Krakow gets a neck ahead in race to be No. 2 city
Krakow is beating Wroclaw and Poznan in the race to become Poland's No. 2 commercial center as investors move beyond the capital city, at least according to the Polish Agency for Foreign Investment's (PAIZ) total investment figures.
According to PAIZ statistics tracking foreign direct investment (FDI), Krakow had attracted $1.7 billion by the end of June. That figure includes investment only from companies that have committed more than $1 million and is well behind Warsaw, the nation's No. 1 FDI target with $5.3 billion invested to date.
Krakow's figure compares with the $1.2 billion Poznan had drawn by June and the $564 million Wroclaw had pulled in.
"The investment climate is very positive, people are very attracted to Krakow," said Torben Nielsen, director of Central Europe at developer Tishman Speyer. "It's really beginning to happen, we expect to see very strong growth."
Projects such as Tishman Speyer's more than $500 million real estate development and Motorola's $110 million research center, both of which were announced in the last year or so, pushed Krakow over the other two cities. Tishman Speyer is still in the planning process of its project, and Motorola is also in the initial stages.
Krakow is not the most dynamic city in terms of the number of businesses established, though. In 1997 Warsaw was home to 9,576 companies registered with foreign capital, while Poznan and Wroclaw had 1,498 and 1,510 respectively, according to PAIZ. Krakow was fourth with 1,100.
But Krakow has seen a flood of foreign companies moving into Poland's cultural capital recently. Earlier this year accounting giant PricewaterhouseCoopers opened its "Center of Excellence" there and auto-parts producer Delphi Automotive Systems Poland announced it would spend $20 million on a technical center for the development of vehicle components to be opened mid-2000.
In addition, telecoms equipment producer Motorola announced plans to develop its high-tech research center in March 1998 at the Krakow Technological Park. After a series of hiccups, the majority of the planned 130 engineers Motorola intended to have working in the park by year's end have only begun in the last six months. The company plans to have 500 engineers at the center in about five years, said Rick Lada, Motorola Polska's country manager.
Tishman is currently busying itself with clearing and demolishing a site between Krakow's old town and railway station, which is planned to house Poland's largest retail and entertainment center. The first phase of the center is scheduled to be completed by the end of 2002, Nielsen said. It is also developing "the first real international class hotel outside Warsaw," with 250 rooms and 30, 000 square meters of class A office space, he said.
Krakow has a plethora of advantages to it that some other cities simply cannot offer, Nielsen said. While generally considered to be Poland's most livable city, Krakow also has a relatively low cost of labor in contrast to the capital, he said.
"More and more companies are realizing that they can do a significant amount of business in Krakow and make substantial savings," Nielsen said.
In addition to the competitive labor costs, Lada said that Krakow's low real estate rates also make it attractive. While Warsaw office rents can go as high as $40 per square meter, property in Krakow now is coming on line at $13 per square meter.
Furthermore, as well as excellent road and rail communications with Warsaw, Krakow has a highly educated labor market, with 13 universities and more than 100,000 students enrolled in them or in other fields of higher education. The city is also renowned for its high quality of scientific research, which is a particular bonus to the tech firms coming into the area.
"There's a lot of human capital and it's very easy to attract," Nielsen said.
However, Wroclaw and Poznan may beat Krakow when it comes to creating a healthy atmosphere for businesses, executives said. The Wielkopolska region, where Poznan is located, has a longer and deeper tradition of entrepreneurship as a result of being under German occupation during the partition era. That tradition encourages hard work and a greater focus on productivity, said Bohdan Wyznikiewicz, vice president of the Institute for Market Economics.
Furthermore, Poznan's geographical status as a centerpoint between Warsaw, Berlin, Krakow and Szczecin is also of overriding importance to the city's German investors, said Mariola Krzyzaniak, public relations senior manager at tobacco company Reemtsma Polska, which has so far invested $400 million in the area.
Poznan snagged one of the larger FDI deals last year: pharmaceutical firm Glaxo Welcome's purchase of 80% of pharmaceuticals company Polfa Poznan for $220 million and a further $100 million in additional investments. Glaxo was impressed with the city's organizational efficiency, said Aldona Zygmunt, head of public relations. The area has also benefited from the fact that it was home to many profitable state-run industries that have since been purchased by foreign investors, Reemtsma's Krzyzaniak added.
Wroclaw's highly educated work force, like Krakow, has also helped to lure investors. "In general there is really a boom in investments," said Jan Stromberg, director at Volvo Polska, which came to Poland in 1993. "It's a big education center, the people are extremely good here and the workers fantastic."
Stromberg said that in 30 years at Volvo, the Wroclaw work force is the best he has ever worked with. He added that the factory has the highest average level of education of any Volvo factory in the world 75% of white-collar workers had a university education.
Executives also attested to a lack of bureaucracy in Wroclaw and Poznan and a willingness by city authorities to work with investors. Krzyzaniak said that the Tarnowo Podgorne gmina, where Reemtsma settled, offered the company excellent conditions in terms of infrastructure and utilities.
Stromberg attributed Volvo's smooth set up of its greenfield operation to good connections with helpful city authorities. Volvo decided to build a new bus plant in June, and the factory is expected to be completed next week.
"There is no difference in timetabling to the Western world," he said. "There were no problems regarding permission, but then, I'm giving them jobs."
