Evaluation of Benefits Gained by EU-15 States As a Result of the Implementation of Cohesion Policy in Poland

Evaluation of benefits gained by EU-15 States as a result of the implementation of cohesion policy in Poland

2010 update

2010 Warsaw Author: Łukasz Skrok

Authors of the original report: Jakub Growiec, Julian Zawistowski (editor), Łukasz Skrok, Piotr Bartkiewicz, Maciej Lis, Karol Pogorzelski, Andrzej Regulski

Cooperation: Piotr Bartkiewicz, Jan Gąska, Andrzej Regulski

Coordination: Julian Zawistowski

Evaluation of benefits gained by EU-15 States as a result of the implementation of cohesion policy in Poland – 2010 update

Study prepared by Institute for Structural Research commissioned by the Ministry of Regional Development

Issuer: Ministry of Regional Development ul. Wspólna 2/4, 00-926 www.mrr.gov.pl www.funduszeeuropejskie.gov.pl

ISBN: 978-83-7610-258-0

Department of Structural Policy Coordination Phone: (+48 22) 461 39 07 Fax: +(48 22) 461 32 63 e-mail: [email protected] e-mail: [email protected]

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MINISTRY OF REGIONAL DEVELOPMENT Evaluation of benefits gained by EU-15 States as a result of the implementation of cohesion policy in Poland Updated in 2010

Table of contents

Introduction ...... 5 1. Research context ...... 8 1.1. Economic sense of EU cohesion policy 8 1.2. EU Cohesion Policy ...... 11 1.2.1. EU Cohesion Policy in Europe after 2004 12 1.2.2. Implementation of EU Cohesion Policy in Poland ...... 16 1.3. Expected channels of impact of the implementation of EU Cohesion Policy in Poland on EU-15 and net payer states 19 1.3.1. Short‑term effects ...... 21 1.3.2. Long‑term effects 22 2. Evaluation of direct benefits gained by EU-15 companies as a result of the implementation of EU cohesion policy in Poland ...... 24 3. Evaluation of benefits gained by EU-15 States as a result of the implementation of cohesion policy in Poland – research method ...... 26 3.1. The objective and scope of the research ...... 26 3.2. Research method ...... 28 3.2.1. Data used ...... 29 3.2.2. Problems with data availability and imputations ...... 31 3.2.3. Research assumptions ...... 32 3.2.4. Macroeconomic analysis step by step ...... 34 4. Evaluation of total benefits (direct and indirect) gained by EU-15 States as a result of the implementation of EU cohesion policy in Poland – update of results ...... 39 4.1. Update of results ...... 39 4.2. Survey results ...... 40 4.2.1. Additional demand on goods and services imported from EU-15 States ...... 41 4.2.2. Additional demand for imported goods and services manufactured in particular economy sectors of EU-15 States 44 4.2.3. Impact on the growth of profits and payroll funds among EU-15 companies and taxes paid by them in mother countries ...... 47 4.2.4. Impact on the growth of profits and payroll funds of companies from particular sectors of EU-15 economies and taxes paid by them in mother countries ...... 51 4.2.5. Changes in the value and structure of goods and services exported by the EU-15 countries to Poland as a result of emergence of an additional production, consumption and investment demand 54 4.2.6. Influence of increase in trade with Poland on the GDP in the EU-15 countries ...... 56 4.3. Total benefits – summary and conclusions ...... 63 5. Summary ...... 65 6. Bibliography 68 7. Methodological Appendix ...... 70 7.1. Validity of the EU cohesion policy assumptions according to the economic literature . . . . . 70 7.2. Microeconomic research ...... 72

3 7.2.1. Methodology of CAWI survey research 73 7.2.2. Survey results 81 7.2.3. Detailed results of the CAWI survey ...... 89 7.2.4. Methodology of extrapolation for 2009-2015 ...... 91 7.2.5. Microeconomic forecast ...... 92 7.3. Statistical tables presenting the results of the macroeconomic research 96 7.5. Questionnaire used in CAWI survey – exemplary path ...... 103

4 Introduction

This report presents the updated results of the comprehensive research carried out in 2008-2009 by the Institute for Structural Research for the Ministry of Regional Development. The study was devoted to the benefits gained by EU-15 States as a result of the implementation of EU Cohesion Policy in Poland. The analysis covers both the benefits gained directly by companies from these countries resulting from the participation in Cohesion Policy, as well as benefits obtained by entire economies – the research applied both micro and macroeconomic approach to the analysed issue. It needs to be underlined here that the research has not analysed the overall impact of the Polish accession to EU, which is undoubtedly far greater, but only an isolated effect of Cohesion Policy implementation. Complete results of initial analyses have been presented in the report entitled Evaluation of benefits gained by EU-15 States as a result of the implementation of cohesion policy in Poland of 2009. A much wider accessibility to data allowed the research to be updated in 2010. In order to retain coherence, the larger part of the report of 2009 has been saved. This means unavoidable cases of repetitions. Elements not subject to update and not directly linked to updated parts have been omitted. A significant difference between the original report and its updated version is the scale of final results of indirect impact evaluation. The research, results of which were used for the 2009 report, indicated that the total additional export from EU-15 States to Poland resulting from the implementation of projects co‑financed from Community funds amounted to EUR 25 billion, but the newest estimations indicate the revenue in the amount of EUR 38 billion. Such a considerable change results mostly from the possibility to use more recent data, in particular concerning input ‑output analyses (Eurostat data). As far as it was possible to use in 2009 some indices estimated on the basis of data from 2000 (or combined data from 2000 and 2004), then in 2010 complete data for 2005 were available. This also allowed the introduction of detailed modifications of research methods, which were adjusted in 2009 to take account of data availability. Meanwhile, trade exchange between Poland and EU-15 States intensified in 2000-2005, which was perceived as a very important process. This phenomenon could have been observed and identified in the research period of 2008-2009 through macroeconomic data analysis, despite the lack of sufficient data. However, application of macroeconomic data in calculations would require the adoption of several other ad hoc assumptions. Taking into account the research objective, this possibility has been rejected in favour of the practice commonly used in scientific research, i.e. accepting conservative assumptions. Thus, as far as the results presented in the 2009 report indicated additional exports, assuming trade intensity at the level of the year 2000, then the current report also takes into account the influence of market unification within the European Union and a more broadly understood internationalisation process regarding production. Benefits gained by EU-15 States have been divided into direct and indirect ones. The former is understood as the situation, where a company from an EU-15 State is a contractor of a project co‑financed from Community funds, executed in Poland. In such situation, contributions of EU-15 States into funds return to payer States in the form of payments for goods and services delivered

5 to Poland. The estimations applied in this study indicate that this happens to 5 % of funds spent in Poland. A direct benefit gained this way by EU-15 States in 2000-2008 amounts to PLN 4.6 billion (EUR 1.18 billion), at fixed prices of 2008. These data concern projects implemented as part of pre‑accession programmes and the National Development Plan for 2004-2006. However, indirect benefits are far greater, as they result from an increased demand of Poland – thanks to the implementation of EU cohesion policy – for imported goods and services. These imports are threefold: production (i.e. imports of goods and services used in production processes in Poland), consumption and investment. Occurrence of these imports is related both to the fact that the implementation of projects co‑financed from Community funds generates the demand for subcontracting and delivery of goods and services related to project needs, as well as to more long‑term effects of economic modernisation of Poland and increasing its production potential, resulting in the growth in demand for various goods and services. According to estimations included in this study, the total (i.e. direct and indirect) benefits gained by EU-15 States in 2004-2009 in relation to the implementation of EU cohesion policy in Poland amount to EUR 4.5 billion (PLN 17.8 billion) at prices of 2008, i.e. 27 % of the total value of funds flowing into Poland under this policy. We need to bear in mind, however, that these benefits are unevenly distributed over time. This happens due to the fact that the amounts of co‑financing that Poland was entitled to within the 2004-2006 programming period (expended until 2008) were significantly lower than the amounts for 2007-2013. Delays in the emergence of indirect effects, particularly those resulting from the increased purchasing potential of Poland, are an important factor. Therefore, according to forecasts included in this report, we should expect that benefits gained yb EU-15 in 2004-2015 will amount to the total of EUR 37.8 billion (PLN 151 billion), at fixed prices of 2008. Thus, a previously observed effect would constitute only 12 % of the value expected for the entire period of 2004- 2015. With time, the significance of indirect effects will also grow: according to forecasts, they will constitute as much as 91% of all observed effects until 2015. At the same time, the impact of induced exports on macroeconomic aggregates in UE-15 countries is low, which results mostly from the fact that the cohesion policy is being implemented in Poland to a limited extent as compared to the value of these States’ economies. However, additional Polish imports considerably lower the actual costs of financing interventions by the States in question. In particular, from each Euro spent on the implementation of cohesion policy in Poland, EU-15 countries receive the return of 36 cents in the form of additional export of goods and services, or even 46 cents if we deduct their own payments under cohesion policy from the cost. The abovementioned summary results have been obtained by aggregating partial results characterised, in the case of smaller projects, by considerable disaggregation. Individual chapters dis- cuss results broken down to particular EU-15 countries and economy sectors, according to NACE classification. It also needs to be emphasised that these are conservative estimations. Research methodology was structured in a way to, above all, avoid overestimation errors. Therefore, it is possible that the results observed in reality are slightly stronger than suggested by research results. This is confirmed if we compare the current results with those included in the report of 2009. Abandoning of some conservative assumptions (which was possible due to greater data availability), significantly increased the values of indirect effects estimations. Finally, in order to avoid any misunderstandings, we would like to once again emphasise the fact that the benefits gained by EU-15 States, estimated in this research, in elationr to the implementation of cohesion policy in Poland, constitute an additional ffect,e simultaneous to far greater

6 benefits gained in the same period yb Poland. Obviously, Polish companies and citizens benefit the most from the implementation of co‑financed projects. The structure of this report is the following: The first chapter outlines the economic background for further considerations. Therefore, the economic reference books were discussed, which provide justifications for EU cohesion policy and showing its consequences in a broader context; then facts concerning the implementation of EU cohesion policy were presented, with particular focus on its implementation in Poland; finally, the expected channels of impact of EU cohesion policy on EU-15 economies were presented, including, in particular, on net payer states. This chapter is a repeated first chapter of the 2009 report. It is supplemented by Appendix 7.1 containing the discussion on the economic reference literature justifying the concept of the cohesion policy. Chapter two synthetically presents the estimation of the value of direct benefits gained by EU-15 States due to the implementation of EU cohesion policy in Poland. Direct benefits have been quantified in this research through an Internet survey covering projects with a total value amounting to one‑third of total financing. It is worth stressing that the results of Internet survey, carried out on a broad scale, provide detailed information on the sectoral structure of expenditure from structural funds in Poland (also broken down by operational programmes of NDP 2004-2006) – information which is very important to analyses of the impact of EU funds on the Polish economy, not only in the context of this project. A forecast of the impact of EU cohesion policy on EU-15 States’ companies in 2009-2015 has also been formulated. Detailed results, as well as methodological description, are presented in Appendix 7.2. Compared to 2009 report, only the forecast has been updated. Chapter three presents the objective and method of a macroeconomic research. It has been based on input‑output analysis and sectoral foreign trade accounts. Despite a high degree of disaggregation, its character was macroeconomic. Due to greater data availability, a method was modified compared to the year 2009. Additionally, Appendix 7.4 presents the juxtaposition of main research questions and methods used to provide answers. Chapter four – undoubtedly the most important to this study – characterises total benefits gained by EU-15 States, including both direct and indirect benefits resulting from the implementation of EU cohesion policy in Poland. All estimations have been made at the level of NACE sectors, which allowed for highly detailed analyses and which provided a possibility to answer research questions related to specific aspects of the impact of structural funds on the Polish economy and (indirectly) on EU-15 economies. The results have been broken down by particular States, years and economy sectors. Apart from the impact of Community funds on EU-15 economies in 2004- 2009, their expected impact in 2010-2015 has also been quantified. This chapter describes results which are the main object of an update. Appendix 7.3 is a drill‑down of the chapter, as it contains additional tables with numerical results. Chapter five is a summary. Due to the lack of close connection with the evaluation of indirect benefits, presented in Chapter 4, this report omits research elements from the 2008-2009 period. In particular, the 2009 report presents results of supplementary analyses (in‑depth interviews, documentation analyses, case studies). They cover such aspects as external effects of basic infrastructure, impact ofINTERREG initiative on international cooperation and foreign capital flows. If you would like to find out more on these topics, please see the 2009 report: Evaluation of benefits gained by EU-15 States as a result of the implementation of cohesion policy in Poland of 2009.

7 1. Research context

This chapter is an introduction to the report’s subject matter. It is a repeated, analogous version of the part of the report Evaluation of benefits gained by EU-15 States as a result of the implementation of cohesion policy in Poland of 2009, however, to introduce the issues to interested readers it has been fully retained.

1.1. Economic sense of EU cohesion policy

The fundamental reason behind the decision to implement EU cohesion policy by European Communities isthe will to support sustainable economic growth in the entire area (of all Member States) of the European Union. In order to achieve this effect, it is necessary to first level out the developmental differences between particular States and their regions, so that the grounds for a long‑term economic growth are established also in the areas where income per capita is the lowest. In this sense, cohesion policy is supposed to accelerate and facilitate real convergence processes between regions. The real need for it is reflected in a disproportion between Member States when it comes to product per capita (chart 1.1).

CHART 1.1. GROSS DOMESTIC PRODUCT PER CAPITA IN EU-27 STATES IN 2007 (MEASURED BY PURCHASING POWER PARITY, EU-27=100)

Luxembourg Ireland Netherlands Austria Denmark Sweden Belgium UK Finland Germany France Spain Italy Greece Cyprus Slovenia Czech Rep. Malta Portugal Estonia Hungary Slovakia Lithuania Latvia Poland Romania Bulgaria

050100 150200 250300

Source: http://epp.eurostat.ec.europa.eu/.

EU cohesion policy is of a regional character, i.e. instead of countries, regions are the basic territorial units. This allows the aid to be granted not only to less wealthy countries but also to regions with serious structural problems located in developed countries.

8 The possibility of large divergences between regions within particular countries was reflected, among others, in Poland in the pre‑accession period (figure 1.1):

FIGURE 1.1. CONVERGENCE AND DIVERGENCE PROCESS OF POLISH REGIONS (IN THE PERIOD 1995-2004), MEASURED BY GDP PER CAPITA

I – regions around national average II – regions losing advantage over national average III – regions catching up to national average IV – regions developing lags compared to national average V – regions increasing their advantage over national average

Source: Own elaboration based on the data from Regional Data Bank of CSO.

A fundamental question, in the context of justifying the usefulness of cohesion policy, apart from the existing developmental disproportions, isthe question of selecting economic policy instruments and their efficiency and effectiveness. Here we can make use of findings of the theory of economy. The possibility to increase the investment into a (broadly understood) capital is a key economic channel, through which Community funds are to influence the acceleration of the real convergence process. According to predictions of nearly all models proposed by economic growth theories (starting from the Solow model of 1956 to contemporary theories of endogenous and semi ‑endogenous growth), countries with a lower growth level will converge in the direction of better developed economies, thanks to a faster accumulation of physical capital, the source of which lies in the above‑average rates of return. Real convergence requires the simultaneous removal of barriers such as insufficient development of basic infrastructure or high risk related to running a business activity. Moreover, due to mobility limitations, adjustments take place gradually. Aid from structural funds, addressed to the relatively most poorly developed EU regions, eliminating the abovementioned barriers, delivering a necessary infrastructure and additional incentives for private investments, may largely contribute to accelerated convergence process. The analogous convergence mechanism may also relate to the accumulation of human capital (cf. e.g. Mankiw, Romer and Weil, 1992, cf. discussion below). Since the difference in human resources is in fact one of the significant reasons for the developmental lags of Poland compared to the wealthiest EU States, EU funds supporting the human capital in Poland – especially funds expended by SOP Human Resources Development – can considerably accelerate Polish convergence with these States. However, investment acceleration requires limited consumption in a short time, and along with the modernisation of physical capital (cf. Greenwood, Hercowitz and Krusell, 1997) it can also be related to outdated qualifications of a part of the workforce, resulting in the decline in real remu- nerations and (potentially) with unemployment growth. Therefore, the aim of cohesion policy is

9 to facilitate the less affluent EU States and regions too g through the transitional period related to modernization. A further discussion of economic reference books related to this research is presented in the Appendix. To shortly sum up, it needs to be emphasised that the significance of cohesion policy to the process of economic convergence is analogous to the impact of public investments or subsidising private investments, broadened by redistribution at the international level.The channels of EU cohesion policy’s short‑term and long‑term impact on the economy are following: • subsidies to private investments, aiming at increased accumulation of modern forms of physical capital; • public investments in broadly understood infrastructure, enhancing the ultimate productivity of private capital; • supporting investments in human capital, that is, increasing labour productivity; • supporting scientific research leading to increased productivity of all production factors in a long perspective (due to the implementation of innovations obtained) Temporary multiplier effects on the demand side may also occur as they result from increased consumption or public investments. These effects may be strong, albeit short‑term, if house- holds do not fear the increased expenditure in the future, resulting from the increased public expenditure in the current period, financed by public debt. In the case of the inflow of external funds (i.e. coming from other European Community States) this is justified, thus the effect can be stronger than in the case of activities financed from national funds. The theory of economy indicates a number of channels for potentially positive impact of interventions from Structural Funds on subsidised economy. It is indispensable though, to allocate funds to productivity‑enhancing investments, which includes e.g. enhancing the quality of human capital – especially in the field of science and engineering or expenditure on research and development. Geographical concentration of aid is also significant, depending on the expected results. In accordance with conclusions from empirical analyses, investments in road infrastructure and human capital have the most significant impact on convergence rate between EU regions among economy sectors supported by EU cohesion policy.1 This impact, with the scale of funds as the one in Poland in 2004-2013, may trigger the increase in gross domestic product (GDP) by 3.5 %. This means that benefits gained thanks to funds are higher than funds allocated to them (for more details, see Chapter 1.2, charts 1.6 and 1.7), which translates into positive net effect on the European scale. EU cohesion policy also strives to fulfil objectives consisting in supporting the labour market. Creating incentives to increase the employment rate among the population or changes of sectoral employment structure in particular regions may significantly contribute to a higher convergence rate when it comes to GDP per capita and also, in a short perspective, to a higher economic growth rate of the entire area. Apart from the impact on convergence rate, this activity has a serious additional economic justification. When economic lagging of certain regions exists in one socio‑economic organism, which the European Community is supposed to form, it may result in abandoning these areas by most mobile persons (who usually have the highest human capital at their disposal) aspiring to improve their living standard. In the scale of the entire economy, such

1 “Reakcja gospodarki polskiej na fundusze strukturalne w latach 2007–2013 – wnioski dla Polski”, Institute for Structural Research, 2007.

10 process is beneficial, since it allows the increased efficiency of workforce allocation; however, it may also lead to a partial depopulation of less affluent regions and, above all, to their further marginalisation and social exclusion of these areas residents. Since such perspective is a potential threat to the integrity of the European Union, the role of EU cohesion policy seems to be immensely important. The implementation of (in particular)INTERREG initiatives is supposed to favour the reduction of divergences between EU regions via strengthening the cooperation between neighbouring regions. The environmental protection‑promoting policy requires particular attentions as well. It allows to limit environmental pollution by particular states, with a particular focus on a situation when pollution adversely influences neighbouring countries.

1.2. EU Cohesion Policy

The conviction that it is necessary to act towards increasing socio‑economic cohesion of Europe at the international level was outlined as early as in the Treaty of Rome of 1957. The execution of this task was supposed to be based on two first structural funds established in 1958: the European Social Fund, whose task was to finance the activities on the labour market, and the European Agricultural Guidance and Guarantee Fund, supposed to support the agricultural restructuring and modernisation, as well as rural development processes. Later on, accepting other countries with varied levels of development to the European Communities resulted in growing divergences between particular regions, which led to intensified activities for increasing cohesion within the Community area. This was accompanied by the following system reforms: on the accession of Denmark, Ireland and United Kingdom in 1973, the European Regional Development Fund was established, the task of which was to support less developed, particularly industrial, areas. This meant the beginning of direct redistribution of funds between better and worse developed Community areas. Accession of Greece, Spain and Portugal in 1986 preceded the thorough reform of structural funds that began in 1989. The official objectives of the executed policy were formulated at that time: • supporting economic growth in the least affluent Community regions; • supporting entrepreneurship and improvement of the natural environment’s quality in industrial areas; • flexible programmes focused on labour market policies; • acceleration of structural adjustments of agriculture to reforms under Common Agricultural Policy. In 1992 the Cohesion Fund was established, aiming at supporting large ublicp investments – dealing mainly with infrastructure and environmental protection – in less developed Member States. It was decided that the Cohesion Fund is of a national scope instead of a regional one, contrary to other structural funds. The accession of Austria, Finland and Sweden to EU in 1995 was accompanied by the establishment of the Financial Instrument for Fisheries Guidance.

11 Another reform concerning the cohesion policy management system took place in 1999 and was related to the preparation of the accession of 10 countries (including Poland), which took place in 2004. The following objectives have been reformulated: • development and structural adjustment of less developed regions; • economic and social changes in regions dealing with structural problems; • adaptation and modernisation of national policies, as well as education, training and employment systems. Until end-2006, funds allocated from structural funds were expended through Operational Programmes and initiatives, aiming at solving specific problems, inscribing into cohesion policy objectives. Financial aid from the Cohesion Fund was allocated directly to the financing of public investments in authorised countries. In developing the 2007-2013 perspective,the Cohesion Fund was integrated with structural funds. New objectives have been formulated (convergence, regional competitiveness and employment, cooperation), whereas most funds (ca. 80 %) were supposed to be allocated for the implementation of the first mentioned objective, consisting in supporting real convergence of the least ‑developed EU regions. In order to increase cohesion between development levels of particular regions, entrepreneurship, increasing flexibility of labour markets and modification of educational systems are to be supported alongside with co‑financing infrastructural investments. Methods of managing structural policies at the national level are also supposed to be modernised. Moreover, actions for the quality of natural environment in industrialised areas are also to be undertaken. Care for natural resources is also executed as part of programmes directed at agriculture and fisheries sectors. Structural reforms of the cohesion policy have been accompanied by the gradual increase in funds allocated to their implementation over years.

1.2.1. EU Cohesion Policy in Europe after 2004

The period between 2004 and 2006, falling for the last years of the planning perspective 2000-2006 and the accession of 10 new Member States to European Communities was characterised by the domination of EU-15 in the structure of cohesion policy beneficiaries (chart 1.2). Particularly large subsidies were directed at relatively poor Mediterranean countries: Spain, Portugal and Greece, as well as to Italy (supporting the development of southern regions) and to Germany (mostly post‑GDR regions).

12 CHART 1.2. ALLOCATION OF FUNDS EXPENDED FOR COHESION POLICY IN 2004-2006

Spain 22,37%

Other 9,80% Germany 12,50% Czech Rep. 1,47% Hungary 2,10% France 6,43% Italy 12,28%

Poland 7,34%

UK Portugal 8,93% 7,86% Greece 8,92%

Source: Own elaboration based on http://ec.europa.eu/regional_policy.

The picture showing the domination of selected (poorer) EU-15 States in 2004-2006 is also visible in the data concerning the expenditure under EU cohesion policy per capita. The largest amounts fell on the residents of Greece and Portugal in this period. High per capita amounts were also directed to Spain and Baltic States, which joined EU in 2004 (chart 1.3).

CHART 1.3. EXPENDITURE UNDER COHESION POLICY PER CAPITA (IN EURO, FIXED PRICES OF 2008)

Portugal Estonia Spain Lithuania Latvia Hunhary Ireland Poland Slovakia Italy Slovenia Czech R. Finland 2006 Malta 2005 Germany UK 2004 Cyprus France Sweden Austria Netherlands Belgium Luxembourg Denmark Greece

050100 150 200 250 300 350400

Source: Own elaboration based on http://ec.europa.eu/regional_policy and http://epp.eurostat.ec.europa.eu/.

At the same time,Community budget in 2004-2006, the fourth part of which consisted of expenditure on cohesion policy, was to a great extent financed by EU-15 States (chart 1.4).

13 CHART 1.4. SHARE OF PAYMENTS TO COMMUNITY BUDGET IN 2004-2006

Germany 21,23% Other 9,00%

Poland Denmark 1,92% 2,04% France Austria 16,61% Sweden 2,19% 2,71%

Belgium 3,88%

Netherlands 5,33% Italy Spain 13,71% 8,59% UK 12,80%

Source: Own elaboration based on http://ec.europa.eu/.

Taking into account, on the one hand, the total payments to budget, and on the other hand, the sum of all benefits (including direct payments to farmers), most EU Member States were net payers; only ten countries were net beneficiaries in 2004-2006. The largest net beneficiary in this period was Spain (over EUR 9 billion, at prices of 2008), while the largest net payer was Germany (approximately EUR 160 billion, at prices of 2008). Among EU-15 States, only the following were beneficiaries: Spain, Greece, Portugal and Ireland. Among states that joined in 2004, the following were beneficiaries: Estonia, Latvia, Lithuania, Poland, Slovakia and Hungary. The remaining new Member States, i.e. Slovenia, Czech Republic, Cyprus and Malta were net payers.

FIGURE 1.2. EU MEMBER STATES – NET BENEFICIARIES AND PAYERS IN 2004-2006

Net beneficiary states have been marked red and pink. Net payer states have been marked yellow. The more intense the colour the larger the difference between payments to budget and benefits gained.

Source: Own elaboration based on http://ec.europa.eu/regional_policy.

14 Moreover, the distribution of direct benefits and burdens resulting from theohesion c policy will change in the perspective of 2007-2013 to the disadvantage of most EU-15 States. Although certain EU-15 States will remain significant beneficiaries of structural funds, a considerably greater concentration of expended funds in new Member States is visible. This means that the share in benefits resulting from the implementation of cohesion policy by EU-15 States will be limited, which is a natural result of enlarging the European Communities by 10 countries (and by other 2 in 2007 – Romania and Bulgaria), the majority of which are characterised by a lower productivity level or GDP per capita compared to EU-15. We should additionally expect that the share of the majority of EU-15 States in Community budget financing will remain high (at least in proportion to their population), which results from basing contribution levels on the gross domestic product. Therefore, as long as the cohesion policy does not fully achieve its basic objective, i.e. convergence of regions, the most affluent EU-15 States will have to finance larger parts of the Community budget.

CHART 1.5. ALLOCATION OF FUNDS EXPENDED FOR COHESION POLICY IN THE 2007-2013 PERSPECTIVE

Poland 19,40%

Spain Other 10,25% 17,47%

Italy 8,34% France 4,14%

Romania 5,63% Czech Republic 7,70%

Greece 5,92% Germany Portugal 7,62% Hungary 6,22% 7,30%

Source: Own elaboration based on http://ec.europa.eu/.

A particular role in this scope is played by the Cohesion Fund, which due to supporting public investments of the infrastructural and environmental nature, is supposed to support the stability of least developed economies. In the 2007-2013 perspective, this fund’s resources will be directed only to countries which joined the European Union in 2004 and later, as well as Greece and Portugal (Figure 1.3). Spain will be included in the transition period resulting from the fact of receiving Fund aid until 2006 and in accordance with “n+2” rule will be granted funds until end-2008.

15 FIGURE 1.3. EU MEMBER STATES – COHESION FUND BENEFICIARIES IN 2007-2013

Countries which are Cohesion Fund beneficiaries in the 2007-2013 perspective have been marked red. Other European Union states have been marked yellow.

Source: Own elaboration based on http://ec.europa.eu/regional_policy/.

Summing up, the information presented in this item suggests the low profitability of participation in the system on the part of large EU-15 States, particularly Germany. It needs to be noted, though that supporting the growth of poorer economies may tighten the internationalooperation, c as well as intensify trade. This may lead to a situation where indirect benefits level direct disadvan- tages concerning net payers out. The analysis being the subject of this report will help answer the question concerning the relation between increasing the stream of international trade between Poland and EU-15 States and financing the Community budget by these states.

