City Hall

In the World Bank’s ranking of countries for ease of doing business for 2013 Poland is the best improver leaping 19 places to 54th position (although it is still behind Hungary, Slovakia, Kazakhstan and Georgia, for example). What does this mean in practice? Well, on the basis that there are lies, damned lies, and statistics, and given the apparent recent bad experience of one large investor, perhaps not much at all.

The story is available, amongst other places, on the online version of the Wall Street Journal (http://on.wsj.com/Szvkjg) and is worth reading. In summary, a property developer bought a dilapidated building in the centre of Warsaw which it intended to demolish and replace with a modern tower block. The property was bought from the Polish treasury ministry and barely was the ink dry on the contract when Warsaw city had the building declared a historical monument which now prevents its being demolished. In an added twist, the developer had leased the property to the museum of contemporary art for four years pending the city building a new museum and it appears that this declaration of historical status may be a ruse by the city to force the developer to extend the lease to seven years while the new museum is being built. The developer has cancelled the lease but the museum refuses to leave. As quoted in the WSJ, the President of Warsaw and the museum director intend to stand their ground: “I think that two strong women will be able to tackle this,” Mrs. Gronkiewicz-Waltz said.

I am not personally involved in this case but the developer concerned is experienced in this market and will, no doubt, have performed appropriate due diligence before committing itself. Furthermore, even if 1960s communist architecture is your thing, this particular building can a hardly be described as exceptional and the city has allowed other more interesting buildings from the period to be demolished. No, it appears simply to be yet another example of breach of trust. Those involved may well be congratulating themselves on pulling a fast one over a foreign investor but they have not thought of the damage they do to the city’s reputation. As I wrote here recently (please see Trust) trust is a vital part of business life and the actions of the city in this case will do much to destroy confidence in Warsaw – or even Poland – as a safe country in which to invest. The president of Warsaw is a regular visitor to the annual MIPIM real estate fair in Cannes, trying to encourage investment in Warsaw, but I suspect that she may well have her work cut out next time. After all, actions speak louder than words and, as a former president of the national bank of Poland, you might have expected her to be more attuned to importance of investor confidence than this case – if the remarks attributed to her are as reported – would suggest. Ironically, property development and construction has in recent years been one of the more successful areas of the Polish economy and has attracted many foreign investors. There may be fewer in the future.

This comes against a background of a Polish government which is keen to realise state assets as the crisis in the Euro zone begins to have an effect in Poland – a crisis in respect of which the government was congratulating itself for having “sat this one out” (please see The Banker). Perhaps this case will finally be resolved in a way which re-establishes trust but, in the meantime, one is reminded of that moment in the film version of A Man For All Seasons in which Thomas More, on learning that Richard Rich, whose perjury lead to More’s downfall, has been made attorney general for Wales, says simply: “It profits a man nothing if he gives up his soul for the world – but for Wales!” And thus, it appears, it may profit a city nothing if it gives up its integrity for a great public gain – but for a three year lease of a decrepit building on Emilii Plater!

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