Most Important (PJN). The preference for Civic Platform among the business community was no surprise to the speakers. Krzysztof Bobiński noted that when it comes to the global economic crisis, PO is the only party that is really willing to talk about it. According to Bobiński, “PO said it is advisable to elect the same people who have led Poland so far through the crisis in a relatively uneventful way.” Nonetheless, Bobiński admitted that PO kept its comments on the crisis to a minimum in its election campaign. As he put it, “It would be difficult to campaign on budget cuts when shopping malls are full of customers carrying bags full of products.” However, as he pointed out, in its election campaign PO did mention an option to lower VAT “if the budgetary situation allows.” Łukasz Warzecha agreed that PO addressed business issues in its campaign, while Law & Justice referred to business only in a very limited way, and in a more general context. “PiS naturally would not care so much about big business,” Warzecha said.

“They cater to small business, but their message is more general. They promise to make the lives of entrepreneurs easier, but they do not have any specific details about how they plan to achieve that.” For Tomasz Wróblewski, PiS leader Jarosław Kaczyński sent a very mixed message to the business community: “On the one hand he said he does not support the privatization of big state-owned companies. On the other hand he has proposed a tax reform which makes investment in R&D deductible 100%, which in essence is tax relief for big companies.” Tomasz Ćwiok

Meet the speakers

KRZYSZTOF BOBIńSKI, a former Warsaw correspondent of the Financial Times, is now president of Unia & Polska, a pro-European NGO. He is also associate editor of Europe’s World and contributes political commentary to the Polish media for openDemocracy.org, an NGO. In 2005–2007 Bobiński worked for the Polish Institute of Foreign Relations.

Photo by Grzegorz Rogiński/ Courtesy of Prime Minister’s Office

ŁUKASZ WARZECHA is a columnist for Fakt daily. He studied international relations at the University of Warsaw. His journalistic career includes writing columns for influential titles, such as the daily Rzeczpospolita as well as Fakt. He has authored book-length interviews with some of Poland’s top politicians, including Minister of Foreign Affairs Radosław Sikorski. He is a commentator for national television and radio stations.

TOMASZ WRÓBLEWSKI is editor in chief of the daily Dziennik Gazeta Prawna. After graduating from the University of Houston in the US, he worked for Newsweek and the Washington Post. He was a correspondent for Radio Free Europe in the US, and after 1989 for independent Polish media. Since returning to Poland he has served as broadcasting director at the national radio station RMF, managing editor of Wprost weekly, editor in chief and publisher of the Polish editions of Newsweek and Forbes, and vice chairman of the publishing house Polskapresse.

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AMERICAN INVESTOR NOVEMBER-DECEMBER 2011

NOVEMBER-DECEMBER 2011 AMERICAN INVESTOR

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FOCUS: Outsourcing in Katowice

FOCUS: Data safety

Katowice has a lot of attractive modern space such as here at the Monopol Hotel

Silesia and the outsourcing industry have got a special thing going on
he ambition of Katowice and the neighboring cities, known collectively as the Silesia Metroplex, in attracting investors in outsourcing operations was in the spotlight at a conference organized by AmCham in cooperation with the City of Katowice, the Association of Business Service Leaders in Poland, and the Katowice Special Economic Zone. The conference, entitled “Clean, Green and Talent-Driven SSC/BPO/ITO Hub in Central Europe,” was held in Katowice in September at the recently refurbished Monopol Hotel in the city center. The featured speakers were Katowice Mayor Piotr Uszok and officials from companies that have made successful investments in the region in their outsourcing operations, such as outsourcing giant IBM, project management specialist Fluor, the Żywiec group of breweries, press distributor Ruch, power company Tauron, coal producer Katowicki Holding Węglowy, and outsourcing specialist Cap Gemini. The businesspeople talked about the purpose, benefits and challenges of implementing these solutions in their companies. They all underlined the fact that increased efficiency and streamlined processes are the obvious reasons for pulling back-office processes together into one center. Their reasons for choosing Katowice were the location, offering an optimal balance between quality and costs of human resources, as well as the level of infrastructure and the logistical situation of the area.
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Back-office romance

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people power While private sector representatives pointed out many additional aspects that make Katowice a good place to invest, such as the availability of office space, good cooperation with city officials and good transportation networks, the underlying theme in nearly all the comments was the hard-working attitude of the people available for hiring in the area. As Marcin Nowak, delivery center director at IOS Cap Gemini, put it, “The availability of potential employees and their diversity, as well as the high work ethic that prevails in Upper Silesia, brought very high efficiency to our operations in Katowice.” Dave Gibson, General Manager of Fluor SA, said that Fluor chose Katowice “because people here want to learn. There is indeed a visible work ethic.” This was echoed by Tomasz Jachna, Customer Service Development Manager of the Żywiec Group: “The work ethic in Upper Silesia, which is a very important element in client relations, made us choose Katowice for our outsourcing operations. We hire people from the area, and we see how they build their interpersonal relations and how this translates into our success.” trying harder There are many reasons for this. According to Mateusz Skowroński, the city’s strategic investors czar, who also spoke at the conference, Katowice is the capital of the largest Polish metroplex, which is also the largest conglomerate of cities in Central Europe, with nearly 2 million resi-

dents. This concentration means there is a large base of human resources available, complemented by a strong academic base with an output of 35,000 graduates each year and a student body of 134,000 across 29 higher education institutions. The metroplex is also well-connected, with a highly developed network of public transportation and road infrastructure. This is why residents in Katowice have the lowest traffic congestion rates out of the seven largest cities in Poland. Silesia also has a healthy economic structure. Skowroński noted that while there are numerous foreign investors in the area already, the market is far from saturated. New investors have the advantage of being able to deal with a business-friendly city council, which has created a wide spectrum of investor incentives, such as a real estate tax exemption, which may be considered either regional investment support or de minimis support, in which case it does not have to be reported to the European Commission. In addition to the conventional tasks of a labor office, the regional employment office coordinates internships and offers a number of addedvalue services, including equipment cost refunds and training. Additionally, the Katowice Special Economic Zone offers corporate income tax breaks. a broader picture Paweł Panczyj from Ernst & Young, who spoke at the conference, stressed that Katowice is part of a country that is one of the destinations of choice for foreign investors today. Panczyj noted that from 2009 to 2010, Poland generated a 40% increase in the number of FDI projects and a 4% increase in the number of jobs created. Additionally, Panczyj said that according to AT Kearney, Poland places 6th in terms of investor confidence, after China, the US, India, Brazil and Germany. “The reason for Poland’s success,” Panczyj said, “is the enormous number of qualified employees who speak English and a variety of other foreign languages.” Panczyj added that according to ABSL, the value of transactions in international service centers in Poland exceeds USD 3 billion per year. At present there are 300 service centers in Poland, which support some 70,000 jobs. But due to maturing of the outsourcing sector and increasingly more experienced staff, Poland is becoming more capable of handling decision-support and knowledgeprocess outsourcing for international companies. This in turn is associated with greater added value, state-of-the-art knowhow, and high-quality processes. If this trend of moving up the services value chain continues, the sector may grow by 15–20% annually in the short and medium term. Robert Chomik