1.2.2. Implementation of EU Cohesion Policy in Poland

EU cohesion policy, financed from structural funds, was implemented in Poland in 2004-2006 through six Sectoral Operational Programmes and two Community Initiatives. Moreover, funds from the European Regional Development Fund were transferred to Poland through Operational Programme Technical Assistance as well. The Rural Development Plan was also financed from the European Agricultural Guidance and Guarantee Fund. Table 1.1 presents a detailed structure of programme financing.

16 TABLE 1.1. IMPLEMENTATION OF COHESION POLICY IN POLAND IN THE 2004-2006 PERSPECTIVE

European European Agriculture Financial Instrument Regional European Social Guidance and for Fisheries Guidance Development Fund (ESF) Guarantee Fund (FIFG) Fund (ERDF) (EAGGF) Equal CI Interreg CI Rural Development Programme Technical Assistance OP SOP Restructuring and Modernisation of the Food Sector and Rural Development SOP Human Resources Development SOP Fisheries and Fish Processing SOP Transport SOP Improvement of the Competitiveness of Enteprises SOP Integrated Regional Operational Programme

Source: www.mrr.gov.pl.

Cohesion Fund resources were not expended in the 2004-2006 perspective through operational programmes. Expenditure was divided between “Transport” and “Environment” categories. Funds flowing to Poland in the 2004-2006 perspective were significantly increased only in 2006. Despite a longer period of European Union membership in 2005 compared to 2004, the total value of funds remained on a low level. Funds received by Poland in 2004-2009 constituted a small part of Polish GDP (Chart 1.6).

CHART 1.6. VOLUME OF FUNDS FLOWING TO POLAND IN 2004-2009 AS PART OF THE NATIONAL DEVELOPMENT PLAN AND NATIONAL COHESION STRATEGY

6 2.0% lski Po

(2008) 1.8% 5 1.6% y eu ro

rd 4 1.4% Udział w PKB

Milia 1.2% 3 1.0% 0.8% 2 0.6% 0.4% 1 0.2% 0 0.0% 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009

Source: Own elaboration based on data of MRD, Eurostat and NBP.

17 In the 2007-2013 perspective, the allocation of funds for Poland is supposed to increase significantly, which is going to make Poland the largest recipient of assistance funds among EU-27 states. In regards to the size of Polish economy, this means the more than a double increase of previous aid. Therefore, we can expect a considerably greater influence of cohesion policy on the Polish economy. This effect may abate only in the final years of the period 2007-2013, due to the higher economic growth rate than the assistance funds allocation growth (Chart 1.7). In the context of imports from EU-15 States, this means that the part of inflow triggered by Community Funds will be replaced by an autonomous economic growth.

CHART 1.7. ALLOCATION OF FUNDS FOR POLAND IN THE 2007-2013 PERSPECTIVE UNDER COHESION POLICY (IN EUR BILLION AND AS % OF GDP)

10.5 2.7% lski Po (2008) 2.6% 10.0

y eu ro 2.5% rd 9.5 2.4% Udział w PKB Milia 9.0 2.3%

2.2% 8.5 2.1% 8.0 2.0%

7.5 1.9% 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013

Source: Own elaboration based on http://ec.europa.eu/regional_policy and ISR macroeconomic forecast.

In the 2007-2013 perspective the organisation of cohesion policy implementation system has also been reformed in Poland. Compared to the years 2004-2006 more emphasis has been placed on regional development, which corresponds to the greater meaning accredited to convergence objective in cohesion policy assumptions. In the case of Poland, this is manifested in the separation of divisible regional programmes for each Voivodeship, as well as the establishment of the Operational Programme Development of Eastern Poland (all these programmes have been financed from ERDF). Moreover, more emphasis has been placed on supporting innovativeness and development of human capital and less emphasis – on direct assistance activities. Apart from the aforementioned ones, Operational Programme Innovative Economy and Operational Programme Infrastructure and Environment (co‑financed from the Cohesion Fund) will also be financed from ERDF. Operational Programme Human Capital will be financed from ESF. Apart from increasing the amount of aid, different management of Polish economy should contribute to the reinforcement of positive impact on it, according to conclusions from Chapter 1.1. This should also translate into higher additional imports of goods and services from EU-15 States. At the same time, funds flowing to Polish economy from EU-15 payments, constitute a minute proportion of gross domestic product of these countries, which is indicated in Table 1.2. This means that the flow of funds should result in a stronger positive effect for the Polish economy than a negative one for EU-15 economies, even without taking into account return effects in the form of increased trade exchange.

18 TABLE 1.2. PAYMENTS TO COMMUNITY BUDGET IN THE PART DEDICATED TO THE IMPLEMENTATION OF COHESION POLICY IN POLAND IN REGARD TO GDP OF EU-15 STATES

2004 2005 2006 2007 2008 2009 2010 2004-2010 Austria 0.02 % 0.02 % 0.03 % 0.06 % 0.07 % 0.07 % 0.07 % 0.05 % Belgium 0.03 % 0.03 % 0.04 % 0.10 % 0.10 % 0.12 % 0.12 % 0.08 % Denmark 0.02 % 0.02 % 0.03 % 0.08 % 0.08 % 0.09 % 0.09 % 0.06 % Finland 0.02 % 0.02 % 0.03 % 0.06 % 0.07 % 0.08 % 0.07 % 0.05 % France 0.02 % 0.02 % 0.03 % 0.07 % 0.07 % 0.08 % 0.08 % 0.05 % Greece 0.02 % 0.02 % 0.03 % 0.07 % 0.07 % 0.09 % 0.09 % 0.06 % Spain 0.02 % 0.02 % 0.03 % 0.09 % 0.09 % 0.10 % 0.10 % 0.06 % the 0.02 % 0.02 % 0.03 % 0.08 % 0.09 % 0.10 % 0.10 % 0.07 % Netherlands Ireland 0.02 % 0.02 % 0.03 % 0.07 % 0.07 % 0.08 % 0.08 % 0.05 % Luxembourg 0.02 % 0.02 % 0.03 % 0.06 % 0.07 % 0.07 % 0.07 % 0.05 % Germany 0.02 % 0.02 % 0.03 % 0.06 % 0.07 % 0.07 % 0.07 % 0.05 % Portugal 0.02 % 0.02 % 0.03 % 0.07 % 0.07 % 0.09 % 0.08 % 0.06 % Sweden 0.02 % 0.02 % 0.03 % 0.06 % 0.06 % 0.07 % 0.07 % 0.05 % United 0.01% 0.01% 0.02 % 0.05 % 0.05 % 0.06 % 0.06 % 0.04 % Kingdom

Source: ISR own calculations based on http://ec.europa.eu/regional_policy, as well as data and forecasts of GDP by Eurostat.

1.3. Expected channels of impact of the implementation of EU Cohesion Policy in Poland on EU-15 and net payer states

Concept of cohesion policy is not limited to the redistribution of funds between particular EU regions, though, but it also covers the expectation of beneficial economic effects for the entire Community, including its wealthier net payer countries and regions. Description of economic relations, within which these benefits may arise, is best understood from the angle of a basic accounting equation Y = C + I + G + X – Z, according to which the disposable product (i.e. product generated in Y country with Z total import) is divided between C consumption, I investment, G government expenditure and X exports. After a slight transformation this identity takes the form of: (S - I) + (T - G) = (X - Z), in which foreign trade balance (X‑Z) is equal to private savings surplus over investments (S‑I) in terms of identity, added up to central budget surplus (T‑G). Thus, if there is an inflow of EU-15 funds to Poland (via governmental sectors of EU-15 States) supporting Polish investments (I private and G governmental), then, assuming that in the short perspective, tax savings and revenues of the government will be roughly constant, net payments to Poland must return abroad – in particular to EU-15 States – in the form of additional imports of goods and services (cf. Figure 4). Obviously,

19 the impact of this effect does not have to be proportional to funds invested by particular EU-15 States. A significant role will be played here by the structure of investments co‑financed under cohesion policy, as well as the structure of Polish foreign trade – especially the share of imports from particular EU-15 States by particular sectors of the Polish economy. Additional positive effects of the implementation of EU cohesion policy olandin P should be expected for EU-15 States also in the long perspective. These effects will be discussed in detail in paragraphs below; it is these long‑term effects, albeit only indirect that are the basic reason (apart from the feeling of transnational and transregional solidarity) for which the wealthier EU-15 States agree to be net payers of Structural Funds and EU Cohesion Fund.

FIGURE 1.4. DIAGRAM OF PRODUCT CIRCULAR CYCLE IN ECONOMY

C+I+G+X–Z Taxes Transfers Export (X) Private income

Net taxes (T)

Savings (S)

EU-15 States C+I+G–Z Private Consumpon (C) sector Government (S–I) (T–G) Other countries Investments (S) Import (Z)

Government purchases (G)

C+I C+I+G

Source: Own elaboration.

It needs to be emphasised then that the mechanisms analysed in this research, dealing with the impact of the implementation of EU cohesion policy in Poland on EU-15 economies are based both on short and long‑term phenomena.2 In the short perspective, the main effect consists in the fact that additional investment incentives (public or private) will translate themselves into additional demand for goods and services, which are obviously partly imported, largely from EU-15 States. This demand (both direct and indirect) appears both at the investment implementation stage and later on, when physical or human capital accumulated is used in production processes. In the long perspective, the key benefits are related to material effects of the implementation of EU cohesion policy, i.e. with real changes of the sectoral economic structure, development of modern branches of industry and services, increased purchasing power among consumers in

2 Unfortunately, due to the fact that primary data available only cover the years 2004-2007, i.e. too short a period for the long- term effects to manifest themselves visibly, the microeconomic part of the research identifies mostly short-term effects. The macroeconomic part, whose description is a significant part of this partial report, will contain a formulation of a long-term forecast which will also take long-term effects into account.

20 regions supported by structural funds etc. From the perspective of EU-15 States, the long‑term external effects of the implementation of EU cohesion policy in Poland are also very important, as these are additional “side‑benefits” of its implementation, but their emergence was not the reason behind the process. These effects include: (i) increased possibility to explore the Polish market (including local and regional markets) by goods and services supplied by EU-15 companies, (ii) increased internal and external trade exchange of EU-15, including with post‑Soviet republics, (iii) reduction of operational costs of EU-15 companies operating in Poland.3

1.3.1. Short ‑term effects

We should expect that additional investments in Poland, separately supported under EU Cohesion Policy, will trigger the development of modern sectors of the Polish economy. This would mean the increase in production and investment demand (concentrated around selected branches), and indirectly, in consumption demand as well. This in turn means, in particular, the increase in demand for imported goods and services, especially those coming from EU-15 States. The effect of foreign trade creation is in fact the main channel via which direct benefits for countries other than direct beneficiary of funds are executed. Investments supported under the EU Cohesion Policy in Poland will lead to a change in the structure of Polish production and imports. Due to the structure of directions of Polish imports (modern sectors supported by EU cohesion policy require the imports of considerable amounts of goods and services from medium and high technology sectors; a vast majority of such goods and services is imported to Poland from EU-15 States), we should expect that this change will trigger additional growth of imports from EU-15 States, to the disadvantage of third countries in terms of the share and not total values (we are dealing here with the trade creation effect instead of forcing out certain directions by other ones), especially those third countries from which only low‑processed goods are imported. Therefore, it is crucial to answer the question: which EU-15 States and which sectors of their economies have gained, or will gain, the highest direct benefits from the implementation of EU cohesion policy in Poland. In order to understand better what sort of EU-15 companies will benefit from the implementation of EU cohesion policy in Poland, three categories of such companies need to be separated. First of all, certain companies from EU-15 States can directly use structural funds or the EU Cohesion Fund – as contractors of projects co‑financed from these funds and executed in Poland. The second category is “direct beneficiaries”, that is,suppliers of goods and services, for which the additional demand was generated by executed projects. The third category of companies is all enterprises which neither directly, nor indirectly participated in project execution, but in spite of this, can experience positive external effects of projects, such as an increased volume of trade with Poland due to the development of Polish internal market, or an increased value of Polish trade with other countries, including non‑EU countries. This may also be companies benefiting from the reduction of operational costs in Poland, e.g. due to the execution of infrastructural projects. Applying only macroeconomic methods, all these three categories of cohesion policy beneficiaries were treated jointly; their separation is possible thanks to the analysis on the microeconomic

3 An important, however difficult to express in economic terms, external effect relating to the effective implementation of the Cohesion Policy - i.e. efficient reduction of developmental disparities within the European Union - is the increase of social, economic and political stability of the EU as a whole, reduction of the probability of the emergence of economic conflicts as well as better integration of Member States, also in non-economic terms.

21 scale. Accuracy of evaluation of the strength of structural funds’ impact on particular categories of companies will become lower with the fall of directness of this impact and, consequently, the effect measurability level. Moreover, the impact on suppliers of indirect goods, particularly companies experiencing positive external effects of projects, may emerge with a certain delay (it is indeed a long‑term effect). That delay will be the longer, the weaker are the company’s links to the discussed project. Unfortunately, the dynamic nature of a discussed phenomenon cannot be fully identified in this research, since the currently available data include only 5 years of observations (2004-2008).

1.3.2. Long ‑term effects

Inasmuch as the key mechanism of the impact of EU cohesion policy implementation in Poland on EU-15 economies, including net payer countries (such as, e.g. Germany), is in the short perspective the effect of foreign trade creation and sectoral reallocation, then in the long perspective indirect effects related to the modernisation of sectoral structure of the Polish economy, its improved basic infrastructure, accumulation of additional resources of physical and human capital and adaptation of new technology will play an even more significant role. EU-15 States may (indirectly) gain benefits from these phenomena owing to at least four different mechanisms. First mechanism, which was already indicated in the previous chapter, is based on external effects of the implementation of additional investments, including, in particular, investments in basic infrastructure. Side‑effects of such investments include the increased possibility to explore the Polish market by goods and services supplied by foreign companies (including EU-15 ones), increased internal (through multiplier effects initiated by the direct effect consisting in the creation of additional trade with Poland) and external trade exchange of EU-15, including post‑Soviet republics, as well as reduction of operational costs of companies operating in Poland, Including from EU-15 States. Obviously, such external effects will be observed with a considerable delay in regards to the initial investment process. Such delays may appear due to a long investment execution period, time needed to begin the activity, numerous stages of certain investments, time needed to execute multiplier effects etc. Second mechanism of long‑term impact of the implementation of EU cohesion policy in Poland on EU-15 economies is based on the growth of wealth among the Poles, since it means, in macroeconomic scale, the growth of aggregated demand for goods and services, including imported ones, particularly from EU-15 States. In order for the discussed effect to be effective, it is necessary that the investments executed with support from structural funds or the Cohesion Fund translate themselves first into the total productivity growth of production factors in Poland. This requires time and requires for Community funds to be allocated to those sectors of the Polish economy, whose development will result in the growth in average productivity in our country. In the case of infrastructural investments, it is crucial that benefits related to the improvement of infrastructure strengthen the incentives of private companies to increase their investments to the extent allowing the total productivity in the national (or regional) scale to grow. In the light of previous experiences related to the implementation of cohesion policy in other EU States, it was visible that it was able to considerably accelerate capital accumulation and modernisation, followed by real convergence. This is reflected, above all, in the case of Ireland and Spain. Unfortunately, this effect is not fully guaranteed: Greece, southern regions of Italy and eastern regions of Germany have provided examples that structural investments are sometimes wasted.

22 Third mechanism is based on benefits related to enhanced quality of technology used in particular branches of the Polish economy. Modernisation of physical capital and accumulation of human capital – both these effects are supported under EU cohesion policy – not only do they lead to labour productivity growth in Poland, but also to innovativeness growth among Polish companies and public institutions. In the situation of higher innovativeness in Poland, the transfer of technology from our country to EU-15 States is possible, in longer perspective, which positively influences their productivity. We have observed only the reverse phenomenon so far; however, this fact is directly related to the technological distance between Poland and most technically advanced EU-15 States. Fourth mechanism is based on more comprehensive economic integration between Poland and other EU States. Owing to a more comprehensive integration, particular EU markets should become more competitive and efficient; there will be a better chance for fuller utilisation of locally available benefits of scale in those branches of industry and services where they appear. Due to the inclusion of Poland into the group of signatory states of the Schengen Treaty, progress aiming at full implementation of EU Single Market and persistent upward trend of trade exchange between Poland and EU-15 States, the level of economic integration between Poland and other EU States is ever higher already. Only the full real convergence and the entry of Poland to the Euro zone will allow the complete integration. If then the implementation of EU cohesion policy in Poland accelerates its real convergence, benefits from resulting economic integration will be surely experienced by EU-15. All abovementioned mechanisms of long‑term impact of the implementation of cohesion policy in Poland on EU-15 economies work indirectly. An accurate quantification of their impact is very difficult – if not impossible taken into account a five‑year period of data availability for the needs of this analysis. The microeconomic part of the research will therefore focus mostly on short‑term effects. In the macroeconomic part, due to the utilisation of long‑term macroeconomic forecasts and assumption of Leontief’s model in regards to particular years of analysis, it will also be possible to additionally take into account the long‑term effect, based on the growth of aggregated demand for goods and services, including the ones imported from EU-15 States. Impact of the third and fourth mechanisms mentioned above is unverifiable at currently available data.

23 2. Evaluation of direct benefits gained by EU-15 companies as a result of the implementation of EU cohesion policy in Poland

This report presents synthetic results of Computer Aided Web Interview carried out by ISR at the turn of 2008 and 2009. It has been executed as part of the work upon the report Evaluation of benefits gained by EU-15 States as a result of the implementation of cohesion policy in Poland of 2009. A full description of methodology and analysis results is included in Appendix 7.2 to this report. As part of the analysis, hereinafter referred to as a microeconomic analysis, questionnaires were sent to all project coordinators whose proper and updated email address was available. The analysis covered 24,631 projects; 6,187 completed questionnaires were returned, which means the sample was executed at the level of 25 % of population. Owing to questionnaires, data concerning the value of particular projects, value of contracts with contractors and countries of their origin have been collected. Analysed projects had been implemented since 2004 in the case of programmes co‑financed from structural funds and since 2000 in the case of ISPA and Cohesion Fund co‑financing.4 Cumulated value of co‑financing the final sample of projects amounts to 33 % of the total amount of Community funds expended in Poland in 2000-2008 under EU cohesion policy. Such proportion of population and sample size are sufficient to draw conclusions concerning the entire population covered by projects. It needs to be said that direct impact of the implementation of EU cohesion policy in Poland on EU-15 companies being project contractors is significant – in absolute volumes. A vast majority of funds from European Programmes has been allocated to construction works (73 %), including particularly works financed by Cohesion Fund and Integrated Regional Development Programme. Due to low, fourteen percent share of contractors from EU-15 States in the total value of construction contracts, they amounted to 2.3 % of contractors with regard to number of companies and 7.8 % with regard to the value of contracts. Their share in supplying machines and devices was significant when it comes to proportion. They utilised Cohesion Fund resources to a largest extent (when it comes to value), as well as SOP HRD and SOP ICE. A vast majority of the companies were German, although a significant share of funds found its way also to Danish and Austrian companies.

4 ISPA – Instrument for Structural Policies for Pre-Accession and the Cohesion Fund are characterised by a common, constant reporting, which makes it impossible to separate financing from these instruments. As indicated by Chart 7.5, funds expended in the period 2000–2003 constitute a small part of the total research results.

24 Most important results of macroeconomic study

• Direct impact of the implementation of EU cohesion policy in Poland on EU-15 companies being project contractors in 2000-2008 amounted to EUR 1.18 billion i.e. PLN 4.6 billion. • The above impact constitutes 7.8 % of the whole amount contracted to contractors, which at the very slight share of foreign (non‑EU-15) contractors translates into a considerable impact of the implementation of Cohesion Policy in Poland on Polish enterprises. • It may be expected that in 2009-2015 the value of direct impact on EU-15 companies will increase almost 4 times – by EUR 2.7 billion (PLN 10.9 billion), where the % of the whole amount remains at the level of 4.6 %. • Largest beneficiaries (apart from Polish beneficiaries) of the discussed impact were and will be the German companies and companies from the construction sector. • An important role in the additional import caused directly by the implementation of the Cohesion Policy in Poland is played by the modern production capital, which on the one hand increases the productivity of Polish economy and on the other provides considerable benefits to the suppliers from highly productive branches of the economy. • EU-15 companies become contractors the more often, the larger the projects are. • Projects financed from the resources of the European Social Fund practically do not use the goods and services generated by EU-15 companies.

This shows that the direct share of foreign companies, particularly those from EU-15 States, was low in terms of direct use of Community funds. Their participation mostly consisted in supplying machines and devices which would be hard to obtain on the domestic market. Moreover, a larger part of the direct impact of cohesion policy on EU-15 companies, forecasted for 2004-2015, is yet to come (for more details see forecast included in Appendix 7.2). Direct impact constitutes only a small part of the total impact that the implementation of EU cohesion policy in Poland has on EU-15 companies. Production process is complex and multistage, thus it often requires contractors supplying semi‑finished products, sub‑contractors or external companies providing various services, some of which are foreign companies, including those from EU-15 States. An additional demand incentive is not without importance, as it relates to, among others, the increased demand for consumption and investment imports and is generated due to the inflow of additional Community funds to Poland. In order to quantify the summary effect of all mentioned ingredients, it is necessary to focus on the macroeconomic level. Apart from the sectoral structure of induced demand, obtained in CAWI, data from national accounts and international exchange account have also been used. Such analysis providing a comprehensive picture of the impact of cohesion policy on EU-15 companies, has been described further in the report.

25 3. Evaluation of benefits gained by EU-15 States as a result of the implementation of cohesion policy in Poland – research method

3.1. The objective and scope of the research

A general objective of the research discussed in this chapter is to evaluate indirect benefits and – after adding them up to direct benefits – total benefits obtained by economies of EU-15 States due to the implementation of cohesion policy in Poland. A general objective formulated in such a way is divided into two detailed objectives. First detailed objective is the quantification of the impact of funds expended under projects co‑financed from EU structural funds on the growth of consumption and investment demand in Poland and its impact on the growth of imports of goods and services from EU-15 States, including net payers of EU cohesion policy. This objective requires macroeconomic analyses: they will focus on comprehensive characteristics of economies, as well as indicators related to their price structure. Second detailed objective of the research is to carry out direct evaluation at a company level, aimed at identifying indirect benefits gained by EU-15 companies, resulting from the growth in demand for goods and services imported due to the expenditure of structural fund and EU Cohesion Fund’s resources in Poland. The impact of the implementation of EU Cohesion Policy in Poland on profits and payroll funds of EU-15 companies will be subject to analysis, as well as taxes paid by these companies in mother countries. A research objective formulated above specifies the thematic scope thereof, as well as largely determines the selection of research tools used. Methodology of this research has been structured this way, so as to allow the comprehensive answer to questions posed. As regards the research on a macroeconomic level, evaluation will be based on the analysis of data concerning aggregated characteristics of economies and economic indicators broken down by particular sectors, separated according to NACE classification. The scope of the macroeconomic part of the research has been formulated in the context of first detailed objective and individual evaluation questions this objective comprises. Methodological details and descriptions of datasets used in the research will be presented in the next sub‑chapter. Time scope of the research covers the impact of structural funds and EU Cohesion Fund on EU-15 economies in 2004-2009 under all operational programmes in the 2004-2006 programming period and taking into account (through applications, recommendations and forecasts) the programming period 2007-2013, the implementation of which will take place until 2015. In accordance with research assumptions, the analysis on the “macro” level abstracts from specific mechanisms of the impact of EU cohesion policy on EU-15 companies. At this stage, only the

26 total value of indirect impact and total impact has been quantified, as well as theirdecomposition between particular economy sectors. Therefore, we need to remember about separating direct effects from indirect effects of the implementation of EU cohesion policy in Poland. The results of macroeconomic analysis presented in Chapter 2 have been used to achieve this. At this stage the division of companies benefiting from the execution of projects co‑financed from structural funds and EU Cohesion Funds into two categories has been made: (i) project contractors and (ii) suppliers of indirect goods and services necessary for project execution. The analyses of the impact of funds expended under projects co‑financed from EU structural funds for the growth of consumption and investment demand in Poland and its impact on the growth of imports of goods and services from EU-15 States, including net payer states, will assume the perspective of the following detailed research questions:

1. What volume of additional demand (in terms of production, consumption and investment) generated by the implementation of the cohesion policy in Poland is oriented at goods and services imported from the respective sectors of the economy of) EU-15 countries? 2. What is the influence of projects co‑financed by the EU structural funds in Poland on the increase in the profits and payroll funds of companies from (respective sectors of the economy of) the EU-15 countries, providing (a) goods, (b) services necessary for the implementation of these projects and taxes paid by those companies in their countries of origin? 3. How has the value and structure of goods and services exported by the EU-15 countries to Poland changed as a result of emergence of an additional production, consumption and investment demand? 4. What is the influence of increasing trade with Poland (as a result of increased demand gained owing to the implementation of the cohesion policy in Poland) on the GDP in the EU-15 countries?

Among the abovementioned questions, only question three requires explicite consideration of the sectoral structure of imports in the Polish economy (or its excerpt whose development was financed from structural funds or EU Cohesion Fund). It turns out, though that the use of data concerning a detailed sectoral decomposition of the Polish economy will allow a more accurate estimation of the impact of cohesion policy in Poland on EU-15 States also in questions one, two and four. Therefore, as discussed in methodological Appendix, this decomposition was used at providing answers to all four abovementioned research questions.

27 3.2. Research method

The description of research methodology is divided into four parts. First one presents data used in the research: their sources, basic characteristics and legitimacy of their use in the research will be provided. Second part focuses on the problems to deal with while collecting data at the aggregated and sectoral level. Cases in which even the best available data are incomplete or contain outdated observation will be presented along with the methodology of imputing such missing observations used in the research. The third part analyses in detail the assumptions made for the research. The last sub‑chapter of this chapter is devoted to step‑by‑step discussion of the procedure which was applied to execute the first detailed objective of this evaluation research.

Glossary of terms relating to the inter‑sectoral flow charts

• Global product of economy branch – total value of goods or services produced by a given branch of domestic economy in a given year, regardless of further purpose. Global product is divided into indirect use (use of materials needed for production in certain branches of economy) and final use, i.e. consumption, investments and exports. • Final product of a branch of the economy – global product minus intermediate consumption. Global product is divided between consumption, investments in fixed capital, changes in stocks and exports. On the basis of the identity of national accounts, the summed‑up final product of all branches of the economy (including final imported goods) is the same as the GDP of the country (i.e. sum of added value of all domestic products produced in a given year) plus total import. • Production (material) imports – import of goods and services with the aim to use (consume) in the production process of respective branches of the domestic economy. • Consumption imports – import of goods and services for consumption (including government consumption). • Investment imports – import of goods and services used in investments in fixed capital. • Import intensity rate of economy branches – percentage share of production import in the global product of a given economy branch. • Added value of a given branch of the economy is the sum of profits and payroll funds of all companies in a given economy branch. On the basis of a balance equation, global product generated in a given sector of the economy requires incurring costs equalling the sum of material costs (including cost of imported goods and services), use of fixed assets and wages. The remaining part of the global product constitutes company profit.

