Clocking out
NOWA RUDA - For a mining town of 27,000 tucked in the hills of southwestern Poland, Nowa Ruda is getting a lot of attention. That's because it is seen as a test case in industrial restructuring and, as such, has received loans and technical assistance from the European Community's Phare fund and the World Bank's Industrial Development Agency (IDA).
The zl. 31.5 million ($13 million) World Bank loan is earmarked for the development of six projects initiated by Kopalnia Wegla Kamiennego "Nowa Ruda," as part of the mine's restructuring program.
In 1991, when the Industry and Trade Ministry decided to close mines in the Walbrzych region of Lower Silesia, the Nowa Ruda mine officials negotiated a better alternative. They would close one mine in 1995 and the other in 2001, eliminating more than 1,500 jobs by attrition while creating a special department to develop job alternatives.
Restructuring means retraining, and this has been a tall order, especially because mining "is part of our landscape and our feelings," notes Bogumil Wazny, principal at Stanislaw Staszic High School.
Major changes are under way. But creating non-mining businesses remains a gamble with few pay offs, so far.
More than 5,000 people worked in the two mines of Nowa Ruda in the early 1990s, when the death knell sounded for inefficient mines facing new market conditions.
The local mines might have been racking up huge losses and festering health hazards, but they employed 80% of the town's men. And, as was true for most of the Silesian mining landscape, very little other employment was in place to soak up those laid off from the mines.
Mine director Janusz Siemieniec started drafting volunteers from the mines and from outside to help retool the workforce. When Grzegorz Jakubowski joined in 1991, he was one of six team members; there now are 25.
Jakubowski brainstormed a rock-cutting business that became one of the first mine-sponsored private businesses, GranMarCo, with a start-up capital of zl. 100,000 ($42,000). GranMarCo began producing granite and marble facades for buildings in October 1994, with a zl. 4.2 million ($1.8 million) loan from the local Bank Zachodni branch to buy zl. 5 million ($2.1 million) worth of rock-cutting machinery.
Rocky start
Several parts of GranMarCo's game plan went awry, despite an elegant business plan and apparent extensive market research with the help of Warsaw-based Proxima M.S., whose services were subsidized by an ECU 24,000 ($31,000) grant from Phare.
IDA President Arkadiusz Krezel says GranMarCo has suffered from poor marketing and distribution systems. Competition was unexpectedly high, and customers for marble facades have been hard to come by. Jakubowski says their main problem has been that the shareholders - the mine, the World Bank's IDA and the state's Regional Development Agency - did not provide enough cash to make GranMarCo more than a rock-cutting service for other projects.
The company currently is in arrears on the $1.8 million loan and is seeking to renegotiate terms. Jakubowski wants the bank to extend payments from three to five years "as their share in the restructuring effort." Bank Zachodni branch director Elzbieta Bielewicz, while wanting her client to prosper, says the bank is not a charity. A decision on the extension is expected by the end of the month.
"The solution to the GranMarCo problem," Bielewicz says, "is in the hands of the company's owners."
IDA's Krezel is also taking a hard line. "They've (GranMarCo) been given the fishing pole and hook, now they have to catch a fish on their own ... You cannot make them accustomed to a safety-net - a 'warm uncle' to rescue them ... These are the economic realities. The weak die."
A recent shareholders' meeting increased the company's share capital by zl. 1 million ($420,000) to solve some cash problems, and the mine has decided to buy out the shares to put the rock-cutter back on its feet.
The Cieplownictwo boiler house is the only firm, of four other companies created by the mine during the last few years, to show a profit. Financial returns for the other three - red sandstone extractor Kamex, coal refinery Bonowex and the Silesia hotel - typify the struggle for independence and survival beyond 2001, when the last mine is supposed to close.
Today, the World Bank loan, under the EFSAL (Enterprise Financing Sector Adjustment Loan) program, is enabling another six projects to be launched, including a second rock-cutting initiative to complement rather than compete with GranMarCo. Other projects include methane gas exploration, a rock quarry, wood processing, propane-butane distribution and a coal analysis laboratory.