Neglect is the order of the day
hen almost 90% of documents today function in digital form, data protection procedures are crucial. Companies may be scrupulous about using anti-virus programs, but when it comes to erasing data from disused devices—not so much. When computers or mobile devices are trashed, given away or resold on a computer exchange or auction site, they may still contain sensitive company or customer data. Erasing strategic information is becoming almost as important as protecting it against loss in the first place. The need for greater care when erasing files was confirmed by a survey of member companies in August and September by the AmCham Outsourcing/High Tech Committee. The survey found that 85% of respondents do erase their data, but 67% of them do so only using the “delete” button. This is definitely not enough to dispose of sensitive information. About 35% are careful to use special file erasing programs to get rid of their files. But 10% said they delete data by formatting the hard drive, which unfortunately allows data to be accessed even by an IT amateur. Less than 5% use a degausser, which ensures total deletion of information from the carrier. Another 12% said they outsource data erasure to external companies. According to a global survey in 2010 in North America, Asia and Europe (including Poland) by Kroll Ontrack, only half of businesses erase sensitive digital documents from disused computers and hard drives, and 75% of them do not delete data securely. According to the Kroll Ontrack ESI Trends Survey 2010, global companies suffer a loss of sensitive digital data stored on old media once a year on average. The global survey revealed that 40% of companies donate their old computers, with stored data, to other companies or individuals, and another 22% actually have no idea what happens to equipment taken out of service. Over 60% of company computers available on the secondhand IT market contain business data that are fully accessible and have not been subjected to even the simplest data wiping methods. According to the international Ponemon Study 2009, negligence connected solely with the lack of procedures for erasing strategic data may cause global companies to lose

Photo courtesy of AmCham Kraków

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An AmCham survey finds that Polish subsidiaries of global companies do not have proper procedures for erasing computer files
USD 6.75 million on average, depending on the type and importance of the lost data. In Poland as well, companies lose huge amounts of money as a result of such events. Although there are no data about the exact losses here (partly because companies rarely admit to falling victim), it is estimated that they amount to millions of zloty. According to experts, in the event of a data leak a medium-sized Polish company could lose PLN 500,000 a day. Could sensitive proprietary data end up being offered for sale by, for example, a secondhand computer dealer? Unfortunately, this is not a far-fetched scenario, and the possibility exists wherever such data are managed. This may affect any company that has data in a digital format, including data concerning specific individuals.

even before an old computer is discarded. Some 25% of computer users send corporate e-mail to their private accounts and 20% send e-mail with classified information to friends and third parties. When a computer is no longer needed by the company, it may be given to a colleague, sold to a used computer dealer, or scrapped. When a company disposes of a computer, the most common way of removing data is reformatting. This is ineffective, and afterwards all the data are still accessible, even for an amateur using widely available data recovery programs. how to erase data effectively from hard drives? Over 80% of information is stored on hard drives. There are many methods for irretrievable data wiping. The most effective include software methods and hardware methods. Software erasure uses applications that overwrite data multiple times. Although it is reliable and safe, it cannot be used in some circumstances—for example, when the hard drive is damaged. Although damage to the storage medium makes it impossible to access the data directly, an unauthorized person could still repair the device and gain access to the data. Software data erasing may also fall short of absolute safety in the case of some technologically advanced media. With the latest laboratory methods it is possible to gain access to them, and therefore to data stored on them. Using non-software methods is sometimes prompted by more mundane reasons. If a large number of magnetic media must be wiped in a short time, software data overwriting may be too slow. One other method is degaussing, which wipes the data using a strong magnetic force that irretrievably removes all information recorded on the magnetic layer of a storage medium. In the case of hard drives this method also makes it possible to erase data necessary for proper operation of the drive, which is a guarantee that after degaussing the drive is no longer usable. The latest degaussers, available from data erasure companies, irretrievably wipe data from any storage medium, regardless of its capacity, in less than four seconds. A working degausser is so powerful that it may even accidentally wipe data from other devices within a 6-foot radius. Marek Suczyk

Among AmCham members, 85% of companies routinely erase their digital data, but 75% use inadequate procedures.
In the case of personal data, there is a legal obligation to erase important data under the Personal Data Protection Act. The act provides that in the case of disposal of equipment, hard drives or other electronic data carriers containing personal data, the data must be wiped beforehand, or if that is not possible the hardware must be damaged in a way that makes it impossible to read the data. Similarly, in the case of transfer of the hardware to another entity that is not authorized to process the data, the data must be wiped beforehand in a way that prevents recovery. The technology for proper data erasure is out there and accessible. The problem is a lack of awareness of basic principles of data erasure. so how do data leak from disused company computers? When a staff member’s computer is replaced and there are no procedures for protection and erasure of data, it is almost certain that data can leak outside the company. But in many organizations data leak

The author is CEO of the Polish subsidiary of Kroll Ontrack and co-chair of the AmCham Outsourcing/High Tech Committee
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AMERICAN INVESTOR NOVEMBER-DECEMBER 2011

NOVEMBER-DECEMBER 2011 AMERICAN INVESTOR

FOCUS: Executive chef

“In the West you have to stand in line to get a table at a good restaurant. We do not have that in Poland yet. We need perhaps another 10 years.”
pineapple, apricot or peach—great, versatile produce for a creative chef. Despite the administrative hassle—it took the Westin six months to handle the red tape for importing carica to Poland—Korzyński says it was worth the effort: “We were determined to have carica in our restaurant no matter what. We wanted to make sure that the produce is available to us for the entire year.” But it was not an economic calculation. “We worked with a gastronomic enthusiast in Chile who agreed to export the carica for us,” he says. “Such enthusiasts are a very important part of the business, because if we only look at the economy we will not be inclined to experiment and take risks and have exciting new dishes for our guests.” local products a must Korzyński is keen to experiment and loves to use regional products. His new tasting menu, launched this fall, includes Polish mutton (marinated in bison grass and crushed black pepper and slow-cooked), served with buckwheat terrine with bacon, oscypek cheese, fresh spinach, and forest fruit sauce with lemongrass served from a siphon. While he has been relying on one local beef producer since 1990, Korzyński wishes there were more opportunities for chefs to use Polish produce. He explains that quality products can be found in Poland, but the producers are so small that they cannot support enough restaurants to make the whole enterprise economically viable. Another problem is that many of them cannot guarantee uninterrupted supplies of their produce throughout the year, a big drawback for a hotel restaurant. “I can’t afford having a given product at one time and not having it at another time,” Korzyński says. “I have to respect my guests and make sure that the next time they come to eat at my restaurants they get the same quality dishes they had before, all year round.” But he sees a change. Family-run companies, which were extinct before 1989, have returned to the market. They have slowly built their brands and developed customer networks. Nonetheless, Korzyński says, “We need another 10 years for the market to recuperate.” talent scout Another reason Korzyński is upbeat about the future of gastronomy in Poland is the quality of human resources available. “There are many talented young cooks,” Korzyński says. “I work with people who are open to new ideas and always look for new inspiration. They surf the Internet for ideas. Today cooking is not about reproducing a dish according to a cookbook recipe. It is the art of searching for ideas and implementing them.” Korzyński’s goal at the Westin is to build a team of cooks who perfectly complement one other when it comes to knowledge of different cuisines and techniques. “You cannot be good at everything in the Fusion kitchen,” as Korzyński puts it. But building a kitchen team is also about maintaining standards under different circumstances. “My people have to comply with very strict and high standards,” he says. “The Fusion restaurant is one thing, but we do catering as well. We can deliver to up to 2,000 people.” He adds that he cooperates with a cooking school in Warsaw to have access to a greater numbers of cooks when he needs them. evolution Along with being an executive chef, Korzyński is a promoter of food culture through the blog akademia-kulinarna.pl, where executive chefs of Starwood hotels in Poland share their knowledge with the public. The project is designed for young Poles who travel extensively and encounter new cultures—including the food. The blog helps them summarize their culinary experiences and gives them practical advice on how to approach the preparation of exotic new cuisines. The adventurous and knowledgeable attitude of young Poles to food makes Korzyński extremely enthusiastic about the future of the food service industry in Poland. Traditional Polish cuisine—dishes with heavy sauces, butter and cream—is somehow out of step with current trends in healthy nutrition. In other words, ecology, health concerns, and the need to stay fit are setting the cooking trends today. And this is where Polish cuisine should seek out a new identity. Korzyński says, “This is an opportunity for our cuisine to make a difference on the world gastronomic scene.” Korzyński is excited about the fact that some chefs in Warsaw are trying to reinvent Polish cuisine as a modern cuisine, focused around local products and new techniques. The new way of thinking he pioneered in the early 1990s in Warsaw is now taking off at last. He also surveys the attitudes of the dining public himself. Corporate events at the Westin are the perfect occasion. “We have to prepare special dishes for our quests,” he explains. “We have to offer something we have not done before. We talk to them. It is about letting our imagination fly so we can create something extraordinary. Such events keep us moving forward.” Looking ahead at the restaurant business in Poland, the main issue for Korzyński is the economy. World-class cuisine is expensive. “You need to invest a lot and you need to charge global prices because you are using world-class products,” Korzyński says. At the high end of the economic scale, there are very few people who can afford a night out at a restaurant for EUR 300–400 per head. “In the West you have to stand in line to get a table at a good restaurant,” Korzyński says. “We do not have that in Poland yet. We need perhaps another 10 years.” Tomasz Ćwiok