28 3.2.1. Data used

In order to estimate the impact of the implementation of EU cohesion policy in Poland on the growth of imports in 15 pre-2004 EU Member States, the data from the following sources have been used: • STAN OECD base, from which the information onbilateral and global trade inflows between analysed states has been drawn, broken down by branches (except for services). The base includes data until 2008. In the majority of cases, the division of data into sectors overlaps NACE classification. Certain NACE sectors of a similar character have been grouped together. These are: a) agriculture, forestry and fishery, b) mining and quarrying, c) production of foodstuffs, beverages and tobacco products, d) production of textiles, wearing apparel, leather and leather products, e) production of paper and paper products and printing and reproduction of saved information carriers. The research utilises data concerning exports to Poland from EU-15 States (for all available sectors or NACE sector groups) from the years 2003-2008. The database is available at OECD portal. • Statistics on International Trade in Services OECD base, from which the information on bilateral and global volumes of trade in services between analysed countries has been taken, broken down by branches. Structure and contents of the base are analogous to the STAN OECD base described above. This base allows to supplement the data concerning international trade by information related to services sectors. Data gathered in the discussed base do not include all services sectors specified in NACE classification, but the majority of omitted sectors is not subject to international exchange. This concerns the following sectors: a) wholesale and retail trade in vehicles and motorcycles and their repair, b) accommodation and catering services, c) scientific research and development work, d) rental and lease. In the scale of the entire research, chances for potential distortion of results resulting from the omission of these sectors are very low – a total estimated induced demand for these sectors amounts only to ca. 1 percent of the total impact. Similar as in the case of STAN OECD, the research utilises data concerning exports to Poland from EU-15 States (for all available sectors or NACE sector groups) from 2004. The database is available at OECD portal. • ESA 95 Supply, Use and Input‑Output Tables base, available on Eurostat portal, containing supply tables, input‑output tables, use tables and imported goods input‑output tables of selected countries. All tables describe economies broken down by 55 (as in the case of Poland) or 59 branches, according to NACE classification.

29 Use tables describe the absorption of products of particular branches broken down by use in production processes of other sectors, consumption, investments, changes in stocks and exports. Supply tables contain data on the manufacturing of products by particular branches within particular sectors5 and their imports. Input‑output tables describe volumes of use of products manufactured within particular economy branches to production of other products. They also take into account the data on imports, exports and consumption and investment use. It needs to be noted here that data concerning international exchange for each type of tables mentioned are available in breakdown into two groups of trade partners: EU-15 States and others. Imported goods input‑output tables contain information on the use of goods of particular sectors manufactured abroad by sectors of an importing economy. Data availability for particular years depends on countries and table types. All mentioned matrices are available for Poland for the year 2005. • Macroeconomic forecast for Poland, worked out by Institute for Structural Research experts. A forecast concerns the years 2010-2015. This research uses forecasts concerning the level of the Gross Domestic Product. • Estimation of impact of funds expenditure under structural funds on the Polish economy, prepared with the EUImapactMOD model, prepared under projects executed by the Institute for Structural Research. Results are quantified here as a deviation from the level of the product of Polish economy, which could be obtained in a given year, if these funds were not expended. Impact estimation concerns the period 2000-2020. Estimations were prepared by use of DSGE model (Dynamic Stochastic General Equilibrium), which allows the evaluation of the impact of structural policy taking into account adjustment activities of all entities operating in economy. Complete reports from 2008 and 2009 describing the model assumptions, “Impact of Community funds on the Polish economy in 2004-2020” are available on websites of the Ministry of Regional Development and the Institute for Structural Research. However, the model is subject to constant development work and is supplied with updated data, whereas the results are used by the Ministry. The research uses recently published results (as of July 2010), from November 2009. • Data and forecasts of the changes in exports of goods and services of EU-15 States, Gross Domestic Product, price indices, population, income and labour productivity, as well as labour productivity in industry in 2004-2006, taken from Eurostat database. The research uses historical data concerning the dynamics of above‑mentioned macroeconomic and demographic aggregates for the years 2004-2007/2008/2009 (depending on availability, and in exceptional cases, also data for the years 2000-2003), as well as forecasts for the years 2009-2011. In the case of dynamics of international exchange, separate information is available for goods and services. Historical data and forecasts of gross domestic product, population, income and labour productivity have been used in step eight of the research (cf. sub‑chapter 3.2.4), allowing

5 It needs to be noted here that products of particular sectors are not manufactured only by sectors these products are accredited to. For example, in 2004 over 15 % of production of simple metals, being the product of simple metals processing sector, was manufactured by metal mining industry.

30 the estimation of the impact of the changing value of exports streams on the economy in relation to its actual level, i.e. calculations of impact in absolute terms. Price indices served to the realign all dynamics values and absolute values estimated and forecasted in the research. It allows to obtain a direct comparability of data from particular years. • Official information by the European Commission as regards annual budgets of the European Union and allocation of structural funds. Data concerning payments to budget are available for the years 2004-2010, whereas data on the allocation of structural funds and Cohesion Fund – for the years 2004-2013. Data are available on the European Commission website broken down by particular years and particular Member States of European Communities. • Average annual NBP exchange rates. For the period 2010-2015 the exchange rate of PLN to EUR was assumed at 4. This assumption is made both at preparing estimations aided by EUImpactMOD model and at all further calculations.

3.2.2. Problems with data availability and imputations

Unfortunately, due to the high level of specificity of data needed to execute this research, problems with their availability or validity have been experienced several times.In many cases – which could be noticed in the previous sub‑chapter – available data concerned, unfortunately, a more limited period and higher aggregation level than required by the needs of this research. This concerns the following problems: A. Aggregation of selected processing sectors, agriculture, forestry and fishery, as well as mining and quarrying in the case of STAN OECD data. Due to a similar character and technological advancement of particular sectors included in the aforementioned groups (within these groups), this does not distort conclusions resulting from the performed analysis. B. Lack of data for selected services sectors in the case of bilateral streams of international exchange. As mentioned in the sub‑chapter devoted to the discussion of data sources used, in the case of large part of sectors this problem applies to, estimated imports are running at zero level. This results from the lack of trade exchange in services of this branch in 2004. Due to the specific character of these branches (these are, among others, education and public administration), we should not expect the emergence of significant international flows in these areas. Lack of data about the international trade in services also concerns three sectors for which estimated additional imports are positive. These are: a) sale, maintenance and repair of motor vehicles and motorcycles; retail sale of automo- tive fuel, b) research and development, c) renting of machinery and equipment without operator and of personal and household goods. In abovementioned cases, the structure of foreign trade (broken down by exporting countries) has been approximated by an average structure for other service branches, the data of which had been included in Statistics on International Trade in Services OECD database. In the scale of an entire research, a potential distortion resulting from this approximation is low due to marginal meaning of the abovementioned branches – a total estimated additional demand for these branches amounts to 0.2 % of the total impact of EU funds expenditure in Poland.

31 Moreover, other data are available only for 2004. When it comes to other years, Eurostat data concerning the national structure of Polish imports from EU-15 States for total services have been used. It has been assumed that, compared to 2004, the changes of the share of each EU-15 States in Polish imports for each services sector took place at a rate corresponding to total services. Identical problem concerns construction. Services related to accommodation and catering, towards which the dynamics corresponding to the imports of tourist services, are an exception.A gain, this assumption should not significantly exceed the results – total services constitute less that 4.5 % of additional imports (construction – 4.5 %) and the applied estimations concern only the dynamics. The share of EU-15 States in Polish imports of particular services should not be subject to totally different trends. C. In the case of data concerning payments to the European Communities budget, available only for the years 2004-2010, it was necessary to extrapolate observed trends for the years 2011-2015. In order to maximise the reliability of imputations made, the following assumption has been made: for the years 2011-2013 changes in volumes of payments to Community budget will be proportional to the changes in quantity of funds transferred to particular countries under structural funds and EU Cohesion Fund. For the years 2014-2015 the maintenance of average annual rate of changes for the period 2009-2013 has been assumed. This means the assumption that at least in the initial period of another perspective of Community policies, its assumptions will not be significantly different from current perspective’s assumptions as regards the structure of budget payments and withdrawals. D. Price indexes in EU-15 States and in Poland (historical data for the years 2004-2009 and a forecast for the years 2010-2011). In the case of the years 2012-2015, the dynamics of price changes equal to average dynamics of 2005-2011 has been assumed for particular EU-15 States, whereas for Poland it amounts to 2.5 % annually, which is close to the average dynamics of price levels in 2005-2009. Estimations for EU-15 States have been necessary only for the forecasts concerning the budget of European Communities and withdrawals from the budget, since they were expressed at current prices exclusively. All other forecasts, both external and carried out as part of the research, concern the dynamics of real variables expressed at fixed prices of 2008. E. The results of CAWI for projects implemented as part of the National Development Plan 2004-2006 and a forecast for the National Cohesion Strategy 2007-2013 prepared on the basis of the former, both of which were discussed in detail in the part of the report devoted to the analysis of direct benefits of the implementation of EU cohesion policy in Poland.

3.2.3. Research assumptions

The macroeconomic analysis, used for the quantification of indirect benefits gained by EU-15 States as a result of the implementation of EU cohesion policy in Poland, has been carried out based on a number of assumptions. Making these assumptions was a necessary condition to conduct such analyses – based on data largely from secondary sources; failure to meet the assumptions in reality may distort the results to a certain extent. The research is based on the following assumptions: 1. Proportionality of impact of structural funds on the Polish economy in relation to sectoral structure of allocation of funds expended as part of the implementation of the cohesion policy in Poland (in the form of contracts for Polish contractors), obtained as a result of

32 CAWI. Since CAWI was performed at a higher level of aggregation than calculations made as part of steps 1-5 of the macroeconomic analysis, it was necessary in six cases to break down the obtained structure. To this end, the data on production structure in Poland in 2004 coming from a supply table were used. Moreover, it has been assumed that funds not allocated to contracts with contractors had been expended – directly or indirectly – on consumption. Distribution of expenditure on consumption has been taken from a use matrix for the Polish economy for 2004. For the years 2009-2015, i.e. the period not covered by CAWI, the structure of impact has been obtained on the basis of extrapolation described in items 7.2.4 and 7.2.5. 2. Stability of the input‑output matrix for the Polish economy in time (estimated as above). In fact, due to technological changes, this matrix will undergo gradual changes (usually slight and evolutionary). However, we do not have any information concerning sectors which will change their cost structure due to the implementation of EU cohesion policy in Poland after 2005. Comparison of only two observations – data of 2000 and 2005 (for which all matrices are available) does not allow to draw conclusions about possible future trends. Assumption of this matrix’ stability seems to be an assumption which influences the obtained results to a small extent. 3. Constant level of relative (intersectoral) prices in Poland and EU-15 States. At data processing stage an assumed unit was Euro at prices from 2008. Final results will be presented both in PLN and EUR. In order to obtain coherence of external data expressed at monetary values, deflators fromEurostat database have been used. This assumption is closely related to the second one. 4. Stability in time of relation between internal (i.e. as part of Polish economy) and external (i.e. through imports) method of satisfying indirect demand for particular economy sectors’ products. These relations have been assumed at the level of 2005, i.e. the most recent for which data are available. This means that it has been assumed that the annual growth of Polish GDP will be divided, in demand terms, into imported and domestic goods and services, at a set level. We might however suspect that import intensity of the Polish economy will grow instead of falling down; in recent years we have observed that the volume of Polish foreign trade grows faster than GDP in the process of convergence of the Polish economy in relation to EU-15. This means that the assumed stability of import intensity rates regarding the Polish economy may lead to (a slight) underestimation of benefits for EU-15 States gained from the implementation of EU cohesion policy in Poland. 5. Stability over time of the relation between the demand for consumption and investment imports and the total final use of products from particular branches. Due to low availability of sectoral data regarding consumption and investment imports, included only in the intersectoral flows matrix for imported products, made available by Eurostat (ESA 95 Supply, Use and Input‑Output Tables), the assumed relation is based on data for 2005 – the only year available in the case of Poland within the research period. Similar, as in the abovementioned case, this assumption may lead to a slight underestimation of the strength of discussed effects. 6. Stability in time of matrix of production imports structure. These relations have been assumed at the level of 2005. However, technological changes will most probably trigger changes of this matrix; unfortunately, no macroeconomic forecasts of these changes

33 have been formulated and their construction significantly expands the range of this study. We should not expect, though, that estimation errors resulting from the failure to meet this assumption, could systematically disturb the obtained results, neither upwards, nor downwards. 7. Stability in time of the matrix of total Polish imports broken down by sectors and particular EU-15 States after 2008. We should expect that generally, directions of imported goods and services’ inflow to Poland may change over time, since the processes of technological change will favour those countries which have specialized in given production or services branches. However, we do not have any information concerning countries which will change their percentage share in Polish imports due to the implementation of EU cohesion policy in Poland. Assumption of this matrix’s stability seems to be an assumption which influences the obtained results to a small extent. Having presented assumptions on which the analysis made here is based, we would like to present its methodology in detail. The macroeconomic analysis has been executed in the eight subsequent steps. Next sub‑chapter is dedicated to their detailed discussion.

3.2.4. Macroeconomic analysis step by step

Step 1. Estimation of gross product growth, induced by the inflow of structural funds, broken down by sectors of the Polish economy.

This step utilises the following data: (i) estimation of the impact of the implementation of cohesion policy on the Polish economy in 2004-2009, alongside with a forecast for 2010-2015; (ii) data on the volume of Polish GDP in particular years, alongside with a forecast for 2010-2015 and (iii) results of CAWI, alongside with a microeconomic forecast. Evaluation of the impact of structural funds on the Polish economy, obtained thanks to EUImpactMOD model, has been quantified as a percentage deviation from the product level, which would be obtained in a given year, had these funds not been expended. Therefore, in order to obtain an absolute volume of this impact, it was necessary to multiply this deviation by the total value of GDP in Poland in particular years. In the case of the forecast for the coming years, a forecast of GDP level, made by ISR experts during work on the model, has been used. A vector of absolute values of the impact of structural funds on the Polish economy broken down by years, obtained in the abovementioned way,has been multiplied by vector of sectoral structure of the allocation of structural funds and Cohesion Fund, obtained on the basis of CAWI. As a result, a table of the impact of structural funds on gross product of particular sectors of the Polish economy and particular years 2004-2009 has been obtained, as well as a forecast for the years 2010-2015. All these volumes are measured at absolute values, i.e. either in PLN or in EUR at fixed prices of 2008.

34 Step 2. Estimation of additional investment6 and consumption7 imports broken down by sectors from which the imported products come.

This step utilises the following data: (i) results of step 1, (ii) import intensity rates8 of particular sectors of the Polish economy, estimated on the basis of supply and use tables and (iii) investment and consumption imports intensity rates, estimated on the basis of import structure tables and supply tables. Import intensity rates for each branch of the Polish economy have been calculated by dividing imports of final goods (the values of which, broken down by imports from EU-15 States and all other economies, are presented in imported goods and services flow table) by the value of domestic added value of particular branches’ products (information is available in domestic products flow table). However, since the impact of funds in step 1 is calculated as an impact on gross product of particular sectors, an additional final product (i.e. gross product growth, that is, added value, plus imports growth) has been estimated (for each branch and analysis year) as the sum of gross product growth and the result of multiplication of gross product growth and the abovementioned import intensity rate. Vectors of impact of the implementation of cohesion policy in Poland on final products of particular branches (used in Poland) obtained this way have been multiplied by consumption and investment imports intensity rates of the Polish economy, calculated as a relation of consumption and investment imports of particular branches’ products (available in imported goods flow table) and final product of these products (available in general input‑output table). An estimation of an additional investment and consumption imports obtained this way, has been broken down by branches from which the imported products come, i.e. appropriate branches of exporting economies. Then, these results were multiplied by the share of imports of particular products from EU-15 States in the total Polish import of a given product (available in supply table). As a result, in this step a table of additional investment and consumption imports, broken down by branches of exporting economies, has been obtained. The result is separate for particular years of the period 2004-2009 and 2010-2015 (forecast).

Step 3. Estimation of global product growth9, broken down by sectors of the Polish economy.

This step utilises the following data: (i) result of step 1, i.e. table of additional domestic final product of particular economy branches and (ii) input‑output table for Poland. According to Leontief’s method,global product growth in particular branches of the Polish economy (i.e. final product of particular branches, magnified by indirect use) has been determined on the basis of input‑output table. The following formula has been used here: x = (I‑A)–1y,

6 Investment imports – imports of goods and services used in investments in fixed capital. 7 Consumption imports – imports of goods and services for consumption. 8 Import intensity rate of economy branches – percentage share of imports in final or global product of a given economy branch. 9 Global product of economy branch – total value of goods or services produced by a given branch of domestic economy in a given year, regardless of further purpose. Global product is divided into indirect use (use of materials needed for production in certain branches of economy as “semi‑finished products”) and final use, i.e. consumption, investments in fixed capital, changes in stocks and exports.

35 where A is a matrix of the structure of costs of the Polish economy (i.e. each element of matrix

A calculated directly from an input‑output table, aij=xij/Xj, is the share of materials from i‑branch in the total product of j‑branch), I is a unit matrix, y is a vector of final domestic product growth and x is a global growth vector. This formula has been used separately for each year in the period 2004-2009 (and for each year of the forecast for the period 2010-2015). As a result, due to the application of Leontief’s method, a table of global product growth has been obtained, broken down by particular branches of the Polish economy and the years 2004-2009 and 2010-2015 (forecast).

Step 4. Estimation of additional production imports broken down by particular branches of the Polish economy.

This step utilises the following data: (i) result of step 3 and (ii) productive import intensity rates estimated on the basis of supply matrix and use matrix (analogously to the estimation of the input‑output table in step 3). Production import intensity atesr of particular branches have been calculated on the basis of the imported goods flow matrix and domestic goods flow matrix by dividing imports used in production processes of products in given branches by their (domestic) global product. Rates obtained this way have been multiplied by a forecasted global product growth of each branch, due to the implementation of EU cohesion policy in Poland. Such activity was repeated for each year in the period 2004-2009 and 2010-2015 (forecast). As a result, a table of production imports growth of particular branches of the Polish economy, broken down by years 2004-2015 was produced.

Step 5. Estimation of additional production imports of Poland broken down by particular branches of exporting economies (i.e. EU-15 economies).

This step utilises the following data: (i) result of step 4 and (ii) matrix of sectoral structure of Polish imports. Matrix of sectoral structure of imports has been estimated on the basis of input‑output table of imported products. This matrix comprehensively describes a sectoral structure of imports of each sector of the Polish economy: each of its bij/bj elements means the share of imports of products from i‑branch in the total import of j‑branch. Then, for each separate year, the same matrix of imports structure has been multiplied by productive imports growth vector of particular branches of the Polish economy in a given year, obtained in step 4. As a result, a table of additional production imports induced by the implementation of EU cohesion policy in Poland has been developed, broken down by branches of exporting economies and particular years in the period 2004-2009 and 2010-2015 (forecast). Particular values have been multiplied by corresponding rates describing the share of EU-15 States in the total Polish imports of products of a given branch (see step 2). The resultant table is a supplement to the table of additional investment and consumption imports, obtained in step 2.

36 Step 6. Breakdown of additional Polish imports induced by EU cohesion policy implemented here, by particular EU-15 States.

This step utilises the following data: (i) final result of step 2, (ii) final result of step 5 and (iii) matrices of imports structure of the Polish economy for the years 2004-2008 broken down by particular EU-15 States and particular branches of economy, estimated on the basis of data of STAN OECD, OECD Statistics on International Trade in Services and EUROSTAT on international flows of services. The main element of this step was the multiplication of vectors of additional consumption and investment imports, as well as material imports by matrix of imports structure of the Polish economy from EU-15 States, by branches of economy. As a result, two matrices describing, respectively, additional consumption and investment imports, as well as production imports induced by the implementation of EU cohesion policy in Poland, by particular EU-15 States and their economy branches for particular years (method of obtaining it was presented in a more detailed way in item 3.2.3). For the period 2009-2015 an averaged structure for the years 2004-2008 has been used. Due to the lack of significant changes in the period 2004-2008, it has been judged that this approximation is sufficient. Final estimations of additional imports have been obtained by adding up consumption and investment imports, as well as production imports and direct impact, that is, values of contracts concluded with EU-15 companies, which were estimated on the basis of CAWI (in the case of 2004-2006 perspective) and a microeconomic forecast based on it (for 2007-2013 perspective). In order to reduce the number of dimensions and to present obtained results more clearly, in this chapter we will also use results aggregated for the entire period 2004-2009, 2010-2015 (forecast) and for the entire period 2004-2015. Indirect consumption and investment demand, indirect production demand and direct demand will also be subject to comprehensive analysis.

Step 7. Relation of obtained results to the previous structure of EU-15 States’ international trade.

This step utilises the following data: (i) volumes of additional imports of products from particular economy branches of particular EU-15 States induced by the implementation of EU cohesion policy in Poland, estimated in step 6, (ii) data on changes of Polish imports from particular EU-15 States according to branches in 2004-2008, also used in step 6 and (iii) data on payments to the European Union budget by particular EU-15 States in 2004-2015 (see also description in item 3.2.3). The final effect of this step is the possibility to carry out the analysis of a relative meaning of imports induced by the implementation of cohesion policy in Poland. Obtained estimations have been related to actual changes of trade exchange. Moreover, values of additional exports of particular EU-15 States to Poland, induced by the implementation of EU cohesion policy in Poland, have been related to the volume of funds these states allocate to the financing of the European Union budget. To this end, official data of the European Union have been used.

37 Step 8. Drawing conclusions on the impact of the implementation of EU Cohesion Policy in Poland on GDP of EU-15 States on the basis of reference books

The impact of the export growth of particular EU-15 States on their GDP has been estimated sec- ondarily, using the results of other analyses from various sources. The results of the performed meta‑analysis form the basis to answer the research questions discussed in Chapter 3.1.

38 4. Evaluation of total benefits (direct and indirect) gained by EU-15 States as a result of the implementation of EU cohesion policy in Poland – update of results

The evaluation of total benefits gained by EU-15 States as a result of the implementation of cohesion policy in Poland has been made at two analysis levels: microeconomic (CAWI, documentation analysis, in‑depth interviews) and macroeconomic (use of input‑output tables, multidimensional data concerning foreign trade and national accounts). Only the comprehensive consideration of these two levels – which is a subject of this chapter – allows a complete, reliable and detailed evaluation ofindirect benefits gained by EU-15 States thanks to the implementation of cohesion policy in Poland. The basis for drawing conclusions related to indirect benefits is the results of the questionnaire described synthetically in Chapter 2, but methodology used here mainly utilises an input‑output model described in Chapter 3. Therefore, it also takes into account a broad range of alternative (secondary) data sources and the inference is of a secondary character. This chapter is an updated version of the corresponding chapter from the report Evaluation of benefits gained by EU-15 States as a result of the implementation of cohesion policy in Poland of 2009.

4.1. Update of results

As emphasised in the introduction to the report, this chapter is an updated version of the report of 2009. Among all research elements, estimations of indirect impact have undergone most significant changes. The main reason for this is the application of input‑output matrices for the Polish economy in 2005, which were not available at preparations of the report of 2009. The use of tables from 2004 was necessary and, in some calculations, data from 2000 were used (as the most up‑to‑date ones). At the same time, conservative assumptions were made at additional estimations. In the case of updates, this was not necessary – it was possible to use the existing data. In consequence, import intensity rates have grown (which is understood due to the tightening of economic relations between Poland and EU-15 States). Effective import intensity (i.e. relation between additional imports and the growth of product of a given category in the Polish economy, presented in chart 4.4) has nearly doubled. These changes mostly influence the scale, sectoral and national structure of additional imports. The aforementioned changes of the research method and data used have contributed to a significant increase in estimated impact. In particular, total additional imports from EU-15 States to Poland in 2004-2015, resulting from the implementation of cohesion policy, in accordance with the report of 2009, amounted to EUR 25 billion (PLN 87.6 billion). According to updated calculations, it amounts to EUR 37.8 billion (PLN 151 billion). A different scale of difference in both cur- rencies results first of all from the changes in impact distribution over time and from the modified

39 assumption regarding the exchange rate. The report of 2009 for the years 2009-2015 applied the exchange rate of 3.5 PLN/EUR, whereas this report uses a higher real rate for the year 2009 and 4 PLN/EUR for the years 2010-2015.10 It needs to be noted that funds allocated for Poland as part of cohesion policy are specified in Euro. Thus, its application at result analysis is less susceptible to assumptions regarding the exchange rate. Moreover, estimations from 2010 indicate a higher share of industrial products, particularly high and medium technology ones, in an additional import stream. This should be accredited to changes of the sectoral structure of the Polish economy, indicated in input‑output tables. With a rapid development of the country, the growth of demand for high‑performance products leads to the situation, where the domestic producers are unable to deliver in a sufficient amount, which is a natural process. The growth of effective import intensity of demand for final goods also contributes to this (i.e. consumption demand and demand of enterprises for capital goods) in the research. Division of additional imports between particular EU-15 States has not changed significantly. As in the report of 2009, the German economy takes the dominant position. Italian and French economies have improved their position in relative terms. The Austrian economy has lost is second place. At the same time, comparing detailed results presented in reports of 2009 and 2010, we have to remain cautious. As mentioned before, a considerably higher data availability has allowed to avoid the need for substitute assumptions, which means a modification of a research method in practice. Due to basing on a more updated and broader set of information, the version of 2010 corresponds to reality to a greater extent.

4.2. Survey results

Presentation of results of the macroeconomic analysis will be divided in two time periods: a) the years 2004-2009, for which an evaluation of impact of the implementation of EU cohesion policy in Poland on EU-15 States has been made, formulated in the form of an answer to four abovementioned detailed research questions; b) the years 2010-2015, for which a forecast has been made. This chapter analyses jointly the direct effects resulting from the conclusion of contracts between contractors from EU-15 States and contractors of projects co‑financed from Community funds, and the indirect effects resulting from the increase in demand needs of the Polish economy due to the implementation of these projects. Additional imports, comprising production, consumption and investment imports have been estimated by use of input‑output tables. This method allows the calculation of the impact of added value produced in Polish sectors, received as a result of the implementation of EU cohesion policy, on the global demand structure (including imports). This sub‑chapter focuses on already observed effects, as well as summary ones in the entire period 2004-2015; detailed tables have been included in the Appendix (part 7.3). In certain cases it is legitimate to treat the research period and forecast period together, without making separate

10 Exchange rate at the level of 4 PLN/EUR was also used in the previous version, as part of sensitivity analysis. This rate does not lead to considerable differences, as the one noticeable between both reports.

40 analyses for the years 2004-2009 and 2010-2015 – especially where questions concern the total impact of the implementation of EU cohesion policy in Poland on the exports, GDP and employment in particular EU-15 States. Methodological differences between an estimated historical impact and preparing future forecasts are low. They only result from: • the use of CAWI results for the sectoral structure of the impact of Community funds on the Polish economy and an additional demand on imported goods and services resulting directly from these funds’ impact in the period 2004-2008 and the need to extrapolate these results for the years 2009-2015, taking into account differences in the allocation of funds in programming perspectives of 2004-2006 (funds expended in 2004-2008) and 2007-2013 (funds expended in 2009-2015); • the use of macroeconomic historical data for the years 2004-2009 and forecasts for the years 2010-2015.11

4.2.1. Additional demand on goods and services imported from EU-15 States

The analysis, carried out according to the procedure described in detail in the Methodological Appendix, indicated a significant impact of expenditure of structural funds and Cohesion Fund resources on the Polish imports from EU-15 States. All in all, in the entire period of 2004-2015 EU cohesion policy will be a reason for the growth of exports from the aforementioned group of countries to Poland by a total amount of nearly EUR 37.8 billion (PLN 151 billion), at prices of 2008. This amount includes both direct and indirect effects. However, a highly asymmetrical distribution of additional imports in time results in the fact thatuntil end-2009 a growth in imports by over EUR 4.5 billion (PLN 17.8 billion) was observed according to estimations, i.e. only 12 % of the total effect. At the same time, such amount constitutes 27 % of the co‑financing amount for Poland under cohesion policy in 2004-2009. In the entire period 2004-2015 the value of this index will amount to 52 %. We need to remember that the figures above refer to the total effect, thus the aforementioned amount of EUR 4.5 billion of the total impact includes EUR 525 billion12 of direct impact (resulting directly for the supply of goods and services by companies from EU-15 States as part of projects financed from European funds, corrected by the contribution of Polish funds into co‑financed investments), EUR 186 million of forecasted direct impact (resulting from projects executed in 2007-2013 perspective) and EUR 3.8 billion of indirect impact, resulting from the increased demand for production imports (i.e. imports of indirect goods and services declared by Polish companies involved in the execution of projects under EU cohesion policy), as well as consumption and investment imports.

