Outside in One new message Health check Intelligent life The rise and rise of public-to- Is social media really the Taking the temperature How Russia’s “innovation private equity deals saviour of business? of pharma in CEE city” will inspire the region Transform Issue 6/Autumn 2010 Insight for CEE’s business leaders Bridging the gap Special report: Building CEE’s future fabric Adviser of the Year to Private Equity in Central & Eastern Europe www.pwc.com/cee/private-equity unquote” has named PricewaterhouseCoopers For more information please contact: Adviser of the Year to the Private Equity CEE Private Equity Leader industry in Central & Eastern Europe. Mike Wilder Tel: +48 22 523 4413 The unquote” CEE Private Equity Awards [email protected] recognise excellence in the CEE private equity Czech Republic market. In a highly challenging environment over Miroslav Bratrych the past year, we were among a few select firms Tel: +420 251 15 2084 that still managed to achieve above-par [email protected] success. Poland Joanna Simonowicz PricewaterhouseCoopers helps more private Tel: +48 22 523 4213 equity houses to realise the unique investment [email protected] opportunities in Central & Eastern Europe than Russia any other adviser in the region. Jonathan Thornton Tel: +7 495 232 5711 [email protected] © 2010 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. FROM THE CEO Brave new world As trusted advisers to leading businesses across the globe, we at PwC often experience first hand the game- changing events of the corporate world. The global economic downturn has led to a ‘brave new world’ that we and our clients operate in now. In CEE the financial crisis has had an added potency, offering, as it does, a new perspective on the region’s honeymoon with capitalism after so long under socialism. The financial crisis doesn’t mean the end of capitalism but it does mean a fresh start. This amounts to a new economic environment, intensified by the greater immediacy of climate change, new technology, tougher competition, increased regulation, demographic issues and government involvement in the economy. These factors make it imperative to transform our businesses and Inventiveness and reinvent ourselves. innovation will be key to Inventiveness and innovation will be key to any business’s success PricewaterhouseCoopers any business’s success CENTRAL AND EASTERN EUROPE in the post-crisis future. in the post-crisis future We ourselves in PwC CEO: Mike Kubena CEE are undergoing a process of change, setting a bold vision of our future firm and articulating the changes necessary to MANAGING PARTNER ADVISORY: Mark Okes-Voysey realise that vision. MANAGING PARTNER ASSURANCE: Rick Munn The core principle of this vision is to enable our clients, to MANAGING PARTNER TAX & LEGAL help them prepare for and profit from the new era. This issue SERVICES: Steven Snaith of Transform magazine features a number of fascinating organisations, businesses and leaders, all grappling with PwC CONTRIBUTING EDITOR: today’s complex issues and turning them into opportunities. Donall O’Shea I hope these stories provide some food for thought and help you build a resilient business for the future. COVER IMAGE: PHOTOLIBRARY Mike Kubena pwc.com/transform 3 CONTENTS 06 Upfront Awards spotlight the response of Czech entrepreneurs to the financial crisis; call for Hungary’s SSCs to develop beyond the capital; PwC Russia launches technology and innovation centre; new man at the top at PwC Czech Republic; PwC forms JV with operations management consultancy firm; PwC wins Adviser of the Year award for private equity in CEE 10 Comment Demographic dilemma Aging and declining populations are presenting major socioeconomic and business challenges 13 20 for the CEE region CAPITAL PROJECTS AND 25 Comment Roadside assistancee INFRASTRUCTURE Encouraging local production could provide the required boost to get Russia’s 12 Introduction car market motoring again Activity in CEE’s capital projects and infrastructure sector is on the rise. PwC 26 Micro-businesses partner Tibor Almássy sets the scene Small, and perfectly formed Micro-businesses are contributing to the 13 Managing the growth of several CEE economies – however, unmanageable government support for them is vital 26 New energy infrastructure is a high priority in CEE. To achieve success, cooperation between 30 Company profile the public and private sectors is key Forging ahead Polish copper mining company KGHM sets 16 The nuclear option out plans for major global growth Nuclear power is making a comeback in CEE. But CEE governments and energy companies 34 Innovation first need to navigate a number of hurdles Mind and matter