Banking on change
With dreadful prescience, and having subsequent regard to the week's events, Raimo Valo assumes a patient expression and declares: "Somehow I think Poland is not quite ready for the European Union. I view it with mixed feelings."
We could not know it at the time, but more or less at the same time that one of Sweden's leading bankers here was uttering these words, the hapless European minister Danuta Hübner was receiving her now famous snub in Brussels. Valo, who is a little bit of a non-Finnish Finn, having spent two years there of his last 20, is the boss of Svenska Handelsbanken Polska. His point about readiness was, in fact, directed at the lack of transparency in the public bureaucracy. Of course, other people had bureaucracy too: in Finland the machine once informed him he did not exist. But he feared the consequences of hitching this country's enormous engine of paper-chasing to the one developed by Brussels. Would the two systems understand each other?
He tells the story of a Finnish super-farmer weighed down with Ph.D.'s, who milks his cows with computers. But when it comes to claiming his due subsidies from the Eurocrats, he has to pay an expert E500 to do the job for them, then wait years for the results. One can see a lot of heads being scratched out there on the vast Polish veldt when the paperwork really starts arriving.
He is not optimistic that too much will change within any visible horizon. "There are many people in Poland who really don't have much more to give to the society than their knowledge of bureaucracy," he says.
The engine which might power change was still too weak to have any effect - and there were not enough people interested in the outcome. "We can see a sort of elite which is being formed," Valo says. "It is about 15% of the population which is really capable, and they will be leading Poland into the European Union, mostly business-wise. But I think most of those people are already working for the foreign companies." A winsome smile: "The banking business here had been taken over by foreign capital a long time ago."
We turn to the question of business strategy and acumen within the purely domestic sector. We agree it is hobbled by short-termism. "The plan is to privatise 85% of government-owned companies by the end of 2005," he says. "They will be left with less than 15%, and that can be the basis of a new kind of Polish enterprise. I think that the train has already left. There are many industries that are really crucial for this country, which are really governed by foreigners, although they are run by Poles physically." He gestures at the Scandinavian neatness around him: "People I am working with here on a daily basis, they represent the hope of this country."
Accession to the EU, if it happens, will mean major changes in the way foreign banks do business here. They will no longer need to be registered as independent banks. In a neat bit of actually removing bureaucracy, it will be simply necessary to send a letter to the National Bank informing the mandarins there that so-and-so bank is opening a branch office. Not that everything will change for the better, so far as the NBP is concerned. Despite Leszek Balcerowicz, high priest of reform, sitting there at the helm, Valo says the bank indulges in blatant protection of the three remaining purely Polish banks. He isolates the rule whereby foreign banks are limited to lending no more than 25% of their equity to a single customer. The straitjacket was intended to send rich customers to the domestic banks, but it almost never happened since Svenska and others called up the remaining capital they required from HQ.
"We are financing our clients from abroad more than we are financing them through our Polish operations," Valo says. "It is sad that the authorities have not understood this. And you can imagine what will happen when we and our competitors will be able to open a foreign branch here and are no longer subject to the limit ... For me personally, this has been the single biggest problem in doing business in Poland." He sighs: "I don't think the Polish authorities are ready to abolish the rule."
Shouldn't the wizard himself down at the NBP intervene? "I think Balcerowicz is not the person behind this rule," Valo says. "He probably sees it as one of the smallest problems he has at the moment. He is, of course, in a rather difficult situation because of the political problems." Valo adopts an expression which he would never need at home in Finland. "He has been threatened several times by the government and the politicians ... He is being targeted for political reasons." We picture the embattled governor, locked in his office, men with six-guns hammering on the door. They don't get up to that sort of thing in Helsinki.
