THE ECONOMIC SITUATION OF POLAND APRIL 2016 Poland

THE ECONOMIC SITUATION OF POLAND APRIL 2016

Poland - your business partner Quality of goods and services Well-educated and high skilled workforce Large internal market Why Poland? Special Economic Zones Improvement of infrastructure Stable economy Area: 312, 679 km 2 Population: 38. 5 mn GDP total: EUR 413. 1 bn* GDP per capita PPP: EUR 18. 6 thous. * GDP per capita: EUR 10. 7 thous. * Membership: OECD, W TO, NATO, EU Interesting opportunities in capital market Diversified economy EU membership Data: Poland’s CSO and Eurostat data; *2014.

Solid fundaments of economic growth Industrial production (% yoy) 70, 0 68, 0 66, 0 64, 0 62, 0 60, 0 58, 0 56, 0 54, 0 52, 0 50, 0 Employment rate (LFS, %) CPI (% yoy) Unemployment rate (registered, %) 2000 2002 2004 2006 2008 2010 2012 2014 Data: Poland’s CSO data; *2015 - estimates.

GDP and its decomposition GDP growth (% yoy) GDP demand decomposition Value added sector decomposition Data: Poland’s CSO data; 2015 – estimates, 2016 - forecast.

Poland – an attractive place for FDI stock in Poland (EUR bn) Major foreign investors in Poland stock (bn EUR) 2014 Investment opportunites Automotive Aerospace Electronics Business Services Centres R&D IT Domestic appliance market Renewable energy Biotechnology Food sector Yachting sector Data: National Bank of Poland, PAIi. IZ.

Special Economic Zones and Industrial Parks Data: DDS Mo. E.

Poland’s position in international rankings • 25 • 36 • 39 Doing Business 2016 World Competitiveness Yearbook 2015 • 7 Position in CEE region in terms of investment projects Index of Economic Freedom 2016 • 3 Position in CEE region in terms of number of new jobs 98% of investors do not regret investing in Poland 8 th position in Europe 20 th in the world In terms of the total value of FDI World Investment Report 2015

Foreign trade Poland’s foreign trade (EUR bn) Poland’s foreign trade with Croatia (EUR mn) Poland’s main export partners (share in %, 2015*) Poland’s main imports partners (share in %, 2015*) Data: Poland’s CSO data; *2015 - estimates.

Polish trade with Croatia 2014 Exports: EUR 399. 1 mn (+21. 8%) Imports: EUR 103. 1 mn (+5. 9%) Balance: EUR 296. 1 mn 2015* Exports: EUR 544. 1 mn (+36. 3%) Imports: EUR 167. 9 mn (+62. 9%) Balance: EUR 376. 2 mn I-II 2016* Exports: EUR 80. 8 mn (+20. 4%) Imports: EUR 21. 1 mn (+23. 7%) Balance: EUR 59. 7 mn In 2015 Croatia was on the 39 th position on the list of Polish exports partners (0. 3% of share) and on the 64 th position on the list of Polish imports partners (0. 1% of share). Data: Poland’s CSO data; *2015 - estimates.

Changes in the commodity structure of foreign trade with Croatia Exports Imports Data: Poland’ s CSO estimates.

Growth of Polish firms and capital fundamental for strong and prosperous Poland Growth of Polish firms and capital Quality of life Adequate salaries Savings instead of debt Family-friendly environment Comprehensive education Good healthcare Strong Poland

Responsible Development Plan – more Polish economy in the Polish economy Poland must take full advantage of its own potential and include smaller cities and rural areas in pursue of further development, to build strong economy in all regions 1 zł Our strategic goal is to grow Polish capital in financial, social, technological and educational capacity Polish companies must receive a positive stimulus from the state, to spur further growth and foster environment for creating highly paid jobs Team playing is crucial – Poland must transcend institutional barriers, engage in cooperation with social partners, job providers, trade unions. State administration must serve the citizen, not the other way round.

5 pillars of the economic development of Poland Strong Polish economy 1 2 Reindustrialization • Partnership for Development of innovative companies • New „Business the strategic branches of the economy Constitution” • Friendly legal environment • National • Review of Intelligent Specializations • Clusters and 3 research institutes industrial valleys • Start In Poland 4 Capital for development • Growing savings • European funds • Polish Development Fund • Juncker’s plan, EBOR, EBI, AIIB 5 Foreign expansion Social and regional development • Export Support • Comprehensive Division at PDF • Financial offer demographic programme • Strong Polish • Pact for rural • Review of • Effective brand business diplomacy areas regional policy • Education • Foreign investments Efficient state • e-Administration • Intelligent public procurement • End of „departmental Poland” • Energy – security, availability, price

