Poland: Analysis of Selected Economic Sectors

Poland: analysis of selected economic sectors

December 2006

PMR Authors of the report: Marcin Sadowski, Managing Editor PMR Publications [email protected]

Szymon Konop, Head of Consulting Services PMR Consulting [email protected]

Stathis Karaplios, Senior Consultant PMR Consulting [email protected]

Paweł Sionko, Economist PMR Publications [email protected]

Joanna Nowak, Analyst PMR Publications [email protected]

This report contains information obtained and collected from many publicly available sources and is based on research conducted by PMR Ltd. It should be viewed exclusively as providing general guidelines and not investment or other advisory. Therefore, it should not be used as a basis for making any investment decision, and it does not release third persons from exercising due care in verifying its content. PMR Ltd. shall not be held liable for any consequences of decision taken based on information presented in this report.

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Table of contents

Introduction ��11

1. Poland – general information ��12 1.1. Geographical location ��13 1.2. Population ��13 1.3. Transport infrastructure ��13 1.3.1. Road transport ��13 1.3.2. Airports ��15 1.4. Economic environment ��15 1.4.1. Gross domestic product ��16 1.4.2. Industrial output ��17 1.4.3. Inflation ��17 1.4.4. Unemployment ��18 1.4.5. Foreign trade ��18 1.5. Regulatory environment ��19 1.5.1. Business activity ��19 1.5.2. Tax system ��19 1.6. Special Economic Zones ��20 www.pmrcorporate.com Poland: analysis of selected economic sectors

2. Business Processes Offshoring (BPO) sector ��23 2.1. Dolnoslaskie voivodship ��25 2.1.1. Largest companies with service centres set up in the region as part of BPO ��25 2.1.2. Workforce availability ��26 2.1.3. Costs of doing business ��28 2.1.4. Availability of investment sites ��30 2.2. Lodzkie voivodship ��30 2.2.1. Largest companies with service centres set up in the region as part of BPO ��30 2.2.2. Workforce availability ��31 2.2.3. Costs of doing business ��33 2.2.4. Availability of investment sites ��34 2.3. Lubelskie voivodship ��35 2.3.1. Largest companies with service centres set up in the region as part of BPO ��35 2.3.2. Workforce availability ��35 2.3.3. Costs of doing business ��37 2.3.4. Availability of investment sites ��38 2.4. Malopolskie voivodship ��38 2.4.1. Largest companies with service centres set up in the region as part of BPO ��38 2.4.2. Workforce availability ��39 2.4.3. Costs of doing business ��42 2.4.4. Availability of investment sites ��43

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2.5. Mazowieckie voivodship ��44 2.5.1. Largest companies with service centres set up in the region as part of BPO ��44 2.5.2. Workforce availability ��45 2.5.3. Costs of doing business ��47 2.5.4. Availability of investment sites ��48 2.6. Slaskie voivodship ��49 2.6.1. Largest companies with service centres set up in the region as part of BPO ��49 2.6.2. Workforce availability ��49 2.6.3. Costs of doing business ��50 2.6.4. Availability of investment sites ��52 2.7. Wielkopolskie voivodship ��53 2.7.1. Largest companies with service centres set up in the region as part of BPO ��53 2.7.2. Workforce availability ��53 2.7.3. Cost of doing business ��55 2.7.4. Availability of investment sites ��56

3. Advanced technologies (high-tech) sector ��57 3.1. Dolnoslaskie voivodship ��58 3.1.1. Largest high-tech companies in the region ��58 3.1.2. R&D institutions in the high-tech sector ��59 3.1.3. Workforce availability ��59 3.1.4. Costs of doing business ��61 3.1.5. Availability of investment sites ��63

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3.2. Kujawsko-Pomorskie voivodship ��64 3.2.1. Largest high-tech companies in the region ��64 3.2.2. R&D institutions in the high-tech sector ��64 3.2.3. Workforce availability ��65 3.2.4. Costs of doing business ��66 3.2.5. Availability of investment sites ��67 3.3. Malopolskie voivodship ��68 3.3.1. Largest high-tech companies in the region ��68 3.3.2. R&D institutions in the high-tech sector ��68 3.3.3. Workforce availability ��70 3.3.4. Costs of doing business ��72 3.3.5. Availability of investment sites ��73 3.4. Mazowieckie voivodship ��74 3.4.1. Largest high-tech companies in the region ��74 3.4.2. R&D institutions in the high-tech sector ��75 3.4.3. Workforce availability ��76 3.4.4. Costs of doing business ��78 3.4.5. Availability of investment sites ��79 3.5. Pomorskie voivodship ��80 3.5.1. Largest high-tech companies in the region ��80 3.5.2. R&D institutions in the high-tech sector ��81 3.5.3. Workforce resources ��82 3.5.4. Costs of doing business ��84 3.5.5. Availability of investment sites ��86 3.6. Slaskie voivodship ��88 3.6.1. Largest high-tech companies in the region ��88 3.6.2. R&D institutions in the high-tech sector ��89 3.6.3. Workforce availability ��89 3.6.4. Costs of doing business ��91 3.6.5. Availability of investment sites ��93

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4. Automotive sector ��96 4.1. Traditions of the automotive sector ��97 4.2. Current situation in the sector ��98 4.2.1. Major manufacturers ��98 4.2.2. Output and employment ��100 4.3. Growth prospects for the sector ��101 4.4. Selected sites for automotive investments ��101 4.4.1. Dolnoslaskie voivodship ��101 4.4.1.1. Industrial traditions of the region ��101 4.4.1.2. Large companies operating in the automotive industry ��102 4.4.1.3. Business support institutions ��103 4.4.1.5. Workforce availability ��103 4.4.1.5. Costs of doing business ��105 4.4.1.6. Availability of investment sites ��107 4.4.2. Slaskie voivodship ��108 4.4.2.1. Industrial traditions of the region ��108 4.4.2.2. Large companies operating in the automotive industry ��108 4.4.2.3. Sector-specific scientific and research centres ��110 4.4.2.4. Business support institutions ��110 4.4.2.5. Workforce availability ��111 4.4.2.6. Costs of doing business ��113 4.4.2.7. Availability of investment sites ��115

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5. Aviation sector ��117 5.1. Traditions of the aviation sector ��118 5.2. Aviation sector today ��119 5.2.1. Aviation firms established as a result of the transformation of former WSK entities ��120 5.2.2. Foreign investors in the Polish aviation industry ��120 5.2.3. Aviation companies in the SME sector ��121 5.3. Key sub-suppliers for the aviation sector ��122 5.4. Sector-specific scientific and research centres ��123 5.5. Business support institutions ��124 5.6. Workforce availability ��125 5.7. Availability of investment sites ��126

6. Pulp and paper sector ��129 6.1. Conditions promoting investments in the pulp and paper industry ��130 6.2. Traditions of the pulp and paper industry ��130 6.3. Feedstock availability ��131 6.3.1. Wood pulp ��132 6.3.2. Primary fibre pulp ��133 6.3.3. Secondary fibre pulp ��133 6.4. The largest producers ��135 6.4.1. Producers of hygienic paper ��135 6.4.2. Paper producers ��136 6.4.3. Largest board producers ��137

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6.5. Sector-specific scientific and research centres ��140 6.6. Availability and cost of qualified staff ��143 6.7. Availability of investment sites ��145 6.7.1. Lubuskie voivodship ��145 6.7.2. Mazowieckie voivodship ��146 6.7.3. Warminsko-Mazurskie voivodship ��146 6.7.4. Wielkopolskie voivodship ��147

7. Household appliance sector ��148 7.1. Traditions of the household appliance sector ��149 7.2. Current situation in the household appliance sector ��149 7.2.1. The largest market players ��149 7.2.2. Output ��150 7.3. Growth prospects for the sector ��150 7.4. Select locations for investments in the household appliance sector ��151 7.4.1. Dolnoslaskie voivodship ��151 7.4.1.1. Industrial traditions of the region ��151 7.4.1.2. Large companies operating in the household appliance sector ��151 7.4.1.3. Business support and scientific and research institutions ��152 7.4.1.4. Workforce availability ��152 7.4.1.5. Costs of doing business ��154 7.4.1.6. Availability of investment sites ��156

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7.4.2. Lodzkie voivodship ��157 7.4.2.1. Industrial traditions in the region ��157 7.4.2.2. Large companies operating in the household appliance sector ��157 7.4.2.3. Business support institutions ��158 7.4.2.4. Workforce availability ��158 7.4.2.5. Costs of doing business ��160 7.4.2.6. Availability of investment sites ��162

List of graphs ��164

List of tables ��166

About PMR ��169

Contact PMR ��170

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Introduction

In the last few years, foreign investors have become increasingly more interested in Poland. Following a period of a slight slowdown in FDI inflow, since 2004 the value of foreign investments has clearly gone up compared with the beginning of the present decade. Poland, with its educated and qualified employees, dynamically developing economy, advantageous localisation in the centre of Europe and upbeat prospects for the near future, has become attractive for foreign investors from many industries. This report analyses six economic sectors: BPO, high-tech, automotive, aeroplane, pulp and paper, and household appliance manufacturing. The abovementioned sectors are examined for the presence of international firms operating in the mentioned industries, workforce availability, the costs of doing business, and R&D institutions and centres active in a given sector. The report provides a more in-depth analysis of selected voivodships, in which investors can count on particularly attractive conditions for investing in a given sector. The authors have also provided a listing of selected interesting investment sites in each region. In most cases, the selected investment sites are located in special economic zones, or industrial or technological parks. This is because the zones have been successful in attracting increasingly more investors for quite some time by offering opportune forms of business support and attractive sites. Additionally, under existing regulations an investment site can be incorporated into a special economic zone as long as an investor meets defined conditions.

Other comments Values in PLN were translated into the euro using the following exchange rate: 1 EUR = 3.9 PLN.

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1. Poland – general information

Sweden Lithuania Baltic Sea Russia Ustka Gdynia Kolobrzeg Gdansk Swinoujscie Elblag

Szczecin Bydgoszcz Bialystok Wisla Belarus Warta Poznan WARSAW Zielona Gora Lodz

Germany Odra Radom Lublin

Wroclaw Czestochowa Opole

Gliwice a Katowice Wisl Rzeszow Krakow Ukraine Czech Republic Slovakia

Poland – general information

PMR088

2 Area: 312,685 km l Population: 38.1 million

Tota Capital: Warsaw Language: Polish Political system: Parliamentary democracy

cs Lech Kaczynski

ti President: li Prime Minister: Jaroslaw Kaczynski Po Date of accession to the EU: 1 May 2004 GDP (2005): €243.3bn my GDP per capita (2005): €6,370 Inflation (Oct 2006): 1.2% Econo Unemployment rate (Oct 2006): 14.9%

Source: PMR, 2006 www.pmrpublications.com

12 www.pmrcorporate.com Poland: analysis of selected economic sectors

1.1. Geographical location Poland is situated in the centre of continental Europe and neighbours: Germany (456 km – shared boarder length), Czech Republic (658 km), Slovakia (444 km), Ukraine (526 km), Belarus (407 km), Lithuania (453 km) and Russia (Kaliningrad oblast). Poland also boarders the Baltic sea ((491 km). The country has an area of 312,685 km2. The capital city, Warsaw, is located in central-western Poland. Other large cities include: Krakow, Poznan, Lodz, Wroclaw, Gdansk and Rzeszow. Poland is divided into 16 main administrative units, called voivodships.

1.2. Population Poland has a total of 38.1 million inhabitants. For several years, the country’s population has been gradually decreasing. Currently, the young (aged below 18) still account for a greater percentage share than the elderly (men aged over 65 and women over 60) – 20.1% and 15.7% respectively. However, owing to the declining population size and the rising average live span, the gap between the two age groups has been shrinking steadily for several years.

Select demographic indicators in Poland, 2006

PMR089

Demographic indicators Population 38.1 million Change in population size -0.06% < 18 years 20.1% 18-64 years – men Age structure 64.2% 18-59 years – women > 65 years 15.7% Projected life span 74.7 years

Source: Polish Statistical Office (GUS), 2006 www.pmrpublications.com

Despite its multicultural past, at present Poland has a stable ethnical composition, most of its inhabitants being native Poles – 96.7% of the population. The largest national minorities include: German (0.4% of total population), Belarusian (0.1%) and Ukrainian (0.1%). Polish is the official language of Poland.

1.3. Transport infrastructure

1.3.1. Road transport Today, the national road network has an aggregate length of ca. 379,500 km, including hard- paved roads of ca 250,000 km, which gives 79.6 km of roads per 100 km2. The road network includes: n national roads – 18,368 km (including streets in urban areas, 5% of the total) n voivodship roads – 28,444 km (8%) n county roads – 128,870 km (34%) n municipal/communal roads – 203,773 km (53%). www.pmrcorporate.com 13 Poland: analysis of selected economic sectors

At present, Poland has a total of 673 km of motorways and 230 km of expressways. Based on plans, Polish motorway and expressway network is to have over 9,000 km by the end of 2013. Plans provide for a system of motorways composed of the following routes (in brackets information on the main foreign destinations of the planned routes): n A1 motorway: Gdansk-Torun-Lodz-Czestochowa-Gliwice-Gorzyczki-boarder crossing- (Ostrawa), length: 564 km n A2 motorway: (Berlin)-boarder crossing-Swiecko-Poznan-Warsaw-Siedlce-Kukuryki- boarder crossing-(Minsk), length: 651 km n A4 motorway: (Dresden)-boarder crossing-Jedrzychowice-Krzyzowa-Legnica-Wroclaw- Opole-Gliwice-Katowice-Krakow-Tarnow-Korczowa-boarder crossing-(Lvov), length: 779 km n A6 motorway: (Berlin)-boarder crossing-Kolbaskowo-Szczecin (S3, Rzesnica interchange) n A8 motorway: Wroclaw ringroad, section A4-Psie Pole n A18 motorway: (Berlin)-boarder crossing-Olszyna-Krzyzowa (A4).

Planned motorway network in Poland

PMR098

Gdansk Suwalki Koszalin Elblag Szczecin Olsztyn

Kolbaskowo Bydgoszcz Lomza Pila Bialystok Ciechanow Ostroleka Gorzow Wlkp. Torun Wloclawek Poznan Konin WARSAW Siedlce

Kalisz Olszyna Leszno Lodz Sieradz Radom Lublin Zgorzelec Legnica Wroclaw Kielce Walbrzych Tarnobrzeg Opole Czestochowa Zamosc

Katowice Krakow Bielsko-Biala Tarnow Rzeszow Gorzyce Krosno

Source: GDDKiA, 2006 www.pmrpublications.com

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1.3.2. Airports The existing airport infrastructure encompasses one central airport, 11 regional airports and 43 local ports. Warszawa-Okecie, located in Warsaw (Mazowieckie voivodship) is the largest airport in Poland. The other regional airports are located in 10 voivodships. The largest ports are located within the boundaries of the largest cities – Warsaw, Krakow, Katowice, Gdansk, Poznan and Wroclaw. Airports in Zielona Gora and Szczytno, characterised by low passenger traffic and low frequency of regular connections with other airports, have been categorised as regional airports primarily because of the considerable distance (of over 100 km) to the nearest airport capable of handling air cargo transport of over 10 tonnes.

Passenger traffic at main airports in Poland (thousands), 2005 and Q1-Q3 2006

PMR090

2005 Q1-Q3 2006 Warsaw-Okecie 7,071.9 6,245.6 Krakow-Balice 1,586.1 1,748.6 Katowice-Pyrzowice 1,092.4 1,100.6 Gdansk-Rebiechowo 667.9 935.4 Wroclaw-Strachowice 465.5 607.4 Poznan-Lawica 399.3 495.9 Rzeszow-Jasionka 94.0 157.7 Lodz-Lublinek 18.1 152.0 Szczecin-Goleniow 100.8 139.0 Bydgoszcz-Szwederowo 39.7 100.4 Total 11,501.2 11,685.4

Source: airports, Civil Aviation Office (ULC), 2006 www.pmrpublications.com

1.4. Economic environment Following the collapse of communism in 1989, the Polish economy had to go through a difficult period of restructuring in order to create an economy founded on free market principles. After more than two years of declines, Poland returned onto a path of economic growth in 1992. The gradual privatisation and restructuring of state-owned enterprises has led to a steady reduction of the public sector’s share in the national economy. At the end of the last century, the Polish government implemented pension and educational system reforms as well as administrative and healthcare reforms. Between 2001 and 2002 Poland’s economy slowed down, the economic growth rate falling to 1-1.4% from over 6% noted at the end of the 1990s. Then, in 2003, the Polish economy picked up pace, expanding at 5.3% in the year of Poland’s accession to the European Union.

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Poland – selected economic indicators

PMR091

2001 2002 2003 2004 2005 2006e GDP (%) 1.1 1.4 3.8 5.3 3.5 5.2 Industrial output (%) 0.6 1.1 8.4 12.3 3.4 11.6 Annualised inflation (%) 5.5 1.9 0.8 3.5 2.2 1.2 Unemployment rate (%, eop) 19.4 20.0 20.0 19.0 17.6 15.2 Average monthly wage (€) 557 561 500 510 595 640 Net FDI (€ bn) 6,372 4,371 4,067 10,292 7,703 9,000 Exports (€ bn) 46.5 49.3 53.8 65.8 77.6 89.8 Imports (€ bn) 55.1 57.0 58.9 70.4 79.8 93.3 Current account (€ bn) -6.0 -5.4 -4.1 -8.5 -4.1 -4.3 Current account (% of GDP) -2.9 -2.7 -2.1 -4.2 -1.7 -1.6 Average exchange rate: PLN/EUR 3.7 3.8 4.4 4.5 4.0 3.9 Average exchange rate: PLN/USD 4.1 4.1 3.9 3.6 3.3 3.1

e – estimate FDI – foreign direct investments Source: GUS, NBP,PMR, 2006 www.pmrpublications.com

1.4.1. Gross domestic product Following the period of stagnation between 2001 and 2002, the Polish GDP growth rate rose in 2003 to 3.8%. The country’s accession to the European Union in May 2004 was beneficial for the Polish economy, which at the time expanded at 5.3%. In the following year, the economy slowed down slightly, in an attempt to catch its breath. Then in 2006, the economic growth rate returned back onto the path of rapid growth, once again surpassing 5%. The strong economic growth was powered primarily by two factors: strong internal demand, a fruit of improvements on the labour market and rising investment activeness on part of enterprises, and the inflow of EU funds. In the upcoming future, the economic growth rate will remain high, at around 4.5-5%.

Real GDP growth rate in Poland (%), 2001-2007

PMR092 5.3 5.2 4.7 3.8 3.5

1.4 1.1

2001 2002 2003 2004 2005 2006e 2007f

e – estimate f – forecast Source: GUS, PMR, 2006 www.pmrpublications.com

16 www.pmrcorporate.com Poland: analysis of selected economic sectors

1.4.2. Industrial output Poland’s accession to the European Union in 2004 had a significant impact on the performance of the industrial sector. High demand for products at the eve of the EU accession was fuelled by changes in fiscal regulations and by fears of price hikes. The resulting higher demand generated a more than 12% increase in industrial output. In the following year, the growth rate markedly faltered, however, this was caused more by a high comparative base than by a true deterioration of the industrial sector climate. The fact that the sector continued to fare well was confirmed by its performance in 2006, when industrial output expanded once again by over 10%.

Industrial output growth in Poland (%), 2001-2007

PMR093

12.3 11.6 9.8 8.4

3.4 0.6 1.1

2001 2002 2003 2004 2005 2006e 2007f e – estimate f – forecast Source: GUS, PMR, 2006 www.pmrpublications.com

1.4.3. Inflation At the beginning of the current decade, inflation in Poland was lowered to below 2%. The country’s accession to the EU sparked a temporary demand shock, which fuelled pro- inflationary pressure. Yet, this was only a temporary factor, and the following year inflation returned to around 2%. In 2006 consumer prices rose very moderately; in the first half of the year, Poland posted the lowest CPI in the EU, of below 1%. In the second half of the year, inflation picked up pace slightly, to exceed 1%. Based on our forecasts, inflation should grow further in 2007 though it will remain low, at around 2.7%. Thus, it will continue to fall within the permissible range around the inflation target set in the monetary policy formulated by the Monetary Policy Council (RPP), which stands at 2.5% +-1%.

Annualised inflation in Poland (%), 2001-2007

PMR094 5.5

3.5 2.7 2.2 1.9 1.2 0.8

2001 2002 2003 2004 2005 2006e 2007f e – estimate f – forecast Source: GUS, PMR, 2006 www.pmrpublications.com www.pmrcorporate.com 17 Poland: analysis of selected economic sectors

1.4.4. Unemployment Poland has the highest unemployment rate among the EU member states. At accession to the EU, it stood at 19.5%. Then, the following years ushered in dynamic declines in the unemployment rate as the economy picked up pace and Poles emigrated abroad in search for gainful employment in other EU member states. As a result, we estimate that the unemployment rate in Poland stood at around 15% as at the end of 2006. The rate should continue to go down further in the upcoming years.

Unemployment rate in Poland (%, eop), 2001-2007

PMR095

19.4 20.0 20.0 19.0 17.6 15.2 14.5

2001 2002 2003 2004 2005 2006e 2007f

e – estimate f – forecast Source: GUS, PMR, 2006 www.pmrpublications.com

1.4.5. Foreign trade Since it accession to the European Union, Poland has posted double-digit growth in foreign trade turnover. The abolition of tariffs and accession to the free trade zone did much to help Polish products compete on foreign markets and, as a result, exports growth significantly outperformed that of imports, prompting the foreign trade deficit to fall to a mere €2.2bn. In 2006 exports continued in the steep uptrend, yet rising internal demand prompted imports to perform better as well. This situation will continue in 2007, and imports growth will outpace that of exports, leading to a higher foreign trade deficit.

Foreign trade in Poland (€ bn), 2001-2007

PMR096 .5 5 1. 107 .3 10 .8 93 .8 89 .6 .4 79 .8 77 70 .9 .0 .1 65 .8 .3 58 .5 57 55 53 49 46 .6 .0 .7 .5 .1 .6 .2 -8 -7 -5 -4 -2 -3 -6

2001 2002 2003 2004 2005 2006e 2007f

Exports Imports Balance e – estimate f – forecast Source: NBP,PMR, 2006 www.pmrpublications.com

18 www.pmrcorporate.com Poland: analysis of selected economic sectors

1.5. Regulatory environment

1.5.1. Business activity The Business Activity Freedom Act of 2 July 2004 is the single piece of legislation with the greatest bearing on business activity in Poland. It regulates the commencement, performance and discontinuation of business activity on the territory of Poland as well as the related tasks of public administration bodies. Foreign persons1 from member states of the European Union and of the European Free Trade Agreement (EFTA) – signatories of the agreement on the European Economic Area (EEA) – can commence and engage in business activity in Poland on the same conditions as Polish entrepreneurs. Citizens of other countries that are not EU (EEA) members can also commence and conduct business activity in Poland on the same conditions as applicable to Polish entrepreneurs as long as they: n have been permitted to reside on the territory of Poland n were conferred a tolerated stay permit or refugee status in Poland n are subject to temporary protection on the territory of Poland.

As long as international treaties do not provide otherwise, other foreign persons have the right to commence and engage in business activity in Poland only in incorporated form, as: n limited partnership n limited joint-stock partnership n limited-liability company n joint stock company.

The above persons can also accede to the abovementioned companies and acquire or purchase shares therein. In addition, foreign entrepreneurs2 can engage in business activity by establishing a branch or a representative office in Poland.

1.5.2. Tax system The Polish tax system identifies 12 types of taxes, including: n direct taxes:  corporate income tax (CIT)  personal income tax (PIT)  tax on actions under civil law  property tax

 vehicle tax 1 Under the act, a foreign person is: n natural person domiciled outside  donation and inheritance tax of Poland, not a holder of Polish citizenship  agricultural tax n legal person with registered offices abroad  forest tax n non-incorporated organisational unit with the right to engage in legal actions, with registered offices  dog tax abroad.

2 Under the act, a foreign entrepreneur is a foreign person conducting business activity abroad. www.pmrcorporate.com 19 Poland: analysis of selected economic sectors

n indirect taxes:  value addend tax (VAT)  excise tax  game tax.

Main tax rates in Poland, 2006 and 2007

PMR097

2006 2007 22% – basic rate 22% – basic rate 7% – some goods and services, e.g. goods related to 7% – some goods and services, e.g. goods related to heath care, food, hotel services, folk art., crafts and heath care, food, hotel services, folk art., crafts and artwork artwork VAT 3% – temporary rate, in effect until 30 April 2008, 3% – temporary rate, in effect until 30 April 2008, encompassing the supply of some agricultural products encompassing the supply of some agricultural products 0% – some services, (e.g. financial, healthcare, 0% – some services, (e.g. financial, healthcare, educational, cultural) educational, cultural) 19% (annual income up to PLN 37,024) 19% (annual income up to PLN 43,405) PIT 30% (annual income from PLN 37,024 to PLN 78,048) 30% (annual income from PLN 43,405 to PLN 85,528) 40% (annual income over PLN 78,048) 40% (annual income of over PLN 85,528) CIT 19% 19% Dividend tax 19% 19%

Source: Ministry of Finance, 2006 www.pmrpublications.com

1.6. Special Economic Zones Special Economic Zones (SEZ) are an important instrument for attracting and supporting new investments in Poland. The SEZ comprise administratively separate areas of the Polish territory, within which business activity can be conducted on special, preferential, terms defined in the SEZ Act and other legislation. The rules for the SEZ’s operation and the procedure for defining a zone were defined under the act of 1994. The original statute was amended in later years in order to align Polish legislation on special economic zones with the relevant EU requirements. Currently, there are 14 SEZ in Poland. They differ in terms of size, location, business profile, land development conditions, and road, technical and telecommunications infrastructure. The zones are to operate till 2017, except for the Katowice Special Economic Zone, which will be active a year less, and the Euro-Park Special Economic Zone in Mielec which is to discontinue operations in 2015. With time, the SEZ will be transformed into business activity zones whose task will be to provide entrepreneurs with an environment conducive to creating new jobs. After 2011, new investors will not be allowed to enter the SEZ.

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Investors operating in the SEZ are covered by special forms of business support, in particular – tax relief. A company operating in a zone can receive: n exemption from income tax n relief from property tax n relief from vehicle tax n relief from custom duties n regional support available for new investments n regional support available for businesses creating new jobs.

To receive the above assistance, an investor must: n obtain a permit to conduct business activity in a zone – issued by the administration of the zone n incur capital expenditure of at least €100,000.

An entrepreneur who establishes a business on the territory of a zone by virtue of a permit issued after 31 December 2000 can draw on regional support in the form of income tax deductions for: n capital expenditure incurred n new jobs created.

In the case of capital expenditure, the value of the exemptions is calculated as a multiple of the maximum aid intensity defined for a given area and the costs of investments that qualify for the deductions. An entrepreneur drawing on regional relief available for new investments must: n conduct business activity in a zone for at least five years n own the assets connected with the capital expenditure for five years as of their entry into the tangible and intangible fixed assets register, as provided for in income tax regulations.

The amount of relief provided for creating new jobs related to a given investment is calculated as a multiple of the maximum support intensity and the gross amount of two- year costs of employing the new employees plus all the related mandatory payments. An entrepreneur drawing on this type of support has to maintain the newly-created jobs for at least five years. The maximum percentage value of support for nearly the entire territory of Poland stands at 50%, except for municipal counties of Wroclaw, Krakow, Gdansk, Gdynia and Sopot, for which the rate amounts to 40%, and for municipal counties of Warsaw and Poznan for which it stands at 30%. In the case of support advanced to an SME, the maximum value of support is increased by 15 percentage points, except for entrepreneurs active in the transport industry. The maximum percentage value of support advanced to investments in the auto industry, to an entrepreneur investing more than €5m, amounts to 30% of the maximum percentage value of support permissible in a given area.

www.pmrcorporate.com 21 Poland: analysis of selected economic sectors

Location of SEZs by voivodships in Poland, 2006

PMR099

8 9 11 14

5 6

1 13 10 2 12

7 4

Legend: 1 – Kamienna Gora SSE, 2 – Katowice SSE, 3 – Kostrzyn-Slubice SSE, 4 – Krakow SSE, 5 – Legnica SSE, 6 – Lodz SSE, 7 – Mielec SSE, 8 – Pomorska SSE, 9 – Slupsk SSE, 10 – Starachowice SSE, 11 – Suwalki SSE, 12 –Tarnobrzeg SSE, 13 – Walbrzych SSE, 14 –Warminsko-Mazurska SSE Source: PMR, 2006 www.pmrpublications.com

22 www.pmrcorporate.com Poland: analysis of selected economic sectors

2. Business Processes Offshoring (BPO) sector

BPO sector – selected locations

PMR112

Poznan Warsaw

Lodz

Lublin Wroclaw

Katowice

Krakow

Source: PMR, 2006 www.pmrpublications.com

www.pmrcorporate.com 23 Poland: analysis of selected economic sectors

Business Processes Offshoring (BPO) is the practice of locating defined (non-production) business functions in countries where the costs of conducting business, primarily the labour required for a given function, are lower. Usually, within the frameworks of BPO, investors set up the following types of service centres: n finance n accounting n HR n customer service n logistics n R&D.

The number of service centres located in Poland as part of BPO has rapidly grown over the recent years. At the end of November 2006, there were over 80 such centres. The following factors have encouraged investors to locate service centres in Poland: n Availability of qualified and relatively inexpensive labour – there are approximately 2 million students in Poland, with about 400,000 university graduates each year. The percentage share of students in the population aged 20-30 is quickly rising. n Investment incentives for locating service centres within the frameworks of BPO:  Since March 2005 investors, who locate service centres (including accounting, finance, research & development, call centres and IT support) in Special Economic Zones can receive tax relief and other incentives as ones investing in the SEZ.  Investors relocating services to Poland as part of BPO can also apply for public aid from the state budget, if they employ more than 250 persons, and from EU funds – as reimbursement of costs of employee training (60-100% of training costs are subject to reimbursement). Projects in the R&D sector can count on additional financing even if they provide work to less people (e.g. 80-100 engineering specialists).  Investors who create at least a 100 new jobs and maintain them for at least five years can apply for regional support for hiring new employees.  An area an investor selects to locate an investment can be incorporated by the Ministry of Economic Affairs into an existing zone as long as the capital expenditure incurred in the area exceeds €40m or that at least 500 new jobs are created.  Municipalities and communes in which BPO investments are implemented can offer investors either full or partial relief from property tax. n Macroeconomic stability. n Poland’s EU membership.

24 www.pmrcorporate.com Poland: analysis of selected economic sectors

2.1. Dolnoslaskie voivodship

2.1.1. Largest companies with service centres set up in the region as part of BPO Wroclaw, beside Krakow and Warsaw, has to date attracted the largest number of firms as a BPO destination for their service centres. To date, the largest projects in the region have been: a shared services centre built by Hewlett Packard which, once fully operation, is to employ approx. 1,000 persons, and a software development centre constructed by Siemens. In 2006 the following companies made the decision to locate their shared service centres in the region: n Genpact (planned workforce of 300) n KPIT Cummings (planned workforce of 500) n ACN (planned workforce of 150).

UPS plans to launch an accounting centre in the first half of 2007, which is to employ around 300 persons.

Select companies with service centres in Dolnoslaskie voivodship

PMR001

Location Company Business profile Financial and accounting centre, Wroclaw Hewlett Packard HR management, procurement support Wroclaw Volvo Accounting and administration centre Development of IT solutions for clients Wroclaw QAD from the CEE, regional centre Call centre for customers from Germany, Wroclaw Genpact Austria and Switzerland Wroclaw KPIT Cummings Financial and accounting centre and IT centre Wroclaw American Communication Network Call centre Wroclaw Siemens Software development centre Wroclaw CTM Call centre Wroclaw Alstom R&D centre Wroclaw Cap Gemini Polska IT services and software development centre Wroclaw Remy Internationale R&D centre Design and implementation of innovative Wroclaw Diehl Controls solutions for household appliance manufacturers Wroclaw UPS Accounting centre*

* investment planned for Q1 2007 Source: PMR, 2006 www.pmrpublications.com

www.pmrcorporate.com 25 Poland: analysis of selected economic sectors

2.1.2. Workforce availability

Workforce resources Wroclaw is the fourth largest city in Poland, it ranks fifth in terms of persons employed in the enterprise sector3. The Dolnoslaskie voivodship ranks fourth in the number of academic students. Over 160,000 students are taught by around 7,000 academic teachers in the region’s 35 tertiary schools. In Dolnoslaskie, most students, close to 137,000, study in Wroclaw which has 26 higher education institutions (only two other cities in Poland – Warsaw and Krakow – have more students). Every year, around 26,000 students graduate from Wroclaw higher schools.

Number of students and graduates in Wroclaw (thousands), 2000-2006

PMR002

136.8 126.9 132.0 134.8 113.8 122.2

27.2 26.1 16.4 19.1 22.0 24.0

2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006

Students Graduates

Source: GUS, 2006 www.pmrpublications.com

Nearly 61% of persons studying in the region attend one of the four Wroclaw academic institutions: Wroclaw University, Wroclaw University of Technology, Wroclaw University of Economics, and University of Life Sciences in Wroclaw.

Number of students and graduates of largest academic institutions in Dolnoslaskie

PMR003

Wroclaw University 9,239 39,701

Wroclaw University of Technology 4,143 32,312

Wroclaw University of Economics 3,710 17,314

University of Life Sciences in Wroclaw 2,458 12,431

Students Graduates

3 Average employment in the Source: Regional Investor Support Centre (COI), 2006 www.pmrpublications.com enterprise sector in Q1-Q3 2006 in Wroclaw stood at 133,500.