Local initiative
Nowa Ruda's isolation and dependency on mining has made it a perfect test site for restructuring efforts. Donors and analysts say it's the level of local economic-turnaround activity - by the city and by the miners, at least in the engineering hierarchy - who have led the restructuring initiative that singled out the town.
The city relieved the mine of maintaining a costly 90-building communal housing estate, says Mayor Andrzej Cyman. The city also swapped a transportation base to be used in a new project for the mine with the mine's 290-bed hotel, which the city will now upgrade for zl. 100,000 ($42,000). In addition, the city allowed the mine to write-off part of its yearly zl. l.6 million ($670,000) in real estate taxes by accepting instead the miners' work on public projects, such as renovating a brewery into a public library. The mine also supplies coal to the city.
The task is challenging because Nowa Ruda does not have an upper-crust of wealthy residents that can invest in their own town. Those that work on the projects for the restructuring team often find jobs in the companies they create. Team member Piwowarczyk, 47, says their motivation for taking on the risky task of restructuring is ensuring their own future as well as that of their town.
But not all are so optimistic.
Piotr Mlynarczyk, 35, an underground miner, points to two men selling eggs in the local market as examples of the fate of many who spent their lives in the underground mines. After 18 years in the mines, Mlynarczyk needs only four more to retire. He'll stick it out and then may take up odd jobs. He scoffs at job retraining.
"With my health, who will take me?" he asks. He suffers from lung disease, like many men in the mines.
Miners here earn about zl. 750 ($310) a month, or about 1.5 times the national average, which is why wages comprise 60% of the costs in mining. It also is a disincentive for miners to retrain.
"Miners make more than they would starting in a new company. They're not willing to sacrifice now for the future," says Adam Durski of Ernst & Young. Solidarity union leader Ryszard Glanc agrees. Miners, he says, are a special breed with non-transferable skills and poor health.
Programs that subsidize job retraining or continuing education programs have been hard sells.
For now, Nowa Ruda does not have the feel of devastation by economic calamity. While the one mine is open, 3,400 people still have jobs.
"Risks are everywhere; we're at least trying to create jobs and give it a chance," says Piwowarczyk.
The zl. 31.5 million ($13 million) World Bank loan is earmarked for the development of six projects initiated by Kopalnia Wegla Kamiennego "Nowa Ruda," as part of the mine's restructuring program.
In 1991, when the Industry and Trade Ministry decided to close mines in the Walbrzych region of Lower Silesia, the Nowa Ruda mine officials negotiated a better alternative. They would close one mine in 1995 and the other in 2001, eliminating more than 1,500 jobs by attrition while creating a special department to develop job alternatives.
Restructuring means retraining, and this has been a tall order, especially because mining "is part of our landscape and our feelings," notes Bogumil Wazny, principal at Stanislaw Staszic High School.
Major changes are under way. But creating non-mining businesses remains a gamble with few pay offs, so far.
More than 5,000 people worked in the two mines of Nowa Ruda in the early 1990s, when the death knell sounded for inefficient mines facing new market conditions.
The local mines might have been racking up huge losses and festering health hazards, but they employed 80% of the town's men. And, as was true for most of the Silesian mining landscape, very little other employment was in place to soak up those laid off from the mines.
Mine director Janusz Siemieniec started drafting volunteers from the mines and from outside to help retool the workforce. When Grzegorz Jakubowski joined in 1991, he was one of six team members; there now are 25.
Jakubowski brainstormed a rock-cutting business that became one of the first mine-sponsored private businesses, GranMarCo, with a start-up capital of zl. 100,000 ($42,000). GranMarCo began producing granite and marble facades for buildings in October 1994, with a zl. 4.2 million ($1.8 million) loan from the local Bank Zachodni branch to buy zl. 5 million ($2.1 million) worth of rock-cutting machinery.
Rocky start
Several parts of GranMarCo's game plan went awry, despite an elegant business plan and apparent extensive market research with the help of Warsaw-based Proxima M.S., whose services were subsidized by an ECU 24,000 ($31,000) grant from Phare.
