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POLAND MARKET ANALYSIS AND RISK MANAGEMENT
Congress on Exports and Investments by the
Medium-Sized Company Sector in Central and
Eastern Europe Munich, 28-29 June
2004 Katarzyna Kompowska COFACE GROUP POLEN
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Coface - Presence in Poland
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• POLAND
• KEY DATA OF THE POLISH ECONOMY

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POLAND - KEY DATA OF ECONOMY
2004
2003
2002
2005
Population (in million)
38.20
38.22
n a
n a
Gross Domestic Product (GDP) in billion Euro
199.6
183.0
n a
n a
5.4 1.5 G
Real Growth in
3.7 -0.1 G
1.4
5.5 1.5 G
GDP/Head (EUR)
4,790
5,169
2.2 1.3 G
Inflation Rate (Consumer Prices in )
0.8 1.1 G
1.9
2.5 1.2 G
Unemployment in
19.5 10.2 G
20.0 10.3 G
18.1
18.2 10.1 G
Foreign Trade in billion USD
Imports (Changes in from Previous Year)
54.6 (21.1)
55.0 (9.3)
Exports (Changes in from Previous Year)
42.7 (26.9)
40.9 (13.3)
Balance
-11.9
-14.1
Currency PLN against EUR
4.40
3.86
4.68
4.58
5.25 2.00 G
5.25 2.00 G
Key Lending Rate
5.75 2.50 G
Public Debt (in GDP)
47.2
51.5
54.8
59.3-60
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POLAND - ECONOMIC STRUCTURE (in GDP)
POLAND
EU 15
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POLAND - WAGE COSTS
WAGE COSTS 2003 Average Gross Income per Month,
in EUR
Source Eurostat, March 2004
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BILATERAL RELATIONS
POLISH FOREIGN TRADE WITH GERMANY (1991-2003)
2003 Polish Exports
11.3 Polish Imports 2.0 Volume
6.4
Source Eurostat, March 2004
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POLISH EXPORTS 2003
10 Most Important Countries Germany Polands
Largest Export Market 32.3
Source Central Bureau of Statistics, March 2004
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POLISH EXPORTS 2003
Top 10 Products

(Polish Exports to Germany in 2003)
Source Processed by Economic and Trade
Department of the Polish Embassy in Berlin, based
on data supplied by the Centre for Information on
Foreign Trade, March 2004
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ECONOMIC RELATIONS WITH POLAND

• LEADING TRADE SECTORS IN GERMAN-POLISH ECONOMIC
  RELATIONS
• Car Industry
• Banking and Finance
• Construction
• Food Industry
• Chemical and Pharmaceutical Industry
• Furniture Industry

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FOREIGN INVESTMENT IN POLAND
Leading Investor Countries (with investments of
at least 1 million US ), at end 2003
Realised Investments
Promised Investments
Source PAIZ, April 2004
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REGIONAL STRUCTURE OF COMPANIES

• 3 551 000 Companies (incl. Sole
  proprietorships) according to REGON System
• Strong Concentration 2 374 900
  Companies (67) in 7 Polish Voivodeships

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STRUCTURE ACCORDING TO LEGAL FORM
0.5
0.05
5.8
Sole Proprietorships (ca 2.8 million) Partnerships
under the Civil Code (ca 280,000) Others
Public Limited Companies
- Sp. z o.o., S.A. (ca 206,000) Cooperatives
(18 571) State-owned Enterprises (1,804)
7.7
7.9
78
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MAIN CHARACTERISTICS OF POLISH ENTERPRISES

• Relatively young companies (average age 6-7
  years)
• Free market economy for the last 14 years
• Low equity contribution
• Large share of accounts receivable in the assets
  (in the balance sheet) ca 47
• Supplier credits most important source of
  finance for SMS
• Difficult access to external sources of finance
• Banking procedures, price of credit (average
  interest rate 11.15)
• Development of Leasing (PLN 10 billion - 26
  growth from 2002)
  and Factoring (PLN 12.1 billion 18 growth from
  2002)

