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Slightly shorter version of this article first appeared in Contact International Business Voice 2/07 (78) - Summer 2007
In preparing the winning presentation the Polish Executive Committee for Euro 2012 cooperated with a team of lawyers lead by Michał Kurzyński and Adriana Bronikowska of Wierzbowski Eversheds. The firm was supported by PricewaterhouseCoopers experts in the area of documentation relating to financial issues.
During the breakfast Michał Kurzyński presented briefly the highlights of the project. ‘Our team worked on the project in Warsaw, London and Kiev. It was a difficult and complex project,’ he said. ‘Since there was no earlier experience, we based it on the practical advice of our colleagues from London who had worked on the London Olympics bid documentation. One difficulty was collecting data from various authorities needed for the project, but still confidential.’
The final success, he said, was due to the quality of documentation, as well as the lobbying done by both National Football Federations.
‘UEFA requirements are such that there are no negotiations; you have to follow exactly the requirements,’ stressed Kurzyński. ‘And some of them are in certain places not quite in line with Polish law. Therefore, political support was very important in order to show that Poland is ready to adapt its law to these requirements.’
The Euro 2102 bid documentation included nine chapters, starting with an introduction summarising the whole document (the so-called ‘selling story’) and followed by: political support and legal environment; stadiums and accommodation; infrastructure; transport; media rights; safety and security; and finance. These areas were covered in relation to Poland and Ukraine, he explained, presenting the current status and what would be changed.
The weakest part of their offer was sport and accommodation infrastructure, said Kurzyński: ‘the need to build new hotels to accommodate half a million football guests, and training centres which do not exist yet.’ These training centres have to be close to the airport and the hotels (no longer then one hour’s drive away).
What needs to be done?
1. Three new stadia will be built – in Gdańsk, Wrocław and Warsaw. Gdańsk is organising a tender to select advisers to the city on PPP. ‘In Poland’s public sector it will be difficult to find managers able to effectively manage the stadiums,’ said Kurzyński. ‘The managing director of Wembley once said that income from tickets covers only the cleaning of the stadium. Crucial in achieving business success is the ability to attract certain events beside sport to the venues, such as concerts, conferences, so that the building “works”.’
2. Cities need to develop local public infrastructure; and they are keen to do that. Warsaw plans to construct a new metro line to the stadium.
3. Training centres to be built will also serve the local community; hence they would be in the hands of the local authorities.
4. Development of accommodation base: in Warsaw five hotels are in place and the city is better prepared to organise the final match then Kiev. ‘Still, only a few hotels in Warsaw had by the end of May signed the agreements with UEFA guaranteeing bookings for Euro2012.
5. ‘This is a fantastic opportunity to develop a PPP project, which I believe will be successful. The cities have already started working on it and are motivated and keen to compete with each other.’
Kurzyński then listed some further challenges:
• Coordination of investments on a local and central level.
• Need to adapt PPP law – change or simplify certain procedures to meet UEFA requirements and deadlines.
• Local roads – a complex investment which needs time from the planning stage to construction stage.
• Workforce – who and how?
• Time – the key factor.
The presentation was followed by a panel discussion.
Martin Oxley asked: ‘How can we bring the public sector and the private sector in the same room and get them to talk with each other?’ One of the key issues of developing successful infrastructure and stadiums for 2012 is optimising the financing of the infrastructure development. ‘Get public experts and project and get it financed by the private sector – that’s how to build more quickly.’
Adriana Bronikowska of Wierzbowski Eversheds said, ‘If we are to introduce private partners to the project we have to do this as ASAP, because the tender process takes time. We can take money from public sources from local and central budget. However, this is not a solution. The solution is PPP and this is what we recommend. If we don’t start the procedure now, the stadia will be financed and managed by public sources.’
Asked why she thought the private sector should put money into this she replied that it wasn’t just a question of money. ‘This is a question of management of the infrastructure after 2012. The problem is to make them profitable in future.’
Sebastian Gościniarek of PricewaterhouseCoopers agreed, and added: ‘The scale of the investment is huge and, let’s face it, there is no such money in the public cash-box. The government needs to face the fact and try to involve the private sector somehow. The value of investment is estimated as €67 billion in the next few years.’
Oxley stressed that PPP was not just about financing; it was about managing the whole thing.
Neil Logan Green of Eversheds, referring to the Olympic bid, said: ‘Eversheds London has great experience of how to co-ordinate the public authorities in such projects. How can we get the two groups together, so we can create a sense of trust, a sense of working together and develop publicly and privately financed projects?’ He explained that a major impediment to development is the fact that the project crosses with private interest. ‘In London we formed a joint planning action committee made up of London areas. This would be a useful idea – to form a committee of all the leading cities in the project. With the London case the committee dealt with all the planning and legal requirements in just nine months. This has never been done before; everyone said this particular stage would take two years.’
Jonathan Cripps, also of Eversheds said it was all about building trust. ‘Just look what PPP has done in the UK. There are over 800 closed PPP projects. 80 per cent of those have been delivered on time and on budget.’ He believed that with the notorious Wembley stadium project, had the stadium been procured under PPP it would have been delivered on time and within budget.
