Why Warsaw’s skyline should be a source of national pride for Ireland

Josef Stalin would be furious if he could see Warsaw now. Where once the postwar cityscape was dominated by the Palace of Culture, an unwanted and unsubtle gift to the Polish people from the Soviet leader, the skyline is filling up now with unashamedly capitalist skyscrapers.

It's a similar sight across Poland where, a quarter of a century after the transition to democracy and a decade after EU accession, this sprawling country in central Europe is still making up decades of lost time.

Motorways, stadiums, train stations: everywhere you look, from Poznan to Gdansk, big infrastructure projects are either just completed or still underway. The momentum from the 2012 European Championships is still palpable: in the streets and in the economic data.

The most daring addition is the twisting tower-block beside the central train station. While it is the brainchild of architect Daniel Libeskind and his team, the building is made of materials from Ireland's CRH group.

"My own personal view is that they want to make a statement, that Poland has arrived as a nation and Warsaw as a capital," said Mark Lowry, head of CRH's Poland operations for the last three years.

“Everything on the Warsaw skyline stands on concrete. That an Irish-based plc is the largest supplier of those building products should be a source of national pride. We’re privileged to be a part of that.”

Global profits

The Irish-based building materials multinational owns eight different companies in Poland, employing 3,500 people. Its Polish-based operations contribute a fifth of CRH European profits and 7 per cent of group global profits.

The positive economic outlook and ongoing transformation in Poland, bankrolled in part by EU structural funds, makes it all the more remarkable to listen to the opposition Law and Justice party (PiS) on the campaign trail.

After eight years in opposition, they are on course to win Sunday’s general election with 36 per cent support. One of their most striking campaign slogans is “Poland is in ruins” – a daring choice in a country where older generations remember the ruins, literally and figuratively, of the Nazi occupation and the communist era.

But PiS says the fruits of the past years have not been shared equally, that rural Poland has been decoupled and that the conservative-liberal Civic Platform (PO) government has done little that will attract home two million Polish emigrants in Ireland, Britain and elsewhere.

"If I was to encourage you to return to the country, I'd be lying," newly elected PiS president Andrzej Duda said to Polish emigrants in London last month. "GDP growth is only on paper: Poles are getting poorer, the middle class is disappearing."

While his remarks prompted heated debate in Poland, few disagree about the urban-rural gap. And, in a polarising election debate, PiS has decided perceptions surrounding this gap are as potent a vote-winner as any economic data.

In the past decade, Polish GDP expanded by 46 per cent when adjusted for inflation, the strongest rise of all EU member states. Unlike its neighbours, it skirted recession in the banking and financial crisis and its economy is expected to grow by 3.3 per cent this year.

But the average net monthly salary here is 2,800 zlotys (€662). Millions are struggling with the rising cost of living and one in 10 is out of work. Among those with jobs, one in four is on a temporary so-called “junk contract” with few benefits.

After eight years, the PO party’s election slogan of “strong economy, higher wages” is, for many, too little, too late.

“The economy is growing but not everyone has felt the benefits,” said Dariusz Górski, head of research at Bank Zachodni WBK, which was sold by Ireland’s AIB to Santander of Spain in 2011.

“People are tired of the PO and many just want change for the sake of change.”

Ahead of Sunday’s election, the question plaguing business leaders here – home-grown and foreign – is whether a change of government, from the PO to PiS, will bring significant changes, even risks, for them.

After the euro crisis, recent turbulence has proven the case for not being bound into the single currency, and neither PiS nor PO wants to abandon the zloty.

“Stress in the markets acted like a self-adjusting mechanism, weakening the zloty and making our exports more competitive,” said Górski. “For a big exporter like us, that has proven very useful.”

Promises

Some business leaders are concerned where a new PiS government will find the money for social spending promises its PO rivals say will cost 50 billion zloty (€11.7 billion).

Promises of a new banking tax, say some, could yet be softened to a general financial transaction tax. If anything, long-time Warsaw watchers say, another PiS era is likely to be far less dramatic than their campaign rhetoric.

“PiS adopted an antimarket tone in the election a decade ago yet, when in power, cut taxes and showed they could manage the economy,” said Górski.

That assessment is shared by Mike Hogan, Enterprise Ireland manager for Poland and the Baltics. The strengths and weaknesses of the Polish economy, he says, are larger than any one political party.

“I don’t get the impression that anything radical will happen with PiS in power,” he said.

The dynamism of recent years speaks for itself but this is still a country where the stock market is dominated by large, state-controlled companies. And, as foreign companies in Poland have learned to their cost, Poland still has ways of doing things.

Irish companies Sisk and Siac, for instance, are still engaged in legal action with the Polish state over big infrastructure projects related to the Euro 2012 football championship, with each side blaming the other for breach of contract. On the ground in Warsaw, experienced observers say it was a "perfect storm" with blame on all sides.

“The companies signed contracts on the assumption that there would be flexibility, a flexibility that simply doesn’t exist in Poland,” said one well-placed source who asked not to be named.

“There were cultural and legal misunderstandings compounded by a bloated bureaucracy and poor procurement procedures. Then the rising price of oil increased costs, making the fixed-cost contracts impossible to fulfil.”

Enterprise Ireland’s Mike Hogan doesn’t want to comment on the Sisk/Siac affair, but says it underlines the importance for companies to do their homework before making the move into Poland.

Thriving

And, despite some negative headlines, many Irish companies have come and thrived. When Dell moved its plant from Limerick to Lodz, for instance, several Irish suppliers, from security to packaging, followed and are still there.

Looking to the future, a shift is already underway in the Polish economy, says Hogan. While heavy industry – coal, steel and manufacturing – remain dominant, the diminishing cost benefits are driving a push into the services sector.

Poland’s young, multilingual workforce means it is well-placed to pull in call-centre investment, such as recent signings Citibank or Nordea. The country is becoming more prominent on the radar of western European companies looking either to outsource or to “near-source” call centres back from India.

Locals say the future looks bright for Polish-Irish business relations. Not only are there 55 flight connections a week, more than most other European countries, but business links are being built up quietly thanks to young people with a Polish background in Irish companies.

"The sons and daughters of people who came in the 1990 are leaving university now," said Mike Hogan of EI in Warsaw. "We now have cases of Irish companies leapfrogging western Europe to come to Poland. When you look closer it's because of their Polish employees opening the door." In numbers: Irish business in Poland 26% The percentage increase in Irish exports of goods to Poland to date in 2015 (Central Statistics Office).

€954m The value of goods Ireland exported to Poland in 2014, a rise of 16.7% (CSO). €1.8bn The expected value of combined exports of goods and services from Ireland to Poland in 2014/2015.

14th For Irish indigenous exporters, Poland is now their 14th largest export market (EI Data) and the country’s eighth largest market in the EU.

The strongest sectors for Irish indigenous exports to Poland are in manufacturing subsupply, agricultural machinery and technologies, medical and wellness products, enterprise and cloud-based solutions, and plastics (Enterprise Ireland).