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• POLAND
• ASSESSMENT AND EXPERIENCES OF THE COFACE GROUP

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POLAND COFACE RISK ASSESSMENT
Jan 2004
Jan 2003
Jan 2002
A2
A2
A2
Hungary
A2
A3
A3
Czech Republic
A3
A4
B
Slovakia
A4
A4 ?
A4 ?
Poland
B
B
B
Russia
B
B
C
Romania
A2
A2
A1 ?
Germany
An already irregular payment history could
further deterioate through the influence of a
worsening economic and political environment.
However, the risk of default remains low.
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POLANDS NON-PAYMENT INDEX 2003
The Polish payment incidents index is subject to
strong variation and is above the world average
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PAYMENT RISK IN POLAND (1)
DEBT COLLECTION IN POLAND

• Extra-judicial Collection (Cost 5-10)
• Dunning Procedure
• Success Rate ca 65,
• Duration 3-4 Months
• Judicial Procedure (incl. Court Enforcement)
• Accelerated Default Summons
• Duration 2-5 Months
• Cost ca 10
• Court Action
• Duration 1-3 Years
• Cost ca 21
• Arbitration
• Sale of Accounts Receivable

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PAYMENT RISK IN POLAND (2)
PAYMENT MODALITIES (AVERAGE)

• PAYMENT HISTORY
• Credit Periods 21 to 30 days
• Average Payment delays 40
  to 60 days
• Real Dates of Payment 51 to 90
  days
• Payment delays affect ca 80 of transactions
• There are fewer payment delays in import business
• INDUSTRIES AND TRADE SECTORS WITH LARGE PAYMENT
  DELAYS
• Wholesale
• Textile
• Steel
• Metal Industry
• Construction

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INSOLVENCY RISK IN POLAND
INSOLVENCIES IN POLAND IN 1997-2002 Petitions

• NEW INSOLVENCY LAW
• IN POLAND SINCE 1 OCTOBER 2003
• Three Options
• Liquidation
• Composition
• Restructuring Procedure

Insolvency proceedings
Composition proceedings
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INSOLVENCY RISK IN POLAND
INSOLVENCIES IN POLAND IN 1997-2003 Proceedings
Instituted

• TRADE SECTORS WITH HIGH
• INSOLVENCY RISK (2003)
• Construction
• Wholesale
• Retail
• Agrarian and Food Production
• Non-Metal Goods Manufacture
• Metal Goods Manufacture

Insolvency proceedings
Composition proceedings
I
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INSOLVENCY RATIOS
Insolvencies per 10,000 Enterprises
Source Verein Creditreform
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EU ACCESSION CHANCES AND RISKS

• CHANCES
• Dynamic economic growth
• Restructuring of sensitive sectors steel,
  energy, hard coal
• Adaptation of legal system to EU legislation
• Market expansion and opportunities for growth
• Import of new technologies
• Growth of foreign investment
• Euro introduction in 2007
• RISKS
• Growth of competition in the domestic market
• Introduction of rules, norms procedures
  (environmental protection, food etc.) and
  certification for industrial and food products
• New tax rules (higher value added tax for
  building materials, Internet, books, press)
• Restructuring of sensitive sectors like
  metallurgy, agriculture, energy, anthracite
  extraction
• Risk of Zloty devaluation and increasing budget
  deficits

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SUMMARY

• Despite a growing GDP share, there will be no
  economic growth comparable to the Spanish after
  that countrys EU accession.
• Reasons
• a high degree of business integration has already
  been achieved in Central Europe
• the state of direct foreign investment is at
  present higher in Central Europe than it was in
  Spain
• relatively small EU funds for Central Europe
• Growth - 0.5 bis 1.0 percentage points in the
  coming 5-10 years
• Driving forces
• the growing mutual trade with the 15 EU countries
• the varying level of FDI (foreign direct
  investments)
• Support payments from the EU
• Source The Economist Group

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CONCLUSIONS POLAND AFTER EU ACCESSION

• the most highly developed country
• (compared to all new EU members)
• intensive economic growth
• (5.4 in 2004)
• a country with foreseeable risks and notable
  chances