Paweł Wojciechowski, the PAIiIZ President, reminded that only last year the inflow of FDI into Poland was 14 billion EUR.
“In the context of attracting foreign investment, either for the football tournament or around it, I would like to draw attention to a few matters. It’s important how you structure them. Let’s start with the issue of time. Considering how many days, minutes and seconds are now left to the kick off date, I have tried to calculate the value of time, and as we sit here in this room some 3 million EUR worth of FDI is flowing into Poland. So “time is money” and the attention from foreign investors to the Polish economy is impressive.
Referring to PPP, suggested the concept should be called PPT. ‘PPP sounds outdated; somehow it resembles Program Powszechnej Prywatyzacji (PPP), the Polish Mass Privatisation Programme! So perhaps some people do not pay enough attention to the concept thinking that’s the same old thing. PPT sounds better – Public-Private Trust, which in fact is the core of the concept,’ he said. “Time is also important from the perspective of the process and for project management. To achieve a win-win situation in PPT or PPP, it is important to understand that the process and structure of management is crucial and needs to be established now – that’s my understanding of the time issue.
Wojciechowski then introduced the HR issue with the simple question of how many people are needed to work on such developments i.e. infrastructure, stadiums and hotels. ‘Poles are going to the UK maybe to build stadiums for the 2012 Olympics. There are suggestions of bringing the Chinese here to help. Perhaps the Chinese should go to the UK and Poles should stay in Poland?’
In the next couple of years PAIiIZ will have greater responsibilities for the promotional activities of Poland. We will take part in the process of FDI inflow and promotion. The promotion part in ref. to Euro 2012 is naturally in UEFA’s domain, but to some extent we will use the event to attract more FDI to Poland. You need to be aware however that PAIiIZ, unlike the Polish Tourism Organisation is not taking part in the works of the inter-ministerial committee to organize EURO 2012.
Relating to the question about the over-inflated construction industry in Poland and the distinctive danger of foreign investment moving further East, Wojciechowski said: “Some of the investments are in fact re-investments of those who have already been here for a while. Recently the biggest investment projects however, came not from the EU, but from Asia and the US. In fact the smaller investors come from the EU, and the larger investors are coming from the US and Far East Asia. Some of them are very large - their size being between 1 and 5 billion EUR each, much larger than the average size of European investment projects.
The construction sector is not the main priority from the point of view of attracting FDI. The government today aims at providing incentives to investments that support a knowledge-based economy. We are looking for investors who might create large numbers of job-places and also be innovative, i.e. contribute to developments based on high technology projects.
PAIiIZ will also be involved in distributing EU funds in the Operational Project for Innovative Economy Project, in which PAIiIZ will be directly responsible for bringing over 1 billion EUR for the next five years.
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Of course the construction sector will grow rapidly because of EURO 2012 and there is the danger of a shortage of people who can work in this sector. This is an issue we need to deal with now.
The EURO 2012 project will attract higher wages to the sector, as it will suffer from a lack of qualified workers. There is also a lack of materials, the price for some construction materials have risen 100% over the last year. The supply of land will become greater due to the implementation of new laws.
At the moment the most important issue is pointing the Polish economy in the right direction: we need to develop three times as fast,” concluded Wojciechowski.
Oxley said, ‘The 2012 Olympics project will for sure compete with Euro2012 for builders to achieve success. Wembley had 830 workers from Poland – either we are going to get them back or we will need to get workers from elsewhere.’ It was emphasised that 35 per cent of Poles are overqualified for the jobs they do in the UK and other EU countries.
Everyone agreed that the problem of qualified Polish workers for the construction industry emigrating is purely for economic reasons.
‘It’s really all about money,’ said Alex Kloszewski, Chairman of the Warsaw Destination Alliance Foundation (WDA). ‘In Poland they get some €5 per hour, in the UK €20. Pay them €25 and all the qualified engineers will be back here in no time.’
There are other key areas which can help the HR position.
‘We have a construction law which gives five years for people to become licensed engineers, so that they can work on site in particular positions. That’s the five years we need now,’ said Jakub Łoch of Jacobs, the engineering company. ‘Can we change the construction law so that licensing of engineers gets shorter? We can bring Chinese – yes, but again they will not have a license. They will be just simple staff. What’s more, the Chinese contractors – the good ones – have enough work in China, so they are not looking for other markets, so we have to remember what quality will come to Poland.’
Wiesław Wilczyński, Director of the Sport and Tourism Department of the City of Warsaw, presented the work ahead for the capital’s authorities.
‘Warsaw has a lot of tasks to fulfil in terms of investment, especially in the area of municipal infrastructure and public transport,’ he said.’ Together with central government the capital needs to build a second airport and develop a commuter system from the airports to the city centre, to hotels and sports facilities.
‘In practice all the investments planned to be concluded in the next 15 years now must be executed in five,’ he said. ‘The money we currently have in our budget is insufficient, mostly due to the increase of investment costs, therefore our interest lies in the development of relations based on the PPP model. We shall also apply for EU funds.’
