The Malaysian Insider :: Features
The Malaysian Insider :: Features |
| Poland stumbles on journey from low-cost to hi-tech Posted: 28 Oct 2012 07:43 AM PDT  A view of the bedroom in one of the world's narrowest buildings in Warsaw October 22, 2012. — Reuters pic His firm, which made sensors on the US space agency's Mars rover Curiosity, sought financing from banks for a new production facility. Because the loan was to be partly paid back from European Union funds, the government had to sign off on it. In the end, Grudzien got his money, but it took a year, forcing his company, VIGO System, to delay the launch of a new range of high-technology sensors. "Civil servants do not care if I get the credit today, in a year or in three years. They do not have a clue that in modern technologies one year of delay in financing can mean defeat," Grudzien, the firm's chief executive, said. Such stories are common in Poland. The biggest economy in eastern Europe, it has seen two decades of vigorous economic growth and yet — based on several different measurements — is one of Europe's least innovative economies. Up to now, that has not been a problem. It has thrived on attracting low-value-added businesses such as television assembly plants and offshore accounting- and call-centres. However, that type of economy depends on low costs. This advantage is being eroded by rising living standards which last year reached 65 per cent of the EU average. Long-term, underlying growth, meanwhile, has already slowed to 3 per cent from 6-7 per cent four years ago, the central bank estimates. To compete in the future, Poland will need to replace its low costs with innovation. The government says it is working on that. "The time has come to invest more heavily in policies that support development ... the state will stimulate these policies very heavily," said Science and Higher Education Minister Barbara Kudrycka. But Poland has a long way to travel if it is to catch up on its more innovative competitors. It filed 8 patents per million citizens to the European Patent Office in 2010, Eurostat data show, one more than Greece's 7 and compared with an average of 108 in the whole European Union and 266 in Germany. Unless Poland turns itself into an innovative, knowledge economy, it risks heading down the same path as Spain, Greece, or Portugal, said Maciej Bukowski, head of the Warsaw-based Institute for Structural Research (IBS). Those countries experienced rapid growth but failed to shift in time the structure of their economies away from low-cost industries. Now they are wealthier and their costs have gone up, they struggle to find a niche in the world economy. "These counties share a few characteristics. One is a very low level of research and development spending and innovation in general. Another is a bad regulatory environment and the third one is a rigid labour market," Bukowski said. "Poland has all those three characteristics... This is something that the politicians do not take account of." Priorities The statistics show just how poor Poland - in common with many of its neighbours in eastern Europe - is at innovation. Poland ranked as the EU's third least innovative economy in 2012, with a worse result recorded only by Greece and Romania, a report by World Intellectual Property Organisation's showed. The country spent 0.74 per cent of gross domestic product (GDP) on research and development (R&D) in 2010, much less than the 2 per cent on average in the EU. People involved in Polish science say when Communist rule collapsed two decades ago and was replaced by a market economy, few people wanted to invest in research projects that might never make money when they could just import foreign technology. The result now is a system that fails to support innovation: Universities do not cooperate well with business, the state does not encourage companies to take risks by developing their own technology, and thickets of red tape stifle activity. Zbigniew Luczynski, the head of the Institute of Electronic Materials Technology (ITME), a state-owned research centre, has spent years wrestling with these problems. His institute discovered a new method to produce the one-atom thick film of carbon known as graphene, which was classified as one of the nine most interesting findings in the field in 2010-2011 by technology consultancy Future Markets. The material is stronger than diamond, transparent and conducts electricity, which could make it a perfect material for touch screens for smartphones. Luczynski described how his institute has been seeking for nearly two years to get state funding for equipment to help with research on graphene. And he said his institute was barred by the Economy Ministry, which oversees it, from entering a joint-venture with a foreign investor to commercialise graphene. "It is a choice of the state, whether the things we do have an impact on the economy. For now it seems the state does not really care," Luczynski said in his office in the institute. Asked by Reuters about the delay in funding, the Science Ministry said it had given ITME around 60 million zlotys (RM57.94 million) for research programmes and equipment. The Economy Ministry said it blocked the venture because the agreement to set it up contained legal irregularities. Kudrycka, the science and higher education minister, told Reuters the government was doing something about the problem. Warsaw plans to increase research and development spending to 1.7 per cent of GDP by 2020, a more than twofold rise though still below the EU's three per cent target. The state has promised to spend 10 billion zlotys between now and 2015 on scientific infra-structure. The government has also announced a 1 billion zlotys research programme into shale gas extraction, and Kudrycka said firms should be able to write-off 1 per cent of their tax bill from 2014 if they direct the money to research. "I cannot say that this is a civilisational leap, but regulatory and systemic changes will allow Poland to surprise many countries. This requires five, maybe 10 years," Kudrycka said. Brain drain Shortcomings in the education system are a big part of Poland's lack of innovation. Poland's best universities rank outside the top three hundred academic institutions globally, the Academic Ranking of World Universities shows. Many of the most promising researchers take posts at universities abroad. "I'm afraid that if I returned here it would mean an end of my academic career," said Karolina Safarzynska, a Polish economist working at the Vienna University of Economics. "Publishing articles in local science journals is not enough" she said. "The Polish educational system promotes mediocrity and conformism." Salaries also offer little incentive to pursue a scientific career in Poland. "I did not consider staying in Poland for my PhD studies because of financial grounds," said Marta Luksza, a computational biologist who graduated from Warsaw University, earned a PhD in Berlin and now works at Columbia University in the United States. "Back then you received 1,000 zlotys per month and you also had to teach students. In Germany you received 1,300 euros, but you were not required to teach and could cover your expenses with this money." One of the most vocal supporters in Poland of a more innovation-centred economy in Michal Boni, minister for administration and digitalisation. His job includes trying to get Internet technology into schools and offices and encouraging firms to embrace the knowledge economy. Yet even he expresses frustration at the slow pace of change. "I think that Polish political elites have not grown up enough to place innovation at the centre stage. Our political debates resemble those from the 1960s. Nobody debates such issues here," he said in an interview. — Reuters |
