AND FOREIGN INVESTMENT AGENCY POLISH INFORMATION AND FOREIGN INVESTMENT AGENCY WHY POLAND Monika Gąsiorowska Seattle, March 12th 2012

Agenda I. Why Poland – Key Facts II. Foreign Investment - Advantages III. Why Eastern Poland

Poland - Key Facts Area: 312 700 sq km – 6th in European Union Population: 38,12 million – 6th in European Union Currency: Polish Zloty (USD 1 ~ 3.10 PLN) GDP volume: USD 721 bn (PPP, 2010 6th in the EU) GDP growth: 1.6% (2009), 3.9% (2010), 4.3% (2011*) Membership: EU, NATO, OECD, WTO, Schengen Zone GDP composition by sector: agriculture – 4.6%, industry – 28.1%, services – 67.3% Employment by sector: agriculture – 17.4%, industry – 29.4%, services – 53.4% 21st economy in termes of GDP PPP * Central Statistical Office of Poland, forecast 2012 3

Real GDP growth rate (2009) Poland was FIN -8,4% NO -1,7% SE -5,0% EU27: - 4.3% USA: - 3,5% Japan: - 5.5% EE -14,3% Poland was a green island in the red Europe LV -17,7% LT -14,8% IR -7,0% DK -5,2% UK -4,4% PL +1,6% NL -3,9% BE -2,8% DE -5,1% CZ -4,7% SK -4,9% FR -2,7% AT -3,8% HU -6,8% RO -6,6% IT -5,1% BG -5,5% TR -4,8% PT -2,9% ES -3,7% GR -3,3% Source: Real GDP growth rate, Eurostat 2012

GDP changes in 2010 2009: Poland avoided recession & experienced the highest GDP growth in Europe 2010: developed at one of the highest pace in Europe 2011: Polish economy growths two times faster than all EU FI 3,1% NO 0,4% SE 5,5% EE 3,1% LV -0,3% DK 2,1% LT 1,3% IR -1,0% PL +3,9% UK 1,3% NL 1,8% DE 3,6% BE 2,1% CZ 2,4% SK 4,0% FR 1,6% AT 2,0% HU 1,2% RO -1,3% IT 1,3% BG 0,2% ES -0,1% PT 1,4% TR 7,5% GR -4,5% Source: Eurostat.

Poland leads in GDP growth Poland one of the leading countries in terms of GDP growth fifth in the world first in Europe Source: The Economist 2011

EC forecast of GDP change in 2012 Source: Eurostat, February 2012

Most attractive countries for FDI Perception Most attractive countries for FDI Rank 2011 (2010) Country 1 China 2 USA 3 India 4 Brazil 5 Russia 6 (12) Poland 7 Indonesia 8 Australia 9 Germany According to UNCTAD, Poland is 6th most attractive country for foreign investors in the world. Source: World Investment Report 2011. 8

Agenda I. Why Poland – Key Facts II. Foreign Investment - Advantages III. Why Eastern Poland

Competitive Advantages Location & economic fundamentals strategic location in continental Europe part of trans-European transportation corridor stable economic growth - the only country of the EU with positive GDP growth in 2009 38 million consumers 1000 km radius 250 mn people Labor force young, well-educated work force ca 11% of university students in the EU 455 universities & high education schools language proficiency increasing labour productivity Investment incentives tax exemptions in 14 Special Economic Zones grants co financed from the EU (USD 110 bn) 2000 km radius 550 mn people

European Funds - over EUR 87 bn in 2007-2013 Operational Programmes financed from the EU Funds (ca EUR 67 bn) and Polish contribution (ca EUR 20 bn) 100%= EUR 87 bn Poland is the largest beneficiary of EU funds. Over 87 bn was assigned to Poland. For investment projects are those programmes realted to improving the competitiveness of enterprises by innovation, human resources development and regional development. Each company registered in Poland can apply for financing from EU structural funds.