One thing Svenska Handelsbanken does not get up to here is lending to Polish companies which, of course, is a favourite Andrzej Lepper insult. Valo is clear on this one. "No, we do not lend to any entity which has no connections to Nordic companies," he says. "But if you look at the figures, which probably Mr. Lepper has not seen, then the ones who are not lending to Polish companies, and are probably not lending to anybody, are the Polish banks. If you look at their capital and equity, and then the relationship to the lending, it is negligible compared to what they have in their power."
Outside this piece of Nordic order in a foreign land, the January rain soaks the bleak landscape of the airport district. The subject turns to the prospects for the economy, and whether the country will slip into deeper recession. Valo describes the country's economic experience of the past two years as one of mild recession. So what next? Up or down? The soggy mess in Germany, the country's main partner, is a problem. "There is nothing which would tell me that the German economy will get out of recession soon, nor will EU enlargement greatly help there; it's probably neutral, even if it is German industry which is pushing enlargement forward," he says. "They want to be here."
That's a more-of-the-same prospect. What a recession would really need would be something really sharp to kick it into play. Such as a war in Iraq. It is where Valo sees the still very feeble Polish economy acutely exposed. "The worst case scenario is that there will be a war in the near future and that oil prices will go up to $35 a barrel," he says. "This economy can't take it. We saw how vulnerable this country is to oil prices two years ago. Inflation was down to 5%; we still had growth of 4%-5%. Oil prices shot up 30% and inflation went to 11%, and at the same time the unemployment figure doubled in less than a year."
Like so many, Valo fears the crawling pace of the economy, returning not much more than about 1% growth for the last four quarters. "I hope the worst is over ... but I fear that there might be an even deeper recession," he says. "A country like Poland needs 6%-7% growth to be out of recession. The third quarter of last year looked positive, but that may have been just a blip. I want to see the signs that we are out of this recession ... We are sliding at the moment."
Indeed, one can safely say, just like the political direction of the country, with which the economy is so intimately bound up. Mind you, it can always be worse somewhere else, like Russia, for instance. On the way out, Valo tells the story of visiting a bank in St. Petersburg where customers are instructed to check in their guns at the door. Not here. Instead one admires, while completing the farewell formalities, the good taste someone has acquired in modern Polish abstract art ...
We could not know it at the time, but more or less at the same time that one of Sweden's leading bankers here was uttering these words, the hapless European minister Danuta Hübner was receiving her now famous snub in Brussels. Valo, who is a little bit of a non-Finnish Finn, having spent two years there of his last 20, is the boss of Svenska Handelsbanken Polska. His point about readiness was, in fact, directed at the lack of transparency in the public bureaucracy. Of course, other people had bureaucracy too: in Finland the machine once informed him he did not exist. But he feared the consequences of hitching this country's enormous engine of paper-chasing to the one developed by Brussels. Would the two systems understand each other?
He tells the story of a Finnish super-farmer weighed down with Ph.D.'s, who milks his cows with computers. But when it comes to claiming his due subsidies from the Eurocrats, he has to pay an expert E500 to do the job for them, then wait years for the results. One can see a lot of heads being scratched out there on the vast Polish veldt when the paperwork really starts arriving.
He is not optimistic that too much will change within any visible horizon. "There are many people in Poland who really don't have much more to give to the society than their knowledge of bureaucracy," he says.
The engine which might power change was still too weak to have any effect - and there were not enough people interested in the outcome. "We can see a sort of elite which is being formed," Valo says. "It is about 15% of the population which is really capable, and they will be leading Poland into the European Union, mostly business-wise. But I think most of those people are already working for the foreign companies." A winsome smile: "The banking business here had been taken over by foreign capital a long time ago."
We turn to the question of business strategy and acumen within the purely domestic sector. We agree it is hobbled by short-termism. "The plan is to privatise 85% of government-owned companies by the end of 2005," he says. "They will be left with less than 15%, and that can be the basis of a new kind of Polish enterprise. I think that the train has already left. There are many industries that are really crucial for this country, which are really governed by foreigners, although they are run by Poles physically." He gestures at the Scandinavian neatness around him: "People I am working with here on a daily basis, they represent the hope of this country."
