I t may seem an incongruous sight these days, but less than a decade ago – before Poland joined the EU – it was not uncommon to see horse-drawn wagons jostling for space with Mercs and Nissans on the two-lane roads that doubled as the country’s major highways. To pass these throwbacks from Communist rural life, cars would have to find a straight shot and then zoom by the wagon – usually with a wave from the farmer as the car passed.
Thanks to Poland’s booming economy, there are fewer horse-drawn wagons, but the two-lane roads still mean that if cars want to pass vehicles the slower one has to drive partially along the breakdown lane so the faster vehicle can pass – not exactly something seen on modern EU highways. However, with a €70bn injection of cash promised by the EU specifically for developing infrastructure (see below), passing a slower car this way will soon become as historically quaint for Poles as the horse and wagons are now. “The building of these highways is a vital step [for the country],” says Lars Johansson, managing director of Skanska, the Swedish construction company contracted to build the A1 highway that will connect Gdansk to Vienna.
While the rest of Europe has watched as construction cranes dangle in mid-air due to funding for projects drying up during the global recession, Poland has been abuzz with the sound of pneumatic drills, cement trucks and foremen shouting orders. The country is booming with multi-billion euro deals for infrastructure, construction and real estate projects, and is Europe’s biggest construction site, according to Marcin Borek, a partner with Ernst & Young in Warsaw.
As fDi Magazine reported in December, the Polish economy was the only one in Europe to expand in 2009 and estimates are that it will outperform all other countries in Europe this year. Cities such as Poznan, Wroclaw and Gdansk are also benefiting from their role as co-host cities of football’s 2010 European Championships; along with 2000 kilometres of new highways, there are also stadiums, conference centres, hotels, shopping centres and railway stations being built in anticipation.
There are predictions that Warsaw, which is also hosting several matches in the 2012 tournament, will in the next few years surpass Moscow as a top European destination for investment by foreign companies. The Polish capital has been undergoing a facelift in recent years with new buildings under construction by famed architects such as Zaha Hadid.
In AT Kearney’s latest FDI Confidence Index (see global news), Poland was placed sixth in the world – up 22 spots from 2009 – in terms of investor confidence. “Poland’s time has come and I think last year was a huge differentiator,” says John Duckworth, managing director for central and eastern European operations for real estate services firm Jones Lang LaSalle (JLL). “The country will be one of the best destinations for investment, both in terms of real estate and corporate investment, to locate to a big consumer market – one that can provide a labour force and good value for money at a strategic location in Europe.”
Poland has come to swiftly realise that the only way to keep growing is to focus on the infrastructure (in which it is hugely lacking for a prospective major EU player) and investment will continue to follow. The country’s highways are in the greatest need of improvement, with €10bn set aside for national and regional projects; Poland is hoping to have three new major highways up and running by 2012 – but industry experts believe 2014 is a more likely date for completion.
“Principally the main impact has been to produce indicative projects – about 500 in total in terms of local, regional and national – including roads, motorways and environmental schemes that are part of public tenders,” says Mr Borek. The Skanska-built A1 will link the country north to south, while two other highways – one through Warsaw and the other through Krakow – will connect the German border to Belarus and Ukraine.
According to Skanska, the A1 highway deal is not only one of the most important transport routes in Poland, but also across the continent and is the largest single venture in Europe in terms of the use of equipment. The total cost for construction of the Skanska project is estimated at almost €1.3bn and will employ 4500 workers. “[Those highways] will be a tremendous fillip to the economy – it’s what Poland has been crying out for,” says Mr Duckworth. “It will mean a pool of investment opportunities.”
With the country’s focus being on highways, its railway lines – also in need of updating – have been put on the back burner for the most part until 2013.
A few, including the Warsaw to Katowice and the Poznan to Wroclaw lines, will be updated and the central rail stations in Warsaw and Poznan will be refurbished and expanded. The challenge will be to update or reconstruct existing lines while trains are still using the tracks. “The government could have done a lot better because now procurement is shrinking,” says Mr Borek. “It’s a shame because after such a long period of stable flows – from 3bn zlotys [€732m] per annum to a drop last year to 1bn zlotys – it is now sending a bad message to the railway guys.”
Warsaw’s Frédéric Chopin airport – which last year was used by 8.2 million passengers – will continue its expansion, including an underground railway tunnel connecting the airport with the city railway network. According to JLL, there is also an architectural competition being held to design a large airport city that will consist of hotels, offices, restaurants and various shops.
Poznan’s Lawica airport is also undergoing a €100m renovation that will be completed by 2012 and will include a runway extension, terminal enlargement and technical facilities that will be modernised so it can serve more flight operations. This year will also see the expansion of the Warsaw metro; currently the subway runs just north to south across the capital, but the new extension, which is being built by a Turkish-Italian-Polish consortium for €800m, will criss-cross the city east to west by the time of its completion in 2013.
According to Mr Duckworth, real estate inquiry levels are much higher than this time in 2009, with interest in both business parks and blue-collar manufacturing and production investments. “From the point of view of construction, it is all beginning to join up and long-term investment decisions are playing out,” he says. “Poland is not just a service provider nor a cost differentiator for a corporate to relocate to Lodz or Wroclaw because it is cheaper – the country is also a huge domestic market with a stable increasing GDP so Poland is becoming a consumer market as well as a low-cost destination.”
However, despite all the good news, the country has not totally escaped the global financial crisis with regards to foreign investors. US architect Daniel Libeskind’s Zlota 44 luxury high-rise building has seemingly run into financing problems and construction has stopped for the time being. “That has scared everyone who [invests] in high-prestige buildings because it’s in the middle of Warsaw as an [obvious] reminder of what happens when you lose your backers,” warns Mr Borek.
The road to good business
According to Patrycja Wolinska-Bartkiewicz, the undersecretary for EU funds with Poland’s Ministry of Infrastructure, the biggest benefactor of the €70bn-worth of EU funds given to Poland for development have been institutions responsible for infrastructure projects.
“We have a challenge to face and we will not waste a penny,” she told fDi Magazine in a telephone interview. “Without the aid from the EU, Poland still would have [updated the transport] infrastructure but it would have taken longer, so entering the EU has not just been about the money but also the way of thinking about infrastructure and connecting [ourselves] to western Europe.”
Ms Wolinska-Bartkiewicz says that in 2007, the country’s prime minister, Donald Tusk (who announced in January he would not be running for president in elections later this year), insisted the government make highways the infrastructure priority.
“We looked at the needs of the population and people were saying that they needed highway improvements more than anything else,” she says. “So we have done everything to make that a reality.”
Now that the highway tenders are mostly finished, the ministry’s priority will now be turning to the railways. “[In terms of] foreign investment, good infrastructure is one of the most important factors when making a decision about whether or not to enter a country,” says Ms Wolinska-Bartkiewicz.
“Good connections are very important [because] no one is interested in opening a business without good transport.”