Rafal Kasprzak (PhD)
Warsaw School of Economics
rafal.kasprzak@sgh.waw.pl
Executive summary:
The paper describes frame for
setting up and developing SME in Poland created by structural funds. Author
refers to survey launched by himself for Mazovia Marshal Office which evaluate
the implementation of this frame in the region.
Information’s about author:
Rafal Kasprzak, PhD in economics, is
working in Warsaw School of Economics. His scientific interests focus on
implementation of structural funds in Poland (microeconomic approach), creating
and managing innovations and creative industries (development and their impact
on economy). Author of many papers and books. Owner of the consulting and
advisory company. Member of evaluation committee for implementation of
structural funds in Poland.
Title: Impact of European Structural Funds on
creating SMEs in Poland
Introduction
Poland’s integration
with European Union structures has facilitated Polish organizations’ access to
EU structural funds. Historically, the first pool of funds consisted of
pre-accession assistance funds: the PHARE mechanism. These funds were made
available in Poland within the framework of pre-accession assistance.
After Poland’s accession
to the EU in 2004, Polish entrepreneurs obtained the possibility of utilizing
structural funds focused on establishing new enterprises and supporting the
competitiveness of pre-existing ones. The funds earmarked to start up new
enterprises were allocated at the regional level, i.e. at the level of
voivodships.
In 2006 and 2007, under
an engagement from the Marshal Office of the Mazowsze Region, the author
conducted an analysis entailing the outcomes of implementing funds focused on
enterprise development. Projects overseeing the process of establishing
enterprises and the various enterprises established using EU funds fell within
the scope of this analysis. The subject
matter of the analysis was the implementation of Measure 2.5 of the Integrated
Regional Operational Program in 2004-2006 in the Mazowsze Region.
1. Characterization of
Measure 2.5
This
measure’s immediate objective is to support employment actively by stimulating
the establishment of new micro-enterprises and by providing assistance to
newly-registered micro-entrepreneurs in utilizing the financial support
instruments available underwritten using public funds. The institution
responsible for implementing Measure 2.5. IROP is the region’s self-government,
which may entrust the implementation of the measure to some other institution, in particular under the procedure
contemplated in the National Development Plan Act of 20 April 2004 and the
Public Procurement Law of 29 January 2004.[1]
The following beneficiary organizations may prepare and submit projects under
Measure 2.5 IROP:[2]
- Centers in the National Service System.
- Labor market institutions within the scope of the measures being
implemented: public employment services, Volunteer Labor Corps, employment
agencies, training institutions, social dialog and local partnership
institutions (organizations with trade unions, employers and the
unemployed as members, non-governmental organizations cooperating with
public employment services).
- Institutions of higher learning.
- Non-governmental organizations.
- Regional and local development agencies.
- Scientific units.
- Job centers and psychological counseling centers.
- Partnerships between the entities enumerated in items 1-7.
The support under
Measure 2.5 is addressed to natural persons who are not registered as being
unemployed and who intend to commence economic activity (regardless of age,
gender, occupational experience), excluding persons who were owners of an
enterprise or who conducted economic activity after January 1, 2004.
The provision of support
continues after the final beneficiaries set up economic activity in the course
of taking advantage of consulting and training support under measure 2.5 if
they meet the criteria specified for a micro-entrepreneur.[3]
Persons exiting the agricultural sector, persons at risk of losing their job,
youth up to 25 years of age not registered as being unemployed are treated with
priority.
One type of
project entailing three directions of support for entrepreneurial attitudes
using public funds is being implemented under this measure: [4]
- Rendering consulting and training services to support the
establishment and conduct of economic activity.
- Disseminating best practices and development methods.
- Transferring vested financial aid[5]
after a micro-entrepreneur registers in the following form: bridge support[6]
or a non-recurring investment grant[7]
to develop activity.
The implementation of Measure 2.5
IROP across the nation is supposed to contribute to attaining the following
indicators (Table 1).
Table 1.
Indicators concerning the implementation of Measure 2.5 IROP
|
Phase of the
intervention cycle |
Indicators |
Estimated
target value of the indicator |
|
Deliverables |
Number of consulting and training projects financed
(in units) Number of persons taking advantage of consulting (in
persons) - of which: men / women (%) - of which: youth up to 25 years of age (%) Number of persons taking advantage of training (in
persons) - of which: men / women (%) - of which: youth up to 25 years of age (%) Number of persons taking advantage of bridge support
or non-recurring grants (in persons) of which men
/ women (%) - of which: youth up to 25 years of age (%) |
200 25 000 65% / 35% 20% 15 000 65% / 35% 20% 4 000 65% / 35% 15% |
|
Outcomes |
Number of new micro-enterprises established as a result of
implementing these projects (in units) - of which: ones established by persons exiting the
agricultural sector (%) - including: ones established by persons exiting
industries undergoing restructuring (at risk of job loss) (%) - of which: ones run by women (%) - of which: ones conducted by youth up to 25 years
of age (%) |
4000 50% 40% 20% 15% |
|
Impact |
1. Newly-established enterprises operating on the
market 18 months after establishment stated as a percentage of the total
number of micro-enterprises established in these projects (%) 2. Number of jobs in the supported enterprises
created or retained 18 months after their creation (in units) |
75% 60 00 |
Source:
Supplement to the Integrated Regional Operational Program in 2004 – 2006.