Accession to the EU, if it happens, will mean major changes in the way foreign banks do business here. They will no longer need to be registered as independent banks. In a neat bit of actually removing bureaucracy, it will be simply necessary to send a letter to the National Bank informing the mandarins there that so-and-so bank is opening a branch office. Not that everything will change for the better, so far as the NBP is concerned. Despite Leszek Balcerowicz, high priest of reform, sitting there at the helm, Valo says the bank indulges in blatant protection of the three remaining purely Polish banks. He isolates the rule whereby foreign banks are limited to lending no more than 25% of their equity to a single customer. The straitjacket was intended to send rich customers to the domestic banks, but it almost never happened since Svenska and others called up the remaining capital they required from HQ.
"We are financing our clients from abroad more than we are financing them through our Polish operations," Valo says. "It is sad that the authorities have not understood this. And you can imagine what will happen when we and our competitors will be able to open a foreign branch here and are no longer subject to the limit ... For me personally, this has been the single biggest problem in doing business in Poland." He sighs: "I don't think the Polish authorities are ready to abolish the rule."
Shouldn't the wizard himself down at the NBP intervene? "I think Balcerowicz is not the person behind this rule," Valo says. "He probably sees it as one of the smallest problems he has at the moment. He is, of course, in a rather difficult situation because of the political problems." Valo adopts an expression which he would never need at home in Finland. "He has been threatened several times by the government and the politicians ... He is being targeted for political reasons." We picture the embattled governor, locked in his office, men with six-guns hammering on the door. They don't get up to that sort of thing in Helsinki.
One thing Svenska Handelsbanken does not get up to here is lending to Polish companies which, of course, is a favourite Andrzej Lepper insult. Valo is clear on this one. "No, we do not lend to any entity which has no connections to Nordic companies," he says. "But if you look at the figures, which probably Mr. Lepper has not seen, then the ones who are not lending to Polish companies, and are probably not lending to anybody, are the Polish banks. If you look at their capital and equity, and then the relationship to the lending, it is negligible compared to what they have in their power."
Outside this piece of Nordic order in a foreign land, the January rain soaks the bleak landscape of the airport district. The subject turns to the prospects for the economy, and whether the country will slip into deeper recession. Valo describes the country's economic experience of the past two years as one of mild recession. So what next? Up or down? The soggy mess in Germany, the country's main partner, is a problem. "There is nothing which would tell me that the German economy will get out of recession soon, nor will EU enlargement greatly help there; it's probably neutral, even if it is German industry which is pushing enlargement forward," he says. "They want to be here."
That's a more-of-the-same prospect. What a recession would really need would be something really sharp to kick it into play. Such as a war in Iraq. It is where Valo sees the still very feeble Polish economy acutely exposed. "The worst case scenario is that there will be a war in the near future and that oil prices will go up to $35 a barrel," he says. "This economy can't take it. We saw how vulnerable this country is to oil prices two years ago. Inflation was down to 5%; we still had growth of 4%-5%. Oil prices shot up 30% and inflation went to 11%, and at the same time the unemployment figure doubled in less than a year."
Like so many, Valo fears the crawling pace of the economy, returning not much more than about 1% growth for the last four quarters. "I hope the worst is over ... but I fear that there might be an even deeper recession," he says. "A country like Poland needs 6%-7% growth to be out of recession. The third quarter of last year looked positive, but that may have been just a blip. I want to see the signs that we are out of this recession ... We are sliding at the moment."
Indeed, one can safely say, just like the political direction of the country, with which the economy is so intimately bound up. Mind you, it can always be worse somewhere else, like Russia, for instance. On the way out, Valo tells the story of visiting a bank in St. Petersburg where customers are instructed to check in their guns at the door. Not here. Instead one admires, while completing the farewell formalities, the good taste someone has acquired in modern Polish abstract art ...
