Poland (whose capital, Warsaw, is pictured) has two weapons in it economic armoury: an $8.9bn privatization programme to help drive down its high levels of public debt; and the Euro 2012 football tournament. Steve Macvicar reports.

Since the Berlin Wall came down in 1989, the countries of the former Soviet Bloc have been in healthy competition with each other in the race to attract foreign direct investment (FDI).

The front-runners have consistently been the Central European triumvirate of the Czech Republic, Hungary and Poland. Poland, however, has captured the lion’s share of investment, primarily due to the size of its consumer market, its strategic geographic location and the quality of the workforce emerging from its enviable education system.

Now Poland can claim first place in an even more significant race, as it looks set to become the only European Union member state to record a rise in GDP in 2009, making it the sole EU country to avoid a recession during this year. The country’s predicted annual growth figure of somewhere between 1% and 1.5% is hardly stratospheric, but it is one that most of its neighbours would happily settle for.

In absolute terms, however, it has been a rough old year, with FDI inflow expected to have dropped from a peak of €16.6bn in 2007 to around the €7bn mark for 2009. This has had a knock-on effect for the property sector, with many tenants taking their time to sign lease contracts with developers, and developers putting projects on hold until the future is more certain.

Two events look set to bring this period of uncertainty to an end: the Polish government’s privatisation programme and the co-hosting with Ukraine of Euro 2012, UEFA’s European football tournament.

The largest single cloud on Poland’s economic horizon is its level of national debt, which is running at a ratio of 50% to GDP. The significance of this is that a rise to 55% would trigger budget austerity measures — and a further 5% on top of that would be in breach of the state’s constitution. Poland is therefore betting on an ambitious $8.9bn two-year privatisation programme, which will see the Polish treasury divesting its interests in about 800 companies in a range of industrial sectors, including minerals, energy and chemicals, as well as the symbolic flagship of the country’s financial services sector — the Warsaw Stock Exchange. The privatisation programme can only be good news for property developers, as injections of overseas cash will stimulate demand for improved office and industrial premises.

Despite Poland’s enthusiastic embrace of capitalism in the past 20 years, its sub-standard road system has been one of the democratic system’s signal failures, as administrations on both right and left have found it impossible to break through the bureaucratic inertia. However, the imminent arrival of Euro 2012 has galvanised the current government into action and plans are now under way to build 3,000 km of highways and expressways.

These include a main north-south highway, running from the Baltic port of Gdansk to the border with the Czech republic in the south, and two east-west highways, one running along the south and the other connecting Warsaw to Berlin. Other infrastructure plans that have been given a welcome impetus by the requirements of Euro 2012 include the Warsaw Metro for which, in April, an international consortium was awarded a $1bn contract for the construction of a second line. And of course, the football stadiums in the towns that will host the Polish end of the tournament — Warsaw, Wroclaw, Gdansk and Poznan — have become a focus of attention and investment.

While building contractors are proving to be the immediate beneficiaries of the Euro 2012 adventure, the hosting of such a high-profile tournament will undoubtedly benefit the rest of the Polish economy, not least the hospitality sector.

The current downturn has not deterred the likes of Hilton Worldwide from planning new hotels in many of the country’s major cities, including a string of Hilton Garden Inns in Krakow, Warsaw and Rzeszow. But this is much more than an opportunistic attempt to capitalise on the influx of tourists who will arrive with Euro 2012.

“There is a significant demand from hotel owners for a contemporary yet affordable focused service product and a real appetite for quality and branded accommodation, particularly in Poland’s regional centres,” says Patrick Fitzgibbon, Hilton Worldwide’s senior vice-president of development for Europe and Africa. Retailers also traditionally thrive on big sporting tournaments, so the opening of Poznan’s Galeria Malta by Spanish investor Neinver earlier this year should pay dividends.

Galeria Malta’s 54,000 sq m of retail space makes it the largest retail and entertainment centre in western Poland. It houses 170 stores and service outlets, as well as a multiscreen Multikino movie theatre, a fitness club and a range of cafes and restaurants. Neinver is also developing two new factory centres in Krakow and Warsaw.

Elsewhere, one of the largest retail developments in the pipeline is the 100,000 sq m Ikea complex in Lodz, which is due to open in the spring and will house about 200 retail outlets. Despite the recession, the Polish consumer market remains healthy. Demand for FMCG (fast-moving consumer goods) increased 5.8% year on year in value terms and 2% in volume in the third quarter of 2009.

The privatisation programme and Euro 2012 may give a temporary boost to the Polish economy and property sector, but the factors that are really driving the country’s success and that are proving to be consistent magnets to overseas investors are more fundamental.

One is the quality of the workforce, a factor that was key in persuading Fujitsu Services to establish a major component of its European customer-services operation in a refurbished textile mill in Lodz. At the time, Fujitsu’s management cited “customer access to a highly skilled workforce with strong language skills at competitive costs” as a decisive factor.

Cost also played a major part in Cadbury’s 2007 decision to relocate some of its operations from the UK to Poland — and for Dell to do the same from Ireland early in 2009. But it is principally the high calibre of the labour pool and the country’s strategic location at the heart of Europe that remain its biggest draw.

Indeed, these were the key reasons why JP Morgan Treasury Services also decided to open an operations centre in Bydgoszcz. “As we look to grow our trade finance and logistics business in Europe, we need a dedicated centre of excellence from which to service these clients,” says the company’s EMEA regional executive, Alexander Caviezel. “Bydgoszcz will be an important centre for our global trade business going forward, as well as a gateway for our business into Eastern Europe.
” But the financial sector’s interest in Poland is not restricted to the operational. Reports emerged in December that a range of institutions, including HSBC, Credit Suisse and Skandinaviska Enskilda Banken, have been considering investments in the Polish real-estate market.

Just what the long-term implication of the planned privatisation of the Warsaw Stock Exchange remains to be seen, but the skyline of the country’s capital is gradually being transformed into a thoroughly 21st century conurbation.

That skyline will eventually be dominated by the 50-storey 220 m high Warsaw Spire, with its 60,000 sq m of office space and parking for a 1,000 cars. And by 2015, the Warsaw Spire will have been joined by a further 200,000 sq m of office space and parking for a 1,000 cars. And by 2015, the Warsaw Spire will have been joined by a further 200,000 sq m of office space in the Poleczki Business Park.