Ministry of Regional Development, Warsaw 2005, p. 134.
The implementation of this measure
will therefore lead to the creation of 4,000 new entities in the national
economy, of which 2,000 should be established by persons exiting the
agricultural industry, 1,600 should be established by persons at risk of job
loss, 800 should be run by women and 600 should be run by youth up to 25 years
of age.
Measure 2.5 is characterized by the
comprehensive nature of the support focused on entrepreneurial persons
overcoming the obstacles related to the commencement of economic activity. The
projects being implemented concentrate on providing assistance in training and
consulting, promoting best practices and the crucial element of providing
strong financial support to a micro-enterprise enabling it to cover
investment-related expenses via the investment grant and to provide it with
liquidity to facilitate the payment of current liabilities ensuing from
registration in the social insurance system.
2.
Structure of the enterprises established under Measure 2.5 in the Mazowsze
Region
Applications for a
non-recurring investment grant are submitted by the Final Beneficiaries under
projects being implemented under Measure 2.5 IROP. This application is
submitted after completing the training and after the final beneficiary
registers an enterprise. The 431 applications submitted under the projects
being implemented and vetted positively by the Project Assessment Commission
under Measure 2.5 IROP were analyzed. The final beneficiaries’ gender and age
structure is depicted in Table 2.
Table 2. Final beneficiaries of Measure 2.5 IROP, age and gender
structure
|
Age from |
Age to |
Number |
Of which women |
Of which men |
|
To |
25 |
88 |
28 |
60 |
|
26 |
30 |
151 |
62 |
89 |
|
31 |
35 |
70 |
38 |
32 |
|
36 |
40 |
47 |
21 |
26 |
|
41 |
50 |
58 |
26 |
32 |
|
51 |
and more |
17 |
6 |
11 |
|
|
Total |
431 |
181 |
250 |
Source: Proprietary computations.
The
total number of final beneficiaries in Measure 2.5 is 431, of which 42% are
women. It is worth noting that this means that the IROP indicators have been
surpassed by more than double (the assumed percentage of micro-enterprises
established by women was 20%). Persons up to 25 years of age account for 20.42%
of the group of entrepreneurs, which means that the indicators were surpassed
by 5.42%. The presence of 17 entrepreneurs in the age group above 51 years of
age appears to be of particular interest. One should nevertheless observe that
the primary group of persons setting up their own economic activity consists of
persons up to 30 years of age – they account for more than 55.45% of the
population. Such a high percentage of persons from this age group is
particularly important with a view to future decisions on maintaining similar
measures in the next programming period. For it means that support in the form
of public funds may be a real alternative to job-related emigration for this
most productive age group. The percentage gender structure by age group is
portrayed in Figure 1.
Figure 1. Gender structure by age group of the final beneficiaries
Source: Proprietary computations.
The
age structure of entrepreneurs indicates that the assumed parity for women in
age groups up to 50 years of age has been maintained. The clear prevalence of
women in age groups aged 31-40 (54.29%) demands special attention. This may
imply that women in this age group have a strong motivation to embrace
entrepreneurial attitudes. The causes of these determinants, if confirmed in
subsequent analyses, after obtaining additional information about the final
beneficiaries, may be used as the basis for further analyses regarding the
obstacles to, and determinants of, entrepreneurial attitudes among women. The
final beneficiaries’ education level structure is portrayed in Table 3.
Table 3. The final beneficiaries’ education level structure
|
Education level |
Number |
Of which women |
Of which men |
|
vocational |
21 |
7 |
14 |
|
high school |
207 |
82 |
125 |
|
university |
203 |
92 |
111 |
|
Total |
431 |
181 |
250 |
Source: Proprietary computations.
The
dominating group of persons taking advantage of support under Measure 2.5 IROP
consists of persons with a high school education. The similar number of persons
with a university education appears to be interesting. A very inconsequential
percentage of beneficiaries has a vocational level of education. This outcome
may be interpreted in two ways: either persons with a vocational level of
education are not interested in participating in this form of support or the
applicants have not decided to recruit persons with a vocational level of
education to participate in these types of projects, e.g. on account of concerns
regarding the capacity of the enterprises run by these persons to survive. This
circumstance requires in-depth research and analysis. For if the latter
hypothesis is confirmed, then this could imply ineffective support and
consulting provided by the applicants or the existence of prejudice based on
the level of education. In turn, if the first hypothesis is confirmed, this may
imply the need to strengthen the support provided to this group of persons in
the next programming period. The gender structure of the beneficiaries by type
of education is portrayed in Figure 2.