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anusz Korzyński, executive chef of the Westin Warsaw, has never had a simple relationship with food. As a child, prompted by his mother, a professional cook, Korzyński developed certain tastes and had a strong inclination to eat only what he really liked. He loved sweet stuff, but considering the reality of food supplies in Poland in the 1960s, his chances to fulfill his tastes were few and far between. He remained picky about food. He was skinny. People thought he just didn’t like to eat. It was his mother’s influence that prompted Korzyński to pick a career in professional food service. After graduating from a cooking school in Słupsk, Korzyński went to work for Karczma Słupska, a chain of quality restaurants serving regional dishes. He did well and soon was promoted to the position of chef. He was all of 19. “The people I worked with were excellent professionals,” Korzyński recalls. “They did their job with passion, and the passion for gastronomy is what they passed on to me.” Korzyński’s high professional standing, passion and talent helped him land jobs in restaurants in Germany, Hungary and North Africa—quite an extraordinary achievement for a Polish professional before Poland opened to the outside world in 1989. But this experience was pivotal for Korzyński’s future career in the post-communist era. “My work abroad helped me find solid ground in the time of economic transformation in Poland,” Korzyński says. “I belong to the generation of cooks who received good training in communist Poland but found it difficult to adjust to the new reality after 1989, when the political and economic transformation took place. Without my experience abroad my food career would have taken a different course.” making up for losses Having been part of the Polish food service industry before 1989, Korzyński is well aware of the drawbacks that the industry experienced in the 1980s when Poland was alienated from the rest of the world and the produce available here did not meet basic quality standards. “It takes time to make up for the losses to the gastronomic culture experienced by Poland under communism,” Korzyński says. But he sees that the time has come for a change. “Our gastronomic market has been experiencing rapid growth and has been evolving for the last five years. It will continue to change dynamically in the years to come.” Korzyński is part of the gastronomic avantgarde. He was the first chef to introduce the Chilean carica to the dining table in Warsaw. The fruit, which is sometimes marketed as golden papaya, is much firmer than papaya, with a flavor that some liken to mango,

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How a skinny kid under communism became a world-class foodie

1. Korzyński talks to the media at a presentation of a new menu at the Westin’s Fusion restaurant. 2. Korzyński uses the same supplier of beef since 1990. 3. Korzyński adds the final touches to dishes before they are served

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AMERICAN INVESTOR NOVEMBER-DECEMBER 2011

NOVEMBER-DECEMBER 2011 AMERICAN INVESTOR

Photos: Tomasz Ćwiok
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Dishing up the avant-garde

Janusz Korzyński, executive chef of the Westin Warsaw

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COMPANY PROFILE: Marathon Oil

COMPANY PROFILE: CEERES

An exciting new business
American Investor’s Tomasz Ćwiok talks with Carl Hubacher, Marathon Oil Corporation’s country manager for Poland, about the company’s business prospects and challenges
What are marathon oil’s holdings in poland, and how does the company plan to develop this business opportunity? Through our wholly owned subsidiary, Marathon Petroleum Poland Services, Marathon Oil Corporation, which is listed on the New York Stock Exchange as MRO, holds an interest in 11 concessions in Poland totaling approximately 2.3 million gross acres or 1.2 million net acres, spanning the full geographic extent of the country’s Lower Paleozoic shale play. Earlier this year, we signed agreements to farm out a 49% working interest in 10 concessions. Marathon Oil holds a 51% working interest in those 10 concessions and serves as operator of all 11. We opened an office in Warsaw in 2010, and we currently have 20 personnel on staff, 12 of whom are Polish citizens. Marathon Oil has a long and well-respected reputation developing multiple types of onshore and offshore hydrocarbon assets, and we’ve entered Poland because the opportunity here fits our skills developed in other shale plays. Since becoming more active in US shale developments in 2006, we have utilized skills learned from decades of conventional hydrocarbon development and added specific competencies to address the environmental, infrastructure, regulatory, geologic and drilling and completion challenges in shale plays. Poland’s Lower Paleozoic shale gas objective is similar to many North American plays, including those where Marathon is active, and we plan to transfer those skills to this exciting new business in Poland.
Photo: Courtesy of Marathon Oil

Reaching critical (bio)mass
fracturing—a safe and proven stimulation technology used for more than 60 years in more than 1 million wells—now enable us to free oil and gas locked in tight shale rock formations that previously were inaccessible—like those found in Poland. We’re already using this technology to the fullest in US shale plays like North Dakota’s Bakken and Oklahoma’s Anadarko Woodford, and we’ll transfer those skills to our emerging operations in Poland. What are marathon’s corporate values? Marathon Oil, which is based in Houston, Texas, is an independent international exploration and production company with proved reserves in North America, the North Sea and Africa. Marathon and its employees place a high value on being good neighbors wherever in the world we live and work, and Poland is no different. We are committed to conducting our business with high regard for the health and safety of our neighboring communities, employees and contractors—our first priority wherever we conduct business. We also strive to minimize the environmental impact of our operations. We will uphold high standards of business ethics, integrity and transparency. And we will live by our principles of corporate social responsibility and do all that we can to make communities safer, cleaner and better. Around the world, Marathon’s good standing with stakeholders is sustained in large part by effective dialogue and relationships with an increasingly broad range of stakeholders. The company believes that effective stakeholder engagement is a proactive, two-way dialogue. For more information, please visit the company’s website at marathonoil.com.

proven to exist and deemed commercial, could have a very positive impact on Poland in terms of employment, economic growth and increased energy security. We are in the beginning phases of our exploration work to assess the potential of our acreage, and at the present time we con-

