1INoordwijk, October 4, 2004Prof. Roland Berger Chairman, Roland Berger Strategy ConsultantsEU enlargement new opportunities for the chemical industry2IA. The changing face of Europe B. Challenges and opportunities of enlargement for EU 15C. Opportunities for EU 15 chemical players in CEE and CISD. ConclusionContents3IA. The changing face of Europe4I% of EU 25France, Germany, Italy and Benelux: Six wealthy core countries start economic integration process in 19571.1EU 6 (1957)* 2003 data Europes core countries had sluggish growth over the last ten years: Average growth 1.3% p.a. in Germany, 1.7% in France, 2.5% NetherlandsGDP/capita USD 28,608118.0%75.5% of USPopulation m 22750.0%78.0%GDP USD bn 6,49458.9%59.0%5IDenmark, Ireland and the United Kingdom: First acces- sion round after 16 years increases economic power1.2EU 9 (1973)* 2003 data As a result of EU integration, Irelands economic growth has been out- standingly high over the past ten years: 7.6% p.a. (DK 2.1%, UK 2.8%)Population m 29765.0%102.0%GDP/capita USD 29,141120.2%76.9%GDP USD bn 8,65578.5%78.8% of EU 25% of US6IGreece: A poorer country joins the European Union in 1981 first discussions about dilution 1.3EU 10 (1981)* 2003 data Greece now has high average growth rates (3.8% p.a. from 1995-2004) partly due to European money from structural / regional funds GDP USD bn 8,82780.0%80.3%Population m 30867.7%106.2%GDP/capita USD 28,659118.3%75.6% of EU 25% of US7ISpain and Portugal: Accession of two less developed southern countries reduces EUs average wealth1.4EU 12 (1986)* 2003 data Today, the southern countries contribute to EU growth: Spain (3.3% p.a. since 1995) and Portugal (2.4% p.a.) achieved high average growth ratesGDP USD bn 9,81689.0%89.3%Population m 35978.9%123.0%112.8%72.2%GDP/capita USD 27,343% of EU 25% of US8ISweden, Finland and Austria: Europes northern enlargement pushes up the average GDP per capita1.5EU 15 (1995)* 2003 data Stimulus to EU growth over the past ten years: Finlands economy grew 3.5% p.a. on average, Swedens 2.7 % p.a., and Austrias 2.0% p.a.GDP USD bn 10,53495.5%95.9%Population m 38183.7%130.5%GDP/capita USD 27,648114.1%73.0% of EU 25% of US9IGDP USD bn 11,028100.4%Population m 455156.0%Eastern Europe, Malta and Cyprus: The biggest round of enlargement ever changes the face of Europe1.2EU 25 (2004)* 2003 data GDP growth rates of up to 6.5% p.a. in CEE (average 4.4% p.a. since 95) But: Enlargement is a big challenge for European Union to create wealthGDP/capita USD 24,23764.0% of US10I50 years of enlargement: Compared to the US, the EU has gained size at the expense of average wealth Today, Europes GDP per capita is only about two-thirds that of the US in terms of total GDP, both economies are now comparableEU vs. US* US=100%59.077.580.389.395.9100.478.0102.0106.2123.8130.5156.075.576.975.672.273.064.01957 EU 61973 EU 91981 EU 101986 EU 121995 EU 152004 EU 25GDPInhabitantsGDP per capitaUS = 100* based on 2003 data1.311IWealth gap: Ten years ago, the north of the European Union was rich and the south was poor2.1 South gained wealth in EU: From 34.4% of EU-9 (1986) to 59.8% today1995: Gap between north and south*1995* 2003 data * EU 12 * Portugal, Spain, GreeceGDP USD bnUnemployment %Population mSOUTH*NORTH*1,1619,37313.49.262319RATIO9:1GDP per capita USD18,72629,3833:22:35:112I7,42927,6204:1Today, the gap is between east and west GDP per capita in the EU 15 is four times higher than in EU 102.22004: Gap between east and west EU support will help EU 10 economic development to reach EU 15 wealth2003EU 10EU 1549310,53410.58.574381RATIO21:14:55:1GDP USD bnUnemployment %Population mGDP per capita USD13IEU 25 vs. US vs. Asia: Enlarged EU is a still powerful, but the slowest growing economic region in the world3. Opportunity: Ten new states give the EU momentum to increase growthECONOMIC POWER GDP, USD bn Comparative indicators 2003POPULATION mWEALTH GDP per capita, USDGROWTH avg. GDP growth 1999-2003, %10,9882903.311,0284552.3USEU 25ASIA* Aggregated data for Japan, China, ASEAN8,4581,9474.837,89024,23712,05814IB. Challenges and opportunities of enlargement for EU 1515IEastward enlargement entails threats and opportunities for economies, companies, and governments Economies Unit labor cost advantages in EU 10 challenge existing value creation structures in EU 15, but also offer momentum for structural change / innovation in EU 15 Companies Competition in EU 15 as well as in EU 10 is increasing, but also new sales, investment, growth and relocation opportunities for EU 15 companies in Eastern Europe Governments Existing institutional setups in EU 15 are challenged by lower taxes / contributions and higher flexibility in EU 10, but also momentum for political change Effects of enlargement on macroeconomic and microeconomic levels16IMacroeconomic threats: Pressure on E