26 www.pmrcorporate.com Poland: analysis of selected economic sectors

The Dolnoslaskie voivodship is one of the largest academic hubs in Poland in terms of the number of persons studying economics, business and administration, as well as computer science.

Number of students and graduates of select specialisations in Wroclaw academic institutions, 2004/2005

PMR004 25,803

10,287 8,665 6,785 5,174 1,687 1,067 1,131

Business and Management IT Engineering* administration Students Graduates

* The data encompasses the following engineering specialisations: production engineering, environmental engineering, material engineering, mechanics and robotics. Source: Regional Investor Support Centre (COI), 2006 www.pmrpublications.com

The decisive majority (84%) of Wroclaw’s students can communicate in English, though only 16% says that it is fluent in the language. German is spoken by more than 56% of the students.

Percentage of students in Wroclaw proficient in English

PMR005 Very good Poor and very poor 15.7% 15.7%

Good Medium-advanced 33.7% 34.8%

Source: Regional Investor Support Centre, “Foreign language proficiency among students in Wroclaw”, November 2004 www.pmrpublications.com

www.pmrcorporate.com 27 Poland: analysis of selected economic sectors

Percentage of students in Wroclaw proficient in German

PMR006

Very good and good 23.3% Poor and very poor 43.3%

Moderately advanced 33.3%

Source: Regional Investor Support Centre, “Foreign language proficiency among students in Wroclaw”, November 2004 www.pmrpublications.com

The unemployment rate in the Dolnoslaskie voivodship is one of the highest in the country, though it has been decreasing steadily. As at the end of October 2006, the region unemployment rate stood at 16.8%. As at the end of September 2006, the unemployment rate in Wroclaw was 8.9% (down by 2.4 percentage points from 11.3% a year earlier). Wroclaw has a relatively high percentage share of university graduates among its registered unemployed. In June 2006, 10.4% of all unemployed in the voivodship had completed tertiary education, representing 28,200 persons. As a consequence of the falling unemployment rate and rising foreign investments, entrepreneurs have begun to face difficulties in finding the right employees. However, this to a large extent concerns candidates with secondary technical training and not with university decrees. According to research conducted by KPMG in July and August 2006, 50% of the 51 surveyed companies experienced problems in recruiting engineers and programmers. A very small group of companies disclosed problems with hiring economists, lawyers and graduates of social studies.

2.1.3. Costs of doing business

2.1.3.1. Salaries and wages In October 2006, the average gross pay in the enterprise sector amounted to PLN 2,544 (€652) in Dolnoslaskie (95.7% of the national average). In a comparison of wages paid in the region capitals in the first nine months of 2006, the average wage was lower in Wroclaw than in Warsaw, Katowice, Gdansk, Poznan and Krakow and amounted to PLN 2,529 (€648), i.e. 27% less than what the average worked earned in Warsaw in the same period.

28 www.pmrcorporate.com Poland: analysis of selected economic sectors

Gross pay (PLN) in Dolnoslaskie voivodship, by select positions, spring 2006

PMR007

Position Average ce

vi Customer Service Specialist 2,706 ser

er Technical Service Manager 5,621

Technical Service Specialist 2,787 Custom

Finance Director 12,265 e

Finance Specialist 4,325 Financ Financial Recovery Specialist 3,439

Chief Accountant 8,416 g Accountant 3,387

Junior Accountant 2,323 Accountin

Cashier 2,815 g Process Engineering Specialist 3,632 neerin

gi Designer / Drafter 3,749 En D R&D Specialist 3,950 R&

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

2.1.3.2. Office space rental costs According to a report published by Jones Lang LaSalle in June 2006, office lease rates in Wroclaw are in a moderate growth trend and amount to €14-15/m2/month for best class A space and €8-13/m2/month for class B office space in office and old tenement buildings. Average maintenance costs amount to approx. €2.5/m2/month.

2.1.3.3. Transport access Wroclaw has an international airport in Strachowice and a river port on the Odra River. Planes fly to the following destinations from the Wroclaw-Strachowice airport: n Denmark: Copenhagen n Germany: Dortmund, Frankfurt Hahn, Frankfurt am Main, Munich n Ireland: Cork, Dublin, Shannon n Italy: Milan, Rome n Poland: Warsaw, Gdansk n Switzerland: Stockholm n UK: Glasgow, Liverpool, London, Nottingham.

www.pmrcorporate.com 29 Poland: analysis of selected economic sectors

In addition, A4 motorway, which transects the Dolnoslaskie region, joins Wroclaw with the Polish-German boarder and with the main urban centres of southern Poland – Katowice and Krakow.

2.1.4. Availability of investment sites

Office space According to representatives of local authorities, the percentage share of office space available for rent in Wroclaw fell in November 2006 to approx. 1%. To a large extent, this was a by-product of large demand for office space on part of BPO companies already present in Wroclaw. The situation related to the availability of office space should improve considerably in the first quarter of 2007. Over 100,000 m2 of new office space is scheduled for completion by the end of 2007.

2.2. Lodzkie voivodship

2.2.1. Largest companies with service centres set up in the region as part of BPO To encourage large investors to relocate their services as part of BPO to the region is one of the objectives of the municipal development strategy of Lodz. To date, seven international concerns have set up service centres in Lodz within the frameworks of BPO, the largest of them being: Philips, Accenture and General Electric Controls.

Select companies with service centres in Lodzkie voivodship

PMR008

Location Company Business profile Lodz Philips Financial and accounting centre Lodz Accenture Financial-accounting and IT centre Development of IT solutions for Lodz Ericpol Telecom the telecommunications sector Lodz General Electric Controls Financial and accounting centre Services related to design, implementation Lodz Teleca and integration of software Lodz Bosch-Siemens R&D centre

Source: PMR, 2006 www.pmrpublications.com

30 www.pmrcorporate.com Poland: analysis of selected economic sectors

2.2.2. Workforce availability

Workforce resources Lodz is the second most populous city in Poland after Warsaw. In the first nine months of 2006, the enterprise sector in Lodz employed more than 102,000 persons, thus, less than in Warsaw, Poznan, Wroclaw, Krakow and Katowice. The Lodzkie region is the sixth largest academic centre in Poland, with around 120,000 students taught by close to 6,000 academic teachers. Lodz is the largest academic centre in the region with 22 higher learning institutions with 114,000 students enrolled each year and 21,000 graduates. That is the fifth best result countrywide. The student population of Lodz is rapidly growing. Over the last six years, Lodz has been one of the three cities in Poland with most significant growth in student population. In 2006 there were 38.5% more students in the region than in 2000.

Number of students and graduates in the Lodzkie voivodship (thousands), 2001-2006

PMR009

113.9 104.9 106.8 110.7 95.1 82.2

21.0 21.0 11.9 14.8 18.5 18.5

2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006

Students Graduates

Source: GUS, 2006 www.pmrpublications.com

The two largest academic institutions in Lodz: the Lodz University of Technology and the University of Lodz, educate in total approx 50% of Lodz students. The most popular specialisations among students in Lodz are management and marketing, administration, and computer science.

www.pmrcorporate.com 31 Poland: analysis of selected economic sectors

Number of students and graduates of select specialisations in Lodzkie

PMR010 14,053

7,829

3,949

1,167 1,686 1,124 1,061 633 188 418 597 73

Management Administration IT Biotechnology Engineering* Physics and marketing Students Graduates

* Aggregate number of students of the following specialisations: production engineering and management, environmental engineering, material engineering and metal engineering. Source: Regional Investor Support Centre (COI), 2006 www.pmrpublications.com

The decisive majority of persons studying in Lodz can communicate in foreign tongues. Only 10% of Lodz students disclosed that they do not know any foreign language; 90% is at least moderately proficient in English.

Declared proficiency in foreign languages among Lodz students

PMR011

Very good Good Medium-advanced Poor English 22.3% 38.1% 31.9% 7.6% German 4.8% 20.9% 42.0% 32.3% French 5.9% 14.2% 42.9% 37.0% Italia 3.6% 27.0% 25.2% 43.6% Spanish 13.5% 34.8% 35.5% 16.3% Other 9.2% 28.3% 42.4% 19.9%

Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

The unemployment rate in the Lodzkie voivodship is close to the national average, though it has been shrinking quickly. In October 2006, the unemployment rate in the region amounted to 14.9%. Close to 162,000 persons were not gainfully employed. Approx. 5% of the unemployed are university graduates. In September 2006, the unemployment rate in the city of Lodz was 12.9% (corresponding to 42,000 persons), i.e. 3.5 p.p. less than a year earlier.

32 www.pmrcorporate.com Poland: analysis of selected economic sectors

2.2.3. Costs of doing business

2.2.3.1. Salaries and wages In the first nine months of 2005, the average gross pay in the enterprise sector in Lodz was 44% lower than in Warsaw and 10% lower than in Krakow, and amounted to PLN 2,322 (€595).

Gross pay (PLN) in Lodzkie voivodship, by select positions, spring 2006

PMR012

Position Average s Tele-sales Representative 2,698 Sale

ce Customer Service Manager 7,102 vi

ser Customer Service Specialist 3,237 er Technical Service Manager 6,197

Custom Technical Service Specialist 2,845

Finance Director 18,307

Finance Manager 10,976

Finance Controller 8,567

Finance Specialist 4,495 Finances

Finance Analyst 5,752

Finance Assistant 2,459

Chief Accountant 9,728 g Accountant 3,272

Junior Accountant 2,311 Accountin Cashier 2,286

g Process Engineering Specialist 3,285

neerin Product Engineer 3,612 gi

En Designer / Drafter 3,666

R&D Manager 7,254 D

R& R&D Specialist 4,087

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

www.pmrcorporate.com 33 Poland: analysis of selected economic sectors

2.2.3.2. Office space rental costs According to a report published by Jones Lang LaSalle in June 2006, office lease rates in Lodz differ depending on location and office standard, from €13-13.5/m2/month in the premium segment to ca. €9/m2/month in other downtown locations. Lower-quality facilities (B/C) are available for around €6/m2/month. As in other large urban centres in Poland, maintenance fees amount to around €3-4/m2/month.

2.2.3.3. Transport access Lodz has an international airport – the Wladyslaw Reymont Lodz-Lublinek Airport. Planes fly to the following destinations from the Lodz airport: n France: Paris (February 2007) n Ireland: Dublin, Shannon n Italy: Rome (February 2007) n Poland: Warsaw n UK: London Stanstead, Nottingham.

In addition, section of the A2 national motorway which joins Lodz with Poznan transects the region. Plans provide for a A2 and A1 motorway junction, connecting western and eastern Poland with northern and southern parts of the country, to be constructed on the territory of the region. Lodz also has a railway connection with the national capital – at present, it takes more than two hours to travel to Warsaw. In the near future, the government would like to modernise this section of the railway line in order to shorten travel time to ca. 65 minutes.

2.2.4. Availability of investment sites

Office space Lodz has a fairly small stock of modern office space, totalling approximately 90,000 2m . Given the sizable demand for modern office space on part of international concerns, the available office space ratio oscillates around zero for most modern faculties. According to Jones Lang LaSalle’s report, in June 2006, 18,700 m2 of office space was either under construction or reconstruction while 7,500 m2 was in the planning stage. The Lodz Special Economic Zone (LSSE) is located in the region. According to the zone’s representatives, it is possible to incorporate new office buildings currently under construction in Lodz into the LSSE.

34 www.pmrcorporate.com Poland: analysis of selected economic sectors

2.3. Lubelskie voivodship

2.3.1. Largest companies with service centres set up in the region as part of BPO To date, Lublin has been selected for investment projects by a small group of investors. Call centres have been opened in Lublin by Idea Centertel, Intelligo, CRH Zagiel and Telekomunikacja Polska.

2.3.2. Workforce availability The Lubelskie voivodship ranks seventh among Polish academic centres in terms of the number of students. Approx. 105,000 students attend tertiary schools in the voivodship. Lublin is the region’s largest academic hub, with 14 institutions with close to 86,000 students (more than in Gdansk or Katowice). The number of students choosing to study in Lublin is steadily rising. Between 2000 and 2006, their population expanded by 24%.

Number of students and graduates in Lublin (thousands), 2000-2006

PMR013 84.0 86.9 85.5 76.6 79.4 69.1

17.4 18.1 10.9 12.5 15.2 16.0

2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006

Students Graduates

Source: GUS, 2006 www.pmrpublications.com

The following four largest institutions account for 73.9% of the region’s students: n Marii Curie-Sklodowska University – 34,000 students n Catholic University of Lublin – 21,000 n Technical University of Lublin – 11,000 n Agricultural University in Lublin – 12,500.

In the 2004/2005 academic year, graduates of social study faculties, economics and law made up the largest body of graduates (47%). Administration, law, as well as management and marketing are the three most popular university specialisations. They are followed by humanities, fine art and education.

www.pmrcorporate.com 35 Poland: analysis of selected economic sectors

University graduates in 2004/2005 academic year, by specialisation

PMR014

Health and welfare Total number of students: 85,500 6% Services Agriculture 4% 5%

Technology, industry and construction 5% Social studies, Pedagogy economics and law 6% 47%

Humanities and fine art. 13%

Education 14%

Source: Regional Statistical Office, 2006 www.pmrpublications.com

According to a survey conducted by the Maria Curie Sklodowska University as part of a research project entitled “Intellectual capital of the Lubelskie voivodship”, English, German, Russian and French are the most popular foreign languages in the region.

Percentage of voivodship residents declaring knowledge of select languages, Q1 2006

PMR015

English 32.3% Russian 24.0% German 14.7% French 2.5% Italian 1.9% Ukrainian 1.1% Dutch 0.4% Latin 0.3% Spanish 0.3% Swedish 0.2% Hungarian 0.1% Hebrew 0.1% Greek 0.1% Czech 0.1% Bulgarian 0.1%

Source: Maria Curie Sklodowska University, “Intellectual capital of the Lubelskie voivodship” research project, Q1 2006 www.pmrpublications.com

36 www.pmrcorporate.com Poland: analysis of selected economic sectors

Unemployment in the Lubelskie voivodship is above the national average and it is steadily falling. In October 2006, the voivodship unemployment rate amounted to 15.2%. As at the end of September 2006, the unemployment rate in Lublin was 10.8%, one of the highest among the regional capitals. In June 2006 unemployed with university degrees accounted for 7.7% of all unemployed in the region. At the time, there were 11,000 unemployed graduates.

2.3.3. Costs of doing business

2.3.3.1. Salaries and wages In the first nine months of 2006, the average monthly gross pay in the enterprise sector in Lublin was PLN 2,221 (€569), the lowest gross pay in the sector from among Poland’s regional capitals except for Gorzow Wielkopolski. The average employee of the enterprise sector in Lublin was paid 26% less than in Warsaw.

Gross wage (PLN) in Lubelskie voivodship, by select positions, spring 2006

PMR016

Position Average ce vi Customer Service Specialist 2,469 ser er

Technical Service Specialist 2,463 Custom

Finance Manager 5,830

Finance Specialist 2,051 Finances Finance Assistant 1,628

Chief Accountant 8,833 g

in Accounting Manager 4,351

Accountant 2,659 Account Junior Accountant 2,179 g Process Engineering Specialist 3,289 neerin

gi Designer / Drafter 2,670 En

R&D Specialist 2,930 D R& R&D Assistant 1,977

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

www.pmrcorporate.com 37 Poland: analysis of selected economic sectors

2.3.3.2. Office space rental costs Lease rates for office space in best locations in Lublin are significantly lower than in Warsaw, Krakow and Wroclaw. Best office space in Lublin (B+) can be rented out for2 €9-12/m a month.

2.3.3.3. Transport access Lublin does not have an airport though the task of launching an airport in the city has been included in the draft of the National Development Plan for 2007-2013. To connect the region by air, the voivodship authorities with the support of the local authorities have made plans to build an airport – Lublin-Niedzwiada – 26 km north of Lublin and 9 km from Lubartow.

2.3.4. Availability of investment sites

Office space According to the Regional Investment Support Centre, around 3,000 m2 of class B+ office space is available for rent in Lublin. More office stock will come on the market in 2007 (ca. 8,000 m2), including around 2,500 m2 within the Science and Technology Park of the Lubelskie voivodship, which is to be leased out to innovative companies.

2.4. Malopolskie voivodship

2.4.1. Largest companies with service centres set up in the region as part of BPO Krakow, beyond Wroclaw and Warsaw, has to date attracted the largest number of foreign firms to invest within the frameworks of BPO in opening service centres in the city. In 2006 the decision to establish a service centre either in Krakow or in its vicinity was made by such companies as: n Phillip Morris (projected number of jobs in the financial services centre: 450; the company is also planning to open an HR centre with around 250 employees) n Shell (projected number of jobs – 800) n Tata Consultancy Services (planned office space – 20,000 2m with a workforce of 1,500 persons).

38 www.pmrcorporate.com Poland: analysis of selected economic sectors

Select companies with service centres in and around Krakow

PMR017

Location Krakow Krakow Philip Morris International Krakow CAP Gemini Krakow IBM Zabierzow Shell Krakow Tesco Krakow Lufthansa Krakow Pricewaterhouse Coopers Polska Krakow IFS Polska Krakow Electrolux Krakow Exult Krakow Bayer Krakow Ahold Zabierzow ACS Affiliated Computer Services Krakow Indesit Krakow Hewitt Krakow KPMG Krakow Tata Consultancy Services* Krakow Fortis Bank Krakow Google* Krakow CH2MHill Krakow ABB Krakow Delphi Krakow Lurgi Krakow Motorola Krakow Pliva Krakow Sabre

* planned investments Source: PMR, 2006 www.pmrpublications.com

2.4.2. Workforce availability

Workforce resources The city of Krakow is the largest, after Warsaw and Katowice, labour market in Poland. In 2005 the average workforce in the enterprise sector in Krakow amounted to nearly 174,000 persons. In terms of the number of students, the Malopolskie voivodship is the third largest academic centre in Poland; it provides work to over 11,000 academic teachers (second largest number in the country) who teach over 200,000 students. Every year, the 34 Malopolskie tertiary schools release over 33,000 graduates into the world. Krakow is the academic hub of Malopolskie. Around 173,000 students are enrolled at its 23 higher institutions, with 27,000 graduates a year. Only Warsaw can boast of a better result. The student population of Krakow is steadily rising. In the last six years, it has grown the most dynamically in the country. In 2006, there were 42% more students in Krakow than in 2000.

www.pmrcorporate.com 39 Poland: analysis of selected economic sectors

Number of students and graduates in Krakow (thousands), 2000-2006

PMR018

166.1 173.8 142.7 153.9 122.1 132.5

20.6 21.5 21.7 23.9 24.1 26.8

2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006

Students Graduates

Source: GUS, 2006 www.pmrpublications.com

Five largest higher schools in Krakow educate in aggregate approximately 75% of all students in the voivodship: n AGH University of Science and Technology – 30,000 n Jagiellonian University – 48,000 n Krakow University of Economics – 30,000 n Krakow University of Technology – 17,000 n Academy of Pedagogy – 20,000.

Since there are a lot of service centres in the region, the labour market has become increasingly more competitive. Yet, the improved competition concerns only a narrow group of professions. Most service centres are looking for specialist with similar qualifications; especially in demand are programmers and persons who beyond English are also proficient in another, less popular, foreign tongue. The regional unemployment rate is among the lowest in the country and is continually falling. As at the end of September 2006, the unemployment rate in Malopolskie was 11.6%, which means that close to 149,000 people did not have a job. Around 6.6% of that total represents university graduates. In September 2006, the unemployment rate in Krakow was 5.8%, which corresponds to more than 21,000 persons, of which a steep 14% held university degrees.

40 www.pmrcorporate.com Poland: analysis of selected economic sectors

Five most popular specialisations at Malopolskie academic institutions (nubmer of institutions offering a given specialisation)

PMR019 32

15 12 5 5

Business and Management IT and applied IT Finances and International administration banking relations

Source: PMR, 2006 www.pmrpublications.com

English and German are the two most popular languages among Krakow students. Around 64% of students reported medium-advanced proficiency in English and slightly less than 15% said the same of German. Other languages popular among students are: Russian, French, Italian and Spanish. Less than 1% of students reported not knowing any foreign language.

Language proficiency among students in Krakow, percentage of students reporting knowledge of a given language (%)

PMR020

Basic Medium-advanced Fluent English 72 64 31 German 21 15 5 Russian 13 8 3 French 8 6 3 Italian 3 2 1 Spanish 2 1 0 Ukrainian 0.4 0.3 0.2 Czech 0.4 0.2 0.1 Slovakian 0.2 0.2 0.1 Swedish 0.4 0.1 0.1 Hungarian 0.1 0.1 0.1 Portuguese 0.2 0.1 0.0 Greek 0.2 0.1 0.0 Norwegian 0.1 0.1 0.0 Danish 0.2 0.0 0.0

Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

www.pmrcorporate.com 41 Poland: analysis of selected economic sectors

2.4.3. Costs of doing business

2.4.3.1. Salaries and wages In the first nine months of 2006, the average pay in Krakow was lower than in Warsaw, Poznan, Katowice and Gdansk, and amounted to PLN 2,563 (€657).

Gross pay (PLN) in Malopolskie voivodship, by select positions, spring 2006

PMR021

Position Average Customer Service Manager 4,601 e ic Customer Service Specialist 3,724 serv

er Technical Service Manager 6,930

Technical Service Specialist 2,925 Custom Serviceman 2,517

Finance Director, Board Member 19,656

Finance Manager 10,498

Controlling Specialist 5,856

Finance Specialist 3,104 Finances

Finance Analyst 6,694

Finance Assistant 1,848

Chief Accountant 8,032

Accounting Manager 7,084

Accountant 3,849 Accounting Junior Accountant 2,504

R&D Specialist 3,028 D R& R&D Assistant 2,151

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

2.4.3.2. Office space rental costs The costs of renting office space in Krakow are the second highest in the country, only in Warsaw are the rates higher. According to Jones Lang LaSalle’s June 2006 report, opening prices for office space in best locations, in the main office buildings in Krakow, oscillate around €15-17/m2/month. Average opening prices for office space in modern class A and B buildings oscillate around €13-15/m2/month.

42 www.pmrcorporate.com Poland: analysis of selected economic sectors

2.4.3.3. Transport access The district of Krakow-Balice houses an international airport, second largest in Poland. Planes fly to the following destinations from the Krakow-Balice airport: n Austria: Vienna n Belgium: Brussels n Czech Republic: Prague n Denmark: Copenhagen n France: Paris n Germany: Berlin, Dortmund, Frankfurt Hahn, Frankfurt am Main, Hamburg, Cologne, Munich, Stuttgart n Greece: Athens n Hungary: Budapest n Ireland: Cork, Dublin, Shannon n Israel: Tel Aviv n Italy: Bologna, Milan, Rome, Turin n Netherlands: Amsterdam n Norway: Oslo n Poland: Gdansk, Warsaw n Spain: Barcelona n Switzerland: Zurich n UK: Birmingham, Bristol, Glasgow, Leeds, Liverpool, London, Manchester, Newcastle, Nottingham n USA: Chicago, New York.

2.4.4. Availability of investment sites

Office space According to the representatives of the local government, in November 2006, there were only a few office buildings with much room for rent. A more significant addition of new stock of office space is expected at the top of 2007. According to Jones Lang LaSalle, there were 32,000 m2 under construction in June 2006. In addition, 90,000 m2 of modern office space was being planned at that time and should be completed by the end of 2008. From among the buildings whose completion is planned for 2007 and 2008, some buildings have been incorporated into a special economic zone on the territory of the Krakow Technology Park (www.sse.krakow.pl), namely: n Between June and July 2007, ca. 3,000 m2 will be made available in Zabierzow in the Krakow Business Park (KBP). Currently, talks are underway with respect to investments in additional locations in the KBP. n At the end of 2007, ca. 2,000 m2 is to be made available in the subzone in Czyzyny.

www.pmrcorporate.com 43 Poland: analysis of selected economic sectors

The Krakow Technological Park is currently in talks with several developers about the inclusion into the zone of additional office buildings, which are currently under construction in Krakow; thus, the aggregate area of office space that will be available to investors in 2007 will most likely be even larger than the above estimates. Investors engaged in business in the Krakow Technological Park qualify for public aid in the form of additional tax relief.

2.5. Mazowieckie voivodship

2.5.1. Largest companies with service centres set up in the region as part of BPO Besides Wroclaw and Krakow, Warsaw has to date attracted the most significant number of companies which as part of BPO have decided to establish service centres in Poland. One of the largest such investments is a centre which provides financial-accounting, IT and logistics services to clients from various European countries; it is located in Piaseczno and once fully operational, it will have 1,000 employees on staff.

Select companies with service centres in Mazowieckie voivodship

PMR022

Location Company Business profile Piaseczno Accenture Financial-accounting, IT and logistics services Verification of information on prospective and Warsaw ABN Amro existing clients of banks from various countries Financial and marketing services Garwolin Avon and a regional R&D laboratory Warsaw CitiGroup Financial and accounting centre Warsaw CTM Teleperformance Tele-marketing centre Warsaw Dimar Tele-marketing centre Warsaw Guest-Tek Servicing centre Warsaw Hewlett-Packard System solutions laboratory Warsaw IBM Technological centre Warsaw Sitel Call centre Warsaw Tchibo Accounting and IT services Warsaw Thomson Financial and accounting centre Warsaw TNT Express Reloading centre for handling road cargo Warsaw Transcom Call centre Warsaw Samsung Electronics R&D centre Warsaw General Electric Aircraft Engines R&D centre Warsaw Microsoft R&D centre Warsaw Cederroth R&D centre Warsaw Humax R&D centre Warsaw LG Electronics R&D centre Warsaw Oracle R&D centre Warsaw SAS Institute R&D centre

Source: PMR, 2006 www.pmrpublications.com

44 www.pmrcorporate.com Poland: analysis of selected economic sectors

2.5.2. Workforce availability

Workforce resources Warsaw comprises the largest labour market in Poland. In 2005 the average employment in the city’s enterprise sector stood at over 871,000 persons. In terms of student population, the Mazowieckie voivodship is the largest academic centre in Poland. There are over 12,500 academic teachers in the region teaching over 370,000 students. Warsaw is the largest academic centre in the voivodship. Around 280,000 students are enrolled at its 77 higher education institutions, with 50,000 graduates each year, i.e. 20% of all students in Poland. Warsaw institutions school twice as many graduates as tertiary schools in Wroclaw and Krakow, the cities which rank second and third after Warsaw in terms of the size of their student populations.

Largest academic centres in Poland, by student number (thousands), 2005/2006

PMR023

Warsaw 277.8 Krakow 173.8 Wroclaw 136.8 Poznan 132.9 Lodz 113.9 Lublin 85.5 Gdansk 71.9 Katowice 71.1 Szczecin 65.5

Source: GUS, 2006 www.pmrpublications.com

The largest Warsaw higher academic institutions: Warsaw University, Warsaw University of Technology, Warsaw School of Economics (SGH), Warsaw Agricultural University (SGGW) and Cardinal Wyszynski University are at the forefront of rankings of Polish tertiary schools. The five schools educate in aggregate 50% of all students studying in the Mazowieckie voivodship.

www.pmrcorporate.com 45 Poland: analysis of selected economic sectors

Number of students and graduates of largest universities in Mazowieckie

PMR024

9.198 Warsaw University 55,203 4,694 Warsaw School of Technology 30,801 3,007 Warsaw Agricultural University 22,186 4,205 Radom University of Technology 16,798 1,841 Cardinal Wyszynski University 16,037 2,426 University of Podlaskie 13,055 2,417 Warsaw School of Economics 11,945

Students Graduates

Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

In Mazowieckie, the most popular specialisations are: business and administration, management, and computer science.

Number of universities offering select specialisations, 2005/2006

PMR025 35 28 25

Business and Management IT Politics science administration

Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

The unemployment rate in Mazowieckie is one of the lowest in the country, and it is steadily decreasing. As at the end of September 2006, it stood at 12.2%. The region still has significant territorial disproportions in unemployment. The highest unemployment rate has been recorded in the counties of Szydlowiec (36.9%) and Radomsko (31.5%). Counties with the lowest unemployment rate include: the Capital City of Warsaw (4.9%), Grojec county (7.8%) and Piaseczno county (7.9%). The registered unemployment rate in Warsaw is the lowest from among all urban centres in Poland.

46 www.pmrcorporate.com Poland: analysis of selected economic sectors

2.5.3. Costs of doing business

2.5.3.1. Salaries and wages In the first three quarters of 2006, the average wage in the enterprise sector stoodat PLN 3,254 (€834), 26% higher than the national average. In the first nine months of 2006, Warsaw had the highest in the country average gross monthly wage.

Gross wage (PLN) in Mazowieckie voivodship, by select positions, spring 2006

PMR026

Position Average

ce Customer Service Manager 6,219 vi

ser Customer Service Specialist 3,802 er Technical Service Manager 6,297

Custom Technical Service Specialist 3,061

Chief Accountant 11,854

g Accounting Manager 7,779 in

Accountant 4,401

Account Junior Accountant 3,245

Cashier 2,731

Engineering Manager 11,163 g Process Engineering Specialist 5,288 neerin

gi Product Engineer 4,120 En Designer / Drafter 5,192

R&D Specialist 6,880 D

R& R&D Assistant 3,615

IT Director 18,234

IT Manager 11,662

System Analyst 7,613

Programmer 3,992

IT LAN/WAN Administrator 5,065

Data Base Administrator 5,926

IT Help Desk 3,541

IT Specialist 5,206

Technical Suport 2,800

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

www.pmrcorporate.com 47 Poland: analysis of selected economic sectors

2.5.3.2. Office space rental costs The costs of renting office space in Warsaw are the highest in the country. According to Jones Lang LaSalle’s report, the highest lease rates have stabilised at €18-21/m2/month in the city’s centre and at €13-15/m2/month outside of the downtown area. Contracted lease rates, for the best office buildings in the centre, oscillate around €17-20/m2/month. Outside of the city centre, the most expensive and average rent rates stand at €13-15/m2/month and €12-14/m2/month respectively. Maintenance costs €4-5/m2 a month in the centre and €3-4/m2 a month outside of the downtown.

2.5.3.3. Transport access Warsaw houses an international airport – Warsaw-Okecie, located 10 km from downtown. At present, it is the largest airport in Poland, with regular connections to over 80 ports in Europe, America, Asia and Africa. Currently, talks are underway with respect to opening a second airport in Warsaw, in Modliny. The new airport, which is to mainly support low-cost airlines, is scheduled to open by the end of 2008. Warsaw is also conveniently connected with other Polish urban agglomerations by rail, with estimated travel time of approx. 2.5-3 hours.

2.5.4. Availability of investment sites

Office space Warsaw is the largest office space market in the country. According to Jones Lang LaSalle’s report of June 2006, it houses total office stock of 2,462,800 2m . Additionally, to the end of 2006 and 2007, an aggregate of 390,000 m2 new office space will be made available in the capital. Approximately 120,000 m2 will be located in the centre and 270,000 m2 beyond the downtown area. As a consequence of the large number of concluded pre-leases, many of the to-be-completed facilities have already been partially leased out. The largest projects at present in the Warsaw downtown area are: Zlote Tarasy Lumen&Tower (45,000 m2 to be completed in 2007), Prosta Office Center I&II (34,000 m2), International Business Centre II (20,000 m2), Universale International (12,750 m2) and Grzybowska Park (10,000 m2).

48 www.pmrcorporate.com Poland: analysis of selected economic sectors

2.6. Slaskie voivodship

2.6.1. Largest companies with service centres set up in the region as part of BPO

Select companies with service centres in Slaskie voivodship

PMR027

Location Company Business profile Katowice Calling Polska Call centre Katowice ING Polska Processing centre Katowice Bombardier R&D centre Katowice Ontrack R&D centre Bielsko-Biala Fiat Financial and accounting services centre Dabrowa Gornicza DHL Logistics Distribution centre Ruda Slaska Gallup Polska Call centre Bielsko-Biała Avio Polska R&D centre Financial and accounting services centre Czestochowa TRW Automotive and R&D centre Financial and accounting services centre Katowice Rockwell Automation and software development centre

Source: PMR, 2006 www.pmrpublications.com

2.6.2. Workforce availability

Workforce resources The Slaskie voivodship is the second most populous region and the second largest labour market after Mazowieckie. It is the region with the third largest number of companies, after the Mazowieckie and Wielkopolskie regions. The region’s 47 higher learning institutions educate over 200,000 students. Katowice is the largest academic centre in the region, with 71 higher schools in which 71,000 students are enrolled (15,000 graduates each year). Four largest higher schools in the voivodship educate in aggregate more than 100,000 students.

Largest higher education schools in Slaskie, by number of students

PMR028

University of Silesia 43,000

Silesian University of Technology 30,000

Czestochowa University of Technology 18,000

Karol Adamiecki University of Economics 13,000

Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

www.pmrcorporate.com 49 Poland: analysis of selected economic sectors

In the Slaskie voivodship, the most popular specialisations are: management and marketing, finance and banking, and economics.

Number of students studying select specialisations in Slaskie*

PMR029 7,246

2,755 2,224 915 873 783 193 160

buildin

banking

marketin

Economics

engineerin

and

management

administratio

and

machinery

financial

Finances

and

Management

engineering

Mechanics

Economis

Enterpreneurship

Production * annual averages for 2003-2006 Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

Despite the fact that unemployment in the region is one of the lowest in the country and is continually falling, some counties in the region have an unemployment rate of over 20%. As at the end of September 2005, Katowice had the lowest unemployment rate – 6.3%, while the average rate for the region was 13.5%, which corresponds to 244,300 unemployed in the region. Unemployed with university degrees account for slightly more than 6% of the total, and those with secondary education – close to 30%.