American Investor’s Tomasz Ćwiok talks with Randy M. Mott, Managing Director of CEERES, a company that specializes in planning and implementing green energy projects across Poland
how has the renewable energy sector done in poland so far this year, compared to 2010? The trends from 2010 have continued. The wind sector is mature and quite robust. Biomass seems to be on a similar track. This year we have encountered reductions in waste from fruit and vegetable processors because they say more farmers went to energy crops. This includes both combustion biomass and biofuels. This may not be a particularly healthy development, but it illustrates the growth in biomass. Biogas, on the other hand, is far less robust. While there are a large number of biogas projects in development, this number is far below what the government’s renewable energy plan calls for. The German model of farm biogas is proving uneconomical to do at the level of Polish government subsidies. The European Biogas Association reports that the larger, more efficient farm biogas plants using energy crops can produce electricity at EUR 0.165 per kWh. The Polish system with sales to the grid and Green Certificates pays EUR 0.117 per kWh. So a lag in actual farm biogas projects moving ahead is not surprising. Waste biogas is a different story, however, since its cost of production is significantly lower. The delay in these projects is due to red tape and waste producers not facing up to the future of organic waste management under EU rules that now apply to Poland. As the market adjusts to the regulatory reality, we think growth will be more dramatic. What key factors have contributed to the development of your business? I started the company in the midst of a recession—not the best time to raise capital, to say the least. But we got through that period and now have a strategic partnership with Electricité de France Energies Nouvelles for 15 projects valued at over EUR 90 million. CEERES also has capital from its shareholders to do another EUR 40 million in projects, exclusive of any government grant programs. We have agreements to proceed on six fast-track projects, each over 1.5 MW, and 20 other projects in early stages of development. CEERES now has six people working full-time in Poland and additional consult-

generation certificates—bonuses for producing heat as well as electricity—weakens the incentives for biogas plants that are larger than 1 MW, although this is the most efficient size and more likely to be economically viable. Larger plants also can accommodate a wider range of substrates—different types of waste—that can help local governments more efficiently manage their sewage sludge and household food wastes. The co-generation certificate should be the same for all sizes of biogas plants. The number of discrete approvals and permits is, of course, too large to promote efficient broad-based development of the sector. In the EU-15, only one-third of planned biogas plants move to construction. In Poland, it will likely be a much lower number, with excessive red tape and bureaucratic inexperience adding to the failure rate. What can you say about your company’s plans and business prospects for 2012? CEERES plans to begin construction of actual biogas plants next year. Six projects have the potential to break ground next year. We also expect to have legal agreements in place for over 15 projects by the end of 2012. Each one of these in a 1.0–2.5 MW combined heat and power plant. Our locations are all over Poland. By the end of 2012, we also hope to follow up on numerous requests for biogas projects outside Poland with at least one or two additional projects outside the country. What is it like to work at ceeres? We are trying to create a team environment where everyone identifies with the company’s success and is rewarded by it. We have flex time and pay above the Polish salary scale. Our employees are younger, well-educated Poles with a sense of humor and self-motivation. We are training people rather than expecting to find experienced workers in the market right now. CEERES has a variety of engineering fields on staff, including a PhD candidate in sanitary engineering and an electrical engineer with advanced studies. Our young Poles work closely with a very experienced Danish team, and we expect in several years to have a worldclass group of technical people based in Poland, doing projects throughout Central Europe. While competence has to be the first goal, a sense of humor is a key ingredient in our formula both to build esprit de corps and to deal with the inevitable frustrations in complex project development. Our shareholders have all been in the Polish market for 20 years, so this experience and a compact decision-making structure have allowed us to adapt as necessary to the conditions we have encountered.

tinue to acquire 2D seismic data. We plan to begin drilling operations in the Łeczna and Siedlce districts in the fourth quarter of 2011, with plans to drill seven to eight wells by the end of 2012. What can you say about marathon’s future growth prospects in poland? Marathon Oil, along with our partners, is in the early stages of exploring and evaluating the full potential of these significant holdings. Any development decisions will be based on these exploration and datagathering activities in the months ahead. What special technologies will marathon oil use to develop poland’s natural gas resources? Technology has had an overwhelmingly positive impact on our industry over the last several years and created the potential for vast new resource development. Seismic imaging, horizontal drilling and other technologies have all been enablers of our exploration and production operations. In particular, recent innovations in hydraulic

Photo: Courtesy of Randy Mott

ants and contractors in Poland and Denmark. We plan to grow to at least 15 people over the next 18 months. As the company moves from project development to construction and operation of its small combined heat and power plants, of course, this number will grow dramatically. are there any regulations in poland that hinder business development in your sector? The slowness of the government to change the rules on post-fermentation byproducts for use as fertilizer has been disappointing, but not unusual in Poland. That was proposed two years ago and just enacted this summer. Discrimination in the value of co-

how do you assess the production potential of these geologic basins? These geologic basins could hold significant natural gas resources which, if

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AMERICAN INVESTOR NOVEMBER-DECEMBER 2011

NOVEMBER-DECEMBER 2011 AMERICAN INVESTOR

27

EXPERT: Environmental crimes

EXPERT: Tax law

Nature bites back
Managers may face criminal sanctions for violating environmental laws
By Izabela Zielińska-Barłożek, partner, head of the Environmental Law Practice Group at Wardyński & Partners, vice-chair of Environmental Practice Group of Lex Mundi; Jarred O. Taylor II, shareholder, Maynard, Cooper & Gale, P Chair of Environmental Practice Group of Lex Mundi; .C., and Shannon Oldenburg, associate, Maynard, Cooper & Gale, P .C.

anctions for violation of environmental law and the significance of criminal liability for environmental violations have recently increased in both Europe and the US. In Europe, criminal liability for environmental harm has been harmonized by the Environmental Crime Directive. In the US, in turn, more and more resources are being devoted to investigating and prosecuting environmental crimes. the eu The EU has an extensive regime of laws governing environmental protection. Approximately 200 legal acts exist, primarily directives, one of which is the Environmental Crime Directive (2008/99/EC). Member states were required to implement the Environmental Crime Directive by December 26, 2010. Poland got around to doing so effective June 10, 2011. The directive introduced a list of the most serious acts which must be punishable as crimes in a member state. These acts include pollution or improper waste management that can cause death or serious injury to any person or substantial harm to the quality of water, air, or soil, or to animals and plants. The directive does not specify the penalties for the offences, but instead states which acts must be penalized. Before the Environmental Crime Directive came into force, many EU countries had their own laws in place imposing criminal liability for environmental offences. Therefore, implementation of the directive generally involved adjusting existing national laws to fit the requirements of the directive.

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many persons to endangerment of even just one person. Generally, criminal law in the legal systems of most EU member states provides for liability of individuals. The Environmental Crime Directive additionally extends criminal liability to companies for acts committed for their benefit by persons holding managerial functions. In 2003 Polish law first recognized secondary criminal liability of collective entities. Fines may be as high as PLN 20 million, but in practice collective entities are

a crime indirectly, for instance by giving orders to subordinates or by failing to supervise their actions. the us In the US, prosecution of environmental violations is on the rise. Environmental enforcement remains one of the few areas in which government resources continue to grow. The criminal enforcement program of the US Environmental Protection Agency has more than

The main impact of the Environmental Crime Directive in Poland was to lower the threshold for criminal liability from endangerment of the life or health of many persons to endangerment of even just one person.
350 specially trained investigators, chemists, engineers, technicians, lawyers, and support staff. The EPA opened 346 new environmental crime cases in 2010, the second-highest number of new cases since 2005. US criminal environmental liability typically requires negligent, knowing or willful acts, although prosecutors typically are only required to prove the act, not knowledge that the act was in violation of the statute. However, some federal environmental statutes apply strict liability standards (no fault or no negligence required), which greatly increases the risk of potential criminal liability. Under federal law and many states’ laws, a corporation may be held criminally liable for the actions of an employee or agent who violates en-

rarely found guilty of crimes because of the complex prerequisites. The main penalties under Polish criminal law are imprisonment, probation, or a fine. The maximum penalty for an environmental offence in Poland is 12 years’ imprisonment, which may be applied for actions causing death or serious harm to human health. Most acts entail imprisonment from one month to two years. While persons holding managerial positions may not typically be the direct perpetrators of environmental offences, they may be responsible for directing such acpoland The main impact of the Environ- tions. Therefore, Polish law imposes managerial liability for dimental Crime Directive in Poland was to lower the threshold recting commission of a crime. for criminal liability from endan- Under this approach, managers may be found guilty of committing germent of the life or health of
28 AMERICAN INVESTOR NOVEMBER-DECEMBER 2011