In this year’s budget Warsaw has PLN 2 billion for investment – a sum which represents a 300 per cent increase in comparison with budgets of previous years. Still, when you look at a 100-200 per cent increase in investment costs the sum is insufficient.
‘Our tasks are mostly related to building municipal infrastructure and numerous sport facilities. While it’s in the central government’s hands to construct the National Sport Centre, all the other sport facilities, training centres for the teams which will be playing in Warsaw, remain Warsaw’s responsibility. We would like to be well prepared for this.’
Among the big investments Warsaw plans to start this year is the Municipal Stadium on ul. Łazienkowska.’ We want it to meet UEFA’s requirements,’ said Wilczyński, ‘although it has not been included in the bid documentation.’ This investment is valued at around $120 million.
Responding to a suggestion that the stadium could serve as a training centre for Euro 2012 he said: ‘For training centres we anticipate more attractive locations, close to forests and parks, which will ensure the best training conditions.’
‘As the capital of Poland we want to be excellently prepared for the event in terms of security issues. Ensuring security requires substantial spending on electronic systems and safety infrastructure. We are aware this is a problem which also heavily affects the total costs of the event.’
‘The currently inadequate hotel base is also a problem that needs to be dealt with fast. In Warsaw and surrounding areas (up to 75 km - the distance allowed by UEFA) us level from youths hotels through one- and two-star hotels to world-class luxury ones. However, the latter can accommodate only 4-5,000 guests, which is not enough. Here we will be realising some investments as well, to grow the accommodation base.’
Again came a further call for amendments in laws currently in force in Poland to facilitate investment processes.. Apparently the government is already moving in that direction.
‘In Warsaw we have already introduced a number of simplified procedures, so that the time required for preparation of an investment is shorter.’ Warsaw hopes that sport in general, and Euro 2012 in particular, will attract not just football fans but also tourists to the city, the rest of Poland and Ukraine. ‘We want the fans not just to watch the matches. That’s why the project is so important. We want sports fans to return to get acquainted with our history, music and traditions, so the tourist industry develops dynamically,’ said Wilczyński.
Most important at this stage is close co-operation between central government, local self-governments and the private sector, he concluded.
Commenting from the floor WDA’s Alex Kloszewski said the challenge was partnership and what needs to be done by the private sector. ‘We need to have more conversations and meetings. Let’s face it: we will need to spend €40 million a day to get €67 billion. If we went on the top floor of an office building and tried to throw this money away in 24 hours we couldn’t succeed. How do we get a committee of experts that works together with government to get it done?’
PwC’s Gościniarek commented that they were discussing the role of the government in the whole process. ‘But we need to remember that probably even more important are the cities and municipal authorities which are responsible for the development of investments and scale of investments. The financial effort which they need to deal with is comparable to what central government has to do.’
Bronikowska added that the bid process showed the government is open to cooperate with international experts and international advisers. ‘Although it’s usually expensive it’s also a guarantee of success. We won the bid because of the involvement of our Partners from the UK,’ she said.
Kloszewski stated: ‘It just needs to be formalised. We need a real expert committee working on the project and organising the event, to make sure we don’t lose at the end of the day. We all want to get this done and we want to do this right. This is how the country can benefit. All should be involved, every one of us.’
Wojciechowiecz commented: ‘From words to action there is a long way to go, but it seems all the political parties in Poland have reached the consensus that they’ll be working together towards the success of Euro 2012.’ At the moment, he believed, the key issue was to focus on project management and infrastructure to support, and formalised structures to produce a result. ‘That’s important not just in terms of PPP or PPT, but also in terms of the political framework as well. To reach consensus on some issues there has to be an engine, co-ordination by the government.’
Representatives of the engineering industry drew attention to a blockage in the system. ‘PPP might help on the project management site but one of the biggest problems is in the area of getting permissions, procedures and consultations – this takes time, and cannot be rushed or bypassed,’ said Simon Hindshaw of Scott Wilson. ‘The procurement system can take months for the simplest of tenders and PPP will not bypass this. With five years to go, from my experience I must be sceptical,’ said Hindshaw. ‘This cannot be done with without the active elimination of the blockages.’
Then he added: ‘We do work around the world and it is a total mystery for us why engineers fit enough to design at Heathrow are not fit to design in Poznań. The EU is working on the services directive. Do you think the Sejm can change the law and at the same time move towards adopting the service directive earlier? That way we can move the most experienced staff to Poland and that way everyone will be winners.’
Concluding the event, BPCC Chairman David Thomas said: ‘I would see two key issues for us all: to get this done the centre for cooperation lies between the Chamber, companies and the local authorities.’ He suggested they should establish a committee to see how the process can be supported. ‘The second is to assist in the changes in the law or implementation of the amended law. I am an optimist – I hink it will get done. Part of the beauty of the Polish character, he said, was that if there was no other alternative than to jump through fire, Poles would travel through and the end goal would be achieved. ‘I am convinced that’s what’s going to happen here. What we’ve got to do is to get it done with the least amount of fire being held. We are here to help, not just to say “great, fantastic!” but also to roll our sleeves up and get it ready.’
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