2.6.3. Costs of doing business

2.6.3.1. Salaries and wages Salaries paid in the Slaskie region are among the highest in Poland. The average gross monthly pay in the enterprise sector stood at PLN 2,743 (€703) in October 2006 (that month the national average wage was PLN 2,658). Katowice has the second highest, after Warsaw, costs of employment. In the first nine months of 2006, the average gross monthly pay in the city’s enterprise sector stood at PLN 3,478 (€892), only 1% less than in Warsaw.

50 www.pmrcorporate.com Poland: analysis of selected economic sectors

Gross pay (PLN) in Slaskie voivodship, by select positions, spring 2006

PMR030

Position Average

ce Customer Service Manager 5,640 vi

ser Customer Service Specialist 3,184 er Technical Service Manager 7,206

Custom Technical Service Specialist 2,917 s Tele-sales representative 3,004 Sale

Chief Accountant 9,952 g Accountant 3,727

Junior Accountant 3,409 Accountin Cashier 2,731

g Engineering Manager 9,818 irin Product Engineer 4,879

Engeen Designer/Drafter 4,809

R&D Specialist 4,209 D R& R&D Assistant 2,730

IT Manager 6,492 IT IT Help Desk 2,985

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

2.6.3.2. Office space rental costs It costs less to rent office space in Katowice than in Krakow or Warsaw. According to data compiled by Metropolis Nieruchomosci Komercyjne, at the beginning of December 2006 class A office space cost ca. €19/m2+utilities to rent per month. Prices are negotiable, and discounts can amount to as much as 30% of the initial price, depending on the market position of the prospective lessee, the size of the facility and the lease term. Usually, office space is rented out under defined-term leases, for a minimum of three to five years. Class B office space may be rented out for ca. €10-12/m2+utilities per month. However, the rule of common areas, means that the rate is subject to additional charges that amount to 20-30% of the initial price. In most cases, class B rent rates are non-negotiable. Leases can be concluded for a defined or an undefined period.

www.pmrcorporate.com 51 Poland: analysis of selected economic sectors

2.6.3.3. Transport access There is an international airport in the Slaskie region, in Pyrzowice. Aircrafts fly to the following destination from the Pyrzowice airport: n France: Paris n Germany: Dortmund, Duesseldorf, Frankfurt Hahn, Frankfurt am Main, Cologne/Bonn, Munich n Ireland: Cork, Dublin n Italy: Milan, Rome n Norway: Oslo n Poland: Warsaw n Sweden: Stockholm n UK: Edinburgh, Liverpool, London, Sheffield.

In addition, the Slaskie region has good road connections with the Polish-German and Polish-Czech boarders, as well as the largest agglomerations in Poland – Warsaw, Lodz, Krakow and Wroclaw.

2.6.4. Availability of investment sites

Office space Katowice is the only city in the Silesian agglomeration with large office facilities. The market of modern office space for rent came to Katowice fairly late, in 2001, upon the completion of the Chorzowska 50 and Millenium Plaza office buildings with class A and class B space respectively. Between the end of 2003 and the beginning of 2004, the existing commercial stock was augmented by the Altus complex. According to data compiled by Metropolis Nieruchomosci Komercyjne, Katowice had 44,000 m2 of class A office space as at the end of November 2006, of which approx. 1,000 2m was readily available for rent. The city’s class B+ office buildings had 4,000 2m of unleased space. Additionally, 12,000 m2 of class B office space was also available in around a dozen or so buildings throughout the city. By the end of the first quarter of 2007, Katowice will have another ca. 6,500 m2 of office space, with an additional 43 000 2m under construction. Two buildings – Chorzowska 50 and Altus – are to be incorporated into the Katowice Special Economic Zone (KSSE) at the top of January 2007, thus, investors with offices in those buildings will be able to apply for additional public support. Both buildings are close to 100% leased out. In order to make the region an even more attractive destination for BPO-type projects, the administration of the KSSE is planning to incorporate additional buildings into the zone.

52 www.pmrcorporate.com Poland: analysis of selected economic sectors

2.7. Wielkopolskie voivodship

2.7.1. Largest companies with service centres set up in the region as part of BPO In Poznan, in comparison to Krakow and Wroclaw, fewer investors have decided to launch service centres. In 2006, the MAN concern made the decision to locate its service centre in Poznan. The company intends to hire around 500 persons, making it the largest to-date investment of this type in the capital of Wielkopolskie. In 2006, Microsoft, along with the Poznan Supercomputer and Network Centre and the Poznan University of Technology, launched the Innovation Centre to support the development of innovative solutions and technologies in the fields of IT security and outsourcing services.

Select companies with service centres in Wielkopolskie voivodship

PMR031

Location Company Business profile Poznan Armato Services Bertelsmann Call centre Poznan Carlsberg Polska S.A. Financial and accounting centre Poznan MAN Financial and accounting centre Poznan GlaxoSmithKline Call centre Poznan KPMG Financial and accounting centre Innovation centre – to support innovative Poznan Microsoft solutions and technologies supporting IT security Poznan Wikia* R&D centre

* investment planned for 2007 Source: PMR, 2006 www.pmrpublications.com

2.7.2. Workforce availability

Workforce resources The city of Poznan is the largest, after Warsaw, Katowice and Krakow, labour market in Poland. In the first three quarters of 2006, the average employment in the enterprise sector amounted to close to 146,000 persons in the city. The Wielkopolskie region has the fourth largest student population in Poland. There are approximately 7,600 academic teachers in the region, while the ratio of teachers per 1,000 students is one of the highest in Poland (only Gdansk can boast of a higher tally). The 36 higher education institutions in Wielkopolskie have in aggregate more than 160,000 students. Poznan is the largest academic centre in Wielkopolska. Its 28 tertiary schools educate 133,000 students and release more than 24,000 graduates each year. This is the fourth best result countrywide.

www.pmrcorporate.com 53 Poland: analysis of selected economic sectors

Number of students and graduates in Poznan (thousands), 2000-2006

PMR032

132.9 118.5 121.8 122.8 126.8 107.5

16.1 20.0 21.5 23.8 25.1 24.1

2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006

Students Graduates

Source: GUS, 2006 www.pmrpublications.com

The Adam Mickiewicz University, the Poznan University of Technology, the Poznan University of Economics, and the Poznan University of Agriculture are the largest tertiary schools in Poznan, in aggregate, they educate close to 66% of students in Poznan. The most popular faculties among Poznan students are management, business and administration, economics, and finances and banking. These specialisations are offered in the greatest number of the region’s higher education institutions (17 – management, 6 – business and administration, and 5 – economics). Computer science can be studied at nine universities in the voivodship.

Number of graduates with most popular specialisations in Poznan

PMR033 5,993

2.181 1,565 1,444 1,289 566

Management Business Economics Finances and Engineering* IT administration banking

* This category encompasses production, material, metal engineering, as well as machinery and robotics. Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

The Wielkopolskie region has one of the lowest unemployment rates in the country, which is continually falling. As at the end of October 2006, the unemployment rate in the region stood at 11.8%, which means that close to 186,000 did not have a job. Nearly 5% of the total were unemployed with university degrees. In September 2006, the unemployment rate in Poznan was 5.3% (only Warsaw had a lower registered unemployment rate at that time), which corresponded to 17,000 unemployed.

54 www.pmrcorporate.com Poland: analysis of selected economic sectors

2.7.3. Cost of doing business

2.7.3.1. Salaries and wages The average pay in Wielkopolskie is below the national average, and it is continually rising. In October 2006, the average gross monthly pay in the voivodship’s enterprise sector amounted to PLN 2,391 (€613), i.e. 11% below the national average. In the first nine months of 2006, the average gross monthly pay in Poznan’s enterprise sector was lower than the corresponding figure in Warsaw, Katowice and Gdansk, and amounted to close to PLN 2,823 (€724).

Gross pay (PLN) in Wielkopolskie voivodship, by select positions, spring 2006

PMR034

Position Average s Tele-sales Representative 2,698 Sale

ce Customer Service Manager 7,102 vi

ser Customer Service Specialist 3,237 er Technical Service Manager 6,197

Custom Technical Service Specialist 2,845

Finance Director 18,307

Finance Manager 10,976

Finance Controller 8,567

Finance Specialist 4,495 Finances

Finance Analyst 5,752

Finance Assistant 2,459

Chief Accountant 9,728 g Accountant 3,272

Junior Accountant 2,311 Accountin Cashier 2,286

g Process Engineering Specialist 3,285

neerin Product Engineer 3,612 gi

En Designer / Drafter 3,666

R&D Manager 7,254 D

R& R&D Specialist 4,087

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

www.pmrcorporate.com 55 Poland: analysis of selected economic sectors

2.7.3.2. Office space lease costs According to Jones Lang LaSalle’s report published in June 2006, the highest monthly office lease rates oscillate from €14/m2 at the Andersia Tower and the Poznan Business Centre to €16/m2 at the Stary Browar Art and Business Trade Centre. The average initial monthly rates in class A and B office buildings range between €12-13/m2.

2.7.3.3. Transport access The Wielkopolskie voivodship has an international airport in Poznan-Lawica. From the airport, aircrafts fly to the following destinations: n Denmark: Copenhagen n Germany: Frankfurt, Munich n Ireland: Dublin n Poland: Warsaw n UK: Liverpool, London.

In addition, the A2 motorway passes through the voivodship, which once completed is to connect the regional capital (Poznan) with the Polish-German boarder, Lodz, Warsaw and the eastern boarder.

2.7.4. Availability of investment sites

Office space Between 2004 and 2005, no sizeable office facilities were completed in Poznan, meanwhile, the available stock, completed in 2003, was gradually absorbed by the market. The percentage share of available office space in Poznan has been falling successively. As a result, there is practically no free class A office space at present. Readily rentable space, approximately 10,000 m2, is available only in class B and C office buildings. The space which will be made available in newly-constructed buildings between 2007 and 2008 will total about 90,000 m2. At present, two important office projects are underway in Poznan, namely the Andersia Tower (8,600 m2) and the Ataner Business Center (9,000 m2), which are both to be completed in 2007. Additionally, 49,000 m2 of office space is currently in the planning stage, including a business park (24,000 m2 ) east from the city centre. In the voivodship there is, among others, a sub-zone of the Kostrzyn-Slubice Special Economic Zone, where investors who have established service centres within the frameworks of BPO operate on preferential terms.

56 www.pmrcorporate.com Poland: analysis of selected economic sectors

3. Advanced technologies (high-tech) sector

High-tech sector – selected locations

PMR113

Gdynia Sopot Gdansk

Bydgoszcz

Torun Warsaw

Wroclaw

Gliwice Krakow

Bielsko-Biala

Source: PMR, 2006 www.pmrpublications.com

www.pmrcorporate.com 57 Poland: analysis of selected economic sectors

The main industries considered high-tech are: information and telecommunication technologies, biotechnology, nanotechnology and robotics. The number of companies investing in advanced technologies in Poland is steadily rising. Poland is seeing a greater inflow of funds from, among others, IT, automotive, aviation, cosmetics and pharmaceutical concerns, which are deciding to locate their research and development (R&D) centres in the country, thus, contributing towards the creation of a private R&D sector in Poland. To present, global concerns have established 37 R&D centres in Poland. Investors are persuaded to locate high-tech projects in Poland by the following factors: n large number of highly qualified graduates of tertiary technical schools and R&D specialists n large number of R&D units (ca. 200 in Poland), Polish Academy of Sciences (PAN) centres (ca. 80) and academic centres (ca. 130) n growing number of technological parks located nearby large academic centres, whose primary task is to improve how effectively new R&D findings are put to practice in economy and society.

At present, Poland houses 34 technological parks.

Number of R&D employees in Poland, by type of institution

PMR035

Tertiary schools 38,455

R&D units 11,387

PAN scientific units 4,494

Development units 3,669

Source: GUS, 2003 data www.pmrpublications.com

3.1. Dolnoslaskie voivodship

3.1.1. Largest high-tech companies in the region The Dolnoslaskie voivodship is second only to Mazowieckie in terms of the number of IT companies operating within its boarders. According to the Teleinfo500 report, in 2005 IT companies operating in Dolnoslaskie generated 10% of the aggregate revenues of all IT companies in Poland (second best result after Mazowieckie which accounts for 60.2% of the total revenues). The region houses large companies specialising in the production of software and in the provision of IT services. Companies in the region also supply components to firms from the IT and biotech industries. Siemens is one of the companies with a software development centre in Wroclaw. The centre, with approximately 700 specialists on staff, is one of Siemens’ largest centres of the type.

58 www.pmrcorporate.com Poland: analysis of selected economic sectors

Select companies from the high-tech sector operating in Dolnoslaskie voivodship

PMR036

Location Company Business profile Wroclaw Winuel Software manufacturing Production of IT solutions for clients from the CEE, Wroclaw QAD Polska regional centre Wroclaw Teta Software manufacturing Wroclaw Vulcan Software manufacturing Wroclaw Hewlett-Packard Outsourcing centre Wroclaw Siemens Software development centre Wroclaw Alstom R&D centre Wroclaw Cap Gemini Polska Software and IT services development centre Wroclaw Remy Internationale R&D centre Design and implementation of advanced solutions for Wroclaw Diehl Controls manufacturers of household appliances Wroclaw InsERT Software manufacturing Wroclaw Euroimpex Software manufacturing Wroclaw PSI Software manufacturing Wroclaw Probit Software manufacturing Wroclaw Controlling Systems Software manufacturing Advisory, integration and implementation of ERP and Wroclaw T-Systems Polska CRM systems Wroclaw IMG Polska Implementation, advisory and consultation services Computer Communication System integrator specialising in provision of advanced Wroclaw System IT services Software manufacturer, implementation and outsourcing Wroclaw Surfland services, hosting, ISP Wroclaw Advatech Implementation, training and outsourcing services

Source: PMR, Teleinfo500, 2006 www.pmrpublications.com

3.1.2. R&D institutions in the high-tech sector Business-type and R&D institutions, which play a role in the development of the advanced technologies sector in the region, include: n Know-How and Technology Transfer Centre at the Wroclaw University (www.otwt.uni.wroc.pl) n Wroclaw Centre for Technology Transfer at the Wroclaw University of Technology (www.wctt.pl) n Wroclaw Technological Park (www.technologpark.pl) n Dolnoslaskie Centre for Advanced Technologies at the Wroclaw University of Technology (www.dczt.wroclaw.pl) n Institute for Computer Automation and Measurement Systems (www.iksaip.pop.pl) n Institute for Power System Automation (www.iase.wroc.pl).

3.1.3. Workforce availability The Dolnoslaskie voivodship is the fourth largest academic centre in Poland, in terms of student population size. The 35 higher education institutions of the region educate more than 166,000 students with the help of around 7,000 academic teachers. In the Dolnoslaskie voivodship, the largest number of students (close to 137,000) is enrolled in one of the 26 academic institutions in Wroclaw. Every year, around 26,000 graduates leave Wroclaw tertiary schools.

www.pmrcorporate.com 59 Poland: analysis of selected economic sectors

The Wroclaw University of Technology is the largest technical school in the region; it has more than 32,000 students each year. The Wroclaw University also offers a lot of technical specialisations (one of the university’s faculties the silver medal in 2004 at the International Team Programming Competition). The region is the fourth largest employer of R&D specialists (approx. 8% of the country’s resources).

Select tertiary schools offering technical specialisations in Dolnoslaskie voivodship

PMR037

Number of School Selected specialisations * students (annual) astronomy biology biotechnology chemistry Wroclaw University 39,700 physics geography computer science mathematics control engineering and robotics biotechnology chemistry electronics and telecommunications electrical engineering physics, technical physics computer science Wroclaw University chemical and process engineering 32,300 of Technology materials engineering environmental engineering mathematics mechanical engineering and machine building metallurgy chemical engineering production management and engineering University of Information Technology and computer science 987 Management “Copernicus”

* The data encompasses the total number of students enrolled at a given school, not just in select specialisations; data to the nearest thousand. Source: PMR, Regional Investor Support Centre, 2006 www.pmrpublications.com

The Dolnoslaskie region has one of the highest regional unemployment rates, though the rate has been falling steadily. As at the end of October 2006, the regional unemployment rate was 16.8% (down by 3.4 percentage points from 20.2% of the preceding year). As at the end of September 2006, the unemployment rate in Wroclaw was 8.9% (down by 2.4 percentage points from 11.3% of the previous September).

60 www.pmrcorporate.com Poland: analysis of selected economic sectors

Number of students and graduates of select technical specialisations in Dolnoslaskie voivodship

PMR038

1,067 Computer science 6,785 546 Production engineering 3,606 390 Environmental engineering 3,026 311 Chemical engineering 2,855 161 Mechanical engineering and robotics 1,902 211 Physics 1,768 300 Biotechnology 1,511 203 Automation and electrical engineering 1,291 34 Materials engineering 131

Students Graduates

Source: PMR based on data from the Regional Investor Support Centre, 2006 www.pmrpublications.com

Wroclaw has a relatively high percentage of unemployed with university degrees. In June 2006 10.4% of the city’s unemployed had graduated from a tertiary school, i.e. 28,200 persons. As a consequence of the falling unemployment rate and the rising inflow of foreign investments, companies have found it increasingly difficult to find duly qualified candidates for offered jobs. This, however, primarily concerns candidates with secondary technical training, not university graduates. According to a survey conducted by KPMG in July and August 2006, 50% of the 51 surveyed companies experienced problems in recurring engineers and computer programmers.

3.1.4. Costs of doing business

3.1.4.1. Salaries and wages The average gross pay in the enterprise sector amounted to PLN 2,544 (€652) in October 2006, i.e. 95.7% of the national average. In a comparison of salaries and wages paid across the regional capitals in the first nine months of 2006, persons gainfully employed in Wroclaw were on average paid PLN 2,529 (€648), thus, less than their counterparts in Warsaw, Katowice, Gdansk, Poznan and Krakow (27% less than in Warsaw).

www.pmrcorporate.com 61 Poland: analysis of selected economic sectors

Gross pay (PLN) in Dolnoslaskie voivodship, by select positions, spring 2006

PMR039

Position Average Production Manager 6,670

Production Planning Specialist 3,838

Maintenance Specialist 3,161

Shift Leader 3,761

Handlers / Operators Foreman 2,980

Mechanic 2,785

Electrician 2,599 on ti Locksmith 3,070

Produc Turner 2,165

Fitter 1,672

Production Operator 2,143

Fork Lift Operator 1,948

Quality Control Worker 1,750

Floor Hand 1,935

Cleaning Staff 1,295 g Process Engineering Specialist 3,632 neerin gi Designer / Drafter 3,749 En

Quality Specialist 3,542 urance ss y a

Laboratory Technician 2,606 Qualit

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

62 www.pmrcorporate.com Poland: analysis of selected economic sectors

3.1.4.2. Office space rental costs It costs less to rent office space in Wroclaw than in Warsaw or Krakow. According tothe June 2006 report published by Jones Lang LaSalle, office space lease rates are in a moderate uptrend and oscillate around €14-15/m2/month for the best class A and B space and around €8-13/m2/month for class B space in office and old tenement buildings. Average monthly maintenance costs amount to ca. €2.5/m2.

3.1.4.3. Warehouse space rental costs According to Cushman&Wakefield, it costs €3-4/m2 a month to rent warehouse space outside of Warsaw (based on a report published at the beginning of 2006).

3.1.5. Availability of investment sites

Wroclaw Technology Park (www.technologpark.pl) The following sectors of the high-tech industry have been assigned priority in the development strategy of the Dolnoslaskie voivodship: n materials engineering (nanoelectronics, nanomagnetics, optical electronics, microsystems, molecular electronics, photonics) n biotechnology n information technologies n power engineering (renewable and alternative energy sources) n advanced medical technologies.

Investors looking to develop operations in the above sectors can do so on preferential terms in the Wroclaw Technology Park. The park provides: n lease of office and laboratory space as well as investment sites n lease of laboratories and equipment, additionally technical equipment comprising the furnishings of workrooms and laboratories is made available to interested firms n use of conference halls and visitor rooms n advisory from the Wroclaw Technology Park (concerning such issues as commercialisation of technologies, patent services, subsidies from EU funds).

Special Economic Zones The following SEZ are located in the Dolnoslaskie voivodship: n Walbrzych Special Economic Zone “Invest-Park” (812 ha) n Legnica Special Economic Zone (416 ha) n Kamienna-Gora Special Entrepreneurship Zone (240 ha).

Any company investing in an area incorporated into a zone has the right to apply for assistance from a public aid package which includes, in particular, partial relief from income tax.

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3.2. Kujawsko-Pomorskie voivodship

3.2.1. Largest high-tech companies in the region Companies operating in the Kujawsko-Pomorskie voivodship account for 1% of revenues generated by all IT companies in the country. The largest foreign investors operating in the high-tech industry in the region are Lucent Technologies Poland and Atos Origin.

Select companies from the high tech sector operating in Kujawsko-Pomorskie voivodship

PMR040

Workforce Location Company Business profile in 2005 Bydgoszcz Bazy i Systemy Bankowe 223 Among others, custom software development Bydgoszcz Postdata - Software manufacturing Bydgoszcz ZETO 111 Software manufacturing Bydgoszcz Macrosoft Polnoc 34 Software manufacturing Bydgoszcz Abas - Software manufacturing and distribution Torun AIS.pl 21 IT services, consulting, outsourcing Bydgoszcz Slican 89 Production of telecommunications equipment Bydgoszcz Lucent Technologies Poland 550 Production of telecommunications equipment; R&D centre Bydgoszcz Atos Origin IT Services 107* Software distribution; integration, implementation and training services “-” – no data * aggregate office workforce in Bydgoszcz and Warsaw as at the end of 2005 Source: Teleinfo500, 2006 www.pmrpublications.com

3.2.2. R&D institutions in the high-tech sector A sizeable number of R&D institutions that support the development of the high-tech sector operate in the Kujawsko-Pomorskie voivodship: n Centre for Technology Transfer (www.technopark.org.pl) and the Regional Centre Supporting Innovation and Technology Transfer which operates within the frameworks of the CTT n Bydgoszcz Scientific Society (www.btn.atr.bydgoszcz.pl) n Wroclaw Scientific Society (www.wtn.pl) n Torun Scientific Society n Regional Innovation Centre at the University of Technology and Life Sciences in Bydgoszcz (www.utp.edu.pl) n National Atomic, Molecular and Optical Physics Laboratory (famo.phys.uni.torun.pl) n Polish Federation of Engineering Associations of Bydgoszcz, Torun, Inowroclaw, Grudziadz and Wloclawek (www.not.org.pl).

The establishment of the Kujawsko-Pomorska Information Network (K-PSI), created as an initiative of the voivod, the Torun University and the University of Technology and Life Sciences in Bydgoszcz, should make a positive contribution towards the development of the high-tech industry in the region. The K-PSI will be responsible for creating a modern broadband IT infrastructure in the region.

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3.2.3. Workforce availability More than 85,000 persons study in the Kujawsko-Pomorskie voivodship. Bydgoszcz and Torun comprise the two largest academic hubs in the region. The Nicolaus Copernicus University of Torun is the largest university in northern Poland, while the University of Technology and Life Sciences in Bydgoszcz is one of the largest higher technical schools in northern Poland. Bydgoszcz has about 43,000 students, Torun – 37,000.

Number of students in Torun and Bydgoszcz, 2001-2006

PMR041

42.7 38.4 40.7 41.4 33.4 36.3

37.1 34.0 34.7 36.5 30.5 32.9

2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006

Bydgoszcz Torun

Source: GUS, 2006 www.pmrpublications.com

Select tertiary schools offering technical specialisations in Kujawsko-Pomorskie voivodship

PMR042

Number of Number of School Selected specialisations students graduates astronomy automation and robotics biology biotechnology chemistry Nicolaus Copernicus University of Torun physics 37,440 7,814 geography computer science applied computer science mathematics environmental protection biotechnology construction electronics and telecommunications electrical engineering physics University of Technology and Life Sciences in Bydoszcz environmental protection 10,066 2,126 mechanical engineering and machine building chemical engineering zoology and animal technology farming and forestry mathematics, physics and technology Kazimierz Wielki University in Bydgoszcz (computer science and econometrics) 15,877 4,520 life sciences (biology and geography) Higher School of Environmental Protection environmental protection 1,100 783 State School of Higher Vocational Education computer science

Note: data refers to the aggregate number of students enrolled at a given school, not just in the selected specialisations. Source: PMR, Regional Investor Support Centre, 2006 www.pmrpublications.com

www.pmrcorporate.com 65 Poland: analysis of selected economic sectors

The unemployment rate in the Kujawsko-Pomorskie region is relatively high. As at the end of October 2006, the regional unemployment rate stood at 19.1% (national average – 14.9%). Close to 158,000 people did not have a job. As at the end of September 2006 unemployed with university degrees accounted for 4% of the region’s unemployed. As at the end of September 2006, the unemployment rate was 9.1% in Bydgoszcz and 10.2% in Torun.

3.2.4. Costs of doing business

3.2.4.1. Salaries and wages

Gross pay (PLN) in Kujawsko-Pomorskie voivodship, by select positions, spring 2006

PMR043

Position Average Production Director 8,684

Production Manager 5,481

Production Planning Specialist 3,513

Maintenance Specialist 3,953

Shift Leader 3,728

Handlers / Operators Foreman 2,818 n

io Mechanic 2,653

Electrician 3,067 Product Fitter 3,288

Production Operator 2,369

Fork Lift Operator 2,255

Packer 2,179

Floor Hand 2,505

Cleaning Staff 1,317 g

neerin Process Engineering Specialist 5,010 gi En

Quality Manager 4,733

urance Quality Specialist 4,089 ss

y a Laboratory Supervisor 2,828

Qualit Laboratory Technician 2,444

R&D Manager 3,975

R&D R&D Specialist 2,406

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

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The average worker receives below the national average pay in the Kujawsko-Pomorskie voivodship. In October 2006, the average gross monthly pay in the enterprise sector amounted to PLN 2,255 (€655), i.e. 15% below the national average. Between January and September 2006, the average gross monthly pay in Torun stood at PLN 2,416 (30% less than in Warsaw) and PLN 2,331 in Bygoszcz (33% less than in Warsaw).

3.2.4.2. Transport access n A planned route of the A1 motorway is to transect Torun and run approx. 50 km away from Bydgoszcz; the motorway is to connect the north with the south of Poland. Currently, the section from Gdansk in the direction of the Nowe Marzy junction is under construction. n International airport in Bydgoszcz-Szwederowo offers direct flights to Warsaw and London.

3.2.5. Availability of investment sites

Centre for Technology Transfer in Torun (www.technopark.org.pl) n Offers office and laboratory space as well as investment sites (as of May 2007, the zone administration will make available 10 ha with road and technical infrastructure and with fully regulated legal status). n Offers fee-of-charge advisory provided by competent units at the Centre for Technology Transfer, namely: Euro Info Centre, Regional Centre Supporting Innovation and Technology Transfer, and the Consultation Point. n Offers a conference and training block, meeting rooms, hotel facilities. n Possibility of relief or exemption from property tax.

Bydgoszcz Industrial Park (www.bpp.bydgoszcz.pl) n Offers facilities that can be used for production, services, storage, as well as investment sites with full media hook up and infrastructure, with fully approved master plans. n Possibility of relief or exemption from property tax. n Good transport connections – the park is situated 3 km from the airport and has an own railway station, Bydgoszcz Emilianowo, on the Slask-Porty route.

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3.3. Malopolskie voivodship

3.3.1. Largest high-tech companies in the region Beyond Mazowieckie and Dolnoslaskie, the Malopolskie voivodship is the largest hub of high- tech companies in Poland; this hub is continually noting dynamic growth. According to Teleinfo500, in 2005 the region recorded to steepest growth in IT company revenues from among all the Polish regions. In 2005 the region had a 7.5% percentage share in the aggregate national revenues generated by IT companies. Krakow is the headquarters of a number of leading software, hardware and telecommunications equipment manufacturers and internet service providers. In 2006 several large international concerns made the decision to establish outsourcing centres in Krakow, including: n Tata Consultancy Services (its investments to date include an IT solutions outsourcing centre) n Google (software development centre which, once fully operational, is to employ 20-30 high-class specialists).

Select companies from the high-tech sector operating in Malopolskie voivodship

PMR044

Location Company Business profile Krakow Comarch Software manufacturing IT integration services, e.g. design and development of power Krakow KONCEPT BIW and logistics computer networks Krakow Lexmark International Polska Design, production and sale of solutions for printing Krakow DTK Computer Polska Hardware manufacturing Sucha Beskidzka Fideltronik Polska Hardware manufacturing Krakow CH2MHill Construction and commissioning of telecommunications networks Krakow IBM Software development centre Krakow ABB R&D centre Krakow Delphi Automotive Systems R&D centre for the auto industry Krakow Lurki R&D centre Krakow Motorowa Software development centre Krakow Plisa R&D centre Krakow Sabre R&D centre Krakow FCA Telecommunications equipment manufacturing Krakow Unima2000 Design, supply and commissioning of telecommunications systems Krakow Tele-Fonika Kable Telecommunications equipment manufacturing Krakow Digitland Software manufacturing Krakow Quantum Software Software manufacturing and distribution Krakow Ericpol Telecom R&D work related to the design of software for telecommunications

Source: PMR, Teleinfo500, 2006 www.pmrpublications.com

3.3.2. R&D institutions in the high-tech sector The Malopolskie region has one of the largest groupings of R&D institutions of any region in Poland. The region is also a leader in terms of the number of technology transfer centres, advanced technology centres, and centres of excellence. The region’s tertiary schools partnership in joint scientific and research-development projects whose aim is to interest the business milieu in R&D work.

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Technology transfer centres: n Innovation, Technology Transfer and Development Centre at the Jagiellonian University (www.cittru.uj.edu.pl) n Centre for Technology Transfer at the Krakow University of Technology (www.transfer.edu.pl) n CYFRONET Academic Computer Centre at the AGH University of Science and Technology (www.cyfronet.pl).

Advanced technology centres: n AKCENT Malopolska Centre for Advanced Technologies at the Jagiellonian University (www.akcent.malopolska.pl), within the frameworks of which the following projects are underway:  Joint venture between the Jagiellonian University, the Agricultural University of Krakow and the Polish Academy of Science: Malopolskie Biotechnology Centre  Provision of additional apparatus to laboratories of the New Materials and Nanotechnology Centre  Krakow Laboratory for Development and Distribution of Multimedia Content for Technology and Know-How Transfer  International Laboratory for Interactive Three-Dimensional Visualisation  Renewable Energy Centre n Centre for Advanced Tele-Information Technologies for Business (AGH University of Science and Technology) n Centre for Advanced Technologies of Raw Materials, Carbon Fuels and Renewable Energy (www.igng.krakow.pl).

Centres of excellence (scientific units engaged on a continuous basis in scientific research and international cooperation, in particular within the frameworks of EU programmes, in order to broaden knowledge in fields regarded as especially critical for the economy in assumptions underlying the country’s scientific and innovation policies): n CeKoMat Centre of Excellence for New Computer Technologies for Metallurgy and Materials Engineering n COCAFTEC Centre of Excellence for Advanced Casting Technologies n Centre of Excellence for the Faculty of Biochemistry, Biophysics and Biotechnology at the Jagiellonian University in Krakow n CATCOLL Centre of Excellence, Krakow Research Centre of Molecular Catalysis and Soft Matter Chemistry n IONMED Centre of Excellence, Krakow Research Centre for Ion Engineering n Centre of Excellence in E-Learning at the AGH University of Science and Technology.

www.pmrcorporate.com 69 Poland: analysis of selected economic sectors

Select R&D institutions operating in Malopolskie voivodship

PMR045

Institution Profile Operates as a remote branch of the Institute of Electron Hybrid Microelectronics and Technology in Warsaw, a PAN unit. The objective of the Resistors R&D Centre centre is to conduct world-class scientific research and to (www.ite.waw.pl) develop advanced semiconductor technologies to be used in innovative products. Institute of Nuclear Physics PAN The institute engages in basic and applied research (www.ifj.edu.pl) in physics. Institute of Catalysis and Surface Chemistry PAS Research in the field of catalysis and surface chemistry. (atom.ik-pan.krakow.pl) Research in such areas as the development Institute of Metallurgy and Materials of environmentally friendly materials, nano- and Science PAN micro-crystalic materials, as well as the development (www.imim.pl) of research and diagnostic tools. Institute of Advanced Specialises in chipboard, abrasive and corrosive machining Manufacturing Technology and in technical metrology, assembly and automation of (www.ios.krakow.pl) manufacturing processes.

Source: PMR, 2006 www.pmrpublications.com

3.3.3. Workforce availability The Malopolskie region is the third largest, in terms of student population, university education hub in Poland. The region has over 11,000 academic teachers (the second largest group of these professionals in the country) who educate over 200,000 students. Every year, more than 33,000 graduates exit the 34 Malopolskie tertiary schools. The region employs also 13% of all R&D specialists in the country (only trailing behind Warsaw). The AGH University of Science and Technology and the Krakow University of Technology together have more than 46,400 students; every year the two release close to 9,000 graduates onto the labour market. Malopolskie has one of the lowest unemployment rates in the country. As at the end of September 2006, the unemployment rate in the region was 11.6%, which means that close to 149,000 persons were unemployed at the time. Of the total, 6.6% represented unemployed with university degrees.