vironmental laws, if the acts were done for the benefit of the company and were within the scope of the employee’s or agent’s authority. A corporate officer may be criminally liable as a “responsible corporate officer” when an environmental violation is committed, the officer had the authority to stop or prevent the violation, and the officer failed to do so. Employees may also bear individual environmental criminal liability. Criminal penalties for environmental convictions are substantial. They may include very large fines and prison sentences, and can affect a company’s ability to do business, particularly with state or federal government. In 2010, at just the US federal level, criminal charges were brought against 289 defendants, a 45% increase over 2009 and the highest number since 2005. Of the 289 cases, 251 (87%) included charges against at least one individual defendant, as opposed to a corporation or other business. Of the cases completed during 2010, 88% resulted in either a guilty plea or conviction at trial. Defendants convicted of environmental crimes in 2010 were assessed a total of USD 41 million in fines and restitution and were ordered to pay USD 18 million for environmental projects, an 80% increase over the previous year. Since 1990, when 75% of all environmental criminal charges were brought against companies, the focus has changed dramatically, with nearly 75% of such charges now being brought against individuals. Multiple violations can be “stacked” for purposes of sentencing, meaning that even misdemeanor violations may result in jail terms of over one year. In 2010, individual criminal defendants were sentenced to a total of 72 years of jail time. Given these statistics, the resources being devoted to criminal enforcement, and the often low burden of proof needed to obtain a conviction, the prosecution of environmental criminal offences is only expected to increase in future years in the US.

Don’t look back in anger
What are the consequences of the ecJ ruling? The issue before the ECJ was reinstatement of the transaction tax on shareholder loans from January 1, 2007, through December 31, 2008. The court held that once Poland repealed the tax on shareholder loans upon EU acompanies that paid Polish By Aleksandra Faderewskacession, it had no right to reintransaction tax (i.e. the tax Waszkiewicz state the tax. This follows from advocate, tax adviser on civil-law transactions) Art. 4(2) of Directive in 2007–2008 on shareholder Łaszczuk & Partners 69/335/EEC and the purposes loans to the company may now stated in Directive 85/303/EEC apply for a refund, following the for amending that article. ruling by the European Court of Art. 4(2) lists transactions—inJustice in Logstor ROR Polska sp. cluding shareholder loans—that z o.o. v. Director of the Katowice “may, to the extent that they directive loans to a commercial Tax Chamber (Case C-212/10, were taxed at the rate of 1% as at company by a shareholder are not judgment of June 16, 2011). subject to capital duty, the bill pro- 1 July 1984, continue to be subThe amounts may be substan- poses exempting such transactions ject to capital duty.” This is intial. In the case of loans for milterpreted as a standstill provifrom the tax.” lions of zloty, companies may Then, effective January 1, 2007, sion, meaning that the tax on qualify for a refund of tens of the provision of the act exempting such items under national law thousands of zloty. What is more, the refund from the tax office will include interest.

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Companies may get a refund of transaction tax on shareholder loans

When were shareholder loans subject to transaction tax? From January 1, 2001, the effective date of the Act on the Tax on Civil-Law Transactions dated September 9, 2000, through April 30, 2004, loans to a company by its shareholders were subject to transaction tax. (Before January 1, 2000, such loans were subject to stamp duty.) The rate was regressive and, depending on the principal amount of the loan, ranged from 1.0% to 0.1%. When Poland joined the EU on May 1, 2004, an amendment to the act went into effect under which shareholder loans to a commercial company (i.e. limited-liability company or jointstock company) were exempt from transaction tax. According to the justification for the bill, the amendment was intended to bring the act into compliance with Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital: “Since under the

Companies should not delay seeking a refund of transaction tax on shareholder loans because the right to do so is limited in time.
had to remain in force from that day forward without interruption. Thus a member state could not reinstate such a tax once it had repealed it, which would be inconsistent with the wording of Art. 4(2) as well as the aim of the directive to limit or—ideally— abolish capital duty. The ECJ thus concluded, “Article 4(2) of Directive 69/335 must be interpreted as precluding a Member State from reintroducing a capital duty on a loan taken up by a capital company, if the creditor is entitled to a share in the profits of the company, where that Member State has previously waived the levying of that tax.” Therefore Poland’s transaction tax on shareholder loans in 2007–2008 must be regarded as contrary to EU law.

shareholder loans from transaction tax was repealed, and such loans were again subject to the tax, this time at a flat rate of 0.5%. According to the justification for that bill, “An amendment is introduced withdrawing the exemption for an agreement on a loan to a commercial company by a shareholder, and at the same time, in compliance with the directive, such transaction is added to the list of transactions considered to be an amendment of the articles of association of a commercial company.” Effective January 1, 2009, shareholder loans were again exempted, and now they are not subject to transaction tax. The exemption was reinstated in order to implement Council Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital.

how to reclaim the tax? Based on the Logstor ruling, companies that paid transaction tax in 2007–2008 on shareholder loans and have not yet applied for a refund may file a motion for declaration of overpayment of the tax. The overpayment should be refunded within 30 days after filing of the motion for declaration of overpayment. The overpayment is also subject to interest at the rate charged on tax arrears. If the motion for declaration of overpayment is filed more than 30 days after publication of the Logstor judgment in the EU Official Journal (i.e. August 6, 2011), interest will be due for the period from the date of the overpayment through the date of publication. Proceedings involving this issue that are still pending before tax authorities and administrative courts should be resolved in favor of the taxpayer. It cannot be ruled out, however, that the tax authorities may refuse to admit overpayment of the transaction tax, by arguing—as the Polish government did before the European Court of Justice in the Logstor case— that Poland never waived the right to levy transaction tax on shareholder loans. Nonetheless, that argument should not prevail before the administrative courts. Companies should not delay seeking a refund, because the right to do so is limited in time. Generally, a taxpayer may no longer seek a refund of a tax overpayment more than 5 years after the end of the calendar year when the tax was paid. This means that in the case of transaction tax paid in 2007, the right to file an application for declaration of overpayment of the tax expires at the end of 2012.

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29

EXPERT: Special Economic Zones

Let them live
Incentives for investment in distressed areas have proved their worth and should continue past their legal sunset of 2020
ment, lower unemployment, and higher per capita GDP than in regions where the zones do not exist. For instance, the unemployment rate in regions where zones operate is on average 1.5 to 2.8 percentage points lower in the case of sub-regions and 2.3 to 2.9 percentage points lower in the case of counties. by Paweł Tynel We also discovered that per capita GDP is an average of Executive Director some PLN 1,300 to 2,500 Ernst & Young higher in the sub-regions in which zones operate than in Empirical studies clearly indi- other sub-regions. This means cate a positive correlation bethat a sub-region where a zone tween the amount of state aid (in- is located has 3.9–7.5% higher cluding in the form of tax relief) per capita GDP (as of 2008) and the level of investment in the than the average per capita country. GDP in Poland in other sub-reIn discussions with investors, gions. however, we have observed a noticeable trend of the tax exempopinion polling tion within SEZs being given less For the report, we also conimportance in the site selection ducted a comprehensive survey process. This is because given among investors in zones, the high investment costs, invest- which gives a clear signal that ment projects lasting several without extending the lifetime years, and market pressures reof the zones, reinvestment by ducing profitability in many inmore than half the companies sidered in the process of choosing the site for an investment. State aid is one of these. While it is natural that the most desirable form of aid will always be a cash grant, exemption from corporate income tax is a very concrete alternative. Beyond sezs The existence of zones and the ability to obtain tax exemptions do not constitute the sole criterion for location of an investment. The looming sunset of the zones or investors’ inability to actually take advantage of the tax exemptions in time significantly weakens the attraction of new investors. This could also be the reason for the reduction in the level of reinvestment by companies currently operating in the zones. This in turn could result in Poland giving away its leading position in the region in the area of investment attractiveness. eu consent The continued existence of SEZs after 2020 should not be difficult to sell to the European Commission, assuming that the zones still fit into the framework of the EU’s regional policy and that the zone regulations are consistent with EU rules on regional aid. Given that the European Commission is not involved in the process of extending the period of operation of SEZs in Poland and that we will have to wait for funding from the new EU budget, it would be very reasonable to enact legislation in Poland extending the lifetime of the SEZs indefinitely. This would give Poland a realistic, specific tool for attracting new investments. After all, we have concrete evidence of the benefits of this process.