11 Due to delays in collecting and publishing data by specialised institutions (e.g. Eurostat), values for the historical period 2004- 2008 for particular macroeconomic categories (such as input‑output tables) are estimated. 12 This value is lower than the whole value of contracts of project promoters with contractors with registered office within the EU-15 States, estimated at the basis of CAWI study (EUR 624.5 million), since some projects within the sample (financed under the Cohesion Fund) were implemented also in 2000-2003 (through ISPA). These projects were also taken into account because throughout both periods reporting was ensured on a continuous basis.

41 CHART 4.1. ESTIMATED ADDITIONAL EXPORTS FROM EU-15 STATES TO POLAND INDUCED BY THE IMPLEMENTATION OF COHESION POLICY IN 2004-2015 (IN EUR BILLION, PRICES OF 2008) – DIVISION BY COUNTRIES

Ϳ ϭϴ ϮϬϭϬͲϮϬϭϱ Ϭϴ ϭϲ

ϮϬ ϮϬϬϰͲϮϬϬϵ ϭϰ

ŝůůŝŽŶ; ϭϮ Zď

h ϭϬ ϴ ϲ ϰ Ϯ Ϭ Ǉ Ǉ Ŭ Ă Ŷ Ě Ŷ Ě ŵ ƌŝ h< ŝƵ ƵŐĂů /ƚĂů Ɛƚ ĂŶĐĞ ĞĚĞ ^ƉĂŝ ƌƚ &ƌ /ƌĞůĂŶ Ƶ 'ƌĞĞĐĞ &ŝŶůĂŶ ^ǁ ĞůŐ WŽ ĞŶŵĂƌ 'ĞƌŵĂŶ EĞƚŚĞƌůĂŶĚƐ >ƵǆĞŵďŽƵƌŐ

Source: Own elaboration based on CAWI results and data described in the Appendix.

According to estimations,the largest beneficiary of the increased demand of the Polish economy for imported goods and services will be the German economy (see Chart 4.1). This results from the fact that, on the one hand, enterprises with headquarters in Germany, apart from the ones located in Poland, dominate among contractors of undertakings executed under projects co‑financed from Community funds (for more details see Chapter 2), and on the other hand, Germany is the most important Polish partner in foreign trade, which is reflected in estimations of indirect impact. We should not expect that the situation could change in the next years, therefore an obtained result is fully compliant with intuition. At the same time, Charts 4.1. and 4.2 indicate a strongly asymmetrical division in time of additional imports induced by structural funds and Cohesion Fund. Until end-2009, according to estimations, only 12 % of the total impact forecasted for the years 2004-2015 has been executed, while a large part of this amount (8 % of the total impact) falls for the years 2008-2009. This means that we should expect a greater increase of imports in the future than it is now and previous experiences with intensification of exports from EU-15 to Poland do not fully show the phenomenon’s intensity. Absolute values of additional imports in the period 2004-2009 by EU-15 States are presented in Table 4.1.

CHART 4.2. ESTIMATED ADDITIONAL EXPORTS FROM EU-15 STATES TO POLAND INDUCED BY THE IMPLEMENTATION OF COHESION POLICY IN 2004-2015 (IN EUR BILLION, PRICES OF 2008) – DIVISION BY YEARS 8 8)

00 7 (2 6 5 R billion

EU 4 3 2 1 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Own elaboration based on CAWI results and data described in the Appendix.

42 According to estimations, around 91.4 % of the total growth of imports from EU-15 in the entire period 2004-2015 will be direct effects, i.e. benefits which emerged as a result of the development of the Polish economy due to the inflow of Community funds (Chart 4.3). Direct effects described in Chapter 2 – constituting the remaining 8.6 % of the total effect – are a minute part of the additional flow of goods and services. It needs to be noted here that direct impact will have a relatively greater significance in 2004- 2009 (15.5 %) than it will in 2010-2015 (7.6 %), which is in accordance with forecasts. This results from the simultaneous emergence of the following effects: • reduced share of EU-15 contractors in the total expenditure of structural funds in Poland (which was discussed in Appendix 7.2); • significant intensification of the impact of structural funds on the Polish economy, in line with forecasts based on EUImpactMOD. Moreover, nearly half of this indirect impact is of a production character, i.e. related to demand for indirect goods and services, needed by Polish companies at manufacturing final goods and services (or indirect goods and services of a higher level). Considering only amounts contracted by EU-15 enterprises (direct impact), extended only by additional investment and consumption demand, would therefore mean a significant underestimation of the value of induced exports from EU-15 States to Poland.

CHART 4.3. ADDITIONAL EXPORTS FROM CHART 4.4. ADDITIONAL (INDIRECTLY EU-15 TO POLAND IN 2004-20015 ACCORDING INDUCED) IMPORTS FROM EU-15 RELATED TO DEMAND CHARACTER TO THE GROWTH OF DEMAND OF THE POLISH ECONOMY (IN 2004-2015)

12%

direct demand 10% 9%

8% indirect producon demand 44% 6%

4% Indirect investment and consumpon 2% demand 47% 0% value of addional investment and consumpon value of addional producon import as compared to the growth of import as compared to the growth of the ﬁnal product global product

Source: Own elaboration based on CAWI results and data described in the Appendix.

Chart 4.4 indicates the total import intensity of the Polish economy. The value on the left shows which part of goods and services available on the market as final goods has been manufactured in EU-15. The chart on the right shows an analogous relationship for indirect goods, i.e. those used in production processes in the Polish economy. An additional consumption and investment imports constitutes over 10 % of the total growth of final product in the Polish economy, whereas material import – over 10 % of the global product growth. This indicates a relatively high import intensity of the Polish economy branches, which are influenced by the implementation of the cohesion policy in Poland.

43 TABLE 4.1. ESTIMATED ADDITIONAL IMPORTS FROM EU-15 TO POLAND IN 2004-2009 BY EXPORTING ECONOMIES AND YEARS

PLN million (prices of 2008) EUR million (prices of 2008) 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 Austria 35.2 48.4 100.0 151.8 176.9 328.0 7.8 12.0 25.7 40.1 50.3 75.8 Belgium –3.2 7.3 53.6 120.0 164.1 348.1 –0.7 1.8 13.8 31.7 46.7 80.4 Denmark 6.2 133.1 165.9 87.4 103.7 223.7 1.4 33.1 42.6 23.1 29.5 51.7 Finland –1.9 3.5 28.9 62.6 113.6 174.4 –0.4 0.9 7.4 16.6 32.3 40.3 France 3.4 32.1 138.3 262.6 345.4 772.0 0.7 8.0 35.5 69.4 98.2 178.4 Greece –0.3 0.4 3.2 7.5 9.6 30.8 –0.1 0.1 0.8 2.0 2.7 7.1 Spain –3.0 4.3 35.1 82.5 126.5 240.1 –0.7 1.1 9.0 21.8 36.0 55.5 the Netherlands 2.5 22.6 124.4 228.9 387.6 597.1 0.6 5.6 31.9 60.5 110.2 138.0 Ireland 5.0 11.2 49.0 85.9 166.3 241.1 1.1 2.8 12.6 22.7 47.3 55.7 Luxembourg –0.3 0.5 3.8 8.1 14.5 28.4 –0.1 0.1 1.0 2.1 4.1 6.6 Germany 77.6 270.0 814.4 1400.2 1716.4 3382.2 17.1 67.1 209.1 370.1 488.1 781.6 Portugal 1.7 3.0 9.2 15.2 21.9 53.7 0.4 0.7 2.4 4.0 6.2 12.4 Sweden –3.7 7.2 46.4 94.5 133.3 279.9 –0.8 1.8 11.9 25.0 37.9 64.7 United Kingdom –4.7 15.4 91.4 191.3 235.1 505.8 –1.0 3.8 23.5 50.6 66.8 116.9 Italy –6.8 55.3 174.9 325.5 426.3 770.4 –1.5 13.7 44.9 86.1 121.2 178.0

Source: Own elaboration based on CAWI results and data described in the Appendix.

Results presented in Table 4.1 show the volume of additional exports of EU-15 States ot Poland which took place in 2004-2009 due to the implementation of EU cohesion policy in our country. It is easy to notice, apart from a clear upward trend observed year by year, large disproportions between particular EU-15 States. Additional imports from Germany is more than four times higher than from second‑best Italy and constitute 43 % of total imports. Only in the case of Germany additional imports until end-2009 exceeded the value of EUR 1 billion. As mentioned before, forecasted benefits gained from the implementation of EU cohesion policy in Poland will be far higher in the future.

4.2.2. Additional demand for imported goods and services manufactured in particular economy sectors of EU-15 States

Apart from the total value of additional stream of exports from EU-15 to Poland, induced by the implementation of EU cohesion policy, calculated in division into particular countries and years of the period 2004-2015, a sectoral structure of analysed flows is also significant. Methodology adopted in this analysis makes the division of total effects between particular sectors, in line with NACE classification fairly easy. First of all, the relationship between the growth of exports and the development of a given sector of exporting economy is natural. In this analysis, we are assuming that estimated growths of Polish imports are equivalent to the increase in Polish demand for given goods and services from EU-15, which, depending on the possible inflexibilities on the supply and price side, will translate themselves into prices growth or production volume. Due to a medium‑term perspective of the analysis and

44 a relative openness of EU-15 markets, we should rather expect greater intensity of the latter process. Production growth (as well as higher prices) will translate itself into higher remuneration and/or higher employment in a given sector. In the case of young and developing branches, we should expect an additional development growth, due to the increased interest in a given branch shown by work- ers and entrepreneurs. Such sectors include, in particular, high‑tech sectors and business services sector, characterised by very high productivity of production factors. A relatively rapid development of such branches means an increase in average productivity and, consequently, an increase in social welfare. For this reason, additional external demand is particularly desired in the case of modern economy branches – especially high‑tech processing and business services sectors. However, the above statement does not mean that additional imports of goods and services produced in low‑tech sectors is a negative phenomenon for the exporting economy. In particular, additional external imports can mitigate the results of gradual decline in internal demand for goods and services produced in traditional sectors, which is particularly important for the workforce. A strong positive impact on economic growth, measured by GDP growth, share of exports of products from high‑tech sectors has been demonstrated in an empirical study by Crespo‑Cuaresma and Wörz (2005). This study also states that exports of goods and services produced in non‑processing sectors has a weaker, albeit still positive and statistically significant, impact on GDP. The value of exports of low‑tech sectors’ products does not significantly affect the GDP growth. In the case of this study, aggregation of particular economy sectors in groups of branches by the level of technical advancement (in line with Eurostat classification) indicates a high share of high or medium‑high technology goods in additional exports from EU-15 to Poland. They constitute over a half of the value of additional export of the EU-15 States to Poland. In the context of the impact of additional export on economic growth of exporting countries, such situation should be judged as positive.Not only does it mean a considerable impact of the implementation of EU cohesion policy in Poland on the development of EU-15 companies, but also an impact facilitating a more rapid development of “future” sectors. Taking into account the entire period 2004-2015, the share of low and medium‑low technology construction is higher, at the expense of construction. Imports structure in 2010-2015 is similar to the entire analysed period.

CHART 4.5. ADDITIONAL EXPORT OF THE EU-15 STATES TO POLAND BROKEN DOWN BY TECHNOLOGICAL ADVANCEMENT OF BRANCHES PRODUCING GOODS AND SERVICES FOR EXPORT

YEARS 2004-2009 YEARS 2004-2015

agriculture, forestry, ﬁsheries, agriculture, forestry, ﬁsheries, mining and excavaon mining and excavaon 1,4% producon sectors 1,8% producon sectors of high technology and of high technology and higher average construcon construcon 5,7% higher average 8,2% 58,2% 56,9% services to a limited extent services to a limited extent based on knowledge (LKIS) based on knowledge (LKIS) 0,7% 0,7% services based services based on knowledge (KIS) on knowledge (KIS) 4,0% 4,0%

producon sectors producon sectors of low technology and of low technology and lower average lower average 27,6% 31,0%

Source: Own elaboration based on the results of CAWI, data described in the Appendix and classification of technological level of branches according to NACE Eurostat – http://europa.eu.int/estatref/info/sdds/en/htec/htec_agg_nace.pdf.

45 The value of additional imports from EU-15 States in 2004-2009 and 2010-2015 (for dominating sectors of the economy) is presented in Chart 4.6. Sectoral structure of export for largest beneficiaries of discussed impact is presented in Charts 4.7 – 4.9. Data for all sectors, due to legibility of report, are to be found in the Appendix (Table 7.12).

CHART 4.6. ADDITIONAL EXPORT OF PARTICULAR SECTORS IN DYNAMIC TERMS (DATA IN EUR BILLION OF 2008)

Producon of chamicals and chemical products and pharmaceucal goods Producon of machines and equipment not otherwise classiﬁed Producon of computers and peripheral devices as well as machines and oﬃce equipment

Producon of vehicles, wagons and trailers

Producon of rubber and plasc goods

Construcon 2004-2009 2010 -2015 Producon of metals

Producon of telecommunicaon equipment Producon and processing of coke and products of crude oil reﬁning Producon of food, beverages and tobacco products

Average (for 36 sectors with addional impact)

EUR billion (2008) 01 23456789

Source: Own elaboration based on CAWI results and data described in the Appendix.

CHART 4.7. SECTORAL STRUCTURE OF ADDITIONAL IMPORTS FROM GERMANY (2004-2015)

Other 19,14%

Producon of precise instruments and medical devices 4% Producon of chemicals and chemical products and Producon of food beverages pharmaceucal products and tobacco products 19% 4% Producon of telecommunicaon equipment 4%

Producon of metals 5%

Producon and processing of coke and products of crude oil refining producon of machines and 6% equipment not otherwise classified 11% Producon of compiters and peripheral devices and machines and office equipment 6% Construcon Producon of rubber 9% and plasc products Producon 7% of vehicles 7%

Source: Own elaboration based on CAWI results and data described in the Appendix.

46 CHART 4.8. SECTORAL STRUCTURE OF ADDITIONAL IMPORTS FROM ITALY (2004-2015)

Producon of machines and wequipment not otherwise classiﬁed 24%

Other 11,40%

Producon of goods from other mineral non-metal raw materials Producon of chemicals 3% and chemical products and pharmaceucal products Producon of food, beverages 15% and tobacco products 3% Producon of orecise equipment and medical devices 4% Producon of metal ﬁnished products 4% Producon of metal ﬁnished products except for Producon of texle products machones and devices clothes, leather and goods made 4% Producon fromleather of metals 12% 4% Producon Producon of rubber of vehicles and plasc products 9% 7%

Source: Own elaboration based on CAWI results and data described in the Appendix.

CHART 4.9. SECTORAL STRUCTURE OF ADDITIONAL IMPORTS FROM FRANCE (2004-2015)

Other 16,39%

Construcon Producon of chemicals 3% and chemical products and pharmaceucal products Producon of texle products clothes, 34% leather and goods made fromleather 3%

Producon of food, beverages and tobacco products 4% Producon of metals 4% Producon of electrical equipment 4% Producon of compiters and peripheral devices and machines and oﬃce equipment 4% Producon of telecommunicaon equipment Producon of machines and 6% equipment not otherwise classiﬁed Producon of rubber 8% and plasc products Producon 6% of vehicles 8%

Source: Own elaboration based on CAWI results and data described in the Appendix.

4.2.3. Impact on the growth of profits and payroll funds among EU-15 companies and taxes paid by them in mother countries

Total growth of Polish demand for imported goods and services, described and characterised in the sub‑chapter above, resulting from the implementation of EU cohesion policy in Poland, translating itself into the growth of exports from EU-15 to Poland, translates itself directly into microeconomic sphere of these countries’ economies. One of the objectives of this study is to measure this impact in the context of growth of enterprises’ profits (approximated by net operational surplus), their payroll funds (including the burdening of labour factor by taxes and social contributions) and net taxes paid by them in mother countries. We need to remember that all

47 these categories are included in an estimated growth of exports to Poland. This means that this sub‑chapter describes in what way additional demand is divided between profits of enterprises, net remuneration of workforce and taxes and other income of public institutions. These elements can be easily calculated following an assumption that they are low enough not to considerably disturb the market structure in which particular companies operate (thus, they do not increase their competitiveness, which would result in the reduction of profit‑cost ratio). Comparing the scale of obtained marginal effects to total size of markets in which these companies operate, this assumption should be judged as legitimate. Described effects have been quantified on the basis of twofold data types: total effects estimated in other sub‑chapters of this chapter and the ratio of profits, payroll funds and net taxes to global product in particular EU-15 States, calculated on the basis of sectoral data (for particular countries and years) included in Eurostat base. In order to estimate a tax burden of labour factor, data concerning tax wedge have been used, which are also made available by Eurostat. Results referring to additional profits are presented in Chart 4.10.

CHART 4.10. SUMMARY GROWTH OF ENTERPRISES’ PROFITS IN 2004-2015 IN EUR MILLION (FIXED PRICES OF 2008)

1400

8) Services

00 Goods (2 1200 illion

R m 1000 EU

800

600

400

200

0 y y k a n d m ri UK ar iu ugal Ital st ance eden Spai rt Fr Ireland Au Greece Finlan Sw Belg Po Denm German Netherlands Luxembourg

Source: Own elaboration based on the results of macroeconomic analysis and data by Eurostat.

As presented in Chart 4.10, the expected growth of exports to Poland in 2004-2015 will increase the profits of German enterprises the most (by ca. EUR 1.3 billion, i.e. by ca. PLN 4.9 billion), and next the French, British, Irish and Austrian ones. Obviously, the geographic structure of the stream of additional profits of enterprises is largely a reflection of the size of particular economies and the scale of their trade exchange with Poland. Separation of production13 and services sectors additionally allows the indication of theheterogeneity of expected results: on one end there are countries in which 90–95 % of additional profits in 2004-2015 will be obtained by production sector enterprises. These are Scandinavian countries, Greece and Spain. On the other end we have got economies whose services sectors will acquire up to 43 % of the pool of additional profits of enterprises: the Netherlands, Portugal and Austria.

13 Which includes all areas not classified as services, i.e. all industrial branches, as well as agriculture and mining.

48 CHART 4.11. SUMMARY GROWTH OF PAYROLL FUND OF ENTERPRISES IN 2004-2015 IN EUR BILLION (FIXED PRICES OF 2008)

4000

8) Services

00 Goods

(2 3500

illion 3000 R m

EU 2500

2000

1500

1000

500

0 y y k a n d d m ri UK ar iu ugal Ital st ance eden Spai inlan Fr Irelan Greece Au F Sw Belg Prot Denm German Netherlands Luxembourg

Source: Own elaboration based on the results of macroeconomic analysis and data by Eurostat.

Considering this part of the stream of additional profits of enterprises, which is translated into the growth of payroll fund, we receive similar, albeit a little different, results. Greatest benefits are still observed in large EU-15 States (Germany, France, United Kingdom, Italy). In particular, the total amount exceeds EUR 3.5 billion in Germany (over PLN 14 billion) at prices of 2008, for the entire period 2004-2015. Moving towards the analysis of net volume of additional taxes paid by EU-15 companies in their mother countries as a result of benefits gained by them from the implementation of EU cohesion policy in Poland, it needs to be noted that additional demand incentive coming from Poland may be linked to a decline in net taxes volume in many EU-15 States. This results from negative net taxation of certain sectors, i.e. their subsidisation and the share of net taxation in final product nearing zero for the majority of other branches (these estimations are included in the statistical Appendix). This concerns agriculture, forestry, fishery, mining and quarrying the most. The distribution of benefits in the form of increase in tax flows is different than in the case of benefits gained by private entities. The country, whose budget should experience the highest growth of inflows from enterprises is United Kingdom – and it is more than twice as much as in the majority of other countries (apart from France and Germany). This result should be treated a bit cautiously, though. The reason for such situation can unfortunately be the relatively worst quality of macroeconomic data for this country14, found in Eurostat base, due to which it was necessary to apply the oldest data used in this research concerning the levels of net taxation in particular sectors of the economy, in order to approximate further proportions.

14 A similar problem regards Spain and Ireland, in the case of which the available data concern only one year of the analysed period.

49 CHART 4.12. GROWTH OF NET TAXES IN 2004-2015 IN EUR MILLION (FIXED PRICES OF 2008)

100 Services Goods 80

60 EUR million (2008)

0 k y y a e n d al UK ium Ital Spai rtug France Ireland Greec Austri Finlan Sweden Belg Po Denmar -20 German Netherlands Luxembourg

Source: Own elaboration based on the results of macroeconomic analysis and data by Eurostat.

In the group of countries whose total volume of net taxes paid by their companies will decline (negative result) due to the increase in exports to Poland, this decline is a result of the production sector – which is not surprising, where branches enjoying preferential treatment as regards taxation policy may experience significant benefits. In other countries, the share of production sector in additional stream of taxes oscillates between ca. 37 % in Austria and as much as 97 % in Ireland and Italy. However, the above results do not mean negative estimations of total changes of inflows to public authorities’ budget. In particular, the growth of payroll fund includes the taxation of labour factor. In sum, the impact on the volume of disposable funds for public authorities is positive, which is indicated by Chart 4.13.

CHART 4.13. TOTAL CHANGES OF NET INFLOWS TO PUBLIC BUDGETS IN EUR MILLION (FIXED PRICES OF 2008)

2000 8) Services

00 1800 Goods (2

on 1600 1400 R milli

EU 1200 1000 800 600 400 200 0

y y a n ri UK ark ium ugal Ital st ance eden Spai Greece Fr Ireland Au Finland Sw Belg Prot German Denm Netherlands Luxembourg

Source: Own elaboration based on the results of macroeconomic analysis and data by Eurostat.

50 In time perspective,all three analysed variables are characterised by very similar dynamics in the period 2004-2015, replicating in its substance the dynamics of additional EU-15 exports to Poland. After a period of growth, the growth of total volume of profits of enterprises – both those operating in production sectors and in services sectors – becomes inhibited and even slightly reversed in the course of achieving the forecasted perspective. Dynamics of these variables is presented in Chart 4.14.

CHART 4.14. ESTIMATED ADDITIONAL PROFITS AND GROWTH OF PAYROLL FUND OF EU-15 ENTERPRISES IN 2004-2015 IN EUR MILLION (FIXED PRICES OF 2008)

1600 Payroll Proﬁts 1400

1200

1000

800

600

400

200

0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Own elaboration based on the results of macroeconomic analysis and data by Eurostat.

Therefore, it should be emphasised that the distribution in time of the impact of direct and indirect benefits of the implementation of EU cohesion policy in Poland on the growth of profits and payroll funds of EU-15 companies, as well as taxes paid by them in their mother countries indicates that until 2009 only a small part of benefits expected for the entire period 2004-2015 could be observed. In future, these positive effects will intensify, which will be related to intensified inflow of Community funds to Poland and a gradual emergence of delayed effects. Among all expected results, the summary effect of the growth of payroll funds, especially in the case of German companies is the strongest. An induced growth of profits experienced (and forecasted to be experienced also in the future) especially by German, French, British, Irish and Austrian companies is also significant.

4.2.4. Impact on the growth of profits and payroll funds of companies from particular sectors of EU-15 economies and taxes paid by them in mother countries

A sectoral structure of the growth of profits and payroll funds of EU-15 companies due to the implementation of EU cohesion policy in Poland is, obviously, highly correlated with the structure of exports from EU-15 countries to Poland. At the same time, sectors observing the highest export volumes are the ones which are forecasted to experience the largest growth of profits and payroll funds. High benefits are thus forecasted for such industrial sectors, as production of chemicals and chemical products, pharmaceutical products and machines and devices (over 60 % of the growth of payroll fund and nearly 50 % of the profits growth). Among services sectors, the greatest benefits

51 are forecasted for construction. This general model of a sectoral distribution of benefits gained by EU-15 companies undergoes changes in certain countries related to a more than average role of the agricultural sector (Spain) or services related to lease and real estate (Ireland). Additional tax burdens, resulting from the growth of exports to Poland in 2004-2015, are distributed in a heterogeneous way among particular economy sectors of EU-15 States. Those economy sectors, in which the value of total benefits is the highest, i.e. production of chemicals and chemical products, production of pharmaceuticals, machines and devices, metals and finished metal products, as well as production of rubber and plastic products, are responsible for the key part of additional tax inflows (nearly 70 % of the total value). Detailed results in sectoral and dynamic terms are presented in Charts 4.15 – 4.20.

CHART 4.15. EXPECTED GROWTH OF PAYROLL FUND OF ENTERPRISES IN SECTORAL TERMS IN 2004-2015

Other 17% Producon of machines and electrical equipment 21% Producon of texle products clothes, leather and goods made from leather 4%

Producon of transport equipment 6%

Producon of rubber and plasc products 6% Producon of chemicals and chemical products Construcon and pharmaceucal products 7% 18%

Producon of metals and metal ﬁnished goods Producon other 7% machines and equipment 14% Source: Own elaboration based on the results of macroeconomic analysis.

CHART 4.16. EXPECTED GROWTH OF PROFITS OF ENTERPRISES IN SECTORAL TERMS IN 2004-2015

Other 23%

Producon of rubber and plasc products 4%

Producon metals and metal ﬁnished products 6%

Producon of chemicals Lease, rent and other and chemical products services and pharmaceucal products 9% 25%

Construcon 10%

Producon other Producon of machines machines and equipment and electrical equipment 11% 12% Source: Own elaboration based on the results of macroeconomic analysis and data by Eurostat.

52 CHART 4.17. EXPECTED GROWTH OF NET INFLOWS TO PUBLIC BUDGETS IN SECTORAL TERMS IN 2004-2015

Other Producon of machines and 15% electrical equipment 19%

Producon of texle products clothes, leather and goods made from leather 4%

Producon transport equipment 6% Producon of chemicals and chemical products Producon of rubber and pharmaceucal products and plasc products 18% 7%

Construcon 7%

Producon metals and Producon other metal ﬁnished products machines and equipment 8% 16%

Source: Own elaboration based on the results of macroeconomic analysis and data by Eurostat.

CHART 4.18. GROWTH OF PAYROLL FUNDS OF COMPANIES FROM PARTICULAR SECTORS IN DYNAMIC TERMS (DATA IN EUR MILLION OF 2008)

Producon of machines and electrical equipment Producon of chemicals and chemical products and pharmaceucal products Producon other machines and equipment Producon metals and metal finished products Construcon Producon of rubber and plasc products 2004-2009 Producon of transport equipment Producon of texle products clothes, leather and goods made from leather 2010 -2015 Producon of food, beverages and tobacco products Lease, rent and other services Producon of paper and paper producys and polygraphy Producon of goods from other mineral raw materials Transport services Agriculture, foresrty and fisheries Producon and processing of coke and refined petroleum products Producon of furniture and producon of products Financial services Producon of wood and cork products, excluding furniture Mining and quarrying Educaon Municipal services Producon and provision of electric energy, gas

Source: Own elaboration based on the results of macroeconomic analysis and data by Eurostat.

53 CHART 4.19. GROWTH OF PROFITS OF COMPANIES FROM PARTICULAR SECTORS IN DYNAMIC TERMS (DATA IN EUR MILLION OF 2008)

Producon of chemicals and chemical products and pharmaceucal products Producon of machines and electrical equipment Producon other machines and equipment 2004-2009 Construcon 2010-2015 Lease, rent and other services Producon metals and metal finished products Producon of rubber and plasc products Agriculture, foresrty and fisheries Producon of food, beverages and tobacco products Producon of paper and paper producys and polygraphy Producon of texle products clothes, leather and goods made from leather Producon and processing of coke and refined petroleum products Transport services Producon of other non-metallic mineral products Producon of transport equipment Financial services Mining and quarrying Producon of furniture and produconof products Producon of wood and cork products, excluding furniture Municipal services Producon and provision of electric energy Educaon 0200 400600 800

Source: Own elaboration based on the results of macroeconomic analysis and data by Eurostat.