Figure 2. Gender structure by the level of education of the final
beneficiaries
Source: Proprietary computations.
Gender
structure analysis by level of education points to growth in the percentage of
female final beneficiaries as their level of education increases.
While
illustrating the foregoing data one may portray the picture of the average
final beneficiary under Measure 2.5 IROP as a person aged up to 30 with a high
school or university level of education. The predominant venues for running an
enterprise are in the following counties: Capital City of Warsaw (15.75% of the
total population of micro-enterprises established), Ciechanów county (15.08%),
City of Radom (9.74%), Płońsk county (7.66%), Szydłowiec county
(7.19%). The next counties with a strong saturation of newly-registered
enterprises are as follows: the city of Ostrołęka,
Ostrołęka county, Radom county, the city of Siedlce, Łosicki
County; a total of 105 enterprises were established in these projects in these
counties (24.36%). Table 4 depicts the locations of the established
enterprises.
Table 4. Locations of enterprises established under Measure 2.5 IROP
|
Name of
the county |
Quantity |
% |
|
Capital
City of Warsaw |
68 |
15,78 |
|
Ciechanów
County |
65 |
15,08 |
|
City
of Radom |
42 |
9,74 |
|
Płoński
County |
33 |
7,66 |
|
Szydłowiecki
County |
31 |
7,19 |
|
City
of Ostrołęka |
30 |
6,96 |
|
Ostrołęcki
County |
24 |
5,57 |
|
Radom
County |
20 |
4,64 |
Source: Proprietary computations.
The crucial element in each project
is to provide public assistance to the newly-established micro-entrepreneur in
the form of a non-recurring investment grant. The following indicators were
derived for the grant applications analyzed.
Table 51.
Descriptive characterizations of the applications for an investment grant
|
|
Total investment expense |
Awarded financing amount |
Final beneficiary’s equity
contribution |
|
Maximum value |
229 914,00 |
20 775,00 |
209 914,00 |
|
Minimum value |
6 360,00 |
4 770,00 |
1 590,00 |
|
Mean |
24 301,11 |
16 494,55 |
7 932,40 |
|
Dominant |
20 000,00 |
15 000,00 |
5 000,00 |
Source: Proprietary computations.
The
average amount of the awarded grant was PLN 24,301.11. The most frequent grant
amount was PLN 20,000.00. When applying for a non-recurring grant financed with
public aid the entrepreneurs had to demonstrate an equity contribution. 89.31%
of the applications demonstrated this equity contribution in the form of funds
on the enterprise’s bank account. In the remaining cases it was made in the
form of a physical contribution: land, property or fixed assets. The average
value of the private equity contribution was PLN 7,932.40. When applying for a
non-recurring investment grant the entrepreneur is obliged to present a
schedule for the expenditures and purchases to be financed using the grant. The
primary directions for using these grants are characterized below in brief: [8]
- Depending
on the type of declared economic activity, the procurement of equipment to
conduct proprietary activity (85.61%) entails the purchase of office
materials, office equipment (chair, cabinet, desk, etc.), store
furnishings (countertop, mannequins, accessories).
- The
procurement of a computer, fiscal cash register and/or multifunctional
device (44.54%) – a recurring set of computerized devices needed to
conduct economic activity based on services.
- Purchase
of a means of transport – a passenger car or a combined passenger and
delivery vehicle selected in 25.52% of the applications; entrepreneurs
declare the purchase of second-hand vehicles[9].
- Adaptation
– renovation of office space to be used as the seat of the enterprise is
indicated in 24.13% of the applications.
- Procurement
of commodities – materials (11.60%) – the purchase of commodities needed
to commence trading activity.
Analysis of these
planned purchases demonstrated that they were aligned to the type of economic
activity, but the diversity thereof, contrary to the author’s research
intentions, made it impossible to devise more precise tables besides the
aggregate figures depicted above.[10]
The beneficiaries’ purchasing decisions were strictly defined and adjusted to
the amount of financing contemplated in the project. The fact that 50 final
beneficiaries indicated the need to purchase trading commodities – materials
does spark some doubt; it seems that this type of purchase should not be
financed using funds for a non-recurring investment grant. Nevertheless, a
meticulous analysis of these instances indicated that they refer to the
purchase of commodities by persons who decided to engage in sales activity –
selling used apparel. Even though the author understands the financial difficulties
encountered by the final beneficiaries, the author calls into doubt this
direction for spending investment grant funds. One should nevertheless
emphasize that the documentation concerning investment grants did not enumerate
the types of purchases eligible for support.
