What is the role of large companies in the Polish industry?

The participants of the debate conducted by PKO Bank Polski and the “Dziennik Gazeta Prawna” daily newspaper have tried to provide answers to the question of what is the role of large companies in the Polish industry; yet the very concept of “role” has proved to be to narrow in this context. Big businesses must not only remain present in the Polish industry, but bust also, first and foremost, act as its primary driving force.

The Polish industry is still in formative phase following the transformation period Can the Polish industry be defined in an unambiguous manner? In the view of Mr Jan Filip Staniłko from the Warsaw Institute for Economic Studies, Poland is still in the process of working out the style and formula of the functioning thereof. – Following a long period of transformation in the area of ownership of industrial assets, the picture which has emerged includes both large Western companies which manufacture their goods for export – such as Philips, for example, as well as European industry leaders with Polish capital, such as Forte or Nowy Styl, large domestic foodstuffs manufacturers such as Cedrob and a multitude of suppliers such as Boryszew, which operate within complex value chains, for example in the automotive sector – Mr Staniłko said. Do these companies have any responsibilities? Should they do more than just provide profits to their shareholders? Mr Staniłko is certain that the scope of their responsibilities is far greater. – Large companies, including, in particular, those in the industrial sector, determine the level of civilisational advancement of the country. It is them that, by creating state-of–the-art technologies and using them in practice, produce profits which they can then reinvest in technological and organisational progress – Mr Staniłko explained.

Big businesses have a potential for innovation… Mr Jakub Papierski, vice-chairman of the management board of PKO Bank Polski, observed that investments made by big businesses – especially the ones which involve innovation – are of particular significance. – Big businesses are able to take the risk that something may or may not succeed. The costs of possible failure would not be a lethal blow to them. An example of how taking risks pays off is the implementation of the IKO application by PKO Bank Polski, enabling its users to make quick payments using their mobile phones. We have invested significant amounts of money in the development of this solution; today, the BLIK system which is based around it has over 700 thousand users. These are the specific opportunities which make it possible to deliver on our promises – promises which are not politically contingent – Mr Papierski concluded.

…and support the development of smaller subcontractors Mr Marek Huzarewicz, CEO of Philips Lighting Poland, presented a practical view on the role of big businesses. The Philips factory, located in the town of Piła, with a population of 70 thousand people, has approximately 5 thousand employees. According to Mr Huzarewicz, the success of failure of the given company will also have an impact on as many as 15 thousand people employed by its subcontractors. – Big businesses have a tremendous impact on the functioning of the entire community. This fact is worth emphasizing since the presence of foreign investors in Poland is often presented in a bad light – Mr Huzarewicz pointed out. Referring to the typical characteristics of medium-sized communities, Mr Huzarewicz also touched upon the issue of cooperation with the local government, which can take on radically different forms in various situations. – Here, in Piła, where we remain a key player, there is not a day during which no talks with the local government would be held. In Warsaw, on the other hand, we are just one of many market players, which means that the scope of such cooperation is negligible – Mr Huzarewicz explained.

In his view, the regional responsibility of big businesses also involves singling out and supporting smaller companies. – If we find a small company which has potential, we help it develop. This we achieve by supporting it through various commissions as well as through the transfer of know-how. This gives a huge boost to such companies, as they are able to gain experience and develop, which makes their “CVs” much more attractive. We, on the other hand, establish links with partners which act loyally and are attractive in business terms – Mr Huzarewicz said.

Foreign capital boosts knowledge transfer This view is supported by Mr Piotr Szeliga, CEO at Boryszew. – Western companies are not some intrinsically evil entities that seek to wring local markets dry and to transfer all capital abroad. The town of Rzeszów is a good example of cooperation with foreign partners; the entry of foreign investors into the market has transformed this area into what we may today refer to as the Polish aviation valley. Perhaps this is a slight exaggeration, yet one can clearly see that the companies which have made substantial investments have also contributed significantly to the development of the entire region. The employees are satisfied, technology is developing, people have jobs and adopt good organisational patterns – Mr Szeliga said, adding that without the import of new technologies, local manufacturers would be unable to reach their current level of development for many years to come.