Strong Polish economy 1 2 Reindustrialization • Partnership for the strategic branches of the economy • National Intelligent Specializations • Clusters and industrial valleys • Foreign 3 Development of innovative companies • New „Business Constitution” • Friendly legal environment • Review of research institutes • Start In Poland 4 Capital for development • Growing savings • European funds • Polish Development Fund • Juncker’s plan, EBOR, EBI, AIIB 5 Ekspansja zagraniczna • Export Support Division at PDF • Financial offer Social and regional development • Comprehensive demographic programme • Strong Polish • Pact for rural • Review of • Effective regional brand business diplomacy areas policy • Education investments Efficient state • e-Administration • Intelligent public procurement • End of „departmental Poland” • Energy – security, availability, price

Foreign investors are welcome to join! We search for the best investments… Examples of criteria , …and offer them our support Examples of support Creating R&D centres Employment grants New high-paid jobs Investment grants Staff employed under contract employments Income tax exemptions Local cooperation and supply network Property tax exemptions Know-how transfer EU funds Regional examples R&D centre, Wrocław Polish Special Economic Zones R&D centre Praga Investments in areas threatened with exclusion Grants for training of staff R&D centre, Rzeszów R&D centre Gyor

Strong Polish economy 1 2 Reindustrialization • Partnership for Development of innovative companies • New „Business the strategic branches of the economy Constitution” • Friendly legal environment • National • Review of Intelligent Specializations • Clusters and 3 research institutes industrial valleys • Start In Poland 4 Capital for development • Growing savings • European funds • Polish Development Fund • Juncker’s plan, EBOR, EBI, AIIB 5 Foreign expansion Social and regional development • Export Support • Comprehensive Division at PDF • Financial offer demographic programme • Strong Polish • Pact for rural • Review of • Effective regional brand business diplomacy areas policy • Education • Foreign investments Efficient state • e-Administration • Intelligent public procurement • End of „departmental Poland” • Energy – security, availability, price

Innovative business leads to high-paid jobs and more profits to build Polish capital on • Goal Business-science cooperation Dual use innovations Taking advantage of the existing infrastructure (Technology Transfer centres, business incubators) R&D outcome for civillian use • Review of the existing research institutes to make them useful to the economy • Introducing „fast lane” strategic programmes in PARP and NCBi. R with streamline decision procedures • Bonding innovation support priorities with other policies, eg. the industrial policy Military Use of most advanced technologies in military Start in Poland New Innovation Act Amendment – June 2016 Imminent changes • Favourable taxing of intellectual and industrial property contribution • • Expanded list of tax deductible R+B expenses Cash reimbursement for start-ups New act – I half of 2017 Economy • • New initiative aimed at breaking barriers in commercialisation in Poland for innovative solutions created by start-ups Building a network of innovation liaisons in large companies New rules for EU fund financing – 1 bln zlotys from Innovative Growth OP Letting start-ups finding solutions for public administration and local authorities (eg. Smart City)

Strong Polish economy 1 2 Reindustrialization • Partnership for • New „Business the strategic branches of the economy Constitution” • Friendly legal environment • National • Review of Intelligent Specializations • Clusters and 3 Development of innovative companies research institutes industrial valleys • Start In Poland 4 Capital for development • Growing savings • European funds • Polish Development Fund • Juncker’s plan, EBOR, EBI, AIIB 5 Foreign expansion Social and regional development • Export Support • Comprehensive Division at PDF • Financial offer demographic programme • Strong Polish • Pact for rural • Review of • Effective regional brand business diplomacy areas policy • Education • Foreign investments Efficient state • e-Administration • Intelligent public procurement • End of „departmental Poland” • Energy – security, availability, price

Polish Development Fund as a comprehensive tool for supporting development Government PDF Supervising Board, investment committees – Ministry of Development, representatives of other ministries Capital markets SMEs Polish Development Fund Investment Exports Innovation Promotion Infrastructure

Polish Development Fund Project assumptions Goal Intended results Market conditions Potential for further projects Project reach • • • Polish development bank of huge investment potential Means of implementation of national economic policy Professional ownership supervision • Achieving scale adequate for carrying out huge projects, key for the development of the Polish economy • Necessity to finance projects of crucial importance to Poland’s development Capital acquisition on world markets • • Taking advantage of the cooperation with state-owned companies (ia. PZU, PKO BP) Optimal operational model Capital markets Financial sector Development fund State EU funds SMEs Export support Infrastructural investments Investments in development