Why a new knowledge city could put Russia 19 The ride ahead on the innovation map PwC’s Mark Okes-Voysey calls for the creation of a new government body to oversee 38 Climate change Russia’s infrastructure shopping list Lighting the way Regulation and taxation can help CEE make 20 CEE on the move? its economy greener, but how? Private public partnerships could be the answer to CEE’s transport infrastructure needs, provided best practices are adopted Published by Bladonmore (Europe) Ltd T: +44 (0)20 7631 1155 E: fi[email protected] 4 34 42 46 42 Pharmaceuticals Healthy prospects The international pharma industry has already shown a commitment to CEE. What can governments do to deepen that relationship? 46 Private equity Public to private Why the number of public-to-private transactions is on the rise in CEE 50 Social networking Totally wired It is time that companies recognised the business potential of social networking sites 54 Data centre A focus on economic facts and figures from across the CEE region 50 The potential of social networks was recognised only half a year ago. 30 Now big companies use Facebook applications EDITOR: Eila Madden MANAGING EDITOR: Sean Kearns SUB-EDITOR: Lynne Densham ART EDITOR: Ivelina Ivanova PRODUCTION MANAGER: Andrew Miller PUBLISHER: Siân Mansbridge pwc.com/transform 5 Upfront >>> Czech awards recognise SME innovators risis”, as the proverb coordinated this process, while PwC goes, “is opportunity” Czech Republic managing partner Jiríˇ – a maxim that the Moser oversaw PwC’s involvement in “CCzech winners of the the project and presented the awards. “In Defiance of Crisis Awards” would Travel company Exim Tours, the agree with. The 10 winners (see box overall winner, was recognised for below) of the inaugural awards for its decision to focus on high-end small or medium-sized privately owned customers which helped stabilise businesses were recognised at a June demand, for its investment in the ceremony at PwC’s offices in Prague, development of its employees to secure for their creativity and innovation in high-level customer care, and for response to the financial crisis. implementing an online booking system Working with the Czech Chamber that helped cut costs. Exim also won the of Commerce, PwC Czech Republic education and travel award category. was the main expert partner for the More than 30 companies were awards, devising the methodology used shortlisted for the 10 category awards, to assess applicants’ online award with a panel of four judges making submissions. PwC partners visited the the decision in consultation with an shortlisted companies to interview the expert company advising in each Best in class: Exim Tours executive company owners. Petr Zmátlík, director director Romana Slížková accepts category. At the awards ceremony, all in assurance at PwC Czech Republic, the main winner’s award the companies involved were invited to vote for the most inspiring project, AND THE WINNERS ARE… with the winner – co-owner of Rodinný pivovar Bernard, a beer company Main winner Exim Tours that launched a new, non-alcoholic Most inspirational project Rodinný pivovar Bernard plum beer to the market during the financial crisis – picking up his award Construction and engineering Isolit-Bravo at the end of the evening. "We see Education and travel Exim Tours the award as a recognition that all the Food and beverages Rodinný pivovar Bernard activities we undertook were successful Healthcare Linet and correct," said Stanislav Bernard. IT WBI Systems "Consequently, we have introduced another new product to the market – a Manufacturing/industrial products 5M non-alcoholic beer called Bernard's Mechanical engineering, electro Zikmund electronics Clear Head Sour Cherry." Professional services Moris design The ultimate aim is to use the Transportation and telecommunication Dial Telecom top ideas as best-practice models Trade TPT Coating for other small and medium-sized companies in the Czech Republic, where SMEs account for a large Jury proportion of the economy. The SME Petr Kužel, president, Czech Chamber of Commerce sector is credited with having helped Petr Zmátlík, director, assurance, PwC audit, Czech Republic the country weather the financial crisis Jindrichˇ Soukup, vice rector, University of Economics, Prague, Czech Republic better than many other EU economies. Pavel Finger, financial director, CCB – Czech Credit Bureau For more on SMEs, see p.26. 6 Hungary’s SSCs should branch out from Budapest ungary should develop the The CEE state is already a location infrastructure and living of choice for multinational companies standards of a second city that want to set up SSCs specialising Hbeyond