ore than 15 years have passed since the establishment of Special Economic Zones in Poland. During this time, SEZs have become a familiar feature of the business landscape, and it is difficult to find a large investment project today that is not located in one of them. When looking for a site for a new project, investors now search dozens of countries and hundreds of sites with a view to finding the optimal place for doing business from their point

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From their establishment in 1995 through the end of 2010, Poland’s Special Economic Zones attracted 1,354 investment projects, valued at a total over PLN 73.2 billion, creating 167,141 new jobs and helping maintain 58,148 existing jobs.
of view. Why do they so often choose SEZs? The popularity of the zones is based on the simplicity and effectiveness of the main tool they employ: tax exemption for businesses. do we need sezs? At the moment, however, Polish SEZs have begun to lose their appeal, as they are only supposed to exist for another 9 years, until the end of 2020. But tax relief is very widely used in the industrial policy of many countries as a means of promoting new investments. It is not only granted by developing countries competing for the inflow of foreign investments, but also developed countries. Therefore, it appears that abandoning this instrument of support in Poland could jeopardize the maintenance of the high assessment of our country among foreign investors in the future. operating in SEZs cannot be expected. The picture changes dramatically if the perspective of the existence of SEZs is extended—in which case, more than 81% of investors declare a willingness to reinvest there. empirical evidence The initial goal in establishIn view of the above, Ernst & ing SEZs was an increase in inYoung decided to prepare a report vestments and economic recoventitled “Special Economic Zones ery in selected locations. Over Beyond 2020,” which would pro- time, zones arose throughout vide the basis for conducting a Poland, resulting in adapting substantive evaluation of the acthe regulations to fit the needs tivities to date in the zones in of investors. Poland. It should also provide a In a way, apart from their foundation for an objective dismain activity, the zones became cussion of the outlook for their a natural platform for creating continued existence. connections with contractors, For purposes of the report, we which in the long term could conducted an econometric analy- become clusters, creating a sis of the impact of SEZs in completely new role for the Poland on business results. It SEZs in the economy. But this confirms intuitive expectations. requires time, and also funds to Among other things, we found support the development of that in regions where SEZs exist, clusters. there is a higher level of investVery many aspects are condustries, the effective time for taking advantage of the exemption has in some cases shrunk to just 3 years before the end of 2020, which is the sunset date for SEZs.

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AMERICAN INVESTOR NOVEMBER-DECEMBER 2011

EXPERT: Public aid

EXPERT: Waste management

Seed money
Poland has an interesting package to support R&D
Eastern Europe in terms of the number of centers and the number of employees. defining r&d When defining research and development, the basic criterion for distinguishing R&D from related activities is the presence of an appreciable element of innovation and the resolution of scientific or technological uncertainty—in other words, when the solution to a problem is not readily apparent to someone familiar with the existing knowledge and technology in the field. The Frascati Manual, the R&D bible published by OECD, defines R&D as “creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications.” However, the Frascati Manual excludes some closely related activities from the definition of R&D, such as testing and standardization, general-purpose data collection, and routine software development. Other criteria for identifying R&D in services are links with public research laboratories, the involvement of staff with PhDs, or PhD students, the publication of research findings in scientific journals, organizing scientific conferences, involvement in scientific reviews, and construction of prototypes or pilot plants. public support A company planning to create a new R&D center or expand an existing center, involving investment in tangible or intangible assets

Gold in garbage
and creation of new jobs, may be able to receive a cash grant from such EU programs as Measure 4.5.2 of Operational Program Innovative Economy, managed by the Polish Ministry of Economy, or Measure I.3 of Operational Program Development of Eastern Poland, or a Polish government grant under the Program for Support of Investments of Importance for the Polish Economy. The types of projects covered by these programs may the same, and only the detailed rules, such as application procedures and evaluation criteria, may differ. There are also tax incentives available for R&D centers, including a corporate income tax exemption in Special Economic Zones and CIT relief for purchase of new technology in the form of intangible assets. The table below presents the main characteristics of these programs. In most cases, a project should involve the use of new technological solutions leading to creation and marketing of a new or significantly improved product or service. Apart from the sources mentioned above, R&D centers may also apply for grants to cover certain eligible costs of R&D projects, such as depreciation, salaries and materials. There are many interesting incentive programs for R&D centers in Poland. Companies planning to invest in establishing or expanding an R&D center should include ongoing applications for grants or tax incentives as part of their strategy. This approach allows them to take advantage of all available options. parency and legal certainty, the tender procedure for municipal waste haulers falls under the Public Procurement Law. Companies that do not win the business will have the option to file a challenge under the law, which may delay the contracting process. However, open tenders are not By Ewa Rutkowska-Subocz the only way to award public conor years there have been a legal adviser, head of Environment tracts for waste collection servwhole raft of issues surices. An alternative will be singlerounding the management and Natural Resources Practice, source procurement. Should it be of non-hazardous household and Salans, and Agnieszka necessary to terminate the conoffice waste. One cause of this Skorupińska, advocate, tract with the business chosen in sorry state of affairs is badly deEnvironment and Natural a tender, the municipality is ausigned law. Under current regula- Resources Practice, Salans thorized to award a new contract tions, the responsibility for muto a business chosen through the nicipal waste management lies single-source procurement prowith the owner of the real estate where the waste is generated. It is out for the waste collector, and pay cedure. With this mechanism there is still a potential problem the owner who is obliged to cona separate fee for municipal waste when the competitive element is tract for waste collection and management. Waste recycling will removed. As the new regulations management services with the take place at regional waste treatlocal authority or a private busiment facilities, which means that a do not state how long municipal ness. whole network of new facilities will waste collection may be provided This allocation of responsibility have to be built. The responsibility by a supplier chosen in a singlefor municipal waste collection has for building, maintaining and oper- source procurement, there is a proved ineffective in practice. ating them will also lie with munici- risk that some companies may end up holding such contracts on Many owners simply avoid signing palities, but much of this work is an almost permanent basis. This any contract for waste collection expected to be outsourced. could undermine the stability and services. To cut costs, some who transparency of the new system. do contract such services pass count in the private sector In a new departure, waste only a portion of their waste to the The new waste management syshaulers will not have to be spehaulers. As a result, the problem tem provides business opportuniof backyard incineration and ille- ties for private enterprises—first of cially licensed. It will be sufficient for them to sign a register maingal dumping has grown exponen- all when it comes to municipal tially. To add environmental insult waste collection services. Although tained by the local municipality. This should help cut bureauto environmental injury, waste the market for waste collection cracy. that is properly collected is not al- services seems fairly stable, the ways managed properly.

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o succeed in a rapidly changing world, businesses must continually introduce innovations. Those aware of this fact organize their own R&D departments or even dedicated R&D centers. Generally, such business-oriented R&D centers concentrate on implementing new solutions in products, technology or processes. Their focus is more on the development half of R&D, which is closer to the introduction of new ideas onto the market, rather than research, which is a more preliminary stage. Global capital groups locate their R&D centers all over the world, taking into account such factors as core business location, quality of employees, and incentives available for R&D activity.

