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Implementation of the recommendations of the Business Environment Simplification Task Force (BEST)

Report

Republic of Poland Warsaw 2001

The document was prepared on the basis of the contribution of following institutions:

- Patent Office of the Republic of Poland - Polish Agency for Enterprise Development - Polish Securities and Exchange Commission - Ministry of Economy - Ministry of Education - Ministry of Finance - Ministry of Justice - Ministry of Labour and Social Policy - Ministry of Regional Development and Construction - State Committee for Scientific Research - Technology Agency - National Association of Guarantee Funds - Chief Council of the Associations of Private Trade and Services

2 INFORMATION ON POLICIES REGARDING COMPANIES IN POLAND

I/ A Short general description of governmental policies and strategy with regard to companies. What are the main priorities? What instruments are used to implement them? Is implementation of these policies monitored and evaluated? If so, in what way?

The source for governmental polices towards the small and medium enterprise sector are found in art. 53 of the Commercial Activities Law dated November 19, 1999. This article states that government, respecting the ideas of equality and competition, will create favourable conditions for the development and functioning of small and medium enterprises.

A detailed elaboration on this is contained in the document entitled “Government Policy Guidelines for Small and Medium-Sized Enterprises until 2002” approved by the Council of Ministers on May 11, 1999.

The main goal of governmental policies towards SMEs up to the year 2002 is creating conditions for full development of the potential of the small and medium size enterprise sector. An indirect goal is increasing the competitiveness of SMEs, increasing export and increasing investments in this sector. Legal, financial, organisational and informational- educational tools are being used to achieve these goals.

The execution of policies regarding small and medium size enterprises is being monitored and checked. Reports are prepared each year on the basis of information gathered by the Fund and other institutions involved in the execution of assignments defined by the aforementioned document. These reports are then presented to both the Council of Ministers as well as the Parliamentary Committee on Small and Medium Size Enterprises.

II/ What amount of the State budget is targeted towards promotion of SMEs? How has it been allocated towards execution of goals between the various priorities?

In total, about 20 million PLN of funds from the State Budget in the year 2000 were targeted towards activities associated with entrepreneurial development as defined in “Government Policy Guidelines for Small and Medium-Sized Enterprises until 2002”Among various tasks, the most important completed ones were: - partial refunding of participation in training courses – 6,103,994 PLN, - free of charge or payable in part advisory services – 4,263,400 PLN, - creation of a database containing legal acts presently in force in the European Union1. This database gives entrepreneurs access to Polish language versions of synopsis’ of legal acts presently in force in the European Union and vital for commercial activities – 777,140 PLN, - publishing free of charge leaflets and publications for entrepreneurs – 180,800 PLN,

1 “Database of legal regulations in force in the European Union”, http://eulex.mg.gov.pl

3 - development of the National System of Services for SMEs – 463,300 PLN.

Other activities were associated with promoting quality. In order to assist entrepreneurs in this field, part of the expenditures borne by entrepreneurs in association with obtaining ISO certificates was refunded for a total of 1,582,300 PLN. The improvement in access to external financing by entrepreneurs was the result of: - organising free of charge conferences for business related organisations regarding available sources for financing business activities – 799,200 PLN, - execution of a countrywide informational and educational campaign aimed at small and medium sized enterprises regarding the regulated and non-regulated securities market2 - 652,049 PLN.

Activities associated with supporting the development of entrepreneurship will be continued on a much larger scale in the year 2001 – the State budget foresees a total of 71 million PLN being targeted for this purpose. The most important undertakings that will be executed in the year 2001 are: - partial refunding of participation in training courses for entrepreneurs – 11,895,000 PLN, - free of charge advisory services – 10,379,000 PLN, - partial refunding of costs associated with obtaining ISO certificates – 4,700,000 PLN, - continuation of the national educational and information campaign regarding the regulated and non-regulated securities market and aimed at small and medium size companies and regional institutions supporting this sector – 550,000 PLN, - partial financing of costs associated with preparing companies to participate on the regulated securities market – 7,490,000 PLN, - development of the database containing legal acts presently in force in the European Union. This database gives entrepreneurs access to Polish language versions of synopsis’ of legal acts presently in force in the European Union and vital for commercial activities (this amount cannot be given due to a tender being presently prepared), - capital increases in small and medium size enterprise loan and credit guarantee funds – 19,260,000 PLN, - development of the National SME Services Network – 1,200,000 PLN.

III/ In what ways are policies regarding companies connected to other governmental priorities?

The development of entrepreneurship is one of the key priorities and this is easily evidenced in numerous governmental documents, e.g.: - “ The National Strategy for Increasing Employment and Human Resources Development” – document approved by the Council of Ministers on January 4, 2000, - “Medium-term Concept for Development of the National Economy up to the year 2002” – document approved by the Council of Ministers on June 15, 20003, - “ Increasing Economic Innovation in Poland up to the year 2006” – document approved by the Council of Ministers on July 11, 2000,

2 „ Implementation of a countrywide informational and educational campaign aimed at small and medium sized enterprises regarding the regulated and non-regulated securities market”, http://www.e-msp.pl 3 „ Medium-term Concept for Development of the National Economy up to the year 2000”, http://www.mg.gov.pl/struktur/DSG/dsg_pl/index.htm

4 - “ Unified Structural Policies regarding Development of Rural and Agricultural Regions” – document approved by the Council of Ministers on July 13, 2000 together with the “Rural and Agricultural Regions Pact”4, - “ Poland 2025 – Long-term Strategy for Stable Development” – document approved by the Council of Ministers on July 26, 2000,

- “ National Strategy for Regional Development in the years 2001 - 2006”5 – document approved by the Council of Ministers on December 28, 2000.

Policies towards companies and regional policies

The relationship between policies towards companies and regional policies can be seen in three different aspects:

1. Regional policies support the development of entrepreneurship and company investments in certain regions.

In the document entitled “National Strategy for Regional Development in the years 2001 - 2006” and approved by the Council of Ministers on December 28, 2000, three of the five regional development priorities are directly or indirectly associated with entrepreneurship and include: - development and modernisation of infrastructure used to increase the competitiveness of the regions, - restructuring of the economic base in the regions and creation of conditions for its diversification, - support for regions requiring activation and threatened with becoming marginal.

Activities in the first priority (in all regions) include development of the physical infrastructure, development of social infrastructure related to information and assistance in developing metropolitan functions in cities. The indirect goal of these activities is increasing the attractiveness of the various regions for investments in economic activities. As far as the second priority is concerned (for all regions), the target of governmental support is the production company sector (including SMEs) and its surroundings (business infrastructure). These activities will consist of supporting the development of new companies in key sectors for the given regions, supporting the transfer of technology and innovative in-flow as well as development of tourist, recreational and cultural preservation activities. The third priority is associated with certain regions that are best categorised by their low production activity and a need for development of alternatives to agriculture as well as towns and cities dependent on singular industrial companies. The activities in this group will be concentrated on infrastructure development and creation of new places of employment outside of agriculture as well as stimulation of SME development.

The aforementioned priorities and activities directed towards companies resulting from them will be financially supported by the State in the form of so called “support contracts” between the local governmental authorities and Central Administration.

4 „Rural and Agricultural Regions Pact”, http://www.kprm.gov.pl/archiwum/pakt.htm 5 „National Strategy for Regional Development in the years 2001 - 2006”, http://wwwkprm.gov.pl/cir/przeglad/2001_02/narstroz.htm

5 2. State assistance, in the form of regional policies, and addressed towards entrepreneurs is based on competitive polices.

Assistance and support is directed to those regions whose per capita GNP is less than 75% of the European Union index. State assistance must also take into consideration various other conditions. State assistance must result from regional policies, must be differentiated in its form, size and period, take into consideration sector assistance programmes and not exceed maximum allowed levels (investment costs or costs associated with creating new places of employment). Taking into consideration that the main purpose of regional assistance programmes is supporting development of regions that are underdeveloped economically and socially, State assistance for entrepreneurs investing in new companies, development of existing production capabilities, acquisition of companies threatened with liquidation and creation of new places of employment is permitted. Another principle that must be abided by is that economic activities arising from such State assistance must be maintained for a minimum of five years and that intangible costs and assets can be considered to be justified costs. In general – on the basis of statistical data – most regions in Poland qualify for the maximum permitted level of 50%. In the case of SMEs, this level may be increased by 15%.

3. New instruments helping in creating new places of employment and increasing employee qualifications will be used in those regions requiring such assistance within the framework of policies aimed at supporting investments.

On April 11, 2001 the Council of Ministers approved the draft “Law on Investment Support” which foresees new instruments that will help in creating new places of employment and increasing employee qualifications. The purpose of this law is to introduce a system of subsidies for entrepreneurs that will be executing major investments or creating a substantial number of new places of employment. This programme will also take into consideration investments in innovative technology. In addition, subsidies will be given to entrepreneurs to use for training of new personnel employed as a result of the new investments. The law also foresees investment incentives in the form of subsidies to the local governments for preparing infrastructure to attract investments. This law will lead Poland to be a more attractive location to invest in. It will also be a means of supporting the creation of new places of employment and attracting investments (including foreign investments) in those regions requiring such assistance. The general guidelines for separating out regions that will obtain this type of assistance is contained in the Law on Regional Development and set out in the “National Strategy for Regional Development”. This law also ensures equal treatment of domestic and foreign investors, which in accord with European Union laws.

Policies towards companies and employment policies.

Government policies towards companies are closely associated with employment problems and decreasing unemployment. This is confirmed in all government documents prepared by the Ministry of Economy that are associated with national and sector economic development strategies.

In the document entitled “Medium-term Concept for Development of the National Economy up to the year 2002” approved by the Council of Ministers on June 15, 1999 and associated with preparation of the Polish economy to membership in the European Union by the end of 2002, one of the goals set out is creating conditions for new places of employment. This

6 concept will require the completion of a number of tasks, including accelerating development of the private sector with particular emphasis on small and medium size enterprises. This will require the creation of a much more favourable work code by limiting the social liabilities imposed on employers by the employment laws as well as reducing administrative loads associated with employment.

In the document entitled “Activities Aimed At Creating Conditions For Creation Of New Places Of Employment”6 approved by the Council of Ministers on November 3, 1999, actions undertaken by government associated with accelerating restructuring and reformation of social sectors that will on the one hand help in improving the economic efficiency of individual sectors of the national economy and their better adaptation to free market conditions, at the same time having a possible negative impact on the employment market, were presented. Employees being laid-off as the result of restructuring processes are under special protection programmes including systems for increasing qualifications that will allow these employees to undertake work in other companies or on their own accord. At the same time, a programme aimed at helping to create new places of employment as a result of various activities undertaken towards development of small and medium size enterprises, development of the housing construction sector, an increase in entrepreneurship and innovation, promotion of export and strengthening regional of development through support of technical and business development infrastructure was approved.

New places in the services sector will have an influence on increasing the level of employment. In particular services associated with insurance, marketing, market research, logistics, hotel activities, tourism and food services will develop as well as all service associated advisory services like legal, tax, finance, accounting and bookkeeping. Development of the services sector will be the result of work becoming more specialised in its nature, e.g., narrow specialisation of insurance services, forwarding and shipping being separated out from transport services, IT services. Therefore specialised service companies will be formed and develop. It must be stated though that the most important element for creating new places of employment is economic growth supported by appropriate macroeconomic polices aimed at reducing inflation and capital costs, which has a direct influence on overall development of companies.

On March 6, 2001 the Council of Ministers approved a document entitled “Agenda for Activities Aimed at Supporting Entrepreneurship and Creation of New Places of Employment”. This document contains a new action plan that will assist entrepreneurs in increasing the number of places of employment.

IV/ Which government bodies are responsible for formulating and coordinating principles of policies with regard to companies? What are the responsibilities of these bodies at a national, regional and local level?

The Ministry of Economy7 is the governmental institution that initiates the industrial policies of the country and manages their execution, taking into consideration above all their pro- export aspects and helping in development of small and medium sized enterprises. The Department of Crafts, Small and Medium Size Enterprises, which is responsible for creating 6 „ Activities Aimed At Creating Conditions For Creation Of New Places Of Employment” , http://www.mg.gov.pl/strutur/DSG/index4_sg/dsg_pkt3.htm 7 Ministry of Economy, Pl. Trzech Krzyży 3/5, 00-950 Warsaw, tel: +48-22 693 51 97, fax: +48-22 629 23 11, http://www.mg.gov.pl , e-mail: [email protected], Mr. Mirosłąw Marek – Director, Department of Crafts, Small and Medium Enterprises

7 and coordinating policies associated with development of small and medium size enterprises is within the structure of this ministry.

V/ How are companies represented in the country? Do large entrepreneur societies exist? Do they represent all the various types of companies? The following organisations exist in Poland: - Craftsman associations – created on the basis of the Crafts Law, - Merchant and Services Companies associations – created on the basis of the Professions Self-government Law for certain entrepreneurs, - Chambers of Commerce – created on the basis of the Chambers of Commerce Law, - Self-government Organisations for certain professions – created on the basis of the law on regulated professions (Bar Associations, Druggists Associations, Doctors Associations, etc.), - entrepreneur associations created on the basis of the law on associations.

Crafts, merchant and tradesman organisations as well as chambers of commerce are represented on a national level. These organisations are – Polish Craft Association8, Chief Council of the Associations of Private Trade and Services9 and Polish Chamber of Commerce10. Trade chambers of commerce cover the entire country in their activities. Due to the existence of such a large number of different organisations, each company can find an organisation that suits it best.

VI/ How are policies associated with companies included in nationwide plans and how are these policies treated? (e.g., The National Development Plan)?

Policies towards companies have been defined in various documents of a strategic nature, for example: - “Poland 2025 – Long-term Strategy for Stable Development”, - “National Strategy for Regional Development in the years 2001 - 2006”, - “Assistance Programme for the years 2001 – 2002”, - “The National Development Plan” – being prepared.

In all of these documents, the small and medium size enterprise sector is seen as having a very influential role in the economic development of the country, in particular with regard to stimulating local and regional economies, in increasing the regional competitiveness and in engaging local human and capital resources. The goal of regional policies is also to take advantage of the chances for development that participation in EU regional policies will give as well as access to structural funds.

In the document entitled “Poland 2025 – Long-term Strategy for Stable Development”, the influence of SMEs on creation of a middle-class and entrepreneurship is noted. Creating the foundations for entrepreneurship is very important both from the point of view of dynamic

8 Polish Craft Association, ul. Miodowa 14, 00-246 Warsaw, tel: +48-22 831 51 51, fax: +48-22 635 79 81, http://www.zrp.org.pl, e-mail: [email protected], Mr. Bogusław Wójcik - President 9 Chief Council of the Associations of Private Trade and Services, ul. Oboźna 8, 00-332 Warsaw, tel: +48-22 828 04 37, fax: +48-22 828 22 07, e-mail: [email protected], Mr. Mirosław Grabowski - President 10 Polish Chamber of Commerce, ul. Trębacka 4, 00-074 Warsaw, tel: +48-22 630 96 00, fax: +48-22 827 46 73, http://www.kig.pl, e- mail: [email protected], Mr. Andrzej Arendarski – President, Mr. Marek Kłoczko – Secretary General

8 economic growth as well as from the point of view of social traits and its consciousness being in favour of building a free-market economy and democracy. Taking into consideration the important social and economic role that small and medium size enterprises can play, the government is intent on undertaking actions aimed at supporting their growth and functioning. In this regard, the government has the following tasks: - creating favourable legal and institutional conditions for creation and growth of small and medium size enterprises, - stimulating the inventiveness of small and medium size enterprises and helping them in gaining access to new technologies to increase their competitiveness, - developing cooperation ties, based on SMEs cooperating with large companies and other small and medium size enterprises, - increasing the export activities of small and medium size enterprises, - making small and medium size enterprise growth more dynamic in State structural policies, - promoting ecological forms of management and production in the small and medium size enterprise sector.

Government actions with regard to the SME sector and are the result of regional policy assumptions are contained in the document entitled “National Strategy for Regional Development in the years 2001 – 2006(NSPP)”. These activities include direct financial support instruments for individual entities as well as support for institutions operating in the business environment. Assistance granted within the framework of State regional development policies will be used both for the creation of new SMEs and support of existing ones. Support instruments for small and medium size enterprises will be limited to a few fundamental solutions used in the European Union.

Direct financial support for companies will include: - grants for the creation of new small and medium size enterprises, increasing the level of investment and modernisation of SMEs and therefore creating new places of employment. Innovative, energy efficient and environmentally friendly investments will be preferred. Grants will be transferred by means of local grant systems and supported by actions taken up within the framework of associated horizontal (sectorial) policies, - capital increases in local and regional loan funds and loan guarantee finds for small and medium size enterprises. Loans will be granted through regional and local loan funds as well as through a system of credit guarantee funds, - subsidising of advisory, information and educational services for SMEs. The implementation of this instrument will be through local and regional business support institutions – business assistance centres, business incubators, local and regional development agencies.

Indirect assistance for the SME sector will above all be through actions aimed at the development of institutions rendering services for this sector – above all in the field of transfer of technology, training and education as well as general advisory services.

The “National Strategy for Regional Development in the years 2001 – 2006”, prepared in accord with principles contained in the Law on Regional Development (dated May 12, 2000), places special emphasis on the role of SMEs in execution of the main priority of restructuring regional economic foundations and creating conditions for their diversification. Three main courses of action, including stimulation of local investments, transfer of technology in companies and development of tourism, recreational activities and protection of natural

9 heritage, are contained in this priority. Small and medium size enterprises also play an important role in other priority fields – development of human resources, assistance for those regions requiring stimulation and threatened with being marginalised (this goal is achieved by creating new non-agricultural places of employment in rural areas) and development of regional cooperation including cross-border cooperation.

The “Assistance Programme for the years 2001 – 2002” is intended to help execute the tasks contained in the “National Strategy for Regional Development in the years 2001 – 2006”. This programme contains a detailed breakdown of the types of tasks that may be executed to help in implementation of voivodship programmes and which could benefit from the overall programme. Assistance for the small and medium enterprise sector as well as the crafts sector will include: - investments in fixed assets (buildings and equipment), - environmentally friendly, energy efficient and clean technology, - business advisory services (information, planning, consultancy services, marketing, management, design, export, environment, purchasing of technology), - services for entrepreneurs (parks, business incubators, stimulating development of services, promotion of export, networks, conferences, trade fairs), - vocational training.

These programmes can only qualify for State assistance and be co-financed within the framework of voivodship contracts if the voivodship authorities apply for such assistance. At present the process of negotiating these voivodship contracts is underway and the final amount of funds allocated to the individual activities in the voivodships will be known after these contracts have been signed and approved by the appropriate authorities, i.e., the Council of Ministers and the voivodship self-governments.

Government policies towards companies have an important influence on the economic growth of the country. This fact is reflected in the “The National Development Plan” which is currently being prepared. One of the five priorities in this programme is “increasing economic competitiveness by increasing business development and innovation.” It is also worth noting that one of the three principles contained in the “The National Development Plan” is a pro- innovative and pro-employment approach to all actions. This approach in the future will form the basis for applying for EU Structural Fund and Coherency Fund funds.

Taking into consideration these priorities, the Ministry of Economics foresees the preparation of a sectorial action plan entitled “Economic Competitiveness Growth” which will result in an increase in the competitiveness of small and medium size companies, inventiveness and better quality in industry as well as support for State economic investments.