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Select tertiary schools offering technical specialisations in Malopolskie voivodship

PMR046

Number of students School Select specialisations * (annual) astronomy biophysics biology biotechnology chemistry physics Jagiellonian University geography 43,400 computer science materials engineering mathematics environmental protection biology and geography studies mathematics and natural science studies automation and robotics electronics and telecommunications electrical engineering technical physics mining and geology computer science AGH University applied computer science of Science and 30,000 materials engineering Technology environmental engineering mathematics mechanical engineering and machine building metallurgy chemical engineering production management and engineering architecture automation and robotics electrical engineering technical physics computer science computer science and data communication systems Krakow University applied computer science 17,000 of Technology chemical and process engineering materials engineering environmental engineering mathematics mechanical engineering and machine building chemical technology production management and engineering

* The data encompasses the total number of students enrolled at a given school, not just in select specialisations; data to the nearest thousand. Source: PMR, 2006 www.pmrpublications.com

In September 2006 the unemployment rate in Krakow was 5.8%, which corresponds to over 3,000 persons, of which a steep 14% had completed tertiary education.

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3.3.4. Costs of doing business

3.3.4.1. Salaries and wages In October 2006 the gross average pay in the enterprise sector amounted to nearly PLN 2,405 (€617), i.e. 90.5% of the national average. In a comparison of remuneration paid across the region capitals, the average gross pay in the enterprise sector in the first nine months of 2006 was lower in Krakow than in Katowice, Warsaw, Gdansk and Poznan, and amounted to PLN 2,562 (€657).

Gross pay (PLN) in Malopolskie voivodship, by select positions, spring 2006

PMR047

Position Average Production Manager 7,619 Production Planning Supervisor 6,654 Production Planning Specialist 2,614 Maintenance Manager 7,832 Maintenance Specialist 7,130 General Specialist in Production Department 6,088 Automation Service Engineer 2,506 Production Assistant 2,733 Shift Leader 4,728 Handlers / Operators Foreman 2,713 on ti Mechanic 4,365 Electrician 4,066

Produc Electrical Fitter 2,048 Locksmith 1,917 Turner 1,873 Solderer 2,055 Fitter 1,669 Production Operator 2,558 Fork Lift Operator 2,040 Packer 3,013 Quality Control Worker 1,868 Floor Hand 2,012

g Engineering Director 14,171 Process Engineering Specialist 5,134 neerin

gi Product Engineer 2,605

En Designer / Drafter 3,032

Quality Manager 7,059

urance Quality Specialist 3,998 ass Laboratory Supervisor 6,036

Quality Laboratory Technician 3,483

R&D Specialist 3,028

R&D R&D Assistant 2,151

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

72 www.pmrcorporate.com Poland: analysis of selected economic sectors

3.3.4.2. Office space rental costs It costs less to rent office space in Krakow than in Warsaw, though the space can be rented out for less in all other regional capitals. According to Jones Lang LaSalle’s report published in June 2006, opening rates in best locations, in main office buildings in Krakow, oscillate around €15-17/m2/month. The average opening prices for modern space in class A and B office buildings stand at €13-14/m2/month.

3.3.4.3. Warehouse space rental costs According to Cushman&Wakefield, the cost of renting a 2m of office space outside of Warsaw is €3-4 per month.

3.3.5. Availability of investment sites

Krakow Technology Park The advanced technologies industry has been defined as a priority sector in the development strategy of the Malopolskie region. Meanwhile, the strategic objectives of the Krakow Special Economic Zone (KSSE) include: n to inspire the establishment of innovative technological projects n to facilitate technology transfer n to commercialise the findings of scientific research of Krakow’s tertiary schools and research units n to initiate cooperation between industry and academia.

The KSSE is particularly interested in attractive investment projects focused on: n IT system technologies and telecommunications networks n electronics, including optical electronics and micro electronics n materials engineering technology n healthcare technologies and medical engineering n biotechnology and genetic engineering n technologies related to environmental protection and to using renewable and unconventional energy sources.

The Krakow Technology Park (KPT) offers preferential terms for the above types of projects. The KPT’s offer encompasses both Greenfield-type investment sites as well as completed office space for rent. A firm investing in an area incorporated in the zone has the right to draw on support from a public aid package, in particular, on partial exemption from income tax. The KSSE has the following sub-zones: n Czyzyny (29.44 ha) – land zoned for office and scientific and didactic facilities, 4 km from downtown Krakow n Pychowice (31.53 ha) – land zoned for office facilities, 7 km from downtown Krakow n Branice (13.82 ha) – land zoned for industrial plants, approximately 10 km from downtown Krakow n Krakow Business Park in Zabierzow – land zoned for office facilities, just at the north- western municipal boarder of Krakow, it neighbours the A4 motorway, the Balice airport and the railway line www.pmrcorporate.com 73 Poland: analysis of selected economic sectors

n Niepolomice (140.87 ha) – land has been approved for development by MAN Trucks of Germany as well as the company’s subcontractors n Bronowice – the Brama Bronowicka office buildings has the status of a Special Economic Zone n Tarnow Industrial Cluster (35.6 ha) – area zoned for industrial plants, located in north- western Tarnow, within the Tarnow-Chyrzow district, near Tarnow’s northern ringroad on the Kielce-Krakow route.

At present, nearly the entire territory of the Krakow Technology Park is occupied by investors. The administration of the zone is planning to prepare new office space for investors in 2007 (around 3,000 m2 of office space in the KBP and another 2,000 2m in office buildings in Czyzyny). Approximately 40 ha of new land will also be made available at the beginning of 2007 to investors within the Krakow Technology Par for Greenfield projects, these areas have already been incorporated into the KSSE. It is also possible that new sites (both office facilities and land for Greenfield projects) in which investors are interested will be incorporated into the zone.

Office space According to the representatives of the local government, in November 2006 only a few office buildings had larger areas of empty space ready for rent. A larger supply of office space should filter onto the Krakow market at the beginning of 2007. According to Jones Lang LaSalle, in June 2006 a total of 32,000 m2 of office space was under construction. In addition, another 90,000 m2 was being planned and should be completed by the end of 2008.

3.4. Mazowieckie voivodship

3.4.1. Largest high-tech companies in the region The Mazowieckie voivodship is a clear leader in the high-tech industry among all the regions of Poland. Its percentage share in total revenues of IT companies in Poland has been rising and in 2005, it was 60.2% (based on Teleinfo500 data). The Mazowieckie region is home to the largest concentration of IT companies in Poland. Next to Malopolskie and Dolnoslaskie, this region is also a leader in terms of the number of R&D centres and foreign investments in the high-tech industry. The largest software producers and IT service providers are headquartered in Mazowieckie. International high-tech concerns have decided to establish their R&D centres in Mazowieckie. Other notable examples of companies based in the Mazowieckie region include Bioton, the largest Polish biotechnology company (Macierzysz, Ozarow Mazowiecki) and Celon Pharma (Lomianki near Warsaw).

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Largest companies from the high-tech sector operating in Mazowieckie voivodship

PMR047

Company City Business profile Hewlett-Packard Polska Warsaw New technology services; distribution of hardware; IBM Polska Warsaw Development of software and distribution of hardware Computerland Warsaw Development of software NTT System Warsaw Production and distribution of hardware Fujitsu Siemens Computers Warsaw Implementation services Development of software for digital satellite, cable, and terrestrial TV Samsung Electronics Polska Warsaw receivers complying with DVB (Digital Video Broadcasting) standards ABG Ster Projekt Warsaw Development of software Softbank Warsaw Development of software Microsoft Warsaw Development of software Accenture Warsaw Integration and implementation services Cisco Systems Warsaw Provision of network technologies and solutions Sun Microsystems Warsaw Implementation, training and maintenance services SAP Polska Warsaw Implementation and consultancy services General Electric Aircraft Engines Warsaw Centre of aircraft engine design Microsoft Warsaw Centre of software engineering Avon Garwolin Regional R&D laboratory Cederroth Radzymin R&D centre Humax Warsaw R&D centre LG Electronics Ciechanow R&D centre Oracle Warsaw R&D centre SAS Institute Warsaw R&D centre

Source: PMR, 2006 www.pmrpublications.com

3.4.2. R&D institutions in the high-tech sector The Warsaw agglomeration is home to 230 of approximately 736 scientific institutions in Poland (including 52% of all scientific units of the Polish Academy of Sciences and 47% of R&D units in Poland). Select business-related and science-research institutions supporting the high-tech sector: n Academic Incubators for Enterprises n Warsaw Technology Park (www.technoport.pl) n Institute of Biotechnology and Anti-Biotics (www.iba.waw.pl) n Institute of Nuclear Chemistry and Technology (www.ichtj.waw.pl) n Ignacy Moscicki Industrial Chemistry Research Institute (www.ichp.pl) n Institute of Electrical Engineering (www.iel.waw.pl) n Institute of Power Engineering (www.ien.com.pl) n Institute of Nuclear Energy (www.iea.cyf.gov.pl) n Sylwester Kaliski Institute of Plasma Physics and Laser Microfusion (www.ifpilm.waw.pl) n Institute of Aviation (www.ilot.edu.pl) n Institute of Mathematical Machines (www.imm.org.pl) n Institute of Precision Mechanics (www.imp.edu.pl) n Institute of Applied Optics (www.inos.pl) n Institute of Electron Technology (www.ite.waw.pl) n Institute of Electronic Materials Technology (www.itme.edu.pl) n Tele and Radio Research Institute (www.itr.org.pl)

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n Tekoma Research and Development Centre for Machine Technology and Design (www.tekoma.pl) n PIAP Industrial Research Institute for Automation and Measurements (www.piap.pl) n Industrial Institute of Electronics (www.pie.edu.pl) n Institute Research Telecommunications (www.pit.edu.pl).

3.4.3. Workforce availability The Mazowieckie voivodship has the largest student and researcher population in Poland. Over 370,000 students are taught by 12,500 academic staff in the region. 27% of all persons employed in the R&D sector are residents of the Mazowieckie region. The largest number of all students in this region (close to 278,000) study in Warsaw, which has the largest concentration of various tertiary schools (77). Every year, Warsaw has approximately 50,000 graduates of third-level schools.

Number of university researchers: Warsaw vs. other regions

PMR049 Warsaw 22%

Other regions 78%

Source: GUS, 2006 www.pmrpublications.com

Number of scientific institutions: Warsaw vs. other regions

PMR050 Warsaw 25%

Other regions 75% Source: GUS, 2006 www.pmrpublications.com

The Warsaw University of Technology is the largest school of that type in the region. It has over 31,000 graduates each year. Similarly, the Warsaw University and Cardinal Stefan Wyszynski University teach students at many technical specialisations.

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Schools based in Warsaw are at the top of national rankings of technical schools. The Warsaw University won the first prize in the TopCoder international ranking of IT professionals, coming out ahead of Massachusetts Institute of Technology, Stanford University and California Institute of Technology. The computer science specialisation is one of the most popular in the Mazowieckie voivodship – it is taught at 25 tertiary schools. Mazowieckie’s unemployment figure is one of the lowest in Poland. At the end of June 2006,

Select tertiary schools offering technical specialisations in Mazowieckie voivodship

PMR051

Number of students School Selected specialisations * (annual) astronomy biology biology and geology biotechnology chemistry Warsaw University physics 55,200 geography geology computer science computer science and econometrics mathematics architecture automatics and robotics biotechnology chemistry computer science electrical and computer engineering electronics and telecommunications electrical engineering technical physics Warsaw University of computer science 30,800 Technology computer science, automatics and robotics, electronics and telecommunications chemical and process engineering material engineering environmental engineering mathematics mechanics and mechanical engineering metallurgy chemical engineering Cardinal Stefan Wyszynski computer science and econometrics 16,000 University mathematics Polish Japanese Institute of Information Technology of computer science Warsaw

* The data encompasses the total number of students enrolled at a given school, not just in select specialisations; data to the nearest thousand. Source: PMR, 2006 www.pmrpublications.com

the unemployment rate in the voivodship was 12.8%. Nearly 307,000 people were jobless; 6.2% of the unemployed have university education. In September 2006, the unemployment rate for Warsaw was 4.9%, dropping by 15% from the figure for September 2005; as expected, it was the lowest figure of all the Polish voivodships. The number of the unemployed in Warsaw was approximately 52,000 persons.

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3.4.4. Costs of doing business

3.4.4.1. Salaries and wages In the first three quarters of 2006, monthly salary in the sector of enterprises averaged PLN 3,254 (€834) and was 26% above the national average. In the first nine months of 2006, the average gross monthly pay in the sector of enterprises based in Warsaw was the highest in Poland.

Gross pay (PLN) in Mazowieckie voivodship, by select positions, spring 2006

PMR052

Position Average Production Director 9,400 Production Manager 8,941 Production Planning Specialist 3,762 Maintenance Manager 7,125 Maintenance Specialist 5,644 Automation Service Engineer 4,227 Production Assistant 2,991 Shift Leader 5,839 Handlers / Operators Foreman 3,738 n

io Mechanic 3,172 Electrician 4,053 Electrical Fitter 3,485 Product Locksmith 2,944 Turner 2,389 Solderer 1,878 Fitter 1,532 Production Operator 2,883 Fork Lift Operator 2,656 Quality Control Worker 3,219 Floor Hand 2,012 Cleaning Staff 1,468

g Engineering Manager 11,163 Process Engineering Specialist 5,288 neerin

gi Product Engineer 4,120

En Designer / Drafter 5,192

Quality Manager 8,371

urance Quality Specialist 5,685 ass Laboratory Supervisor 7,679

Quality Laboratory Technician 3,388

R&D Specialist 6,880

R&D R&D Assistant 3,615

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

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3.4.4.2. Office space rental costs In Warsaw, the office space rental costs are the highest in Poland. According to the report released by Jones Lang LaSalle, the highest rental rates stabilised around €18-21/m2/month for office space in the centre of Warsaw and €13-15/m2/month outside the city centre. In the case of the best office buildings placed in the centre of Warsaw, transaction rental rates fall in the range of €17-20/m2/month. Outside the city centre, the highest and average rental rates average €13-15/m2 and €12-14/m2 a month, respectively. On average, service charges amount to €4-5/m2 a month in the city centre and €3-4/m2 a month in buildings outside the city centre.

3.4.4.3. Warehouse space rental costs According to Cushman&Wakefield, rental rate for warehouse space in Warsaw range from €3.3/m2 to €5.5/m2, depending on district (report released early in 2006).

3.4.4.4. Transport availability Warsaw-Okecie international airport is located 10 km from the main city centre. Currently, it is the largest airport in Poland. Talks are now underway concerning a second airport for Warsaw. Most likely, military airports will be adapted for that purpose; the new airport will be probably located north or west of Warsaw. The Warsaw railway node is the place where national and local railways converge. Depending on technical conditions and traffic safety, railway lines are divided as follows: trunk lines, class 1 lines, class 2 lines and class 3 lines. The lines relevant for the Mazowieckie region are as follows: n Three national trunk railway lines covered by AGC and AGTC agreements:  E20 (nos. 2,3) (Berlin) – Kunowice – Poznan – Warsaw – Terespol – (Moscow) – AGC, AGTC  E65 (nos. 4,9) Gdansk – Warsaw – Katowice (CMK) – AGC, AGTC  E75 (nos. 6, 449) Warsaw – Bialystok – Kuznica Bialostocka – (Sankt Petersburg) – AGC. n Class 1 railway line scheduled to be covered by AGC and AGTC agreements: E28 (no. 7) Warsaw – Pilawa – Deblin – Lublin – Dorohusk n National trunk railway line and class 1 railway line not covered by international agreements:  no. 1 Warsaw – Koluszki – Czestochowa – Katowice (trunk line)  no. 8 Warsaw – Radom – Krakow (class 1).

3.4.5. Availability of investment sites

Warsaw Technology Park In order to create conditions conducive for innovative firms to get established and develop in Warsaw, the Warsaw Technology Park will be set up in Warsaw (www.technoport.pl). It will cover an area of 45 ha where 300,000 m2 of useable area will be built, including laboratories, production space, office space, shared infrastructure (conference halls, car parks etc) and accompanying service space. www.pmrcorporate.com 79 Poland: analysis of selected economic sectors

The project is structured as follows: n Phase 1, 2006-2007 – the development of scientific consortium, site clean-up, obtaining additional funds for the development of an incubator, the development of a 5,000 m2 incubator, engaging partners, drafting applications for EU funds, beginning of the next phase of the WTP project. n Phase 2, until 2008 – two-stage development of the entire site, launch of on-site services.

Particularly desired and preferred investment projects will pertain to the following areas: n IT science and telecommunications n biotechnology and medicine n nanotechnologies and new materials n mechatronics n optoelectronics n renewable source of energy n banking and insurance n logistics and transport n state and public security.

Entrepreneurs will be able to use real estate and technical infrastructure located in the park, as well as laboratories and state-of-the-art research equipment. They will be able to benefit from the transfer of state-of-the-art technologies and use R&D results in developing new products.

3.5. Pomorskie voivodship

3.5.1. Largest high-tech companies in the region Due to a high number of IT companies active in the region, the Pomorskie voivodship is referred to as the “tri-city silicon valley”. Large IT market players recognised on the market are headquartered in Pomorskie, including Prokom Software, a major software producer in Poland which is seated in Gdynia, employing 1,350 people. According to PAIiIZ, approximately 60% of all high-tech companies operating in the Pomorskie region are located in the Tri-City (approx. 100 companies), 15 – in the area of Slupsk, 9 – in the area of Malbork, 7 – in the area of Wejherowo and 7 – in the area of Tczew. Many manufacturers of electronic sub-assemblies operate in the Pomorskie region, particularly in the area of the Tri-City; these companies can act as sub-suppliers for high-tech producers. Gdansk is also home to Eurux, A&A Biotechnology of Gdynia, which are major biotechnology companies in Poland.

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Shares of voivodships in revenues of the Polish IT sector, 2005

PMR053 Kujawsko-Pomorskie 1.0%

Wielkopolskie Other 3.5% 6.0% Pomorskie 5.2%

Slaskie 6.5%

Malopolskie 7.5% Mazowieckie 60.2% Dolnoslaskie 10.0%

Source: Teleinfo500, 2006 www.pmrpublications.com

Select companies from the high-tech sector operating in Pomorskie voivodship

PMR054

Workforce Company City Business profile in 2005 Atena Sopot 181 Development of software Blue Media Sopot - Products and services integrating GSM technology and financial services Comex Gdansk 30 Uninterruptible power supply systems for users, equipment and IT systems Compuware Gdansk 80 Software development centre DGT Straszyn 170 Production of telecommunications software Grand Sopot 50 Integrated hardware solutions for banks, offices and businesses Humax Pruszcz Gdanski - Software development centre Intel Technology Poland Gdansk 302 R&D in data transmission technologies Lufthansa Systems Gdansk 138 Development of software Optix Polska Gdynia 86 Development of software Platan Sopot 76 Production of data transmission systems Pretor Gdansk 26 Development of hardware Prokom Software Gdynia 1,357 Production and distribution of software Softbank Serwis Gdansk 154 Development of software Unisoft Gdynia 200 Development of software Vector Gdynia 227 Development of hardware telecommunications Young Digital Planet Gdansk 290 Development of software

“-” – no data Source: Teleinfo500, 2006 www.pmrpublications.com

3.5.2. R&D institutions in the high-tech sector n Gdansk Science and Technology Park (www.strefa.gda.pl) n Pomorski Science and Technology Park (www.ppnt.pl) n Regional Council of the Federation of Engineering Associations – NOT (www.not.slupsk.pl) n Gdansk Centre for Technology Transfer (www.ctt.gda.pl) n Institute of Computer Science of the Polish Academy of Sciences (www.ipipan.waw.pl) n Institute of Fluid-Flow Machinery of the Polish Academy of Sciences (www.imp.pg.gda.pl).

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3.5.3. Workforce resources Pomorskie has the highest ratio of the population with tertiary education in Poland. In the 2005/2006 academic year, a total of nearly 98,000 students studied at various third level schools across the region (up by 2.3% from the preceding academic year), while higher school graduates numbered 19,000. Students of technical schools account for 18% of all students in the region. In the Tri-City, student population stands at 82,000; each year, 15,000 individuals graduate from local technical schools. Gdansk has the largest ratio of academic teachers per one thousand students in Poland. The Gdansk University, which is the largest higher school in the Pomorskie region, and the Gdansk University of Technology offer a wide range of technical programmes. Engineering and technical specialisations are the most popular ones in secondary vocational schools, with almost 13,000 students attending these courses in the 2005/2006 school year.

Number of students in Pomorskie voivodship by type of tertiary school, 2005/2006

PMR055 Universities Other 31% 33%

Tertiary pedagogy schools Tertiary technical 8% schools Tertiary economic 18% schools 10%

Source: GUS, 2006 www.pmrpublications.com

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Select tertiary technical schools in Pomorskie voivodship

PMR056

Number of Number of Select specialisations students students (annual) (annual) archaeology biology biotechnology chemistry physics Gdansk University geography 29,311 5,582 computer science computer science and econometrics mathematics oceanography environmental protection architecture biotechnology electronics and telecommunications electrical engineering power engineering technical physics computer science Gdansk University material engineering 17,634 2,168 of Technology environmental engineering mathematics mechanics and mechanical engineering environmental protection chemical engineering environmental protection technology electronics electrical engineering mechanics and mechanical Gdynia Maritime University 7,607 1,790 engineering navigation transport

Source: PMR, Regional Investor Support Centre, 2006 www.pmrpublications.com

Number of students of select specialisations at tertiary schools in Pomorskie voivodship

PMR057

Number of tertiary Number of Number of schools offering students graduates given specialisation (annual) (annual) Automatics and robotics 1 759 80 Biotechnology 2 754 146 Chemical engineering 1 541 41 Computer science 3 3,241 380 Production engineering 2 5,533 569 Environmental engineering 1 473 157 Material engineering 1 366 - Mechanics and mechanical engineering 2 2,695 304 Physics 3 909 70 Transport 2 647 94 Oceanography 1 428 35 Environmental protection science 3 1,925 407 Electronics and telecommunications 2 2,109 249

“-” – no data Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

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As at the end of October 2006, unemployment in the region was 15.6% (127,000). In September 2006, the percentage of the unemployed with university education was 4.8%. The unemployed with basic vocational education (32%) represented the largest proportion of the jobless.

Unemployment in the Tri-City, September 2006

PMR058

Number Unemployed Unemployment rate of the unemployed with tertiary education Gdansk 6.7% 12,873 1,533 Gdynia 6.3% 6,616 822 Sopot 5.3% 918 149

Source: Gdansk Statistical Office, 2006 www.pmrpublications.com

3.5.4. Costs of doing business

3.5.4.1. Salaries and wages In October 2006, the average gross monthly pay in the sector of enterprises was PLN 2,684 (€688), i.e. slightly above the average national wage), which was 4.7% higher than in the corresponding period in 2005. In the first nine months of 2006, the average gross pay in the sector of enterprises in Gdansk was among the highest in Poland, amounting to close to PLN 3,175 (€814). The only cities higher with wages were Warsaw and Katowice.

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Gross pay (PLN) in Pomorskie voivodship by select positions, spring 2006

PMR059

Position Average Production Director 8,684

Production Manager 5,481

Production Planning Specialist 3,513

Maintenance Specialist 3,953

Shift Leader 3,728

Handlers / Operators Foreman 2,818 n

io Mechanic 2,653

Electrician 3,067 Product Fitter 3,288

Production Operator 2,369

Fork Lift Operator 2,255

Packer 2,179

Floor Hand 2,505

Cleaning Staff 1,317 g

neerin Process Engineering Specialist 5,010 gi En

Quality Manager 4,733

urance Quality Specialist 4,089 ass Laboratory Supervisor 2,828

Quality Laboratory Technician 2,444

R&D Manager 3,975

R&D R&D Specialist 2,406

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

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3.5.4.2. Office space rental costs

Office space rental costs in the Tri-City, 2006

PMR060

Class of office City Average office space rental cost space Tri-City (Gdansk, €12-15/m2 +€ 2.5-4/m2 (maintenance charge) a month A Sopot, Gdynia) €8-12/m2 +€ 2.5-4/m2 (service charge) a month B

Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

3.5.4.3. Transport availability Gdansk is situated where major roads converge. E28, E75 and E77 European routes meet within the city. It is also where DK1 national road; additionally, DK7 and S6 (a by-pass for the Tri-City) intersect. This road network is complemented by 6 regional roads, including DW468, which is the main transportation artery for the Tri-City. The extension of the road network in the Pomorskie voivodship is underway. The Pomorskie voivodship has two commercial ports – Gdansk and Gdynia, and an international airport offering direct flights for passengers going to Warsaw, Frankfurt, Munich, Hamburg, Copenhagen, Stockholm, Oslo, Dublin, Liverpool and London, as well as chartered flights. Top flight destinations from Lech Walesa Airport of Gdansk: n Denmark: Copenhagen n Germany: Dortmund, Frankfurt am Mein, Frankfurt Hahn, Hamburg, Köln/Bonn, and Munich n Ireland: Cork, Dublin, Shannon n Norway: Oslo n Poland: Krakow, Warsaw, Wroclaw n Sweden: Stockholm n UK: Edinburgh, Glasgow, Liverpool, London,

3.5.5. Availability of investment sites

Office space According to the report released by Jones Lang LaSalle, the largest proportion of all office space projects completed in the Tri-City (48%) are offered in Gdansk, and represents an area of 110,000 m2. In June 2006, the ratio of unleased office space was 5.9%. Also in Gdynia, a decisive majority of the 90,000 m2 of available office space was leased out. In June 2006, the total area of office space which was at the stage of planning amounted to 135,000 m2.

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Warehouse space There are no large logistics centres in the Pomorskie voivodship. Located in Pruszcz Gdanski, the largest logistics centre has an area of 10,000 m2. Entities of various types, including enterprises and private individuals, offer warehouses for sale or lease, most of which have an area of 1,000-2,000 m2 and are in average technical condition.

Pomorska Special Economic Zone and Gdansk Science and Technology Park The Pomorska Special Economic Zone is located within the Pomorskie voivodship; it is where enterprises can conduct business activities on preferential terms. The Pomorska SEZ includes land located in Zarnowiec (Krokowa and Gniewino communes), Tczew, Gdansk, Kwidzyn, Malbork, Starogard Gdanski, Sztum, Czluchow and Chojnice. In December 2006, it was resolved that the zone would be enlarged to include an area of close to 143 ha. After the enlargement, the zone’s area would total 677 ha. The Pomorska Special Economic Zone includes the Gdansk Science and Technology Park (www.strefa.gda.pl) which is located in Gdansk, near the Gdansk University of Technology, the Gdansk University and the Medical University of Gdansk. The operating programme for the Park ensures convenient conditions for R&D laboratories and high-tech companies in the following industries in the Park: n IT and telecommunications technologies n functional materials and nanotechnologies n environmental protection n biotechnology, food and pharmaceutical chemistry.

Currently, the buildings comprising the park are being adapted. In mid-2008, 19,000 m2 of office space and office/technology space will be made available. Additionally, the following institutions will be located within the Park: n Pomorze Centre of Advanced Technologies n an incubator for technology companies n Centre for Technology Transfer n a conference and training centre n Foundation of Pomeranian Innovative Network Brainet n seat of the Pomorska Special Economic Zone.

The Pomorski Science and Technology Park, Gdynia-Redlowo The Park covers an area of 6 ha in the centre of Gdynia. The land is appropriately developed to meet the requirements of modern enterprises. In June 2006, 9,000 m2 of new office and laboratory space, as well as conference and exhibition halls, prototype shops, leisure space and economic resources, were made available to businesses. Currently, the Park does not have any office space available. New buildings will be made available after the completion of the repair in the first quarter of 2007. The Pomorski Science and Technology Park is focused on high-tech projects, mainly in biotechnology, environmental protection, computer science and industrial design. Firms operating in these industries are offered free-of-charge advice on such topics as finance, book- keeping, law, EU subsidies, as well as free-of-charge Internet access. www.pmrcorporate.com 87 Poland: analysis of selected economic sectors

3.6. Slaskie voivodship

3.6.1. Largest high-tech companies in the region The Slaskie voivodship has a large concentration of high-tech companies, in particular from the IT industry (Poland’s fourth largest concentration of IT firms). According to the data released by Teleinfo500, IT companies operating in this region generate over 6% of the IT sector’s revenues in Poland. The largest developers of software in Poland are based in the region; many globally recognized concerns have established their R&D centres in the Slaskie region. Ontrack, a company specialised in data recovery, located its software development centre in Katowice. It is the largest data recovery laboratory in Central and Eastern Europe.

Select companies from the high-tech sector operating in Slaskie voivodship

PMR061

City Company Business profile Gliwice Wasko Development of software, distribution of data communications equipment Katowice SPIN Development of software Tychy Wilk Elektronik Production of data communications equipment Zabrze Elzab Production of data communications equipment Katowice ZETO Development of software Katowice COIG Development of software Knurow Upos System Development of hardware and software Chorzow BPSC Development of software Gliwice Junisoftex Development of software for the telecommunications industry Myslowice Logotec Engineering Group Development of software Gliwice Autorobot Strefa Sp. z o.o.Industrial automatics Czestochowa Process Electronic R&D centre, electronic sector Bielsko-Biala Avio Polska R&D centre, aircraft engine design Katowice Bombardier R&D centre Katowice Ontrack Software development centre Czestochowa TRW Automotive Engineering centre Katowice Rockwell Automation Software development centre* Bielsko-Biala Rekord Systemy Informatyczne Development of software Bielsko-Biala Wind Telecom Development of software

* planned to be opened in mid- 2007 Source: PMR, Teleinfo500, 2006 www.pmrpublications.com

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3.6.2. R&D institutions in the high-tech sector

R&D institutions supporting the development of advanced technologies in Slaskie

PMR062

Institution Activity Association of Silesian universities, the Polish Academy of Sciences institutes, industry institutes, R&D units, technology parks and manufacturers. Silesian Centre of Advanced The activities of the Silesian Centre of Advanced Technologies Technologies (www.sczt.org.pl) are designed to tighten cooperation between the research and development institutions based in the Slaskie region and the economy; Institute of Theoretical and Applied Computer Science of Research in computer science the Polish Academy of Sciences (www.iitis.gliwice.pl) R&D, application and implementation work in the following areas:  network IT systems and on-line services Institute of Control Systems  information security (www.iss.pl)  automation systems  intelligent automation systems for buildings  medical systems for the examination of hearing and balance

Source: PMR, 2006 www.pmrpublications.com

3.6.3. Workforce availability The Slaskie region is the second most populated region and labour market in Poland. The number of companies operating within Slaskie is third highest in Poland, after the Mazowieckie and Wielkopolskie regions. Slaskie is also Poland’s third largest concentration of people employed in the R&D sector (10% of all the employed). There are 47 tertiary schools in the Slaskie region, which teach over 200,000 students, including 31% at technical specialisations. The most important technical schools of the region are: the Silesian University of Technology in Gliwice and the Czestochowa University of Technology. The Silesian University, which is the largest tertiary school in the region, offers students the following specialisations: computer science, physics, and biotechnology. Production engineering, mechanics and mechanical engineering and computer science are the most popular technical specialisations for students, offered by universities.

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Select tertiary technical schools in Slaskie voivodship

PMR063

Number of Number of School Selected specialisations students graduates (annual)* (annual)* electronics and telecommunications electrical engineering technical physics computer science computer science and econometrics Czestochowa University material engineering 18,000 4,400 of Technology environmental engineering mathematics mechanics and mechanical engineering metallurgy environmental protection science management and production engineering automatics and robotics biotechnology chemistry electronics and telecommunications electrical engineering power engineering technical physics mining and geology Silesian University of computer science 32,000 5,250 Technology in Gliwice chemical and process engineering material engineering environmental engineering mathematics mechanics and mechanical engineering metallurgy environmental protection chemical engineering management and production engineering Silesian Medical biotechnology 6,272 824 Academy in Katowice biology biotechnology chemistry physics Silesian University geography 39,376 3,711 in Katowice computer science mathematics interdepartmental individual nature studies environmental protection automatics and robotics, computer University of science, environmental engineering, 1,351 Bielsko-Biala mechanics and mechanical engineering, management and production engineering

* The data encompasses the total number of students enrolled at a given school, not just in select specialisations. Source: PMR, 2006 www.pmrpublications.com

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Number of students of select technical specialisations in Slaskie voivodship

PMR064

Specialisation Number of students (annual) Production engineering and management 915 Mechanics and mechanical engineering 873 Computer science 783 Electrical engineering 564 Engineering and environmental protection 397 Physics 348 Environmental engineering 347 Automatics and electrical engineering 334 Transport 224 Material engineering 107 Biotechnology 68 Chemical and process engineering 27

Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

Despite the fact that unemployment in the region is among the lowest in Poland and continues to drop, there are Silesian counties where the unemployment rate is over 20%. As at the end of September 2006, Katowice had the lowest unemployment rate (6.3%); on average, unemployment in the region was 13.5% (244,300). Individuals with higher education account for a little more than 6% of all the unemployed in the region, while in the case of persons with secondary education, this proportion is almost 30%.

3.6.4. Costs of doing business

3.6.4.1. Salaries and wages Salaries paid to workers in the Slaskie region are among the highest in Poland. In the first nine months of 2006, the average gross salary in the industrial sector in the Slaskie region was PLN 3,043 (€780), which was 16.4% higher than the national average. Higher salaries could be earned only in the Mazowieckie voivodship. In Katowice, labour costs are among the highest in Poland (only Warsaw has higher labour costs). In the first nine months of 2006, the average gross monthly pay in the sector of enterprises was PLN 3,478 (€892), i.e. 1% less than in Warsaw.