CHART 4.20. GROWTH OF NET INFLOWS TO PUBLIC BUDGETS IN PARTICULAR SECTORS IN DYNAMIC TERMS (DATA IN EUR MILLION OF 2008)

Producon of machines and electrical equipment Producon of chemicals and chemical products and pharmaceucal products Producon other machines and equipment Producon metals and metal ﬁnished products 2004-2009 Construcon 2010-2015 Producon of rubber and plasc products Producon of transport equipment Producon of texle products clothes, leather and goods made from leather Producon of food, beverages and tobacco products Lease, rent and other services Producon of paper and paper producys and polygraphy Producon of other non-metallic mineral products Transport services Producon and processing of coke and reﬁned petroleum products Financial services Producon of furniture and producon of products Producon of wood and cork products, excluding furniture Mining and quarrying Educaon Municipal services Producon and provision of electric energy, gas Wholesale and retail sale of cars and vehicles 0200 400 600800

Source: Own elaboration based on the results of macroeconomic analysis and data by Eurostat.

4.2.5. Changes in the value and structure of goods and services exported by the EU-15 countries to Poland as a result of emergence of an additional production, consumption and investment demand

Following the quantification of the absolute strength of impact exerted by EU funds on the development of companies from the EU-15 countries, their profits, payroll funds and tax payables, it will be discussed how additional import that is induced by the implementation of the EU cohesion policy in Poland has influenced the value and structure of export of the EU-15 countries to Poland

54 in 2004-2008. To that end, additional import was referred to the actual changes in that period (according to the OECD STAN data and Eurostat data on import of services). In the context of dependencies between the structure of export and the total wealth of an exporting country, particular attention should be given theto growth, achieved due to the implementation of the EU cohesion policy, in the importance of the structure of export of the EU-15 countries to Poland of high‑technology manufacturing industry products, including telecommunication equip- ments, computers and peripheral devices, machinery and office equipment, as well as precision appliances and instruments. Nonetheless, it should be pointed out that the results should be treated carefully. The results within the range of 70–80 % can be indicated, firstly, by a reduction in import due to reasons attributable to the implementation of the cohesion policy in Poland. Secondly, it partially results also from the adopted assumptions concerning the stability of the material and final demand structure. Therefore, neither limitation on the side of supply, nor the probable acceleration effect for the growth in the national production capabilities are included. The third reason for the achievement of such values is that real data (i.e. the point of reference) describe the economy subject to a business cycle. The induced impact is practically acyclic. The comparison covers individual observations. Yet, it does not affect the conclusion that a substantial influence is exerted by the implementation of the cohesion policy in Poland on the import of products of discussed production sectors. This result should be confronted with the frequently mentioned economic theory according to which modern computer and telecommunication technology constitute a breakthrough in terms of the perspectives for growth in productivity of economies since by gradually becoming a commonly applied technology (see Greenwood, Hercowitz and Krusell, 1997; Timmer, Ypma and van Ark, 2003), they also enable growth in per unit productivity for the remaining sectors. This leads to the conclusion that the EU’s structural funds flowing to Poland can, firstly, indirectly reform the structure of economies (to an insignificant extent) which are net withholding agents, and thus, secondly, increase their productivity.

CHART 4.21. SHARE OF ADDITIONAL DEMAND IN THE GENERATION OF EXPORT (CHANGE IN 2004-2008)

Producon of telecommunicaon equipment Producon of computers and office equipment Mining and extracon Producon of goods from other mineral raw materials Producon of precision and medical instruments Producon of machinery and equipment n.e.c. Producon and processing of coke and crude oil Producon of goods made of rubber and plascs Producon of chemical and pharmaceucal goods Producon of electric devices Producon of goods made of wood and cork Producon of prefabricated products Producon of texle goods and wearing apparel Producon of metals Producon of paper and paper products and prinng Producon of furniture and producon n.e.c. Producon of foodstuffs Agriculture, forestry and fishing Producon of motor vehicles Services Producon of the remaining transport equipment Total (excluding construcon)

010% 20%30% 40%50% 60% 70%80%

Source: Own elaboration based on the results of the macroeconomic research and OECD and Eurostat data. NOTE: Since there were no data available with sufficient reliability, this part of the analysis does not include construction.

55 The changes induced by the implementation of the EU cohesion policy in the sectoral structure of export of the EU-15 countries to Poland should be assessed as advantageous. A gradual growth is noticeable in the share in the total volume of export of high end medium technology products, and it is these sectors that feature an extraordinary per unit productivity. Their relatively faster development should translate into the growth in profits of companies and payroll funds in the economies of the EU-15 countries, both in general terms and per individual employee.

4.2.6. Influence of increase in trade with Poland on the GDP in the EU-15 countries

The answer to the question about the influence of increase in trade with Poland on the aggregated macroeconomic variables has been obtained owing to the secondary analysis of empirical research in this field. The studies used for the needs of the current research includescientific literature in the field of empirical economics in which estimations of the influence of the increase in export on the GDP growth rate are presented (for more, see Table 4.3). In most cases, the conducted analyses were based on the research on effects of changes in the total export (without any breakdown by sectors); this analysis was conducted on the basis of more detailed data only in very few cases. However, these were never the data broken down by 55-59 NACE sectoral categories. Export directly affects the volume of GDP since it is a component thereof. Nonetheless, there are numerous reasons to expect that the influence of trade on the GDP will be in fact higher than the change in its volume alone in 1-1 proportion. As early as in 1776, Adam Smith has pointed out the importance of specialisation increasing the efficiency of production. Increased production volume, resulting from the accessibility of a larger market, might allow for the use of the effects of the scale. Growth in trade intensity may also increase the competition on the market, thus creating incentives for increased innovativeness and more efficient management. In the recent years, emphasis has been also put on the positive role of trade in the dissemination and exchange of knowledge and technology. Despite intuitively clear dependencies, there is no consensus in the economic literature as regards the scale of influence exerted by export on the volume of product. One of the essential problems in this case is the methodology of research – econometric models based on the conventional method of least squares are not resistant to the problem of endogeneity of export in relation to the product. Therefore, it is necessary to apply more sophisticated econometric methods, e.g. the ones based on the methodology of instrumental variables. An important difficulty in this case is represented by the necessity of controlling these regressions by a possibly large number of additional clarifying variables (such as e.g. changes in the economic and monetary policy), which, failing to be included, might lead to biasedestimates of the influence of trade on the GDP (so‑called omitted variables bias). This problem is partially resolved through the study of countries that have noticeably changed their trade policy by means of e.g. lowering of duties or opening of a market to trade. This provides an opportunity of direct comparison of two economy states (closed and open) and an opportunity to obtain more reliable results. However, such a study is not possible in relation to the EU Member States among which most barriers in internal trade have been abolished several dozen years ago. What is more, the changes in the volume of trade between the countries feature moderate growth rate and due to that it is harder to express the scale of impact. The above‑mentioned problems result in high sensitivity of the esearchr on the scale of impact exerted by export on the GDP to methodological differences, which in consequence lead to

56 significant differences between the results. Despite all these inaccuracies, one should bear in mind that there are differences that concern only the scale of impact, but not the direction thereof. The area of impact is unambiguously positive:export increases the GDP more than it is indicated by the fact that it is a component thereof. Therefore the review of literature conducted by Giles and Williams (2000)15 confirmed the positive influence of export policies in 68 out of 75 reported studies and no influence in the remaining 7 studies. Also under the subject literature initially analysed under this research, the influence of foreign trade (in particular export) on the volume of product turns out to be unambiguously positive. This literature is focused mainly on developing countries, although there are also available studies that examine the influence of changes in highly developed countries. In particular Frankel and Romer (1999)16 indicate that growth in the volume of trade (relation of export and import to the volume of GDP) by 1 percentage point will increase the volume of per capita income by 0.9 %. On the other hand, Badinger and Breuss (2005)17 estimate that the growth of the export indica- tor (export/import) by 1 percentage point will increase the productivity of the production sector by 0.6 %. Lewer and Van den Berg (2003)18, depending on the specification of the model and the examined country, estimate that the change of the volume of trade by 1 pp causes a growth of product by 0.1–0.6 %. These authors also indicate that the structure of export is of importance for the scale of influence exerted by trade on the product and employment. The export of highly processed and technologically advanced goods accelerates the growth to a much greater degree than the export of raw materials or low‑processed products. The impact of export on employment is, alternatively, less unambiguous. On the one hand, the growth in demand should cause a growth in employment in companies that produce goods for which increased demand emerged, and, on the other hand, however, Greenaway et al. (1999)19 indicate that increased openness of the market causes an increase in efficiency of using the labour force in the company. Hoekman and Winters (2005)20 indicate that the fact whether increased trade affects to a greater extent the employment or amount of salaries depends on the labour market institutions, efficiency of capital markets and social policies. These authors indicate at the same time that the influence of changes in the volume of trade exerts insignificant impact on the situation on the labour market. To sum up, this influence might turn out to be both positive and negative, yet positive effects are indicated more often in the literature, but in no case did the strength of this impact turn out to be substantial. Following the analysis of available literature, it was decided to use four alternative estimations of extreme influence of increase in export on the increase in labour productivity and per capita GDP in the present study. They served the purpose of transposing the value of additional export resulting from the implementation of the EU cohesion policy in Poland, referred to the forecasts of global export of the economies of particular EU-15 countries into the growth rate of these macroeconomic variables.

15 Giles J., Williams C., Export‑led Growth: A Survey of the Empirical Literature and Some Non‑causality Results. Part 1, The Journal of International Trade & Economic Development, 2000. 16 Frankel J., Romer D., Does Trade Cause Growth?, American Economic Review, Vol. 89, No. 3, (Jun., 1999), p. 379-399. 17 Badinger H., Breuss F., Trade and Productivity: An Industry Perspective, EI Working Paper No. 66, 2005. 18 Lewer J., Van den Berg H., Does Trade Composition Influence Economic Growth? Time Series Evidence for 28 OECD and Developing Countries, The Journal of International Trade & Economic Development, 2003. 19 Greenaway D., Hine R., Wright P., An empirical assessment of the impact of trade on employment in the UK, European Journal of Political Economy Vol. 15, p. 485-500, 1999. 20 Hoekman B., Winters A., Trade and Employment: Stylized Facts and Research Findings, DESA Working Paper No. 7, November 2005.

57 Table 4.3 presents the results obtained in reference to the per capita GDP and labour productivity. It should pointed out at this moment that in order to increase the transparency of estimated results, the total additional export of the EU-15 countries to Poland, i.e. the aggregated export for the entire period of 2004-2015 has been taken into consideration. This means thatadditiona l increase in particular measures of income, or alternatively the productivity, resulting from the implementation of the EU cohesion policy in Poland, is distributed throughout this entire period. As already mentioned before, in the case when influence is exerted by export on the volume of employment, empirical studies are usually inconclusive. The obtained results depend strongly on the adopted research methodology and applied data, and they are generally not resistant to the change of specification. Although it is the positive effects rather than negative ones that should be intuitively expected (since the growth in export might cause the willingness to increase employment by the exporting companies), this impact is in reality inconsiderable and insignificant in terms of statistics. It should be remembered that a growth in export might often indicate a change of target markets of particular companies rather than additional production, and even if such a creation in fact takes place, then it might be a non‑employment growth, i.e. growth reflected solely in the growth of capital resources or per unit productivity of factors. Therefore,a decision was taken to adopt a hypothesis, according to the reliable assessment of results of the scientific literature that the influence of additional export to Poland induced by the implementation of the EU cohesion policy in Poland on the employment in the EU-15 countries will be insignificant on the scale of the entire economy.

TABLE 4.3. CHOSEN ESTIMATIONS OF THE INFLUENCE OF ADDITIONAL EXPORT TO POLAND ON AGGREGATE MACROECONOMIC VARIABLES OF THE EXPORTING COUNTRIES (IN 2004-2015)

In relative categories Badinger, Breuss Greenaway, Morgan, Crespo‑Cuaresma, Research Frankel, Romer (1999) (2005) Wright (1999) Wörz (2005) Aggregate affected Labour productivity in Increase in per capita Increase in per capita Increase in GDP21 by export the industry income GDP Austria 0.0274 % 0.0411% 0.0878 % 0.0113 % Belgium 0.0243 % 0.0364 % 0.0502 % 0.0097 % Denmark 0.0242 % 0.0364 % 0.0820 % 0.0090 % Finland 0.0234 % 0.0351% 0.0902 % 0.0079 % France 0.0094 % 0.0141% 0.0554 % 0.0042 % Greece 0.0033 % 0.0049 % 0.0243 % 0.0007 % Spain 0.0058 % 0.0086 % 0.0335 % 0.0023 % the Netherlands 0.0246 % 0.0369 % 0.0561% 0.0110 % Ireland 0.0331% 0.0496 % 0.0568 % 0.0185 % Luxembourg 0.0193 % 0.0289 % 0.0211% 0.0035 % Germany 0.0316 % 0.0474 % 0.1278 % 0.0123 % Portugal 0.0074 % 0.0111% 0.0380 % 0.0025 % Sweden 0.0193 % 0.0289 % 0.0666 % 0.0061% United Kingdom 0.0059 % 0.0088 % 0.0353 % 0.0026 % Italy 0.0121% 0.0181% 0.0717 % 0.0045 %

→

21 The authors have separately estimated the influence of export of high technology products, low technology products and non-industrial products. Table 4.3 presents the final, aggregated influence of additional export to Poland on the per capita GDP.

58 In absolute categories (fixed prices for 2008) Badinger, Breuss Greenaway, Morgan, Crespo‑Cuaresma, Research Frankel, Romer (1999) (2005) Wright (1999) Wörz (2005) Aggregate affected Labour productivity in Increase in per capita Increase in per capita Increase in GDP by export the industry income GDP million million Currency euro zloty euro zloty euro zloty euro zloty Austria 0.26 1.05 146.26 584.41 25.59 102.34 382.23 1,527.64 Belgium 0.27 1.08 120.94 483.36 14.58 58.30 347.74 1,390.03 Denmark 0.22 0.86 151.55 605.44 28.23 112.80 216.76 865.43 Finland 0.28 1.13 124.46 496.77 26.67 106.56 149.47 597.07 France 0.07 0.30 43.87 175.40 15.88 63.51 874.22 3,495.63 Greece 0.02 0.08 10.27 41.10 4.63 18.53 17.41 69.59 Spain 0.04 0.15 19.23 76.83 6.38 25.49 253.96 1,014.70 the Netherlands 0.25 1.00 139.60 557.21 16.23 64.81 703.64 2,807.28 Ireland 0.76 3.03 190.14 758.58 17.35 69.17 344.30 1,374.08 Luxembourg 0.18 0.72 209.46 836.99 11.53 46.06 15.54 61.98 Germany 0.28 1.11 158.80 634.51 31.87 127.41 3394.50 1,3562.99 Portugal 0.02 0.09 18.37 73.49 5.36 21.46 48.90 195.56 Sweden 0.18 0.71 108.66 434.27 20.94 83.71 226.36 904.40 United Kingdom 0.06 0.23 30.51 121.93 10.20 40.76 575.47 2,299.59 Italy 0.08 0.30 47.19 188.42 19.20 76.73 724.90 2,893.68

Source: Own elaboration on the basis of the conducted research and H. Badinger, F. Breuss – Trade and productivity: an industry perspective, EI Working Paper No. 66, 2005; J.A. Frankel, D. Romer – Does trade cause growth?, American Economic Review, Vol. 89, No. 3, 1999; D. Greenaway, W. Morgan, P. Wright – Exports, export composition and growth, The Journal of International Trade & Economic Development, Vol. 15, No. 2, 1999; J. Crespo‑Cuaresma, J. Wörz – On Export Composition and Growth, Review of World Economics, Vol. 141, No. 1, 2005.

Table 4.3 presents an insignificant influence of the increase in trade of the EU-15 countries with Poland as a result of implementation of projects in Poland that were co‑financed by Community funds, at the GDP level and labour productivity. However, it should be pointed out that, firstly, there is in fact a positive impact. Secondly, low influence does not result from the insignificance of the influence of the volume of export on the economies of the EU-15 countries, but from the inconsiderable volume of aid provided for Poland under the EU cohesion policy in relation to the total level of discussed macroeconomic aggregates (GDP and export streams, for more, see Chart 4.23).

CHART 4.23. REFERENCE OF THE TOTAL FUNDS RECEIVED BY POLAND UNDER THE COHESION POLICY TO THE VOLUME OF THE ECONOMY OF THE EU-15 COUNTRIES

0.25% in relaon to GDP of UE-15 countries

in relaon to export of UE-15 countries 0.20%

0.15%

0.10%

0.05%

0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Own elaboration based on the European Commission data, Eurostat data and forecasts and own forecasts.

59 It is also interesting how export to Poland caused by the implementation of the programmes co‑financed by structural funds and the EU Cohesion Fund is related to the payments made by the EU-15 countries to the budget of the European Community. This will allow for the answer to the question about the real cost of implementing the cohesion policy in Poland incurred by the EU-15 countries. To that end, additional export was referred to the payments made by particular EU-15 countries to the Community budget (gross category). Furthermore, the difference between the above ‑mentioned payments and disbursements for particular countries due to the implementation of the cohesion policy (net category) has been adopted as a point of reference. It should be pointed out that the value adopted as “net payments” does not include funds transferred under the Common Agricultural Policy (due to the absence of data for the period after 2006). An assumption that in 2007-2015 disbursements for particular countries from the system will maintain the average relation from the period of 2004-2006 to the disbursements under structural funds means that the relation of the additional export to Poland to net disbursements to the budget of the European Union will increase up to 4 % (Ireland). Therefore, additional export to Poland from the EU-15 countries caused by the implementation of cohesion policy represents the payments to the budget of the European Community. It should be pointed out that the EU-15 countries are also the beneficiaries of the Community policies, which additionally reduces the estimated costs of financing of Community activities (for more, see Chart 4.24).

CHART 4.24. TOTAL COSTS OF THE EU-15 COUNTRIES RESULTING FROM THE IMPLEMENTATION OF THE EU COHESION POLICY IN POLAND REFERRED TO THE PAYMENTS MADE BY THE EU-15 COUNTRIES TO THE COMMUNITY BUDGET (GROSS CATEGORY) AND PAYMENTS SUBJECT TO DEDUCTION OF DISBURSEMENTS FROM STRUCTURAL FUNDS AND THE COHESION FUND (NET CATEGORY) IN 2004-201522

y y a n ri ark ium ugal Ital st ance eden Spai rt Fr Ireland Au Greece Finland Sw Belg Po Denm German Luxembourg United Kingdom the Netherlands

Source: Own elaboration based on the European Commission data, Eurostat data and forecasts and own forecasts.

22 The presented values were obtained in the following manner: in the case of net category, the value estimated under the research of the additional export for each of the EU-15 countries to Poland was divided by the difference of payments of these countries to the Community budget (with the use of own forecasts concerning payments in the future) and disbursements due to the share of these countries in programmes and initiatives implemented under the Cohesion Policy. This difference was multiplied by the

60 The conducted analysis indicates that there is a noticeable influence of disbursement of structural funds in Poland in the form of reduction of net costs of participation of the economies of the EU-15 countries in the financing of the European Union budget, in particular the countries located closest to Poland (Germany, Austria) and the countries making relatively small payments to the budget (Ireland, Luxembourg). It should be pointed out that the countries with relatively smallest additional export to Poland are at the same time in general either net beneficiaries of Community policies, or they were such beneficiaries in the recent past (Greece, Spain, Portugal). What is more, Chart 4.24 also presents additional export to Poland in reference to the total Community budget, which is used by Poland as not the only beneficiary. Particularly the implementation of the cohesion policy in Poland constituted in 2004-2007 less than 3 % of the total Community budget. In 2008-2013 this share will be on the increase, but it will still be at the level below 10 % (cf. Chart 4.25).

CHART 4.25. ALLOCATION OF FUNDS FROM STRUCTURAL FUNDS AND THE COHESION FUNDS FOR POLAND (EXCLUDING THE DIRECT PAYMENTS UNDER COMMON AGRICULTURAL POLICY, INCLUDING PAYMENTS UNDER PRE‑ACCESSION PROGRAMMES) REFERRED TO THE BUDGET OF THE EUROPEAN UNION

12% annually on average

10%

0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Own elaboration based on the European Commission data and own forecasts.

The statistics presented in Chart 4.24 and 4.25 indicate in total an insignificant real burden for the EU-15 countries by the implementation of the cohesion policy in Poland: on average slightly above 6 % of payments to the budget is earmarked for that purpose, and for eight out of fifteen economies according to the estimations it translates into additional exporto t Poland amounting to over 4 % of the encumbrance by the Community budget.

share of expenditure on the implementation of the cohesion policy in Poland in the Community budget. In the gross category, the value of additional export was divided by the value payments to the Community budget multiplied by the above‑mentioned share.

61 FIGURE 4.1. ADDITIONAL EXPORT TO POLAND IN RELATION TO PAYMENTS OF THE EU-15 STATES TO THE COMMUNITY BUDGET IN 2004-2015, IN THE PART TRANSFERRED TO POLAND UNDER THE COHESION POLICY

Source: Own elaboration based on the European Commission data and own forecasts.

FIGURE 4.2. ADDITIONAL EXPORT TO POLAND IN RELATION TO PAYMENTS OF THE EU-15 STATES TO THE COMMUNITY BUDGET, LESS PAYMENTS UNDER THE COHESION POLICY (NET CATEGORY) IN THE PERIOD OF 2004-2015, IN THE PART TRANSFERRED TO POLAND UNDER THE COHESION POLICY

Source: Own elaboration based on the European Commission data and own forecasts.

62 Figures 4.1 and 4.2 demonstrate low real burden for the economies of the EU-15 countries all the more. In particular when analysing the bilateral relation between Germany and Poland, one can lean towards the thesis that 85 % of the value of payments to the system of Community funds (on net basis), in the part falling for Poland, will be compensated by means of additional import. In other words, for each EUR 1 paid by Germany to the Community budget for the implementation of the cohesion policy in Poland, it receives 72 eurocents in the form of additional export contracts. However, when direct benefits for Germany due to the conduct of Community cohesion policy are included, this reimbursement can be estimated at 85 eurocents. In the case of all EU-15 countries perceived jointly, this reimbursement amounts to 36 and 46 eurocents respectively.

4.3. Total benefits – summary and conclusions

Most important results of macroeconomic research

• Direct impact of the implementation of EU cohesion policy in Poland on EU-15 companies being project contractors in 2000-2008 amounted to EUR 1.18 billion i.e. PLN 4.6 billion. • Aggregated value of total (direct and indirect) benefits obtained by the EU-15 countries as a result of implementing the EU Cohesion Policy in Poland in 2004-2015 amounts to over EUR 37.8billion, that is over PLN 151 billion. • Inclusion of the indirect benefits for enterprises from the EU-15 countries makes the obtained estimated total effect considerably higher than the estimations based solely on direct benefits (quantified through microeconomic research). The total indirect benefits are ten times higher than the direct ones. • The effects observed so far represent only a small part of the additional export of EU-15 to Poland, as forecast for 2010-2015. • The German economy, i.e. the economy of the country that is involved in the most intense international trade with Poland, has the largest share in the effects. • The sectoral structure of the additional export indicates a positive influence for production branches using modern technology. • The influence of induced export on macroeconomic aggregates in the EU-15 countries is small, which results mainly from the small scale of the conduct of Cohesion Policy in Poland in comparison with the volume of economies of these countries.

To sum up, direct and indirect effects of the implementation of the EU cohesion policy in Poland will be connected with a significant increase in export from the EU-15 countries to Poland. It should be anticipated that the largest part of expected benefits will be contributed Germany. 85 eurocents from each euro invested in co‑financing of EU projects in Poland will be returned in the form of

63 additional profits from export when calculated per unit of funds paid to the Community budget. Slightly smaller, yet still substantial effects will be in the remaining EU-15 countries. It should be kept in mind that, largely due to the distribution of amounts of financial support in time, in 2004-2009 it was possible to observe only a small part of the forecasted benefits. According to this forecast, the largest congestion thereof should be expected in 2013-2015. According to the obtained estimations,the total benefits of the EU-15 countries, gained owing to the implementation of the EU cohesion policy in Poland, are substantial. In the case of selected sectors (mainly high technology), the additional import of goods induced by that policy represents a significant proportion of forecast changes in export from each EU-15 State to Poland. The largest share in the additional import covers the traditional trade partner of Poland – Germany, as well as Italy and France to a smaller extent. In the case of all these countries, the additional export to Poland should also translate into an increase in aggregated profits of enterprises and total payroll fund in the economy. As a consequence of that, there would also be an increase in the receipts to the budget of public institutions. At the same time, additional export to Poland features relatively advantageous sectoral structure – over a half of the value is constituted by goods produced by means of high or medium technology. This means a positive stimulus for the most productive and most modern branches of economies of the EU-15 countries. What is most important, the obtained results indicate significant eductionr in the real cost of conducting the cohesion policy in Poland incurred by the EU-15 countries. To sum up, the costs of conducting the cohesion policy in Poland (insignificant on the scale of the entire economy of the EU-15 countries) are to a large extent compensated by additional export with advantageous – from the point of view of the development possibilities and social welfare – sectoral structure and with high degree of independence from cyclical fluctuations.

64 5. Summary

The benefits of the EU-15 countries gained owing to the implementation of the EU cohesion policy in Poland can be divided into direct and indirect ones. Direct benefits are perceptible immediately and they are connected not so much with the effects and results involved in the project co‑financed by the EU funds, but with the process of its implementation itself. These occur when a company from an EU-15 country is a contractor of a project that is being implemented in Poland. According to the estimations included in this study, direct benefits for the EU-15 countries represent 5 % of all the resources disbursed in Poland under EU funds. The benefit gained in 2000-2008 due to that reasons by the countries in question amounts to PLN 4.6 billion (EUR 1.18 billion) in fixed prices of 2008, where, due to the nature of the assumptions adopted in the research, this estimation should be regarded as conservative. Indirect benefits, resulting from increased – due to the implementation of the EU cohesion policy – demand of Poland for imported goods and services, including but not limited to products and services imported from the EU-15 countries, are much higher. In addition, the import of Poland induced by EU funds is partially related to the fact that the implementation of projects co‑financed by EU funds generates the need for subcontracting and provision of goods and services for the needs of project implementation. More often, however, it reflects more long‑term effects related to modernisation of Polish economy and improvements of its production potential resulting afterwards in growth in demand for various goods and services, including the imported ones. According to the estimations included in this study, the total (i.e. direct and indirect) benefits gained in 2004-2009 by the EU-15 countries due to the implementation of the EU cohesion policy in Poland represent EUR 4.5 billion (PLN 17.8 billion) in prices of 2008, that is 27 % of the aggregated value of funds transferred to Poland under this Policy. Thirdly, these benefits – in particular the indirect ones – are distributed over time in an irregular manner. According to the forecasts included in this study, it should be anticipated thatduring the period of 2004-2015, the benefits for the EU-15 countries amount in total to EUR 37.8 billion in fixed prices of 2008. Therefore, the effect observed so far would constitute merely 12 % of the expected value for the 2004-2015 period. The role of indirect effects will be increasing over time: according to the forecast, by 2015 they constitute as much as 91% of all observed effects altogether. These results are based on the following premises: on the one hand, the amounts of co‑financing vested for Poland during the 2004-2006 period (disbursed until 2008) were much lower than the amounts in 2007-2013. On the other hand, indirect effects occur after some time – in particular the ones that result from the growth in purchase potential of Poland.