By Beata Tylman R&D and Government Incentives Team, Tax Department, Deloitte

Polish Academy of Sciences. The biggest investor was Fiat in Bielsko-Biała, BRE Bank was second and Telekomunikacja Polska third. The sectors with the largest R&D investment in 2009 were automotive (total business spending in the sector of PLN 271.4 million, which accounted for 22% of all investments), IT (PLN 172.7 million, 14%), banking (PLN 148.5 million, 12%), and pharmaceuticals (PLN 112.4 million, 9%). With a 3rd-place finish for the sector and two banks in the top 10 companies overall, the banking sector in Poland falls in with a global trend toFigures for r&d investments ward more R&D activity by banks. According to a report published Investments in R&D generate by ABSL in 2011, there are almost many benefits for the economy and 80 R&D centers in Poland (inthe country in which they are locluding software development) cated. The European Union underwith foreign capital, providing stands this very well and is allocating over 12,000 jobs. Foreign insignificant incentives in the form of vestors are increasingly choosing grants and tax breaks to support Poland as a location for their proj- these types of projects. Poland is no ects, creating comprehensive exception, and R&D centers starting R&D centers that have strong or developing their business here connections with the rest of the can count on an appealing package of business world in Europe and incentives. In fact, the wide range of globally. Meanwhile, in 2009 there funding opportunities now available were almost 600 companies dein Poland help make it an attractive claring R&D expenses, to the investment location. tune of more than PLN 1.6 bilAccording to the latest statistics, lion, according to a report by the Poland is the clear leader in the busiInstitute of Economic Sciences, ness services sector in Central &

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New municipal waste management regulations create business opportunities

equipped with a satellite navigation system permitting permanent tracking of the vehicle and verification of records. The purpose of this requirement is to make sure that waste is indeed transported to the treatment installations. Businesses interested in municipal waste collection should keep a close eye on developments surrounding this regulation. processing waste Compared to the extensive new provisions concerning waste collection, the regulations on regional municipal waste treatment facilities seem rather cursory. Nevertheless, there are some significant provisions. Most importantly, pursuant to the new law, regional municipal waste treatment facilities are defined as waste treatment facilities with the capacity to receive and treat waste from a catchment area of at least 120,000 people, which fulfill environmental best available technology requirements and use various waste treatment methods, such as thermal treatment. As a rule, municipalities should have such facilities constructed, maintained and operated by external businesses. These businesses are to be chosen by the municipality in one of three possible procedures, including a tender under the Public Procurement Law. However, the new provisions contain a kind of emergency exit for the municipality. Should the selection procedure used by the municipality not result in selection of a winner, the municipality will be able to build, maintain and operate the regional waste treatment facility on its own. This may mean that unless the selection procedures are conducted flawlessly, private companies may not get a fair crack at this business. hope for the best It will take some time to see whether the new municipal waste management system, when it gets up and running, is environmentally sound and business-friendly. It looks as if many of its mechanisms will be favorable to business, but it is hard to escape the impression that not all of the important issues were addressed as thoroughly as they deserve.

How to get help for an R&D center
Entry criteria 4.5.2 OP IE 10 new jobs minimum investment PLN 2 million CASH GRANTS I.3 OP DEP Project located in Lublin province, Podkarpacie, Podlasie, Świętokrzyskie or Warmia-Mazuria Minimum investment PLN 12 million TAX INCENTIVES Polish government grant Special Economic Zone Modern Technology 35 new jobs Investment located in existminimum investment ing SEZ –key criteria: PLN 3 million 1. minimum investment EUR 100,000. Number of new jobs depends on the SEZ. 2. SEZ enlargement procedure (SEZ “comes to you”) 50 new jobs or investment of PLN 10 million up to 50% one-time, non-depreciable allowance, reduction of the tax base by 50% of the expenditure on acquiring new technology N/A

Level of support up to 50% of eligible invest- up to 50% up to 50% (for large enterment costs prises): up to 25% of specific train(investment costs or ing (maximum PLN 1 million) 2-year labor costs) Additional rules For large enterprises, no delo- For large enterprises, no delo- N/A calization within EU allowed calization within EU allowed Call for proposals Anticipated in 1Q-2Q 2012

N/A

For large enterprises, no delo- Rolling Rolling Rolling calization within EU allowed Note: All the data comply with the current wording of the EU operational programs and related documents but may be subject to change in actual contests announcement

new regulations Amendments to the Act of 13 September 1996 on Maintaining Order and Cleanliness in Municipalities, adopted in July 2011, are set to remedy the flaws in the system. The new provisions seek to make the municipal waste collection system more effective. They introduce wide-ranging selective municipal waste collection “at the source,” reducing the volume of municipal waste headed for landfills and boosting the number of municipal waste treatment facilities. At the heart of the new system is the concept that municipalities should take overall responsibility for municipal waste management. From January 1, 2012, municipalities will be empowered to sign contracts with municipal waste collectors. Homeowners are thankfully cut out of this particular loop. They will simply have to bin their municipal waste, leave it

The market for waste collection services seems stable but the need to adapt to the new law may create an opportunity for private companies.
need to adapt to the new law may shake up the market structure, creating an opportunity for private companies. The second area of business potential is construction, maintenance and operation of regional municipal waste treatment facilities. Since the new system guarantees a steady waste flow, this form of business involvement might prove particularly attractive. rules of the game Under the new law, municipal waste collection services may be provided only by businesses selected through public tenders by municipalities. To ensure transstandards to meet The municipal waste management services provided by the chosen business will have to meet certain quality standards. To this end, the business will have to be properly equipped. Detailed requirements in this respect are to be set forth in an executive regulation. A draft of the regulation was published by the Minister of Environment in August 2011. Among other things, waste haulers would be required to have at least two vehicles for collection of mixed municipal waste and at least two vehicles for selective waste collection. The vehicles would have to be

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EVENT: AmCham Wrocław

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Bronze sponsors

Oktoberfest 2011 draws in crowds
he 8th International Oktoberfest drew 800 businesspeople, diplomats and government officials to the Arsenal courtyard in Wrocław in September. As in previous years, the high attendance proved that this event—an exceptional initiative undertaken by international chambers of commerce in Poland—is one of the most significant business events in the city and in the region of Lower Silesia.

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1. Iwona Makowiecka, director of the Wrocław office, Polish-German Chamber of Industry and Commerce; Joanna Bensz, AmCham Wrocław and PM Group; Jarosław Obremski, Deputy Mayor of Wrocław; Rafał Dutkiewicz, Mayor of Wrocław; Paweł Panczyj, Ernst & Young. 2. US Ambassador Lee Feinstein; Irish Ambassador Eugene Hutchinson; British Ambassador Robin Barnett; Dr. Gottfried Zeitz, German Consul in Wrocław. 3. Rafał Dutkiewicz; Ilona Antoniszyn-Klik, Deputy Governor of Lower Silesia; Lee Feinstein; Eugene Hutchinson; Robin Barnett. 4. Rafał Dutkiewicz; Ilona Antoniszyn-Klik; Rafał Jurkowlaniec, Governor of Lower Silesia. 5. Iwona Makowiecka; Joanna Bensz; Ilona Chodorowska, British Polish Chamber of Commerce in Wroclaw. 6. Alon Redlich, International Technology Sourcing; Dr. Gottfried Zeitz; Eugene Hutchinson. 7. Monika Richardson, emcee; Iwona Makowiecka; a Bavarian Orchestra musician. 8. Bill Hall, Pittsburgh Glass Works; Doohyun Kim, Junglim Architecture; Peter Stahn. 9. The venue of the International Oktoberfest was the Arsenal courtyard. 10. Lee Feinstein taps the keg. 11. The Bavarian Orchestra. 12. Live entertainment by Bavarian musicians. 13. The fun lasted until late.
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EVENT: September Monthly Meeting

EVENT: AmCham Kraków

Views of the immediate economic future
discussion panel of three distinguished economists, moderated by a Polish banking legend, must draw crowds. Members attending the AmCham Monthly Meeting in September could hear a first-hand overview of the economic situation from the most authoritative sources in town, raise questions for their comment, and chat with them after the show.