Polish businesses need to trust one another Mr Jan Filip Staniłko believes that cooperation between businesses and the local government may be improved by adopting the solutions applied in Germany, where companies are under an obligation to establish self-governing business associations. Mr Piotr Szeliga, on the other hand, does not believe in compulsory solutions. – Had I not known that this method actually works in Germany, I would have said it is a pile of nonsense. Yet I still believe this solution will not work here, in Poland. Let us work out our own solutions instead – he suggested. Mr Maciej Formanowicz, chairman of the management board of the Forte furniture factory, was also against the idea of compulsory associations. However, he emphasized that voluntary cooperation between various entities is of crucial importance, which he attempted to demonstrate by giving an example of a problem which his industry currently faces. – The situation on the global furniture market has changed drastically due to the substantial concentration on the customer side. In the UK and France the trade in furniture is controlled practically by a single entity, which forced suppliers to make decisive steps. There are few companies which are able to serve customers of this size – Mr Formanowicz explained. He himself admitted that his company has two options available – systematic growth or merger with another entity. He would be willing to consider the latter, although he is aware that there is a significant obstacle along the way. – What prevents us from acting is the utter lack of trust. Smaller companies will always fear that we are trying to double-cross them. This is why we need an intermediary of sort, an entity serving as a catalyst; it is here that a self-governing business association would prove useful – Mr Formanowicz suggests.

Banks could act as catalyst for cooperation between businesses Mr Jakub Papieski believes that banks may encourage cooperation between companies. While it is true that the level of mutual trust among Poles remains low, the banks were able to develop a system which allows for a robust and trustful cooperation between two entities, a large one and a small one, by removing all suspicion that one wishes to take advantage of another – Mr Papierski said. Thanks to their extensive knowledge of market participants and their good reputation, banks are able to support the establishment of healthy business relations between companies. He also noted that the intensification of the relations between large companies and smaller entities serves to stabilise their operations and make it more difficult for foreign partners to leave the market in the event of changes in the methods of financing or the abolition of tax concessions.

The state must open itself up to businesses Mr Andrzej Goździkowski, CEO of Cedrob, believes that opportunities for the domestic economy lie not only in big businesses from Western countries, but also, first and foremost, in Polish companies. – The local government often fails to appreciate the role of education. If you wish to encourage the best lawyers, economists and engineers to stay in Poland, you need to find an occupation for them right here – Mr Goździkowski emphasized.

In Mr Goździkowski’s view, cooperation between the state and businesses should be high on the agenda of all influential participants of the public debate, including, first and foremost, policymakers, the media and the domestic elite. Mr Goździkowski also pointed out that we should take a greater advantage of the opportunities presented by our membership of the European Union. – The use of subsidies is of key importance. In competition on the European market, the countries in which manufacturing activities are subsidised will prevail. Versatility is also important, as demonstrated by livestock farms in Western countries. Apart from fattening pig husbandry, the farms also feature biogas facilities, which means threefold benefits for the farmers. They are able to benefit from both the sale of fattening pigs, from energy generation and from increased subsidies. Yet here, for the last 25 years, nobody has even thought about anything like that – Mr Goździkowski explained.

The authorities must learn how to communicate with businesses According to Mr Piotr Szeliga, the task of enhancement of the cooperation between the world of politics on one hand and the world of business on the other hand faces an obstacle in the form of apprehension. – I get the impression that many policymakers fear that they might be accused of unethical conduct if they engage in talks with company directors. From my personal observations it is clear that they are loath to engage in cooperation with private enterprises. Officials are more inclined to engage in talks with state-controlled entities – Mr Szeliga said. He also added that the entire community must no longer think it inappropriate to talk about profits in cases where the results of cooperation would be beneficial for all the parties involved.

