Building bridges
By : Dolores Cruz
When Israeli businessman Ehud Brunicki visited Poland in 1994, it was to see a country where his family had lived for generations.
These days when he visits, however, it's to do business.
Brunicki is one of an increasing number of Israelis returning to their Polish roots both for spiritual and financial reasons.
Brunicki left Poland in 1957 as a young boy with his parents. As a man, he established a successful computer business in Israel and now, as a grandfather of 53, his company, Yazamco, distributes Israeli water filters in Poland. But his main priority is his restaurant, Warszawa-Jerozolima Restauracja Nie z Tej Ziemi on ulica Smocza in the heart of Warsaw's former Jewish ghetto. This, he says, "is for my soul."
On one wall there is a mural of old Krakow, which was his father's home, and on another wall pre-1939 Warsaw, his mother's home. The other murals are scenes of old Israel.
Brunicki said he wants his restaurant to be more than just a place to eat. He'd like people to see it as "a celebration of life and history."
Shai Aizin, First Secretary for Economic Affairs at the Israeli Embassy, speaks with an Israeli hi-tech entrepreneur at a computer fair.
And, of course, he wants to make money, as would any good businessman.
According to the Polish Agency for Foreign Investment (PAIZ), Israeli investors have an estimated $83.4 million of direct investment in Poland. Some, such as the Israeli Embassy's First Secretary for Economic Affairs Shai Aizin, estimate that the actual number is closer to $1 billion.
"Many Israeli companies see great potential in Poland the economy is growing, the GDP (gross domestic product) is growing," Aizin said.
But at the heart of the matter there is something more.
For Plaza Centers Poland South Director Eli Egosi, whose company is investing $50 million to build a large shopping mall and entertainment center in Krakow, the return to Poland (his father's birthplace) is like "closing a chapter."
"Poland, because of history, was a catastrophe for the Jewish people," Egosi said. "So we are starting again from the beginning."
Starting from scratch
Brunicki and Egosi are part of a wave of Israeli investors who have set up shop in Poland in sectors as varied as real estate and consumer goods. Like so many companies from around the world, Israeli investors during the past decade have been enticed here by the free-market reforms, the country's large internal market and the close proximity to the European Union (EU) and former Soviet Union. Having tested the waters, many have decided to jump in.
For Polish businesspeople, this return can also be bittersweet. "We had this sort of conviction in Poland that (Israelis) had negative feelings toward Poles," said Marek Jurlewicz, president and owner of Wroclaw-based Yuma (an accounting software company) doing business with Israeli-based Topmanage.
However, if simply driven by economic pragmatism, Poles and Israelis seem to have struck a new era of understanding in their relations, on a business level at least.
"I would say that the climate is improving more and more," Turkiewicz said.
Wait and see
As with many international investors, the Israeli business community first became interested in Poland with the fall of communism. But unlike corporations from other countries, Israelis were slow on the uptake.
When communism collapsed in 1989, Israel and Poland still lacked formal diplomatic relations. Also, Poland was not considered a safe haven for investment. The uncertainty of the long-term guarantees of change meant Israeli investors took a wait-and-see approach to business here.
"I would say that while other countries came very fast to Poland, for the Israeli investor it took some time," Aizin said. "Maybe because they thought it was too risky when there was high inflation ... it's very hard to know. For the Israelis it was much more complicated."
When Globe Trade Centre (GTC), an international company with Israeli roots, entered the market in 1994, entrepreneurs in Israel thought the investment would flop.
"When (GTC) entered the market, many firms said they would break their heads here," said Moshe Taitelbaum, an Israeli lawyer-turned-real-estate-agent, who helps people from Israel invest in Polish property.
The signing of a bilateral free trade agreement between the two countries in 1998 unleashed an inflow of goods from Israel into Poland and led to a normalization in relations. While in the mid-1980s trade between Israel and Poland was non- -existent, by 1990 Israel exported $11 million in goods to the country. By 1998, Israel exported about $128 million in goods. That number increased to just under $160 million in 1999, according to data from Israel's Economy and Trade Ministry.
While trade is growing, in terms of direct investment Israel lags behind other countries, at least as far as official statistics are concerned. In 1999, Israel ranked 34, or second to last, on PAIZ's list of the biggest foreign investors in Poland.
But Israel should be higher on PAIZ's list, Aizin said. While many investments originate in Israel, they often enter Poland through sister companies based in Belgium or Holland. "Most Israeli investments are not directly invested in Poland," Aizin said, adding that an example of this is GTC, the developer of Galeria Mokotow in Warsaw. "GTC is a big Israeli investor," Aizin said.
According to GTC's Web page, the company is owned by two Netherlands-based companies, Nobelgo and Adria. Other shareholders include Deutsche Bank and Citibank (Poland).