65 Essential conclusions and recommendations

• For each EUR 1 paid for the implementation of the Cohesion Policy in Poland, the EU-15 countries receive in return 36 eurocents in the form of additional export of goods and services, and when their own income from assistance under the Cohesion Policy are deducted from the cost, it amounts to 46 cents. • In the first instance, it is the national entities that derive benefits from the implementation of the Cohesion Policy. However, increased demand (including the production one) results in significant increase in export by foreign entities. This way all the parties benefit from it. • Implementation of the Cohesion Policy intensifies the trade between Poland and the EU-15 countries to a great extent. • The sectoral structure of the implementation of the Cohesion Policy in Poland should be clearly assessed as positive: it favours the modernisation of the Polish economy (in particular of the machine park), it stimulates the development oriented towards export of enterprises from the sectors of high and medium‑high technology in the EU-15 countries and it promotes the change of consumption patterns in Poland for the benefit of consumption of goods produced by technologically advanced sectors with higher productivity per unit. • From the point of view of trade stimulation, the most beneficial projects are the infrastructural ones and projects for the support for enterprises. • The cohesion policy can be applied as an instrument that is to a small degree depend- ent on cyclical fluctuations. On the other hand, the level of use of awarded funds is of essential importance, which is indirectly indicated by the difference between the results presented in the reports for 2009 and 2010. • Projects co‑financed from the European Social Fund, in comparison with the remaining funds, have the lowest potential for increase in import, both directly and indirectly. • In the methodological dimension, the use of input‑output tables allows for complete assessment of benefits for foreign enterprises. Therefore, this method is useful to carry out further evaluation research with similar subject.

66 Spatial differentiation of the effects in question is also substantial. Due to very strong economic links with Poland, large economy and substantial contribution in the financing of the cohesion policy, it is Germany that gains the greatest benefits. Substantial benefits are gained also by Italy and France.

List of conservative assumptions

• The definition of a foreign enterprise is based on the criterion of registered office (for more, see 7.2.2). • The benefits for enterprises from the EU-15 countries as the final beneficiaries have been omitted. • There is no quantification of positive external effects of implementations of the discussed projects that should be subject to gradual intensification in 2009-2015. • The influence of projects is examined only in the part financed by Community funds, which means that contracts implemented in the part implemented by national funds is omitted (this assumption minimises the risk of omitting dead weight loss when selecting the total benefits). • The study uses the results of the EUImpactMOD model, which is characterised by very high conservatism in the assessment of influence of the Cohesion Policy on the Polish GDP when compared to other tools (e.g. Hermin model).

Fourthly, the results of the study were obtained after a number of conservative assumptions.This means that one should expect underestimation of results rather than overestimation thereof. Besides, it should be kept in mind that the described study obviously concerns only the results of the cohesion policy, instead of total effects of the accession of Poland to the European Community, which are surely much bigger, also in the context of the study subject. The conservative nature of the study is also proven by the comparison of the results presented in this report with the result of Evaluation of benefits gained by EU-15 States as a result of the implementation of cohesion policy in Poland of 2009. After annulment of some of the conservative assumptions (which was possible only due to the update of the used data), the estimation of the influence increased substantially.

67 6. Bibliography

Badinger H., Breuss F., Trade and Productivity: An Industry Perspective, EI Working Paper No. 66, 2005 Barro R., Sala‑i-Martin X., Economic Growth, The MIT Press, Boston, 2003 Benhabib J., Spiegel, M., Human Capital and Technology Diffusion, [in:] Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 13, Elsevier, 2005, p. 935-966 Bils M., Klenow P., Does Schooling Cause Growth?, American Economic Review, American Economic Association, vol. 90(5), 2000, p. 1160-1183 Cappelen A., Fagerberg J., Verspagen B., The Impact of Regional Support on Growth and Convergence in the European Union, Eindhoven Center for Innovation Studies (ECIS) working paper series 01.14, Eindhoven Center for Innovation Studies (ECIS), 2001 Crespo‑Cuaresma J., Wörz J. – On Export Composition and Growth, Review of World Economics, Vol. 141, No. 1, 2005 Frankel J., Romer D., Does Trade Cause Growth?, American Economic Review, Vol. 89, No. 3, 1999, p. 379-399 Fricker A. et al., An Experimental Comparison of Web and Telephone Surveys, Public Opinion Quarterly 69(3), 2005, p. 370-392 Fujita M., Thisse J., Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Loses From It?, CEPR Discussion Papers 3135, 2002 Giles J., Williams C., Export‑led Growth: A Survey of the Empirical Literature and Some Non‑causality Results. Part 1, The Journal of International Trade & Economic Development, 2000 Greenaway D., Hine R., Wright P., An empirical assessment of the impact of trade on employment in the UK, European Journal of Political Economy Vol. 15, 1999, p. 485-500 Greenaway D., Morgan W., Wright P. – Exports, export composition and growth, The Journal of International Trade & Economic Development, Vol. 15, No. 2, 1999 Greenwood J., Hercowitz Z., Krusell P., Long‑Run Implications of Investment‑Specific Technological Change, American Economic Review, American Economic Association, vol. 87(3), 1997, p. 342-62 Growiec J., Zawistowski J. (ed.) – Ocena korzyści uzyskiwanych przez Państwa UE-15 w wyniku realizacji polityki spójności w Polsce, MRR, Warszawa, 2009 Hoekman B., Winters A., Trade and Employment: Stylized Facts and Research Findings, DESA Working Paper No. 7, November 2005 Jones Ch., Growth and Ideas, [w:] Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 13, Elsevier, 2005, p. 1063-1111 Lewer J., Van den Berg H., Does Trade Composition Influence Economic Growth? Time Series Evidence for 28 OECD and Developing Countries, The Journal of International Trade & Economic Development, 2003 Quah D., Empirics for Growth and Distribution: Stratification, Polarization, and Convergence ,Clubs CEPR Discussion Papers 1586, 1997 Reakcja gospodarki polskiej na fundusze strukturalne w latach 2007–2013 – wnioski dla Polski, Institute for Structural Research, 2007.

68 Solow R., A Contribution to the Theory of Growth, Quarterly Journal of Economics, 70, February, 1956, p. 65-94 Timmer M., Ypma G., van der Ark B., IT in the European Union: driving productivity divergence?, GGDC Research Memorandum 200363, Groningen Growth and Development Centre, University of Groningen, 2003

69 7. Methodological Appendix

7.1. Validity of the EU cohesion policy assumptions according to the economic literature

The discussion concerning the meaning of economic implementation of the EU cohesion Policy conducted in the first Chapter has been reduced to the most important dependencies and phenomena. However, in order to avoid difficulties in the reception of the entire report, several important thread were omitted therein. These threads will be discussed in the paragraphs below. Firstly, empirical evidence for the phenomenon of real convergence are ambiguous (cf. Quah, 1997; Barro and Sala‑i-Martin, 2003) but generally the differences in development level between individual regions in one country, or alternatively between particular countries within a relatively homogenous area, decrease over time.

Concepts from beyond the growth theory and the possible influence of Structural Funds on the economy

New Economic Geography (NEG) emphasises the role of network effects and agglomeration benefits (Fujita and Thisse, 2002). If one enterprise chooses a given location for its registered office, then it is more advantageous for another one to start a business in the immediate neighbourhood rather than in an unindustrialised area. This depend- ency functions stronger and stronger for each new entity until the increasing salaries and other factors cause the benefits resulting from clustering (agglomeration) to stop outweighing the costs thereof. Signalling in the educational system, according to Spence theory (1974), results from informational asymmetry on the labour market. If the employers are not able to assess the actual qualifications of their potential employees, such a situation exerts detrimental impact on the market force of the latter. Therefore persons with high productivity are interested in giving a reliable signal to the employers to confirm their skills and capabilities. One of such opportunities is represented by participation in the educational system. In the context of economic development, this means that education does not have to significantly increase the productivity of particular persons: above all, it provides a confirmation of the skills they already had before. A direct conclusion of the theory of Spence is the possibility of excessively high private investment in human capital, which is caused by will to gain advantage on the labour market. In such a situation, subsidising the education by public funds would lead to an even greater level of disbursements for that purpose, much greater than it is socially.

70 The theory of technological gap suggests that if the assistance is spent on promotion of technological progress, the process of real convergence of relatively poorer regions can be accelerated due to the use of technology invented in other places. Adaptation or imitation of foreign technology is cheaper than the invention thereof. Cappelen et al. (2001) indicate the failure to reach agreement in the literature as regards the factors reducing the technological gap. Nonetheless, it is commonly accepted that expenditure on research and development, as well as focus on industry and services related to high technology, should increase the productivity. It is because a correlation between economic growth in the medium‑term period and expenditure on R&D is noticeable.

Reference to the new economic geography (e.g. Fujita and Thisse, 2002; see Box 1) persuades, on the other hand that the factor that reduces positive influence of stuctural support on the productivity of private capital might be constituted by network effects and increasing economies of scale. Structural resources are allocated for areas that are relatively poorer and frequently deprived of developing metropolises and featuring outdated sectoral structure of economy, as well as the areas in which the general level of business activity is low. The inflow thereof might delay the natural processes of capital concentration in the centres with the highest growth potential and hinder the change of the existing sectoral structure of the economy into a more modern one at the same time, in so far as such processes require substantial agglomeration of business activity. Neoclassical growth models, such as for instance the Solow model (1956), can be extended by means of human capital (formal education, professional qualifications and experience in the current work position), whose accumulation is subject to similar principles as physical capital: investments in this field can also accelerate the process of real convergence. However, the issue of human capital requires separate considerations. On the one hand, improvement in qualifications is a process whose effects on the scale of the entire economy should be demonstrated as late as in the medium- and ongl ‑term period (which is affected by many years of education in the pre‑working age, which represents the most important element of education). In the perspective of several years, expenditure on education exerts influence on the situation of individual entities on the labour market rather than the behaviour of aggregate macroeconomic variables such as GDP or unemployment. However, most theoretical models, as well as empirical findings, indicate a similar nature of the influence exerted by accumulation of human capital and of the physical capital on convergence: the higher the level of regional development, the more difficult and less efficient the further increase in investment (cf. e.g. Bils and Klenow, 2000). The distribution of the level and areas of education in the population is of major importance as well. It is because it is postulated, firstly, that return on education decreases as the person advances to the subsequent level thereof, secondly, that the potential long‑term influence on the increase in the labour productivity level is related mainly to the specialisations in technical and engineering field as well as exact science. In the theoretical dimension, there are also hypotheses of informational nature of motivation to participate in the education system (the theory of signalling by Spence, see Box 1). Empirical research on the influence of education usually indicates the concurrence of both effects of education, i.e. (i) the effect of increase in productivity and (ii) the effect of signalling. In such a situation, the ex‑ante assessment of the influence of increase in external financing oriented towards that goal is additionally hindered. Appropriate allocation of funds, both in terms of geography and

71 the nature of education, gains vene more importance. For there is always a risk of the effect of dead weight loss in a situation when the opportunity of education in programmes with support is used mainly by those that would take the effort anyway, even if the support would have not been provided. It stresses the necessity of correct allocation of aid funds, i.e. the concentration on the least developed regions. Some of the growth models, which endogenise the accumulation of human capital (cf. Jones, 2005; Benhabib and Spiegel, 2005), predict that the achievement of an appropriate development level of the education system is a prerequisite for the commencement of the convergence process but it is not able to sustain it over a long‑term period. In the long‑term period, the technological dimension becomes essential: full convergence requires not only the equalisation of factors of production between regions, but also the unification of the quality of applied technology. Similar influence, as in the case of human capital, is attributed by some models to investments in public capital (e.g. primary infrastructure), which is a complementary good in comparison with private capital. It should be pointed out that in the light of prevailing concepts developed within the growth theory, the ultimate source of economic growth in the long‑term period on a global scale is represented by technological progress. In the context of inducing and accelerating the interregional convergence, however, greater importance is attached to the process of adaptation of innovations applied in the most developed countries. According to the theory of technological gap, financial support for the process of adapting new technology means, apart from the reduction in costs alone, an increase in the relative price of conducting innovative research as well. A similar effect can be achieved also by pressuring to adjust of the labour to the most modern technology, which, de facto, means investment in human capital. At the same time, in the case of private investments, the level at which innovative activity affects the growth rate for the local economy depends on whether or not the innovator can benefit from the success. These possibilities might depend on the institutional and legal surrounding of the innovation process (e.g. by patents), and therefore the effectiveness of intervention might differ significantly from country to country. Furthermore, due to the fact that borders between the actual innovation and adaptation of its results in the economy may be blurred, the prediction of the actual influence of particular activities is difficult.

7.2. Microeconomic research

The general purpose of the microeconomic research was to assess direct benefits gained by companies from the EU-15 countries as a result of the implementation of the cohesion policy in Poland. The paragraphs below specify what amount of funds disbursed under projects co‑financed by EU structural funds has been directly contracted to companies from the EU-15 countries that have become contractors of these investments. It was also concluded what was the number of companies from the EU-15 countries that have undertaken to perform these contracts (fully or partially). The scale of direct benefits for companies from the EU-15 countries, expressed in Polish zloty and in euro (fixed prices for 2008), is presented in a breakdown by individual EU-15 countries, by particular years of the 2004-2008 period and by particular sectors of the economy according to the NACE classification.23 On the basis of the acquired results, it was also possible to compare the sectoral

23 NACE classification (French: Nomenclature statistique des Activités économiques dans la Communauté Européenne – Statistical Classifications of Economic Activities in the European Union) divides economies of the EU Member States – according to the Rev. 1.1 version – into 59 sectors. The latest version of NACE classification, effective from 1 January 2008, is the new Rev. 2 version.

72 structure of investments under particular structural funds and to compare the sectoral structure of funds disbursed in general and the funds transferred to companies from the EU-15 countries.

Owing to the research, answers were provided to the following research questions:24

1. What value of resources from the structural funds has been absorbed by foreign companies from the EU-15 countries that are contractors of projects co‑financed by the EU structural funds? 2. What is the number of companies from the EU-15 countries that were contractors of projects co‑financed by the EU structural funds and the Cohesion Fund implemented in Poland?

It should be also mentioned that the choice of web‑based forms as the primary tool for the acquisition of data was connected with the specific nature of the examined population – above all with its high number and substantial dispersion of information that is essential for the research, which hinders the collection thereof on the basis of analysis of documentation. Hence, the most important information in the context of direct benefits of the companies from the EU-15 countries gained owing to the implementation of the EU cohesion policy in Poland have been acquired on the basis of the survey research.

7.2.1. Methodology of CAWI survey research

The survey questions concerning direct and indirect benefits gained by the companies from the EU-15 countries due to the implementation of the cohesion policy in Poland require a detailed answer based on the possibly broadest, and if possible complete, sample of projects. It is because the possibility of statistical conclusions about the entire population is most essential; otherwise it would be impossible to carry out a reliable quantification of particular effects. It was decided to base the methodology of collecting data allowing for the answer to these questions ona web‑based CAWI survey (CAWI – Computer Assisted Web Interview). Such a selection was dictated by the possibility of easily reaching a broad group of entities that have submitted positively examined applications for co‑financing of projects and the fact that it guarantees a high level of survey completion.25 The remaining arguments in favour of the application of the CAWI method are included in the Box below.

However, the data on input‑output flow and sectoral structure of foreign trade available in Eurostat databases are based on the older methodology of Rev. 1.1. Therefore, it was decided to conduct the entire research on the basis of the older version. Owing to that, the necessity of using two classifications at the same time is avoided. What is more, such an approach is all the more justified as the national sectoral accounts, as defined in the information published on the Eurostat webpage, will be made available according to the new NACE Rev. 2 methodology as late as in September 2011. In the case of Poland, certain sectoral categories have been additionally aggregated, due to which the research will be based on the breakdown into 55 instead of 59 sectors in the end. The description of the methodology and legal basis are available on the European Commission webpage: http://ec.europa.eu/environment/emas/documents/nace_en.htm. 24 The research questionnaire also includes the possibility that companies or other entities from the EU-15 countries were direct beneficiaries of the implementation of the EU cohesion policy in Poland. However, all surveyed project applicants declared that they are Polish entities. 25 Detailed information on the response rate – in fact satisfactory – is included in Attachment 6.2.3.

73 The choice of web‑based forms as the primary tool for the acquisition of data is also connected with the specific nature of the examined population – above all with its high number and dispersion of information that is essential for the research, which hinders the collection thereof on the basis of analysis of documentation. The interview used in the CAWI survey research, presenting an exemplary path of completion thereof is included in Appendix 7.5. Its ultimate form was determined by the pilot research on a small subsample of companies.

Advantages of the web‑based interview over other techniques

Survey research such as the CAWI one is a very efficient tool for the acquisition of information about large populations of respondents (Fricker, A. et al. (2005), An Experimental Comparison of Web and Telephone Surveys, Public Opinion Quarterly 69(3), 370-392). Such a population is examined in this analysis. High quality of the obtained database has been guaranteed owing to strictly defined dictionaries of answers and because the main CAWI interview was preceded by a pilot survey. The use of other methods to obtain data that is essential from the point of view of the survey purpose about particular projects would require incomparably more expenditure and would extend the time for the collection of information. Choosing the analysis of project documentation as the main part of the survey would mean significant narrow- ing of the examined sample due to time‑absorption of an analysis of a single project. Furthermore, large differences in the reporting forms between operational programmes could indeed cause problems in the comparability of obtained results. Very large population renders other methods useless as they require direct participation of the interviewer in the acquisition of information about a single project, such as telephone surveys or indirect interviews. To sum up, a web‑based survey is well adjusted to the specific nature of the project and it allows for the conduct of a survey using a very large population, which is of major importance for the quality of estimations.

Identification of tasks performed by contractors in terms of sectors of the economy

The starting point for the determination of sectoral division of the economy is the NACE classification of economic activities.However, the large number of categories included therein substantially hinders its use in a survey in a direct manner – the inclusion of all sections in one question could lead to accidental answers of respondents. This problem was solved in the research by means of a series of detailing questions in the questionnaire, so that survey respondents would not have to choose between too many possibilities of answer at particular stages of the survey. The names and numbers of NACE sections, constituting the basis for the conclusions in this research, emerge on the list of potential response options only when one of three most general categories of implemented tasks – supplies, construction works and services – has been attributed to the contractor. These are the terms from the public procurement law, with which the coordinators of projects should

74 be acquainted as far as basics are concerned. Sequential nature of detailing questions structured this way served the purpose of minimising the percentage of incorrectly completed surveys. The validity of the proposed questionnaire structure was verified positively in the pilot survey. The list of NACE categories in the version available in surveys – meaning slightly aggregated in comparison to the original breakdown into 59 categories – is presented in Table 7.1. Relevant numbers according to the official NACE terminology have been assigned to each sectoral category that can be indicated by survey respondents. In Table 7.1, NACE sectors providing innovative products and technology, as well as banking and counselling services, are marked in particular, for which a more detailed analysis was conducted at the stage of project documentation examination. Technology- and knowledge‑intensive sectors were identified primarily on the basis of indications resulting from the Eurostat analyses (it concerns mainly the document titled: Technology and knowledge‑intensive sectors).

NACE sectors included in the CAWI survey

TABLE 7.1. Sectoral NACE Classification and sectors in the CAWI survey research

Innovation NACE Sectoral category/subcategory name (*) 1 Supplies 1.1 Supply of products of the industrial sector 15,16 Food products, beverages and tobacco 17-19 Textiles, wearing apparel 20 Wood products (excluding furniture) 21,22 Paper, publishing and printing products 24 Chemicals and chemical products yes Products of the petrochemical industry, rubber and plastics (breakdown into categories 23,25 according to NACE) Products of the metal and non‑metallic mineral industry (breakdown into categories according 26-28 to NACE) 29-35 Products of the machinery industry (breakdown into categories): 30-33 Electrical and optical equipment (breakdown into categories according to NACE) yes 34,35 Transport equipment (breakdown into categories according to NACE) yes 29 Machinery and equipment n.e.c. yes 36,37 Manufacturing n.e.c. 1.2 Energy and water supply 1.3 Other supplies 1,2,5 Supply of agricultural, forestry and fishing products 10-14 Supply of products of the extraction sector

75 2 Construction Construction works

3 Provision of services 50-52 Wholesale and retail trade, repairs 55 Hotels and restaurants 60-63 Transport services and activities of travel agencies (breakdown into categories) 64 Post and telecommunication services yes Financial intermediation and activities auxiliary to financial intermediation (breakdown into 65-67 yes categories) 70 Real estate activities 71 Renting of machinery and equipment without operator and of personal and household goods 72 Computer and related activities yes 73 Scientific research and development yes 74 Other business activities yes 80 Educational and training services 85 Health and social services 90 Community services 0 Other services

(*) – „Yes” was used to mark sectoral categories providing innovative products and technology, as well as banking and counselling services.

According to the above table, the following sectors were classified as innovative sectors: • chemical industrial, • machinery industry (broken down into 3 categories: electronic and optical industry, transport industry and industry producing other machinery devices), • post and telecommunication services, • IT services, • scientific research and development • financial intermediation, insurance and supporting services, • services for enterprises. The basis for such a division of sectoral NACE categories was the document titled Technology and knowledge‑intensive sectors published by Eurostat in a cycle of methodological publications Eurostat Metadata of February 2008. Individual sectors of the economy were assigned therein to collective groups by the level of technological advancement (in the case of industrial sectors) and the level of knowledge‑intensity (in the case of service sectors). It proposed a number of competitive methodologies of such division, hence allowing for the selection depending on the research needs.

76 The division of the sections of the economy producing industrial goods in this study is based on the OECD classification (Manufacturing industries classified according to their global technological intensity). NACE sectors classified under this methodology to industry groups as high‑technology and medium‑high‑technology were selected as innovative. In one case, it was necessary to apply a simplification since the OECD division classifies the components of particular sections instead of entire sections: the entire section No 35 (transport industry) was recognised as innovative, although one of its five components, shipbuilding industry, is not included in the list of high technology sectors. However, this simplification was necessary so that data could be used as input for input‑output tables. A problem of this type has not emerged in the case of division of service sectors. The formula for the selection of innovative section was constituted by knowledge‑intensive high technology services, extended by financial services and services for enterprises. Both these added sections feature high level of knowledge‑intensity, and additionally they constitute a significant element of this study since they contain the sectors of banking and counselling services distinguished herein in particular.

CAWI survey – technical aspects

CAWI survey has been conducted with the use of tested information tools, already applied previously by the Institute for Structural Research in other projects. The interactive form has been placed on an external server assuring complete confidentiality of stored data. The questionnaire was not generally available, so as to prevent its completion by accidental persons. It was possible due to the generation of access codes, owing to which each respondent received a unique URL address for the survey intended for them. The same mechanism has excluded the possibility of repeated filling in of a completed questionnaire. Following the ultimate identification of the research sample, invitation for the participation in the survey have been sent via electronic mail to all project coordinators included in that sample. They contained a brief project description and web address for the form. A letter of recommendation from the Minister of Regional Development was attached to these invitations, which served as additional motivation for the applicants to participate in the survey. Due to the specific nature of the survey, it was not an anonymous interview, which is typically used in evaluation surveys. Identification of answers of particular respondents in the resulting database allowed for the selection of the projects that were most interesting from the point of view of survey purposes. The cases isolated this way have become an important starting point in the consecutive analysis stages at the microeconomic level: research on the documentation and in‑depth interviews. The publication of the final form version in the internet and circulation of invitations for the- par ticipation in the survey was preceded by a pilot survey. Since the entities participating in it were not previously informed that they participate in a pilot survey instead of the main research, it also made it possible to define the expected return rate of surveys.

77 The data obtained under the CAWI survey constituted the basis for the following analysis stages at the microeconomic and macroeconomic level: • Estimation of the number of foreign contractors and the amounts transferred to them due to implementation of projects in Poland that are co‑financed by structural funds and the EU Cohesion Fund. • Elaboration of a precise sectoral breakdown of additional investment and consumption demand generated due to the implementation of the cohesion policy in Poland (research questions No 1 and 2 in the macroeconomic part). • Identification of projects that will be subject to in‑depth analysis under the examination of documentation and in‑depth interviews. • Estimation of the influence exerted by projects implemented in Poland and co‑financed by EU structural funds for the development of enterprises from the EU-15 countries providing (indirect) goods and services to Poland necessary for the implementation of the above‑mentioned projects, broken down by the sectors of the economy (additional research questions). The quality of data obtained by the CAWI research is of major importance for the implementation of other research elements. Therefore, it was decided to conduct it for the entire population of applicants, that is a group of 86,371 projects. Due to limited availability of electronic mail addresses of project coordinators in some cases, however, it was necessary to reduce this number. However, it should be pointed out that among the projects not covered by the survey due to absence of contact data, small projects implemented under SOP Agriculture whose beneficiaries were individual farmers predominated and additionally small projects under SOP Fish oriented at fisher- men. However, a insignificant number of such projects in the sample did not limit the research credibility since (i) most projects did not generate direct benefits for companies from the EU-15 countries because no contractor was contracted in it or the only contractor was a Polish company, (ii) these projects were very homogenous and thus it was justified to extrapolate from a small number of observations to the remaining part of the population, (iii) these projects were very small in terms of value and thus, despite great number thereof, they covered a small percentage of the total value of financing under the EU cohesion policy. The population of structural projects implemented in Poland featuresa strongly left‑sided diagonal distribution of the amount of co‑financing: for instance, already the first percentile of projects accumulates over 50 % of the total amount of co‑financing. Therefore, in order to obtain reliable results in terms of value, it is important to have a strong representation of the largest projects in a sample, which have a very high information value. It is particularly important from the point of view of the acquisition of reliable data on the structure of contractors and features used in projects covering indirect goods. On the other hand, it was necessary to include in the sample a great sectoral variety of projects implemented in Poland. Because the representativeness of all programmes was assured, it was possible to quantify in a reliable manner the differences (significant, as it turns out) between the programmes, concerning the role of foreign enterprises and the sectoral structure of purchase made. Because the survey response rate differed between particular operational programmes and priorities, the obtained observations underwent balancing. The method of selecting analytical balances is presented in a separate subchapter.

78 Response rate

This chapter contains characteristics of a sample from a CAWI survey research. In the CAWI survey conducted at the turn of 2008 and 2009, answers were obtained that concerned 6,187 projects for the total amounts of PLN 23.4 billion (in fixed prices for 2008). The applicants in all cases were Polish entities.26 There were no contractors indicated with which contracts have been concluded in the case of 1,463 projects with the total value of PLN 1.68 billion. In the remaining 4,726 projects, 92 % of funds were spent by means of contracts with contractors. In total 13,126 contracts with contractors were concluded under these projects and they amounted to PLN 19.9 billion. This means that almost 80 % of all funds were allocated to project contractors (for more, see Table 7.2). Because it is impossible to obtain information on the remaining 20 %, the analysis of direct benefits gained by the countries from the EU-15 countries is limited to the funds spent by means of contracts with contractors. We assume that these amounts spent on remuneration, to cover administrative costs etc., translate into growth in consumption demand in Poland. The projects included in the sample were co‑financed by a total amount of PLN 16 billion, which means that the sample covers 33 % of the value of all funds financed by the Cohesion Fund. This constitutes a good basis for the conclusion about the entirety of Community funds. The structure of analytical balances that allows for such conclusion is presented in the next subchapter.

TABLE 7.2. Characteristics of the value of projects covered by co‑financing from the eu funds in the sample and in general (in PLN billion)

Total In the sample Sample cover rate Value: • of projects in total 78.34 24.97 32 % • projects with contracts 71.44 23.29 33 % • projects without contracts 6.91 1.68 24 % • resulting from contracts 58.72 19.88 34 %

Value of co‑financing from the EU: • total 50.65 17.25 34 % • in projects with contracts 46.18 16.10 35 % • in projects without contracts 4.46 1.15 26 % • included in contracts 37.55 13.67 36 %

Source: Own elaboration based on CAWI survey. Note: All prices are quoted in fixed prices (PLN billion for 2008). Projects with contracts are perceived as projects in which a contract has been concluded with at least one contractor. The total values were obtained by appropriate re‑balancing of results from the sample (see the methodological Appendix). The population of projects does not contain priority axes of the SOP Agriculture and SOP Fish oriented at individual recipients. The quoted values do not include them.