Mr Marek Huzarewicz supports this view. – If, when visiting a government ministry, I produce my business card, which says that I am a representative of a private enterprise, I stand no chance of getting anything done. The only way to get to talk about things that really matter is to enter into some kind of association or union – Mr Huzarewicz explained. No platform for dialogue Mr Maciej Bukowski, chairman of WISE, views the matter from a different perspective. – The industry must be more active in the area of financing of certain types of activities. In the American model, the industry established industrial institutes, which then act in its name – Mr Bukowski said. He also presented the view that what is lacking in Poland is not the willingness to talk, but a platform on which such talks between interested parties could actually be held. Even in cases where such a debate does take place, it is not serious enough and concentrates on general issues which have little to do with actual practice. – In spite of all this, we certainly do need an initiative and I believe that it is the industry which must take the initial step. Yet at the present moment the industry remains silent on the issue – Mr Bukowski concluded. Mr Jan Filip Staniłko also believes that there is a need for dialogue. – When people actually start to meet each other, the willingness to act starts to emerge. Everyone has their own problems which they deal with on an everyday basis; it is only an external impulse, such as the crisis in our relations with Russia, which is conducive towards cooperation. Yet we do not want to move from crisis to crisis. We wish to establish social structures which accelerate cooperation – Mr Staniłko opined. An example of such “accelerator” is the boiler cluster near Pleszew, where a few dozen entrepreneurs have managed to reach an agreement and have even established a joint R&D department. – It is such people who should be appreciated and who should receive financial support – Mr Staniłko said.

The need for supporting international expansion What is the role which the state has to play in determining the shape of the activities performed by big businesses? – I would not overestimate the role of the state and neither would I expect it to become involved in the creation of the strategy for the functioning of various industries. There is one exception, however, and that is the subtle support for international expansion. This is the area in which every state lends support to its exporters – Mr Jakub Papierski opined. Such support for the Polish industry is also offered by PKO Bank Polski, which wishes to follow its clients and has plans for opening corporate branch offices abroad. The very first of those branch offices, located in Germany, is currently in organisational phase. Owing to the presence of the bank on the German market, Polish companies will benefit from an easier access to financing, since the relations with them will be developed on the basis of previous experience and will not need to be established from scratch with a German partner.

– How is the state supposed to provide horizontal support to selected industries, where even ministries are not able to reach agreement with each other? On the other hand, one also needs to ask how is this goal to be achieved where the state itself is sometimes a competitor of the companies in question? – asked Mr Marek Huzarewicz, CEO of Philips Lighting Poland, citing the preparatory works pertaining to the act on renewable energy sources as an example. – The manner in which the discussion was conducted did not position the state in the role of a catalyst; on the contrary, the state acted as a stronger competitor of the companies with whom it negotiated, defending the interests of the partially state-owned energy sector enterprises – Mr Huzarewicz explained. Mr Piotr Szeliga, on the other hand, pointed towards the competency gap among decision makers in the area of the economy. – The policy and the economy are mostly controlled by people who have never ventured outside their offices. I wish that, instead, they were controlled by people who have achieved success in business and who have their own industrial record.

Big businesses can determine the shape of the Polish industry Big businesses may play a crucial role in determining the shape of the Polish industry. In order to achieve this goal, there are specific decisions which need to be made, including on the government level. These decisions must, however, be preceded by an extensive debate which shall mostly involve practitioners. Mr Jan Filip Staniłko has reminded that the key players in the Polish economy are foreign companies which today account for 70% of all Polish exports. It is these companies which may stimulate the growth of Polish subcontractors, while their activities, apart from increasing their financial results, must also serve to enhance the living standards in the regions in which such companies operate.

The Dziennik Gazeta Prawna newspaper, along with the PKO BP bank, has organised an expert debate entitled “What is the role of large companies in the Polish industry?”

The meeting took place on June 11, 2015 in the editorial office of Dziennik Gazeta Prawna between 10.30 and 11.30.

The participants of the meeting were:

Mr Maciej Bukowski, Chairman of the Board, Warsaw Institute for Economic Studies (WISE); Mr Maciej Formanowicz, Chairman of the Board, the Forte S.A. furniture factory; Mr Andrzej Goździkowski, Chairman of the Board, Cedrob; Mr Marek Huzarewicz, Chairman of the Board, Philips Lighting Poland Sp. z o.o.; Mr Jakub Papierski, Vice-chairman of the Board, PKO Bank Polski, Mr Jan Filip Staniłko, Director of the Industrialisation 3.0 Programme, Warsaw Institute for Economic Studies; Mr Piotr Szeliga, Chairman of the Board, Boryszew.

The moderator of the meeting was Mr Marek Tejchman, deputy editor-in-chief of Dziennik Gazeta Prawna.