Students and graduates Number of 1st year students by group of fields 20 M young people almost 2 M students more than 400 thous. graduates every year more than 90% of students know foreign languages Main academic centers 360> POZNAN WROCLAW WARSZAWA KRAKOW LODZ SZCZECIN TRI-CITY KATOWICE BYDGOSZCZ/TORUN BIALYSTOK OLSZTYN ZIELONA GORA OPOLE KIELCE LUBLIN RZESZOW 455 higher education institutions 18 universities 22 technical universities 95 academies of economics growing number of science students 201 > 151 – 200 101 – 150 51 – 100 50 < No. of students (thousands) Source: Central Statistical Office

Foreign language capabilities Foreign language capability by age groups Language proficiency is one of the strongest points for Poland as a BPO center Children learn foreign languages from the age of 6 Foreign language capability among students English is the most popular foreign language in Poland Learning of foreign languages is obligatory in the Polish education system Source: CBOS Survey 2006, Randstad, October 2008

Tax rates Corporate Income Tax (CIT) rate: 19% Personal Income Tax (PIT) rates: 18% & 32% Value added tax (VAT) basic rate : 23% reduced rates : 8%, 5% export rate : 0% Social Security Tax paid by employer between 17.48% and 20.41% 14

FDI flows in 2011 (bn USD) World +17% Poland +46.7% * Estimates Source: UNCTAD, January, 2012.

FDI inflow to Poland (EUR bn) and its sources Geographical sources of FDI Cumulative value of FDI Major FDI investors in Poland (FDI stock at the end of 2010, bn EUR) Source: National Bank of Poland 2011 16

Services and Manufacturing Hub in Poland Automotive White goods Electronics

Services and Manufacturing Hub in Poland Aviation BPO R&D

Aviation companies in Poland Warsaw Spółka Pratt & Whitney Kalisz powstała w 1992 roku. Od 1996 roku jedynym udziałowcem spółki jest Pratt & Whitney Kanada Inc., światowy producent silników lotniczych. Spółka ciągle się rozwija – w 1992 roku zatrudniała 13 osób, w 2007 roku zatrudnia 1554 pracowników. Produkuje części do silników lotniczych, a cała jej produkcja jest eksportowana do jedynego odbiorcy – Pratt & Whitney Kanada Inc. Asortyment firmy charakteryzuje się najwyższymi wymogami technicznymi, dużą złożoności technologiczną, a jego produkcja wymaga najwyższej klasy parku maszynowego o nowoczesnej technologii. CAV Aerospace From a 20,000ft² manufacturing facility in Nowa Deba, south eastern Poland, CAV offer low cost capabilities covering sheet-metal fabrications and sub-assemblies. The team in Nowa Deba provide components and assemblies of exceptional quality standards. Project management and technical competence are at the heart of the team, with a dedicated and integrated approach to product supply, from concept, with in-house design support (Catia v5 based) through to implementation. Kreisler Polska Sp. Z o.o. - wytwarza komponenty dla przemysłu lotniczego i turbin gazowych generatorów energii elektrycznej. Oferuje usługi w zakresie toczenia, frezowania, gwintowania i elektroerozji. Posiada zaawansowany system zarządzania jakością zgodny z AS/EN 9100, który ciągle doskonali. Kreisler Polska korzysta z nowoczesnych technik zarządzania produkcją czyli Lean Manufacturing, 5S, Continual Improvement, które zapewniają niezbędny poziom elastyczności wobec wymagań ich klientów. Zakład produkcyjny firmy składa się z dwóch hal o łącznej powierzchni 1000 m2 i wydzielonej przestrzeni administracyjno biurowej. Nicholsons Sealing Technologies Sp. z o.o. - founded in 2005 as an Eastern European base for both Sales Development and Strategic Sourcing activities. With highly experienced and skilled engineering and commercial employees based in the South East of Poland, it is the Supply Chain Management interface between our world-wide customers and suppliers in Poland. Nicholsons Group - global specialists in the design and manufacture of high temperature metal seals, gaskets and ancillary components for the aerospace, automotive, turbocharger, oil and gas, power generation, and process industry sectors. With over 80 years experience of product and process engineering design and production allied to leading-edge technology and a highly skilled workforce, Nicholsons provides quality components and professional services to customers on land, sea and air. King & Fowler Polska Sp. z o.o. - oferuje kompleksową obsługę procesów obróbki powierzchni metali dla branży lotniczej i inżynieryjnej, w tym: kadmowanie, chromowanie twarde, nieinwazyjna metoda testowania – magnetyczna oraz penetracyjna, miedziowanie, cynkowanie, pasywacja jak również anodowanie (w kwasie siarkowym, chromowym oraz siarkowo-borowym) i malowanie. King & Fowler Polska, będąc częścią grupy Aerogistics, organizuje transfer wszystkich certyfikacji na polski oddział, w tym NADCAP, Airbus, Rolls Royce, Smiths, Bombardier, Goodrich oraz Messier Dowty. King & Fowler Polska obecnie posiada certyfikacje przemysłu lotniczego ISO9001:AS9100, NADCAP (dla nieinwazyjnych metod testowania oraz procesów chemicznych) jak rownież następujących firm: Boeing, BAe Systems, Raytheon, Saab i Hispano Suiza. RD Precision Mielec Sp. Z o.o. - manufacturing started in November 2005 and the workforce and capacity has grown steadily since. Today 51 qualified engineers and 17 staff ensure the efficient running of our latest facility 24 hours a day 7 days a week. Mielec offers RD Precision customers a low cost, one stop production option. We're able to cut materials such as steel, aluminium and titanium and treat the parts locally increasing efficiency and control, whilst keeping the cost low. RD Precision to firma, która zajmuje się produkcją detali i elementów lotniczych dla wielkich koncernów tej branży. Remog – seryjną produkcją korpusów hydraulicznych dla takich firm jak: Linde, Bosch Rexroth. Do tego celu przeznaczone są: wielkoseryjną produkcją zaworów Ventil ZDR Platte dla Bosch Rexroth. - ręcznym gratowaniem części lotniczych dla firmy Liebherr Aerospace. Ze względu na bardzo dużą wymaganą dokładnoć, większość operacji przeprowadza się pod precyzyjnymi mikroskopami.