VII/ Statistical data on the SME sector in Poland

The SME sector in Poland, which includes companies employing up to 249 people, can best be characterised as follows (based on data available for the entire SME sector in 1999): 1) Share in Poland’s Gross Domestic Product – small and medium size enterprises accounted for 48% of the GDP. For comparison, the share of large companies in the GDP was 22.5%. 2) The number of small companies (employing up to 49 people) registered in the National Register of Economic Entities (a statistical registry) at the end of 1999 was 2,978,574 (an increase of 7.9% compared to year-end 1998). The number of medium sized

10 companies was 28,870 (an increase of 13.4%). The number of active SMEs in the year 1999 increased by 2% and amounted to 1,816,000 at the end of the year. The growth rate of active SMEs in 1999 was lower than in 1998, 1997 and 1996 (18%, 18% and 9% respectively). 3) Share of women in entrepreneurship – during the III quarter of the year 2000 women accounted for almost 37% of all employers or people working on their own. This share shows an almost insignificant downward tendency since 1992 (November 1992 – 39.5%). 4) The number of people employed by SMEs at the end of 1999 was 7,152,000 (64.2% of all employed persons). Some of these entities, the so called budgetary organisations, are mainly grouped into three branches of the economy – public administration, education and health services, in other words so called non-market services. In the market sector, the number of people employed by small companies was 4,103,000 (46.5%), whereas in medium sized companies the number of people employed was 1,689,000 (19.1%). The following branches had the greatest share of people working for SMEs – services and repairs (89.8%), hotels and restaurants (86%) and other service activities (80.7%). 5) In 1999 the share of market sector SMEs in overall company revenues achieved in the sale of goods, products and materials was 63% and increased by 3 percentage points compared to 1998. This increase in the SME share of overall revenues during 1999 was observed in all branches of the economy with the exception of other service activities. 6) The net profits on turnover for all companies having bookkeeping standards and employing in excess of 9 people decreased from 0.6% in 1998 to 0.1% in 1999. This drop was above all the result of the declining profitability of small companies (a drop from 2% to 1.1%) and large companies (a drop from 0.3% to –0.8%). In the case of medium sized companies though, the drop in net profitability was very small – going from 1.3% to 1.2%. 7) 1999 also saw a continuing growing interest in short-term loans by the SME sector. The value of short-term loans taken out by SMEs increased in 1999 by 28.8% (to 25 billion PLN) and accounted for 45.5% of the total debt incurred by companies from this sector (long-term debt increased by 4% to 30 billion PLN). 8) Compared to the previous year, 1999 showed a drop in export by Polish companies of 3% and import by 2.5% (according to prices in USD). During this same period, export by SMEs decreased by 3.8% and import increased by 1%. The share of SMEs in overall exports went down from 48.1% to 47.6%, whereas in the case of imports it rose from 63.2% to 65.4%.

1. EDUCATION AND TRAINING

1.1. Education towards developing a entrepreneurial society

“Company and entrepreneurship promotion through an education system”

1.1.1. What are the priorities of the education system / its reform? Is promotion of entrepreneurship one of these priorities?

One of the priorities in the recently started reform of the educational system for youth and adults is preparing these people for life in a market economy where competition and changing

11 conditions on the work market are normal, where career mobility and personal career planning is important as well as entrepreneurial behaviour.

1.1.2. If the answer to the above question was “yes”, please describe what type of educational programmes have been prepared. Are they for both primary and secondary schools? Are these courses aimed at encouraging people to set-up their own companies / learn about SME management? Are companies taking part in the preparation of these programmes? Has cooperation with foreign educational institutes been initiated in order to prepare these programmes? Do these programmes encompass the entire country, or are they concentrated in certain regions? What part of the overall students are these programmes aimed at (as a percentage of all)? Has the government set out any specific directions in this regard?

In accordance with the new organisational and programme structure introduced in conjunction with educational reforms, education associated with fundamental aspects of economy and entrepreneurship is started in the third level of education, i.e., pre-secondary (gymnasium) school level and is continued at the secondary school level. One of the subjects of “social studies” at the gymnasium level is active participation in economic life. This subject will include issues associated with a market economy, introduction of elementary aspects of economics such as entrepreneur and entrepreneurship, will explain the procedures in effect for undertaking work or starting up business activities.

In order to support this educational process, all gymnasiums operating as of September 1999 (over 5,000 schools) have received instructive and methodological materials for teachers who will be teaching the aforementioned subject entitled “School and career orientation in the gymnasium. The role of the teacher” together with a student guide entitled “Plan your career”. This material is being continuously updated. The programme assumptions for post gymnasium schools (which will start functioning in September of 2002) foresee the overall implementation of programmes aimed at giving a general level of knowledge associated with economics and law and giving the skills required to set-up and run a company, in particular a small or medium size enterprise. In secondary schools having a profile, classes entitled “The basics of entrepreneurship” will be a mandatory part of the students overall education. In addition, students will be able to increase their knowledge of the subject taking part in classes entitled “The basics of professional mobility”. For students following one of the following profiles – technical, environmental and agricultural, social and services, artistic – this subject will be mandatory, whereas in the case of students following a university preparatory programme, this subject will be non-mandatory. Subjects associated with entrepreneurship will be separate subjects in vocational schools, although connected to the profile of the specific school. Education associated with entrepreneurship, setting up and running a company and being active on the work market will be continued in supplementary secondary schools (foreseen for vocational school graduates) and post secondary school institutions.

Also with regard to schools operating under the present educational system a number of steps have been taken to disseminate information on entrepreneurship among students. The following are some of the most important steps taken: - introducing into the programmes of all post primary schools classes associated with entrepreneurship and the market economy, - supporting various types of programmes aimed at stimulating students to taking actions associated with functioning in a market economy, including promotion of micro-

12 companies run by youth – many schools have programmes called e.g., “The career start of youth”, “Self-promotion”, “Young entrepreneurs”, “Creating roles on the work market”, - creating an attitude of inventiveness and entrepreneurial behaviour among youth by supporting and promoting various types of tournaments and Olympics, e.g., Economic Knowledge Olympics, Tournament on Inventive Thinking, Tourneé of Young Technical Experts, - supporting initiatives by business foundation other non-governmental organisations, economic publishers and the mass media promoting entrepreneurship among youth – at present a series of television programmes on entrepreneurial activities is being prepared together with Polish Television.

Introducing subjects associated with entrepreneurship into the education system also means that teachers must be properly prepared. In order to assure this, the following actions are being undertaken: - post-graduate courses held by public universities as a part of activities recommended by the Ministry of Education11 - during the 2000/2001 academic year 19 universities in the country will execute these types of educational classes for over 800 teachers, - vocational courses and training at various companies for teachers already running classes associated with economics and entrepreneurship. These courses will include fundamental knowledge on the market economy, career planning and active participation on the work market, setting up and running a small company. Public and non-public institutions aimed at increasing teacher qualifications, including centralised institutions run by the Ministry of Education, will run the courses. 250 teachers in the year 2000 took part in various courses and training sessions organised by the central institution – The National Centre for Supporting Vocational Education12.

“Inviting the SME sector to close cooperation with schools and universities”

1.1.3. Do examples of cooperation between schools / universities and companies exist? (If so please describe briefly the nature of such cooperation and the role of public institutions in the promotion of such activities – if such cooperation exists).

Small and medium size companies participate in the vocational education process by giving on the job training – on-site classes and professional training – executed on the basis of agreements signed with schools giving vocational education. A large group of employers, in particular the crafts, sign agreements with youth in order to teach them professions. Education at the employer’s site ends with an examination – in the case of education in a crafts shop this is a primary crafts certificate. During this vocational education at the employer’s site, youth obtain theoretical schooling in public schools. At present about 300,000 youth in Poland are being educated in this way. Employers, acting as sole proprietorships (or as civil code companies) and educating youth or employing them to teach a profession obtain tax deductions.

11 Ministry of Education, Al. Szucha 25, 00-918 Warsaw, tel: +48-22 628 04 61, fax: +48-22 629 72 41, http://www.men.waw.pl, contact person Mrs. Zofia Stypińska 12 National Centre for Supporting Vocational Education, ul. Spartańska 1B, 02-637 Warsaw, tel: +48-22 844 34 38, fax: +48-22 646 52 51, http://www.kowez.edu.pl, Mrs. Grażyna Osicka - Director

13 The present laws – the Higher Education Law dated September 12, 1990 and the Higher Vocational School Law dated June 26, 1997 – ensure schools wide autonomy and give university level schools the authority to define their educational courses as well as to undertake cooperation with the business environment. Schools operating on the educational services market organise various types of courses, training sessions, and post-graduate studies. As a result of cooperation with foreign partners, modern programmes containing elements associated with entrepreneurship are being prepared and directed to various groups, including representative of the SME sector. Technical parks have been opened at the technical universities in Wrocław, Kraków and Poznań that has resulted in educational programmes being modernised and updated and given the possibility to employ well-educated graduates. Also very important, and possible thanks to the engagement of university authorities, is close cooperation with companies and local government institutions responsible for disseminating government tasks. A very important partner in this cooperation is the small and medium size enterprise sector. In addition to this, some students and graduates open their own companies, putting their knowledge into practical use.

“Introduction of a system of rewards at the local / regional / country level in order to distinguish those who have achieved success, innovative entrepreneurs and SMEs.”

1.1.4. Do such awards exist in your country ? (If so, are the directed to a particular group of entrepreneurs – young entrepreneurs, women, etc) or particular type of enterprises (IT companies, Internet companies, companies implementing quality systems management TQM) ?) How long do such award exist ? How many enterprises take part in them ?

The most important and prestigious awards given to entrepreneurs is the President of the Republic of Poland Business Awards also called the Business “Nobel”13. These awards are given in seven categories – Polish Companies, Small Polish Companies, Financial Institutions, Exporter, Agricultural Farms, Foreign Investments in Poland, Inventions in the fields of product or technology. Authorised organisations and business associations, organisers of the most important competitions and promotional programmes propose candidates for the award. The jury that approves the nominations consists of main experts and authorities in Polish business.

In addition awards are given to certain groups of companies. Since 1997, innovative products and technologies can try to obtain the Polish Product of the Future award14. This competition, organised by the Technology Agency15, is aimed at promoting new and innovative technical solutions that can be put into use in short time (up to 3 years), especially in small and medium size enterprises. Competition is held in two categories – product of the future and technology of the future. The competition is under the patronage of the Prime Minister of the Republic of Poland.

Business organisations and foundations grant numerous other, highly prestigious, awards associated with business activities. The following should be noted:

13 President of the Republic of Poland Business Award - Business “Nobel” http://www.president.pl/nagroda/index.html 14 Polish Product of the Future, http://www.att.gov.pl/atit/konkurs.html 15 Technology Agency, ul. Krucza 38/42, 00-512 Warsaw, tel: +48-22 661 86 10, fax: +48-22 628 36 11, http://www.att.gov.pl, contact person Mrs Anna Kacprzyk

14 1. Polish Promotional Programme “Teraz Polska” granted by the Polish Promotional Emblem Foundation16 2. Polish Business Leader – Business Centre Club17 3. Business Centre Club European Medal18 4. Entrepreneurship Leader 5. Fair Play Company19

In addition to this, numerous local and regional awards are granted. These awards are granted by the voivodship authorities, city presidents, during business conferences organised by regional business organisations, etc.

The local mass media also play an important role in promoting entrepreneurship and companies by organising various types of competitions and creating rankings of companies. The “Lubelski Grosz” founded in 1996 can serve as an example. The purpose of this competition is to promote the business achievements of companies in Eastern Poland, the integration of the business community in the region, to help in finding new sales markets as well as promoting the best companies and products. This competition, which was organised by the Eastern Institute (Instytut Wschodni) is also supported by local newspapers Panorama Lubelska and Tygodnik Lubelski and is promoted by the local media. In addition, central and specialised newspapers and magazines also give awards. An example may be the Bull and Bear Award granted by the well-known stock market newspaper Parkiet.

Another important category of awards are those granted during trade fairs. One of the most prestigious are the Poznań International Trade Fair Medals20.

“Promoting entrepreneurship through media campaigns”

1.1.5. Do any initiatives aimed at promoting entrepreneurship exist in your country? Please describe briefly the methods and means used. What has been their effectiveness to date?

Various central and regional events are organised to promote a positive view on entrepreneurship. One of these events is the annual National Trade Fairs “Everything for SMEs” held together with the National Education Forum for SMEs in Warsaw.

As of the year 2000, the Securities and Stock Market Commission coordinates a “Promotional and Educational Campaign for e-SMEs”. This campaign, initiated by the government, is aimed at small and medium size companies and regional institutions supporting this type of business entities. The aim of the campaign is to create a system of direct information on the capital market and to promote modern methods of financing business activities. One of the main ideas of this event is to make entrepreneurs aware of the prestige associated with a company coming onto the stock market.

A distinction for efforts made towards making entrepreneurship more popular and for accurately showing this is the Władysław Grabski Award which is awarded during the prestigious competition organised by the Polish Journalist Association for texts, radio and 16 Polish Promotional Programme “Teraz Polska”, http://www.terazpolska.pl 17 Polish Business Leader BCC, http://www.bccnet.com.pl/lider/lider.htm 18 Business Centre Club European Medal, http://www.bcc.org.pl/medal/medal.htm 19 Company „Fair Play”, http://www.kig.pl/konk_06.html 20 Poznań International Trade Fairs, http://www.mtp.com.pl

15 television programmes associated with business activities. Last year television programmes aimed directly at companies from the SME sector were started. One of them is Wielki Mały Biznes (Big Small Business), which is emitted in Polish Television regional stations.

A key element in promoting entrepreneurship is making a pro-active approach to yourself and your surroundings popular, in particular among youth. This important assignment is being carried out in Poland through for example the Junior Achievement Foundation21 created from an initiative started by the Stefan Batory Foundation and a group of entrepreneurs. This is a non-commercial, non-governmental organisation whose purpose is preparing youth for life in a market economy and teaching skills that will allow them to find jobs. The organisation, founded in 1919, operates in over 100 countries and is present in Poland since 1992. For the past eight years a competition entitled “Managing a Company” (MESE - Management and Economic Simulation Exercise) prepares high school graduates for work in “small business”; for the past six years the Polish National Competition for the Best Student Company and best Youth Mini-company is organised. In addition, the foundation is introducing educational programmes aimed at high school and gymnasium level students. Another initiative of this type is the annual Young Talented Businessman competition organised by Alcat Communications and Rzeczpospolita newspaper. This competition is part of the international World Young Business Achiever competition.

1.2. Training Courses

“Preparing special business courses in the public and private sector”

1.2.1. Do such courses exist? What is special emphasis put on – courses on how to run your own business or courses on how to become and entrepreneur? Are these types of courses organised all over the country? Do they meet the needs of entrepreneurs / companies? Quality wise? Quantity wise?

Many different institutions organise these types of courses in Poland for entrepreneurs – both within the framework of publicly funded programmes (free of charge or partially free of charge) as well as commercially. They offer a wide range of workshops associated various aspects of setting up and running a company. Numerous information seminars on changes in the legal system, external sources of capital, etc. are organised. A large number of courses are organised and run by the National SME Services Network22 (KSU) centres. These centres offer standard training programmes of a general scope as well as specialised training courses identified by entrepreneurs. The Euro Info Centres23 also play an important role in organising various types of trainings and seminars associated with business activities on European Union markets, e.g., requirements for undertaking business activities, quality requirements, legal regulations, directives, etc. While it is easy to state that the range of training courses is very wide, it is much more difficult to try to evaluate the quality of them since many institutions are independent. A judgement can only be made with regard to publicly funded assistance programmes. In the case of the KSU centres, their activities are closely associated with standards approved within the entire network and confirmed by accreditation associated with training, constant contact with entrepreneurs and an objective evaluation of their activities.

21 Junior Achievement Foundation, ul. Flory 9, 00-586 Warsaw, tel: +48-22 646 52 15, fax: +48-22 646 52 16, http://www.junior.org.pl, Mr. Zbigniew Modzelewski - President 22 National SME Services Network, http://www.parp.gov.pl/ksu, e-mail: [email protected] 23 Euro Info Centres Network, ul. Nowy Świat 6/12, 00-400 Warsaw, tel: +648-22 625 13 19, fax: +48-22 625 12 90, http://www.euroinfo.org.pl, e-mail: [email protected], Mr. Ireneusz Kamiński – Programme Manager

16 1.2.2. Are these courses sponsored by national / regional / local institutions? If so, are they addressed to a specific group of entrepreneurs / companies / qualifications and what type?

In the year 2000 the Ministry of Economy co-financed the participation of small companies in various types of training courses. These subsidies were given for training associated with company management. The entrepreneur himself chose the subject of the course as well as the training institution organising the course. A person managing a company or a part of it could obtain a maximum of a 60% refund of training costs. 30 Training Refunding Centres24 where entrepreneurs could file for a refund of incurred costs were set-up across the country. This project is to be continued this year on similar conditions.

1.2.3. Are business organisations and associations engaged in running such courses and in what way?

A number of training programmes funded from public programmes are executed by non- governmental organisations belonging to the KSU network. The selection of programmes is on the basis of a competition organised by the Polish Foundation for Small and Medium Enterprise Promotion and Development (presently the Polish Agency for Enterprise Development25) within a framework operating in accord with State policy funds. In addition, various business organisations and associations – as non-government organisations – participate in numerous competitions and tenders for execution of training programmes for various groups of entrepreneurs that are financed from public and foreign assistance programmes. Training courses are also run by business organisations (chambers of commerce, crafts chambers, sector associations, etc.) with the participation of their own specialists or invited experts.

1.2.4. Do special courses exist for civil servants responsible for handling companies? lack of data

“ Adapting the educational system and programmes, including adult education programmes, to the needs of SME employees and companies in cooperation with social partners.”

1.2.5. What activities are being undertaken to increase the management skill levels of entrepreneurs, in particular those persons managing very small companies?

The aforementioned training and advisory services programmes can be taken into consideration in this regard. Very important is the project whereby up to 60% of the training costs incurred by management personnel of small companies (up to 49 employees) and held at a training institution selected by the entrepreneur can be refunded. This project is financed from State assistance funds (Training Refunding Centres).

24 Training Refunding Centres, http://www.parp.gov.pl/ksu, e-mail: [email protected] 25 Polish Agency for Enterprise Development, Al. Jerozolimskie 125/127, 02-017 Warsaw, tel: +48-22 699 70 44/45, fax: +48-22 699 70 46/56, http://www.parp.gov.pl, e-mail: [email protected], Mrs. Krystyna Gurbiel - President

17 1.2.6. What actions / systems are being put into place to promote the participation of employees, especially from SMEs, in continued training and courses aimed at increasing professional qualifications?

Mandatory education of adults is treated in government documents as a key element in increasing employment and therefore a number of actions that would stimulate its growth are foreseen, in particular the schooling of SME employees. The most important issues are: 1. Enforcing the mandatory vocational education system by implementing new regulatory and organisational solutions associated with: - cooperation between State and local government and public partners (employer and employee organisations) in the scope of mandatory education, - motivating employers to invest in the education of their employees. 2. Designing a system for monitoring the mandatory education of employees (MEU) as well as periodical testing of employer engagement in employee training (CVTS2). 3. Preparing new, high quality modular vocational training programmes that take into consideration the changing situation on the work market and preparing instructors to execute the aforementioned programmes as well as preparing the assumptions for promoting such training among employers and employees and the training market.

Within the framework of executing the II part of Project No PL/2000/IB/SO 02/ entitled “Strengthening of the Mandatory Education System in Poland” preparation of new, high quality modular vocational training programmes that take into consideration the changing situation on the work market is foreseen. In addition, the following steps will be taken to promote the aforementioned programmes among groups interested in education for the work market: - an electronic database of the various programme modules will be prepared. This database will contain – a description of the programmes and information on programme authors and educational institutions executing the programmes, - 300 specialist involved in adult education will be prepared to develop and promote these modular programmes in accord with the needs employment market, - legal and organisational solutions ensuring the updating, development and dissemination of the modular educational programmes will be prepared.

“Creating the motivation to undergo training by implementing appropriate incentives – including income tax and social security premium deductions”

1.2.7. Has the government prepared any methods that will allow entrepreneurs and employees easier access and participation in vocational schooling and training? What type?

A number of system type incentives are foreseen to promote the participation of employees, in particular those from the SME sector, in continued vocational training. One of these incentives are deductions in income tax and social security premiums. The provisions contained in the Personal Income Tax Law dated July 26, 1991 (Journal of Laws No 14, item 176 dated 2000 with subsequent changes) foresee a number of deductions and reductions in tax liabilities that would motivate the taxpayer to increase his professional qualifications and education.

1. The following costs are income tax deductible: - paid for additional schooling and increasing professional qualifications,

18 - paid for education at university level schools as defined by the laws on higher education and higher vocational education.

The following are considered to be education related costs incurred by the taxpayer: - additional schooling in schools and non-facultative institutions as defined in laws associated with conditions and principles for raising adult vocational qualifications and general education, - submitting an examination in order to receive qualifications, - learning of a foreign language in institutions running these types of activities.