| Swiss offer military bunkers as art storage answer Posted: 28 Oct 2012 07:30 AM PDT  Employees of the Swiss defence ministry's real estate management office walk inside a 57-year old disused military bunker near the central Swiss town of Alpnach, near Lake Lucerne, August 27, 2012. — Reuters pic The doorway leads into a disused military bunker, one of several being sold off by the Swiss government and whose echoing, climate-controlled chambers, once used to stockpile munitions, are being put forward as ideal storage space for works of art. The 57-year-old bunker near Lake Lucerne, marketed as a site to store valuables and on offer at 386,000 Swiss francs (RM1.3 million), could relieve a huge concentration of costly paintings at the world's biggest fine art vault in Geneva, the storage option of choice for wealthy buyers worldwide. That warehouse, prized for its high security and its location in Geneva's tax-exempt freeport zone, holds art worth about US100 billion and has space to accommodate more. But insurance underwriters, fearing ruinous losses if the facility were hit by a fire or an art heist of the kind that struck Rotterdam's Kunsthal museum earlier this month, are raising the cost of insuring any more paintings under its roof, or even refusing cover altogether. "If you are a prudent insurer you want to make certain that you know how much risk you are exposed to at a certain location," said Nick Brett, underwriting director at AXA Art Insurance, the world's biggest specialist art insurer. "There's an awful lot of art in Geneva freeport, and as insurers we have to make sure we don't expose ourselves to just one place." The cost of insuring paintings stored at the Geneva facility has doubled over the last three years, Brett estimates. Investors who stockpile art in an equally secure location without the same concentration of risk can expect to pay up to 50 percent less to insure it, according to Richard Nicholson, fine art specialist at insurance broker Willis. The insurance impasse at Geneva, replicated at other specialist art vaults worldwide, comes as wealthy investors fleeing volatile stock and bond markets are putting money into paintings instead and need places to store them. Soaring art sales have increased the volume of work in storage while also boosting its price, causing a build-up of value at the world's art vaults, and creating an unforeseen new risk factor for the insurance industry. Art investors want new storage space to cut their insurance costs, and would use converted military bunkers provided they met the necessary security and climate control requirements, said Enrique Liberman, president of the New York-based Art Fund Association. "It really depends what they do with the space rather than the space itself," he said. "If you expand the number of warehouses a lot of the risks inherent to storing art might be mitigated, because they won't be so overcrowded." Burning question The danger of allowing a big accumulation of costly art in one place was underscored in 2004 by a London warehouse fire which destroyed work by Damien Hirst and Tracey Emin among others, costing insurers 20 million pounds (US30 million). With turmoil in financial markets prolonging the art investment boom, art storage looks set to remain at a premium. Art's growing appeal as an investment asset is illustrated by the emergence since the mid-2000s of professional fine art investment funds. There are about 45 such funds with combined assets of about US1 billion, and more are preparing to launch, according to the Art Fund Association's Liberman. They have contributed to the global art market's recovery from a brief downturn after the 2008 banking crash, evidenced by the sale in May of a version of Munch's "The Scream" for a record US120 million. Total sales through auction houses and dealers grew to an estimated US55 billion last year, not far off their pre-crisis peak of about US60 billion, Willis' Nicholson said. Art storage firms have responded by building new facilities. The Geneva freeport unit is being extended, and a new freeport vault is due to open its doors in Luxembourg in 2014. But disused bunkers in Switzerland, the epicentre of the art storage world thanks to the country's expertise in discreetly looking after the assets of the rich, offer a ready-made alternative that is already being exploited. "People have been talking about this for some time," said Robert Read, fine art underwriter at Bermuda-based Hiscox , the world's second-biggest art insurer. "It would make very suitable storage." One firm that has successfully converted a military facility into storage space for art is Swiss Data Safe, based in the central Swiss town of Amsteg. Swiss Data Safe stockpiles paintings, bullion and computer data in an Alpine bunker originally intended as a refuge for the Swiss government in case of invasion or nuclear war. The company declined to be interviewed. The Tate, home to Britain's national art collection, keeps some of its paintings in a decommissioned missile storage unit in Hampshire, south-west of London, an art industry source said. The Tate declined to comment. Missile bunkers can be adapted to hold paintings as they are climate-controlled and highly secure, the main requirements for art storage, according Paul Williamson, commercial director at London-based art logistics firm Constantine. Buying and converting a bunker could also be cheaper than building a vault from scratch, which can cost between 15 million and 20 million pounds (US24-US32 million), Williamson said. Bunkers for sale There are many disused military facilities in Switzerland, heavily fortified during World War II against Nazi invasion. More were built at the height of the cold war in the 1960s, when the country was committed to providing space in a nuclear fallout shelter for each resident. But the collapse of the Soviet Union has led to a reassessment of defence priorities. To save money, many such sites were closed, and some are now up for sale. Armasuisse, the government agency selling the bunker near lake Lucerne, declined to say how much interest it has received. The agency will review offers for the site after October 31. Art insurance premiums amount to about US600 million annually. Big art claims have been rare, caused mainly by accidental damage to paintings during transport, or mishaps such as a 2006 incident in which casino owner Steve Wynn put his elbow through a Picasso he owned. But the build-up of billions of dollars' worth of art in a handful of locations has brought a realisation that a single event could now easily wipe out a whole year's premiums. "A plane crashing into one of the freeports - that would be where our catastrophes are," said Hiscox's Robert Read. — Reuters |
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