IDA President Arkadiusz Krezel says GranMarCo has suffered from poor marketing and distribution systems. Competition was unexpectedly high, and customers for marble facades have been hard to come by. Jakubowski says their main problem has been that the shareholders - the mine, the World Bank's IDA and the state's Regional Development Agency - did not provide enough cash to make GranMarCo more than a rock-cutting service for other projects.
The company currently is in arrears on the $1.8 million loan and is seeking to renegotiate terms. Jakubowski wants the bank to extend payments from three to five years "as their share in the restructuring effort." Bank Zachodni branch director Elzbieta Bielewicz, while wanting her client to prosper, says the bank is not a charity. A decision on the extension is expected by the end of the month.
"The solution to the GranMarCo problem," Bielewicz says, "is in the hands of the company's owners."
IDA's Krezel is also taking a hard line. "They've (GranMarCo) been given the fishing pole and hook, now they have to catch a fish on their own ... You cannot make them accustomed to a safety-net - a 'warm uncle' to rescue them ... These are the economic realities. The weak die."
A recent shareholders' meeting increased the company's share capital by zl. 1 million ($420,000) to solve some cash problems, and the mine has decided to buy out the shares to put the rock-cutter back on its feet.
The Cieplownictwo boiler house is the only firm, of four other companies created by the mine during the last few years, to show a profit. Financial returns for the other three - red sandstone extractor Kamex, coal refinery Bonowex and the Silesia hotel - typify the struggle for independence and survival beyond 2001, when the last mine is supposed to close.
Today, the World Bank loan, under the EFSAL (Enterprise Financing Sector Adjustment Loan) program, is enabling another six projects to be launched, including a second rock-cutting initiative to complement rather than compete with GranMarCo. Other projects include methane gas exploration, a rock quarry, wood processing, propane-butane distribution and a coal analysis laboratory.
Local initiative
Nowa Ruda's isolation and dependency on mining has made it a perfect test site for restructuring efforts. Donors and analysts say it's the level of local economic-turnaround activity - by the city and by the miners, at least in the engineering hierarchy - who have led the restructuring initiative that singled out the town.
The city relieved the mine of maintaining a costly 90-building communal housing estate, says Mayor Andrzej Cyman. The city also swapped a transportation base to be used in a new project for the mine with the mine's 290-bed hotel, which the city will now upgrade for zl. 100,000 ($42,000). In addition, the city allowed the mine to write-off part of its yearly zl. l.6 million ($670,000) in real estate taxes by accepting instead the miners' work on public projects, such as renovating a brewery into a public library. The mine also supplies coal to the city.
The task is challenging because Nowa Ruda does not have an upper-crust of wealthy residents that can invest in their own town. Those that work on the projects for the restructuring team often find jobs in the companies they create. Team member Piwowarczyk, 47, says their motivation for taking on the risky task of restructuring is ensuring their own future as well as that of their town.
But not all are so optimistic.
Piotr Mlynarczyk, 35, an underground miner, points to two men selling eggs in the local market as examples of the fate of many who spent their lives in the underground mines. After 18 years in the mines, Mlynarczyk needs only four more to retire. He'll stick it out and then may take up odd jobs. He scoffs at job retraining.
"With my health, who will take me?" he asks. He suffers from lung disease, like many men in the mines.
Miners here earn about zl. 750 ($310) a month, or about 1.5 times the national average, which is why wages comprise 60% of the costs in mining. It also is a disincentive for miners to retrain.
"Miners make more than they would starting in a new company. They're not willing to sacrifice now for the future," says Adam Durski of Ernst & Young. Solidarity union leader Ryszard Glanc agrees. Miners, he says, are a special breed with non-transferable skills and poor health.
Programs that subsidize job retraining or continuing education programs have been hard sells.
For now, Nowa Ruda does not have the feel of devastation by economic calamity. While the one mine is open, 3,400 people still have jobs.
"Risks are everywhere; we're at least trying to create jobs and give it a chance," says Piwowarczyk.