2. Costs incurred by a taxpayer for additional schooling and increasing professional qualifications can be deducted if: - they have not been deducted as paid for education at university level schools, - they have not been counted as justified costs or have not been refunded to the taxpayer in any form what so ever.

3. On the basis of the personal income tax law, the following are not taxable: - the value of services received from the place of employment in accord with separate laws on increasing professional qualifications and general employee training, with the exception of sabbatical remuneration received during such training to which employees undertaking such training or schooling are entitled, - amounts equal to work related travel costs and lodging costs refunded by regional employment offices on the basis of employment laws.

In accordance with the document entitled “Government Policy Guidelines for Small and Medium-Sized Enterprises until 2002”, entrepreneurs from the SME sector are entitled to for example e refund of costs incurred for company management training.

2. ACCESS TO FINANCING

I/ What are the main obstacles that companies in your country meet with regard to finance sources? Are these problems associated with reforms of the finance sector, strengthening of ownership rights and corporate management?

One of the main obstacles that small and medium size enterprises face in Poland is access to bank loans and credits. Barriers for SMEs are high interest rates, overly high bank fees and commissions as well as formal requirements associated with credit histories and collateral. In accordance with regulations presently in force, banks make granting a loan conditional on the creditworthiness of the borrower. Each decision of the bank is autonomous and based on a risk analysis of the given company’s activities, but on a general overall analysis of the company’s financial and economic standing. Entities that are more creditworthy financially and able to secure credible material or legal loan securities are always in a better situation in asking a bank for a loan.

A much more readily available form of financing operations is leasing, although it is more expensive since the companies offering leasing use bank loans. Other external financing

19 sources are not well known to entrepreneurs. A major obstacle in these other forms of financing are costs and procedures associated with them.

A major problem also are high tax liabilities which cause shortages in own funds and the necessity to draw on external financing. Increases in VAT and excise tax over the past few years are the result of, among others, Poland’s obligations to implement tax regulations in accord with Union laws. As a result of changes already implemented, some goods are already taxed at the minimum level required by EU tax regulations.

II/ What are the priorities of Government activities to eliminate these obstacles? DO these actions take into account the needs of various types of companies (micro, small, medium, start-up companies, young companies, mature companies)? What amounts in the State Budget have been targeted at execution of these activities?

In May of 1999 the Council of Ministers approved a document entitled “Government Policy Guidelines for Small and Medium-Sized Enterprises until 2002”. This document foresees, among other actions, undertaking various actions associated with increasing access of small and medium size companies to such external sources of finance as bank loans and credits, credit guarantee funds, leasing, “venture capital” funds as well as the off-market capital market.

The result of these actions is inclusion of the lease agreement and it’s form in the Civil Code as well as amendments to the Investment Funds bill foreseeing the opening of specialised closed investment funds whose operations are very similar to those of “venture capital” funds. Also, in January 2001, changes to the Public Securities Trading Law came into effect. These new regulations make it much easier to be traded on regulated and non-regulated securities market.

In May of 2001, Parliament approved the draft of a law changing the present Law on Guarantees and Sureties granted by the State Treasury and certain legal entities. The proposed change include expanding the scope of sureties given from the BGK Credit Guarantee Fund (KFPK)26 and introduction of new instruments that will allow the Bank Gospodarstwa Krajowego (BGK)27 – in which KFPK is situated – to financial support regional and local guarantee institutions.

In order to allow entrepreneurs to become better acquainted with the capital market, a national information and education campaign aimed at small and medium size companies and regional institutions supporting their activities on using trading facilities on the regulated and non- regulated securities markets was started towards year-end 2000. About 20 million PLN is designated in the State Budget in the year 2000 for activities aimed and helping entrepreneurs gain easier access to external sources of finance. These funds will be used to increase the knowledge entrepreneurs have of the capital market, co-financing of advisory services associated with introduction of company stock to public trading and the regulated securities market as well as to assist institutions granting loans and loan sureties by means of granting financial support or advisory services.

26 BGK Credit Guarantee Fund, Al. Jerozolimskie 7, 00-958 Warsaw, tel: +48-22 522 91 92, fax: +48-22 522 91 94 http://www.kfpr.org.pl , e-mail: [email protected] 27 Bank Gospodarstwa Krajowego, Al. Jerozolimskie 7, 00-958 Warsaw, tel: +48-22 522 91 12, fax: +48-22 627 06 33, http://www.bgk.com.pl , e-mail: [email protected]

20 III/ What sources of finance are available? What market shortages or lacks exist for companies in different stages of evolution? What are the differences in interest paid by large, well-known companies and small companies not having a credit history or significant market results?

All of the various financial instruments available for small and medium size companies, bank credits and loans – both domestic currency and foreign currency denominated – are the most often used. Aside from bank loans, SMEs also take advantage of leasing, guarantees and sureties, factoring. Another option available to these companies are “venture capital” finds, although these are more interested in companies with a high growth potential and therefore their interest in SMEs is rather insignificant. On the other hand though, the public capital market as a form of financing is becoming more and more popular.

Loans are granted by numerous institutions in Poland, both banks and non-banking sector institutions, e.g., local work offices, regional development agencies, foundations, micro-loan institutions, loan funds, savings and loan coops and others.

Individual persons or small companies just starting commercial activities, without a credit history and insufficient assets to secure a loan face the greatest problems in obtaining outside finance. Companies like these have a significantly smaller chance of obtaining a bank loan. If though they do obtain the loan, the interest they pay is sometimes even 5-7% higher than in the case of well-established companies.

IV/ What type of financial services do public authorities ensure if the private finance sector cannot meet the needs of the SMEs? Are the various methods of obtaining easier access to financing tied to training and advisory services for entrepreneurs regarding methods of talking with financial institutions and obtaining loans? In what way are companies informed of such services?

Small and medium size companies can obtain assistance from public funds. Various types of loans and preferential credits have been initiated within the governmental programme to reduce unemployment and perform restructuring in various sectors of the Polish economy, e.g., development of entrepreneurship in rural areas or assistance to coal-miners leaving the mines or ex-metalworkers starting up their own companies. Those small and medium size enterprises that create new places of employment for employees of industrial sectors under restructuring and farmers can also count on low interest loans. The funds for these loans, as well as funds for subsidies come from the State budget or various assistance programmes.

One of the instruments available for supporting small and medium size enterprises by the State is the BGK Credit Guarantee Fund created within the Bank Gospodarstwa Krajowego on the basis of the Law on Guarantees and Sureties granted by the State Treasury and certain legal entities. Guarantees given by BGK can be used for investment loans as well as production goods and materials.

In addition to this, a number of advisory services associated with managing and running commercial activities were rendered to persons and entrepreneurs just starting such activities. These services were given using the National SME Services Network within Counselling and Advisory Centres (PKD)28. The aim of these points was to inform entrepreneurs on various financing options available on the market as well as the possibility to take advantage of

28 Counselling and Advisory Centres (PKD), http://www.parp.gov.pl/ksu, e-mail: [email protected]

21 specialised advisory services and training that would help in obtaining outside financing. The PKD project will be continued in the year 2001.

V/ Are there means of encouraging private financial institutions to grant loans to SMEs? How effective are these methods? Are there methods in place to increase the capability of banks to grant loans to SMEs? Have the authorities put in a proposal to take advantage of PHARE funds targeted for SMEs?

More and more banks in Poland are coming to realise that the small and medium size enterprise sector is one of the most promising market sectors and therefore banks are beginning to introduce more and more packages especially designed for SMEs, including loan packages. The changes are going towards simplifying loan procedures and adapting loan requirements to bookkeeping and tax standards used by SMEs. These changes are above all associated with a policy to gain new clients, in particular SMEs, which are treated as a priority group for development of entrepreneurship. Above all, package type products are being introduced, e.g., debenture on current accounts, electronic access to accounts, complex company servicing. Another important element is the policy that banks coming into the Polish banking sector are showing, i.e., being interested in increasing the share of SME clients.

Credit guarantee funds could have a significant influence on development of the local banking sector. Experience shows that these types of funds increase the share of credits granted by banks since bank clients can obtain credit guarantees, and at the same time resolve the problem of money supply since deposits are created in local banks. One of the priorities of government is development of a system of credit guarantees through advisory services and co- financing of local and regional credit guarantee funds. This tool though cannot be immediately interpreted as a means of increasing the number of loans granted since that depends above all on the knowledge of individual banks and their policies. At the end of the year 2000, 17 local and regional credit guarantee funds associated in the National Association of Guarantee Funds29 were operating in Poland. These funds had at their disposal a total of 37.1 million PLN and granted a total of 1,879 guarantees for a total amount of almost 93 million PLN during the period 1994 – 2000. The total value of loans and credits guaranteed during this period was over 183 million PLN.

Proposals for using PHARE funds for SMEs Funds equal to 21.6 million Euro are designated for execution of various SME support programmes within the framework of the PHARE 2000 programme. The proposed activities will be executed on a national level in all 16 voivodships and regionally in the following 5 voivodships – Śląskie, Podkarpackie, Lubelskie, Podlaskie, Warmińsko-Mazurskie.

National component: - introduction to quality, - innovation and technology for business development, - fit for business in Europe, - introduction to exports, - exports promotion programme.

Regional component: - company development programme,

29 National Association of Guarantee Funds, Pl. Wolności 1, 13-100 Nidzica, tel: +48-89 625 22 26, fax: +48- 22 625 43 37 http://www.ksfp.org.pl , e-mail: [email protected], Krzysztof Margol - President

22 - company development for exporters programme, - regional investment grant scheme for SMEs

Funds equal to about 33 million Euro are designated for execution of various SME support programmes within the framework of the PHARE 2001 programme. The proposed activities will be executed in all 16 voivodships. The programme will consist of the following components: - investment grants for companies, - company development programme, - company development programme for exporters, - Internet based company development programme.

2.1. Financing for small companies in the early phase of development

2.1.1. Do young and small companies face particular problems in obtaining finance (e.g., how substantial are requirements regarding loan securities)?

Even though an increase in financing the SME sector by banks has been noted over the past few years, access to these funds is still difficult - especially in the case of small companies and young companies just starting on the market or operating for a short time. This is the result of limited access to reliable and comprehensive financial and business information on these companies as well as a lack of good quality collateral that these companies could offer. In addition, there are no loan facilities for people just starting their business activities. This shortfall is partially covered by loan funds and loans from regional work offices.

The obtainment of a bank loan is dependent on the person presenting sufficient collateral, often times even 200% of the loan amount. The most willingly accepted form of collateral is paradoxically a cash deposit. Also, a lien on working funds (working capital loan) is not often used. In addition, local banks are not always interested in guarantees given by the BGK Credit Guarantee Fund. This is partially due to a lack of knowledge regarding the mechanisms ruling this fund. Another major element that limits the access of new companies to loans is the requirement that companies present a 2-year history of their activities.

2.1.2. What actions have been taken / are planned, to help companies in overcoming these difficulties?

The system of credit guarantees is being developed. The collateral offered by the credit guarantee funds increase the creditworthiness of the entrepreneurs in their dealings with financial institutions and hasten the process of approving funds for entrepreneurial undertakings. At the end of the year 2000, 17 local and regional credit guarantee funds were operating in Poland. In addition, one national credit guarantee fund was in operation – the BGK Credit Guarantee Fund – that received its funds from the State budget. The local funds operate in their specific regions, usually within a few counties (gminas) or boroughs (powiaty), whereas the regional funds can guarantee credits within a voivodship.

The local and regional funds operate similarly but take into consideration the specific conditions of the region that is serviced by them and the development strategy and priorities approved. Guarantees are granted to small and medium size companies as well as to unemployed persons just starting commercial activities. The guarantees can be used for both

23 bank credits as well as loans from the work offices and other institutions financing commercial activities. The funds usually guarantee 60 – 70% of the credit and each fund cooperates with a few selected banks and institutions. At present, numerous new credit guarantee funds are being created in various regions of the country and are in various stages of development. The main forces behind then are local and regional governments. A capital increase from the State budget for about 6 loan institutions and 12 local and regional credit guarantee funds operating on behalf of SMEs is planned in the year 2001. In addition, financing is being prepared for advisory activities in 18 institutions involved in granting loans and credit guarantees.

In May 2001, the Polish Parliament30 approved the draft of an amendment to the Law on Guarantees and Sureties granted by the State Treasury and certain legal entities. These changes foresee the scope of guarantees being expanded to include credits for procurement of commercial goods and creation of new places of employment, as well as financing of export contracts. The draft also introduces instruments that will help in strengthening the position of local and regional credit guarantee funds through a system of re-guarantees by BGK or purchase of shares in these finds by BGK.

An important item in assisting companies just starting activities is the possibility of obtaining tax exemptions. The local governments are empowered to grant exemptions other than those contained in the law on real estate tax, vehicle tax and forestry tax. With regards to agricultural tax, the local governments are empowered with the authority to grant tax exemptions other than those associated with this tax. The local governments very often grant tax exemptions or preferences for entrepreneurs starting up activities in the region or creating new places of employment.

“ Systems for attracting small amounts of funds for small companies and the crafts sector.”

2.1.3. Do smaller companies have access to external sources of finance?

Smaller companies above all take advantage of bank credits and micro-loans from institutions like Fundusz Mikro (the Mikro Fund)31. The most commonly used by small companies type of credit is a credit on the company’s current account. Small entrepreneurs take-out investment loans and short-term working capital credits and often take credits to purchase vehicles.

2.1.4. Do micro-loan and micro-guarantee systems exist? To whom are they directed?

The Fundusz Mikro (Micro Fund) was created in 1994 by the Polish – American Enterprise Fund. This fund is directed mostly towards those small companies and those just starting activities that do not fulfil the requirements imposed by banks on borrowers. Security on loans granted by this fund are sureties given by persons and a promissory note from the borrower. The Micro Fund has created the unique possibility of mutual guarantees being given by groups of people whose number exceeds 4 to their friends and acquaintances who also have their own companies and are interested in long-term cooperation with the Micro Fund and are ready to help each other out in case of problems with repayment.

30 Sejm of the Republic of Poland, ul. Wiejska 4/6/8, 00-902 Warsaw, tel: +48-22 629 50 17, http://www.sejm.gov.pl, Mr. Maciej Czarniecki – Head of the Chancellery of Sejm 31 Fundusz Mikro, ul. Żurawia 22, 00-515 Warsaw, tel: +48-22 629 00 92, fax: +48-22 628 88 11, http://www.funduszmikro.com.pl , e-mail: [email protected], Mr. Witold Szwejkowski - President

24 Micro-loans are also granted by local Business Support Organisations participating in the TOR 10 Programme. These loans are above all directed towards small companies. If new activities are started in a rural area that result in new places of employment being created, micro-loans are granted from the Agency for Restructuring and Modernisation of Agriculture32 funds. New credit facilities are also started up, within the existing system of micro-loans, which combine financial assistance with training programmes and advisory services. One of the institutions that executes this programme if the Rural Development Foundation33.

“System of mutual loans and guarantees”

2.1.5 Do such systems exist? How have they been designed? Do companies and financial institutions use these systems?

At present three mutual guarantee funds are in operation in Poland. These funds are located in Dzierzgoń (Regional Investment Society S.A.34), in Biłgoraj (Regional Development Agency S.A in Biłgoraj35) and Ustrzyki Dolne (Regional Development Agency S.A. in Ustrzyki Dolne36). The common element in their activities relates to three elements, namely: - fund management – the qualifying committee of each fund consists of representatives of the commercial sector, so called “fund participants”, - financial liability for fund liabilities resulting from granted guarantees – a prerequisite for becoming a fund participant is signing a promissory note on it’s behalf, - mutual creation of the funds’ capital base which forms the basis for guarantee activities.

The funds operate at a local level, i.e., within the region of one or a few counties (gminas) – at most a couple of boroughs (powiaty). Taking into consideration their experience to date, it can be concluded that this form of guarantee institutions works. From the point of view of the banks, the means in which the funds operate is unimportant.

“Methods intended to simplify the transfer of companies and their continued existence”

2.1.6. What are the rules (taxes, management) regarding transferring company operating fixed assets?”

1/ Merger of capital companies. In the case of a merger of legal entities, the acquiring company will be exempt from tax on the excess of the target company's assets that it received over the nominal value of shares (stock) taken up by the target company's shareholders (stockholders). A condition for the exemption is that the acquiring company holds a minimum 25% share in the target company's capital. In 32 Agency for Restructuring and Modernisation of Agriculture, ul. Jana Pawła II, 00-175 Warsaw, tel: +48-22 860 29 50, fax: +48-22 860 29 80, http://www.arimr.gov.pl , e-mail : [email protected] , Mr. Mirosłąw Mielniczuk - President 33 Rural Development Foundation, ul. Obozowa 20, 01-161 Warsaw, tel: +48-22 632 00 76, fax: +48-22 632 14 62, http://www.fww.org.pl , e-mail: [email protected], Mr. Piotr Szczepański - President 34 Regional Investment Society S.A., Pl. Wolności 1, 82-440 Dzierzgoń, tel: +48-55 276 25 79, fax: +48-55 276 25 70, e-mail: [email protected], Mrs. Violetta Grzybowska - President 35 Regional Development Agency S.A. in Biłgoraj, ul. Kościuszki 65, 23-400 Biłgoraj, tel: +48-84 686 54 08, fax: +48-84 686 24 92, e-mail: [email protected], Mrs. Irena Gadaj - President 36 Regional Development Agency S.A. in Ustrzyki Dolne, ul. Dworcowa 1, 38-700 Ustrzyki Dolne, tel: +48-13 461 29 98, fax: +48-13 461 21 47, e-mail: [email protected], Mr. Adam Pędzioł - Director

25 the case of a merger of legal entities, revenues in excess of the difference between the price paid for shares (stock) in the acquiring company and the amount received for shares (stock) in the target company are not taxable upon completion of the merger. In determining revenues arising from the sale of shares (stock) in the acquiring company, the shareholder in the company determines his costs in accord with the method used to acquire shares (stock) in the target company (cash, in-kind contribution).

The above provisions also related to companies being merged in order to form a new company. The introduction of these provisions is to adapt Polish tax laws to those in the European Union and EU Directive Nr 90.434 EEC. The purpose of these provisions is to defer tax on capital gains achieved from the merger of companies while at the same time ensuring final taxation in the domicile country of the company being acquired upon sale.

2/ In-kind contributions into limited liability and joint stock companies Income is the nominal value of shares (stock) received in the company in exchange for an in- kind contribution other than an enterprise or its organised part. This provision means that for tax purposes, income is calculated in the moment the in-kind contribution is put into the limited liability or joint stock company.

A revenue cost in the case of taking over shares (stock) in exchange for an in-kind contribution other than an enterprise or its organised part is: a) in a situation when the contribution is either fixed assets or intangible assets – the initial value of the subject of the in-kind contribution updated in accord with separate regulations, reduced by the depreciation allowance made prior to the contribution, b) if the subject of the contribution are shares or stock that have been received in exchange for an in-kind contribution other than an enterprise or its organised part – the nominal value of such shares or stock, c) if the shares (stock) that are being put into another limited liability or joint stock company were obtained in cash – the costs incurred in purchasing or taking over such shares (stock), d) if the subject of the contribution is different than described above – the actual value of expenditures incurred in their purchase, but not accounted for as a revenue cost.

In the case of sale of shares (stock) received in exchange for an in-kind contribution, the revenue cost incurred at sales is determined on the basis of the nominal value of acquired shares (stock); if the subject of the in-kind contribution was an enterprise or its organised part, the value of that enterprise or its organised part based on book value on the day of purchasing such shares (stock).

3/ Depreciation The initial value of fixed assets or intangible assets in case of their acquirement in the form of an in-kind contribution put into a limited liability or joint stock company and determined for the taxpayer on the day the individual elements of the fixed assets or intangible assets were put into the company, no higher though than their market value and under the condition that the aggregate value of the elements constituting the cash and in-kind contribution do not exceed the nominal value of shares (stock) acquired. If the in-kind contribution comes from abroad, the initial value of the individual elements of the fixed assets and intangible assets constituting such a contribution cannot be higher than the nominal value of shares (stock)

26 received in exchange for the in-kind contribution or the market value such fixed assets on the day the shares or stock or taken over.