State aid (I) CIT exemption in Special Economic Zone only available in Special Economic Zone (SEZ) II. Government grants through individual negotiations individually approved and granted by the Ministry of the Economy based on the Council of Ministers’ Resolution III. Real estate tax exemption subject to negotiation with the local authorities only in case if the investor is the owner of the building (provided by the Commune Council) IV. Cash grants available through EU Funds subject to negotiation with different managing institutions depending on the investment project key parameters Poland offers to investors a number of investment incentives, of which the most important is the possibility to invest in one of the 14 Special Economic Zones, that is areas specially prepared for investment, which offer even full exemption from income tax, plus exemptions from local taxes from real estate and means of transport. Advantages of SSE: fully infrastructured, One-stop-shop services, income tax exemption for production and R&D,unlimited, well-educated workforce, concentration of suppliers and subcontractors All above presented instruments can be combined together however the total amount of state aid cannot exceed the maximum aid intensity

State aid (II) A special economic zone (SEZ) is a designated area in which manufacturing or distribution activities can be conducted on preferential terms The purpose of SEZs is to support regional development Currently, there are 14 SEZs in Poland, each consisting of several subzones Total area of all SEZ – 20 000 hectares SEZ will operate until 2020 Permits to conduct activities in SEZ are issued by the authorities of each SEZ Minimum investment: EUR 100,000 Possibility of including the land selected by an investor into SEZ Benefits from obtaining a permit to conduct activities in SEZ : eligibility for income tax exemption – a form of regional aid plot of land prepared for an investment project, available at a competitive price free assistance in dealing with formalities relating to the investment project

14 Special Economic Zones A special economic zone (SEZ) is a designated area in which manufacturing or distribution activities can be conducted on preferential terms The purpose of SEZs is to support regional development Currently, there are 14 SEZs in Poland, each consisting of several subzones Total area of all SEZ – 20 000 hectares SEZ will operate until 2020 Permits to conduct activities in SEZ are issued by the authorities of each SEZ Minimum investment: EUR 100,000 Possibility of including the land selected by an investor into SEZ Benefits from obtaining a permit to conduct activities in SEZ : eligibility for income tax exemption – a form of regional aid plot of land prepared for an investment project, available at a competitive price free assistance in dealing with formalities relating to the investment project Pharmaceutical companies appreciate this kind of an incentive. Within SEZ operate: Adamed, Aflofarm, Polfa Łódź, Popharma.