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Gross pay (PLN) in Slaskie voivodship, by select positions, spring 2006

PMR065

Position Average Production Director 15,527 Production Manager 7,674 Production Planning Specialist 3,750 Maintenance Manager 7,655 Maintenance Specialist 4,752 Automation Service Engineer 4,066 Production Assistant 2,855 Shift Leader 5,643 on ti Handlers / Operators Foreman 3,307 Mechanic 3,454

Produc Electrician 3,230 Locksmith 3,180 Turner 2,426 Solderer 2,172 Production Operator 2,322 Fork Lift Operator 2,201 Floor Hand 2,153 Cleaning Staff 1,818

g Engineering Manager 9,818 General Technologist 7,784 neerin

gi Product Engineer 4,879

En Designer / Drafter 4,809 Quality Manager 6,974

urance Quality Specialist 4,501

ss Laboratory Supervisor 6,745 y a Laboratory Technician 2,966

Qualit Environment Protection Specialist 5,136 R&D Manager 8,135 R&D Specialist 4,209 R&D R&D Assistant 2,730

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

92 www.pmrcorporate.com Poland: analysis of selected economic sectors

3.6.4.2. Office space rental costs In Katowice, office space rental costs are lower than in Krakow or Warsaw. According to the data released by Metropolis Nieruchomosci Komercyjne, at the beginning of December 2006 the asking rental rate of class A office space was around €19/m2+utilities. The rates, however, are negotiable. They can be reduced even by 30% of the asking price; the rates depend on the market position a potential tenant, leased area and term of lease. As a rule, contracts are concluded for specific duration (a minimum of three or five years). Rental rate of class B office space is about €10-12/m2+utilities. In this case, tenants are required to cover the costs of the use of “common areas”, which increases the base rental rate by 20-30%. Generally, rental rates are non-negotiable. Contracts are concluded for both specified and unspecified periods.

3.6.4.3. Warehouse space rental costs According to Cushman&Wakefield, the cost of renting warehouse space outside of Warsaw amounts to €3-4/m2 a month.

3.6.4.4. Transport access Transport infrastructure in the Slaskie region is one of the best in Poland; the region has the highest density of roads in Poland. The Slaskie region is where the following two important international and national routes intersect: n A1 route (Gdansk-southern border of Poland in Cieszyn) n A4 route (Zgorzelec-Wroclaw-Przemysl, southern border of Poland), which has motorway sections from Katowice to Krakow and from Wroclaw to Gliwice.

The region has an airport in Pyrzowice and a river port in Gliwice, which provides a convenient transportation route to Szczecin via the waterway.

3.6.5. Availability of investment sites

Office space Katowice is the only city in the Silesian agglomeration where large office buildings are built. According to the data released by Metropolis Nieruchomosci Komercyjne, at the end of November 2006, Katowice had a stock of 44,000 m2 of class A office space, of which 1,000 m2 were available for lease immediately. Class B+ office buildings had 4,000 m2 of office space for lease. Including class B space, Katowice had 12,000 m2 of office space available in a number of buildings within the city. Until the end of the first quarter of 2007, approximately 6,500 m2 of office space will be commissioned; 43,000 2m are still under construction. Two buildings: Chorzowska 50 and Altus will be included in the Katowice Special Economic Zone from the beginning of January 2007, so investors operating in them will be entitled to additional public aid. In both these buildings, there is hardly any unoccupied office space available. In order to increase the attractiveness of the region for BPO investments, the authorities of the Katowice Special Economic Zone plan to add new buildings to the zone.

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Warehouse space The Silesia agglomeration is one of the largest storage space centres in Poland. According to the data released by Cushman&Wakefield, in 2006, the total supply of storage space in Upper Silesia is over 240,000 m2. Over 157,000 m2 of storage space was under construction, of which 73,000 m2 had already been leased in Q3 2006.

Katowice Special Economic Zone The Katowice Special Economic Zone is located within the Slaskie voivodship (www.ksse. com.pl); it is the largest of the 14 economic zones in Poland. In total, the Katowice Special Economic Zone occupies land of 1,156 ha comprising 35 different sites. Such a structure of the zone enables investors to choose the most convenient location. The Katowice SEZ comprises four sub-zones: n Gliwice sub-zone n Jastrzebie-Zory sub-zone n Sosnowiec-Dabrowa Gornicza sub-zone n Tychy sub-zone.

By locating investments in the zone, investors can apply for public aid in the form of tax breaks. It is planned that Gliwice Technopark Science and Technology Park (www.technopark. gliwice.pl) will be created within the Katowice SEZ. The Gliwice Technopark is a joint investment of the municipality of Gliwice, the Silesian University of Technology and KSSE SA. It will be developed on the basis of an unfinished technology hall of the Silesian University of Technology; it will consist of an area of 600 m2, intended for production, and 2,000 m2 of high-class office space. The key objective of Technopark will be to disseminate information on the most recent technology developments and access to them, and, in particular, to intensify the transfer of technology from the Silesian University of Technology and R&D units in the Silesian region to SMEs. These enterprises will use the agency offered by Technopark to access technologies, find laboratories, universities and scientists supporting technology application in SMEs. They will also receive assistance in obtaining funds from the European Union.

Sosnowiec Science and Technology Park The Sosnowiec Science and Technology Park (www.um.sosnowiec.pl) is located in southern Sosnowiec. Its main task is to create conditions conducive for entrepreneurs to conduct innovative business activities and to provide them with access to innovation through the following: n preparing suitable buildings, premises and sites equipped with the required technical infrastructure n creating a platform for knowledge and technology transfer between science units and entrepreneurs and developing forms of cooperation satisfying to both parties n providing services concerning utility supplies with appropriate parameters and in sufficient quantity

94 www.pmrcorporate.com Poland: analysis of selected economic sectors n enabling the use of diverse business services, including:  consultancy  financial and book-keeping  legal assistance  patent law  market analysis and marketing surveys  creating favourable conditions of financial support for new projects, including EU funds.

The offer of the Sosnowiec SEZ is mainly addressed to the following industries: pharmaceutical industry, medical equipment, automobile and automotive industry, machine engineering industry, chemical industry, construction, computer science and geothermics.

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4. Automotive sector

Automotive sector – selected locations

PMR114

Legnica Wroclaw Walbrzych Jelcz-Laskowice Gliwice Sosnowiec

Tychy Bielsko Biala

Source: PMR, 2006 www.pmrpublications.com

96 www.pmrcorporate.com Poland: analysis of selected economic sectors

4.1. Traditions of the automotive sector

4.1.1. Origins of the automotive sector The origins of the automotive sector in Poland date back to the period between the First and the Second World Wars; the first company in the automotive sector was Centralne Warsztaty Samochodowe (CWS), central car works, of Warsaw. Established immediately after the end of the First World War, CWS was the company where the first Polish passenger car was designed; its production was launched in1925 and continued until 1932 when a licence agreement for manufacturing Fiat 508 was concluded. That car became the most popular passenger vehicle in Poland in the 1930s. It was manufactured by CWS’s Warsaw plant, which in 1928 was renamed Panstwowe Zaklady Inzynierii (PZInz), a state-owned engineering plant. Two years later, Ursus, a truck manufacturer producing vehicles mainly for the army was merged with PZInz. Soon thereafter, PZInz expanded its range of products to include motorcycles, and the Ursus plant launched the production of buses under a licence from Saurer, a Swiss company. In 1933-1934, an advanced plant was constructed at PZinz’s site, which was named Fabryka Samochodow Osobowych i Polciezarowych (a passenger car and van plant) where a number of vehicles were produced under a licence from Fiat. Until the outbreak of the Second World War, a number of passenger car and truck models were manufactured at that plant.

4.1.2. 1945-1989 After the end of the Second World War, the entire Polish economy, including the automotive industry, had to be rebuilt from scratch. In 1945-1989, numerous plants and automotive centres were built in Poland, the major of which were as follows: n Fabryka Samochodow Ciezarowych (a truck company) of Lublin n Fabryka Samochodow Ciezarowych (a truck company) of Starachowice n Fabryka Samochodow Malolitrazowych (a small-engine car company) of Bielsko-Biala and Tychy n Fabryka Samochodow Osobowych (a passenger car company) of Warsaw n Fabryka Samochodow Rolniczych (an agricultural vehicle company) of Poznan n Fabryka Samochodow Specjalizowanych Polmo-SHL (a specialised vehicle company) of Kielce n Jelczanskie Zaklady Samochodowe (a car manufacturing company) of Jelcz-Laskowice n Sanocka Fabryka Autobusow (a bus manufacturing company) of Sanok n Wytwornia Silnikow Wysokopreznych Andoria (a diesel engine manufacturing plant) of Andrychow n Wytwornia Sprzetu Komunikacyjnego PZL-Mielec (a transportation equipment manufacturing plant) of Mielec n Zaklad Samochodow Dostawczych FSO (a delivery truck plant) of Nysa n Zaklady Mechaniczne Ursus (mechanical works) of Warsaw.

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These manufacturers produced a wide range of passenger and delivery vehicles, trucks, buses and specialised cars. They manufactured both their own car models and vehicles licensed from foreign automotive companies.

The most popular vehicles manufactured in Poland in 1945-1989

PMR074

Model Manufacturer Fabryka Samochodow Osobowych Warszawa, Syrena, Fiat 125p, FSO 125, Polonez (a passenger car company) of Warsaw Passenger cars Fabryka Samochodow Malolitrazowych (a small-engine Fiat 126p car company) of Bielsko-Biala and Tychy Zaklad Samochodow Dostawczych FSO Nysa (a delivery truck plant) of Nysa Fabryka Samochodow Ciezarowych Delivery cars Lublin,Zuk (a truck company) of Lublin Fabryka Samochodow Rolniczych Tarpan (an agricultural vehicle company) of Poznan Jelczanskie Zaklady Samochodowe Jelcz (a car manufacturing company) of Jelcz-Laskowice Fabryka Samochodow Ciezarowych Trucks Lublin (a truck company) of Lublin Fabryka Samochodow Ciezarowych Star (a truck company) of Starachowice Sanocka Fabryka Autobusow Autosan, San (a bus manufacturing company) of Sanok Jelczanskie Zaklady Samochodowe Buses Berliet, Jelcz (a car manufacturing company) of Jelcz-Laskowice Fabryka Samochodow Ciezarowych Star (a truck company) of Starachowice

Source: PMR, 2006 www.pmrpublications.com

4.2. Current situation in the sector After 1989, as a result of political and economic changes, the Polish automotive sector was radically transformed. Most of the manufacturers of vehicles and automotive equipment have been privatised or shut down. As a result of a substantial influx of foreign investments, a good number of manufacturing centres have been established in Poland. All the major types of cars are now manufactured in Poland, including passenger cars, trucks and buses; additionally, Poland is home to numerous makers of car parts and accessories.

4.2.1. Major manufacturers As a result of foreign investments, southwest Poland, chiefly the Slaskie and Dolnoslaskie regions, has become the automotive centre of the country. In recent years, approximately 100 large and medium producers of car parts and accessories were established in these regions, encouraged by the proximity of both domestic car manufacturers and the ones based in the Czech Republic and Slovakia. Relatively good transport accessibility of both regions makes them, potentially, a major supply centre for plants based in Central Europe and certain Western European countries. In addition to the aforementioned regions, equipment for the automotive industry and vehicles are also manufactured in the Wielkopolskie, Mazowieckie, Malopolskie, Lubelskie, Podkarpackie, Pomorskie and Kieleckie voivodships.

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The main car manufacturing plants are located in the following Polish cities: n Tychy (Fiat) n Gliwice (Opel) n Poznan (Volkswagen) n Warsaw (FSO) n Lublin (Intrall).

Bus manufacturers are also well represented in the Polish market. The major producers include: n MAN (Starachowice, Sady near Poznan) n Volvo (Wroclaw) n Solaris (Bolechowice near Poznan) n Autosan (Sanok) n Scania (Slupsk) n Solbus (Solec Kujawski) n Jelcz (Jelcz-Laskowice). Recently, Germany-based MAN resolved to build a truck plant in Niepolomice near Krakow, which will be the largest plant of that type in Poland.

Shares in the passenger car output of Poland, January-October 2006

PMR075 Intrall FSO 0.03% 7.65%

Volkswagen 14.66% Fiat 46.35%

Opel 31.30%

Source: Samar, 2006 www.pmrpublications.com

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Shares in the delivery car output of Poland, January-October 2006

PMR076

Intrall 1.37% Fiat 27.39%

Volkswagen 71.25%

Source: Samar, 2006 www.pmrpublications.com

At the same time, many producers of car parts and accessories for the automotive industry are based in Poland. The major ones include: n Delphi (Jelesnia, Blonie, Ostrow Wielkopolski, Gdansk, Tychy, Krosno, Krakow) n Faurecia (Grojec, Legnica, Walbrzych, Gorzow Wielkopolski) n Lear (Tychy, Mielec, Jaroslaw, Teresin) n TRW (Czestochowa, Pruszkow, Czechowice-Dziedzice) n Valeo (Czechowice-Dziedzice, Chrzanow, Tychy, Zielonki) n Inter Groclin (Grodzisk Wielkopolski).

Poland is also a major European engine manufacturer. The following companies have established their plants in Poland: n Toyota (Walbrzych, Jelcz-Laskowice) n Volkswagen (Polkowice) n Isuzu (Tychy).

4.2.2. Output and employment According to our estimates, there were over 1,500 companies active in the automotive industry in Q1 20064. They employed a total of over 160,000 people, three-fourths of who worked at foreign-capital companies. As a result of good market conditions relevant for the industry, since 2004, employment in the automotive sector has been rising at a rate of 10% a year. Having experienced a period of worse market conditions and a slump in the output of cars at the beginning of the present decade, since 2004, Poland has witnessed a marked increase in the production of cars and parts and accessories for the automotive industry. In 2005 the output sold of the automotive industry exceeded PLN 61bn (€15.6bn) which, compared to 2000, represents growth of nearly 90%.

4 The REGON register contained 2,264 automotive companies.

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Output of the automotive sector in Poland (thousands of units), 2000-2005 and January-October 2006

PMR077

2000 2001 2002 2003 2004 2005 Jan-Oct 2006 Passenger cars 532 364 288 334 522 540 531 Trucks 58.1 24.7 21.0 18.5 59.0 67.7 60.7 Engines 521 740 800 920 1,300 1,506 -

Source: GUS, Samar, 2006 www.pmrpublications.com

The automotive sector is one of the key branches of the Polish economy. In 2005 the output sold of the automotive sector accounted for about 10% of the total output of the country’s industrial sector. At the same time, the value of goods exported by the automotive industry amounted to €11.2bn, i.e. approximately one-sixth of the entire Polish exports. In the first ten months of 2006, 96% of passenger cars and 92% of delivery cars manufactured in Poland were exported to foreign markets, mainly to EU states. Similarly, the exports of buses, car parts and components and diesel engines have also been rising recently.

4.3. Growth prospects for the sector During the first ten months of 2006, the output sold of the automotive industry was nearly a fourth higher than in the same period in 2005. According to forecasts released by the Polish Automotive Chamber, further growth in the production of passenger and delivery vehicles should be expected in the upcoming years in Poland. At the same time, as a result of robust exports and the development of car production plants in the Czech Republic and Slovakia, the volume of engines and car accessories produced by Polish plants should continue to grow rapidly.

4.4. Selected sites for automotive investments

4.4.1. Dolnoslaskie voivodship

4.4.1.1. Industrial traditions of the region The Dolnoslaskie region has long been associated with the automotive industry. This is largely due to the operations of Jelczanskie Zaklady Samochodowe of Jelcz-Laskowice, set up in 1952, which for many years was a leading manufacturer of trucks and buses in Poland.

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4.4.1.2. Large companies operating in the automotive industry Currently, the region is one of the largest automotive centres in Poland. According to our estimates, almost 150 automotive firms are based in the Dolnoslaskie region. The majority of them are manufacturers of subassemblies, parts and accessories for the automotive industry. They include such large, globally-recognised companies as Toyota, a manufacturer of engines and power transmission systems at plants in Walbrzych and Jelcz-Laskowice, and Volkswagen, with its diesel engine plant in Polkowice. Such companies as Bosch, Faurecia, Volvo and Wabco have also invested in the region. Toyota deserves a special mention here – it launched a Walbrzych-based plant in 1999; and in subsequent years, encouraged by the plant’s performance, it gradually increased its investment outlays in the region. Consequently, in 2002, another plant was launched (Jelcz- Laskowice), and the production activities of both plants increased in subsequent years. Toyota was followed by other investors, and the region soon became the main destination for Japanese investments in Poland. Most of the automotive investments in the region were attracted by the Special Economic Zones operating in the voivodship, mainly the Walbrzych Special Economic Zone and Legnica Special Economic Zone.

Select automotive companies operating in Dolnoslaskie voivodship

PMR078

Country of Location Company Business profile origin Jelcz-Laskowice, Olawa Autoliv Sweden Manufacture of air bags and seat belts Zarow Daicel Chemical Industry Japan Manufacture of air bags Legnica, Walbrzych Faurecia Investments France Manufacture of seats for vehicles and car upholstery Olesnica GKN Industries Limited USA Manufacture of homokinetic half-shafts and joints Walbrzych Grossmann Germany Manufacture of car seats and upholstery Manufacture of buses, trucks Jelcz-Laskowice Jelcz Poland and specialised vehicles Manufacture of electric systems Jelenia Gora Lisa Draexlmaier Germany for the automotive industry Metzeler Automotive Dzierzoniow Germany Manufacture of automotive sealing systems Profile Systems Europe Mirkow Robert Bosch Germany Manufacture of braking systems Manufacture of air-conditioning equipment Polkowice Sanden Corporation Japan for the automotive industry Jelcz-Laskowice Simoldes Plasticos Portugal Manufacture of plastic elements Krzeszow, Walbrzych Takata Petri Japan Manufacture of safety systems Legnica TBMECA Poland Monaco Manufacture of subassemblies for car engines Jelcz-Laskowice, Walbrzych Toyota Japan Manufacture of engines and gear-boxes Walbrzych Trelleborg Sweden Manufacture of rubber appliances for cars Legnica, Polkowice Volkswagen Germany Manufacture of diesel engines Wroclaw Volvo Sweden Manufacture of buses Wroclaw Wabco Europe The Netherlands Manufacture of brake systems

Source: PMR based on data from PAIiIZ and SEZs, 2006 www.pmrpublications.com

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4.4.1.3. Business support institutions In the region, there a number of business-support institutions that provide help to investors executing investment projects, including: n Wroclaw Branch of the Industrial Development Agency (ARP) (www.arp-sez.pl) n Wroclaw Branch of the British-Polish Chamber of Commerce, (www.bpcc.org.pl) n Lower Silesian Regional Development Agency (DARR) (www.darr.pl) n Lower Silesian Chamber of Commerce (DIG) (www.dig.wroc.pl) n Lower Silesian Chamber of Craft (DIR) (www.izbarzemieslnicza.com.pl) n Lower Silesian Chapter of the BCC (www.bcc.org.pl) n Lower Silesian Centre for Advanced Technologies – the Technical University of Wroclaw (DCZT) (www.dczt.wroclaw.pl) n HRK – a country-wide human resources consultancy (www.hrk.pl) n Karkonosze Agency for Regional Development (KARR) (www.karr.pl) n Centre for Knowledge and Technology Transfer at the Wroclaw University (www.otwt.uni.wroc.pl) n Sudety Industrial and Commerce Chamber (SIPH) (www.siph.pl) n Wroclaw Industrial Park (WPP) (www.wpp.wroc.pl) n Wroclaw Technology Park (WPT) (www.technologpark.pl) n Wroclaw Centre for Technology Transfer of the Wroclaw University of Technology (www.wctt.pl) n Western Commercial Chamber (ZIG) (www.zig.pl).

There are four special economic zones located in the Dolnoslaskie voivodship: n Kamienna Gora Special Economic Zone for Medium Business (www.ssemp.pl) n Legnica Special Economic Zone (www.strefa-legnica.com) n Tarnobrzeg Special Economic Zone (www.tsse.pl) n Walbrzych Special Economic Zone “Invest-Park” (www.invest-park.com.pl)

Special economic zones are specific areas for conducting business activities on preferential terms. Investors representing the automotive industry can enjoy corporate income tax relief of up to 30% of capital expenditure made or the value of two-year’ employment costs. In addition to well-prepared land, the zones’ authorities provide enterprises with assistance in starting investment projects in the zone.

4.4.1.5. Workforce availability Despite a steady decrease in unemployment in the recent years, the number of people without jobs in the Dolnoslaskie region is still among the highest in Poland. As at the end of October 2006, the registered unemployment rate was 16.8%, which was 3.4 p.p. lower than in the same period of 2005. The unemployment rate is much lower in Wroclaw where the registered unemployment rate was 8.5% at the end of October 2006. More than a half of the unemployed in the Dolnoslaskie voivodship (i.e. about 100,000 persons) have vocational education (secondary or basic). Despite a relatively high number of the unemployed, as a result of rising emigration for financial reasons and a considerable www.pmrcorporate.com 103 Poland: analysis of selected economic sectors

inflow of investments into the region, entrepreneurs are starting to find it increasingly more difficult to find employees with the right technical qualifications. More than a third of the unemployed in the region have primary or lower-secondary education, while a relatively low percentage, of about 5.5%, have completed higher education.

Unemployment structure in Dolnoslaskie voivodship as at the end of September 2006

PMR079

Number of the unemployed Percentage share Total: 192,798 100.0% higher education 10,572 5.5% secondary vocational education 42,923 22.3% secondary general education 15,027 7.8% basic vocational education 57,488 29.8%

Source: GUS, 2006 www.pmrpublications.com

In terms of the student population, the Dolnoslaskie voivodship ranks fourth in Poland. In 2005, nearly 170,000 students studied at 34 higher-education schools, while the number of graduates amounted to 33,000. Almost 137,000 students study in Wroclaw which is home to 26 higher-education schools. Every year, more than 26,000 students graduate from Wroclaw universities.

Number of students and graduates of Wroclaw higher-education schools (’000), 2000-2006

PMR080

126.9 132.0 134.8 136.8 113.8 122.2

27.2 16.4 19.1 22.0 24.0 26.1

2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006

Students Graduates

Source: GUS, 2006 www.pmrpublications.com

The Wroclaw University of Technology is the largest technical school in the region, with over 32,000 students enrolled at the university every year. The Wroclaw University also has many technical faculties.

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Number of students and graduates of select technical departments of Wroclaw universities

PMR081

1,067 Computer science 6,785 546 Production engineering 3,606 390 Environmental engineering 3,026 311 Chemical engineering 2,855 161 Mechanical engineering and robotics 1,902 211 Physics 1,768 300 Biotechnology 1,511 203 Automatics and electrical engineering 1,291 34 Material engineering 131

Students Graduates

Source: PMR based on data released by the Regional Investor Support Centre, 2006 www.pmrpublications.com

Additionally, the region also has 166 secondary vocational schools and 136 basic vocational schools, where a total of 37,000 students are taught.

4.4.1.5. Costs of doing business

4.4.1.5.1. Salaries and wages In October 2006, the gross average monthly pay in the enterprise sector in the Dolnoslaskie voivodship was PLN 2,544 (€652), i.e. more than 4% less than the national average. Comparing the remuneration earned in capital cities of voivodships in the first nine months of 2006, Wroclaw’s average was lower than that of Warsaw, Katowice, Gdansk, Poznan or Krakow, amounting to PLN 2,529 (€648), i.e. 27% less than Warsaw’s. The comparative situation changes slightly when the pay in industry is concerned – here, the Dolnoslaskie region reports much higher salaries than the majority of other voivodships. Only residents of the Mazowieckie and Slaskie regions employed in the industrial sector earn higher wages. This year’s growth of salaries paid in the industrial sector of the Dolnoslaskie voivodship has been the highest in Poland. However, it should be noted that this is largely attributable to the presence of the copper giant KGHM in the region.

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Gross pay (PLN) in Dolnoslaskie voivodship, by select positions, spring 2006

PMR082

Position Average Production Department Manager 6,670

Production Planning Specialist 3,838

Maintenance Specialist 3,161

Production Group Manager / Foreman 3,761

Team Leader 2,980

Mechanic 2,785

Electrician 2,599 on ti Locksmith 3,070

Produc Turner 2,165

Fitter 1,672

Production Operator 2,143

Fork Lift Operator 1,948

Line Quality Controller 1,750

Line Worker 1,935

Cleaner 1,295 g Production Process Engineer 3,632 neerin

gi Constructor – Engineer 3,749 En

Quality Specialist 3,542 urance ass

Laboratory Specialist 2,606 Quality

Research and Development Specialist 3,950 R&D

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

4.4.1.5.2. Office space rental costs According to a report released by Jones Lang LaSalle in June 2006, rental costs in Wroclaw are at the initial stage of moderate growth trend and stand at about €14-15/m2/ month for top class A office space and €8-13/m2/month for class B office space and office space in tenement houses. Average maintenance charges are about €2.5/m2 a month. This means that office space rental costs in Wroclaw are lower than in Warsaw or Krakow. In other cities and towns of the Dolnoslaskie voivodship, the average lease rent is in the range of €5-8/m2 a month.

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4.4.1.5.3. Warehouse space rental costs According to Cushman&Wakefield, the rent for warehouse space outside of Warsaw is €3-4/m2 (based on a report released early in 2006).

4.4.1.5.4. Transport access The geographical position and a relatively well-developed transport infrastructure – compared to other regions – attract automotive investments to the Dolnoslaskie region. However, it should be added that how developed the local infrastructure is varies considerably depending on specific parts of the region. The localisation of the Dolnoslaskie voivodship in southwest Poland provides investors with a relatively easy access to countries in Central and Eastern Europe (that region has recently become a major car manufacturing centre in Europe) and to markets in Western Europe. The Dolnoslaskie region has the following advantages: n convenient car transportation links – international routes: E40, E36, E65 and E67 n a well-developed railway system – international railway routes E30 (connecting Germany and Ukraine) and E59 (connecting the complex of Szczecin-Swinoujscie harbours with the south of Europe) n a dynamically developing airport in Wroclaw offering flights to many European cities n a river port on the banks of the Oder River, enabling transport and transit by river.

At the same time, Wroclaw, being the capital of the region, is among the biggest railway nodes handling passenger and freight traffic in Poland. It has connections to Leszno-Poznan, Opole-Lubliniec, Legnica-Zgorzelec, Glogow-Zielona Gora, Klodzko-Kudowa Zdroj, Walbrzych- Jelenia Gora, and Olesnica-Ostrow Wielkopolski. Wroclaw is transected by national routes nos. 5, 8 and 94; and a short section of A4 motorway passes through the city as well. Additionally, there is a node of A4 motorway and routes nos. 5 and 35 in Bielany Wroclawskie, near the city’s border.

4.4.1.6. Availability of investment sites Most of the investor-preferred sites are situated within the four special economic zones within the Dolnoslaskie voivodship. By launching business activity within a special economic zone, companies can draw on public aid. The following special economic zones are located in the Dolnoslaskie voivodship:

Kamienna Gora Special Economic Zone for Medium Business The zone covers an area of 241 ha. Investment sites are located in the following towns: Kamienna Gora, Krzeszow, Lubawka, Nowogrodziec-Wykroty, Luban, Jawor, Piechowice and Radomierz.

Legnica Special Economic Zone The zone covers an area of 417 ha. It is composed of eight sub-zones. The land within the zone is zoned for manufacturing and service-related investment projects; it is located in the following towns and cities: Legnica, Legnickie Pole, Polkowice, Krzywa, Zlotoryja, Lubin, Sroda Slaska and Prochowice.

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Tarnobrzeg Special Economic Zone – Kobierzyce sub-zone The Kobierzyce sub-zone comprises 260 ha of investment land located in the Kobierzyce commune near Wroclaw. The sub-zone is managed by the Wroclaw branch of the Industrial Development Agency.

Walbrzych Special Economic Zone “Invest-Park” The zone covers an area of 939 ha. It comprises 16 sub-zones, of which 13 are located in the Dolnoslaskie voivodship. Investment sites are located in the following cities and towns: Walbrzych, Nowa Ruda, Klodzko, Dzierzoniow, Zarow, Jelcz-Laskowice, Kudowa Zdroj, Swidnica, Wroclaw, Olawa, Strzelin, Strzegom and Brzeg Dolny.

4.4.2. Slaskie voivodship

4.4.2.1. Industrial traditions of the region The Slaskie region has been a major automotive centre in Poland for many decades. Substantial encouragement for the automotive industry to develop in the region followed from the creation of Fabryka Samochodow Malolitrazowych in Bielsko-Biala early in the 1970s, and the purchase of the licence to manufacture Fiat 126p, which was to become the most widely bought car in Poland over the next 20 years. As a result of the great popularity of Fiat 126p, its production grew and another plant was constructed in Tychy. Consequently, the Silesia region soon saw the development of an entire network of sub-suppliers and minor businesses cooperating with both plants.

4.4.2.2. Large companies operating in the automotive industry Currently, the region is by far the largest cluster of automotive companies in Poland. According to our estimates, about 220 companies engaged in the automotive industry operate in the region. Around 80% of passenger cars manufactured in Poland are made in the Slaskie voivodship. They are produced in a Fiat plant in Tychy and a GM Opel plant in located Gliwice. The plants have attracted a wide number of sub-suppliers manufacturing car subassemblies and accessories for the automotive industry. For the most part, the firms are foreign owned. The companies which launched their production plants in the Slaskie voivodship in recent years include Delphi, Isuzu, Lear, NGK, Tenneco and Valeo. Most of the major automotive investments are concentrated within the Katowice Special Economic Zone, specifically in the following sub-zones: Gliwice, Jastrzebie-Zory, Sosnowiec- Dabrowa Gornicza and Tychy. A substantial inflow of foreign investors from the automotive industry has been clearly visible in the region for a long time; additionally, recently they have expanded the scope of their activities. Production plants tend to be increasingly more often accompanied by sales centres, storage facilities, and research and development centres. A good case in point is the investment project of TRW, whose most state-of-the-art engineering solutions are developed in the vicinity of its plants in Czestochowa.

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Select automotive companies operating in Slaskie voivodship

PMR083

Location Company Country of origin Business profile Sosnowiec Bitron Poland Luxembourg Manufacture of car accessories Manufacture of restraining nets Tychy BOS Automotive Products Polska Belgium/Germany and boot upholstery elements Dabrowa Gornicza Brembo Poland Italy Manufacture of brake discs Czestochowa BST Safety Textiles Germany Manufacture of airbags and safety belts Bielsko-Biala Cornaglia Poland Italy Manufacture of automotive accessories Manufacture of steering transmission Tychy Delphi Automotive Systems USA systems, wires, half-shafts and cleaners Jasienica Eaton Automotive Systems USA Manufacture of valves and pushers Sosnowiec Ergom Poland Italy Manufacture of car accessories Manufacture of plastics Gliwice Fabryka Plastikow Gliwice France for the automotive industry Tychy Fiat Italy Manufacture of cars Bielsko-Biala Fiat-GM Powertrain Polska Italy Manufacture of engines Sosnowiec Ficomirrors Polska Spain Manufacture of mirrors Bielsko-Biala Galwano-Technika Poland Manufacture of car accessories Gliwice GM Opel Polska USA Manufacture of cars Gliwice HP Polska Germany Manufacture of sound-deadening materials Manufacture of door handles Tychy HUF Polska Germany and security systems Tychy Isuzu Motors Polska Japan Manufacture of engines Siemianowice Slaskie Johnson Controls USA Manufacture of car seat components Gliwice Kirchhoff Polska Assembly Germany Manufacture of car parts Manufacture of forged elements Gliwice Kotani Poland Japan for the automotive industry Tychy Lear Corporation Poland II USA Manufacture of car parts and accessories Manufacture of air-conditioning elements Tychy Manuli Auto Polska Italy for the automotive industry Manufacture of ceramic cleaners Gliwice NGK Ceramics Polska Japan for diesel engines Czerwionka-Leszczyny OML Morando Polska Italy Manufacture of car accessories Gliwice Plastal Sweden Manufacture of car accessories Manufacture of electric leads Dabrowa Gornicza Segu Polska Germany for the automotive industry Tenneco Automotive Eastern Gliwice USA Manufacture of dampers Europe Zory TMP Fondalmec Poland Italy Manufacture of engine components Gliwice TRWBraking Systems Polska USA Manufacture of brake systems Czestochowa TRW USA Manufacture of air-bags and seat belts Poland/The Czech Tychy V.A.B.Tychy Pressing of car body parts Republic Czechowice-Dziedzice, Manufacture of electric leads, starters, Valeo France Tychy alternators and front-end modules

Source: PMR based on data from PAIiIZ and the SEZ, 2006 www.pmrpublications.com

The large number of automotive companies active in the region and their broadly varied business profiles provide prospective investors with numerous opportunities for establishing cooperation.

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4.4.2.3. Sector-specific scientific and research centres The Slaskie region has a wide range of scientific and research institutions, which can provide substantial support for the automotive industry. In addition such recognised universities of technology as the Silesian University of Technology and the Czestochowa University of Technology, they include the following institutions: n Silesian Centre of Advanced Technologies (www.sczt.org.pl), an association of Silesian universities, the Polish Academy of Sciences institutes, automotive institutes, research and development units, technology parks and manufacturers. The activities of the Silesian Centre of Advanced Technologies are designed to tighten cooperation between the research and development institutions based in the Slaskie region and the economy. n BOSMAL Automotive Research and Development Centre (www.bosmal.com.pl) – it used to be a conceptual design and R&D base for Fabryka Samochodow Malolitrazowych of Bielsko-Biala. Currently, it is an independent unit performing research and development projects for diverse companies; BOSMAL cooperates with many recognised institutions and technical universities, both in Poland and abroad.