If case of a change in the legal form of the company, or as a result of a merger or demerger of companies executed on the basis of separate regulations which state that the company formed as the result of such transformation, division or merger enters into all obligations of the transformed, divided or merged company, the initial value of fixed assets and intangible assets is determined on the book value of such fixed assets or intangible assets.

In case of acquiring by means of an in-kind contribution, contribution of an enterprise or its organised part, the initial value of acquired fixed assets and intangible assets is defined as: - the total aggregate value of their market value if the value of the company if greater, - the difference between the price of the acquired company or its organised part or the nominal value of stock or shares compared to the value of assets not being fixed assets or intangible assets if the value of the company is not greater.

Enterprises created as the result of transformations, mergers or demerger of enterprises count depreciation allowances in the same manner as was used in the acquired enterprise prior to the transformation, merger or demerger.

2.1.7. What types of barriers or obstacles exist for transferring companies? Are their any plans to simplify these regulations? lack of information

2.2. Financing growth of developing companies in the new technologies field

“Changes in the tax system to enhance employment”

2.2.1. Does the tax system enhance the creation and keeping of new places of employment? If so, what are the main initiatives and tax incentives? In what form do they exist? Are they efficient?

The local governments are empowered to grant exemptions other than those contained in the law on real estate tax, vehicle tax and forestry tax. With regards to agricultural tax, the local governments are empowered with the authority to grant tax exemptions other than those associated with this tax. The local governments very often grant tax exemptions or preferences for entrepreneurs starting up activities in the region or creating new places of employment. At present work is underway to change the lump-sum tax law on certain revenues achieved by sole proprietorships in such a way as to enlarge the range of persons whose employment will not cause an obstacle to such a tax system being used and will not cause an increase in the tax rate (at present this draft is being reviewed by the Polish Parliament).

2.2.2. Are there plans to allow certain services requiring a substantial effort to be included in the lowest VAT tax rate?

There are no such plans at present.

27 “Methods for supporting research and development activities by SMEs”

2.2.3. Does a system of tax incentives or assistance exist that would encourage research and development activities by SMEs? What criteria are used? DO companies take advantage of these incentives?

The tax regulations presently in force allow entrepreneurs to: 1. deduct the following costs: a) expenditures incurred on research and development, procurement of research results and non-investment implementation costs, b) depreciation write-offs on fixed assets and intangible and legal assets, c) 50% of revenues achieved from the following activities by sole proprietorships: - fees incurred for transferring ownership rights to inventions, integrated circuit topography, trademark or ornamental design from the first owner, - license fees received from the first entity to whom the license is granted during the first year in case of transferring rights to inventions, integrated circuit topography, trademark or ornamental design, - originators and artists taking advantage of copyright laws or similar rights; 2. include as intangible and legal assets development costs incurred by the entity for its own needs and incurred prior to commencing production if: - the product or technology is specifically defined and development costs associated with this are determined in a credible manner, - the technical usefulness of the given product or technology has been properly documented and the decision to implement this made on the basis of such results, - development costs will be recouped from predicted revenues in sales of the given product or technology. 3. deduct investment costs associated with implementation of licenses, patents or results of domestic scientific and development work – does not apply to sole proprietorships and legal entities.

On the basis of data obtained from the Ministry of Finance37, almost 2,500 legal entities took advantage of investment incentives in the year 1997, with almost 5 billion PLN being deducted from pre-tax revenues. The value of post-tax investment allowances was equal to 2 billion PLN. In addition, almost 30,000 sole proprietorships took advantage of investment incentives with pre-tax write-offs amounting to almost 680 million PLN and investment allowances amounting to 147 million PLN.

In conjunction with execution of assignments contained in the “Innovation Policies Assumptions of the Country up to the year 2002”38 schedule, new provisions regarding corporate income tax have been implemented: - a substantial reduction – 10 percentage points – in corporate income tax during the years 2000 – 2004 (from 32% in 1999 to 30% in the year 2000, 28% in the years 2001-2002, 24% in the year 2003 and 22% in the year 2004) has been planned

37 Ministerstwo Finansów, ul. Świętokrzyska 12, 00-916 Warsaw, tel: +48-22 694 55 55, fax: +48-22 826 31 40, http://www.mofnet.gov.pl, Finance and National Economy Department, Mr. Zbigniew Boniuszko - Director 38 „Innovation Policies Assumptions of the Country up to the year 2002”, http://www.kbn.gov.pl/analizy/inno.html

28 together with liquidation of investment allowances. In addition, a further lowering of personal income tax is planned, - increasing the one-time deduction for purchase of fixed assets or improvement of fixed assets from 2,500 to 3,500 as of January 1, 2000, - increasing depreciation rates for all groups of fixed assets as well as giving the possibility to use accelerated depreciation.

The solutions proposed, i.e., a reduction in income tax liabilities and an increase in depreciation are above all directed towards entrepreneurs and will allow them to accumulate the funds necessary to finance investments associated with development, in particular in new technologies and modernisation of production facilities.

“Facilitating capital investments by supporting venture capital systems”

2.2.4. Do “venture capital” funds exist? How do they operate (reinvestment of capital gains, etc.)? Are they run by State / private / foreign investor institutions? Do they operate nationally / regionally? Do they concentrate their activities on certain types of companies? Can their activities associated with increasing management knowledge and experience be evaluated?

On March 21, 2001 an amendment to the Act on Investment Funds came into effect. Up to that moment, only two closed-end investment funds operated on the market whose policies were similar to “venture capital” funds. Taking into consideration that the provisions contained in the law were insufficient for “venture capital” funds, the amendment to the aforementioned law introduced a new type of investment fund – a specialised closed-end investment fund whose concept allows for the creation and management of “venture capital” funds by investment fund societies. In particular, the amendment foresees that specialised closed-end investment funds will be allowed to issue investment certificates not admitted to public trading. In the part related to deposits made by investment funds, much more liberal provisions have been put into place and the loan limits for investment funds have been increased. At the same time the law guarantees the participants in specialised closed-end investment funds the ability to have an influence on investment decisions made by the fund since an assembly of investors - similar to a shareholders assembly in a joint stock company - functions in this type of fund.

The profits of specialised closed-end investment funds can be reinvested. The law also foresees the possibility of paying our fund revenues with out the necessity of remitting investment certificates during the existence of the funds. The method in which the fund distributes profits is individually determined in the fund charter.

Specialised closed-end investment funds are created and managed by investment fund societies acting as joint stock companies domiciled in Poland. The shareholders in investment funds can be both domestic and foreign entities. Specialised closed-end investment funds as well as the investment fund societies managing these funds are controlled by the Polish Securities and Exchange Commission (KPWiG)39.

To date only two applications have been filed with the Commission for the opening of specialised closed-end investment funds, therefore it is difficult to evaluate the scope of

39 Polish Securities and Exchange Commission, Pl. Powstańców Warszawy 1, 00-950 Warsaw, tel: +48-22 556 08 00, fax: +48-22 826 81 00, http://www.kpwig.gov.pl, e-mail: [email protected]

29 activities of these companies, what type of companies they will concentrate on or what influence they may have on increasing knowledge and experience in management.

2.2.5. Do market gaps exist? Does the government intend to fill them and how?

Until the amendment to the Act on Investment Funds came into effect, legal provisions were insufficient for the creation of “venture capital” funds. The implemented amendment foresees the creation of a new type of investment fund – a specialised closed-end investment fund – that could undertake activities similar to a “venture capital” fund.

2.2.6. How would you describe the capital investment culture in your country? Are investor rights sufficiently protected? What types of mechanisms exist on the market that would allow venture capital investors to withdraw?

The Act on Investment Funds regulates legal form, operating methods and investment possibilities of funds. It also foresees Commission supervision over fund and society activities and requirements associated with the funds informing their participants. The law sets high standards for investments that are allowed and investor protection. Open-end investment funds meet the requirements contained in European Economic Committee directive 85/611/EEC dated December 20, 1985 on the coordination of laws, regulations and administrative provisions relating undertakings for collective investment in transferable securities (UCITS).

With regard to investment funds acting in accord with the investment fund law, fund participant rights are protected by provisions contained in the law, in secondary legislature, fund charters that are approved by the Commission as well as the supervision the Commission has on the funds respecting the law and charter.

In accordance with the law on investment funds, an investment society is liable to fund participants for all damages caused by inappropriate performance or non-performance of its responsibilities related to fund management and representation of the fund, unless the inappropriate performance or non-performance is caused by circumstances for which the investment society is not responsible. An investment society's liability cannot be limited by assigning performance of certain responsibilities to a third party. At the same time the law has introduced a provision whereby the depository is required to act on behalf of the fund participants in claims against the society arising from the aforementioned. This provision has been introduced to protect the interests of fund participants and to ensure proper representation before court.

In addition to the civil liability of investment fund societies, the investment fund law also foresees administrative and legal liability of the funds. If the society infringes legal regulations in force, does not fulfil requirements imposed on it by the license or infringes on the interest of the fund participants, the Commission can either revoke the funds license, impose a monetary fine or both.

The Commission can impose these same sanctions on the Society if the investment fund undertakes activities infringing on legal regulations in place, the fund charter or license conditions. It should also be noted that in such cases the administrative fine is imposed not on the fund but on the society managing the fund. This is in order to protect the fund participants who cannot be responsible fro actions undertaken by the fund. Imposing fines on the funds

30 would decrease its assets, and therefore reduce the value of certificates or units held by the participants.

The remittance of investment certificates in a specialised closed-end investment fund is dependent on whether or not the fund certificates are publicly traded. This is because specialised closed-end investment funds can operate in two ways – as a fund whose certificates are publicly traded or as a fund issuing certificates that cannot be publicly traded. Those certificates that cannot be publicly traded though be converted to publicly traded certificates if all issues of certificates are included in such a change. Specialised closed-end investment funds operate on the basis of certificates of such funds being remitted if the fund is liquidated and in the case of non-public funds, if they are purchased back by the fund in order to be remitted.

Withdrawal from an investment in a fund whose certificates are not publicly traded is possible either by means of a civil agreement to sell such certificates or the fund purchasing back its own certificates in order to remit them. Withdrawal from a publicly traded investment fund is possible in the following ways: - sale of certificates on the regulated market, - sale of certificates through a brokerage house if the certificates are not noted on the regulated market, - sale of certificates on the basis of a civil agreement and in accord with the law on public trading of securities.

2.2.7. What are the tax provisions / tax incentives used with regard to funds investing in high-risk undertakings? Have these provisions been effective in supporting development of venture capital activities?

Specialised closed-end investment funds operating as “venture capital” type funds are liable to the same tax regime as other investment funds created on the basis of the Investment Fund law. Provision for holding and trading investment certificates are identical for all types of investment funds. Since investment funds are legal entities, according to the Corporate Income Tax law investment funds are exempt from income tax. All income resulting from participation in the investment fund, including the income from sale of the units of participation or investment certificates at present is exempt from personal income tax. The income resulting from the participation in investment funds is subject to the corporate income tax. According to current regulations, the legal persons who participate in the fund have to pay the tax on the difference between selling price and purchase price of the units of participation or investment certificates.

Bearing in mind that specialised closed-end investment funds have not yet been created, it is impossible to evaluate the impact of present tax provisions on these funds. Taking into consideration though that fund revenues are exempt from corporate income tax, the undertaking of “venture capital” activities by investment funds in accord with the Investment Fund law is much more favourable from a taxation view point then execution of such activities by other legal entities.

3. INNOVATIONS AND RESEARCH.

31 3.1. Access to innovations and research

3.1.1. What type of barriers do innovations face? What steps have been taken to alleviate these barriers?

The following types of barriers in development of innovation can be identified:  internal barriers – associated with innovation activities and processes in place in companies,  external barriers – associated with innovation activities in the business, legal and social environment of companies.

These barriers can be grouped into two categories:

1. Barriers related to research and financing limitations of R & D, including: - relatively low (compared to EU countries) research potential when measured in investment outlays and structure on R & D and amount of scientific and research personnel working. This limits the possibility of developing new technology and knowledge, with subsequent transfer of such findings to companies – in particular to SMEs which have a limited potential for running their own R & D activities, - a domination of university level academics and government sector employees associated with R & D activities in comparison to staff coming directly from companies (opposite than in the EU). As a result of this structure, information flow between the research institutions and the companies regarding new technologies is limited which indicates the necessity to build mutual ties, - limited outlays on research activities. The majority of funding comes from the state budget, with very little input from SMEs and foreign sources, - limited outlays on research work and innovation activities in companies. This is the result of the poor financial situation of many companies, the high cost of capital for loans targeted for financing innovative solutions and limited support from the capital market (venture capital), - insufficient incentive system for small and medium size enterprises to undertake research and implementation work (lack of a strong tax incentive programme for entities running research activities and using new technologies), - high costs associated with filing and obtaining patents (lack of support for SMEs in the form of tax allowances, partial refunding of costs associated with filing and obtaining patents or patent advisory services). At the same time there is a significant inflow of foreign filings which limits self-sufficiency in the fields of inventiveness and patents.

2. Barriers related to institutional infrastructure, connections and innovative attitudes: - a weak financial and organisational infrastructure of institutions supporting the transfer of technologies to the SME sector. This is the result of a lack of coordination of actions associated with the transfer of technology and implementation of innovative solutions. There is a lack of transparency on the innovations and new technology market, - the lack of a network of technological parks that could offer full and advanced services associated with the transfer of technology to the SME sector, in particular with regard to high tech solutions,

32 - a passive approach of scientific research institutions to becoming more commercial in their research and development activities, - a poorly developed local system of transferring technology and a limited scope of cooperation and formal ties between SMEs with research and development institutions, including international cooperation, - low level of interest among SMEs in implementing new and innovative solutions in conjunction with poor marketing analysis and a high level of uncertainty associated with introducing a new product, - insufficient influence of educational programmes on developing a innovative approach at all level of education.

In order to overcome these barriers, government has approved a number of undertakings that are included in the following documents: - “Programme for supporting regional development institutions acting towards the transfer of technology”40 approved by the Council of Ministers on March 4, 1997, - “Government Policy Guidelines for Small and Medium-Sized Enterprises until 2002” approved by the Council of Ministers on May 11, 1999, - “ State Policy Assumptions with regard to Innovations up to the year 2002” approved by the Council of Ministers on December 6, 1999, - “Increasing Economic Innovation in Poland up to the year 2006” approved by the Council of Ministers on July 11, 2000.

These activities are being undertaken in the following fields: 1. Economic solutions: - allowing costs incurred by a company in association with research and development work and purchasing of testing results to be considered a justified operating cost, unless such purchase of such results in a change of proprietary rights or procurement of technical or construction documentation, a prototype, etc., - accounting development work as intangible assets as defined by the accounting law upon fulfilling other requirements imposed by said law, - starting a system of bank loan guarantees for investment undertakings, ensuring implementation of new technologies from State funds by operating through the BGK Credit Guarantee Fund, - implementing export guarantee insurance for research and development work guaranteed by the State Treasury, - introducing investment allowances for companies that have made investment outlays consisting of the procurement and installation of machines or equipment associated with implementing domestic licenses, patents or the results of domestic scientific or research and development work, - implementing changes in the tax regime that will lead to a gradual reduction over the next five years in the corporate income tax from 32% to 22% in the year 2004 as well as implementing changes consisting of increasing depreciation rates for fixed and intangible assets.

2. In the field of science: - making all domestic entities, regardless of their legal status, involved in research work equal in trying to obtain State funds for scientific research. This will allow for the

40 “Programme for supporting regional development institutions acting towards the transfer of technology”, http://www.mg.gov.pl/struktur/DSG/index5_sg.htm

33 commercialisation and privatisation of research and development institutions and as a consequence lead to improved efficiency of scientific research and development work, - introducing additional funding through the Scientific Research Committee41 for undertaking financed from the European Union Fifth Framework Programme for Research, Technical Development and Presentation42 in that part requiring a domestic input. In addition, those domestic projects that do not qualify for such programme funding but are judged by the Commission to be at least good will be entitled to receive lump sum funding to continue their cooperation with foreign partners and subsequently file their applications.

3. Policies associated with development of inventiveness - work has been commenced on simplifying procedures associated with financing research and development as well as investment and implementation projects directed towards small and medium size enterprises, in particular for long- term programmes and the methods in which results from such programmes are later used.

4. Institutional structure - the Agency of Technology has been created which will be responsible for execution of State policy programmes in the field of using new technology and techniques in the economy as well as promoting and supporting the implementation of innovative techniques and technology and commercialisation of research results, promotion of solutions stimulating inventiveness in company activities, - transfer of technology centres, technological parks and business incubators have been set-up adjacent to university institutions to enhance direct cooperation between these scientific research institutions and companies, - 9 centres of improvement have been created to enhance the transfer of technology from scientific institutions to businesses.

3.1.2. What types of structures exist to support the development of innovative systems? Does a pro-inventiveness policy exist? If so, what are the its main goals / priorities / instruments for execution?

The institutional infrastructure for supporting the development of inventiveness is fairly well developed but varies significantly from one region to another and is not connected in one unified, smoothly operating system. It is also not sufficiently funded. At the government level, this structure consists of the following institutions: - The Scientific Research Committee which is responsible for activities in the field of science which constitutes the surrounding environment for the economy, - The Agency of Technology which is responsible for executing State policy programmes in the field new technology, - The Ministry of Economy, which is responsible for innovative activities in the economy.

At the non-governmental level this infrastructure consists of university and college institutions, the Polish Academy of Science institutes, research and development institutions, 41 Scientific Research Committee, ul. Wspólna 1/3, 00-529 Warsaw, tel: +48-22 826 25 02, fax: +48-22 828 53 70, http://www.kbn.gov.pl, e-mail: [email protected], contact person – Mrs. Teresa Mielczarska 42 National Contact Point of the 5 Framework Programme, ul. Świętokrzyska 12, 00-049 Warsaw, tel: +48-22 826 25 02, fax: +48-22 828 53 70, http://www.npk.gov.pl, e-mail: [email protected], Mr. Andrzej Siemaszko – Head of the Point

34 institutions operating at an inter-regional level, regional and local institutions which include transfer of technology centres, technological parks and business incubators with a technological profile (some of these belong to the KSU network) as well as brokerage companies and patent offices involved in transfer of technology and protection of intellectual rights issues. At the end of 1999, 273 various types of organisational centres were operating: - 147 advisory and training centres, - 23 transfer of technology and information centres, - 51 local loan and credit guarantee funds, - 49 business incubators and technology centres, - 3 technological parks.

In Poland, policies associated with innovation are considered to be one of the economic policies. These policies in their scope include the following: - strengthening cooperation within the domestic innovation system, - creating and strengthening the possibilities of implementing innovations – both those associated with technology and technical issues as well as organisational and educational, - optimum use of innovations as one of the main elements of economic growth and causing a stable increase in the number of jobs, - structured technical, technological and quality changes in industry, - taking advantage of international cooperation and the processes of economic globalisation.

The importance of innovation policies is the result of two items: - the role that technical and organisational inventiveness plays in economic growth, - the so called imperfection function of a self-regulating market which in itself cannot assure the proper level, from a social point of view (business competition, regional development), of economic inventiveness in the economy without assistance from the State.

One of the most important goals of innovation policies is development of national and regional systems of innovation, i.e., a system of institutions, capabilities and incentives (tax, loans and other) that will: - increase economic competitiveness and raise the standard of living, - transform a research and development system that is oriented towards national needs, as well as transform an economy based on work, capital and raw materials into an economy based on knowledge, - strengthen the mutual ties between science, technology, the market, state and regional administration as well as non-governmental organisations and educational institutions.

Goals of innovation policies presented in such a manner require the uses of instruments and funds at both a governmental level and non-governmental level such as: - education at various levels, - scientific development through grants and participation in national research programmes, etc., - development of infrastructure serving innovation activities – technological parks, technical service networks for small and medium size enterprises, innovation centres and technology transfer,

35 - development of information networks and centres and specialised libraries, - development of SME advisory services, - development of loan guarantee systems and tax allowances, - introducing legal solutions in the field of protection of intellectual rights, monopoly controls.

One of the means of implementing pro-innovation policies is the implementation of the government programme entitled “Increasing Economic Innovation in Poland up to the year 2006” started last year. This programme assumes certain priorities and sets down an action plan consisting of: - creating an attitude of innovation in society, - creating structures and mechanisms that will support innovative activities, - increasing the efficiency of implementing modern economic solutions, - changing consumption and production models to ones that are more favourable to long-term steady growth.