Strong Polish economy 1 2 Reindustrialization • Partnership for Development of innovative companies • New „Business the strategic branches of the economy Constitution” • Friendly legal environment • National • Review of Intelligent Specializations • Clusters and 3 research institutes industrial valleys • Start In Poland 4 Capital for development • Growing savings • European funds • Polish Development Fund • Juncker’s plan, EBOR, EBI, AIIB 5 Foreign expansion Social and regional development • Export Support • Comprehensive Division at PDF • Financial offer demographic programme • Strong Polish • Pact for rural • Review of • Effective regional brand business diplomacy areas policy • Education • Foreign investments Efficient state • e-Administration • Intelligent public procurement • End of „departmental Poland” • Energy – security, availability, price

Support for new directions in Polish companies foreign expansion Heavy engineering, furniture Food, chemical and timber Natural resources, engineering Business diplomacy posts new current to discontinue • European markets remain crucial for Poland • Increased activity on prospective markets – Asian, African and North-American Keys at arrows indicate sectors/potential that Polish companies can take advantage of Source: Ministry of Economy, Go. China commissioned by Invest in Poland, Ministry of Foreign Affairs

Professional support of exports Project assumptions • Goal Intended results Market conditions Potential for further projects • • New trade posts Establishing a support for exports division within the Polish Development Fund Expanding the Polish economic diplomacy network New operational model for trade posts Rise in exports to EU markets Opportunities for expansion towards new markets Economic diplomacy push up towards Asia and Africa Expanding to new markets essential for companies to reach their „national champion” potential Insufficient domestic demand for innovative products Visas for entrepreneurs – incentives for founders who could develop their ideas in Poland Value of exports to countries where new trade posts are planned (mln PLN) 15 000 +209% 10 000 5 000 0 2008 2009 2010 2011 2012 2013 2014

Strong Polish economy 1 2 Reindustrialization • Partnership for Development of innovative companies • New „Business the strategic branches of the economy Constitution” • Friendly legal environment • National • Review of Intelligent Specializations • Clusters and 3 research institutes industrial valleys • Start In Poland 4 Capital for development • Growing savings • European funds • Polish Development Fund • Juncker’s plan, EBOR, EBI, AIIB 5 Foreign expansion Social and regional development • Export Support • Comprehensive Division at PDF • Financial offer demographic programme • Strong Polish • Pact for rural • Review of • Effective regional brand business diplomacy areas policy • Education • Foreign investments Efficient state • e-Administration • Intelligent public procurement • End of „departmental Poland” • Energy – security, availability, price

Specialisations of Eastern Poland Assumptions • Project reach Development of Eastern Poland regions through building on their advantages by investing in crucial state projects Building essential infrastructure, especially express motorway S 19 Białystok-Lublin-Rzeszów Goal • Intended results • Establishing companies with export potential, offering high quality jobs Market conditions • Additional EU financing within the Eastern Poland Operational Programme Potential for further projects • • Wilno-Białystok-Lublin-Rzeszów railway Coal 2. 0 – development of Lublin coalfield Illustrative initiatives Lublin Białystok • • Eastern Construction Cluster – further development and R+D investment in passive construction solutions and their commercialisation Advanced Business Services Centre – establishing locations competitive to bigger cities • • Eco-Food Valley – further development of the existing cluster Clean Coal Technologies – building modern installations for coal gasification Rzeszów • • Aviation Valley – drawing small innovative firms and establishing a chain of cooperatives Air. IT – centre for aviation software, especially for drones

Goals for 2020 Strong Polish economy High Quality GDP 1 2 Reindustrialisation 3 Indicator 2020 > GDP increase Capital for development Development of innovative business A • Large and Increase in industrial output medium companies B • Share of R+D in GDP A • > 22 000 B • Increase from 0, 8% to 2% 4 5 Expanding abroad A • More loans for A • Increase in • > dynamics for A • > GDP increase A B • Increase by companies • B Investments (% GDP) households B • > 25% Social and territorial development export • B Polish FDI 70% • Ratio of A relative poverty risk B • GDP per capita A • Under 15, 5% B • 79% of average Przyjazne otoczenie biznesu i sprawne państwo Efficient state e-Administration platform Initiatives Procurement policy supporting economic growth EU 2020 ✓ ✓ • e-Administracja • Edukacja i kultura Long-term national energy strategy • Przełamanie „Polski resortowej” ✓ • Inteligentne zamówienia publiczne • Polityka Prorodzinna • Energia – bezpieczeństwo, dostępność, cena

Thank you for your attention. Ministry of Economic Development Pl. Trzech Krzyzy 3/5 00 -507 Warsaw tel. +48 22 693 50 00 fax. +48 22 693 46 www. mr. gov. pl