4.4.2.4. Business support institutions In the Slaskie voivodship, there a number of business-support institutions as well as other organisations which provide assistance in executing investment projects, including: n Upper Silesian Agency for Restructuring of Enterprises (GAPP) (www.gapp.pl) n Upper Silesian Regional Development Agency (GARR) (www.garr.pl) n Economic Chamber of Exporters and Importers (IGEI) (www.igei.katowice.pl) n Tarnowskie Gory Chamber of Commerce and Industry (IPH) (tarnowskiegory.com.pl) n Chamber of Commerce and Industry of the Rybnik Industrial District (www.izbaph.rybnik.pl) n Craft Chamber of Small and Medium-Sized Enterprises of Katowice (www.ir.katowice.pl) n District Chamber of Commerce and Industry of Tychy (www.izba.tychy.pl) n Regional Chamber of Commerce of (www.rig.katowice.pl) n Regional Chamber of Commerce and Industry of Bielsko-Biala (www.cci.pl) n Regional Chamber of Industry and Commerce of Gliwice (www.riph.com.pl) n Katowice Voivodship Labour Office (www.wup-katowice.pl) n Zaglebie Chamber of Commerce (www.lemir.com.pl/zig).

Silesia is home to science and technology parks, which were designed to create conditions conducive to conducting innovative activities and facilitating transfer of state-of-the-art technologies to businesses, namely: n Gliwice Technopark Science and Technology Park (www.technopark.gliwice.pl) n Sosnowiec Science and Technology Park (www.um.sosnowiec.pl)

The Katowice Special Economic Zone (www.ksse.com.pl) is within the region, offering attractive investment sites and assistance in the preparation of projects.

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4.4.2.5. Workforce availability The Slaskie region has a population of nearly 4.7 million. Being the most industrialised region of Poland which generates about 15% of Poland’s GDP, the Slaskie voivodship is the second largest labour market in the country. The industrial sector provides jobs to almost 435,000 people in the region, with about 10% of the jobs in the automotive industry. At the same time, the automotive industry generates one-third of the region’s industrial output. In terms of the size of population employed in the research and development sector, the Slaskie region ranks third in Poland, with a 10% share of the sector’s workforce. As at the end of October 2006, the registered unemployment rate for the Slaskie region was 13.1%, which represents a total of 236,000 unemployed persons. Despite the fact that the unemployment rate in the region is one of the lowest in Poland and continues to dwindle, there are counties where the unemployment rate is over 20%. Substantial unemployment affects a number of large cities of the region, e.g. Swietochlowice, Bytom, Siemianowice Slaskie, Zabrze and Chorzow. On the other hand, the registered unemployment rate for Katowice is less than 6%.

Unemployment structure in Slaskie voivodship as at the end of September 2006

PMR084

Number of unemployed Percentage share Total 244,322 100.0% higher education 15,266 6.2% secondary vocational education 54,297 22.2% general secondary education 18,860 7.7% basic vocational education 75,449 30.9%

Source: GUS, 2006 www.pmrpublications.com

People with primary and lower-secondary education make up the largest group of the unemployed in the region; similarly, the group of workers with vocational education (basic and secondary) is large as well. Conversely, individuals with higher education account for a little more than 6% of all the unemployed in the region. According to data released by the Katowice Regional Labour Office, 9,700 mechanical engineering technicians and automobile mechanics were jobless at the end of 2005. The Slaskie region is Poland’s second largest academic centre. In 2005 almost 208,000 students (45,000 graduates) studied at 43 universities in the region, including over 59,000 students (11,500 graduates) at three technical universities. Katowice is the region’s academic centre, with the highest number of students. In terms of the number of students, the Silesian University is the leader, closely followed by the Silesian University of Technology in Gliwice and the Czestochowa University of Technology.

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The largest technical universities in Slaskie voivodship

PMR085

Number of Number of University Select specialisations students graduates (annual)* (annual)* electronics and telecommunications electrical engineering technical physics computer science computer science and econometrics material engineering Czestochowa University environmental engineering 18,000 4,400 of Technology mathematics mechanics and mechanical engineering metallurgy environmental protection production management and engineering automatics and robotics biotechnology chemistry electronics and telecommunications electrical engineering power technical physics mining and geology computer science Silesian University chemical and process engineering 32,000 5,250 of Technology (Gliwice) material engineering environmental engineering mathematics mechanics and mechanical engineering metallurgy environmental protection chemical engineering production management and engineering

* The data encompasses the total number of students enrolled at a given school, not just in select specialisations. Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

The most popular majors at technical universities are production engineering, mechanical engineering and machine building, and IT science.

Number of graduates of select technical specialisations in Slaskie voivodship

PMR086

Specialisation Number of graduates (annual) Production engineering and management 915 Mechanics and mechanical engineering 873 Computer science 783 Electrical engineering 564 Environmental engineering and protection 397 Physics 348 Environmental engineering 347 Automatics and electrical engineering 334 Transport 224 Material engineering 107 Biotechnology 68 Chemical and process engineering 27

Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

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The Slaskie voivodship has a well-developed network of secondary vocational schools. Its vocational schools (basic and secondary) educate 90,500 students.

4.4.2.6. Costs of doing business

4.4.2.6.1. Salaries and wages Salaries paid to workers in the Slaskie region are among the highest in Poland. In October 2006, the average gross monthly pay in the enterprise sector was PLN 2,743 (€703), i.e. over 3% higher than the national average. Only those working in the Mazowieckie region earned more.

Gross pay (PLN) in Slaskie voivodship, by select positions, spring 2006

PMR087

Position Average Production Director 15,527 Production Department Manager 7,674 Production Planning Specialist 3,750 Maintenance Department Manager 7,655 Maintenance Specialist 4,752 Automation Service Specialist 4,066 Clerk – Production Department 2,855 Production Group Manager / Foreman 5,643 on

ti Team Leader 3,307 Mechanic 3,454

Produc Electrician 3,230 Locksmith 3,180 Turner 2,426 Welder 2,172 Production Operator 2,322 Fork Lift Operator 2,201 Line Worker 2,153 Cleaner 1,818

g Engineering Department Manager 9,818 Processor Supervisor 7,784

neerin Product Engineer 4,879 gi

En Constructor – Engineer 4,809 Quality Control Manager 6,974 Quality Specialist 4,501 urance

ss Laboratory Manager 6,745 y a Laboratory Specialist 2,966 Environment Protection Specialist 5,136 Qualit Research and Development Department Manager 8,135 Research and Development Specialist 4,209 R&D Development Department Assistant 2,730

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

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In Katowice, which is the capital city of the voivodship, labour costs are even higher. In the first nine months of 2006, the average gross monthly pay in the enterprise sector was PLN 3,478 (€892), i.e. 1% less than in Warsaw. In Silesia’s industrial sector, in the first ten months of 2006, the average monthly pay was PLN 3,037 (€779), which was over 16% higher than the national average.

4.4.2.6.2. Office space rental costs In Katowice, office space rental costs are lower than in Krakow or Warsaw. According to data released by Metropolis Nieruchomosci Komercyjne, at the beginning of December 2006, the asking rental rate of class A office space was around €19/m2+utilities per month. The rates, however, are negotiable. In practice, they can be reduced even by 30% of the opening price and depend on the market position of the potential tenant, leased area and term of lease. As a rule, contracts are concluded for specific duration (a minimum of three or five years). Monthly rental rate for class B office space is about €10-12/m2+utilties. In this case, tenants are required to cover the costs of the use of common areas, which increases the base rental rate by 20-30%. Generally, rental rates are non-negotiable. Contracts are concluded for both specified and unspecified periods.

4.4.2.6.3. Warehouse space rental costs According to Cushman&Wakefield, the rent for the lease of warehouse space outside of Warsaw is €3-4/m2 a month.

4.4.2.6.4. Cost of land The prices of investment land available to investors in the Katowice Special Economic Zone vary from PLN 15/m2 to PLN 70/m2, depending on specific site.

4.4.2.6.5. Transport access The Slaskie region is the most highly urbanised region in Poland; it has a very well-developed transport infrastructure. Of all the regions in Poland, the road network is densest in this voivodship. The Slaskie voivodship is where the following two important transportation routes intersect: n A1 route (Gdansk-southern border of Poland in Cieszyn) n A4 route (Zgorzelec-Wroclaw-Przemysl, southern border of Poland), which has motorway sections from Katowice to Krakow and from Wroclaw to Gliwice.

Thanks to convenient railway connections, almost half of the entire domestic transport by railroad is carried out in the Slaskie region. The region has a section of wide-gauge railroad system supporting transport of goods between Europe and Asia and a handling terminal in Slawkow. Additionally, many international flights are offered by Pyrzowice, a dynamically developing airport, through which approximately one million passengers travel every year. The Gliwice river port provides a convenient transportation route to Szczecin via the waterway.

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4.4.2.7. Availability of investment sites

Office space According to data released by Metropolis Nieruchomosci Komercyjne, most of the office space available in the region is offered in Katowice; however, other cities in the region do not lag much behind the capital in that respect. Yet, as far as class A office space is concerned, it is available only in Katowice. Class B and C buildings are widely available in other cities of the region; if a tenant signs a long-term lease, buildings can be refurbished to a higher standard, if necessary.

Warehouse space The Silesia agglomeration is one of the largest warehouse space centres in Poland. According to Cushman&Wakefield, in 2006 the total supply of storage space in Upper Silesia was over 240,000 m2. Over 157,000 m2 of warehouse space was under construction, of which nearly a half had already been pre-leased in Q3 2006.

Available sites In many investment rankings, the Silesia region is ranked as the best place for industrial investments. It offers a wide range of greenfield sites; as a result of restoration of post- industrial land, increasingly more brownfield sites are available as well. Most investor-preferred sites are located in the Katowice Special Economic Zone, which is the largest special economic zone in Poland and attracts more investments than any other SEZ in Poland. Investments are primarily made in the Upper Silesian agglomeration and in the area of Bielsko-Biala and Czestochowa. Covering an area of 1,156 ha, the Katowice Special Economic Zone offers fully developed sites of varying areas, from small lots through areas of a few tens of hectares. It comprises diverse 35 sites, which provides enterprises with a sufficient selection to choose the most suitable place for their investment. The Katowice SEZ comprises four sub-zones:

Gliwice sub-zone Industrial land in the sub-zone is located in Gliwice and Zabrze. Prices of land average about PLN 65/m2.

Jastrzebie-Zory sub-zone Investment sites in the zone are located in Bielsko-Biala, Czerwionka-Leszczyny, Godow, Jastrzebie Zdroj, Pawlowice, Rybnik and Zory. Prices of land are in the range of PLN 11-45/m2.

Sosnowiec-Dabrowa Gornicza sub-zone The sub-zone’s investment potential comprises industrial land in Sosnowiec, Dabrowa Gornicza, Slawkow and Siemianowice Slaskie. The sub-zone is characteristically dispersed across the Slaskie voivodship; the sites comprising the sub-zone are located close to enterprises which are being restructured. An advantage of such a structure of the sub-zone is a well-developed technical and transportation infrastructure of the investment land. Prices of land in the sub-zone vary from PLN 40 to PLN 70/m2.

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Tychy sub-zone The sub-zone’s investment sites are located in the south-east part of the municipality of Tychy and in suburban areas of the city. The sub-zone is equipped with complete technical infrastructure and has very good access to the Warsaw-Cieszyn motorway.

Representatives of the automotive sector who have decided to conduct activities in the Katowice Special Economic Zone can draw on public aid; in particular, they can obtain exemptions from corporate income tax of up to 30% of capital expenditure made or two years’ costs of employment incurred. They can also obtain property tax credits.

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5. Aviation sector

Aviation sector – selected locations

PMR100

Warsaw

Kalisz

Swidnik

Mielec Rzeszow Bielsko-Biala

Krosno

Source: PMR, 2006 www.pmrpublications.com

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5.1. Traditions of the aviation sector

5.1.1. Before 1939 The origins of the Polish aviation sector date back to the period immediately preceding the outbreak of the First World War and to Aviana, a plant manufacturing aircrafts under a license from Farman, was established in 1910. After Poland regained its independence, the following enterprises were set up: n 1918 – Centralne Warsztaty Lotnicze (CWS – central aviation workshops) n 1920 – Plage & Miskiewicz n 1923 – Podlaska Wytwornia Samolotow (PWS – an aircraft plant) and Samolot.

The first aircraft plant established by the state was Panstwowe Zaklady Lotnicze (PZL – state-owned aircraft plant), which was created in 1928 on the basis of former CWS. At the start, Polish companies produced aircrafts under licences from French companies [Poteza (PWS) and Wibault (PZL)]. In 1929 Polish Airlines LOT were established, as a result of the merger of companies formerly operating in the aviation transport sector. In 1930 the newly-established company joined the IATA and launched its services as an international carrier. The production of aircraft was encouraged by both the growing popularity of flights and the modernisation of the Polish army. It was at that time that a series of globally unique P fighters (whose characteristic feature was a V-shaped wing) and the “Los” bomber were created. Both aircraft proved so good that they promptly found eager buyers abroad. In 1939 PZL had three plants located in: n Warsaw – two plants manufacturing aircrafts and engines under a licence from Bristol n Mielec – a plant producing aircraft parts, which was established as part of the Central Industrial District’s project, along with a plant manufacturing engines in Rzeszow. When the Second Word War broke out, in addition to the wide aircraft portfolio, the company had also many interesting aircraft designs planned to be executed in the future. For the Polish aviation sector, the between-war period was also marked by a few spectacular successes in the sports arena, which led to keen public interest in the new industry. One of them was a victory of a Polish pilot in the Challenge 1936 international aviation contest and a non-stop transatlantic flight from Senegal to Brazil. Both these successes were achieved using Polish RWD aircrafts.

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5.1.2. 1939–1989 A large majority of the Polish aviation industry was destroyed during the Second World War, which in practice meant that the industry had to be rebuilt from scratch. The restoration of the sector was possible thanks to the creation of a network Wytwornia Sprzetu Komunikacyjnego (WSK – a transport equipment enterprise), manufacturing a wide range of products related to transport, from motorcycles through airplanes and helicopters. The major WSK companies were as follows: n WSK Okecie of Warsaw, which was created on the basis of PZL Warszawa; the unit manufactured sport, training, agricultural and multi-task aircrafts, including a number of widely-known models such as PZL-104 Wilga and PZL-106 Kruk. n WSK Swidnik, which was created in 1951 on the basis of PWS and LWS, operating in Lublin and nearby cities. In 1958 the company launched the production of Mi-1 and Mi-2 helicopters under a Russian licence. In the 1980s W-3 Sokol was manufactured, as well as parts for Il and An passenger aircraft. n WSK Mielec, which was established on the basis of the PZL plant of Mielec, manufactured aircrafts under a Russian licence (the An-2 bi-plane and MIG-15 and MIG-17 jet aeroplanes). In the 1960s WSK Mielec launched the production of its own training aircraft, TS-11 Iskra and M-15 Belphegor, the only bi-plane jet aircraft in the world. n WSK Kalisz, which was established in 1946, has produced aircraft engines since 1952 (radial, turbine, turbopropeller) and flap steering systems for passenger aircrafts. n WSK Rzeszow, which continued the business of the pre-war PZL plant manufacturing engines; the company produced engines for MIG-15 and MIG-17 jet airplanes and turbopropeller engines.

A word should be added about Specjalne Zaklady Doswiadczalne (a special experimental centre) of Bielsko-Biala where gliders were produced. Another important feature of the Polish aircraft history was Poland’s specialisation in aircrafts for agriculture within the Council for Mutual Economic Assistance, which followed from the internal division of tasks within that organisation.

5.2. Aviation sector today Today, the Polish aviation sector comprises 50-100 firms employing over 16,000 people. The companies manufacture small sport aircrafts, as well as passenger, agricultural, training aircrafts, helicopters, gliders and aircraft parts and accessories. The Polish industry is specialised in the manufacture of units of aluminium alloys (riveting, welding and etching). In the future, Poland can potentially become an international centre for the production and maintenance of small aircraft as it has both the requisite background and experienced experts; the necessary infrastructure is being developed. Currently, the aircraft sector can be divided into the following three groups, depending on type and historical background: n firms established as a result of the transformation of former WSK enterprises into commercial companies n firms established as a result of foreign direct investments n aviation companies from the SME sector. www.pmrcorporate.com 119 Poland: analysis of selected economic sectors

5.2.1. Aviation firms established as a result of the transformation of former WSK entities This group comprises the following companies: n PZL-Rzeszow – the company was established as a result of the transformation of WSK Rzeszow. It has operated under the new name since 1994. PZL-Rzeszow produces aircraft engines and, as the first company in Poland, it has obtained a JAR certificate. In the 1990s its major customers included Fiat Avio, Rolls Royce, Hamilton Sundstrand, Honeywell and Pratt & Whitney Canada. In 2001 85% of PZL-Rzeszow’s share capital was acquired by United Technologies Holding. Currently, the company employs around 4,700 people. n PZL-Swidnik – the company is the only manufacturer of helicopters in Poland. Additionally, it also manufactures gliders and aircraft and helicopter components; it also provides helicopter maintenance training. One of its major customers is Aerospatiale (in the 1990s PZL-Swidnik manufactured ATR-72 aircraft for that company) and Airbus, for which PZL-Swidnik manufactures passenger aircraft doors. Other contractors of the company include Eurocopter, Agusta, Latecoere, Dassault, Ratier-Figeac, Snecma, Boeing, Lord, Fokker, Cesna, Bell Helikopter and GKN. The company is also a supplier for the US Navy. Currently, it employs 2,100 people. n PZL-Mielec – the company was established as part of the transformation of WSK Mielec. Currently, it is a leading Polish aircraft manufacturer. Its products include the M-28 Skytruck Bryza twin-engine high-wing, the M-18 Dromader agricultural aircraft and M-26 Iskierka. The company’s largest customers include Boeing, BAE Systems and SAAB. The company employs 1,500 people. n WSK Kalisz – the company is a manufacturer of aircraft engines (radial, turbine, turbopropeller) and flap steering systems for passenger aircrafts.

5.2.2. Foreign investors in the Polish aviation industry The major large companies established as a result of foreign direct investments in the Polish aviation industry include the following firms: n Pratt & Whitney Kalisz – the company was established in 1992; it is entirely owned by Pratt & Whitney Canada. Pratt & Whitney Kalisz produces around 2,100 types of parts, including: gear-wheels, pump components, reducers, transmission systems and compressors. The company employs 1,000 people. n BF Goodrich Krosno – the company is a manufacturer of chassis components for commercial and military aircraft. The company employs around 275 people. n Creuzet Polska – the Polish branch of the French company Creuzet is located in Sedziszow Malopolski. It produces aircraft components. n Snecma Polska (Hispano Suiza Polska) – established in 2001, the company is a manufacturer of aircraft engine parts. The company has a production plant in Sedziszow Malopolski and is entirely owned by the Snecma Group. n Fiat Avio Polska – the company was established in Bielsko-Biala in 2002. It is a design centre and a plant manufacturing parts for aircraft engines. It employs 200 people.

120 www.pmrcorporate.com Poland: analysis of selected economic sectors n Gardner Poland – the company is located in Tczew; part of Gardner Group Ltd., the company is specialised in precise machining of components for the aviation and automotive industries. n Smith Aerospace Components Poland – the company employs over 130 people at its plant manufacturing components for aircraft engines based in Dzierzoniow. It closely cooperates with PZL-Rzeszow. n Vac Aero Kalisz – the company is specialised in highly technologically advanced, specialised processes applicable to steel, stainless steel, titanic, ceramic and other materials, which are mainly used in the aircraft industry. The company is entirely owned by Vac Aero International.

5.2.3. Aviation companies in the SME sector The third group of aircraft companies includes the following entities: n Marganski & Myslowski Zaklady Lotnicze – a company based in Bielsko-Biala. Its business includes the reconstruction of historic aircrafts, the repair of gliders and ultra-light aircrafts and the manufacture of sport gliders. It conducts research and development work concerning proprietary aircraft designs. It is a global leader in the production of gliders. It employs 34 people. n Serwis Samolotow Historycznych – the company is headquartered in Jasienica near Bielsko-Biala. It produces replicas of Jungmann and Jungmeister aircraft (the 1930s), ultra-light aircraft and aircraft components. It employs 46 people. n Allstar PZL Glider – the company is based in Bielsko-Biala. It continues the business of SZD Bielsko-Biala concerning repair and production of SZD gliders. The company has a JAR certificate. n 3Xtrim – the company is headquartered in Bielsko-Biala, continuing a part of former SZD Bielsko-Biala’s business. The company is specialised in the production of three ultra-light training aircraft composite models for professional purposes. n Remos – the company is headquartered in Bielsko-Biala. It manufactures ultra-light composite aircrafts. n ETC-PZL Aerospace Industries Warszawa – the company is specialised in the design and construction of simulators and training equipment. It also modernises and adapts similar equipment; additionally, it develops and upgrades the equipment’s databases. n Centralna Szkola Lotniczo-Techniczna (central technical school of flying) of Krosno – a training and production centre manufacturing FK aircraft in cooperation with the German-based B+F; the company also organises aircraft and technical courses.

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5.3. Key sub-suppliers for the aviation sector Sub-suppliers constitute a separate group within the sector companies. Below, we present a list of the major sub-suppliers (some of them have already been mentioned above): n Arkom – a Rzeszow-based company specialised in the manufacture of tools (including tools for the aviation industry) n El-Automatyka – a Rzeszow-based manufacturer of machine tools. Its customers include Goodrich and Snecma n HSW-Narzedziownia – a manufacturer of instrumentation for the aircraft industry, headquartered Stalowa Wola n Kreisler Polska – it manufactures components for the aircraft industry and gas turbines for electric generators of high-grade steel at its plant in Krakow n TW-Metals Polska – located in Rzeszow, the company is a supplier of metals for the aircraft industry; it holds certificates awarded by the major global aircraft companies n Wietpol – an aircraft company specialised in machining; it is located in Krosno and employs 130 persons n WZK Mielec – the company was established in 1994. It manufactures aircraft components. It is specialised in the manufacture of doors for Boeing aircraft n Zaklady Mechaniczne Rufus – the company manufactures parts, units, mechanic, hydraulic, pneumatic, electric and electronic machines and equipment for many industries, including the aircraft sector n Zaklad Metalurgiczny WSK Rzeszow – the company produces iron, aluminium and magnesium castings and forged shapes for the aircraft industry; it also provides machining services n Zaklady Narzedziowe Prodrom Mielec – the company manufactures tools for many industries, including the aircraft sector n Zaklad Narzedziowy of Swidnik – the company manufactures tools for the aircraft and automotive industry; it employs 250 persons.

In Poland, there are also companies specialised in the operation and maintenance of military aircraft. They include: n Wojskowe Zaklady Lotnicze (military aircraft plant) no. 1 of Lodz n Wojskowe Zaklady Lotnicze no. 2 of Bydgoszcz n Wojskowe Zaklady Lotnicze no. 3 of Deblin n Wojskowe Zaklady Lotnicze no. 4 of Warsaw.

Despite the fact that these companies are managed by the Ministry of National Defence, they alo provide commercial services.

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5.4. Sector-specific scientific and research centres In addition to manufacturers and service providers, the Polish aircraft sector also comprises scientific and educational institutions. At the moment, these organisations include: n Rzeszow University of Technology – the Faculty of Aircraft and Mechanical Engineering offers studies with the following degree specialisations: aircraft, aircraft engines, avionics and pilotage. n Lublin University of Technology – the Department of Mechanics and Mechanical Engineering offers studies at the Helicopter Engineering programme (M.Sc. programme). n Warsaw University of Technology – the Faculty of Power and Aircraft Engineering, which offers the following specialisations: the Automatics and Aircraft Systems, Astronautics, Aircraft Propulsion and Aircraft. The Transport Department offers studies at the Air Traffic Management specialisation. The Department of Automation and Aircraft Systems conducts research work in aircraft-related fields. n Warsaw Military University of Technology – the following departments operate as part of the Institute of Aircraft Technology: Aerodynamics and Thermodynamics, Avionics and Aircraft Armament, Aircraft Engineering and Operation, all of which perform educational and scientific work. n State Higher Vocational School of Chelm – the Department of Mechanics and Mechanical Engineering offers the following specialisations: aircraft engineering, aircraft and land navigation, aircraft pilotage, machine technology, production system IT science. First students are due to graduate in 2007. n State Higher Vocational School of Kalisz – B.Sc. studies at the Department of Mechanics and Mechanical Engineering, the specialisation of aircraft engine engineering. n Institute of Aviation of Warsaw – set up in 1926, it is the main research and development and design centre in Poland in aviation and related sciences. The Institute is a research and development unit, which offers research, design and research and development work for the aircraft industry. n ITWL Warszawa – the company provides scientific and research support for the operation of military aircraft. It is specialised in the research of aircraft and its weapons in terms of broadly understood flight safety, logistics reliability and maintainability.

There are also secondary schools which provide vocational education in professions associated with the aviation industry. They include: n European Aviation Technical Secondary School at the Complex of Agricultural and Technical Schools in Powodow (avionics technician).

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n Private Aviation Schools of Warsaw – a complex of three schools: a general secondary school, a technical secondary school and a post-secondary school, which provides education in aviation professions. n European Aviation Technical Secondary School of Warsaw, which provides aviation education in the following professions: aviation mechanic and avionics technician.

5.5. Business support institutions A project named the Aviation Valley Association of Aviation Manufacturers is an important feature of the Polish aviation sector. This organisation groups the majority of aviation companies operating in Poland, including manufacturers of aircraft and aircraft components, their suppliers, aircraft research and development and logistics service providers and educational institutions training future aircraft employees. The objectives of the Association are: n organisation and development of a low cost supply chain n creating favourable conditions in order to enhance the development of the aviation industry enterprises in the region n further development of aviation studies, competences and qualifications n cooperation with universities of technology aiming to promote new ideas and continue scientific research within the aviation industry n promotion of the Polish aviation industry n support for aviation industry enterprises n influencing the Polish government’s economic policy to be conducive for the aviation industry.

As a result of the concentration of the Polish aviation industry in the specific part of the country, the Aviation Valley is becoming a geographically descriptive term which covers the Podkarpackie region, though the companies which are its members are also located the Lubelskie and Slaskie regions. Currently, southeast Poland is home to approximately 85% of all investments in the sector. A new project launched in 2006, which is related to the development of the Polish aviation industry, was the Polish Technology Platform for the Aviation Industry, whose aim is to support the development of the Polish aviation industry, facilitate the flow of information between research centres and companies and coordinate activities between the Polish aviation sector and the European Union.

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5.6. Workforce availability The Polish aviation industry comprises about 16,000 employees of various professions; however, most of them are employed in large companies employing up to a few thousand persons. Since salaries in these companies are not high, many employees might be willing to change jobs and relocate to a new company which could offer suitable posts. Furthermore, every year, educational institutions, as presented above, release graduates seeking jobs (about 70 potential aviation mechanics and 370 aviation engineers). The chart below shows salaries of engineers within the aviation sector, presented as the annual gross cost of the employer)5:

Salary (€) of the aviation engineer in Poland (presented as the annual gross cost payable by the employer)

PMR066

17,200 13,500 10,700 8,500 6,900

Graduates 3-5 years 5-8 years 8-10 years 10-15 years

Source: PMR, 2006 www.pmrpublications.com

Salaries on non-engineering positions are presented in the chart below.

Salaries (€) in the aviation industry in Poland (presented as the annual gross cost payable by the employer)

PMR067

17,139 14,800 14,500

9,700 8,950 8,950

4,500 3,500 3,500

Technician Mechanic Office clerk, administration clerk

Minimum Average Maximum

Source: PMR, 2006 www.pmrpublications.com

5 Research conducted on the basis of declarations submitted by the aviation sector employees in the Podkarpackie voivodship.

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Employees in the Polish aviation sector are not covered by any programme obliging aviation employers to incur payroll fund expenditure in excess of that mandatory in other industrial sectors. Neither do aviation employers have any obligatory non-financial liabilities towards the employees of the sector, such as early retirement, work-time regulation, etc. From new investors’ point of view, a great advantage of the Polish aviation industry is the fact that the sector is concentrated in a specific number of geographical areas, which greatly facilitates hiring new employees from among the workers of the existing plants (provided that the new investment is located there). Additionally, some of the areas traditionally associated with the aviation industry experience high unemployment; below, we present unemployment rates for specific regions, as estimated in October 2006: n Podkarpackie – 16.2% n Lubelskie – 15.2% n Slaskie – 13.1% n Wielkopolskie – 11.8% n Mazowieckie – 11.9%.

At the same time, the national unemployment rate was 14.9%.

5.7. Availability of investment sites Currently, the special economic zones located in the regions traditionally associated with the aviation industry offer sites which can be used by investors from the aviation industry. The list of the offered sites follows: n Europark Mielec Special Economic Zone has 607 ha of land in Mielec; it offers the following buildings:  a 4,300 m2 production hall (3,300 m2 of production space and 1,000 m2 of office space), available to investors as of 30 April 2007  a 1,600 m2 production hall (1,200 m2 of production space, 400 m2 of office space), available to investors as of Q1 2007; proposed rate oflease: €4.21/m2+utilities+VAT  a 5,608 m2 production hall; proposed rate of lease: €3.94/m2+utilities+VAT  a 750 m2 production hall: proposed rate of lease: €3.94/m2+utilities+VAT  additionally, the Special Economic Zone has land for developer projects in the following sites: (total area of the zone in brackets): n Debica (13 ha) n Gorlice (30 ha) n Sanok (30 ha) n Pustkow (7 ha) n Jaroslaw (9 ha) n Lezajsk (11 ha).

126 www.pmrcorporate.com Poland: analysis of selected economic sectors n Tarnobrzeg Special Economic Zone:  Tarnobrzeg (139.36 ha)  Stalowa Wola (241.64 ha)  Nowa Deba (174.5 ha)  Staszow (97 ha)  Jaslo (47 ha)  outside the Podkarpackie voivodship: Radom (92.65 ha), Wroclaw-Kobierzyce (281.96 ha)  the following buildings are currently offered to prospective investors: n a 2,340 m2 production hall n a 1,900 m2 production hall. n Katowice Special Economic Zone has the following investment sites in diverse parts of the Slaskie voivodship, which have excellent transportation infrastructure (proximity of motorways, expressways and railroads).

www.pmrcorporate.com 127 128 Poland: analysisofselectedeconomicsectors Aviation sector in its key voivodships in Poland

PMR068 Podkarpackie Lubelskie Slaskie Wielkopolskie Mazowieckie PZL-Rzeszo w PZL-Mielec WSK Kalisz Large companies BF Goodrich Krosno PZL-Swidnik Fiat Avio P&W Kalisz WZL no. 4 Wars aw Snecma Polsk a Vac Aero Kalisz Creuzet Polsk a Marga nski & Myslowski, SSH, Small and medium enterprises CSLT Krosno 3Xtrim, ETC-PZL Remos, Allstar PZL-Glider Arkom (tools), El-Automatyk a (machine tools), HSW-Narz edziownia (instrumentation ), TW-Metals (a meta l supplier ), Wietpol (machining), Sub-suppliers WZK Mielec (aircraft components ), Rufus (aircraft components ), ZM WSK Rzes zow (founding ) Prodrom Mielec (tools), ZN Swidnik (tools ) Lublin University of Warsaw University of State Higher Universities educating aviation Technology Technology Rzeszow University of Technology Vocational School of professionals State Higher Vocational Military University of Kalisz School of Chelm Technology Private Aviation Schools of European Technical Secondary schools educating aviation Warsaw Aviati on Secondary professionals European Technical Aviation School of Powodow Secondary School of Warsaw Institute of Aviation of Warsaw RESEARCH AND DEVELOPMENT Technical Institute of Military ITWL institutions Warszawa Euro-Park Mielec Special Economic Zone Katowice Special Economic Special economic zones Tarnobrzeg Special Economic Zone Zone Road density (the national average = 2 2 2 2 2 2 79 km/100 km 72 km/100 km 164 km/100 km 84 km/100 km 83 km/100 km 81 km per 100 km ) Labour effectiveness ratio 72 71 110 97 129 (the entire country = 100) Gross pay ratio (entire country = 100) 85 88 107 95 132 Business Support institutions Aviation Valley Association A project concerning the www.pmrcorporate.com development of an Projects improving the aviation industrial zone for aviation infrastructure companies and the construction of an airport in the county of Bielsk o

Source: PMR, 2006 www.pmrpublications.com Poland: analysis of selected economic sectors

6. Pulp and paper sector

Pulp and paper sector – selected locations

PMR115

Kwidzyn

Ostroleka Swiecie

Warsaw Kostrzyn

Konstancin-Jeziorna

Kielce

Krapkowice Klucze

Tychy

Source: PMR, 2006 www.pmrpublications.com

www.pmrcorporate.com 129 Poland: analysis of selected economic sectors

6.1. Conditions promoting investments in the pulp and paper industry n Dynamic development of markets which need paper and board:  printing – Poland is considered to be the “Europe’s printing house”; the market is growing at a fast rate of over 10% a year  packaging production – a survey conducted by PMR among the largest producers of packaging reveals an accelerating trend of 6-8% annual market growth to continue until 2010  the market of hygiene articles – after a passing slowdown in 2001 and 2002, the market has been expanding over the past two years as the average pay has grown – the estimated growth rate of 7-10% n low consumption of paper per one resident (87.9 kg), while the average for CEPI countries6 is 193.4 kg, which clearly indicates the strong growth potential of the Polish market n low costs of energy and water – the pulp and paper industry is characterised by high consumption of water and energy sources; e.g. the price of water in the Kostrzyn-Slubice Special Economic Zone is PLN 3.73/m3, while electricity is sold at a cost of PLN 0.40/kW n legislation effective as of 2007, aiming to regulate the timber sector, which will probably bring the prices of the feedstock down n high density of forests in certain regions of Poland, including the Lubuskie, Warminsko- Mazurskie and Zachodniopomorskie regions n the community regulations require Poland to restructure and increase the efficiency of the system for recycling paper and board packaging waste material (Directives 2004/12/ EC and 99/31) n convenient location in the centre of Europe, proximity to suppliers of timber (Russia, Ukraine and Belarus) and the main markets (Germany, Austria, Sweden), which implies low transport costs n political and economic stability, the EU membership.