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Outsourcing shines in the Katowice area

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n mid-September, AmCham Kraków, the Association of Business Service Leaders, and the Katowice Special Economic Zone organized a conference on the opportunities for investing in outsourcing in the Katowice region.

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1. Discussion panel: Joseph Wancer, AmCham Chairman; Witold Orłowski, PwC; Ryszard Petru, demosEuropa; Mark Allen, International Monetary Fund. 2. Ryszard Petru; Jacek Stryczyński, Lionbridge; Cezary Krasodomski, Cisco; Alain Bobet. 3. Joseph Wancer; Monika Thieme, Kałużyński & Madeja. 4. Paula Wąsowska, Cisco; Alexander King, Monitor Group. 5. Krzysztof Lubkiewicz, Raiffeisen Bank Polska; Jerzy Thieme. 6. Larry Kraut, American School of Warsaw; Thomas Kolaja, Alvares & Marsal. 7. Tony Gerlicz, American School of Warsaw; Judith Gliniecki, AmCham Vice Chair. 8. RJ Donovan, US Commercial Service. 9. A full house at the InterContinental’s Hemisphere. 10. Ville Ylosjoki, ExxonMobil; Natascha Mauthner, Sheraton Warsaw Hotel.

1. Piotr Uszok, Mayor of Katowice. 2. Paul Fogo, AmCham Board Member. 3. Paweł Panczyj, Ernst & Young. 4. Katarzyna Unold, Skanska Property Poland. 5. Jacek Suczyk, Kroll Ontrack. 6. Jacek Frączek, Silesian University of Technology. 7. Danuta Jakoniuk, Ruch. 8. Rafał Kijonka, Manpower. 9. Andrzej Kolat, Tauron. 10. Aleksandra Stańczyk, KHW. 11. Tomasz Jachna, Żywiec Group; Dave Gibson, Fluor; Marcin Nowak, Capgemini; Paweł Tynel, Ernst & Young. 12. Coffee break. 13. Mateusz Skowroński, City of Katowice; Monika Pilarska, AmCham Kraków Director; Piotr Uszok. 14. Monika Pilarska; Marcin Nowak. 15. Jolanta Jaworska, IBM; Paweł Tynel; Marcin Nowak.

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EVENT: October Monthly Meeting

EVENT: AmCham in Muszyna

Politics on the table
look ahead to the upcoming parliamentary elections and what might follow in their wake was on the agenda at the AmCham Monthly Meeting in October, at the Hemisphere at the Warsaw InterContinental. Leading political columnists gave members food for thought over breakfast as they explained the ins and outs of Polish political life.

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Discovering new places—Muszyna
mCham Poland invited members to the picturesque town of Muszyna in the Beskid Sądecki region for a conference showcasing the region’s attractions for tourists. The event brought together partners from Poland and nearby Slovakia, who have a shared interest in promoting the region’s natural gem, the Poprad Valley.

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1. Michal Biganic, 8 Mayor of Stara Lubovna, Slovakia; Włodzimierz Tokarczyk, Deputy Mayor of Muszyna. 2. Stijn Oyen, Sheraton Kraków Hotel; Monika Pilarska, AmCham Kraków Branch Director. 3. Ewa Martuszewska, Fluor. 4. Slovakian, Polish and US flags symbolized the international character of the conference. 5. Ryszard Kruk, Enterprise Investors. 6. Breakout sessions. 7. A presentation is about to start. 8. Hertz sponsored a van for the AmCham team who traveled from Warsaw to Muszyna. 9. Klimek Hotel, venue for the Muszyna conference.

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1. Tony Housh, AmCham Board Member, who moderated the meeting, with speakers Krzysztof Bobiński, Unia i Polska; Łukasz Warzecha, Fakt; and Tomasz Wróblewski, Dziennik Gazeta Prawna. 2. Richard Lada, AmCham Vice Chairman; Joseph Wancer, AmCham Chairman. 3. Dorota Dabrowski, AmCham Executive Director; Angelo Pressello, Direct Communications. 4. Krzysztof Bobiński; Kevin Kabumoto, US Embassy. 5. Tadeusz Szostak. 6. David DeBenedetti, DeBenedetti Majewski Szcześniak; Peter Turo, Młode Orły. 7. Łukasz Warzecha; Tony Housh; Tomasz Wróblewski. 8. Jacek Błocki, Hewlett-Packard, fills in a ballot for the straw poll. 9. Paweł Wideł, General Motors; Robin Wendell-Zabielewicz, Ernst & Young. 10. Cezary Krasodomski, Cisco Systems; Joanna Chomicka, US Commercial Service.
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SUMMARIES: in Polish

W tym numerze:

COVER STORY

Wizerunek Polski na światowej mapie innowacyjności wygląda nieźle, choć niektóre dane wskazują, że mogłoby być lepiej, str. 14
EKSPERCI
natura jest sroga Menedżerowie mogą zostać pociągnięci do odpowiedzialności karnej za łamanie przepisów o ochronie środowiska, str. 28 nie żałuj przeszłości Firmy, które zapłaciły podatek od pożyczek udzielanych przez ich udziałowców, mogą ubiegać się o zwrot tego podatku, str. 29 niech trwają Specjalne Strefy Ekonomiczne w rejonach szczególnie narażonych na zastój ekonomiczny zdały egzamin i powinny trwać dłużej niż do 2020 roku, str. 30 pieniądze na początek Polska ma interesujące oferty dla inwestorów w centra badawczo-rozwojowe, str. 32 złoto na śmietniku Nowe przepisy regulujące gospodarkę odpadami komunalnymi stwarzają nowe możliwości biznesowe, str. 33

MONTHLY MEETING
Wrzesień problemy z kryzysem Polska poradzi sobie stosunkowo dobrze z negatywnymi efektami globalnego kryzysu gospodarczego ale pod warunkiem, że strefa euro się nie rozpadnie, str. 18 Październik czarny koń Dyskusja na temat politycznej sceny w przeddzień wyborów parlamentarnych, str. 20

FOCUS
romans w biurze Sektor outsourcingu spogłada z coraz większym zainteresowaniem na stolicę Górnego Śląska, str. 22 zaniedbanie to codzienność Badanie przeprowadzone przez AmCham potwierdza, że firmy będące częściami międzynarodowych koncernów nie stosują dobrych praktyk w dziedzinie usuwania danych z komputerów, str. 23 awangarda na talerzu Historia o tym jak niepozorny chłopak stał się światowej klasy szefem kuchni, str. 24

RELACJE ZDJĘCIOWE
Oktoberfest 2011, str. 34; Monthly Meeting we wrześniu, str. 36; Konferencja na temat oursourcingu w Katowicach, str. 37; Monthly Meeting w październiku, str. 38; Konferencja AmChamu w Muszynie, str. 39

PROFIL FIRMY
nowy wspaniały biznes Wywiad z Carlem Hubacherem, szefem Marathon Oil w Polsce, str. 26 (Bio) masa krytyczna Wywiad z Randy M. Mottem, szefem firmy CEERES, str. 27
© American Chamber of Commerce in Poland 2011. All rights reserved.

DZIAŁY STAŁE
Informacje o Firmach Członkowskich Izby, str. 2 Informacje o działalności Komitetów Izby, str. 6 Przewodnik po Komitetach Izby, str. 12

American Investor to oficjalny magazyn Amerykańskiej Izby Handlowej w Polsce. Magazyn reprezentuje głos środowisk międzynarodowego biznesu w Polsce. Celem magazynu jest dostarczanie członkom Izby i innym czytelnikom aktualnych informacji na temat działalności Izby a także trendów biznesowych i polityce społecznej firm. listy do rekacji prosimy wysyłać na adres poczty elektronicznej: tomasz.cwiok@amcham.pl

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