Regional Aid Map in Poland 2007-2013 50% 40% 30 % Small enterprises can enjoy maximum intensity limits increased by 20 percentage point, medium-sized companies by 10%

Agenda I. Why Poland – Key Facts II. Foreign Investment - Advantages III. Why Eastern Poland

Convenient location at the borders Lithuania Russia Bielorussia Ukraina Slovakia Baltic Sea warmińsko-mazurskie podlaskie lubelskie świętokrzyskie podkarpackie Territorial potential: • 206 cities • 6 cities over 100 thous. inhabitants • 38 border’s crossing points between EU and Eastern Europe • 6 road’s and 5 railway’s international transportation corridors between EU and Eastern Europe 5 provinces: • warmińsko-mazurskie • podlaskie • lubelskie • świętokrzyskie • podkarpackie

Investment asset of Eastern Poland Young population Investment asset of Eastern Poland Birth rate at the leve of 2.7% (one of the highest in Poland) 31.8% of population below 25 years old The highest increase in the group of population in production age in Poland • 16% 64% 20% Population in pre- production age Population in production age Population in post- production age

Modern universities, professional staff There are 53 universities in Eastern Poland (16 of them are ranked in the ranking of 2010 Top 100 Poland’s Universities) in which there are over 331 thous. students (17.4% of students in Poland). More than 47 thous. students are studying the technical faculties.   There are over 213 thous. students of the secondary vocational schools in Eastern Poland. To the year 2013 Eastern Poland’s universities will implement 26 projects connected with modernization and development of their facilities worth 0.6 billion USD Lublin is the eighth largest academic center in Poland

The lowest labour costs in the country 1 820 USD 1 540 USD 1 400 USD 1 260 USD 1 190 USD 1 120 USD 1 050 USD The unemployment rate in Eastern Poland was 14.6% at the end of November 2010 and was higher than the unemployment rate for Poland (13.1%).

Renewable energy sources BPO Food sector Logistics Engineering industry Metal industry Renewable energy sources Rzeszów 29

Wood, paper and furniture industry Clothing industry Aviation sector Building industry Nonmetal resources Business Tourism Wood, paper and furniture industry Rzeszów 30

Foreign investors in Eastern Poland Rzeszów

Major projects in Eastern Poland 2009-2011 Sector: wooden Investment: 160 mln EUR Employment: 230 Location: Orla 2010 Sector: automotive Investment: 96 mln EUR Employment: 500 Location: Chmielów 2011 Sector: aviation Investment: 45,7 mln EUR Employment: 250 Location: Jasionka 2010 Sector: aviation Investment: 69 mln EUR Employment: 418 Location: Jasionka 2009

What is unique in Eastern Poland? Border’s location Positive outlook for road infrastructure development Highly skilled, young workers Lower labour costs High level of public support

The Agency Direct service and assistance to investors Information on legal and economic environment Investment offers database Identification of suppliers and contractors Contacts with central & local authorities, experts and lawyers Exports promotion by EU financed Project (e.g Eastern Poland project) Creating of a positive image of Poland abroad

Source: PAIiIZ, 2011.

Effective incentive system including EU-Funds Why Poland? Strategic location – gateway to the EU Economic and political stability Availability of skilled human resources At the end let me summerise what are Poland competitive advantages: First of all Human capital – very good qualified; flexible and loyal Another factor - the lowest labour costs on the continent; Then we have stable economy with perspective of fast growth. And finally Investor friendly climate. Effective incentive system including EU-Funds 36

Macroregion - Macrofuture Thank you Eastern Poland Macroregion - Macrofuture Polish Information & Foreign Investment Agency ul. Bagatela 12 00-585 Warszawa tel. +48 22 334 98 00 fax + 48 22 334 98 86 e-mail: invest@paiz.gov.pl www.paiz.gov.pl