6.2. Traditions of the pulp and paper industry The pulp and paper industry is characterised by considerable consumption of the feedstock and water, hence production plants are built near large forest areas and by rivers. The largest plants are in Kwidzyn, Konstancin-Jeziorna, Swiecie, Kostrzyn and Ostroleka. Poland’s paper industry has a long track record; the first paper plants, which used linen to make paper, were set up in Poland in the 15th century. The first papermaking machine in Poland was built in 1836 in Jeziorna, which is today’s Mazowieckie region. Before the First World War, there were 15 paper plants in Poland, which produced a total of about 50,000

6 The Confederation of European tonnes of paper a year. In the between-war period, the paper industry was not a very well Paper Industries – the association of developed industry since the largest plants stayed in Slask and Pomorze, which were within companies from the paper and pulp industry operating in 17 member Germany’s boarders at the time. They produced over 300,000 tonnes of paper every year. countries (Austria, Belgium, the Czech Republic, Finland, France, Spain, the Netherlands, Germany, Norway, Poland, Portugal, Slovakia, Sweden, Switzerland, Hungary, the United Kingdom, Italy).

130 www.pmrcorporate.com Poland: analysis of selected economic sectors

After the Second World War, Poland was reconstructed to include Slask and Pomorze. The paper plants located therein were nationalised. The plants located in central Poland were nationalised and expanded (Jeziorna and Kielce). Another milestone in the development of the pulp and paper industry was the economic transformation after 1989 and the ensuing privatisation of the sector. In the first half of the 1990s, major global pulp and paper concerns invested in Poland, including International Paper, Stora Enso, Kimberly-Clark and Mondi Packaging. According to GUS data, in the first half of 2006 the Polish pulp and paper industry comprised over 3,674 businesses, of which 99% were SMEs employing not more than 250 people. The rest of the market was represented by 24 large firms with more than 250 employees (International Paper and Stora Enso Poland employ more than 1,000 people each). The majority of these plants were established as a result of ownership changes forced on by the post-1990 economic transformation. Depending on their business profile, these companies can be divided as follows: n pulp and paper plants n paper or board plants n plants manufacturing corrugated board and packaging n larger plants processing paper.

The companies which have their production plants in Poland are specialised in the following areas: n hygienic paper n newsprint n uncoated printing and writing wood-free paper n paper for manufacturing corrugated board n corrugated board and corrugated board packaging.

6.3. Feedstock availability The feedstock base primarily includes timber (as primary feedstock) and waste paper (as secondary feedstock). Timber availability in Poland is conditioned by state policy and imports regulations. Waste paper availability mainly depends on the state policy regarding waste and recycling. As opposed to the European Union, Polish forests are state-owned and publicly available. The State Treasury owns 80% of the woods. The productivity of Polish forests is among the highest in Europe and it is still growing. In Poland, only 55% of the new forest volume is annually cut down, while in Scandinavia, the respective ratio is 85%. In Poland, according to projection the density will be increased to 30% of the country’s area by 2025 and to 33% by 2050. Currently, the ratio is 29%. The national forestation programme for Poland assumes that 700,000 ha of land will be reforested by 2020. Currently, only 17% of the feedstock used by the Polish pulp and paper industry is the timber cut down in Polish forests; this is because the industry uses pulp wood coming from sanitary thinning out of woods. In Poland, the timber used in the production of paper comes mainly from state-owned forests; only a minor part comes from imports or private woods.

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The prices of wood in Poland are slightly higher than in Western Europe, but due to logistics costs, the final price of the feedstock is nearly the same. European prices of wood are influenced by limited supply resulting from restrictive ecology policies of the General Directorate of State Woods. However, this issue should be resolved in the nearest future as the General Directorate of State Woods has prepared a revolutionary solution which should standardise the sales of timber and liquidate the so-called grey market, and put an end to unfair competition. The papermaking specialists perceive these changes as a great opportunity for the pulp and paper industry. The new regulations will come into force in 2007. Key proposed changes: n establishing the Forest and Timber Committee, which will determine the volume of timber to be sold, price range, rules governing the execution of agreements and procedures governing the sale of timber under extraordinary conditions n creating a forest and timber portal (an integrated information base) n submitting bids by purchasers through the e-drewno IT system n universal implementation of timber purchase guarantees.

6.3.1. Wood pulp The structure of the consumption of wood pulp in the production of paper and board in Poland is as follows: n primary wood pulp – 54.4% n secondary wood pulp – 31.6% n non-fibre feedstock – 14%.

Output, consumption, imports and exports of wood pulp in Poland (’000 tonnes), 2001-2005

PMR069 4 4 25 22 , 194 , 1 , 1 1 022 0 , 1 96 0 0 3 3 81 802 79 78 75 4 4 0 49 47 8 42 376 29 6 13 91 41 42 37

Output Consumption Import Export

2001 2002 2003 2004 2005

Source: Association of Polish Papermakers, GUS, 2006 www.pmrpublications.com

132 www.pmrcorporate.com Poland: analysis of selected economic sectors

6.3.2. Primary fibre pulp In Poland, wood pulp is produced by six plants; three of them produce sulphate wood pulp (including semi-chemical pulp and CTMP), the other three produce just wood pulp. In 2005 their combined output was 1,039,500 tonnes, including 802,300 tonnes of sulphate wood pulp, 96,400 tonnes of semi-chemical wood pulp, 64,500 tonnes of CTMP and 76,300 tonnes of wood pulp.

6.3.3. Secondary fibre pulp In Poland, the recycling of waste paper has grown steadily and dynamically. Through the 2001 output was 851,000 tonnes and the subsequent year’s growth was not significant, in 2003, the production grew to 1,015,000 tonnes, reaching 1,123,600 tonnes in 2004. Meanwhile, the consumption of waste paper jumped from 818,000 tonnes (2001) to 979,000 tonnes (2004). In 2005 about 1,263,000 tonnes of waste paper were recycled, including 1,041,000 tonnes used to produce approximately 870,000 tonnes of secondary fibre pulp. The remaining 231,000 tonnes of waste paper were exported, mainly to Germany and Austria.

Consumption and recycling of waste paper in Poland (’000 tonnes), 2001-2005

PMR070 1,263 1,124 979 1,041 1,015 908 818 843 851 874

Consumption Recycling

2001 2002 2003 2004 2005

Source: Association of Polish Papermakers, GUS, 2006 www.pmrpublications.com

The dynamic growth of waste paper production is caused mainly by the restrictive EU regulations, which oblige member states to implement an efficient system for waste sorting and storage. In Poland, collection of waste paper relies mainly on massive suppliers, such as shopping centres and retail chains, where the collection costs are significantly lower than in the case of households. Other factors which have impact on waste collection include a low price of waste paper and a still low public ecological sensitivity. Despite the numerous drawbacks, waste paper collected in Poland fully satisfies the needs of the Polish industry. This tendency is consistent with global trends since there are virtually no countries which would struggle with waste paper shortages; on the contrary, there is too much waste paper, which, in view of the need for a balance between demand and supply, pushes waste paper prices down.

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The Association of Polish Papermakers has disclosed that there are 48 paper and board makers in Poland, including: n five producers of paper for printing and writing uses n eight producers of paper for packaging uses n 30 producers of hygienic paper n five producers of other types of paper and board.

Production, exports and imports of paper and board in Poland (’000 tonnes), 2001-2005

PMR071 2 7 1 73 2 7 69 634 , , , 2 46 2 0 6 2 7 , 34 35 , , 2 7 0 2 2 11 08 3 05 , 4 , , 1 86 85 2 2 2 , , 74 66 0 , 1 1 56 , 1 , 1 1 32 , 1

Production Import Export

2001 2002 2003 2004 2005

Source: Association of Polish Papermakers, GUS, 2006 www.pmrpublications.com

In 2005 a total of 2,731,900 tonnes of paper and board were produced in Poland, of which 2,109,600 tonnes were exported. At the same time, the imports of paper and board amounted to 2,696,900 tonnes, thus, Poland’s trade balance in paper and board was negative. Despite the fact that the consumption of paper and board in Poland has been rising, it is still much lower than in Western European countries. In 2005 the average per capita consumption of paper was 86.9 kg, while in Germany, the Netherlands and Finland, the respective ratios were 242.7 kg, 249.3 kg and 288.4 kg. The figures clearly demonstrate that the consumption of paper and board in Poland will be growing in the upcoming years. In 2005 Poland’s demand for paper and board was 3,319,200 tonnes, but the forecasts released by the Association of Polish Papermakers predict a figure of over 3,500,000 tonnes in 2007 and 4,000,000 tonnes in 2010.

Consumption of paper and board in Poland, 2003-2005

PMR072 3,319.2 3,140.5 86.9 2,773.4 82.2

72.6

2003 2004 2005

Consumption (’000 tonnes) Consumption per person (kg/year)

Source: Association of Polish Papermakers, GUS, 2006 www.pmrpublications.com

134 www.pmrcorporate.com Poland: analysis of selected economic sectors

6.4. The largest producers

6.4.1. Producers of hygienic paper Toilet paper accounts for the largest share (approx. 50%) of the Polish hygienic paper market; furthermore, this segment also includes tissues, paper towels, napkins, sanitary towels, pads, tampons and cotton buds.

DELITISSUE SP. Z O.O. The company, a member of the Sofidel group of Italy, is based in Ciechanow, where it has a plant, offices, warehouse, logistics centre and a paper mill. n Site location: Ciechanow, Mazowieckie voivodship n Origin of capital: Italy n Products: tissue paper, tissues, toilet paper, towel.

HANKE TISSUE SP. Z O.O. The company was established at the beginning of the 1990s when Trebruk, a Swedish paper concern, purchased Kostrzynskie Zaklady Papiernicze (Kostrzyn paper company). However, the concern’s principal business concentrates on copy paper, while the machinery acquired as part of the purchased assets of Kostrzynskie Zaklady Papiernicze could be used to produce tissue paper. Therefore, in 1994, half of the equity interests in the newly created company were acquired by Hanke Papier, a German company, and the new company was named Hanke Tissue. Hanke Papier came to hold the entire share capital of Hanke Tissue in 1998. n Site location: Kostrzyn by the Oder River, Lubuskie voivodship n Origin of capital: Germany n Products: tissue paper, toilet paper, tissues, towels.

ICT POLAND SP. Z O.O. Plant established in Kostrzyn in 2001; one of the three main production plants of the Industrie Cartarie Tronchetti (ICT) concern in the world. n Site location: Kostrzyn by the Oder River, Lubuskie voivodship n Origin of capital: Italy n Products: tissue paper, toilet paper, tissues, towels.

KIMBERLY-CLARK S.A. Kimberly-Clark made its first investment in Poland in 2003; it bought a Klucze-based plant producing hygienic paper from International Paper, a US investor in the latter company, which decided to sell a division producing hygienic paper. n Site location: Klucze, Malopolskie voivodship n Origin of capital: USA n Products: tissue paper, tissues, toilet paper, towels, serviettes, cellulose wadding and articles for feminine hygiene.

www.pmrcorporate.com 135 Poland: analysis of selected economic sectors

METSÄ TISSUE S.A. The Polish branch was established as a result of the acquisition of Warszawskie Zaklady Papiernicze (Warsaw paper company) in 1998. At the same time, the Finnish concern purchased equity interests in Zaklady Papiernicze Krapkowice (Krapkowice paper company), which was finally acquired in 2001. n Site location: Konstancin-Jeziorna, Mazowieckie voivodship Krapkowice, Opolskie voivodship n Origin of capital: Finland n Products: toilet paper, towels.

6.4.2. Paper producers

ARCTIC PAPER KOSTRZYN S.A. As Hanke Tissue, Arctic Paper Kostrzyn was set up as part of the privatisation of Kostrzynskie Zaklady Papiernicze. Arctic Paper has been the owner of the plant since 1993. In 2003, as a result of Arctic Paper’s consolidation, the company was renamed from Kostrzyn Paper S.A. to Arctic Paper Kostrzyn S.A. Today, its total employee strength is 445 persons. n Site location: Kostrzyn by the Oder river, Lubuskie voivodship n Origin of capital: Sweden n Products: offset paper.

INTERNATIONAL PAPER – KWIDZYN S.A. The company named Zaklady Celulozowo-Papiernicze w budowie (cellulose and papermaking company under construction) was established in 1972. In 1991 it was transformed into a state-owned company, which was a step towards full privatisation, which took place in 1992 when it was purchased by International Paper, the world’s largest firm in the industry. Currently, the company is headquartered in Warsaw; it has production plants in Kwidzyn and a financial-accounting centre in Krakow. International Paper Kwidzyn S.A. is one of Poland’s largest exporters – over a half of its output is exported, mainly to the EU states. The company employs over 1,200 persons. n Site location: Kwidzyn, Pomorskie voivodship n Origin of capital: USA n Products: bleached pulp, GC, GT, GD, PTF coated board, envelopes, paper for laser printers, writing paper, newsprint paper, copy paper, offset paper, packaging paper, (solid, cover, coated) board.

136 www.pmrcorporate.com Poland: analysis of selected economic sectors

MONDI PACKAGING PAPER SWIECIE S.A. Mondi Packaging Swiecie S.A. is part of the international group Mondi Packaging Group. The company was established in 1997 when the Framondi NV consortium bought 59.88% of the share capital of Zaklady Celulozy i Papieru (a pulp and paper company) of Swiecie. In 1998 the company was named Frantschach Swiecie S.A. but finally, in 2005, took the name of Mondi Packaging Paper Swiecie S.A. The Mondi Group also has plants in Mielec, Solec, Bystrzyca, Dorohusk and Warsaw. The company employs approximately 950 persons in Poland. n Site location: Swiecie nad Wisla, Kujawsko-Pomorskie voivodship Mielec, Podkarpackie voivodship Solec, Mazowieckie voivodship Bystrzyca, Dolnoslaskie voivodship Dorohusk, Lubelskie voivodship Warsaw, Mazowieckie voivodship n Origin of capital: Austria n Products: non-bleached cellulose (SA), fluff cellulose, semi-chemical wood pulp, thallic oil, and fluting paper for corrugated board, packaging paper, sack paper.

Other major producers:

FABRYKA PAPIERU W DABROWICY SP. Z O.O. n Site location: Jelenia Gora, Dolnoslaskie voivodship n Origin of capital: Poland n Products: drafting, writing, drawing, waste offset, packaging and watermark paper, parchment.

6.4.3. Largest board producers The packaging market is one of the most dynamically developing sectors of the Polish economy. Its total value (including but not limited to paper packaging) is estimated at over PLN 5bn, though Poland’s per-capita use of packaging is considerably lower than in the EU average. We predict that the packaging market will be growing at an average rate of 6-8% a year until 2010. All the major global producers of corrugated board and corrugated board packaging, including: DS. Smith, SCA Packaging, Stora Enso and Smurfit Kappa.

DS SMITH POLSKA S.A. The company was established in 1968 as Kieleckie Zaklady Wyrobow Papierowych (the Kielce paper product manufacturer). In 1995, the company was purchased by David S. Smith, and in 2001, it was renamed to DS. Smith Polska S.A. Currently, the company has two production plants in Poland: the one in Kielce and a plant in Kutno, which was built in 2005. The company employs over 600 persons. n Site location: Kielce, Swietokrzyskie voivodship Kutno, Lodzkie voivodship n Origin of capital: UK n Products: computer and PE coated paper, corrugated board, corrugated and solid board boxes. www.pmrcorporate.com 137 Poland: analysis of selected economic sectors

SCA PACKAGING POLAND SP. Z O.O. SCA Packaging Poland Sp. z o.o. is part of the SCA (Svenska Cellulosa Aktiebolaget) concern. The company was incorporated in 1997, and it was also then that the first production plant was constructed in Pila. The company produces corrugated board, corrugated board packaging and hygienic paper (SCA Hygiene). n Site location: Olawa, Dolnoslaskie voivodship Siechnice, Dolnoslaskie voivodship Kwidzyn, Pomorskie voivodship Poznan, Wielkopolskie voivodship Pila, Wielkopolskie voivodship Warsaw, Mazowieckie voivodship n Origin of capital: Sweden n Product: corrugated board, boxes.

STORA ENSO POLAND S.A. Stora Enso Poland S.A. was formed as part of the privatisaton of Intercell and its acquisition by Stora Enso in 2004. Intercell was established on the basis of the state-owned enterprise Ostroleckie Zaklady Celulozowo-Papiernicze (Ostroleka cellulose and paper plant), which was subsequently acquired by Lodzkie Zaklady Papiernicze (Lodz paper plant), which launched a paper plant in Tychy. The company employs over 1,600 persons in Poland. n Site location: Ostroleka, Mazowieckie voivodship Tychy, Slaskie voivodship n Origin of capital: Finland/Sweden n Product: cellulose (SA), semi-chemical pulp, thallic oil, liner and fluting paper for corrugated board, packaging paper, sack paper, corrugated board and boxes.

SMURFIT KAPPA SP. Z O.O. The company which was the Smurfit Kappa Group’s predecessor in Poland had been the Pruszcz Gdanski plant, which was bought by the Dutch KNP BT in 1994. Two years later, the company acquired from the State Treasury a packaging plant based in Drezdendko; another two years later, another plant was built in Warsaw. At the same time, as a result of the restructuring of KNP BT, the Kappa Packaging Group was established. In 2001 following the acquisition of AssiDoman by Kappa Packaging, the Group was expanded by a plant in Modla Krolewska near Konin. In 2002 the Jefferson Smurfit Group purchased equity interests in a plant based in Pruszkow (former Munksjo Packaging). In 2005 as a result of the merger of Kappa Packaging and Jefferson Smurfit, the Smurfit Kappa Group was established. It employs approximately 900 persons in Poland. n Locations: Drezdenko, Lubuskie voivodship Pruszcz Gdanski, Pomorskie voivodship Konin, Wielkopolskie voivodship Warsaw, Mazowieckie voivodship Pruszkow, Mazowieckie voivodship n Origin of capital: Netherlands, USA n Products: corrugated board, packaging, boxes.

138 www.pmrcorporate.com Poland: analysis of selected economic sectors

Other major producers:

OTOR SILESIA S.A. n Site location: Tychy, Slaskie voivodship n Origin of capital: France n Products: fluting paper for corrugated board, packaging paper, corrugated board boxes, corrugated board, box board.

WERNER KENKEL SP. Z O.O. n Site location: Krzycko Male, Wielkopolskie voivodship n Origin of capital: Poland n Products: corrugated board, boxes.

TFP SP. Z O.O. n Site location: Dziecmierowo, Wielkopolskie voivodship n Origin of capital: Poland n Products: corrugated board, boxes.

EUROBOX POLSKA SP. Z O.O. n Site location: Przesiadlow, Mazowieckie voivodship n Origin of capital: a trade holding (Austria, Bulgaria, Croatia, Germany, Poland, Romania, Ukraine, Hungary) n Products: corrugated board, boxes.

RAWIBOX S.A. n Site location: Rawicz, Wielkopolskie voivodship n Origin of capital: France n Products: envelopes, boxes, corrugated board.

BART SP. Z O.O. n Site location: Swiecie, Kujawsko-Pomorskie voivodship n Origin of capital: Poland n Products: corrugated board, corrugated board boxes.

POLPAK KARTON SP. Z O.O. n Site location: Poledno (near Swiecie), Kujawsko-Pomorskie voivodship n Origin of capital: Poland n Products: corrugated board, boxes.

MODEL TEK-PAK SP. Z O.O. n Site location: Czosnow, Mazowieckie voivodship Bilgoraj, Lubelskie voivodship n Origin of capital: Switzerland n Products: corrugated board, boxes.

www.pmrcorporate.com 139 Poland: analysis of selected economic sectors

PACKPROFIL SP. Z O.O. J.V. Site location: Kolonowskie, Wielkopolskie voivodship Origin of capital: Poland Products: solid board, protective board, sleeves.

6.5. Sector-specific scientific and research centres In the between-war period (1918-1939), no university in Poland taught a papermaking studies course (except for a one-term lecture course on paper technology at the Mechanical Engineering Department of the Warsaw University of Technology). After the Second World War, the severely destroyed papermaking industry was in need of technically-trained specialists. However, this issue was problematic since a vast majority of Polish papermaking professionals emigrated, and many of them lost their lives during the war; additionally, foreign experts who worked in Poland before the war, returned to their homelands. Therefore, those specialists who stayed in Poland had to undertake the task of educating a new workforce. The educational base was provided by the Lodz University of Technology (established in 1945) where, upon the initiative of Professor Bohdan Stefanowski, the Section of Cellulose and Papermaking Machinery and Equipment of the Department of Mechanics was created. Two years later (1948), Biuro Projektow Przemyslu Papierniczego (office of designs for the paper industry) was created, which was transformed into BIPROPAP Sp. z o.o. at a later date.

INSTITUTE OF PAPERMAKING AND PRINTING The Interdepartmental Institute of Papermaking and Printing of the Lodz University of Technology is a scientific and educational research unit educating a wide variety of papermaking specialists. Established in 1970, the Institute of Papermaking and Paper Machines was a result of the merger of the Chair of Papermaking and Paper Machines (originally, the Mechanical Engineering Department) and the Chair of Pulp and Paper Technology (originally, the Chemical Department). In 1998, as a result of consistent expansion of the scientific and educational scope of its activities by new fields, including paper processing and printing, the Institute of Papermaking and Paper Machines changed its name to the Institute of Papermaking and Printing. The following scientific and research activities are conducted by the Institute of Papermaking and Printing: n technology for the production of fibre pulp n paper production n machines for the production of paper and fibreboard n drying and energy generation; processing machinery and equipment n printing machinery.

140 www.pmrcorporate.com Poland: analysis of selected economic sectors

PULP AND PAPER RESEARCH INSTITUTE (ICP) of Lodz The Pulp and Paper Research Institute was set up in October 1946 when the economy was slowly switching from the production for military purposes to non-military production after the Second World War. Industrial plants established at that time, including pulp and paper units, needed a research centre which would provide services for the sector. In October 1946, the Experimental Paper Laboratory of Wloclawek was set up. It was moved to Lodz in May 1946 and renamed to the Central Pulp and Paper Laboratory. The scope of its activities included arbitration analyses, supervision over plant-owned laboratories, extensive training programme, as well as scientific and research activity through conducting its own research projects and projects to the order of the industrial sector. In 1952, by virtue of the regulation of the Minister of the Chemical Industry, the Central Pulp and Paper Laboratory was transformed into the Pulp and Paper Institute. Currently, the Pulp and Paper Institute’s employee strength is 47 people, including 30 staff with university degrees and seven with Ph.D.-level degrees. The Institute has been headed by Tomasz Malinowski, Ph.D. Eng., since 1 June 2002. The Institute performs science and technical work and services for the pulp and paper industry; it also organises training and courses related to its activities. The Institute also awards certificates for paper products and administers the Office of the Standardisation Committee for Wood Pulp, Paper, Board and their Products. The Institute has two laboratories and five units: n Paper Quality Laboratory n Environmental Protection Laboratory n Certification Unit n Documentation and Information Unit n Papermaking Unit n Pulp Unit n Experimental and Production Unit.

The Paper Quality Laboratory performs research tasks and prepares opinions and arbitration analyses for raw materials, semi-finished products, paper products, paper- based products, packaging material and packaging (concerning consistency with norms, EU directives and technical requirements); it also designs and awards certificates for paper and board packaging and provides specialist trainings. The Environmental Protection Laboratory conducts research and assessment projects; its responsibilities also include improvements to technologies for the treatment of waste and gas emissions and the utilisation of solid waste, including measurement services, development of new research and analytical methods, as well as drafting of applications for environmental permits. The Certification Unit issues certificates for the following marks: “Q” (quality-certified marks), “B” (security mark), ecology mark, and certificates confirming compliance with normative documents. The Documentation and Information Unit maintains Poland’s largest specialist library and the “Paper” thematic database. The Papermaking Unit develops new technology processes and adapts global ones to the domestic conditions; it also assesses and modifies supporting technologies and resources used by Polish papermaking plants. www.pmrcorporate.com 141 Poland: analysis of selected economic sectors

The Pulp Unit performs scientific and research work concerning new technologies for manufacturing and bleaching fibre pulp and assesses and modifies applied technology processes; it also undertakes analyses of plant feedstock. The Experiment and Production develops technologies for producing various clearing, insulation and special-purpose materials and produces these materials. The unit is responsible for the development of technologies for industrial manufacturing of technical paper and makes classic laid paper for restoration and archiving purposes.

WOOD TECHNOLOGY INSTITUTE The Wood Technology Institute was established by the Minister of Forestry on 1 January 1952. It is a research unit whose scope of responsibilities includes issues relating to wood processing and use. The Institute conducts research and development, training and publishing activities; it also conducts studies and undertakes certification and standardisation tasks. The Institute issues opinions and performs surveys, certifications and expert opinions concerning the following matters: n properties of wood and wood-based products n adhesives and bonding processes n protecting wood and wood-based products against aging n impregnation and modification of wood and wood-based products n chemical processing of wood n woodworking n production of sawmill wood and wood-based products n furniture technology n machinery ergonomics n noise control, protection against dust and fire n economics, production organisation and forecasting.

BIPROPAP SP. Z O.O. BIPROPAP continued the business of the Office of Studies and Designs for the Papermaking Industry, which was established in Lodz in 1946. BIPROPAP renders services to customers in the pulp, paper and paper-processing industries. Its range of services includes: n development of investment programmes n location surveys n designing and workshop drawings n business plans, economic analyses, marketing n erection and start-up supervision n procurement assistance n valuations (of machinery, equipment, costs and investments).

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INTERPROJEKT SP. Z O.O. The company conducts research and analytical projects in the following fields: n feasibility analyses for new projects and modernisation undertakings n technical and economic surveys, advisory services n designing (of preliminary and final stages) for complete plants producing fibre pulp and paper n project supervision.

PMPOLAND S.A. The company is active in the following areas: n delivery of equipment for the papermaking industry, including machinery for preparing of wood pulp, machinery for producing paper and board, finishing and processing machinery n execution of designs for paper plants, including complete units, process lines and machinery modernisation; the company can be a general supplier, a general contractor or a project coordinator n provision of planning, designing, engineering and management services for the pulp and paper industry n provision of spare parts for machinery n advisory concerning production technology n services indirectly related to the paper industry.

6.6. Availability and cost of qualified staff In addition to feedstock and energy, the availability of qualified staff is the major factor with an impact on investments in the pulp and paper sector.

6.6.1. Education The Institute of Papermaking and Printing of the Lodz University of Technology is the only scientific unit in Poland which teaches papermaking specialists. It provides its graduates with the knowledge of modern production processes concerning technology, machinery and equipment, their engineering and development, as well as with the expertise in human resources management in papermaking, printing and related industries. Over 1,200 students, including 40 foreigners, have graduated from the Institute so far. Furthermore, there are a number of schools which provide education at specialisations indirectly associated with the papermaking industry, including wood industry and printing schools.

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Universities n Agricultural University of Poznan:  Faculty of Wood Technology  Faculty of Forestry n Warsaw Agricultural University:  Faculty of Wood Technology  Faculty of Forestry n Agricultural University of Krakow:  Faculty of Forestry.

Secondary schools n Complex of Wood Industry Schools in Lomza n Complex of Wood Industry and Forestry Schools in Ruciane Nida n Complex of Wood Industry and Environmental Protection Schools in Zwierzyniec n Complex No. 1 of Vocational Schools in Stargard Szczecinski n Wood Industry Secondary Technical School in Kalwaria Zebrzydowska n Karol Brzostowski Complex of Basic Vocational Schools in Suwalki n The Complex of Mechanical Engineering and Wood Industry Schools in Przemysl n Construction and Wood Industry Basic Vocational School in Poznan n Complex of Basic Vocational Schools in Ilawa n Complex of Wood Industry Schools in Bydgoszcz n Printing Secondary School at the Complex of Chemical Schools in Bydgoszcz n Printing Secondary School in Lodz n Printing Secondary School in Garwolin n Private Printing Secondary School in Wyszkow n Printing Secondary School in Warsaw n Non-Public Supplementary Secondary Printing School in Warsaw n Printing Secondary School in Miejsce Piastowe.

The Polish paper sector comprises over 35,000 people of various professions; usually, they are employed in large companies with a few hundred staff on average. According to the Association of Polish Papermakers, the average employment in pulp and paper companies was 36,000 (2005) (on the basis of a survey of 182 largest companies). The average employment has been rising steadily since 2003, at a rate of 1,000 persons a year (2003 – 34,000 persons, 2004 – 35,000 persons). The average gross pay in the pulp and paper industry is about PLN 2,600 (€666). In 2003 the average gross salary was PLN 2,619; in the following year, it fell slightly to PLN 2,606. In 2005 it reported considerable growth, achieving PLN 2,659.

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Average employment and pay in the pulp and paper industry in Poland, 2003-2005

PMR073 36,000

35,000

34,000

2,659 2,620 2,607

2003 2004 2005

Average employment Average pay (PLN)

Source: Association of Polish Papermakers, GUS, 2006 www.pmrpublications.com

6.7. Availability of investment sites In the analysis of the paper sector, we focused on the regions where the largest companies from the sector are active, which, due to limited access to a qualified workforce, is one of the more relevant factors conditioning investments. The other relevant factors include access to feedstock and appropriate infrastructure.

6.7.1. Lubuskie voivodship n Proper supply of feedstock:  the highest density of forests in Poland (49% of the voivodship’s area is covered by forests). n Good climate:  the longest vegetative period in Poland  the average annual temperature of roughly +8°C. n Numerous sawmills across the voivodship:  third position in Poland in terms of wood acquisition  5.8% of the output sold of the domestic wood industry comes from the Lubuskie voivodship  the voivodship’s timber industry accounts for 9.5% of Polish exports. n Timber industry traditions of a few decades, n Steady development of the sector through the presence of major foreign companies, including:  Hanke Tissue  ICT Poland  Arctic Paper  Smurfit Kappa.

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6.7.2. Mazowieckie voivodship n The proximity of the Warminsko-Mazurskie voivodship, which has good supply of the feedstock:  forests cover 27.8% of the voivodship’s area  leader in terms of deciduous and coniferous sawn timber output (477.2 m3 of wood can be obtained from one hectare of forest in the region; the national average is 321.4 m3). n Steady development of the sector through the presence of major foreign companies, including:  Delitissue  Metsa Tissue  Mondi Packaging  Stora Enso  Smurfit Kappa  Eurobox  Model Tek-Pak.

6.7.3. Warminsko-Mazurskie voivodship n Appropriate supply of feedstock:  forests cover 27.8% of the voivodship’s area  possibility of acquiring large volumes of feedstock for furniture production. n Long-established timber industry traditions:  leader in terms of deciduous and coniferous sawn timber (477.2 m3 of wood can be obtained from one hectare of forest in the region; the national average is 321.4 m3),  leading region in terms of the exports of furniture and woodworking products (approx. 14.3% market share in the domestic production of furniture). n Proximity of voivodships with large wooded areas:  potential for cooperation between producers and between subcontractors. n Warminsko-Mazurska Special Economic Zone.

As part of the public aid offered by the state, corporate investors in the Warminsko- Mazurska Special Economic Zone can enjoy tax breaks on income on two bases: capital expenditure made or new jobs created. The Warminsko-Mazurska SEZ sill has over 200 ha of investment land available.

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6.7.4. Wielkopolskie voivodship n The availability of the feedstock:  the proximity of the Zachodniopomorskie voivodship, which has high forest density  forest density of 34.3%, (the national average – 28.4%)  multi-purpose forests (including commercial forests) – 72.5%  prevalence of public forests: total area of forests: 785,500 ha, including 776,800 ha of public forests. n Kostrzyn-Slubice Special Economic Zone An entrepreneur commencing business activities in the Kostrzyn-Slubice Special Economic Zone is entitled to draw on regional aid in the form of tax breaks. Investors can enjoy tax breaks on income on two bases: capital expenditure made or new jobs created. The Kostrzyn-Slubice SEZ sill has over 360 ha of investment sites available. n Steady development of the sector through the presence of the following major foreign companies, including:  SCA Packaging  Smurfit Kappa  Wernel Kenkel  TFP  Rawibox  Packprofil.

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7. Household appliance sector

Household appliance sector – selected locations

PMR116

Kutno

Lodz

Zarow Wroclaw Radomsko

Olawa Swidnica Kobierzyce

Source: PMR, 2006 www.pmrpublications.com

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7.1. Traditions of the household appliance sector The origins of the Polish white goods sector date back to the period after the Second World War, i.e. the 1950s and 1960s. It was at that time that many household appliance manufacturers were established. They were state-owned companies, and the majority of them were part of the Predom Group (the Association of Mechanical Industries – Automated Household Goods). The most known of those companies were: n Dezamet (Nowa Deba) n Farel (Ketrzyn) n Lucznik (Radom) n Polar (Wroclaw) n Wromet (Wronki) n Wrozamet (Wroclaw) n Zelmer (Rzeszow).

A large producer of washing machines and spin-dryers was Myszkowska Fabryka Naczyn Emaliowanych Swiatowit (a plant manufacturing enamel dishes) of Myszkow. This manufacturer produced the most popular washing-machine of these times in Poland, named “Frania”. A vast majority of Polish refrigerators sold on the domestic market at that time were produced by Silesia of Rybnik.

7.2. Current situation in the household appliance sector In most cases, the white goods sector successfully navigated through the political and economic revolutions. After 1989, a large majority of the plants were restructured and currently operate as independent units or were acquired by foreign investors. Now, large international concerns have the greatest impact on the Polish household appliance sector. Productions activities are concentrated in three voivodships: Dolnoslaskie, Lodzkie and Wielkopolskie, but white goods are also produced in other regions of the country, including the Mazowieckie, Slaskie and Podkarpackie voivodships.

