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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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