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WHY POLAND?

Market Overview and Economic Situation

Michael Clay – UK Chairman

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• 2009 GDP rises by 1.8%. Poland escapes recession – luck or judgment?

• EU structural and cohesion funds shoring up Polish economy; British taxpayer paying to build Poland’s infrastructure – but missing out on chance of benefiting from the rewards

• Consumer spending growing, unemployment falling, opportunities not only to cut costs but to find new markets

• British business largely missing out on Polish opportunities, despite the country offering high potential and low risk

• Sterling-denominated goods and services 20% more competitive compared to those from the eurozone

Main themes

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Poland $534 bn (+1.8%) 18th 38.1m

Czech Rep. $207 bn (-4.3%) 40th 10.5m

Hungary $146 bn (-6.7%) 52nd 10.0m

Slovakia $90 bn (-5.0%) 57th 5.4m

Slovenia $51 bn (-7.5%) 69th 2.0m

Lithuania $40 bn (-14.4%) 75th 3.3m

Latvia $28 bn (-17.5%) 80th 2.2m

Estonia $20 bn (-14.5%) 93rd 1.3m

GDP (nominal) Source World Bank/EIU, 2009

growthGDP rank pop.

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Poland – High Skills, Low Cost

• Manufacturing – pluses and minuses of China

• Business Process Outsourcing

• Infrastructure, public projects

• Supply chain (automotive, aviation)

• Chemicals and pharmaceuticals

• Food, agricultural products and processing

Foreign direct investment

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Structural & Cohesion Funds• 2004-2006: €12.8 billion

• 2007-2013: €67 billion(plus matchfunding – another €23 billion)

Money earmarked for infrastructure (€28 billion), regional development, enterprise development, skills training, business competitiveness, is being spent between now and 2015/6 (‘n+2’/‘n+3’)

Is changing the face of Poland!

EU structural and cohesion funds

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Structural & Cohesion Funds

• 2014-2021: €?? billion

Most unlikely that Poland will see the money earmarked for it in the current EU Financial Perspective. Main net donors to EU budget have their own profound financial problems to deal with (plus Greece).

The current round of EU funding will not be repeated – make the most of it while you still can!

EU structural and cohesion funds

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Structural & Cohesion FundsHow much do the net contributors to Poland’s EU structural and

cohesion funds see of the money?

For every €1 that Austria contributes to Poland via Brussels, it sees €0.93 back in terms of contracts won by Austrian companies competing for EU-funded tenders.

Germany sees back €0.64. Denmark €0.43, Sweden €0.41.

The UK? A mere €0.13!

The UK taxpayer is paying to build Poland’s new infrastructure, but UK businesses are not benefiting from the opportunities!

EU structural and cohesion funds

Source: Ministry of Regional Development

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Structural & Cohesion FundsNew law came into force on 27 February, less proscriptive than

old law from 2005 (under which no project was initiated)

Will PPP finally get moving?

• EU funds – projects need local matchfunding

• Municipal bonds and loans – 60% debt/budget limit

• Banks showing far less appetite to lend

• Yet projects have to be delivered.

Is PPP the answer?

Public Private Partnerships

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Structural & Cohesion FundsThe UK is the world’s greatest storehouse of PPP experience

and expertise. Once PPP gets moving in Poland, there will be plenty of opportunities for UK know-how in this sector:

• Road, rail and telecoms infrastructure

• Public buildings

• Healthcare

• Environmental protection

• Renewable energy

Public Private Partnerships

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Poland – High Skills, Low Cost

Source: OECD, GUS, Eurostat

• Young, skilled, motivated and flexible working population

• Multilingual – 71% of students have passed English at

‘A’ Level equiv.

• Record numbers of graduates and school-leavers have

been entering the labour market

• Poland’s student population quadrupled during ‘90s –

today, 1.9m in tertiary education – more than entire

population of Estonia

Poland’s skilled workforce

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FDI destinations and unemployment

6.7%

1.9%

3.5%

7.4%

1.6%3.3%

8.5%

1.8%

4.0%

8.7%

2.6%

4.6%

12.2%

2.1%

5.8%

13.2%

3.4%

5.6%

14.1%

6.8%

9.5%

19.5%

6.4%

9.9%

14.5%

7.1%

12.0%

0%2%

4%

6%8%

10%

12%14%

16%

18%20%

Warsaw Poznan Katowice Krakow Tri-City Wroclaw Lublin Lodz Bialystok

Feb '04 Oct '08 J ul' 10Source: GUS

1Source: GUS, 2009 data

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

0 10 20 30 40 50 60 70 +Age

Year of birth 2010 2004

19831967 1957 1946

Falling demographics for next 20 years

1939

2034 20272007

1991 1981 1970 1963starting work

340 000

2017

1993

1

0

1

2

3

4

5

6

7

824

18

21

15

12

9

6

3

Growth and unemployment

2000 2001 2002 2003 2004 2005 2006 20082007

Un

emp

loym

ent

%

2009

Source: GUS (Polish stats office)

0

GD

P g

row

th,

year

-on-

year

%

2010

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• UK 7th largest investor in Poland – dominated by corporates

• With only a very few examples, all these investments have been highly profitable

• UK: Poland’s 3rd largest export market (after Germany and France)

• Poland: UK’s 20th largest export market (up from 26th in 2005)

• UK: Poland’s 8th largest import source

• Poland: UK’s 15th largest import source (up from 25th in 2005)

• Very low presence of British mid-caps and SMEs on Polish market (different legal system)

• Unrecognised export opportunity for British exporters!

