It is worth taking a look at farther markets

PARTNERS: KUKE, PAIH

To what extent can the uncertain economic situation in the European Union, and in particular in Germany, which remains our main trading partner, thwart Polish exporters? These and other questions relating to exports were answered in Karpacz by participants in a debate entitled, “Polish export in times of war in Ukraine and uncertainty in our trade partners”.

– “What happens if the German market is no longer receptive is an open question. If the economy slows down, it does not happen overnight. This also applies to the German economy, which is struggling with some problems. However, Germany will certainly stabilise its economy and stimulate further growth”, said Paweł Kurtasz, president of the Polish Investment and Trade Agency (PAIH).

– “The dynamics of our exports this year will be lower and is expected to oscillate around 9–10%. This still means increased exports. Germany and other EU countries are places where the presence of our exporters must be preserved, and their problems will not affect us so much again because Polish companies have skilfully entered the changed supply chains and transferred production, for example by Germany — from China to Europe”, noted Janusz Władyczak, President of the Export Credit Insurance Corporation (KUKE).

Ukraine is a large importer

Referring to last year’s record result for merchandise exports, J. Kurtasz said that this result was very much influenced by sales to Ukraine. However, will the increase in exports to Ukraine, which last year more than compensated for reductions in sales on the Russian and Belarusian markets, also continue this year?

– “What is happening across our eastern border is very worrying and affects all areas of economic activity, including exports. We need to counteract the unfavourable trends that are taking place. European funds from the new EU perspective 2021–2027 are available. We will be able to support our entrepreneurs reaching out to both European markets and those farther away, outside the EU”, said Małgorzata Jarosińska-Jedynak, Secretary of State at the Ministry of Funds and Regional Policy (MFiPR).

– “In 2022, Ukraine entered our top ten export markets and will hopefully remain there permanently. Of course, this largely depends on what our entrepreneurs do. We support them by creating an enabling environment. And for the last year and a half, it has been the best supportive environment when it comes to cooperation with Ukraine. No other European country has insured its companies’ trade with Ukraine. Our support was unprecedented not only in the European Union, but globally”, analysed Janusz Władyczak.

He added that the ongoing reconstruction of Ukraine continues on a daily basis, which means that the country needs a lot of goods every day. – “Especially as the bulk of production takes place in eastern Ukraine — now occupied by the Russians. It has to be sourced from somewhere, and the easiest way to do it is from neighbouring countries, such as Poland, Romania, and Turkey”, explained the head of the Export Credit Insurance Corporation.

The Polish family-owned clothing company LPP was and still is operating in Ukraine. What is its experience? – “We were present in Ukraine before the war. We currently have around 125 points of sales there. We have lost some as a result of the hostilities, particularly in eastern Ukraine. At the beginning of the Russian invasion, we donated clothes to those in need for free. We export to 27 markets and for us Ukraine is a very important market in contrast to Germany, which in our case accounts for about 4% of revenue. Ukraine is among our three most important customers, next to Romania and the Czech Republic”, pointed out Przemysław Mitraszewski, commercial proxy and director for external relations at LPP.

As he recalled, LPP has a company in Ukraine and therefore employees there. – “This makes us want to provide them with a semblance of normality. However, we face down-to-earth issues because, for example, when we want to open a new location, we struggle with a lack of manpower. There is a great shortage of construction teams. Now, we hear about a new draft. Nevertheless, Ukraine remains a promising market for us”, explained the LPP representative.

Looking beyond Europe

Participants in the discussion strongly encouraged going beyond the markets of Europe. – “We work with our entrepreneurs to prepare them for export and to make it a bit more geographically remote. Exporting to EU countries is natural because we have an intra-community market. On the other hand, it is in our common interest that we export more to markets outside the EU. In this way, we are improving the gross result of the entire EU. We want to diversify our exports geographically and we encourage this. However, it is much easier to talk about this with entrepreneurs who are already exporting and more difficult with those who are just preparing for expansion”, said Paweł Kurtasz.

– “Polish exports have been a success story for many years. However, we should already be looking really broadly at the world map. As a bank, we financed trade with 85 countries around the world last year, which does not at all mean that we are limited to them. The openness of the Polish economy is currently higher than that of the German economy, but the fact is that we have so far concentrated our exports on the EU. This is natural because of Poland’s participation in the common European single market, but it also carries the risk of lack of geographical dispersion. Today, we are talking about reduced growth in our exports because we face the reduced GDP growth of our main customers. If GDP and demand there are falling, then the demand for foreign goods will also fall”, analysed Piotr Stolarczyk, head of international banking and trade finance at Bank Pekao.

– “It is therefore worth looking at the developing countries, as their long-term growth rates are expected to be significantly higher than those of our major EU trading partners. We should have the “other foot” of our exports in these distant countries because today they are relatively small there as Poland’s exports to non-European countries amount to 14% of our total goods exports”, said the representative of Bank Pekao. And, he added, every contract, whether export or investment, in developing countries is an opportunity to stay longer on a particular market.

– “In addition to their growth dynamics, these countries have other advantages — they are highly receptive and have extremely dynamic demographic trends. African countries are a good example. Global demographic projections indicate that by 2050, the continent will have the largest number of young people, i.e., potential customers for our goods. On top of this, the absorptive capacity of developing countries is due not only to demographics, but also to their integration. In the case of Africa, it is the African Union. Increasingly, therefore, we are talking not about one country, but a group of countries. The potential is huge”, encouraged Piotr Stolarczyk.

In turn, the PAIH president pointed to North America and the Middle East. – “We are currently working hard with the US market, which is very interesting and, despite appearances, is not at all more difficult than the French or German market in terms of legal conditions. At the same time, the US is a much more capacious market although, of course, each state should be treated separately, almost like another country. When preparing an export strategy, the US should not be considered as a whole”, Paweł Kurtasz pointed out. He also recalled that Polish companies, in particular food producers and distributors, are getting better and better at selling food in the Middle East, largely as a result of our country’s successful participation in the Dubai World Expo and Poland’s vibrant political and economic relations with the United Arab Emirates and other Gulf countries.

EU funds as an incentive

But how do we encourage more SME companies to export and capitalise on overseas expansion? Preferably financially. – “Also in this perspective, entrepreneurs are the main recipients of EU subsidies. These include funds from sixteen regional programmes for the closed-loop economy, greening the economy, the development of modern enterprises, but also precisely for export support and the promotion of an entrepreneur’s product/service brand on international markets. And this is primarily for companies in the SME sector”, stressed Małgorzata Jarosińska-Jedynak.