The analysis of the volume of direct benefits gained by the companies from the EU-15 countries should be supplemented by means of data on the number of contracts and contractor companies. Precisely 458 out of 13,126 contracts that were in the sample were concluded with entities from the EU-15 countries. Since particular companies were found in more than one project, it

26 Entities with registered offices in Poland were regarded as Polish entities.

79 is possible to identify in the sample 375 foreign companies constituting contractors of projects co‑financed by the European funds. By means of generalisation of results for the entirety of structural funds together with the Cohesion Fund, it can be concluded that 81,637 contracts were concluded in 2000-2008. This number also includes 1,909 contracts concluded by 1563 companies from the EU-15 countries.

Selection of analytical balances

The total value of co‑financing of all projects identified under the CAWI survey amounts to 33 % of the total value of Community funds. In order to be able to draw conclusions about the volume of particular absolute effects in reference to the entire population of projects, this fact has to be taken into consideration. However, the identified projects must not be simply multiplied by three since the response rate differed significantly between the operational programmes. For particular programmes it oscillated from 4.3 % (SOP Fish) to 51% (Interreg); substantial differences emerged also between individual priorities under operational programmes. Table 7.3 illustrates such a state of affairs. Therefore, it has become necessaryto select analytical balances for particular observations so that the differentiation in the response rate for various programmes and priorities is taken into account. Where it was possible due to the sufficient response rate, the survey differentiated analytical balances according to particular priorities, and in the remaining cases (Cohesion Fund, Interreg, Equal), a common balance for the entire programme was selected. Furthermore, in order to isolate the effects of the inflow of EU funds to Poland, the procedure of selection of analytical balances included also (at the level priorities) the fact that projects were partially financed by the structural funds and the Cohesion Fund. Therefore, instead of the total value of projects, it was the part thereof that was financed by EU funds that was taken into consideration. Hence, the final balances used for the purpose of calculating the value of contracts include the share of Community funds in the total project financing. Obviously, in the case of calculation of the number of projects and their aggregated value for the needs of describing the population surveyed by means of CAWI, this factor was not taken into account. Taking into consideration the number of entities in the sample in particular measures and priorities, as well as all above‑mentioned factors, a balance structure was adopted at the level of priorities of particular programmes according to the formula below:

1 ϕpi γpi = −, where: θpi

ϑpi – response rate,

φpi – the level of co‑financing from Community funds, pi – programme and priority.

Analytical balancesg pi were calculated, therefore, as a quotient of the value of total co‑financing under the given priority, obtained from the programme documentation containing financial tables and aggregated value of projects from that priority, identified in the CAWI survey. In the case of the number of projects and their total value, the following formula is applied:

2 1 γpi = −. θpi The balances adopted for particular priorities are presented in table 7.3.

80 TABLE 7.3. Share of EU funds, response rate and analytical balances used in the analysis of results of the CAWI survey

Share of EU funds in the Balance Share of Balance Programme Priority financing of pro- Response 1 Programme Priority Community Response 1 γpi γpi jects in the given funds priority axis Axis 1 75.0 % 36 % 2.08 Axis 1 71.6 % 38 % 1.89 SOP HRD Axis 2 75.0 % 8 % 9.77 Axis 2 73.2 % 37 % 2.00 IROP Axis 3 75.0 % 0 % none Axis 3 75.0 % 52 % 1.45 Axis 1 67.5 % 35 % 1.93 Axis 4 75.0 % 0 % 179.12 SOP ICE Axis 2 33.9 % 29 % 1.16 Axis 1 75.0 % 29 % 2.54 Axis 3 74.9 % 19 % 3.92 OP TA Axis 2 75.0 % 20 % 3.84 Axis 1 63.7 % 8 % 8.17 Axis 3 75.0 % 2 % 45.04 SOP Axis 2 75.6 % 3 % 25.40 Axis 1 67.6 % 80 % 0.85 Agriculture Axis 3 75.0 % 2 % 45.59 SOTA Axis 2 75.0 % 21% 3.52 Axis 1 75.0 % 0.005 % 14562.02 Axis 3 75.0 % 2 % 46.17 Axis 2 87.5 % 0 % none Cohesion Fund 76.8 % 46 % 1.66 SOP Fish Axis 3 71.5 % 12 % 5.83 Interreg 75 % 51% 1.48 Axis 4 60.1% 4 % 16.38 Equal 75 % 19 % 3.96 Axis 5 75.0 % 0 % none

Source: Own elaboration based on CAWI results and programme documents of Operational Programme and Community Initiatives implemented in Poland in 2004-2006.

7.2.2. Survey results

Prior to the answer to two essential research questions, the survey results were briefly characterised in terms of the method of distributing funds transferred to Poland under the EU cohesion policy, both under particular structural funds and the entire EU cohesion policy treated jointly. It is particularly valuable because the analysis of expenditure from the Community funds has not been conducted so far at the level that is aggregated to such an extent. What is more, the sectoral structure of the aggregated demand induced by Community funds obtained in the CAWI survey made it possible to assess in a more reliable manner their indirect influence on foreign companies in the macroeconomic part discussed in the main part of the report. It should be pointed out here that foreign contractors were identified in the CAWI survey according to the country in which the registered office of the contractor signing the contract is located. Therefore, foreign companies are defined therein in a conservative manner: a part of foreign entities that have only a distribution network in Poland could be classified herein as Polish companies whereas no Polish company could be classified as a foreign one. The current analysis completely disregards the capital structure of entities. On the other hand, it was the only definition possible at the operational level. On the other hand, as opposed to the flow of goods and services, the country of origin of the enterprises’ capital does not exert influence on the primary category of national accounts, which is represented by the gross domestic product. It should also not be concluded on the basis of the capital structure of enterprises about the inclination towards re‑investment

81 of profits within the territory of the country in which they were gained. Adopting a definition of a foreign enterprise based on the criterion of the registered office is justified both in terms of methodology and in the content‑related terms. The prudence of the assessment of direct benefits in this chapter results from the fact that it was impossible in the CAWI survey to take into account the benefits gained by foreign companies as beneficiaries of the final projects, that is the benefits resulting e.g. from the fact that these companies participate in co‑financed training. Therefore, it can be concluded that the CAWI survey has conservatively assessed the direct benefits gained by the companies from the EU-15 countries and has actually underestimated the real effects rather than overestimated them. The further part describes the influence exerted so far by EU funds on the companies from the EU-15 countries. In addition, a forecast of the direct impact of the EU cohesion policy on enterprises from the EU-15 countries in 2009-2015 has been presented.

Total allocation of funds under cohesion policy

The implementation of projects co‑financed by funds from European programmes usually requires the involvement of external companies as contractors. In total 81,600 contracts with 66,400 contractors in almost 40,000 projects have been concluded under all funds in 2000-2008.27 The average project value (including co‑financing) amounted to PLN 1.6 million. The co‑financing of projects by Community funds amounted on average to 64 %.28 PLN 35 billion, i.e. EUR 9 billion, in prices for 2008 were transferred to project contractors under structural funds and the Cohesion Fund in 2000-2008. This amount equals ca. 80 % of the total value of co‑financing that amounted in total ot PLN 47.8 billion (EUR 12.3 billion).29 The remaining 20 % was provided for expenditure under smaller contracts with contractors30 and for other purposes, i.e. remuneration, rental of rooms etc. Due to the nature of this expenditure, it can be very likely assumed that they were sent to national entities.This means that the analysis conducted in this survey, concentrating on contractors of projects contracted by applicants covered most funds spent in Poland under the implementation of the cohesion policy.

27 Excluding the projects implemented under SOP Agriculture (SOP Restructuring and modernisation of the food sector and rural development), which were constituted mainly by individual projects whose examination by means of CAWI survey was not possible, the response rate with analytical balances included amounted to 39,864 projects. The entire base encompassing all projects implemented within this period amounted to 36,724, excluding SOP Agriculture projects. Taking into consideration that the assumed balances were based on the values of projects, this difference is acceptable. It should be also emphasised that inclusion of only institutional projects in the survey and balancing of them by value usually has to lead to the underestimation of the number of projects in these programmes. It is because individual projects are as a rule much smaller than the institutional ones. 28 In the case of a database describing the actual implementation progress of particular projects, the average value of projects amounted to PLN 1.1 million. The observed difference results mainly from the fact that it is impossible to take individual agricultural projects featuring low average value into consideration in the CAWI survey. If projects implemented under SOP Agriculture are excluded, average project values are obtained that amount to PLN 1.6 million (CAWI survey) and PLN 2.2 million (project implementation progress). This difference results from the above‑mentioned smaller number of projects and higher aggregated value in the case of the available database, which in turn results from the absence of projects from Priority Axis 3 of SOP HRD (Technical Assistance) and Priority Axis 2 and 5 of SOP Fish in the CAWI research sample. 29 These values are expressed in fixed prices for 2008. Due to the absence of projects from Priority Axis 3 of SOP HRD and Priority Axis 2 and 5 of SOP Fish in the research sample, the survey did not include projects with the total value amounting to EUR 123 million (in prices for 2008) whose co‑financing by Community funds amounted to EUR 64.6 million. 30 The CAWI form contained a question only about the 5 largest contractors.

82 CHART 7.1. Structure of contract value according to community programmes/ initiatives (chart on the left) and contractor sectors (chart on the right)

Producon of Other electrical devices 30% 7% 1% Producon of motor vehicles 1% 20% Construcon Other business 73% acvies 4% 10% Other individual service acvies 4% 0%

L Producon of CF IRO P

SOPT instruments and OPTA EQUA

SOP ICE precision devices Producon of machinery SOP HR D SOP FISH SOP AGRI INTERRE G 3% and other devices 7%

Source: Own elaboration based on CAWI survey. Note: The charts concern the structure of Community funds distributed by means of contracts. The „Other” contains all the sectors that had a share below 1%.

Under most operational programmes, the major part of funds was earmarked for construction works (as much as 73 % of the total value) and for the purchase of machinery and devices (15 %). A considerable share is constituted also by services for business and training (4 % each). The remaining branches participated in the direct absorption of European funds to a similar extent. It should be pointed out that construction works constituted 90 % of the total value of funds in three funds largest in terms of value, namely Cohesion Fund, IROP and SOTA. It is related to mainstreaming of these programmes towards development of physical infrastructure. In most of the remaining funds, a noticeable part of resources was used for the purchase of machinery and devices, in particular precision instruments, namely in the branches strongly connected with import. Services were more important in the case of programmes with lower value, such as SOP HRD or SOP ICE. It should be pointed out that the structure of expenditure of particular funds complies with their assumptions (cf. Chart 7.2).

83 CHART 7.2. Distribution of resources under particular funds according to the branch structure of contractors

Cohesion Fund IROP Other Construcon 10% Construcon 93% Business acvity n.e.c. 86% 6% Individual service acvies n.e.c. 1% Business acvity n.e.c. Producon of machinery 1% and devices n.e.c. 1% Producon of instruments and precision devices and medical equipment 2%

SOP AGRI SOTA Other 21% Construcon Other Construcon 27% 2% 91% Business acvity n.e.c. Individual service 3% acvies n.e.c. 10% Producon of transport equipment n.e.c. 3% Producon of instruments Producon of instruments and precision devices and precision devices and medical equipment and medical equipment Producon of 1% 7% machinery and equipment n.e.c. 35%

SOP ICE SOP HRD Other Business acvity n.e.c. 21% Construcon 4% 33% Educaon Other 68% 12% Business acvity n.e.c. 7% Acvies related to hotels and Producon of instruments restaurants 14% and precision devices Producon of and medical equipment machinery and Scienﬁc research 11% equipment n.e.c. and development 28% 2%

Interreg SOP FISH Business acvity n.e.c. Other Other 5% 31% 15% Construcon Acvies related to 78% culture, entertainment Producon of instruments and recreaon and precision devices 2% and medical equipment Business acvity n.e.c. 11% 4% Producon of instruments Producon of and precision devices machinery and and medical equipment equipment n.e.c. Construcon 1% 11% 42%

EQUAL PO TA Acvies related to Business acvity n.e.c. culture, entertainment 11% Individual service and recreaon acvies n.e.c. 24% Other 31% 15%

Educaon 53% Acvies related to hotels and restaurants 13% Educaon Scienﬁc research 22% and development Scienﬁc research 23% and development 8%

Source: Own elaboration based on CAWI survey. Note: Four sectoral NACE categories that were most important in terms of value are presented for each programme.

84 Direct benefits of companies from the EU-15 countries

As indicated by the structure of contractors within particular funds, a vast majority of funds disbursed from the structural funds and the EU Cohesion Fund were transferred to Polish companies.31 These companies have absorbed as much as 93 % of all resources in total. Among foreign contractors, there were mainly entities from the EU-15 countries: merely 0.5 % of all the European resources allocated in Poland were received by companies from other countries. Table 7.4 presents various indicators featuring the share of foreign companies in the absorption of Community funds. As one can see, the contractors from the EU-15 countries constituted 2.3 % of all the contractors and they have participated in 3.6 % of implemented projects. Furthermore, they were implementing contracts that were larger than the average ones in terms of value, which is demonstrated by their 7.8 % share in the value of all concluded contracts. It means that 4.8 % of Community funds – already at the level of project contractors – were transferred to the companies from the EU-15 countries.

TABLE 7.4. Number of contractors from the EU-15 countries with which contracts were concluded under the projects co‑financed by Community funds and the value of contracts awarded to them in 2004-2008 (Cohesion Fund: 2000-2008)

Share of companies Number Total Contractors from EU-15 from EU-15 of projects 45,940 1,460 3.2 % of projects with contracts 40,075 1,460 3.6 % of contracts 81,636 1,909 2.3 % of companies 66,407 1,552 2.3 %

EUR billion PLN billion EUR billion PLN billion Value (2008) (2008) (2008) (2008) of all projects 20.21 78.34 1.18 4.61 5.8 % of contracts 15.13 58.72 1.18 4.61 7.8 % of total co‑financing from 13.05 50.65 0.62 2.44 4.8 % Community funds of co‑financing for contracts 9.66 37.55 0.62 2.44 6.4 % from Community funds

Source: Own elaboration based on CAWI survey. Note: The table presents the share of participation of the EU-15 counties in terms of the number and value in the implementation of the cohesion policy in Poland.

When converted into zloty and euro in fixed prices, this means that the value of additional contracts concluded by the EU-15 countries, obtained owing to the implementation of the cohesion policy in Poland in 2004-2008 reaches the amount of PLN 4.6 billion, i.e. EUR 1.18 billion.

31 In order to determine where a given contractor comes from, project coordinators were asked about the registered office of the contractor’s company. This means that all companies with a registered office within the territory of the Republic of Poland were regarded as Polish entities.

85 After the deduction of resources constituting the Polish contribution and after the inclusion solely of the value of financing by European funds, this amount decreases to PLN 2.44 billion, i.e. EUR 624 million. This amount should be recognised as the most precise approximation of direct benefits of the EU-15 countries, gained owing to the implementation of the EU Cohesion Policy in Poland. Most funds were transferred to the EU-15 countries from projects implemented under the Cohesion Fund: nearly EUR 0.3 billion, that is over PLN 1 billion (in prices for 2008). It resulted both from the fact that this fund featured high value of disbursed resources and from the relatively high share of contractors from the EU-15 countries in the implementation of projects co‑financed by the CF. High total value of contracts was featured also by the projects financed by the European Regional Development Fund. Great majority of them were implemented under SOP Improvement of the Competitiveness of Enterprises. Nearly 1/8 of resources under this programme were transferred to the EU-15 countries (cf. Chart 7.3). In connection with the fact that nearly 40 % of this fund was disbursed for the purchase of machinery and devices, it should be concluded that these funds to a great extent were earmarked precisely for the import thereof from the EU-15 countries. Therefore, support for the competitiveness of Polish enterprises partially consisted in the transfer of technologically advanced products from the more developed EU-15 countries. On the other hand, the entities from the EU-15 countries had the smallest share in the implementation of SOP HRD and IROP projects. In so far as in the case of SOP HRD it is caused by a large share of educational services (in Polish), it is difficult in the case of the latter to find a justification in the sectoral structure since it is similar to the Cohesion Fund. It appears to result from the fact that IROP was a regional programme and it contained predominantly smaller projects under which contracts with foreign entities were used less frequently. The value of a contract with a contractor in IROP was on average 20 times smaller than in CF. In the assessment of the share of contracts for contractors in the value of co‑financing at the level of Community funds, it should be pointed out that there were virtually no such cases in the European Social Fund.

CHART 7.3. The value of Community funds transferred to contractors from the EU-15 countries in EUR million for 2008 (on the left) and the share of contracts with contractors from the EU-15 countries in the value of community funds in a given community programme/initiative (on the right)

300 14%

250 12% 10% 200 8% 150 6% 100 4%

50 2%

0 0% E G L E RI D G D RI CF TA SH CF TA SH IROP P IC SOPT IROP RRE P IC OP SOPT RRE OP P FI P HR P HR P FI P AG P AG EQUA SO TE SO TE SO SO SO SO SO SO IN IN

Source: Own elaboration based on CAWI survey. Note: There were no foreign contractors identified in theEQUAL programme.

86 CHART 7.4. THE VALUE OF COMMUNITY FUNDS TRANSFERRED TO CONTRACTORS FROM THE EU-15 COUNTRIES IN EUR MILLION FOR 2008 (ON THE LEFT) AND THE SHARE OF CONTRACTS WITH CONTRACTORS FROM THE EU-15 COUNTRIES IN THE total resources disbursed from a GIVEN fund (ON THE RIGHT)

300 8%

7% 250 6% 200 5%

150 4%

3% 100 2% 50 1%

0 0% CF ERDF EAGGF FIFG ESF CF EAGGF ERDF FIFG ESF

Source: Own elaboration based on CAWI survey.

Considering the distribution over time for the financing of projects under the funds of European programmes, it should be pointed out that incremental growth in the absorption of European funds was observed in 2005. The total volume of absorption for these funds has reachedPLN 9.7 billion this year. In the following years, 2006-2008, these values were slightly smaller, yet insig- nificantly. The share of contractors from the EU-15 countries was maintained at a constant level of 5–7 % throughout the entire year in question (cf. Chart 7.5).

CHART 7.5. Amount of contracted resources from the European funds according to the country of origin of the applicant in particular years (in EUR billion for 2008)

EU-15 2.5 Other countries

2 Poland

1.5

0.5

0 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Own elaboration based on CAWI survey. Note: The share of foreign contractors amounted to 7.8 % of the total value of co‑financing from the EU funds.

The sectoral structure of contractors originating in the EU-15 countries differs largely from the one for the contractors in general. A much smaller, yet still dominant role is played here by construction works. On the other hand, the production of machinery, precision mechanics and production of electrical devices is of greater importance. This indicates a substantial complementarity of the involvement of foreign entities in relation to the national ones – they implement the parts of

87 projects that the national entities are not able to implement, e.g. in the form of supply of special- ist machinery or devices (cf. Chart 7.6).32

CHART 7.6. Structure of the value of financial orders from Community funds according to the branch of the contractors from the EU-15 countries (Chart on the left) and the share of contractors from the EU-15 countries in particular branches (Chart on the right)

Construcon Producon of instruments and precision Other 48% devices and medical equipment Producon of food 2% Producon of machinery and equipment n.e.c. products, beverages and tobacco Individual service acvies n.e.c. 2% Producon of electrical devices Producon of electrical devices Producon of instruments and precision devices 3% Business acvies n.e.c. Business acvies n.e.c. Producon of motor vehicles 6% Construcon

Producon of instruments All branches excluding construcon Producon of and precision devices All branches 7% machinery and equipment n.e.c. 0% 10%20% 30%40% 32%

Source: Own elaboration based on CAWI survey.

Although construction represents most of the value of contracts also among foreign contractors originating in the EU-15 countries, this result reflects solely the fact of strong predominance of this branch in the total allocated funds. As indicated by Chart 7.6, foreign companies in this branch constituted 4 % of the value of contract, and the share of entities from the EU-15 countries, exclusive of the construction, increases from 6.5 to 13 %. On the other hand, in the case of e.g. sector of production of machinery and devices, the share of contractors from the EU-15 countries has exceeded 20 %. This means that a small share of entities from the EU-15 countries in the direct use of funds results to a great extent from the predominance of construction works that are implemented mainly by national entities. The distribution of direct benefits resulting from the implementation of the EU cohesion policy in Poland between particular EU-15 countries is not even, which is connected with the varying volume of existing structure of links in foreign trade.Over a half of resources contracted to foreign entities fell for Germany, 12 % for Denmark and 11% for Austria. The companies from the remaining countries played a less significant role (cf. Chart 7.7). The analysis of the number of companies from particular EU-15 countries that have become contractors gives similar effects, making it possible at the same time to notice additional phenomena. Namely, the share of German companies in terms of value of projects has surpassed their share measured by means of the number of companies, which leads to a conclusion that companies from Germany were implementing relatively large contracts. This effect is even larger in the case of Denmark and Austria. A reverse phenomenon can be seen among companies from the Netherlands and United Kingdom, which have implemented many small projects.

32 Detailed tables concerning the value of contracts in particular branches are available in the Attachment.

88 CHART 7.7. Structure of the value and number of contracts according to the foreign contractor’s country of origin

50% Number of Value of contracts 40% companies

30%

20%

10%

0% s k y y a n d m ri ar iu ugal Ital st do m ance eden Spai rt inlan Fr Ireland Au F Sw Belg Po Denm German King r countrie he e Netherlands Ot United th

Source: Own elaboration based on CAWI survey. Note: The share of foreign contractors amounted to 7.8 % of the total value of co‑financing from the EU funds. The chart does not include Greece and Luxembourg since these countries did not participate in the CAWI survey.

Germany, from where the companies dominant among foreign contractors come from, is also the largest net payer to the EU budget. Already at this stage of analysis, it can be seen that companies from countries with the largest contribution in the financing of the EU cohesion policy in Poland have the largest share in the implementation of these projects.

7.2.3. Detailed results of the CAWI survey

TABLE 7.5. Value of contracts with contractors from the EU-15 countries (a) from Community funds and (b) with national contribution

Community funds With national contribution PLN 2008 EUR 2008 PLN 2008 EUR 2008 Research and development 432,812 118,636 1,276,901 350,004 Construction 1,168,980,344 297,430,676 1,549,102,088 394,418,417 Education/training 4,830,052 1,293,239 6,471,962 1,732,809 Wholesale and retail trade 1,383,388 355,876 2,804,118 717,271 Hotels and restaurants 89,305 24,479 119,073 32,638 Other services for business 142,904,880 36,211,768 186,938,225 47,385,169 Services related to computers 393,255 103,775 1,123,628 296,787 Equipment of machinery and devices 35,019 9,603 46,693 12,804 Production of office equipment and 640,726 169,791 1,631 781 433,584 computers Production of wood and wooden 6,218,714 1,596,679 17,860,967 4,584,055 products Production of rubber and plastics 8,225,514 2,141,772 24,267,268 6,318,750 Production of machinery and devices 779,013,168 200,124,170 2,065,570,588 531,032,095

89 Production of furniture and other 11,112,095 2,944,578 27,116,928 7,134,020 products, as well as recycling Production of non‑metallic mineral 10,440,897 2,705,695 29,974,710 7,769,762, products n.e.c. Production of transport devices 645,870 169,845 1,905,475 501,083 n.e.c. Production of metal products 4,786,536 1,311,372 14,045,630 3,849,118 Production of motor vehicles 1,627,678 416,505 2,170,921 555,518 Production of precision devices 175,386,278 45,610,276 377,194,845 98,064,549 Production of video/audio devices 8,244,005 2,259,648 14,558,766 3,990,526 and communication devices Production of foodstuffs and tobacco 38,107,623 9,755,263 96,075,104 24,594,495 products Production of electrical devices and 75,740,851 19,713,032 187,315,572 48,391,043 machinery TOTAL 2,439,239,011 624,466,677, 4,607,571,242 1,182,164,497

Source: Own elaboration based on CAWI survey.

TABLE 7.6. Value of contracts with contractors from particular countries

Community funds With national contribution PLN 2008 EUR 2008 PLN 2008 EUR 2008 Austria 280,871,540 70,753,193 420,559,319 106,543, 087 Belgium 9,649,230 2,486,501 19,866,338 5,171,531 Denmark 322,705,450 82,296,682 864,983,168 220,804,072 Finland 3,446,772 876,974 7,100,340 1,811,775 France 130,643,401 33,471,384 191 969 767 49,391,547 Spain 886,204 241,288 2,614,518 711,857 the Netherlands 87,121,888 22,215,725 197,857,484 50,578,181 Ireland 54,656,984 13,864,592 71,193,687 18,059,385 Germany 1,349,147,141 346,614,582 2,348,852,282 604,502,554 Portugal 20,614,800 5,224,459 26,877,908 6,812,119 Sweden 6,668,048 1,754,946 11,873,124 3,116,885 United Kingdom 44,444,443 11,603,205 106,366,084 27,751,436 Italy 128,383,109 33,063,147 337,457,224 86,910,067 EU-15 total 2,439,239,011 624,466,677 4,607,571,242 1,182,164,497 Poland 34,932,315,914 8,991,142,579 53,672,634,426 13,834,092,816 Other countries 177,680,097 46,232,099 437,914,621 113,776,189 TOTAL 37,549,235,023 9,661,841,355 58,718,120,288 15,130,033,501

Source: Own elaboration based on CAWI survey The table does not include Greece and Luxembourg since no project coordinator in the CAWI survey has indicated a contractor from these countries.

90 7.2.4. Methodology of extrapolation for 2009-2015

The preparation of a forecast for the growth rate of direct benefits gained by the companies from the EU-15 countries as a result of implementation of the EU cohesion policy in Poland in 2009- 2015 required the inclusion of information on the amounts that will be provided by the EU for Poland in particular years of the 2007-2013 programming period and the adoption of a number of assumptions. In order to assess the volume of direct impact of the implementation of the EU cohesion policy in Poland on the entities from the EU-15 countries in 2009-2015, results concerning the influence of funds in 2000-2008, the data about which were obtained by means of the CAWI survey, were extrapolated to that period. A structure of the share of countries and sectors from relevant programmes for 2000-2006 has been adopted for new programmes according to Table 7.7.

TABLE 7.7. Representation of programmes for 2007-2013 in relation to programmes for 2004-2006

Programmes for 2007-2013 Programmes for 2004-2006 Share in Community Share in Community Name Name funds funds Programmes under the European Territorial Cooperation in Poland 2 % Interreg 2 % has participated SOP Improvement of the OP Innovative Economy 12 % 10 % Competitiveness of Enterprises. OP Infrastructure and Environment 42 % Cohesion Fund and SOP Transport 46 % SOP Human Resources OP Human Capital 15 % 4 % Development

OP Development of Eastern Poland 3 % Integrated Regional Operational 27 % Regional Operational Programmes 25 % Programme OP Technical Assistance 0.8 % OP Technical Assistance 0.1% TOTAL 100 % TOTAL 88 %

Source: Own elaboration based on analysis of programme documents. Note: Cohesion policy for 207-2013 did not include agriculture and fishery, and therefore counterpart for SOP AGRI and SOP FISH were not taken into consideration. EQUAL programme was also not taken into account as there is no follow‑up programme in the new programming perspective.

Particular programmes were assigned to each other on the basis of relevant scope of objectives. Due to the absolute exclusion of agriculture and fishery from the framework of EU cohesion policy in the new programming period, their counterparts from the previous period were not taken into consideration. Payment forecasts drawn up by the Ministry of Regional Development were adopted as a starting point in the construction of this extrapolation. However, it should be pointed out that distribution over time is a forecast dimension of insignificant importance, and the adopted assumption does not exert influence on the remaining aspects of the survey. What is more, the payments do not have to occur within the same time as the trade in goods and services, which is the essence of the problem. They are merely the best available approximation.

