City in Focus - Kielce
By : Anna Staniszewska
Kielce, the capital of central Poland's Swietokrzyski province, is a city with a richly diverse hinterland, best known for its mineral deposits, industrial plants and mining. But despite its abundance of natural resources, the city has not proved the magnet for foreign investment many officials had hoped during the past decade.
For more than 500 years, companies have been exploiting Kielce's eclectic mix of natural resources, including iron, copper, lead, marble, limestone, gypsum and sandstone. As well as mining interests, Kielce has metallurgical plants, glassworks and arms factories.
To build on this industrial heritage, Poland's first technical college (Kielce Mining Academy) was established in 1816. Even today Swietokrzyski province accounts for 90% of the country's gypsum production, 38% of limestone and 60% of ball bearing production. The largest industrial centers in the province are in cities such as Ostrowiec Swietokrzyski, Starachowice, Skarzysko-Kamienna and Konskie.
But there's more to Kielce than industry. The city's history stretches back to when it was the center of local trade. Historical sites include the 12th-century Basilica Cathedral, while the 17th-century Bishop's Palace is a reminder of the settlment's connections with Krakow.
Kielce is also renowned for its colleges. In addition to the Mining Academy, it also has Swietokrzyski Polytechnic Academy, the Higher School of Economics and Administration and the Higher School of Public Administration.
Kielce is also a popular tourist destination with country parks covering almost half of the province. Adventure tourism spots include gliding and parachuting at Maslow and Pinczow, horse riding at Borkow and Pinczow, and windsurfing at local lakes and on the Nida river. Hiking and skiing are also popular in the Swietokrzyski mountains.
The province is the second smallest in the country, covering about 1.7 million square kilometers.
Kielce is a relatively small city by Polish standards, with just 211,000 people. But despite its size, it has an excellent transport network. The city is on the main E-7 highway linking Warsaw with Krakow and is one of the busiest roads in the country. Rail connections are also well developed, with two freight and reloading stations for standard and broad-gauge lines. The airfield in Maslow, about 10 kilometers from Kielce, is also large enough for medium-sized aircraft servicing only cargo.
Electrical engineering and construction dominate local industry. Eight companies based in Kielce are listed on the Warsaw Stock Exchange (WSE). Exbud is a listed construction company (Poland's largest general contractor), which is 75% owned by Sweden's Skanska. Another listed local construction firm is Echo Investment with office, residential, hotel and retail projects around the country. Other local companies include PIA Piasecki, Mitex, KPBP BICK, all of which provide general contractor services with projects around Poland.
Kielce is also the base of Kolporter, a national press distributor. Another local manufacturer is NSK Iskra, which produces heaters and spark plugs. Also listed on the WSE is local ceramic tiles producer Cersanit. Meanwhile, the Chemar factory produces chemical equipment and industrial fittings and fixtures, while PSS Spolem, one of the oldest food processing cooperatives in Poland, also has a plant in Kielce.
Despite its size, the city has attracted several foreign investors, although many more have found it difficult dealing with the local land ownership problems. "The city has a great chance to attract foreign investments due to its location and resources," said Tadeusz Zolnierczyk at city hall. So far, outside investment has injected money into local retail, petroleum, construction and printing industries. Foreign investors that have set up include Ireland's David Smith Packaging with its zł. 143 million ($34.9 million) investment in cardboard packaging production and Diepensteyn Luxemburg, which has invested zł. 200 million ($48.8 million) in Browar Belgia, a local brewery.
But complicated ownership-rights issues continue to undermine many efforts by the local authorities to attract investment, according to Zolnierczyk. "We have land for investment, but it is hard to persuade local landowners to sell plots," he added. While the government is willing to sell much of its state land, many small property owners refuse to sell to foreign companies.
Michal Kubicki, vice president of Howell, a Wroclaw-based developer and general contractor, said the city should start investor-friendlier strategies for land development. He said one way around the land-owning issue would be for investors to put money into local enterprises and not involve themselves with purchasing property.
As a mark of its status as an industrial center, Kielce has the third largest trade center in Poland, covering 120,000 square meters, 30,000 square meters of which is indoors. About 20 events take place in the Kielce Trade Center annually, including Autostrada Polska the international road construction industry fair, and DOM the residential building materials and interior fittings fair.
Retail/Entertainment
Like other cities that have more than 200,000 people, Kielce has attracted several retail chains. Local Supermarket Nomi is already well established as well as German specialized supermarkets Makro (food), Real (food), Praktiker (handtools) and OBI (household equipment and tools). "There is space for more, but they have to be carefully planned," said Echo Investment's Wojciech Ciesielski. He said French chains are currently looking at the city. Rent per square meter is about zł. 80 for supermarket space. But, again, one of the main obstacles for investors is ownership rights.
Two years ago, Germany's HIT pulled out of a deal to set up a zł. 27 million ($6.6 million) hypermarket in the center of the city after the landowners went to court to claim their rights to the land. This discouraged other investors from taking part in the second tender. "The city is not prepared for this type of development," Ciesielski said, adding that this is due to poor city planning and ongoing ownership claims.
Kielce still lacks entertainment investments. "There aren't many places to go out in Kielce," Kubicki of Howell said. By 2003, Echo Investment plans to complete the Centrum Rozrywki (Entertainment Center) on ulica Manifestu Lipcowego and ulica Swietokrzyska. The complex will comprise a supermarket, shopping gallery, restaurants, discos, a bowling alley and an eight-screen multiplex cinema with Echo Cinema as the operator.
Israeli Plaza Centers plans to build a similar facility with an IMAX theater, a billiard room and a playground for children.
Office
Kielce has relatively old office stock, most of it dating to the 1970s. Most investors that set up in Kielce go for existing buildings, analysts said. The total supply of office space is estimated at 54,700 square meters, most of which dates from the communist era. "Except for Exbud Centrum Biznesu, there is no A-class office space," Kubicki said. The Exbud development covers 8,500 square meters and costs $13-$30 per square meter to rent. Large local companies such as Mitex, Poligrafia, Cersanit and Echo Investment have their own office buildings such as the 7,600 square meters owned by vehicle-producer SHL. Rents for B or C-class buildings usually cost about zł. 25-zl. 50 per square meter. No A-class office developments in Kielce are on the drawing board. "There are no clients who want large A-class office space," Ciesielski of Echo Investment said. However, there is a demand for B-class offices.
Residential
The residential sector in Kielce has yet to develop. Only 157 flats were built in 1999. In 1999, 1,329 construction permits were issued, while in 2000 this number dropped to 1,261. Rents range from zł. 1,600 to zł. 2,500, which industry watchers say is expensive. "Apartments in Kielce are selling," Kubicki of Howell said. But because of expense and the stable population, residential property is not selling as fast as many developers would like, he added.
Warehouse/Industrial
As with most cities the same size, Kielce's warehouse supply is limited to the storage sites of manufacturing plants or private trading companies. "We have no modern warehouse space," city hall's Zolnierczyk said. But firms often sublet their spare space, he added.