The execution of this programme should lead to: - changing innovation policies from centralised (nationwide) to regional (local), - increasing the efficiency of the national innovation system, - improving Poland’s position internationally when measuring innovation indexes such as the value of advanced technology sold, the share of such products in overall exports, number of patents granted – both domestically and abroad.

A very important issue for the execution of this programme, in particular with regard to changing social attitudes, is education at all levels starting at: - supporting the development of children and youth interest in technology and science through, - constant education in the field of innovative entrepreneurship, - supporting the participation of small and medium size enterprises in international programmes like the European Union Fifth Framework Programme for Research, Technical Development and Presentation.

An ongoing process of growth and development of modern institutional infrastructure such as innovation and transfer of technology centres, technological and industrial parks, clusters, local segments and in particular institutions supporting the development of highly innovative small companies is of the utmost importance for overall regional development. Those actions being undertaken by the Ministry of Economics aimed at ensuring financing for innovation projects also take into consideration small and medium size enterprises.

Within the framework of the recently completed PHARE-SciTech II Programme, a number of projects supporting innovation in small and medium sized companies were executed. Certain investment analysis and audit tools (TAIT) that will assist consultants in executing technological audits in SMEs have been prepared within the framework of the “Development of a national and regional system of innovation in Poland” project. In addition to economics, legal and management issues, training courses under this programme also included electronic business and the use of the Internet in business. A network called “INNOWACJE – REKIN” was formed by 21 institutions – beneficiaries of the project - within the framework of this project. One of the tasks of this network will be helping the participants to undertake activities associated with implementing innovation in the SME sector, e.g., technological audits and

36 protection of intellectual rights, facilitating access to innovation financing, assisting in the creation and running of companies as well as rendering consultancy services.

Improvement Centres have a significant influence on the national economy. Five of them were created within the framework of the “Preliminary Study and Pilot Programme for implementing Improvement Centres” project under the PHARE-SciTech II Programme.

Other instruments that help in supporting innovation in small and medium size companies are at the disposal of the Agency of Technology. In the year 2000, the Agency granted entrepreneurs preferential loans for a total of 8,050,000 PLN for execution of innovation projects. In addition to financial support, the Agency also runs informational, inspirational, and organisational-advisory as well as promotional activities.

There are also a number of specific projects financed by KBN in which small and medium size companies can participate. In the year 2000, 164 agreements were signed with small and medium size companies for specific projects (37 agreements with small companies and 127 with medium size companies, i.e., more than triple the amount executed in 1999 – 54 agreements).

The Law on Regional Self-government dated June 5, 1998 transferred the responsibility of defining regional development goals, including those associated with supporting technological advancements and innovation, to the regional governments. The Ministry of Economy is actively with regional institutions to demonstrate to them the key role and importance of innovation in regional economic growth. The main instrument in executing goals associated with regional innovation will be an assistance programme to be enacted in the years 2001 – 2002 on the basis of a law on Guidelines for Support of Regional Growth dated May 12, 2000. Regional projects associated with innovation and transfer of technology can also be supported within the framework of this programme. Project proposed by the governors of the regions with the PHARE “Regional and Social Cohesion” programme will be able to obtain financing from domestic public funds.

3.1.3. What steps have been taken to support participation in the European Union RTD Framework Programme ?

Since Poland entered into the Fifth RTD Programme, an active promotional campaign addressed to entrepreneurs, in particular those from the SME sector, is being undertaken to disseminate information on the programme and encourage participation in it. These activities are being executed by various organisations at both a national and regional level. The Ministry of Economy and the Scientific Research Committee are handling activities at the central level. The action strategy and scope of action of the Ministry of Economy with regard to the Fifth RTD Programme has been agreed upon between the Ministry, the Scientific Research Committee and the National Contact Point.

One of the Ministry of Economy assignments was preparing 4 publications on the subject, with one being made available on the Internet. The Ministry of Economy, working through the Polish Foundation for Small and Medium Enterprise Promotion and Development (presently the Polish Agency for Enterprise Development), initiated a programme of financial assistance for those SMEs preparing to participate in the Programme. This assistance consisted of refunding the company participating in the programme and preparing an application for “Exploratory Awards” from the European Commission or a project addressed

37 directly to the CRAFT Programme - 20 companies took advantage of this assistance. In addition to this, the Ministry of Economy organised a series of regional events to promote the participation of entrepreneurs in the Programme.

A National Contact Point for the 5th RTD Programme opened together with a network of 25 Regional and Sectorial Contact Points carries out information and training activities in the form of seminars, workshops and individual meetings. Assistance in creating consortia between companies and universities is given as well as assistance in preparing applications for European Commission competitions.

3.1.4. What methods are uses to support the transfer of technology?

Tools and instruments at both a national and regional level are used in the process of supporting the transfer of technology. Very important are initiatives undertaken by the Agency of Technology: - commissioning a system on sources of new technology and potential contractors for such new technology. This system also contains full information on innovation production companies, modern technology and product projects, institutions and companies seeking technology or partners, - rendering financial assistance in the form of loans, guarantees or co-financing of loans associated with implementation of innovative technologies, - organising an annual competition entitled “Polish Product of the Future” which is addressed towards finding and promoting new innovative technical solutions (solutions associated with healthcare, environmental protection, energy efficiency and improvement of export capabilities are preferred) that are ready to be phased into production, preferably by SMEs. Awards are granted in two categories – “Product of the Future” and “Technology of the Future”, - participation of the Agency in specialised trade fairs where modern products and technology are promoted and the most interesting products ready for production presented, - organising in cooperation with Polish and foreign institutions various seminars and training courses associated with new technologies in various branches, cooperation between companies and R & D institutions, technology management, preparing innovation projects, etc., - expanding international cooperation making and developing contacts with foreign institutions acting in the field of transfer of technology in order to promote Polish solutions.

Within the framework of a programme to promote quality, the Ministry of Economy is undertaking activities aimed at promoting quality control systems that are in accord with ISO series 9000 and 14000 standards. State funds have been allocated towards publishing information that will promote quality control systems as well as towards schooling of entrepreneurs. These activities are also being executed at a regional level by regional centres working on behalf of promoting innovation. A good example of theses activities are regional centres for the transfer of technology, technological parks operating affiliated to universities or closely together with them and running activities associated with education, technological research, market research, preparing projects and products for companies. These centres are all associated in the Polish Business and Innovation Centres Association43. In addition to these

43 Polish Business and innovation Centres Association, ul. Rubież 46, 61-612 Poznań, tel: +48-61 827 97 44, fax: +48-61 827 97 41, http://www.sooipp.org.pl, e-mail: [email protected], Mr. Jacek Guliński -

38 centres, KSU network also plays a significant role by providing training and advisory services for entrepreneurs and promoting business knowledge and the interest of participants in innovation projects.

Technology Transfer Centres that have been created at various universities are a good example of how university level schools are becoming involved in education directed towards technology transfer to SMEs. These centres render a wide range of support services, including education. Below there are a few examples of activities being rendered for SMEs:  Specialised Educational Centre for Integrated Circuits ADEC44 acting as a mandatory education centre and a centre for the transfer of highly advanced technology organises courses and trainings in the field of designing ASIC high scale integrated circuits and offers technical and economic advisory services in this field. The centre is also involved in the design of such circuits and can assist in the preparation of prototypes,  Institute of Electron Technology45 renders technical and economic advisory services associated with optimisation of designs, prototypes and production of electronic equipment. The centre is capable of designing and executing prototypes of integrated circuits as well as organising their production. The institute is also involved in technical and advisory services associated with use of integrated circuits.  The Wrocław Centre for Transfer of Technology at the Wrocław Technical University46 provides training within the framework of the American “Lean Manufacturing” programme as a good practice in the field of production organisation and management,  The Centre for Innovation Transfer of the Construction and Mechanics Institute of the Warsaw Technical University47 has created a Laboratory for Reducing Design and Finishing-up Time. During the past two years, the laboratory has executed 160 orders for 90 customers, of which 95% were from the SME sector,  The Centre for Research Services and Transfer of Technology in Łódź offers, among other services, general advisory services associated with state of technology, current market trends, possibilities of executing joint-venture agreements, sources of finance for technical innovations,  The Transfer of Technology Centre at the Warsaw Technical University48 organises courses for engineers from the fields of industry and services associated with implementation of quality control standards in accord with ISO standards and implementation of European directives in the field of “new technology and environmental protection”. The Centre has also organised a number of industrial-academic seminars dedicated to the transfer of University patents and research results to industry as well as a series of symposiums and conferences during the “VIII International Trade Fair on Business Use of IT Technologies”,

President 44 Specialised Educational Centre for Integrated Circuits ADEC, ul. Koszykowa 75, 00-662 Warsaw, tel: +48- 22 660 71 46, fax: +48-22 825 82 03, http://www.adec.elka.pw.edu.pl, e-mail: [email protected], Mr. Andrzej Pfitzner – Head of the Centre 45 Institute of Electron Technology, Al. Lotników 32/46, 02-668 Warsaw, tel/fax: +48-22 847 15 51, http://www.ite.org.pl, e-mail: [email protected], Mr. Cezary Ambroziak - Director 46 Wrocław Centre for Transfer of Technology, ul. Smoluchowskiego 27, 50-372 Wrocław, tel: +48-71 320 33 18, fax: +48-71 320 39 48, http://www.wctt.wroc.pl, e-mail: [email protected], Mr. Grzegorz Gromada – Head of the Centre 47 Centre for Innovation Transfer of the Construction and Mechanics Institute of the Warsaw Technical University, ul. Narbutta 86/12, 02-524 Warsaw, tel/fax: +48-22 848 33 79, http://imik.wip.pw.edu.pl/OTI/, contact person – Mrs. Helena Kowalewska-Mróz 48 Transfer of Technology Centre at the Warsaw Technical University, ul. Koszykowa 80, 02-008 Warszawa, tel: +48-22 660 71 66, fax: +48-22 660 71 67, http://www.ctt.pw.edu.pl, e-mail: [email protected], Mr. Władysław Włosiński - Director

39  The Consortium of Consulting Companies operating under the auspices of the Technical University of Warsaw consists of – The Fine Mechanics Institute, MSC Software and ASP Artistic Agency. These companies can ensure customers (including those from the SME sector) full service including the technical design of equipment, proposal regarding aesthetic design and preparation of software. Services that are rendered are inexpensive and high quality.

A slightly different example of “good practices” is another initiative by the Technical University of Warsaw, namely the Centre for Business Development – an academic business incubator directed towards commercialisation of innovation undertakings. The goal of this institution is to assist persons from the academic community in setting-up and running their own technological companies. The main message of this initiative is that success in the process of technology transfer is dependent on the personal engagement of the person and the person’s responsibilities for using the results of scientific research work in business activities.

About 32,000 persons have been educated in implementing quality systems. In addition, 99 seminars in which about 4,600 people took part have been organised and a series of publications entitled “Design and Implementation of Quality Control Systems in accord with ISO 9000 and ISO 45001 Standards –Examples of Practical Solutions” and encompassing 45 titles has been published. At present 455 companies including small and medium size enterprises are actively participating in the Programme as well as 200 laboratories. To date, 256 companies and 93 laboratories have obtained quality system certificates.

In accordance with the government programme entitled “Increasing Economic Innovation in Poland up to the year 2006”, a significant effort is being made to create a pro-innovative attitude by continual education in the field of innovation entrepreneurship. This programme is being implemented at all education levels. In addition, children and youth are being influenced into becoming interested in technology and science. The educational institutions are best fit for this type of education at a national level due to their ability to conduct such education in the fields of innovation and entrepreneurship in a systematic manner and are therefore mentioned in the programme. These institutions, in particular university level schools, have the proper staff to ensure the appropriate educational level and methodology. Certain university level schools, in particular the technical ones, have prepared proposals for students consisting of three lectures that the students can choose between – management of small and medium size companies, transfer of technology and marketing and management in small and medium size companies with particular emphasis on transfer of technology.

3.1.4. Are methods in place to promote cooperation between academic institutions, research centres, large companies and SMEs?

Methods to promote cooperation between academic institutions, research centres, large companies and SMEs are closely tied to initiatives associated with associating entrepreneurs with research and development centres, financial support for implementation of innovation technologies in companies – in particular in the SME sector, presentation of modern technical solutions ready for implementation and promoting cooperation between various parties in the field of technology transfer at trade fairs and expositions are being undertaken by the agency for Technology on behalf of government.

Also regional activities being undertaken by Technology Transfer Centres, Business Incubators and Technological Parks, all of which render schooling and research services for

40 companies interested in innovations, should be noted. The purpose of creating these centres was to facilitate the transfer the results of research activities being carried out by specialised research institutes and university level schools directly to customers and to commercialise such solutions.

3.1.6. Have technological and industrial parks as well as business incubators been created? What results have they achieved to date?

Technical parks have been formed based on initiatives from the academic community and local authorities. The Poznań Science and Technology Park49 has been formed within the auspices of the Adam Mickiewicz University Foundation. The park is located on about 3 ha of land and uses buildings having a total surface area of 700 m2. The Chemical Synthesis Experimental Plant, the Technology Centre of the Chemistry Department of the Poznań Adam Mickiewicz University and the Archaeological Research Centre have been put into operation. In the near future the New Materials Experimental Plant, The Horticulture Production Experimental Plant and the Environmental Protection Laboratory will be put into operation together with a waste utilisation plant. In 1998 the Park became a member of the International Association of Science Parks. Together with the municipal authorities, the Park has put out a publication describing what the academic community has to offer to business and society.

In the years 1999 – 2000, the Poznań Science and Technology Park of the Adam Mickiewicz University Foundation was active in many different areas: - research activities (chemistry and archaeology). In this matter, the Park has carried out research on organosilicon on the basis of a KBN grant, has undertaken its own research activities in this field, taken advantage of research grant from the Deguss company, undertaken archaeological within the “Centre for Archaeological Research” and technical research within the framework of the PHARE SCI TECH II Project Improvement Centre, Centre for Silicon Chemistry, - activities undertaken for small and medium sized companies (related to chemistry) were based on continued long-term contracts and were associated with supplying various supplementary products, analysis’, waste re-circulation, technical improvements, chemical synthesis for large chemical companies, preparing low volume chemical processes for chemical plants, - service activities in archaeology consisted of rescue work associated with construction of gas pipelines and motorways, - consulting and advisory services work for the R & D sector, SMEs and transfer of technology was concentrated on the following: - operating a contact point for the Fifth EU Framework Programme as well as other activities – information days, seminars, training courses, - publishing bulletins and creating a regional network, - obtaining a grant form the Fifth EU Framework Programme for operating Innovation Relay Centre West Poland, opened on July 1, 2000, - Obtaining a PHARE SCI TECH II grant for a “Regional Innovation Network” and rendering activities associated with opening a consultancy point, creating a database – offers from the Wielkopolska Academic Community (issued on CD), organised two seminars and preparing materials for them,

49 Poznań Science and Technology Park, ul. Rubież 46, 61-162 Poznań, tel/fax: +48-61 822 73 69, http://www.amu.edu.pl/fundacja/park.html, e-mail: [email protected], Mr. Bogdan Marciniec – Head of the Park

41 - participation in preparing a strategy for the Wielkopolska region, participation in the “Science for Business” exposition and other events held in conjunction with the 72nd Poznań International Trade Fair (June 2000) during the International Transfer of Technology days. - work has been commenced on a new office building and storage facilities.

The Poznań Science and Technology Park is a member of UNISPAR and the SPICE society.

The Wrocław Technology Park50 is a joint stock company registered in 1998. The founding shareholders are the State Treasury, the City of Wrocław, Wrocław universities (Wrocław University of Technology, University of Wrocław, University of Agriculture), Foundation for Development of the Wrocław University of Technology, Lower Silesian Chamber of Commerce, “DOLMEL” Ltd. Investment Company and Bank Zachodni S.A. The Park is located on about 70 ha of land. The preferred fields of activities are: - telecommunication, electronics (including optical electronics and microelectronics), - computers and data processing, - food and agricultural processing, genetic engineering, molecular biology, - medical devices and materials, pharmacology, - environmental protection and power engineering, - chemistry, new materials, plastic materials, - control engineering, laboratory equipment, precision mechanics, - cryogenics, vacuum and high pressures technologies.

During the period July 1999 – December 2000, the Wrocław Technology Park undertook a number of activities: - attaching supplementary information to the filing from the Lower Silesian Regional Government Office to the Minister of State Treasury regarding transferring 45 ha of land from the State Treasury in order to execute the regional strategic plan entitled “Wrocław Technology Park”, - preparing a business plan for the Wrocław Technology Park company, - signing a land management agreement for the Wrocław Technology Park with its owner – the State Treasury Agricultural Land Agency - increasing the share capital of the company by issuing series “B” shares, purchased by Wrocław University of Technology, University of Wrocław, University of Agriculture and the City of Wrocław, - promoting the Wrocław Technology Park by taking part in international investment fairs, advertising in publications aimed at foreign investors, putting out a prospectus on the Park, - preparing, announcing and executing a tender for the sale of land located within the Wrocław Technology Park, - as a result of the tender, the first 4 buyers purchased almost 7 ha of land and one person acting as a sole proprietorship plans to build buildings to undertake activities associated with electronics, the Internet and power engineering control systems.

50 Wrocław Technology park, ul. Powstańców Śląskich 95, 53-332 Wrocław, tel/fax: +48-71 780 40 36, http://www.technologpark.pl, e-mail: [email protected], Mr. Marek Winkowski - President

42 Work is currently underway to create technology parks inside of special economic zones. The Kraków Technology Park51 occupies 66 km2 of land and encompasses the technological parks of the Jagiellonian University, the Kraków University of Technology and the industrial park adjacent to the “Tadeusz Sendzimir” Steelworks. It is a typical example of a polycentric science and technology park. The preferred areas of activity in the park are: - IT systems and telecommunication networks, - material engineering, - healthcare and medical engineering, - bio-technology - environmental protection and non-conventional sources of energy, - electronics (including optical electronics and microelectronics), - metering and testing equipment.

The purpose of the Park is to create a bridge between the academic community and industry and to facilitate the exchange of know-how between the academic community and industry through information activities, promotional activities and schooling as well as assistance in implementing advanced technologies in industry located in South-eastern Poland. In March 1999 the first permit for running business activities was granted. This permit was for designing of IT systems. Between July 1, 1999 and June 30, 2000 the Advanced Technology Center in Krków granted four subsequent permits for operation in the Kraków Special Economic Zone - Kraków Technology Park. These new investors were: - RR Donnelly Polska Sp. z. o.o (typography), - Pfaffenhain PL. Sp. z .o.o (precision mechanics), - Motorola Electronics Polska Sp. z. o.o.(computer programming), - Bumatech S.A.(construction). - AMK Kraków S.A.(design of industrial equipment), - ComArch S.A. (computer programming).

Total planned investments in the Kraków Technology Park will amount to over 380 million PLN and over 2,300 people will be employed there.

The managing Board of the Centre for Advanced Technologies in Kraków decided to extend the hitherto existing investment offer in the Zone by a proposal for small and medium size enterprises. Taking into consideration the most important objective, the establishing of the Special Economic Zone of Kraków – creation of the Technological Park in order to speed up the restructuring of the region economy with utilisation of the research potential of the scientific circles of Kraków, it would be much desired to have in this zone these companies, which are most innovation driven, i.e. small and medium size companies from the advanced technologies sector. In order to accomplish this objective the Centre for Advanced Technologies plans the construction of the Business and Innovation Centre "Copernicus" – a complex of modern objects (for sale or for rent), designed for office, project, and research activities. The object, with the area of 6,500 m2, will be situated on the terrain, handed for the Kraków Technology University for perpetual usufruct. Such users like companies and research institutes, which represent the advanced technologies sector, are welcomed. The preferred type of activities includes: informatics, telecommunications, electronics, biotechnology, and protection of the environment. The project will be executed by the Centre for Advanced Technologies, and by a private investor. Taking into consideration the character

51 Kraków Technology Park, ul. Mrozowa 20a, 30-969 Kraków, tel: +48-12 428 4980/81, fax: +48-12 422 65 25, http://www.czt.cc.pl, e-mail: [email protected], Mr. Krzysztof Krzysztofiak - President

43 of the undertaking, aimed at supporting small and medium size companies, and at facilitating them technology transfer, the Centre will try to bring into the investment also the local government institutions. On the area of the Business and Innovation Centre "Copernicus" should be localised an "Business Incubator", its creation, however, will depend on financial support from institutions responsible for entrepreneurship support in the region.