The
micro-enterprises established in these projects are characterized by the
following declared types of activity.
Table 6. Final beneficiaries’ declared type of activity
|
Polish Business Activity Classification code |
Quantity |
Description
of the type of activity |
|
5020 |
18 |
Maintenance and repair of motor vehicles, road
assistance |
|
9302 |
16 |
Hair styling and other cosmetic procedures |
|
7487 |
15 |
Other commercial activity |
|
5242 |
15 |
Retail sales of apparel |
|
5248 |
14 |
Other retail sales in specialized shops |
|
7440 |
13 |
Advertising |
|
7414 |
12 |
Business activity and management consulting services |
|
8042 |
11 |
Continuing education of adults and other forms of
education, not classified elsewhere |
Source: Proprietary computations.
The
predominant form of activity consisted of motor industry and cosmetic services
and sales, indicating sales of used apparel in the form of discount shops. The
table above lists the types of economic activity indicated by at least four
final beneficiaries. The micro-enterprises were established as sole
proprietorships contemplating personal income tax settlements. The
entrepreneurs named the following factors in their SWOT analysis: Uniqueness of
their offer – customization to meet the needs of concrete customer groups,
Concern for the threat posed by competitors coupled with a concurrent absence
of competitive edge factors, Prevalence of a price strategy as the primary form
of customer acquisition, Strong motivation to conduct their own economic
activity coupled with a concurrent absence of experience in running a business
for their own account, Absence of funds to start up their own enterprise,
Unfamiliarity with the legal regulations on setting up their own enterprise,
Attractive location as the second most important element of marketing following
price, Flexibility and inclination to meet customer needs.
The years 2007 - 2013
In
the years 2007 – 2013 Poland will have structural funds amounting to ˆ 85.4
billion at its disposal. The contemplated structure for the implementation of
these funds calls for their redistribution through the following operating
programs:[11]
- Infrastructure
and Environment Program – 41.9% of total funds (ˆ 27.9 billion),
- 16
regional programs – 24.9% of total funds (ˆ 16.6 billion)
- Human
Capital Program – 14.6% of total funds (ˆ 9.7 billion)
- Innovative
Economy Capital Program – 12.4% of total funds (ˆ 8.3 billion),
- Eastern
Poland Development Program – 3.4% of total funds (ˆ 2.3 billion),
- Technical
Assistance Program – 0.8% of total funds (ˆ 0.5 billion),
- European
Territorial Cooperation Programs - (ˆ 0.7 billion).
The remaining financial resources in
both structural funds and the Cohesion Fund will be earmarked to create a
national performance reserve (2% of the allocation amount, in other words ˆ 1.3
billion).
The
program structure presented above has not overlooked the opportunities for
supporting the process of creating new enterprises. Under Measure 6.2 of the
Human Capital Operating Program persons who intend to start conducting economic
activity and who have not registered economic activity for a period of 1 year
prior to acceding to the project may count on structural fund support.
The
amount of support may be up to PLN 40,000 for an entrepreneur or PLN 20,000 for
a member of a cooperative or a social cooperative for investment purchases and
bridge support (monthly) of a financial and consulting nature. In the fall of
2008 the first contest to co-finance these types of projects was announced in
the Mazowsze Region.
Conclusion
EU funds are
earmarked for multiple aspects related to socio-economic development. One of
the more important directions is to earmark them for the development of enterprises
in Poland. The effects of implementing one of the forms for supporting the
development of enterprises have been portrayed in the paper described. The
fundamental question that one may pose after reviewing the research findings is
linked to the effectiveness of this support. According to the data of the
Polish Agency for Entrepreneurial Development, the one year survival rate for
an enterprise in the years 2001-2004 (stated as a %) is as follows for the
following industries:
|
Source. Report on the
status of the small and medium enterprise sector in Poland in 2005 and 2006,
edited by A. Pyciński and A. Żołnierski. Polish Agency for
Entrepreneurial Development, Warsaw 2007.
It would be worthwhile to consider whether the subsidized entities
created under this measure will survive on the Polish market and whether this
type of support is indeed effective from the point of view of fund allocation.
Indubitably, the effectiveness of public support is an important research
problem, but at the end of the day several hundred persons have received the
opportunity to fulfill their dreams of having their own business.
Stated sources:
1.
Integrated
Operational Program for Mazovia Region 2004 – 2006. Ministry of Regional
Development. Warsaw 2006.
2.
Operational
Program Human Capital 2007 – 2013. Ministry of Regional Development 2008.
3.
R.Kasprzak.
Implementation of Measure 2.5 in Mazovia Region. Survey launched in 2006 – 2007
for Marshal Office.