The British-Polish experience

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Arcelor Mittal

Tesco BP

Shell

GlaxoSmithKline

Unilever

Aviva

Largest British investors in PolandPilkington (now NSG)

Cadbury’s (now Kraft)

Provident

Associated British Foods

HSBC

RSA (Royal Sun Alliance)

First Property Group

London & Cambridge Property

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Fill

fill

1.35

1.21

1.17 1.30 1.

65

2.31 2.37

3.01

2.79

1.63

1.17

1.83

2.32

3.70

4.31 4.

67

2.84

1.46

1.36 1.30

1.32

1.421.

54

3.62

0.600.57

0.67 0.68 0.

91 1.26

0.00.51.01.52.02.53.03.54.04.55.0

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

I-V

I '1

0

UK exports to Poland Polish exports to UK

GB

P b

illi

on

s

Source: Office of National Statistics, UKTI

Trade between UK and Poland

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Fill

fill

rank country £ bn rank country £ bn rank country £ bn rank country £ bn1 USA 28.8 1 USA 30.9 1 Germany 39.7 1 Germany 39.22 Germany 24.4 2 Germany 23.0 2 China 24.3 2 France 22.23 France 18.6 3 France 19.9 3 USA 22.5 3 USA 22.24 Netherlands 18.2 4 Ireland 16.3 4 Netherlands 21.8 4 Netherlands 20.45 Ireland 14.1 5 Netherlands 12.7 5 France 20.1 5 Bel. & Lux. 15.26 Bel+Lux 11.1 6 Bel. & Lux. 11.4 6 Norway 15.9 6 China 13.07 Spain 9.1 7 Spain 10.7 7 Bel+Lux 15.8 7 Italy 12.78 Italy 8.4 8 Italy 8.8 8 Italy 12.1 8 Norway 12.19 China 5.4 9 Switzerland 5.0 9 Ireland 10.0 9 Spain 11.510 Sweden 4.3 10 Dubai 4.7 10 Spain 9.1 10 Ireland 10.411 Switzerland 3.9 11 Sweden 4.6 11 Japan 8.1 11 Japan 8.712 Hong Kong 3.7 12 Japan 3.9 12 Hong Kong 7.6 12 Hong Kong 6.613 Dubai 3.6 13 Canada 3.3 13 Sweden 5.5 13 Sweden 5.514 Japan 3.6 14 Hong Kong 3.1 14 Switzerland 5.2 14 Russia 5.015 Canada 3.3 15 China 2.8 15 Poland 4.6 15 Denmark 4.416 Singapore 3.0 16 India 2.8 16 Russia 4.6 16 Canada 4.217 India 2.9 17 Australia 2.6 17 Turkey 4.6 17 South Africa 3.918 Australia 2.9 18 Denmark 2.3 18 India 4.6 18 Switzerland 3.919 Norway 2.8 19 Norway 2.2 19 Canada 4.5 19 Singapore 3.820 Poland 2.8 20 Turkey 2.2 20 South Africa 3.8 20 Turkey 3.521 Denmark 2.5 21 Singapore 2.1 21 Denmark 3.8 21 S. Korea 3.122 Russia 2.4 22 South Africa 2.1 22 Singapore 3.5 22 India 2.823 Turkey 2.3 23 Russia 1.9 23 South Korea 2.9 23 Austria 2.524 South Africa 2.2 24 Portugalia 1.7 24 Brazil 2.5 24 Finland 2.425 South Korea 2.2 25 S. Korea 1.7 25 Thailand 2.3 25 Poland 2.326 Brazil 1.8 26 Poland 1.7 26 Taiwan 2.2 26 Taiwan 2.3

Export markets Import sources2009 2005 2009 2005

Poland: an increasingly important partner

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Trade direct for higher margins

PolandUK

750 PLN

€200€160

30%

50%

30%

£100

£1001,000 PLN

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• Re-orientation of investment sourcing – new global economies; Middle and Far East seeking EU platform; private equity funds looking for opportunities, public sector investment

• Cutting costs in western Europe – upping investment in Poland (this affects only investors already present here!)

• EU funds and grants, infrastructure requirements, PPP

• On target for eurozone entry in 2015(?) [budget deficit is the issue]

• Climate change, environment and renewable energy

• UEFA Euro 2012

• EU deadlines for environmental protection, renewable energy targets

• Convergence with Western Europe – a nation in a hurry!

Catalysts for future growth

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• Poland the only EU member to escape recession

• Strategic location, several large, high-growth cities

• Infrastructure projects and EU funds offer promise

• Greenfield FDI once again becoming attractive

• Skilled, well-educated and motivated workforce

• Poland offers the right balance between low risk and higher growth opportunities

Summary

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e-mail: info@bpcc.org.pl

michael.clay@bpcc.org.pl

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