Preparatory works for creation of the two-zone technopark (with its offices in Toruń and Grudziądz) begun in 1998 from the initiative of the Voivodship (provincial) Office and of the "Nicolas Copernicus" University (UMK) in cooperation with the Regional Development Agency in Toruń (TARR)52, and with partners from France and Spain, thanks to financial resources obtained from the European Union. The technological park in Toruń will be situated on areas of the existing companies, which operate mainly in warehousing sector. The Park objectives are concentrated, among others, on create greater competitiveness of local companies, create an advanced techniques centre, bring out demand for new technologies, facilitate access to them, and to change management orientation from production driven to marketing driven. Toruń Regional Development Agency S.A (joint venture company) together with the UMK, after accomplishing project works, begun in June 2001 the 1st stage of construction of the UMK Technology Transfer Centre, financed from Phare, budget and TARR resources. The Centre project provides for construction of an office and production complex, and for adaptation of the existing object (to be accomplished until 2003).

At present are developed initiatives in order to start activities of the Technological Park in Lublin and of the Warsaw Technological Park.

Business incubators are a form, proved worldwide, of promotion and support for newly created companies and for new job creation. "Business Incubator", as one of the elements of the system of institutions, which actively support entrepreneurship, complements the local infrastructure, which is the base for further economic development of the region. One of many examples of business incubators is Innovation and New Technologies Incubator in Płock53. Within this incubator structures there are companies which supply modern technologies and equipment for refineries and the petrochemical industry, companies, which elaborate and implement new, highly specialised research techniques of materials used in industrial installations, and companies, which implement new technologies in the field of automation and electronics.

Business Incubator "IN-MAR" in Mielec54 may serve as another example. It is an independent organisation unit of the Regional Development Agency MARR S.A. in Mielec. The Incubator was created in 1992, as one of the first in Poland, and in 1997, within its structure was created the Technology Transfer Centre. Its model allows a comprehensive approach to business incubation. It offers help for five key areas for the development of small companies: - training and consultancy, which prepares potential entrepreneurs to carry on activities, and which support them during the first period of their functioning on the market, - financial help accomplished in the first period within the internal loan and leasing fund (both funds were liquidated since they lacked legal grounds), and at present the Incubator

52 Toruń Regional Development Agency S.A., ul. Kopernika 4, 87-100 Toruń, tel: +48-56 622 45 01, fax: +48- 56 622 28 99, http://www.tarr.org.pl, e-mail: [email protected], Mrs. Ewa Rybińska - President 53 Innovation and New Technologies Incubator in Płock, ul. Targowa 16, 09-400 Płock, tel/fax: +48-24 268 33 39, Mr. Krzysztof Lewandowski – Director, 54 Business Incubator "IN-MAR" in Mielec, ul. Wojska Polskiego 9, 39-300 Mielec, tel/fax: +48-17 778 78 22/24, e-mail: [email protected], Mr. Andrzej Leyko - Director

44 helps to obtain support in external institutions (banks, leasing companies, credit lines, bank-type funds), - offer of production accommodations with facilities, with the area from 50 to 350 m2, which may be rented on preferential conditions, - support in technology transfer, technology consultancy and mediation in contacts with scientific institutions, - joint promotion, organisation of fairs and meetings.

Incubator has two modern objects, build from scratch, with the total area of 5,160 m2, situated in the area of the Special Economic Zone "Euro-Park Mielec", which constitutes the industrial centre of the town. Until now, a total of 65 companies, which created about 550 jobs, used its help. At present, in the objects exist 23 companies, 10 of which are recently created ones. Approximately 20 external companies cooperate permanently with the incubator, using its infrastructure, trainings, consultancy and information.

The Lublin Development Foundation financed creation of the business incubator in Puławy55. The task of this incubator is to support the local small and medium size companies with technology, consultancy and information. It offers for rent an area of more than 2,500 m2. 30 entrepreneurs use, at present, the help offered. The largest area rented by a company has 400 m2, the smallest – 15 m2. The main objective of the Incubator, and the measure of its activities, is to accompany enterprises until the stage, when they became mature and may survive on their own on the market. Incubator helps small companies to overcame such weak points as lack of financial reserves, underinvestment, lack of skills necessary to obtain success on the market. The Incubator aims at guaranteeing the survival of companies by evaluation of new economic undertakings, economic and financial consultancy, offering of common area in order to carry on economic activities, facilitating access to office and administrative services, and the use of such equipment as fax, copier, or computer.

Another form of support for entrepreneurship in areas dominated by the traditional industry is constituted by industrial parks. The initiative to create a pilot industrial park on the area of former Katowice voivodship took place within the Government's contract for this voivodship. Large post-industrial areas remain as the result of the restructuring carried on in the region. They need a re-development, effective utilisation of the remaining property, and intensification of activities oriented for development of technologically advanced industries. Creation of an industrial park on the area of the coal mine "Centrum – Szombierki", at present under liquidation, aims at restructuring of the property, restructuring of employment and innovative measures in order to attract such companies, which until now have not been present on the Upper Silesia market, among others, with the objective of diversification of production structure and of joint undertakings in new sectors.

3.1.7. What actions are planned or have been undertaken to promote the use of new technologies and e-business?

Information technology plays an important role in the economic growth of the country. Poland has very good traditions in the field of information technology, significant intellectual potential, highly skilled people and a substantial number of companies, in particular small

55 Business Incubator in Puławy, ul. Mościckiego 1, 24-110 Puławy, tel/fax: +48-81 887 64 52, http://www.fpcp.org.pl, e-mail: [email protected], Mrs. Halina Mączka - Director

45 ones, which have production at world-class levels. The optical electronics sector can serve as an example.

An Electronic Data Interchange Centre has been created in Poland (Centrum EDI - Polska56). Its main purpose will be to implement and promote Electronic Commerce procedures, including EDI, in Poland with particular emphasis on small and medium size companies. The CEDIP Committee, in which ATT is a member, also consists of representatives from government institutions, the business sector (industry, trade, transport, banks), non- government organisations, chambers of commerce and others whose goal is to cooperate in the rationalisation of business procedures using e-commerce solutions.

The Committee for Rationalising Business Procedures – POLPRO57 – has been formed within the Polish Chamber of Commerce (KIG). The purpose of this committee is to promote procedures associated with e-commerce and e-business as well as EDI among the members of KIG, in KIG publications and setting up and maintaining Web page containing up to date information related to rationalising business procedures and the use of EC/EB/EDI. The Committee also runs advisory services and schooling associated with rationalisation of business procedures using e-commerce, coordinates and organises cooperation with domestic organisation interested in promoting EC/EDI in Poland and abroad.

One of the planned activities of the Committee is preparing parts of a draft document being prepared by the Ministry of Economics entitled “Partial Strategy for Development of a Information Society in the years 2001 – 2006”. The parts being prepared are entitled “Document and Electronic Commerce” and “Development of the IT Market”. One of the tasks defined in the draft strategy states that in order to create new places of employment based on possibilities arising from development of the IT market, closer cooperation between research institutions and entrepreneurs (Improvement Centres) is needed to create small and medium size companies operating in IT and telecommunication niches.

At present work is under way to sign a preliminary agreement with UNIDO in order to start preparations for starting a programme together with other Central and Eastern European countries aimed at increasing company quality and productivity through the use of IT technology.

3.2. Better use of patents

3.2.1. Are steps being taken to increase the number of registered patents?

The Patent Office of the Republic of Poland58 plays a very important role in the protection of intellectual property rights by publishing in the Internet a database called “ArsPatent” containing information on filed innovations and utility models, patents granted and protected rights as well as trademarks registered in accord with domestic procedures and the Madrid Convention. The Patent Office disseminates information related to Polish and foreign patents to 24 information centres in the country, runs education courses associated with procedures for obtaining exclusive rights and methods of using the information contained in the patent

56 EDI Centre – Polska, ul. Czackiego 3/5, 00-040 Warszawa, tel/fax: +48-22 827 02 44, http://www.ow- simp.home.pl/CEDIP.htm, e-mail: [email protected], Mr. Jan Salomończyk - Chairman 57 Committee for Rationalising Business Procedures – POLPRO, http://www.kig.pl/kom_racjonalizacji.html 58 Patent Office of the Republic of Poland, Al. Niepodległości 188/192, 00-608 Warsaw, tel/fax: +48-22 825 80 01, http://www.uprp.pl, e-mail: [email protected], Mrs. Marianna Zaremba – Director, http://wwwarsinfo.pl/arspatent

46 databases. The Patent Office gives preferential treatment to individuals as well as small and medium size enterprises by means of deductions or exemptions in fees for filing inventions or utility models for protection.

3.2.2. What is the level of use of patents by SMEs in your country?

In 1998, about 8% of all patents and about 41% of all registered trademarks granted in Poland came from the small and medium enterprise sector.

47 4. VISIBILITY OF ASSISTANCE SERVICES

“ Enhancing services for companies, in particular for SMEs and increasing their visibility and presence by uniting advisory and information services and creating Full Service Advisory Points. Implementing systems of periodic evaluation and monitoring.”

4.1. Please describe the types of support and assistance services that exist in your country. Are these services the same countrywide? Are methods in place to help in development of these services in certain regions?

In the year 2000 Polish small and medium size enterprises were able to take advantage of various types of assistance. Funds for development of the SME sector came from both the State budget (5,845,760 PLN) as well as from the PHARE STEP-IFE programme funded by the European Union (2,984,642 PLN). These funds were used to increase the availability of advisory, educational, informational and financial services for entrepreneurs (as defined in the Commercial Activities Law dated November 19, 1999) in the entire country. The following instruments were made available to entrepreneurs in the SME sector in accord with provisions contained in the document entitled “Government Policy Guidelines for Small and Medium- Sized Enterprises until 2002”:

Counselling and Advisory Centres (PKD)59 This project was directed towards small and medium size enterprises as well as persons just commencing commercial activities. The beneficiaries of this project could take advantage of free of charge advisory services associated with the administrative and legal aspects of running commercial activities (so called “start-up” packages) as well as information services on available sources of outside finance. In addition, information on other specialised services available at full or partial charge was available as well as information on conditions that must be met to take advantage of these services. These services were rendered in 48 PKDs located throughout the country and 39 of their branches. The aforementioned funds were sufficient to render 20,594 services for a total of 19,800 people. The services that were met with the greatest interest were those associated with sources of finance for commercial activities and the “start-up” packages (20% each) as well as informational services regarding access to various services by SMEs (19%). In addition, legal advisory services were also very popular (14%) as were financial advisory services (12%).

In addition, 40 of the PKDs and 38 of their branches rendered free of charge IT advisory services associated with using IT technology and the Internet in running commercial activities (these services were rendered using computer equipment). 84% of all recipients of this service (a total of 1,058 clients) were active entrepreneurs; the remaining 16% were people just starting commercial activities. In total, 8,928 hours of services were rendered. The PKDs were and are (since many of them despite losing grants continue their activities) a type of full service advisory points were entrepreneurs are guided step by step from very simple general advisory services to much more complex services and finally to the search for a strategic investor.

Advanced Advisory Services60 This project was aimed at small and medium size enterprises. The beneficiaries of this project could take advantage of subsidised funding (up to 60%) of advanced advisory services. A

59 Counselling and Advisory Centres, http://www.parp.gov.pl/ksu, e-mail: [email protected] 60 Advanced Advisory Services, http://www.parp.gov.pl/ksu , e-mail: [email protected]

48 total of 214 services for 152 entrepreneurs were rendered within the framework of this project. The greatest interest was in sector specific advisory services (54% of all services), in particular those associated with quality control. Advanced services were available in 22 regional offices belonging to the KSU network.

Refunding of ISO Costs61 This project was aimed at small and medium size enterprises. The beneficiaries of this project could take advantage of subsidised funding of specialised advisory services and training in relation to implementing ISO based quality control standards. 125 companies took advantage of this project. Of these, 113 implemented an ISO 9000 quality control system, six implemented an integrated system, three a sector specific system and three an ISO 14000 system. The project was met with tremendous response. Almost 460 properly completed applications were filed in the appropriate time. Unfortunately due to funding limitations over 300 companies did not receive grants or subsidies. The refunding of costs associated with ISO was handled by the Polish Foundation for Small and Medium Enterprise Promotion and Development.

Training Refunding Centres (PRS)62 This project was aimed at small and medium size enterprises. The beneficiaries of this project could take advantage of subsidised funding – up to 60% - of the costs of training rendered by any contractor and associated with company management (management techniques, management competencies, quality control, management marketing, financial management, human resources management, law, foreign trade, conditions for running commercial activities in Poland and the European Union). A total of 8,723 people (of this – 4,270 women) from 4,757 companies took advantage of this refunding. 30 regional KSU offices – two in each voivodship, handled the refunding of training costs. The Kujawsko-Pomoskie voivodship did not have its own refunding office and therefore was serviced by offices in neighbouring voivodships.

A cycle of free of charge conferences for business organisations regarding available finance sources for SMEs63 From September 5th to November 9th 2000, 32 conferences (two in each voivodship) in which 2,492 people (representatives of business organisations and entrepreneurs) took part were organised. During these conferences various sources of outside finance for entrepreneurs were presented – commercial instruments for financing business activities together with an evaluation of their attractiveness for entrepreneurs, public business development funds and foreign donor programmes.

In the year 2000, 3,511 entrepreneurs took advantage of services co-financed by the PHARE STEP-IFE programme. In total, 880 various services were rendered to these entrepreneurs, such as:

Services of a Financial Nature64 This project was aimed at small and medium size enterprises. The beneficiaries of this project could take advantage of subsidised funding of specialised advisory, training and information services directly associated with finding and obtaining outside sources of finance for their 61 Refunding of ISO Costs, http://www.parp.gov.pl/ksu , e-mail: [email protected] 62 Training Refunding Centres, http://www.parp.gov.pl/ksu, e-mail: [email protected] 63 Series of conferences on available finance sources for SMEs, http://www.parp.gov.pl/ksu, e-mail: [email protected] 64 Services of a Financial Nature, http://www.parp.gov.pl/ksu, e-mail: [email protected]

49 undertakings. Funds equivalent to 299,512.94 PLN (84% of the project budget) allowed 560 entrepreneurs to take advantage of 207 advisory services and 11 training courses. These services were available in 15 regional advisory centres, of which 11 belonged to the KSU network.

Advisory and Training Services65 This project was aimed at small and medium size enterprises. The beneficiaries of this project could take advantage of subsidised funding of specialised advisory services and training in 15 centres located across the country. In total 2,951 entrepreneurs took advantage of this project and for whom 393 advisory services were rendered and 269 training services. In total, 1,189,906.33 PLN was used (91% of the project budget).

4.2. Do information centres have databases that contain information on companies operating in other sectors and do they make this information available to other companies to enhance cooperation between them?

Information centres belonging to KSU located throughout the country, the Euro Info Centres (12 centres) and Business Information Network (BIN)66 - 21 centres all have databases containing information on companies operating in various sectors and in various parts of the country that are constantly being updated in order to facilitate cooperation between companies. This cooperation can be in the form of business contacts between the companies or mutual participation in projects that are subsidised both domestically and abroad. The information contained in the databases, aside from typical contact information, also includes data on company employment, level of annual turnover, description of company activities, expectations with regard to a potential partner and proposed forms of cooperation. This data serves as the basis for entering so-called cooperation profiles of companies into European cooperation databases like EIC, BC-Net, BRE, Kompass, etc. Services consisting of entering company data into the database or searching for possible partners are fully or partially charged for.

Foreign proposals for cooperation with Polish companies are also published in various types of bulletins and publications aimed at entrepreneurs. The activities of the Euro Info Centres can serve as an example of the types of activities that are undertaken to put companies into contact with each other. These centres take advantage of the following methods: - web pages – a database of foreign cooperation proposals (about 200), - the Euro Info for small and medium size enterprises bulletin – a list of foreign cooperation proposals (about 240 proposals are chosen annually in the general and regional bulletins – a run of 2 to 3,000 per month), - gaining the participation of about 60 – 100 Polish participants annually in various types of cooperation fairs such as Europartenariat (e.g., Vienna – 56, Potsdam – 64, Aalburg – 32), - the VANS intranet – obtaining foreign cooperation proposals and distributing Polish ones (12 for the 12 EICs, 300 profiles obtained from the database, 100 Polish profiles sent-out each month), - the BRE database (30 – 50 Polish proposals per month), - the Commercial and Trade Departments of Polish Embassies (40 proposals obtained, over 100 sent-out each month), - foreign Chambers of Commerce (40 proposals obtained, 25 sent-out),

65 Advisory and Training Services, http://www.parp.gov.pl/ksu, e-mail: [email protected] 66 Business Information Network, http://www.uslugi-ksu-bin.pol.pl, de-mail: [email protected]

50 - local partners – obtaining proposals from Polish companies and distribution of foreign proposals or just distribution of foreign proposals (40 proposals obtained, 250 sent-out), - countrywide, regional and local media – distribution of foreign proposals (run of over 10,000), - cooperation events such as Interprise and IBEX – in total about 700 companies participated.

5. PUBLIC ADMINISTRATION

5.1. How does cooperation between the various participants in the process (national, regional and local administration as well as agencies and various support institutions) and between various areas of activities (entrepreneurship, regional activities, education, research) function?

Since 1999, i.e., when local government and administration reforms were initiated, SME development policies have started operating under a new regime. Creation of the regional sector of public administration in the form of large voivodships with significant self- government autonomy meant the decentralisation of public tasks and creation of new entities responsible for overall polices and growth. These entities are the voivodship local governments that, according to the law, are responsible for – among others – creating conditions for economic growth and creation of a work market. At the same time, the gradual process of going away from a centralised, sectorial method of running the country to a territorial model together with creation of new instruments and procedures that will help in the formation of regional policies (state and local).

Starting in 1996, the National SME Services Network (KSU) has been developing. Its creation was initiated by the Polish Foundation for Small and Medium Enterprise Promotion and Development (presently the Polish Agency for Enterprise Development). The network currently consists of 153 regional offices (business assistance centres, entrepreneurship support centres, regional development agencies, employer organisations, research and development institutions, foundations and associations). The goal of the KSU is increasing the competitiveness of Polish SMEs by supplying them with high quality advisory, training, information and financial services thereby preparing them better for Poland’s integration into the European Union. The KSU network is actively involved in activities associated with development of entrepreneurship and financed from foreign donor funds like PHARE and as of the year 2000 by the Polish government on the basis of the document entitled “Government Policy Guidelines for Small and Medium-Sized Enterprises until 2002”. Aside from tasks defined by PARP, the centres execute their own assignments and actively participate in tasks initiated by local governments. Many of these centres have taken part in the creation of regional development strategy plans as well as participated in the execution of regional business development programmes.

5.2. Has government undertaken steps towards simplifying the business environment, in particular administrative procedures? Do companies have adequate information on regulations?

51 The government for the past two years has been making efforts towards simplifying the business environment, including administrative procedures. The following actions aimed at simplifying the administrative procedures required to run commercial activities have been included in governmental documents: - limiting social and administrative burdens associated with employing people and giving greater freedom to the parties to negotiate and agree mutual obligations, - simplifying access to public procurement, - introducing simplifications in customs, transit and border procedures for Polish foreign business trade, - strengthening the pro-investment character of the tax system, - simplifying tax reporting, - implementation of legal provisions aimed at making leasing more readily available.

Certain customs procedures in foreign trade between companies have been simplified and the first stage of changing legal provisions to facilitate easier leasing has been taken (the Lease Agreement has been added to the Civil Code).

Activities aimed at simplifying regulations are being coordinated by the Ministry of Economy and are being undertaken by the De-bureaucratisation of the Economy Group as well as within the framework of work being executed in conjunction with regulatory reforms being undertaken as a result of Poland entering into the OECD. The purpose of these reforms is to prepare regulatory and non-regulatory instruments that will be easier to understand, simpler and more effective, at the same time being less expensive. One of the regulatory categories are procedural regulations (official and administrative procedures used by governments to gather information and interfere in individual economic decisions). These procedures have a significant influence on the output of the private sector. Reforms are aimed at modernising and simplifying those procedures that are required and eliminating those that are no longer necessary.

