Experts wary of a rebound
Restructuring in the late 1990s gave companies a chance to bring their equipment in line with modern solutions and this has resulted in a high quality product of a European standard. Seemingly the statistics paint a rather rosy picture: in the first four months of 2004 cement consumption was nearly 40 percent higher than in 2003. It is not clear, however, how much of the growth was stimulated by an actual improvement in the construction industry and how much by the panic caused by the looming introduction of the 22 percent VAT on construction and construction-related materials.
Andrzej Tekiel, president and CEO of Lafarge Cement Polska and president of the Polish Cement and Lime Association, puts a lot of the industry's problems down to residential development, or lack thereof. This is particularly alarming as in Warsaw alone nearly 40 percent of the population lives in high-rise blocks built in the 1960s and 1970s.
"Not enough new apartments are being built," Tekiel said. "There should be apartments available in different cities that mobile workers could rent. Warsaw, especially, will need huge amounts of new apartments."
He is also quick to point the finger at legislators and the lack of significant tax breaks for investments in construction.
"All the tax breaks connected with construction are being revoked," said Tekiel. "Are there any tax preferences for construction companies and investors? Are there any good housing loans? In reality, in Poland we buy apartments from our own funds. While in Canada 97 percent of all houses are purchased with 100 percent loans, in our country the proportions are exactly opposite. If we are talking about a seven or eight percent loan on a yearly scale, that is very high and not many people can afford that."
Another gripe is the country's VAT on construction and construction materials. Poland's rate is one of the highest in Europe standing at 22 percent. The government, in Tekiel's opinion, should also consider a lower VAT for social and welfare construction to help curtail the construction black market.
"Such a high tax rate has lead to the creation of a 'gray area' in construction," said Tekiel. "I cannot estimate its sheer size but it is acceptable when a contractor gives the investor a choice between invoiced work or a contract without an invoice. Most will opt for no invoice because an invoice will not be used as proof for tax deduction-it is essentially useless. So at this stage we really are not in the position to say that we are ready to become a European construction giant because there needs to be a clear signal and political support to introduce certain solutions."
There are, however, several signs that show that the current situation should improve, such as the rising sales of completed residential units, increasing number of affluent twenty somethings and easier access to housing loans. Predictions of steady economic growth are another. Significant investments in infrastructure, in terms of roads and environmental construction, through the EU's structural funds are considered the central driver for growth in the industry. Now, all we need is some political goodwill and wisdom. Andrze Tekiel also invests a lot of hope in EU funding, should it be used wisely.
"I see 2005 as a moderately good year because we have not entirely lost hope that something will change," said Tekiel. "We are also EU members and we will keep on receiving structural funds and we will be able to use them effectively. This funding is profitable because we can be certain that the funds are allocated solely to specific projects."
Andrzej Tekiel, president and CEO of Lafarge Cement Polska and president of the Polish Cement and Lime Association, puts a lot of the industry's problems down to residential development, or lack thereof. This is particularly alarming as in Warsaw alone nearly 40 percent of the population lives in high-rise blocks built in the 1960s and 1970s.
"Not enough new apartments are being built," Tekiel said. "There should be apartments available in different cities that mobile workers could rent. Warsaw, especially, will need huge amounts of new apartments."
He is also quick to point the finger at legislators and the lack of significant tax breaks for investments in construction.
"All the tax breaks connected with construction are being revoked," said Tekiel. "Are there any tax preferences for construction companies and investors? Are there any good housing loans? In reality, in Poland we buy apartments from our own funds. While in Canada 97 percent of all houses are purchased with 100 percent loans, in our country the proportions are exactly opposite. If we are talking about a seven or eight percent loan on a yearly scale, that is very high and not many people can afford that."
Another gripe is the country's VAT on construction and construction materials. Poland's rate is one of the highest in Europe standing at 22 percent. The government, in Tekiel's opinion, should also consider a lower VAT for social and welfare construction to help curtail the construction black market.
"Such a high tax rate has lead to the creation of a 'gray area' in construction," said Tekiel. "I cannot estimate its sheer size but it is acceptable when a contractor gives the investor a choice between invoiced work or a contract without an invoice. Most will opt for no invoice because an invoice will not be used as proof for tax deduction-it is essentially useless. So at this stage we really are not in the position to say that we are ready to become a European construction giant because there needs to be a clear signal and political support to introduce certain solutions."
There are, however, several signs that show that the current situation should improve, such as the rising sales of completed residential units, increasing number of affluent twenty somethings and easier access to housing loans. Predictions of steady economic growth are another. Significant investments in infrastructure, in terms of roads and environmental construction, through the EU's structural funds are considered the central driver for growth in the industry. Now, all we need is some political goodwill and wisdom. Andrze Tekiel also invests a lot of hope in EU funding, should it be used wisely.
"I see 2005 as a moderately good year because we have not entirely lost hope that something will change," said Tekiel. "We are also EU members and we will keep on receiving structural funds and we will be able to use them effectively. This funding is profitable because we can be certain that the funds are allocated solely to specific projects."