7.2.1. The largest market players According to our estimates, there are about 400 white goods companies in Poland. The largest manufacturers of refrigerators, washing machines, cookers and dishwashers are globally- recognised concerns: n BSH (Lodz) n Electrolux (Olawa, Siewierz, Swidnica, Zarow) n Fagor Electrodomesticos (Wroclaw) n Indesit (Lodz, Radomsko) n LG Electronics (Kobierzyce) n Whirlpool (Wroclaw) n and Poland-based Amica (Wronki).

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Philips DAP (Bialystok) and the Polish Zelmer (Rzeszow) are the major producers of such white goods as vacuum cleaners, microwave ovens, coffee makers, irons, electric kettles, food processors, chip pans and toasters.

7.2.2. Output The effects of a considerable inflow of foreign investments seen in recent years andthe resulting creation of new plants are reflected by a quick increase in production. In 2005 the value of production sold generated by the household appliance sector was over PLN 6.4bn (€1.6bn), which was one-sixth higher than the figure recorded in the preceding year. The positive trend was continued into 2006.

Production of household appliances in Poland in 2000 and 2005 (’000 items)

PMR101

1,674 Refrigerators and freezers 693

1,481 Washing machines 564

Vacuum cleaners 1,326 1,674

847 Electric cookers 403

775 Gas cookers 161 2000 2005

Source: GUS, 2006 www.pmrpublications.com

In the first ten months of 2006, the production of washing machines was almost one half higher than in the same period of 2005. The production of refrigerators and freezers rose by nearly a fifth, while the output of gas cookers increased by almost 8%. On the other hand, the production of vacuum cleaners fell by more than a tenth. It should be noted that the decisive majority of household appliances manufactured in Poland (approx. 70-80%) is exported.

7.3. Growth prospects for the sector The forecasts for the white goods sector in the upcoming years are optimistic. In the opinion of representatives of the sector, Central and Eastern Europe is one of the most promising markets in the world. In view of the economic upturn in Poland and the boom in the housing market, the domestic white goods market has been rising at a high rate as well. According to a report released by Dun & Bradstreet, in the first six months of 2006, the sales of household appliances in Poland rose by 10% compared to the corresponding period in 2005. In addition to the positive geographical location, which provides easy access to markets in Central and Eastern Europe, Poland’s attractiveness is enhanced by relatively low labour costs and the availability of qualified workforce, which is seen by investors who build new plants to increase their production capacities in the country.

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7.4. Select locations for investments in the household appliance sector

7.4.1. Dolnoslaskie voivodship

7.4.1.1. Industrial traditions of the region For many years, the Dolnoslaskie region has been the principal manufacturing centre of white goods in Poland. Polar and Wrozamet, Poland’s largest manufacturers, were based in this region where also an extensive network of sub-suppliers was developed. Currently, the production of household appliances is one of the business priorities provided for in the development strategy for the region.

7.4.1.2. Large companies operating in the household appliance sector At the end of 1990s, Wrozamet was bought by Fagor Electrodomesticos, a Spanish concern; Polar was purchased by Whirlpool in 2002. The investors built new production lines and considerably extended the operating capacities of the acquired plants. The past few years saw considerable investments. In addition to the two firms mentioned above, another major investor in the region was the Swedish Electrolux, which built plants in Olawa, Swidnica and Zarow. Furthermore, LG Electronics of Korea commenced the construction of a refrigerator plant in Kobierzyce near Wroclaw. Today, thanks to the investments totalling a few hundred million euro, a few thousand new jobs were created in the Dolnoslaskie voivodship, and, next to the Lodzkie voivodship, the region is still the white goods manufacturing centre in Poland. It should be added here that the establishment of the white goods manufacturing cluster is to a large extent the result of the local authorities’ efforts, which actively try to satisfy investors’ demands.

The largest companies in the household appliance sector in Dolnoslaskie voivodship

PMR102

Location Company Country of origin Business profile Manufacture of washing machines, Olawa, Swidnica, Zarow Electrolux Sweden cookers and dishwashers Manufacture of washing machines, Wroclaw Fagor Electrodomesticos Spain refrigerators and dishwashers Kobierzyce LG Electronics Korea Manufacture of refrigerators Manufacture of refrigerators, cookers, Wroclaw Whirlpool USA dishwashers and ovens

Source: PMR based on data from PAIiIZ and SEZs, 2006 www.pmrpublications.com

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7.4.1.3. Business support and scientific and research institutions In the region, there are many institutions which can provide assistance conducting investments. They include: n Wroclaw Branch of the Industrial Development Agency (ARP) (www.arp-sez.pl) n Wroclaw Branch of the British-Polish Chamber of Commerce (www.bpcc.org.pl) n Lower Silesian Regional Development Agency (DARR) (www.darr.pl) n Lower Silesian Chamber of Commerce (DIG) (www.dig.wroc.pl) n Lower Silesian Chamber of Craft (DIR) (www.izbarzemieslnicza.com.pl) n Lower Silesian Chapter of the BCC (www.bcc.org.pl) n Lower Silesian Centre of Advanced Technologies – the Technical University of Wroclaw (DCZT) (www.dczt.wroclaw.pl) n HRK – a country-wide human resources consultancy (www.hrk.pl) n Institute of IT Systems for Automation and Measurement (IKSAiP) (www.iksaip.pop.pl) n Karkonosze Agency for Regional Development (KARR) (www.karr.pl) n Centre for Knowledge and Technology Transfer at the Wroclaw University (www.otwt.uni.wroc.pl) n Sudety Industrial and Commerce Chamber (SIPH) (www.siph.pl) n Wroclaw Industrial Park (WPP) (www.wpp.wroc.pl) n Wroclaw Technology Park (WPT) (www.technologpark.pl) n Wroclaw Centre for Technology Transfer of the Wroclaw University of Technology (www.wctt.pl) n Western Commercial Chamber (ZIG) (www.zig.pl).

Special economic zones are specific areas for conducting business activities on preferential terms. Investors can enjoy a corporate income tax relief of up to 50% of capital expenditure made or the value of two-year’ employment costs. In addition to well-prepared land, the zones’ authorities provide enterprises with assistance in starting investment projects in the zone.

7.4.1.4. Workforce availability From the investors’ point of view, the region’s strength is the relatively plentiful availability of qualified workforce. Despite a steady decline in the region’s unemployment rate in the recent years, the number of people without jobs in the Dolnoslaskie region is still among the highest in Poland. As at the end of October 2006, the registered unemployment rate was 16.8%, which was 3.4 p.p. lower than in the same period of 2005. Much lower unemployment is recorded in Wroclaw where the registered unemployment rate was 8.5% as at the end of October 2006.

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More than a half of the unemployed in the Dolnoslaskie voivodship (i.e. about 100,000 persons) have vocational education (secondary or basic). Despite a relatively high number of the unemployed, as a result of rising emigration for financial reasons and a considerable inflow of investments in the region, entrepreneurs are starting to find it increasingly more difficult to find employees with appropriate technical qualifications. More than a third of the unemployed in the region have primary or lower-secondary education, while a relatively low percentage of about 5.5% have higher education.

Unemployment structure in Dolnoslaskie voivodship as at the end of September 2006

PMR103

Source: GUS, 2006 www.pmrpublications.com

In terms of the student population, the Dolnoslaskie region ranks fourth in Poland. In 2005 nearly 170,000 students studied at 34 higher-education schools, while the number of graduates amounted to 33,000. Almost 137,000 students study in Wroclaw which is home to 26 higher-education schools. Every year, more than 26,000 students graduate from Wroclaw universities. The Wroclaw University of Technology is the largest technical school in the region, with over 32,000 students attending that university every year. The Wroclaw University provides education at many of its technical departments as well. The Dolnoslaskie voivodship is the fourth largest gathering of research and development specialists (approx. 8% of total R&D workforce in the country).

Number of students and graduates of select technical specialisations

PMR105 1,067 Computer science 6,785 546 Production engineering 3,606 390 Environmental engineering 3,026 311 Chemical engineering 2,855 161 Mechanical engineering and robotics 1,902 211 Physics 1,768 300 Biotechnology 1,511 203 Automatics and electrotechnology 1,291 34 Material engineering 131 Students Graduates

Source: PMR based on data from the Regional Investor Support Centre, 2006 www.pmrpublications.com www.pmrcorporate.com 153 Poland: analysis of selected economic sectors

Select universities offering technical specialisations in Dolnoslaskie voivodship

PMR104

Number of students University Select specialisations * (annual) astronomy biology biotechnology chemistry Wroclaw University 39,700 physics geography computer science mathematics automatics and robotics biotechnology chemistry electronics and telecommunications electrical engineering physics, technical physics computer science Wroclaw University of chemical and process engineering 32,300 Technology material engineering environmental engineering mathematics mechanics and mechanical engineering metallurgy chemical engineering production management and engineering Copernicus Higher School of Information Technology and computer science 987 Management in Wroclaw

* The data shows the total number of students studying at the university, not only the select specialisations; the data is rounded off to the nearest thousand. Source: PMR, Regional Investor Support Centre, 2006 www.pmrpublications.com

Additionally, the region also has 166 secondary vocational schools and 136 basic vocational schools where a total of 37,000 students are taught.

7.4.1.5. Costs of doing business

7.4.1.5.1. Salaries and wages In October 2006 the gross average monthly pay in the enterprise sector in the Dolnoslaskie region was PLN 2,544 (€652), i.e. over 4% less than the national average. Comparing the remuneration earned in capital cities of regions in the first nine months of 2006, Wroclaw’s workers were paid less than their counterparts in Warsaw, Katowice, Gdansk, Poznan or Krakow, i.e. PLN 2,529 (€648), i.e. 27% less than in Warsaw. A situation slightly changes when the pay in industry is concerned – here, the Dolnoslaskie voivodship reports much higher salaries than the majority of other voivodships. Only residents of the Mazowieckie and Slaskie regions employed in the industrial sector earn higher wages. This year’s growth of salaries paid in the industrial sector of the Dolnoslaskie voivodship has been the highest in Poland. However, it should be noted that this is largely attributable to the presence of the copper giant KGHM in the region.

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Gross pay (PLN) in Dolnoslaskie voivodship, by select positions, spring 2006

PMR106

Position Average Production Department Manager 6,670

Production Planning Specialist 3,838

Maintenance Specialist 3,161

Production Group Manager / Foreman 3,761

Team Leader 2,980

Mechanic 2,785

Electrician 2,599 on ti Locksmith 3,070

Produc Turner 2,165

Fitter 1,672

Production Operator 2,143

Fork lift Operator 1,948

Line Quality Controller 1,750

Line Worker 1,935

Cleaner 1,295 g Production Process Engineer 3,632 neerin

gi Constructor – Engineer 3,749 En

Quality Specialist 3,542 urance ass

Laboratory Specialist 2,606 Quality

Research and Development Specialist 3,950 R&D

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

7.4.1.5.2. Office space rental costs According to a report released by Jones Lang LaSalle in June 2006, rental costs in Wroclaw are at the initial stage of moderate growth trend and stand at about €14-15/m2/month for top class A office space and €8-13/m2/month for class B office space and office space in tenement houses. Average maintenance costs are about €2.5/m2/month. This means that office space rental costs in Wroclaw are lower than in Warsaw or Krakow. In other cities and towns of the Dolnoslaskie voivodship, the average lease rent is in the range of €5-8/m2 a month.

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7.4.1.5.3. Warehouse space rental costs According to Cushman & Wakefield, the rent for warehouse space outside of Warsaw is €3-4/m2 (based on a report released early in 2006).

7.4.1.5.4. Transport access The geographical position and a relatively well-developed transport infrastructure – compared to other regions – attract investments to the Dolnoslaskie region. However, it should be added that there are considerable disparities in infrastructure development depending on a specific part of the region. The location of the Dolnoslaskie voivodship in southwest Poland provides investors with a relatively easy access to countries in Central and Eastern Europe and to markets in Western Europe. The Dolnoslaskie region has the following advantages: n convenient car transportation links – international routes: E40, E36, E65 and E67 n a well-developed railway system – international railway routes E30 (connecting Germany and Ukraine) and E59 (connecting the complex of Szczecin-Swinoujscie harbours with the south of Europe) n a dynamically developing airport in Wroclaw offering flights to many European cities n a river port on the banks of the Oder River, enabling transport and transit by river.

Wroclaw is among the biggest railway nodes handling passenger and freight traffic in Poland. It has connections to Leszno-Poznan, Opole-Lubliniec, Legnica-Zgorzelec, Glogow-Zielona Gora, Klodzko-Kudowa Zdroj, Walbrzych-Jelenia Gora, and Olesnica-Ostrow Wielkopolski.

7.4.1.6. Availability of investment sites Most of the investor-preferred sites are situated within the four special economic zones within the Dolnoslaskie region. This is where most of the new investments are located. The zones offer attractive, well-prepared sites; at the same time, by launching business activities within a special economic zone, companies can take advantage of public aid. The following special economic zones are located in the Dolnoslaskie voivodship:

Tarnobrzeg Special Economic Zone – Kobierzyce sub-zone The Kobierzyce sub-zone comprises 260 ha of investment sites located in the Kobierzyce commune near Wroclaw. The sub-zone is managed by the Wroclaw branch of the Industrial Development Agency.

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7.4.2. Lodzkie voivodship

7.4.2.1. Industrial traditions in the region The household appliance industry does not have long-standing traditions in the Lodzkie region. For over a hundred years, the region was mainly a textile centre. The white goods sector started to develop dynamically in late 1990s and its origins are inextricably intertwined with the arrival of two large foreign investors. The investors in question, BSH and Indesit, are global leaders in the industry who erected their plants in the region and attracted a wide array of sub-suppliers. Currently, as is the case with the Dolnoslaskie voivodship, the region is a major manufacturing centre of household appliances on a European scale, and investments associated with the white goods sector are one of the key priorities of the development strategy for the Lodzkie voivodship.

7.4.2.2. Large companies operating in the household appliance sector

Select household appliance companies in Lodzkie voivodship

PMR107

Location Company Country of origin Business profile Lodz BSH Germany Manufacture of washing machines, dishwashers and spin-dryers Manufacture of electric leads for white goods Lodz Cablex Slovenia (mainly dishwashers and refrigerators) Manufacture of plastic goods for white goods Lodz Coko-Werk Germany (washing machine doors) Lodz DSWI Italy/Germany Manufacture of dishwasher baskets Manufacture of metal wires used in the production Lodz Drahtzug Stein Germany of white goods Manufacture of distribution and control equipment Lodz EGO Germany for tumble dryers Lodz Hirsch Porozell Austria Manufacture of polystyrene moulds Lodz HSV The Netherlands Manufacture of polystyrene packaging Lodz, Radomsko Indesit Italy Manufacture of cookers and refrigerators Lodz Mar-Mit Poland Manufacture of parts and units for white goods Lodz Mecalit Germany Manufacture of components for white goods Manufacture of control equipment for automatic Lodz Prettl Elektrotechnika Germany washing machines Kutno Sirmax Italy Manufacture of plastic goods for the white goods industry Lodz TEKA Germany/Spain Manufacture of cookers, hotplates and hoods Lodz Wirthwein Germany Manufacture of rubber and plastic units for tumble dryers

Source: PMR based on data from PAIiIZ and SEZs, 2006 www.pmrpublications.com

www.pmrcorporate.com 157 Poland: analysis of selected economic sectors

BSH and Indesit are still among the largest enterprises in the white goods sector within the Lodzkie region. In recent years, both firms have increased their production capacities and erected new plants in the region. Commissioned in December 2006, Indesit’s plant in Radomsko is its third establishment in the Lodzkie region. Additionally, Indesit has placed a logistics centre in the voivodship, too. Overall, BSH and Indesit have attracted over ten contractors, and some other also plan to settle in the region.

7.4.2.3. Business support institutions There are many business support institutions active in the region, which can provide assistance to investors. They include: n Agency for the Development of the Kutno Region (www.arrk.kutno.net.pl) n Incubator Foundation (www.inkubator.org.pl) – support for enterprises in the Lodzkie voivodship, it assists in establishing and developing SMEs and, thus, in creating new jobs n Foundation for the Development of the Zelow Commune (www.frgz.pl) n Foundation for the Development of Enterprises of Lodz (www.frp.lodz.pl) n Lodz Regional Development Agency (www.larr.lodz.pl) n FPL (www.fpl.com.pl) – a human resources consultancy n Adecco (www.adecco.pl) – a human resources consultancy n Randstad (www.randstad.pl) – a human resources consultancy.

The Lodz Special Economic Zone is located within the Lodzkie region (www.sse.lodz.pl); it offers a wide range of investment sites and assistance in project start-up. Investors who decide on conducting their activities within the zone can apply for public aid, including a corporate income tax relief of up to 50% of capital expenditure made or of the value of two- year’ employment costs.

Other forms of support provided to enterprises in the Lodzkie voivodship include: n Belchatow-Kleszczow Industrial and Technology Park n Kutno Agro-Industrial Park n Boruta Zgierz Industrial Park.

7.4.2.4. Workforce availability The population of the Lodzkie voivodship is approximately 2.5 million people; with nearly 800,000 residents, Lodz is the second most-populated city in Poland. The industrial sector of the region gives jobs to approximately 175,000 people. At the same time, in October 2006 the unemployment figure for the Lodzkie voivodship was almost 162,000. The registered unemployment rate was 14.9% at that time (12.3% for Lodz). However, in recent quarters, unemployment has sharply fallen. People with primary and lower-secondary education make up the largest group of the unemployed in the region; similarly, the group of workers with vocational education (basic and secondary) is large as well. Conversely, individuals with higher education account for a little more than 6% of all the unemployed in the region.

158 www.pmrcorporate.com Poland: analysis of selected economic sectors

Unemployment structure in Lodzkie voivodship as at the end of September 2006

PMR108

Number of the unemployed Percentage share Total: 167,299 100.0% higher education 10,184 6.1% secondary vocational education 35,123 21.0% secondary general education 15,967 9.5% basic vocational education 46,784 28.0%

Source: GUS, 2006 www.pmrpublications.com

The Lodzkie region is Poland’s sixth largest academic centre in terms of the student population. In 2005 over 131,000 students (24,000 graduates) studied at 27 universities in the region, including approximately 21,000 students (2,700 graduates) at technical specialisations. Lodz is the region’s academic heart, with a student population of over 120,000 and 22 higher schools and about 30 institutes and scientific and research units. The number of Lodz students is growing rapidly; in the past six years, Lodz has been one of the three cities in Poland where the number of students has risen the most rapidly (the student population headcount soared by 38.5% from 2000 to 2006). The two largest universities based in Lodz, the Lodz University of Technology and the Lodz University, teach almost half of all the students in the region. The most often chosen majors include management and marketing, administration, and computer science.

Number of students and graduates of select majors in the Lodzkie voiovdship

PMR109 14,053

7,829

3,949

1.167 1,686 1,124 1,061 633 188 418 597 73

Management Administration Computer Biotechnology Engineering* Physics and marketing science Students Graduates

* The total number of students, including production engineering and management, environmental engineering, material engineering and metal engineering. Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

www.pmrcorporate.com 159 Poland: analysis of selected economic sectors

A decisive majority of students in Lodz know foreign languages. Only 10% of the student population claims not to know any foreign language, while 90% have intermediate knowledge of the English language.

Proficiency in foreign languages among students of Lodz universities

PMR110

Very good Good Intermediate Poor English 22.3% 38.1% 31.9% 7.6% German 4.8% 20.9% 42.0% 32.3% French 5.9% 14.2% 42.9% 37.0% Italian 3.6% 27.0% 25.2% 43.6% Spanish 13.5% 34.8% 35.5% 16.3% Other 9.2% 28.3% 42.4% 19.9%

Source: Regional Investor Support Centre, 2006 www.pmrpublications.com

7.4.2.5. Costs of doing business

7.4.2.5.1. Salaries and wages From the investors’ point of view, the Lodzkie voivodship is a very attractive region in terms of payroll costs. Compared to other voivodships, salaries and wages are at a moderate level. For example, in October 2006 the average gross monthly pay in the enterprise sector was PLN 2,192 (€562), nearly 18% lower than the average for Poland. In the city of Lodz, the average pay in the first three quarters of the year was PLN 2,333 (€598), i.e. 44% below the level recorded in Warsaw and 10% down on Krakow. In the industrial sector, in the first ten months of the year, the average salary in the Lodzkie region was PLN 2,244 (€575) and was 14% below the national average.

160 www.pmrcorporate.com Poland: analysis of selected economic sectors

Gross pay (PLN) in Lodzkie voivodship, by select positions, spring 2006

PMR111

Position Average Production Director 15,872

Production Department Manager 7,114

Production Planning Manager 6,239

Production Planning Specialist 3,225

Maintenance Department Manager 8,404

Maintenance Specialist 5,730

Automation Service Specialist 3,749

Clerk – Production Department 2,405

Production Group Manager / Foreman 4,461 on

ti Team Leader 2,710

Mechanic 2,192 Produc Electrician 2,340

Locksmith 2,031

Turner 2,366

Fitter 1,693

Production Operator 2,175

Fork Lift Operator 2,310

Packer 1,870

Line Quality Controller 2,188

Cleaner 1,118

g Production Process Engineer 3,285

Product Engineer 3,612 neerin gi Constructor – Engineer 3,666 En Proxy / Quality Director 13,314

Quality Control Manager 4,955 urance Quality Specialist 3,933 ass

Laboratory Manager 4,034

Quality Laboratory Specialist 2,842

Research and Development Department Manager 7,254

R&D Research and Development Specialist 4,087

Source: AG TEST Human Resources, “Salary report – Spring 2006” www.pmrpublications.com

www.pmrcorporate.com 161 Poland: analysis of selected economic sectors

7.4.2.5.2. Office space rental costs According to a report released by Jones Lang LaSalle in June 2006, the asking rental rates in Lodz range from €13-13.5/m2/month for top class office buildings to about €9/m2/month for other downtown sites, depending on specific site conditions and standard. In poorer quality buildings (B/C class), office space is available at the cost of €6/m2/month. As in other Polish cities, maintenance charges range from €3/m2 to €4/m2 a month.

7.4.2.5.3. Transport access An important strength of the Lodzkie region is its geographical position. The voivodship is located in the centre of Poland, at the intersection of major transportation routes. This gives a strategic advantage to investors who intend to operate on both domestic and foreign markets. The region is crossed by major national roads (no. 1, no. 2, no. 8) and international transit routes connecting Russia and Western Europe (which is of paramount importance for household appliance producers). In Strykow near Lodz, A1 and A2 motorway will intersect (currently, their construction is well-advanced). Furthermore, Lodz has a small, two-terminal international airport operating, which is rapidly expanding. Poland’s largest airport, the Warsaw Okecie is 135 km from Lodz.

7.4.2.6. Availability of investment sites

Office and storage space Lodz has a limited amount of modern office space (approx. 90,000 m2). Due to considerable demand for modern office space from international enterprises, in most of the modern buildings nearly all office space has been leased out. According to Jones Lang LaSalle, in June 2006 18,700 m2 of office space was being constructed or refurbished, and office space of 7,500 2m was at the planning stage. However, the stock of lower-standard office space in the Lodzkie voivodship is much larger; there is also a lot of office space available in buildings which require renovation. On the other hand, the region has a considerable amount of warehouse space.

Available sites Most of the preferred sites are located within the Lodz Special Economic Zone. It occupies an area of 459 ha, offering attractive investment sites in the Lodzkie voivodship and in the city of Lodz; investors in the zone can also enjoy certain tax breaks.

162 www.pmrcorporate.com Poland: analysis of selected economic sectors

The Lodz Special Economic Zone comprises 19 sub-zone located in the following cities, towns and communes: n Ksawerow n Kutno n Leczyca n Lodz n Ozorkow n Piotrkow n Radomsko n Rawa Mazowiecka n Sieradz n Slawno n Strykow n Tomaszow Mazowiecki n Wroblew n Zgierz.

In several sub-zones, all the sites are occupied. Land is still available to investors include Lodz, Kutno, Rawa Mazowiecka, Radomsko, Piotrkow, Leczyca, Tomaszow Mazowiecki, Sieradz and Ozorkow.

www.pmrcorporate.com 163 Poland: analysis of selected economic sectors

List of graphs

1. Planned motorway network in Poland �� 14 2. Real GDP growth rate in Poland (%), 2001-2007 �� 16 3. Industrial output growth in Poland (%), 2001-2007 �� 17 4. Annualised inflation in Poland (%), 2001-2007 �� 17 5. Unemployment rate in Poland (%, eop), 2001-2007 �� 18 6. Foreign trade in Poland (€ bn), 2001-2007 �� 18 7. Location of SEZs by voivodships in Poland, 2006 �� 22 8. BPO sector – selected locations �� 23 9. Number of students and graduates in Wroclaw (thousands), 2000-2006 �� 26 10. Number of students and graduates of largest academic institutions in Dolnoslaskie �� 26 11. Number of students and graduates of select specialisations in Wroclaw academic institutions, 2004/2005 �� 27 12. Percentage of students in Wroclaw proficient in English �� 27 13. Percentage of students in Wroclaw proficient in German �� 28 14. Number of students and graduates in the Lodzkie voivodship (thousands), 2001-2006 �� 31 15. Number of students and graduates of select specialisations in Lodzkie �� 32 16. Number of students and graduates in Lublin (thousands), 2000-2006 �� 35 17. University graduates in 2004/2005 academic year, by specialisation �� 36 18. Percentage of voivodship residents declaring knowledge of select languages, Q1 2006 �� 36 19. Number of students and graduates in Krakow (thousands), 2000-2006 �� 40 20. Five most popular specialisations at Malopolskie academic institutions (nubmer of institutions offering a given specialisation) �� 41 21. Largest academic centres in Poland, by student number (thousands), 2005/2006 �� 45 22. Number of students and graduates of largest universities in Mazowieckie �� 46 23. Number of universities offering select specialisations, 2005/2006 �� 46

164 www.pmrcorporate.com Poland: analysis of selected economic sectors

24. Largest higher education schools in Slaskie, by number of students �� 49 25. Number of students studying select specialisations in Slaskie �� 50 26. Number of students and graduates in Poznan (thousands), 2000-2006 �� 54 27. Number of graduates with most popular specialisations in Poznan �� 54 28. High-tech sector – selected locations �� 57 29. Number of R&D employees in Poland, by type of institution �� 58 30. Number of students and graduates of select technical specialisations in Dolnoslaskie voivodship �� 61 31. Number of students in Torun and Bydgoszcz, 2001-2006 �� 65 32. Number of university researchers: Warsaw vs. other regions �� 76 33. Number of scientific institutions: Warsaw vs. other regions �� 76 34. Shares of voivodships in revenues of the Polish IT sector, 2005 �� 81 35. Number of students in Pomorskie voivodship by type of tertiary school, 2005/2006 �� 82 36. Automotive sector – selected locations �� 96 37. Shares in the passenger car output of Poland, January-October 2006 �� 99 38. Shares in the delivery car output of Poland, January-October 2006 �� 100 39. Number of students and graduates of Wroclaw higher-education schools (’000), 2000-2006 �� 104 40. Number of students and graduates of select technical departments of Wroclaw universities �� 105 41. Aviation sector – selected locations �� 117 42. Salary (€) of the aviation engineer in Poland (presented as the annual gross cost payable by the employer) �� 125 43. Salaries (€) in the aviation industry in Poland (presented as the annual gross cost payable by the employer) �� 125 44. Pulp and paper sector – selected locations �� 129 45. Output, consumption, imports and exports of wood pulp in Poland (’000 tonnes), 2001-2005 �� 132 46. Consumption and recycling of waste paper in Poland (’000 tonnes), 2001-2005 �� 133 47. Production, exports and imports of paper and board in Poland (’000 tonnes), 2001-2005 �� 134 48. Consumption of paper and board in Poland, 2003-2005 �� 134 49. Average employment and pay in the pulp and paper industry in Poland, 2003-2005 �� 145 50. Household appliance sector – selected locations �� 148 51. Production of household appliances in Poland in 2000 and 2005 (’000 items) �� 150 52. Number of students and graduates of select technical specialisations �� 153 53. Number of students and graduates of select majors in the Lodzkie voiovdship �� 159

www.pmrcorporate.com 165 Poland: analysis of selected economic sectors

List of tables

1. Poland – general information �� 12 2. Select demographic indicators in Poland, 2006 �� 13 3. Passenger traffic at main airports in Poland (thousands), 2005 and Q1-Q3 2006 �� 15 4. Poland – selected economic indicators �� 16 5. Main tax rates in Poland, 2006 and 2007 �� 20 6. Select companies with service centres in Dolnoslaskie voivodship �� 25 7. Gross pay (PLN) in Dolnoslaskie voivodship, by select positions, spring 2006 �� 29 8. Select companies with service centres in Lodzkie voivodship �� 30 9. Declared proficiency in foreign languages among Lodz students �� 32 10. Gross pay (PLN) in Lodzkie voivodship, by select positions, spring 2006 �� 33 11. Gross wage (PLN) in Lubelskie voivodship, by select positions, spring 2006 �� 37 12. Select companies with service centres in and around Krakow �� 39 13. Language proficiency among students in Krakow, percentage of students reporting knowledge of a given language (%) �� 41 14. Gross pay (PLN) in Malopolskie voivodship, by select positions, spring 2006 �� 42 15. Select companies with service centres in Mazowieckie voivodship �� 44 16. Gross wage (PLN) in Mazowieckie voivodship, by select positions, spring 2006 �� 47 17. Select companies with service centres in Slaskie voivodship �� 49 18. Gross pay (PLN) in Slaskie voivodship, by select positions, spring 2006 �� 51 19. Select companies with service centres in Wielkopolskie voivodship �� 53 20. Gross pay (PLN) in Wielkopolskie voivodship, by select positions, spring 2006 �� 55

166 www.pmrcorporate.com Poland: analysis of selected economic sectors

21. Select companies from the high-tech sector operating in Dolnoslaskie voivodship �� 59 22. Select tertiary schools offering technical specialisations in Dolnoslaskie voivodship �� 60 23. Gross pay (PLN) in Dolnoslaskie voivodship, by select positions, spring 2006 �� 62 24. Select companies from the high tech sector operating in Kujawsko-Pomorskie voivodship �� 64 25. Select tertiary schools offering technical specialisations in Kujawsko-Pomorskie voivodship �� 65 26. Gross pay (PLN) in Kujawsko-Pomorskie voivodship, by select positions, spring 2006 �� 66 27. Select companies from the high-tech sector operating in Malopolskie voivodship �� 68 28. Select R&D institutions operating in Malopolskie voivodship �� 70 29. Select tertiary schools offering technical specialisations in Malopolskie voivodship �� 71 30. Gross pay (PLN) in Malopolskie voivodship, by select positions, spring 2006 �� 72 31. Largest companies from the high-tech sector operating in Mazowieckie voivodship �� 75 32. Select tertiary schools offering technical specialisations in Mazowieckie voivodship �� 77 33. Gross pay (PLN) in Mazowieckie voivodship, by select positions, spring 2006 �� 78 34. Select companies from the high-tech sector operating in Pomorskie voivodship �� 81 35. Select tertiary technical schools in Pomorskie voivodship �� 83 36. Number of students of select specialisations at tertiary schools in Pomorskie voivodship �� 83 37. Unemployment in the Tri-City, September 2006 �� 84 38. Gross pay (PLN) in Pomorskie voivodship by select positions, spring 2006 �� 85 39. Office space rental costs in the Tri-City, 2006 �� 86 40. Select companies from the high-tech sector operating in Slaskie voivodship �� 88 41. R&D institutions supporting the development of advanced technologies in Slaskie �� 89 42. Select tertiary technical schools in Slaskie voivodship �� 90 43. Number of students of select technical specialisations in Slaskie voivodship �� 91 44. Gross pay (PLN) in Slaskie voivodship, by select positions, spring 2006 �� 92 45. The most popular vehicles manufactured in Poland in 1945-1989 �� 98 46. Output of the automotive sector in Poland (thousands of units), 2000-2005 and January-October 2006 �� 101 47. Select automotive companies operating in Dolnoslaskie voivodship �� 102 48. Unemployment structure in Dolnoslaskie voivodship as at the end of September 2006 �� 104

www.pmrcorporate.com 167 Poland: analysis of selected economic sectors

49. Gross pay (PLN) in Dolnoslaskie voivodship, by select positions, spring 2006 �� 106 50. Select automotive companies operating in Slaskie voivodship �� 109 51. Unemployment structure in Slaskie voivodship as at the end of September 2006 �� 111 52. The largest technical universities in Slaskie voivodship �� 112 53. Number of graduates of select technical specialisations in Slaskie voivodship �� 112 54. Gross pay (PLN) in Slaskie voivodship, by select positions, spring 2006 �� 113 55. Aviation sector in its key voivodships in Poland �� 128 56. The largest companies in the household appliance sector in Dolnoslaskie voivodship �� 151 57. Unemployment structure in Dolnoslaskie voivodship as at the end of September 2006 �� 153 58. Select universities offering technical specialisations in Dolnoslaskie voivodship �� 154 59. Gross pay (PLN) in Dolnoslaskie voivodship, by select positions, spring 2006 �� 155 60. Select household appliance companies in Lodzkie voivodship �� 157 61. Unemployment structure in Lodzkie voivodship as at the end of September 2006 �� 159 62. Proficiency in foreign languages among students of Lodz universities �� 160 63. Gross pay (PLN) in Lodzkie voivodship, by select positions, spring 2006 �� 161

168 www.pmrcorporate.com Poland: analysis of selected economic sectors

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