A special group – called the Group for Legal Regulatory Quality Control – has been formed on the basis of a decree passed by the Prime Minister on September 25, 2000 (decree No 68) and whose main responsibilities are: - preparing a draft project of changes in legal regulations that should be carried out in Poland, - preparing an appraisal of the impact legal regulations based on OECD standards will have, - executing an analysis of legal regulations in place with emphasis put on regulatory transparency, equal treatment of entities, proper use and efficiency, - preparing an action plan proposal for state administrative organs to execute as a result of the findings of the aforementioned analysis, - preparing a proposal of actions to be undertaken to coordinate state administration activities in the field of regulatory reforms.

The following work has been completed in association with regulatory reforms in Poland: - a plan for executing regulatory reforms in Poland has been accepted, - a document entitled “Draft Programme for Regulatory Reforms in Poland and their relation to economic activities” has been accepted and approve by the Chairman of the Group for Legal Regulatory Quality Control – Deputy Prime Minister Janusz Steinhoff,

52 - a Polish language version of the OECD publication entitled “An Appraisal of Regulatory Effects. Experiences in OECD Countries” has been published by the Economic Strategy Department of the Ministry of Economy in conjunction with the OECD, - a regulatory effects appraisal draft has been prepared, - a proposal for implementing the results of the regulatory effects appraisal into the legal system has been prepared.

In addition, work associated with a review of regulatory reforms in Poland is underway and the following actions have been undertaken: - a response to an OECD questionnaire has been prepared and forwarded on February 28, 2001, - an OECD mission visit to Poland was organised between April 2nd and April 6th 2001 during which about 70 meetings with government, parliamentary, business association, employer, consumer, trade union, academic and regulatory office representatives took place, - a time-schedule for further work associated with the review was prepared: - agenda for the OECD to present subsequent drafts of reports prepared on the basis of responses given to the questionnaire and during the OECD visit on the various regulatory reforms occurring in Poland. - an agenda for so-called “exams” for the individual parts of the report to be conducted during visits to Paris as well as a deadline for final completion of the report.

With regard to knowledge of legal regulations by the business community, the government in preparing the draft of the Commercial Activities Law consulted with entrepreneurs in its preparation in order to ensure that this group of people becomes closely acquainted with these regulations.

In addition, changes to the following existing laws are in Parliament or have already been passed: - Labour Code, - Public Procurement Law, - Flat-rate Income Tax.

The knowledge of laws associated with running commercial activities among entrepreneurs varies and in most cases is insufficient. In the opinion of most administrative workers, the owners of companies rarely take advantage of services offered by specialised companies (legal offices, accounting offices and others). The government has undertaken certain specific actions aimed at making entrepreneurs better acquainted with legal regulations, in particular those associated with the European Union. A database of EU directives on running commercial activities is presently under construction. In addition, the Ministry of Economy has published the following publications relating to legal regulations currently in place and distributed free of charge among the business organisations: - “What awaits the entrepreneur after coming into the European Union – Labour Law”, - “ What awaits the entrepreneur after coming into the European Union – Environmental Protection”, - “ How to set-up your own company – conditions for undertaking commercial activities in Poland”.

53 In the year 2000, the Polish Agency for Enterprise Development has obtained funds from the State budget for refinancing a part of the costs incurred by entrepreneurs in taking part in training courses associated with company management.

5.3. Have court procedures (length, complexity) and the effectiveness of implementing court decisions been evaluated from the perspective of improving the business environment?

During the course of legislative work on changes to the Civil Proceedings Code and reformation of Court Registries, work was also evaluated from the perspective of improving the business environment.

In evaluating current regulations, the main item that was taken into consideration was the need to simplify and hasten proceedings in commercial cases, in particular those associated with pursuing claims and the introduction of a centralised system of court registries that would meet European standards and contain a multitude of new and valuable information that is important for confidence in commercial dealings.

5.4. What specific methods were implemented? Are they based on international solutions? Are they monitored and evaluated, and if so how?

On the basis of the Law on the National Court Register (KRS)67 dated August 20, 1997, as of January 1, 2001 a centralised and computerised court registry system has been commissioned. The KRS law has introduced a requirement for submitting applications on official forms and court bureaucracy has been organised into a computerised system. Court procedures for all entities entered into the registry have become unified and significantly simplified. The KRS contains numerous, very important for commercial activities, information on the entrepreneur, e.g., information regarding tax and customs liabilities, ZUS (Social and Health Office) liabilities, a list of creditors and the value of overdue repayments. The creation of a list of insolvent debtors – a totally new institution in the Polish legal system – was, in the intent of the lawmaker, to be a source of information on people with whom undertaking business activities may be effected by increased risk.

Changes to the Civil Proceedings Code came into effect on July 1, 2000. Some of the changes introduced were – increasing the disputed value for commercial cases handled by regional courts to 30,000 PLN, introduction of new simplified procedures for small cases, i.e., those in which the disputed value is less than 5,000 PLN, in which the suit and other filings are made on official forms, evidence hearings are less formalised and the possibility for appeals limited. In addition, corrections to provision for proceedings by writ of payment were introduced that will allow this form of proceedings to be more widely used. All of these changes, in conjunction with separate proceedings for commercial cases existing for years which allow a ruling to be made without a court hearing in numerous circumstances and imposing on the court set deadlines for resolving a claim as well as certain very rigorous guidelines for providing evidence, are aimed at making commercial court far more efficient.

5.5. What have been the results to date of introducing the law on commercial activities in Poland?

67 National Court Register, http://www.ms.gov.pl/krs/krs.shtml

54 The law on commercial activities came into force at the beginning of the year 2001 and therefore it is difficult to evaluate its functioning. Certain items though must be borne in mind, such as: - putting into the law the definition of a small and medium size company, since these companies are entitled to additional public assistance, - withdrawing some of the commercial permits in place previously (permits for running certain types of commercial activities), - limiting the number of commercial licenses (i.e., limitations on executing certain types of commercial activities) to eight types, - introducing provisions related to commercial self-government, - allowing entrepreneurs to have their main company account in a savings and loan bank.

5.6. Do separate departments/groups exist within government whose responsibility is to simplify the business environment? Does the “Economy Group for Reducing Bureaucracy” still exist and what are the main activities that it undertakes?

In 1997 the “Economy Group for Reducing Bureaucracy” was formed within government. The group is situated within the Economic Committee of the Council of Ministers. At the end of March, 2001 the Group had initiated 38 legislative actions of which 19 have been executed. Those executed were associated with: - reducing the number of issued certificates by recognising test results, certificates of conformance and declarations of conformance from producers, - simplifying the provisions of the law on waste by replacing a permit for producing non-hazardous waste with information that such waste is produced and introducing the idea of customer liability for wastes, - simplifying the system of obtaining international road transport licenses, - facilitating easier real estate trading by replacing administrative decisions on dividing land with a conception for its use prepared by the owner, - simplifying and shortening the time required to prepare a decision regarding building and land management conditions as well as building permits, especially in the case of environmentally neutral investments, - simplifying the trade of goods packaged in multiple use packages by removing the necessity of filing written confirmation of a verbal customs declaration on the aforementioned packaging.

Six initiatives were stopped, the rest are in legislature.

5.7. Are activities aimed at simplifying the running of commercial activities mainly aimed at foreign investors, or do they also take into consideration the needs of small domestic companies?

Activities aimed at simplifying the running of commercial activities for the most part have been aimed at all companies, regardless of their domicile and size. Nonetheless, certain initiatives aimed at assisting small companies are being executed, mainly those activities associated with expanding the number of companies eligible to take advantage of lump-sum taxes on documented revenues, increasing the minimum level of turnover requiring full bookkeeping from 400,000 to 800,000 Euro, exempting most companies preparing balance sheets from the obligation of having their results audited. Also at present a proposed change

55 to the Work Code is in Parliament. This change will reduce the bureaucratic and employee obligations of employers employing less than 50 people.

5.8. How long does it take to register a company? How much does it cost? How many legal forms of business activity exist? What is the minimum required initial capital? (Why has the minimum required initial capital for limited liability companies been increased?) Have any specific measures aimed at simplifying the registration process been introduced? Does a central registry of companies exist? In electronic form?

On the basis of statistical data obtained from the Ministry of Justice68, proceedings in registration courts in the 1st half of 2001 lasted about 1.2 months, of which in the case of joint stock companies – 1.1 months; in the case of limited liability companies – 1.2 months; in the case of a registered partnership – 1 month. According to information obtained from the registration courts, the average period for registration proceedings as of May 29, 2001 was about one month, which indicates a shortening of the time required. It should also be noted that during the beginning phase of KRS operation certain difficulties associated with “novelties” introduced by the system and the requirement of entrepreneurs to fill-in new forms may arise. The period for such proceedings is always the result of actions undertaken by the courts and the applicant who is required to file a properly completed application, paid for and with all necessary documents – completed properly as to their form and content – attached.

The applicant upon filing the application is required to pay in a court fee without being reminded of this requirement. In addition, if the registration is to be announced, a fee for such announcement in the Court and Commercial Monitor. An entity other than a natural person must also pay a fixed fee equal to 1,000 PLN for being registered in the Court Register, a fee for being announced in the Court and Commercial Monitor equal to 500 PLN and 60 PLN for receiving an excerpt from KRS Central Information office regarding completed registration. The fee incurred by private persons wishing to register their activities as a sole proprietorship will be significantly lower and is equal to 150 PLN.

The law does not set minimum initial capital requirements for sole proprietorships, partners in a civil partnership, registered partnership, a partnership or limited partnership. On the other hand, in accord with the Commercial Companies Code dated September 15, 2000: - in the case of a limited joint stock company the initial capital must be at least 50,000 PLN, with the nominal value of each share being no less than 1 PLN, - in the case of a limited liability company the initial capital must be at least 50,000 PLN, with the nominal value of each share being no less than 500 PLN, - in the case of a joint stock company the initial capital must be at least 500,000 PLN, with the nominal value of each share being no less than 1 PLN.

The initial capital in a limited liability company must be paid up in full prior to registration of the company. Since a limited liability company is an association of capital the minimum initial capital in the company had to be made more realistic (increased) compared to the initial capital in similar types of companies, as is the case in other European countries.

68 Ministry of Justice, Al. Ujazdowskie 11, 00-950 Warszawa, tel/fax: +48-22 628 65 52, http://www.ms.gov.pl, e-mail: [email protected], Mrs Barbara Mąkosa-Stępkowska – Information Office Director

56 As of January 1, 2001, i.e., the day the law on the National Court Register came into effect, an entrepreneur wishing to undertake commercial activity may do so after receiving a filing in the company registration held by the National Court Register. During the transition period, i.e., until December 31, 2001, the start of commercial activities by entrepreneurs acting in the form of a sole proprietorship or partners in a civil partnership only requires a filing to the commercial activities registry held by the county (gmina).

The National Court Register is a computerised system and consists of: - a central office – the National Court Register Central Office responsible for operation of the KRS central database, - regional offices operating at the regional courts (commercial courts) responsible for managing such registrars – 25 branches located in 20 cities and connected to the central KRS database by means of a computer network.

The National Court Register consists of: - a register of companies, - a register of associations, other social and professional organisations, foundations as well as public health care services institutions, - a register of insolvent debtors.

The register consists of a list of all entities that are required by law to be entered into this register. The register is public and everyone has access to data contained in it. By means of the Information Central Office, everyone can obtain certified copies, excerpts and certificates regarding information contained in the register. These documents have the same validity as documents issued by a court. Data contained in the register cannot be removed unless stated differently in the law. Data entered into the registry must be published in the Court and Commercial Monitor unless stated differently in the law. Entries regarding persons operating as a sole proprietorship do not have to be published. Entry into the register consists of data contained in the registration court decision being input into the database immediately after such a decision is made. The entry is considered to be made after data has been input into the register. No one may claim that he is unaware of the information contained in the register after such information has been published. Every registration court operates as a branch of the KRS Central Information Office and has access to all information contained in the register, which operates within the Ministry of Justice.

The National Court Register Law assumes equal treatment during registration for all entities entered into the register. All applications for entry into the register must be made on official documents which are available at the registration courts (in the KRS branches). Applications for registering sole proprietorships and registered partnerships can be obtained in the county (gmina) offices. The applications contain information as to how they should be filled out, filed and the consequences arising from not fulfilling these requirements. As a result of unified procedures for registration of all entities being introduced and simplified, the opportunity arises to settle matters quickly, thus eliminating backlogs in the registration courts.

5.9. What are the procedures for closing down companies? How long does liquidation of a company take? Have actions been taken aimed at simplifying bankruptcy proceedings and increasing the authorities of the liquidator / executor? Does the bankruptcy law encourage a person to undertake risks (e.g., does it allow an entrepreneur to undertake a second try?)?

57 In the case a person acting as a sole proprietorship or as a partner in a registered partnership wishes to wind-down activities (withdraw from the partnership or dissolve the company), the entrepreneur is required to give written notification to the appropriate commercial activities registry of such an intent within 14 days of such occurrence. The registration entity then strikes the entry out of the register and sends the applicant an official decision regarding the striking out of the entry.

The completion of commercial activities by a commercial company occurs after the company has been dissolved. Such dissolution can be the result of: - causes set out in the company charter, - a resolution passed by the shareholders of the company regarding its dissolution, - declaring bankruptcy of the company, - a legally binding ruling made by a commercial court.

The dissolution of a company usually occurs after the company assets and matters have been resolved. Liquidators chosen by the shareholders or the commercial court, or in the case of bankruptcy proceedings – the court receiver, handle liquidation proceedings. The liquidators are required to file in the court registry the opening of bankruptcy proceedings, the names and addresses of the liquidators, the method of company representation, signatures. In the case of a limited liability company, a joint stock company or a limited joint stock company, the opening of liquidation proceedings must also be announced in the Commercial and Court Monitor.

The time required for completing the liquidation of a company depends mainly on the complexity of the business undertakings made by the company and legal regulations. In the case of a limited liability company, proceedings cannot be concluded earlier than 9 months from their commencement since the distribution of assets remaining after satisfying or securing all outstanding liabilities between the shareholders cannot occur earlier than 6 months after the liquidation proceedings have started and all creditors have been informed of such actions and used up the three month period given for filing of debts. In the case of a joint stock company this period cannot be shorter than one year and seven months (the distribution of assets remaining after satisfying or securing all outstanding liabilities between the shareholders cannot occur earlier than one year after the second announcement of the beginning of liquidation proceedings and call to all debtors to file within 6 months of such announcement all outstanding debts). Following the conclusion of liquidation proceedings, the liquidators file to court an application to strike the company from the commercial register. In the case of limited liability companies, joint stock companies and limited joint stock companies, the shareholders must first approve the liquidation report that the liquidators then file in court together with the aforementioned application. A fee of 300 PLN must be paid to strike the company from the commercial registry and an additional 250 PLN paid for the publishing of an announcement in the Monitor. A company is considered to be dissolved immediately after being deleted from the commercial registry.

In the case of an entrepreneur ceasing to pay debts (and such action not being the result of short-term transitional problems), or in the case of legal entities or registered or limited partnerships undergoing bankruptcy proceedings as well as in situations when the estate of such persons is not sufficient to satisfy debts, cessation of commercial activities occurs after completion of bankruptcy proceedings. A commercial court at the request of the debtor, i.e.,

58 the entity running commercial activities or a creditor of the given entrepreneur makes a bankruptcy ruling.

The entrepreneur (a representative of the entrepreneur, legal entity or aforementioned company) is required to file for the start of bankruptcy proceedings within 14 days of such circumstances taking place. If this requirement is not fulfilled, the commercial court may rule that for a period of between 2 and 5 years, unless the person is not at fault, that the person may not take up commercial activities as a sole proprietorship, be a representative or plenipotentiary of a company, a supervisory board or audit commission member in a joint stock company, limited liability company or coop. Persons that have had such a ruling made against them are entered into the KRS register as insolvent debtors immediately after such ruling becomes binding. The registration authorities also give out a negative decision regarding entry into the commercial activities register if such a person files for entry. Following the prohibition period ruled by the commercial court, such an entry is withdrawn from the commercial register.

In deciding to open bankruptcy proceedings the commercial court designates an official receiver and a judge that conducts the course of bankruptcy proceedings and oversees the actions of the official receiver. The official receiver is responsible for making announcements as set down by law, making filings into the court register and executing liquidation activities. Upon declaration of bankruptcy, the management rights and right to use company assets and estate of the entrepreneur expire. After the completion of bankruptcy proceedings the entrepreneur is deleted from the commercial register at the request of the official receiver. The entrepreneur may undertake any type of legal commercial activity in the future if the court has not passed the aforementioned decision imposing restrictions on the entrepreneur.

5.10. Is any new law associated with commercial activities regularly evaluated to see what influence it has small companies? Do business organisations participate in the creation of new laws?

At present no laws exist that would unequivocally oblige the government to consult drafts of laws with outside organisations. The policies of the individual authorities though are variable. In the year 2000 the Prime Minister called to life a Group for Legal Regulatory Quality Control. At present this group is preparing recommendations for changes to laws associated with non-governmental organisations such as business groups preparing opinions on laws that are to be enacted. The main recommendation is the creation of an independent legal unit within the Council of Ministers that would oversee the entire legally approved process of consulting legislative drafts with non-governmental organisations as well as evaluate the impact of implementing such proposed legislature – not only from the aspect of public funding as is currently the case, but also from the overall social and economic long-term effect of such legislature.

6. EMPLOYMENT AND WORKING CONDITIONS

6.1. What measures, aimed at making access to the labor market more flexible, are taken under the employment policy?

59 Legislative works have been carried on, under the employment policy, in order to adapt the Polish Labour Law to requirements of the European Union Law, and also in order to implement programmes approved by the Council of Ministers – in the part referring to the individual labour law. We have in mind here especially specific legislative actions, undertaken in order to accomplish tasks, included in the "National Strategy of Employment Increase and of Human Resources Development 2000-2006". At present, two fundamental projects of changes are under elaboration.

I. Bill draft on the amendment of the Labour Code and some other laws, the main purpose of which is to adapt the labour law provisions to requirements of some selected EU directives. It contains proposals of legal solutions, which can influence indirectly the process of making access to the labour market more flexible.

Working time 1/ Making some institutions and solutions, stipulated in provisions regulating working time, more widespread and elastic: a. A possibility of modification of working time amount on the base of an understanding between the parties during the period of validity of a contract of employment concluded between the employee and the employer – the present regulatory environment provides for the possibility of such modifications, but stipulations of the Labour Code do not contain any clear norm, which would induce the employer to consider positively motions of his employees referring to modifications of the working time amount, also for a definite period. b. Extension of the scope of application of the interrupted working time – in the mode of interrupted working time, at present, can be employed exclusively employers indicated in the Labour Code. The proposed solutions are aimed at making it easier for an employer to apply the interrupted working time institution, established in the Labour Code, also for other employees, in case they are included in this system by the way of a collective labour agreement. It would be also possible to apply the interrupted working time, exclusively on the base of a contract of employment, in reference to a particular employee. c. Statutory definition of individual working time schedule – the present legal environment does not provide any clear norm, making possible to define for an employee an individual working time schedule, within the working time system, under which the employee is employed. d. Modification of principles of remuneration for work during Sundays and legal holidays – the present system imposes on the employer rigorous principles of granting rest-days, especially in return for work on Sundays. There is a proposal that granting of a rest-day, in return for work in Sundays, should be possible to be made in a longer period of time, including the whole current account period.

2/ Introduction of new working time systems, which would make it possible for an employer to organise his working process according to his individual needs and possibilities: a. a system of a shorter working week, assuming the work is performed during less than five days a week, in an extended day working time amount, limited up to 12 hours. b. a system of work at weekends, possible to be applied for employees, which are employed in part-time jobs, which provides for work in Saturdays, Sundays and Legal Holidays, in the amount not exceeding 12 hours per day. c. a special working time system, possible to be applied in the way of a collective labour agreement concluded with the employers, which operate in such specific conditions

60 that they are not able to organise work with the implementation of working time systems stipulated in the Labour Code. A special working time system, however, could not infringe protection norms, stipulated by regulations, referring to working time, and addressed to all employees or to employees under special protection in this matter.