Aizin estimates that Israeli investments come closer to $1 billion, which would place the country in the top 10 of PAIZ's 1999 list.
"It's very hard to estimate exactly," Aizin said.
From Jaffa oranges to high-tech
Pass the spittoon: The coffee tasting room at Elite Polksa in Poznan.
Whatever the exact figures, Aizin expects them to increase significantly in the next few years. For some Israeli companies, Poland's future EU membership is a big pull. For others, the country serves as a springboard to markets east of the Bug river. Already, 45% of Elite Polska's coffee products are exported to parts of the former Soviet Union. "We are big in the Ukrainian market, we are No. 1 there," said Amir Levin, finance director at Elite Polska. The company is a subsidiary of Israel's food and beverages giant Elite Industries. According to Levin, turnover at Elite Polska reached $80 million last year.
For Israeli developers, projects in Poland are part of larger-scale plans for Central and Eastern Europe. Last month, the Krakow-based Plaza Centers Poland South laid a cornerstone for a $50 million entertainment and shopping center in the city. This Polish investment is part of Israeli parent company Elbit Medical Imaging's 1999 plan to spend about $270 million a year to build some 50 shopping malls throughout the region by 2003.
While the Israeli presence has been driven by food and beverage and real estate investments, the second wave of Israeli investors will probably be dominated by high-tech companies. This mirrors the growing need for IT and telecommunications infrastructure in Poland and more fundamental changes in the Israeli economy in recent years. During the past decade, the economy has moved from an agrarian base to one dominated by cutting-edge, technology-based companies.
While total agricultural exports from Israel between 1996-1999 remained stable at about $800 million annually, the export of software and programming during that period grew 257% from $287 million to $738 million. According to Aizin, Israel is second only to North America in terms of the number of companies registered on the tech-based NASDAQ stock market.
An early high-tech arrival from Israel was Dankner, which until last year owned almost 10% of Poland's largest alternative fixed-line telecommunications service provider, Netia, before selling off to Sweden's Telia.
During the past two years, the Israeli government has been actively promoting Poland among its IT and telecom companies. In 1999, Yuma's Jurlewicz joined 15 other Polish computer industry executives on an Israeli government-sponsored trip to Israel. The outcome for Jurlewicz was a deal struck with Topmanage to develop an accounting software program for the Polish market, which is expected to make its debut later this year. In 2002, Jurlewicz predicts that sales of the new software package will tack on an additional $1 million of Yuma's present annual turnover of about $3 million.
Moshe Reches, vice president for international sales at Ericom Software, has also become a convert to Poland. In the six months of marketing his products in the country, sales reached nearly $300,000. Reches predicts that sales in Poland could top $1 million by 2002. "I believe in Poland," Reches said.
Historical baggage
Izpol investment company is looking for tenants to occupy an empty building in Krakow's Kazimierz district: Israeli money has helped to spruce up the formerly Jewish quarter, which the communists left in a run-down state following WWII.
But investing in Poland has been a return of sorts for many Israeli investors who previously had strong family ties to the country. Before World War II, Poland was the heart of European Jewish culture, which was destroyed by the Nazis. The return has often accompanied a search for family roots, which for many businesspeople has been difficult.
"I had a great attraction to see where my grandparents were born and where they lived," said Aizin, the diplomat who traces his roots to Lodz and Kielce. "On the other hand, it's a place where a lot of misery happened to a large portion of the Jewish people, so you cannot ignore this part."
While many Israelis are bullish about the market, and praise Poles and the country's economic progress during the past decade, they admit the issue of Polish-Jewish relations a long standing sore spot for both Poles and Jews remains sensitive for them. "Business is business, but to be close to the Polish people is another thing," Reches said.
And the divide goes both ways. Studies conducted between 1993-1999 by Warsaw-based pollsters, CBOS, suggest that Israelis figure low on the ranking of nationalities most liked by Poles. In 1999, for example, 19% of Poles surveyed said they "liked" Israelis, while 49% said they "disliked" them. However, in contrast to other nationalities, Polish attitudes toward Israelis appear to have improved slightly during the past seven years. In 1993, 15% of Poles surveyed said they "liked" Israelis. That figure peaked at 28% in 1997.
Business ties also seem to be bringing down barriers. Yuma's Jurlewicz recalls having some trepidation before setting out to Israel. "You always hear that they blame us for the Holocaust and World War II, but it turned out that they treated us very well, with such kindness," Jurlewicz said. "Those aren't sentiments that I had expected."
For some Israelis, the return to Poland has marked a new beginning. "We remember everything, but we are ready for a new chapter with the Polish people and society," said Egosi, who is managing the entertainment and shopping center development in Krakow.
"I think it's improving tremendously," Aizin said. "You see that people are
people."