Termination of an employment relations 3/ System changes in provisions of the Law on special principles of termination of employment relations with employees for reasons concerning their workplace, and aiming to: a. shortening of the period between the moment an employer takes decision of a group lay off and the delivery of first notices of termination. At present it is not possible to terminate a contract of employment before 45 days from the day the district employment office is informed about the intention to make a group lay off. b. clear including in the procedure of informing employees' representatives, and consulting with them, of issues of re-qualification or professional training of employees included in the lay off intention. Such measures can help to prepare better the laid off employees for arranging new jobs. c. inclusion of the district employment office into the procedure previous to implementation of the group lay off. This proposal would open additional possibilities of better preparation of state labour organs for offering comprehensive help to the laid off employees.

Holiday leaves 4/ Changes in the Labour Code provisions on vacation leaves, aimed at: a. to make more flexible principles of granting leaves for employees' employed in jobs authorised on Sundays and Legal Holidays, and in special working time systems and schedules. At present, the Labour Code established the absolute prohibition to grant vacation leaves on Sundays and Legal Holidays. b. reducing of working costs by limiting the number of cases, in which an employer is obliged to pay cash equivalent for a leave not used, and by clear extension of implementation of the proportional leave institution for cases of employment agreements initiated during a given calendar year, when there is no previous employer. The obligation of payment of cash equivalent for a leave not used would not include cases when an employee get call-up papers. Regarding leave rights for employees, who begin working in a given calendar year, when there is no previous employer, it provides for application of the leave institution in proportional assessment.

II/ A bill draft on changes of the Labour Code Law and on changes of some other Laws, the aim of which is further adaptation of the Polish labour law to the European Union law, provides, among others, for creation of clear legal grounds for taking up paid jobs by young adults (employment at light works authorised for young adult employees). A light work may not be hazardous to the young adult's life, health, and psychophysical development, and cannot create difficulties in his educational obligations. The Labour Code amendment will include, too, the following: - increase of permissible number of hours of overtime work, - return of the possibility of concluding unlimited number of employment agreements, concluded for a definite period, - increase of the number of employees, above which it is necessary to create work regulations and remuneration regulations,

61 - gradual elimination of the period, during which employers are charged with the cost of an employee's remuneration for the period of his incapacity to work.

6.2. The European Union has adopted employment recommendation. Two main principles refer to entrepreneurship and the possibility of adaptation. What measures have been undertaken in your country in order to support and favor these two issued.

Entrepreneurship development Speaking on entrepreneurship development, we have to take into consideration creation of jobs in the existing companies, and creation of jobs in newly established economic organisations, including self-employment. Small and medium size companies play an important role in job creation. At the same time they create employment possibilities for persons with relatively law qualifications. Among reasons, which have been limiting development of small and medium size companies, the following are mentioned most often: - non-adaptation of the tax system to specifics and principles of operations of small and medium size companies (including excessive taxes), - difficult access to excessively expensive credit, and small extension of credit guarantees and securities/sureties, - non-cohesive provisions, regulating activities of companies, excessive legal and administrative regulations, and the fact that regulations in all matters are not suitable for specifics and different principles of small companies functioning, - too small, too dispersed and uncoordinated, in the system sense, state assistance for the small and medium size enterprises (SMEs) sector. A serious problem for persons, undertaking an economic activity, is to accumulate proper funds for its start-up.

In the document “Medium-term Concept for Development of the National Economy up to the year 2002”69, approved by the Council of Ministers on 15th June 1999 – which assumes as the main objective preparation of the Polish economy, until the end of 2002, for the membership in the European Union – one of the specific goals is creation of conditions to new jobs creation. It requires implementation of a series of measures, influencing faster development of the private sector, and especially of small and medium size companies. It is linked with the necessity of creation of more favourable regulations of the Labour Code, which would influence the limitation of social charges linked with the Labour Code provisions, and the decrease of administrative charges linked with employment of persons.

In the document "Measures linked with creation of conditions for new jobs creation", approved by the Council of Ministers on 3rd November 1999, have been presented measures, undertaken by the Government, in order to accelerate processes of restructuring and reform of the social sphere, which will contribute, on the one hand, to increase the economic effectiveness of specific sectors of the economy, and to their better adaptation to the market economy conditions, but which may, at the same time, influence deterioration of the situation on the employment market. Employees, laid-off due to restructuring processes, are included in the protection programme, containing a system of re-qualifications, which permit them to be employed by a new company or to begin a self-employment activity.

69 “ Medium-term Concept for Development of the National Economy up to the year 2002”, http://www.mg.gov.pl/struktur/DSG/dsg_pl/

62 At the same time there were programmes elaborated, which should influence the creation of new jobs as a result of measures directed for development of small and medium-size enterprises, housing, increase of inventiveness and entrepreneurship, export promotion, and stimulation of regional development by, among others, the promotion of development of technical infrastructure and business environment. However, the most important factor in the creation of new jobs is economic development, supported by proper macroeconomic policy, in conditions of lowering of inflation, and of decrease of credit costs, what creates conditions for comprehensive development of enterprises.

Problems of entrepreneurship development are dealt with also in the document "The National Strategy for Employment Increase and Human Resources Development in the years 2000- 2006". Under the implementation of this strategy the following measures are taken, referring to: - simplification of the tax system, - limitation of administrative barriers - implementation of modern technologies, - development of business consultancy, - easier access to capital, - development of young people education for entrepreneurship, - development of regional and local institutions supporting entrepreneurship.

6.3. Are there concrete social system in place, aimed at creation of conditions for restructurising of the industry? Is there any general security grid in the social security system?

The state, as the owner, does not enter into direct management in great majority of public enterprises, it has prepared, however, several sector programmes. These programmes provide separate regulations, more favourable than those in force in the whole national economy. Such approach, taking into consideration the importance of these sectors for the economy, and experiences of processes of their restructuring in other countries, was aimed at making possible to restructure the economy, and to prepare it for coping with competitive pressure in the process of integration with the European Union, in the way possibly to be accepted by the interested Parties and with the maintenance of social peace. Restructuring programmes were linked to social protection programmes, which should alleviate social and regional effects of the restructuring. For preparation and execution of these programmes are responsible competent ministries, and the Ministry of Labour and Social Policy 70 cooperates with them in the field of restructuring of employment and of social protection programmes. These programmes were prepared in cooperation of the Government with employers and trade unions, acting in a given industry in the Tripartite Commission.

Restructuring programmes and social packages Restructuring programmes were elaborated for these sectors where it was necessary to make considerable group lay-offs, due to existing excessive employment. Execution of programmes of employment reduction is one of the most difficult, from the social point of view, elements of implementation of restructuring programmes, especially when it is necessary to reduce simultaneously employment in such sectors as: mining, metallurgy and armament. In the

70 Ministry of Labour and Social Policy, ul. Nowogrodzka 1/3/5, 00-315 Warsaw, tel: +48-22 661 04 53, fax: +48-22 661 04 54, http://www.mpips.gov.pl, e-mail: [email protected], Labour Market Policy Department, contact person - Mr. Zdzisław Sadowski

63 second half of the 1990-decade the Council of Ministers approved the following restructuring programmes:  "Reform of the coal mining sector in Poland in the years 1998-2002” – in 1998,  "Programme of restructuring of the iron and steel industry in Poland" – in 1998,  "Programme of restructuring of the defensive industry and of support in the field of technical modernisation of the armed forces of the Polish republic" - in 1999.  "Strategy for the light industry for the years 2000-2005" – in 2000,  "Programme of restructuring of the Polish coke industry" – in 2000,  "Programme of restructuring of the Polish Railways" and "Programme of restructuring of employment in the Polish State Railways" – in 1999.

Restructuring programmes in mining, defensive industry and in PKP (Polish State Railways) were introduced on the base of respective Laws. Restructuring of employment in the iron and steel industry in Poland was approved in the form of the "Agreement on conditions of social protection programmes of the process of restructuring of the iron and steel industry – the Metallurgy Social Package". This package (HPS) was concluded among the Parties of the Tripartite Commission for Social Conditions of the Metallurgy Sector Restructuring. Issuing of a branch Law is not foreseen for the light industry, and in the process of its employment restructuring are not implemented any "special" instruments of social protection.

In the case, where any "special" protection solutions do not exist, under the form of a social package for a given sector or economic subject, general provisions, provided in the Law on employment and actions against unemployment, are applied for employees laid-off due to reasons referring to their workplace.

The Law of 28th December 1989, with later amendments, on special principles of termination of employment relationship with employees due to reasons referring to their workplace, and on amendments of some other Laws, regularised issues concerning lay-offs, where the reduction of employment is made for economic reasons or for reasons due to organisation, production or technology changes, including in the cases where such changes are made in order to improve work conditions or the natural environment conditions. It refers to a situation, where a necessity arises of one time, or of a process not exceeding 3 months, termination of employment relationship with a group of employees including at least 10% of the number of persons employed in companies employing up to 1,000 persons, or at least 100 employees in companies employing over 1,000 persons. These regulations apply also for companies in the case they are declared bankrupt or are liquidated.

An employer is obliged to inform the regional employment office and his company's trade unions organisation on the necessity of group lay-offs with at least 45 days of advance. The trade unions organisation has the right to present proposals in order to limit the lay-off size. Principles and the mode of a lay-off execution are determined in the agreement concluded by the employer with the trade unions Part. In relation to the employees being laid-off are applied also more favourable provisions included in the Law on employment and actions against unemployment, referring to unemployment benefits and pre-retirement benefits for persons living in districts/communes threatened with especially high structural unemployment or if an employment relationship was terminated due to reasons concerning the workplace.

Besides the above-mentioned items, there are also several other possibilities of ad hoc support for companies undergoing the process of employment restructuring, like for example: subsidies for financing of discharge money for the laid-off employees, and/or loans for

64 supplementary financing of the investment from the funds of the World Bank loan, the so- called EFSAL, and also one time benefits (remuneration linked with loan for social security contributions) from the Fund of Guaranteed Contributions of Employees', granted for employers facing temporary difficulties. It is possible also to negotiate more favourable conditions of payment of debts with the Social Security Agency (ZUS).

Detailed solutions in social packages Social packages, created within the above-mentioned restructuring programmes, contain two types of protection instruments: - instruments, which allow shortening of periods required for getting allowances and pre- retirement benefits, - instruments stimulating the employment market, compensations, training courses, loans, consulting assistance.

The Law on employment and on actions against unemployment constitutes the legal grounds for the first group of instruments, which have non-stimulating characteristics. Periods, required for pre-retirement benefits, may be shortened in virtue of this Law. The Council of Ministers used such rights until the end of 2000. Rapid increase of payments linked with the implementation of this instrument, with existing budget limitations, caused that its application was stopped. It does not refer to obligations assumed until then, and rights acquired by employees. Instruments stimulating the employment market are aimed at employees, which do not meet conditions necessary for getting right to obtain retirement pensions, to obtain leaves provided for employees of a given sector or mining or railway company or to obtain pre-retirement benefits.

Solutions applied in particular social packages, and especially the amount and type of benefits, and also criteria, which the laid-off employees have to meet in order to obtain them, result from, among others, branch specifics and from the results of negotiations conducted by the interested parties. Reform of the coal mining, because of its strong spatial concentration, assumed privatisation of this sector, taking into consideration regional and social aspects. It provided for support of industrial re-conversion processes in mining communes, and of diversification of activities of joint ventures dedicated to coal mining. In order of limiting negative effects of the reform on the employment market, instruments were elaborated for miners being laid-off, employers, and mining communes. The restructuring programme was based on the Social Package for Coal Miners, which is an element of the Government programme for the coal mining. It allows voluntary termination of employment with the employer's agreement. During the period of restructuring of coal mining companies, employees, who do not have retirement rights, have the following social protection rights: - coal miner's leave of up to 5 years for an employee included in the Collective Labour Agreement, which, due to the number of years he was employed or due to the number of years he spent inside the mine, needs no more than 5 years in order to obtain the right for retirement. During the period he is on such leave he has the right to cash allowance in the amount of 75% of his remuneration, calculated as being paid for vacation leave, - social allowance, granted for a period of up to 2 years, paid for the time he needs for professional re-qualification, and getting a job outside the coal mining. This allowance amounts to 65% of his remuneration, and if the employee obtains a job outside the coal mining or starts his own economic activity, he will receive 50% of the allowance granted; he has also the right to one, free of charge, training in order to change his professional qualifications,

65 - one-time cash allowance at the moment he is employed outside the coal mining, if this takes place within 24 months after his employment agreement is terminated. The amount of this allowance decreases depending of the year in which his employment agreement is terminated. In the year of 2000 it amounted to 10 times, in 2001 to 8 times, and in 2002 to 6 times the average monthly remuneration, - one-time, unconditional cash allowance, - preferential loan in order to start an economic activity, - free of charge consultation assistance.

An employer, which employs an ex-miner on a workplace, especially created for this purpose, during the period of at least 24 months, can apply for a preferential bank loan for covering the cost of it.

"The Metallurgy Social Package", (HPS), negotiated in the metallurgy sector, which determines protection instruments and conditions to obtain them, was regulated by the following legal acts: - regulation of the Council of Ministers on definition of pre-retirement benefits, - regulation of the Minister of the Economy on detailed principles, the mode of granting, and the way of utilisation of subsidies aimed at financing of the employment restructuring in this sector, and on conditions of obtaining rights, on principles and the mode of granting, calculating and payment of social protection allowances within subsidies, included in the Ministry of Economy budget.

The following protection instruments are provided in the Metallurgy Social Package: - pre-retirement allowances in the amount of 100% of the retirement amount, with the shortening of the period of statutory requirements by 2, 3 or 4 years, depending on the unemployment rate in the region of a given steel works activities, - statutory allowances for employees laid-off due to reasons of the establishment, - unconditional severance payments, paid one-time to entitled employees of steel works, which after the termination of their employment agreement will not use other forms of help, - re-qualifications and other activities stimulating employees on the employment market.

Solutions, adapted in the armaments industry, similar to those adapted for the metallurgy industry. The following measures and instruments are foreseen: - pre-retirement allowances in the amount of 100% of the retirement amount, with the shorter period of the number of employment years required, - trainings and re-qualification under special programme of the Ministry of Labour and Social Policy, provided for selected establishments and for young employees, - creation of affiliated companies, on the base of the defensive industry companies, in which are employed employees of restructured armament companies.

Taking into consideration lower degree of spatial concentration of this industry no separate regulations are provided addressed for local authorities and entrepreneurs employing people laid-off in this sector.

In the State Railway Company (PKP), under the restructuring, employees can use the following instruments: - railway leave, if a given employee needs less than 3 years in order to obtain right for retirement, and especially for railway retirement, and fulfils other required criteria.

66 Decision on sending an employee for such leave is taken by the employer. During the period of being on such leave, the employee receives social benefits amounting to 60% of his monthly remuneration, - one-time severance pay in cash – two values are foreseen: 30,000 and 20,000 PLN. Employees living in districts with the unemployment rate higher than the country's average rate, obtained the right to the higher value of the severance pay, - one-time training in order to change professional qualification for the one, which would allow getting a new job or starting an independent economic activity.

Restructuring programmes received necessary corrections and amendments during their execution. Solutions adapted in the employment restructuring remained unchanged, and small corrections referred to specific issues – lists of establishments, groups of employees entitled or conditions of utilisation of protection instruments. Such approach was dictated by the necessity of maintaining a definite level of investment foreseen for the employment restructuring purposes in the subsequent years of the implementation of restructuring programmes.

Strengthening of employment mediation and employment offices A characteristic feature of restructuring programmes, especially of the bigger ones, is a more important role and the employer's responsibility, statutorily guaranteed, in the fields of organisation and financing of occupational and social consultancy in relation to the employees being laid-off. It is aimed at better understanding of the needs of the employees being laid-off, and to give them diversified support in the field of consultancy, training, and employment. These solutions support activities of the district Employment Offices.

In the mining sector, the Mining Sector Employment Agency71 supervised the activities of 38 Professional Help Offices, conducting activities, among others, in the field of employment intermediation, help and professional consultancy (consultancy for re-qualification: professional, and legal and financial for persons interested in starting an independent economic activity), of direct contacts with miners, mines' management and other institutions, meetings with employers from other sectors, and also conducting, together with Consortium WAKAT (vacancy in Polish) re-qualification trainings from PHARE funds. More than 200 types of trainings and professional re-qualification courses were offered. Re-qualifications are supported by the programme of support for small and medium size enterprises.

Polish State Railways, according to the Law on commercialisation, restructuring, and privatisation of the state-owned company Polish State Railways, obtained the possibility of conducting employment mediation activities and to send people to be employed abroad with foreign employers. Similarly to the Mining Sector Social Package an employee has the right to a one-time training in order to change his professional qualifications, but here the employee has to pay 20% of the training costs.

71 Mining Sector Employment Agency, ul. Powstańców 30, 40-039 Katowice, tel: +48-32 757 21 04, fax: +48- 32 757 21 95, http://www.gap.org.pl, e-mail: [email protected], Mr. Piotr Mielnicki - President

67 Effectiveness of the adapted system solutions Industry restructuring on the base of special programmes including social packages, contributed to a considerable degree towards the achievement of the main objectives of reforms. Significant results were obtained, in particular, in the field of the employment restructuring. The employment in the coal-mining sector reached the level of 155,000 persons, what means that during the 3 years of the reform programme implementation, the employment was reduced by a total of 88,272 persons, i.e. by 36.3%. In the years 1998-2000, a total of 61,200 mines' employees used instruments of the Mining Sector Social Package, i.e. 8,200 more persons than the Government's programme assumed. It should be stressed that interest in specific protection instruments is due to the situation on the employment market.

The decrease, during the last year, of employees' interest in instruments of the Mining Sector Social Package is connected with a more difficult situation on the employment market.

An essential element of restructuring programmes is their cost, including the cost of the employment restructuring and respective contributions, borne by the State budget, and increased participation of employers in bearing them. Execution of debt reduction agreements, especially referring to social security contributions, carried on during the financial restructuring, positively makes influence on stabilisation of the social security sector in Poland.

External assistance Execution of social programmes was carried on based on national funds with support from foreign funds. We should mention here the programme Phare "Initiative I and II", supporting restructuring processes in the mining and metallurgy sectors, aimed to alleviate social and regional effects of restructuring of the mining and iron and steel sectors. The programme is financed by the European Commission and is co-financed from funds of a reserve established for objectives approved by the Council of Ministers. The programme offers various protection instruments, used for new jobs creation, addressed to employers and the laid-off employees, for refunding of the social security contribution (ZUS), for preferential loans, for partial payment of interests of bank credits, for training and re-qualification, and for co-financing of consultancy services.

The European Commission assigned 61 millions of Euro for two stages of the Initiative programme, including training for mining and metallurgy sectors workers, for partial payments of credits for business start-ups, and for support for employers, who would employ ex-miners and ex-metallurgy workers. The significance of the European Union programmes exceeds the material results obtained. Spending of the EU funds facilitated intensification of the active employment market policy.

Regional aspect An essential element of the restructuring programme, applied in the mining sector, is its connection with local end regional development. It is conditioned by the geographical concentration of this sector, and by effects the restructuring causes in the direct environment of mines. The Law, which defines principles of the coal mining sector and instruments for achievement of the established objectives contains also regulations referring to specific rights and tasks of communes in the mining areas. Mining companies are obliged to cooperate in the implementation of the mining sector reform with communes in the mining areas in the field of

68 projecting the economic development of these communes, including projects of development of post-industrial areas of the liquidated mines, establishing of new economic subjects, utilisation of non-productive property of mines, and creation of alternative jobs, and also in the extension of activities of the Economic Activity Zones (in Jastrzębie, Rybnik, and Wodzisław regions). Employers, which start activities on a mining commune area, using for these purposes non-productive property, have the right to use preferences and special economic and financial instruments, including investment credit guarantees, subsidies or loans, they may deduct from their income investment expenses, and have the right to have lower income tax rates. Communes in the mining areas have the right to use special economic and financial instruments and other preferences, which influence their income. It refers also to obtaining preferential credits for financing of investment, which supports new jobs creation.

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