91 TABLE 7.8. Estimated expenditure under NCS 2007-2015

Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 Value (PLN billion, current prices) 0 1.2 16.6 24.2 36.2 44.2 54.2 50.2 42.2

Source: Own elaboration based on Ministry of Regional Development

A forecast of the co‑financing amount that will be transferred to the EU-15 countries has been made on the basis of these data.

7.2.5. Microeconomic forecast

Detailed breakdown of estimated expenditure (in fixed prices for 2008) by particular years is included in columns on the left side of Table 7.9. Assuming the adequacy of programmes from the 2004-2006 and 2007-2013 programming periods, the distribution of the total amount between particular operational programmes is different, due to which the forecast sectoral structure of direct benefits gained by the EU-15 countries changes slightly, as well as the distribution of benefits between particular countries. The key assumptions on which this forecast is based are (i) constant sectoral structure of funds disbursement under projects co‑financed by particular European funds and (ii) constant percentage of the value of funds contracted under particular sectors to foreign contractors from the EU-15 countries. All these proportions have been adopted at the levels for 2004-2008, determined owing to the CAWI survey research. However, this forecast takes into account the change of allocation structure between particular programmes. Therefore, it should be expected that approximately EUR 2.7 billion (PLN 10.9 billion), that is 4.6 %, of the total amount of EUR 58.7 billion (in fixed prices for 2008), that is PLN 236 billion, will be transferred directly to contractors from the EU-15 countries.

TABLE 7.9. Expected amount of allocated community funds in particular years

Total Including: to EU-15 countries Year PLN billion EUR billion PLN billion EUR billion 2008 1 0.4 0.1 0.02 2009 16 3.7 0.7 0.17 2010 23 5.6 1.0 0.26 2011 33 8.2 1.5 0.38 2012 39 9.8 1.8 0.46 2013 47 11.7 2.2 0.54 2014 42 10.6 2.0 0.49 2015 35 8.7 1.6 0.40 Total 236 58.7 10.95 2.72

Source: Own elaboration based on CAWI survey and MRD data

The breakdown of influence exerted by Community funds allocated in Poland by contractors from particular EU-15 countries is presented in Chart 7.8. Due to the assumptions adopted for the

92 forecast construction, it should be anticipated that this breakdown will be similar to the breakdown already observed in 2004-2008. Germany – with a share of over 50 % – will predominate; substantial benefits can be also expected by companies from Austria, Denmark, France and Italy.

CHART 7.8. Forecast value of project co‑financing according to the contractor’s origin

60%

50%

40%

30%

20%

10%

0% y k a d n m Ital y lands Spai France Irelan d Austri Finlan er Sweden Belgiu Portugal Denmar German United Kingdom the Neth

Source: Own elaboration based on CAWI survey Note: The chart does not include Greece and Luxembourg since no project coordinator in the CAWI survey has indicated a contractor from these countries.

Therefore, according to this forecast, as much as EUR 1.6 billion (PLN 6.5 billion) in prices for 2008 should be transferred to Germany. Much less resources, namely EUR 366 million (PLN 1,471 million), will be transferred to Austrian enterprises, and EUR 185 million (PLN 7741 million) to Danish enterprises. The value of Community funds that – according to this forecast – will be sent during the entire 2009-2015 period to companies from particular EU-15 countries is presented in Table 7.10. As far as the breakdown of future direct benefits gained by the EU-15 countries as a result of implementation of the EU cohesion in Poland by particular sectors of the economy is concerned, this forecast assumes that it will be repeated in the following years. Therefore, it is confirmed that the sector on which Community funds will exert strongest influence, both in reference to the entirety of allocated funds and the contracts with companies from the EU-15 countries, will be the sector of construction. Detailed sectoral distribution of the absorption of resources from European funds in the period covered by the forecast is included in Chart 7.9. Just like it was in the case of 2000-2008 period, it is conspicuous that construction works predominate here, however, they are performed by Polish enterprises to a great extent. Once again, the EU-15 countries will be significant suppliers of modern industrial products – primarily machinery and devices, but also instruments and precision devices. Enterprises from the EU-15 countries play a relatively important role also in the sector of “business activity n.e.c.”. This section encompasses mainly business services of high productivity, such as legal, accounting, managing, architectural, engineering and marketing services.

93 TABLE 7.10. Forecast structure of EU funds allocation between contractors from particular EU-15 countries

EUR million PLN million share Austria 366 1,471 0.84 % Belgium 13 52 0.03 % Denmark 185 744 0.43 % Finland 2 8 0.00 % France 164 660 0.38 % Spain 1 5 0.00 % the Netherlands 50 202 0.12 % Ireland 69 275 0.16 % Germany 1,607 6,455 3.69 % Portugal 26 104 0.06 % Sweden 10 40 0.02 % United Kingdom 54 216 0.12 % Italy 177 712 0.41% EU-15 total 2,725 10,946 6.26 % Poland 40,613 163,161 93.26 % Other countries 209 839 0.48 % Total 43,547 174,946 100.00 %

Source: Own elaboration based on CAWI survey and European Commission Data. Note: European funds apportioned by means of contracts with contractors. The table does not include Greece and Luxembourg since no project coordinator in the CAWI survey has indicated a contractor from these countries.

CHART 7.9. Forecast branch structure of Community funds contracted to all contractors (Chart on the left) and contractors from the EU-15 countries (Chart on the right)

Producon oacomputers and Producon of Other peripheral devices, as well as oﬃce electrical devices 2% Other 2% machinery and equipment 6% 1% Producon of instruments Producon of and precision devices and electrical devices medical equipment 1% 9% Producon of instruments Individual service and precision devices and acvies n.e.c. medical equipment 1% 2% Individual service acvies n.e.c. 4% Producon of machinery Producon of machinery and devices n.e.c. and devices n.e.c. 25% 4% Business acvity n.e.c. Construcon Business Construcon 4% 78% acvity n.e.c. 54% 7%

Source: Own elaboration based on CAWI survey.

The sectoral structure of Community funds that are sent to companies from the EU-15 countries is presented in Table 7.11.

94 TABLE 7.11. Planned value of contracts with contractors from the EU-15 COUNTRIES in 2009-2015 (prices for 2008)

EUR million PLN million share Construction 1,475.0 5,925.7 54.1% Production of machinery and equipment n.e.c. 679.9 2,731.4 25.0 % Production of instruments and precision devices, as well as medical 253.3 1,017.6 9.3 % equipment Business activity n.e.c. 178.8 718.1 6.6 % Production of electrical devices 55.8 224.1 2.0 % Production of furniture and production of products n.e.c. 17.1 68.8 0.6 % Individual service activities n.e.c. 13.7 54.9 0.5 % Production of metals 13.1 52.7 0.5 % Production of rubber and plastic products 12.7 50.9 0.5 % Production of wood and cork products, excluding furniture 9.5 38.3 0.3 % Production of fabricated metal products, except machinery and equipment 7.3 29.5 0.3 % Production of motor vehicles, trailers and semi‑trailers 2.3 9.2 0.1% Wholesale and retail trade in motor vehicles and motorcycles and repairs 2.0 8.0 0.1% thereof Production of transport equipment n.e.c. 1.0 4.0 0.0 % Production of computers and peripheral devices, as well as office machinery 1.0 4.0 0.0 % and equipment Production of telecommunication equipment 0.7 2.8 0.0 % Scientific research and development 0.7 2.7 0.0 % Activities related to software, IT consultancy and related activities 0.6 2.4 0.0 % Rental and lease of machinery and equipment 0.1 0.5 0.0 % Activities related to hotels and restaurants 0.1 0.3 0.0 %

Source: Own elaboration based on CAWI survey results and European Commission data.

95 7.3. Statistical tables presenting the results of the macroeconomic research

TABLE 7.12. Estimated additional export of the EU-15 countries to Poland in 2004-2009 broken down by sectors of the exporting economies

PLN million EUR million (prices for 2008) (prices for 2008) Agriculture, forestry and fishing 189.26 46.90 Mining and quarrying 55.42 13.91 Production of food products, beverages and tobacco 577.89 142.82 Production of textile products, wearing apparel, leather and leather 552.25 136.50 products Production of wood and cork products, excluding furniture 100.46 25.52 Production of wood and wood products, as well as publishing and printing, 371.84 93.23 and reproduction of recorded media Production and processing of coke and refined petroleum products 592.13 147.02 Production of chemicals, chemical products and pharmaceutical products 2,980.30 743.14 Production of rubber and plastic products 1,019.65 260.54 Production of other non‑metallic mineral products 323.06 82.40 Production of metals 849.96 217.14 Production of fabricated metal products, except machinery and equipment 433.34 110.36 Production of machinery and equipment n.e.c. 3,000.73 770.03 Production of computers and peripheral devices, as well as office machinery 1475.61 376.90 and equipment Production of electrical devices 567.24 145.01 Production of telecommunication equipment 640.75 160.06 Production of instruments and precision devices, as well as medical 710.81 180.63 equipment Production of motor vehicles, trailers and semi‑trailers 964.87 242.63 Production of transport equipment n.e.c. 11.67 2.99 Production of furniture and production of products n.e.c. 93.81 23.57 Production and supply of electricity, gas, steam and air for air‑conditioning 5.18 1.29 systems Construction 1447.97 361.10 Trade 1.94 0.48 Activities related to hotels and restaurants 0.12 0.03 Land transport; transport via pipelines 110.70 28.13 Transport via railways 63.50 16.02 Storage and auxiliary transport activities 12.28 3.06 Post and courier activities 25.90 6.43

Source: Own elaboration based on CAWI survey results and data described in the Attachment.

96 TABLE 7.12. Estimated additional export of the EU-15 countries to Poland in 2004-2009 broken down by sectors of the exporting economies (continued)

PLN million EUR million (prices for 2008) (prices for 2008) Financial activities, except insurance and pension funding 47.37 11.84 Insurance, reinsurance and pension funding (except compulsory social 29.09 7.24 security) Rental and lease 30.84 7.88 Activities related to software, IT consultancy and related activities 86.78 21.99 Scientific research and development 11.07 2.82 Business activity n.e.c. 395.66 99.76 Education and training activities 8.51 2.14 Cultural, entertainment and recreational activities 13.24 3.33

Source: Own elaboration based on CAWI survey results and data described in the Attachment.

TABLE 7.13. Estimated additional export of the EU-15 countries to Poland in 2010- 2015 broken down by sectors of the exporting economies

PLN million EUR million (prices for 2008) (prices for 2008) Agriculture, forestry and fishing 1,953.6 488.4 Mining and quarrying 505.3 126.3 Production of food products, beverages and tobacco 5,840.3 1,460.1 Production of textile products, wearing apparel, leather and leather 5,842.8 1,460.7 products Production of wood and cork products, excluding furniture 750.0 187.5 Production of wood and wood products, as well as publishing and 3,421.2 855.3 printing, and reproduction of recorded media Production and processing of coke and refined petroleum products 6,009.1 1,502.3 Production of chemicals, chemical products and pharmaceutical products 29,028.5 7,257.1 Production of rubber and plastic products 7,477.8 1,869.5 Production of other non‑metallic mineral products 2,438.1 609.5 Production of metals 6,054.1 1,513.5 Production of fabricated metal products, except machinery and 3,298.1 824.5 equipment Production of machinery and equipment n.e.c. 13,671.4 3,417.9 Production of computers and peripheral devices, as well as office 10,627.1 2,656.8 machinery and equipment Production of electrical devices 3,641.5 910.4 Production of telecommunication equipment 6,118.3 1,529.6 Production of instruments and precision devices, as well as medical 3,886.2 971.6 equipment

Source: Own elaboration based on CAWI survey results and data described in the Attachment.

97 TABLE 7.13. Estimated additional export of the EU-15 countries to Poland in 2010- 2015 broken down by sectors of the exporting economies (continued)

PLN million EUR million (prices for 2008) (prices for 2008) Production of motor vehicles, trailers and semi‑trailers 8,560.7 2,140.2 Production of transport equipment n.e.c. 71.6 17.9 Production of furniture and production of products n.e.c. 790.6 197.7 Production and supply of electricity, gas, steam and air for air‑conditioning 50.4 12.6 systems Construction 7043.5 1,760.9 Trade 7.6 1.9 Activities related to hotels and restaurants 0.3 0.1 Land transport; transport via pipelines 876.3 219.1 Transport via railways 550.5 137.6 Storage and auxiliary transport activities 121.0 30.2 Post and courier activities 265.2 66.3 Financial activities, except insurance and pension funding 450.1 112.5 Insurance, reinsurance and pension funding (except compulsory social 287.8 71.9 security) Rental and lease 227.2 56.8 Activities related to software, IT consultancy and related activities 690.5 172.6 Scientific research and development 80.7 20.2 Business activity n.e.c. 2577.1 644.3 Education and training activities 50.9 12.7 Cultural, entertainment and recreational activities 116.4 29.1

Source: Own elaboration based on CAWI survey results and data described in the Attachment.

TABLE 7.14. Estimated additional increase in the profits of enterprises from the EU-15 countries in 2004-2015 broken down by countries, as well as goods and services

PLN million (prices for 2008) EUR million (prices for 2008) Country Production of Production of Services Total Services Total goods goods Austria 439.56 389.01 828.57 110.07 97.24 207.31 Belgium 435.63 63.04 498.67 109.34 15.82 125.15 Denmark 198.64 18.70 217.34 49.70 4.68 54.39 Finland 396.06 21.20 417.25 99.07 5.31 104.38 France 1,037.61 291.72 1,329.33 259.48 72.92 332.40 Greece 113.11 6.79 119.90 28.25 1.70 29.95 Spain 469.05 34.31 503.36 117.40 8.61 126.01

Source: Own elaboration based on results of macroeconomic survey and Eurostat data.

98 TABLE 7.14. Estimated additional increase in the profits of enterprises from the EU-15 countries in 2004-2015 broken down by countries, as well as goods and services (continued)

PLN million (prices for 2008) EUR million (prices for 2008) Country Production of Production of Services Total Services Total goods goods the Netherlands 407.66 152.15 559.81 101.47 38.09 139.56 Ireland 639.34 127.79 767.13 160.18 31.91 192.09 Luxembourg 20.13 22.14 42.28 5.05 5.55 10.60 Germany 3,707.76 1,199.97 4,907.73 928.38 300.20 1,228.6 Portugal 48.58 23.39 71.97 12.15 5.84 18.00 Sweden 416.14 38.52 454.65 104.09 9.65 113.74 United Kingdom 762.10 262.09 1,024.19 190.96 65.60 256.55 Italy 481.67 75.68 557.35 120.56 18.95 139.51

Source: Own elaboration based on results of macroeconomic survey and Eurostat data.

TABLE 7.15. Estimated additional increase in the payroll fund of enterprises from the EU-15 countries in 2004-2015 broken down by the EU-15 countries, as well as goods and services

PLN million (prices for 2008) EUR million (prices for 2008) Country Production Including Production Including Services Total Services Total of goods taxes of goods taxes Austria 756.2 536.5 1,292.6 565.60 189.4 134.1 323.5 141.55 Belgium 1,667.8 75.7 1,743.5 859.63 419.1 19.0 438.2 216.03 Denmark 945.0 45.8 990.8 389.12 236.6 11.5 248.1 97.44 Finland 445.8 25.5 471.3 183.85 111.6 6.4 118.0 46.02 France 2,266.5 352.3 2,618.8 1,129.56 567.2 88.0 655.2 282.62 Greece 64.6 3.5 68.0 24.23 16.1 0.9 17.0 6.06 Spain 730.9 31.9 762.7 271.18 183.0 8.0 191.0 67.89 the 1,604.7 304.0 1,908.7 777.09 402.4 76.1 478.4 194.79 Netherlands Ireland 348.9 66.8 415.7 70.39 87.5 16.7 104.1 17.63 Luxembourg 49.5 19.6 69.1 21.07 12.4 4.9 17.3 5.28 Germany 12,159.0 1,891.2 14,050.2 6,736.38 3,044.2 472.6 3,516.8 1686.10 Portugal 118.1 44.1 162.2 52.71 29.6 11.0 40.6 13.18 Sweden 809.1 80.1 889.2 406.42 202.5 20.1 222.6 101.72 United 2,117.3 340.9 2,458.2 750.55 529.8 85.3 615.1 187.82 Kingdom Italy 2,418.5 49.5 2,468.0 1,030.57 605.7 12.4 618.1 258.11

Source: Own elaboration based on results of macroeconomic survey and Eurostat data.

99 TABLE 7.16. estimated increase in net taxes paid by enterprises from the EU-15 countries in 2004-2015 in their countries of origin broken down by the EU‑countries, as well as goods and services

PLN million (prices for 2008) EUR million (prices for 2008) Country Production of Production of Services Total Services Total goods goods Austria 14.09 23.78 37.87 3.53 5.94 9.48 Belgium –2.83 3.54 0.70 –0.72 0.88 0.17 Denmark –9.19 1.12 –8.06 –2.30 0.28 –2.01 Finland –7.84 –0.05 –7.90 –1.96 –0.01 –1.97 France 205.97 24.52 230.49 51.53 6.13 57.66 Greece –9.51 0.06 –9.45 –2.37 0.01 –2.36 Spain –35.12 1.63 –33.49 –8.77 0.41 –8.37 the Netherlands 4.98 6.28 11.26 1.25 1.57 2.82 Ireland 4.81 0.17 4.98 1.20 0.04 1.25 Luxembourg –1.56 –0.09 –1.65 –0.39 –0.02 –0.41 Germany 251.18 46.99 298.16 62.92 11.75 74.68 Portugal –1.93 –0.36 –2.30 –0.48 –0.09 –0.57 Sweden 30.07 6.64 36.71 7.53 1.66 9.19 United Kingdom 357.24 16.77 374.01 89.71 4.19 93.90 Italy 145.78 5.13 150.90 36.51 1.28 37.79

Source: Own elaboration based on results of macroeconomic survey and Eurostat data.

TABLE 7.17. Estimation of the benefits gained by enterprises from the EU-15 countries due to additional export to Poland in 2004-2015 broken down by sectors (NACE classification)

PLN million (fixed prices for 2008) EUR million (fixed prices for 2008) Net pay- Net pay- Sector Payroll Including ments Payroll Including ments Profit Profit fund taxes to the fund taxes to the budget budget Agriculture, forestry and 296.65 122.2 486.5 0.83 74.1 30.5 121.49 0.19 fishing Mining and quarrying 116.26 51.8 121.2 26.76 29.1 13.0 30.33 6.69 Production of food products, 961.03 415.0 445.6 434.21 240.1 103.7 111.28 108.46 beverages and tobacco Production of textile products, wearing apparel, leather and 1,345.59 578.0 298.2 624.48 336.2 144.4 74.47 156.01 leather products Production of wood and cork 161.08 72.7 65.7 77.21 40.4 18.2 16.45 19.34 products, excluding furniture Production of wood and wood products, as well as publishing 782.11 342.4 338.6 359.82 195.6 85.6 84.67 89.99 and printing, and reproduction of recorded media

Source: Own elaboration based on results of macroeconomic survey and Eurostat data.

100 TABLE 7.17. Estimation of the benefits gained by enterprises from the EU-15 countries due to additional export to Poland in 2004-2015 broken down by sectors (NACE classification) (continued)

PLN million (fixed prices for 2008) EUR million (fixed prices for 2008) Net pay- Net pay- Sector Payroll Including ments Payroll Including ments Profit Profit fund taxes to the fund taxes to the budget budget Production and processing of coke and refined petroleum 230.56 97.2 252.6 129.54 57.6 24.3 63.12 32.37 products Production of chemicals, chemical products and 5,464.31 2,404.0 3,002 2,651.21 1,366.4 601.2 750.38 662.94 pharmaceutical products Production of rubber and 1,980.58 877.6 523.2 943.68 496.6 220.0 131.14 236.60 plastic products Production of other non‑metallic mineral 647.42 289.5 191.0 314.11 162.3 72.6 47.86 78.74 products Production of metals and 2,218.11 995.2 770.6 1,068.85 556.1 249.5 193.25 267.96 fabricated metal products Production of machinery and 4,130.55 1,820.2 1,338 2,228.97 1,037.5 457.2 336.39 559.92 equipment n.e.c. Production of electrical devices, precision devices, 6,243.63 2658.5 1 508 2 774.02 1 563.8 665.9 377.33 694.77 computers, medical and optical equipment Production of transport 1,711.12 766.2 165.8 799.95 428.2 191.7 41.45 200.19 equipment Production of furniture and 212.86 89.9 66.2 92.83 53.2 22.5 16.57 23.22 production of products n.e.c. Production and supply of electricity, gas, steam and air 8.50 4.0 9.8 5.38 2.1 1.0 2.45 1.34 for air‑conditioning systems Construction 2,170.67 1,004.2 1,254 1,053.76 542.2 250.9 313.52 263.23 Wholesale and retail trade in motor vehicles and 3.42 1.4 1.3 1.54 0.9 0.3 0.32 0.39 motorcycles and repairs thereof Activities related to hotels 0.16 0.1 0.1 0.07 0.0 0.0 0.02 0.02 and restaurants Transport equipment 488.23 205.9 206.1 223.32 122.2 51.5 51.57 55.89 Financial activities, including 210.56 87.6 128.4 104.51 52.6 21.9 32.10 26.13 insurance and reinsurance Rental, lease and other 904.19 351.2 1 101 402.86 226.4 88.0 275.61 100.89 services Education 43.76 18.5 5.6 17.60 11.0 4.6 1.40 4.41 Other cultural, entertainment and 37.75 15.0 20.3 15.07 9.4 3.7 5.09 3.77 recreational activities

Source: Own elaboration based on results of macroeconomic survey and Eurostat data.

101 7.4. Tabular summary of the evaluation methodology

No. Research question Adopted methodology

What volume of additional demand (in terms of Breakdown of forecasts of aggregated impact of the production, consumption and investment) generated cohesion policy on the economy of Poland (in step by the implementation of the cohesion policy in one: with the use of results of the EUImpactMOD Poland is oriented at goods and services imported results, input‑output tables – TPM in Poland and 1 from the respective sectors of the economy of) EU-15 results of the CAWI survey). Estimation of additional countries import of goods and services from particular EU-15 countries, broken down by NACE sectors, on the basis of TPM in Poland and sectoral accounts of foreign trade between Poland and the EU-15 countries. How has the value and structure of goods and services Estimation of the additional export of goods and exported by the EU-15 countries to Poland changed services from particular EU-15 countries to Poland, 2 as a result of emergence of an additional production, broken down by NACE sectors, taken from Point 1. The consumption and investment demand? influence on the structure of export assessed on the basis of OECD and Eurostat data. What is the influence of increasing trade with Poland Meta‑analysis of results included in the published (as a result of increased demand gained owing to the economic works. Calculation of the impact of the 3 implementation of the cohesion policy in Poland) on additional export on the GDP in the EU-15 countries the GDP in the EU-15 countries? on the basis of calculations in the above points estimations derived from literature. What value of resources from structural funds has Web‑based CAWI survey. been absorbed by foreign companies from the EU-15 countries that are contractors of projects co‑financed by these funds? How many companies from the 4 EU-15 countries have directly benefited from the implementation of the cohesion policy in Poland as contractors of the projects under implementation in it? What is the influence of projects co‑financed Web‑based CAWI survey. Detailed sectoral breakdown by the EU structural funds in Poland on the of additional investment and consumption demand development of companies from the EU-15 countries between NACE sectors and the EU-15 countries. providing (a) goods, (b) services necessary for the Change of profits and taxes paid by the companies 5 implementation of these projects? What is the handling additional export to Poland will be calculated influence of these projects on the growth in profits of owing to the use of Eurostat data for the EU-15 the companies in question and the taxes paid by them countries. in the countries of origin? Forecast of the influence exerted by the Forecast elaborated on the basis of the method used implementation of the cohesion policy in Poland for the first research question and extrapolation of 6 in 2010-2015, drawn up at the microeconomic and CAWI survey results. macroeconomic level.

102 7.5. Questionnaire used in CAWI survey – exemplary path

Dear Sirs,

We invite you to participate in a web‑based survey of entities implementing projects co‑financed by structural funds. The processing of data collected through the medium of this survey is the key element of the research project under the title „Evaluation of benefits gained by EU-15 States as a result of the implementation of cohesion policy in Poland” implemented by the Institute for Structural Research on commission by the Ministry of Regional Development. This survey concerns the project whose title is found in the invitation for participation in the survey sent to you. Since we want to acquire detailed information related to project implementation, we ask the coordinator thereof to complete it. The survey is anonymous. Depending on the size of the project under implementation, the completion of the questionnaire takes from 10 to 20 minutes. After proceeding to the next page, your answers are saved. Therefore, it is possible to stop and return to the survey completion at a later time. Obligatory questions are marked with an asterisk (*). We thank you in advance for participation in the survey. The Institute for Structural Research team. [email protected] In order to begin the survey, please click the „Next” button in the bottom.

103 Survey of beneficiaries of the European Union structural funds 2. Project duration* Project start (signing of a co‑financing agreement) Project completion (project accounts) 3. Under which operational programme was the project implemented?* • SOP Human Resources Development • OP Technical Assistance • SOP Improvement of the Competitiveness of Enterprises • SOP Restructuring and modernisation of the food sector and rural development • SOP Fishery and fish processing • Integrated Regional Operational Programme • Community InitiativeEQUAL • Community InitiativeINTERREG

104 Survey of the beneficiaries of the European Union structural funds 8. What was the total project expenditure?* Please, indicate the correct range. • up to PLN 300,000 • from PLN 300,001 to PLN 1,000,000 • from PLN 1,000,001 to PLN 4,000,000 • from PLN 4,000,001 to PLN 10,000,000 • from PLN 10,000,001 to PLN 20,000,000 • over PLN 20,000,001

Survey of the beneficiaries of the European Union structural funds 9. What was the total project expenditure?* Please, detail the value. • from PLN 300,001 to PLN 400,000 • from PLN 400,001 to PLN 500,000 • from PLN 500,001 to PLN 600,000 • from PLN 600,001 to PLN 700,000 • from PLN 700,001 to PLN 800,000 • from PLN 800,001 to PLN 900,000 • from PLN 900,001 to PLN 1,000,000

105 Survey of the beneficiaries of the European Union structural funds 10. What was the total project expenditure?* In order to confirm the previously indicated amount, the total expenditure should be entered in the field below using the Polish zloty currency in full numbers, without spaces, full stops or commas. Total expenditure: ...... PLN

11. What was the share of total co‑financing by public funds in the total expenditure?* Please, indicate the percentage of total co‑financing by public funds (the sum of national public contribution and co‑financing by EU funds) in the total expenditure. Please, round the entered value to full percentage value, e.g. 54.33 % should be entered as 54 %, 35.79 % as 36 %. Co‑financing by public funds: ...... % of total expenditure

12. What was the share of total co‑financing by EU funds in the total expenditure?* Please, indicate the percentage of the co‑financing by EU funds in the total expenditure. Please, round the entered value to full percentage value, e.g. 54.33 % should be entered as 54 %, 35.79 % as 36 %. Co‑financing by the European Union funds: ...... % of total expenditure • No data available (please, tick this option if you do not have information on the amount of co‑financing by the European Union funds.)

13. What was the share of the total personnel costs in the total expenditure?* Please, indicate the percentage of the personnel costs in the total expenditure. Please, round the entered value to full percentage value, e.g. 54.33 % should be entered as 54 %, 35.79 % as 36 %. Total personnel costs: ...... % of total expenditure

106 Survey of the beneficiaries of the European Union structural funds 14. How many task contractors related to project implementation were there in the project?* A contractor shall be understood as an entity that has implemented objectives related to project implementation (e.g. supplies, services, construction works), including but not limited to entities that were awarded public contracts. • 1 • 2 • 3 • 4 • 5 or more • 0 (which means that there were no external contractors participating in the project implementation)

Survey of the beneficiaries of the European Union structural funds In the previous part of the survey, you have indicated that there were 3 contractors participating in the implementation of project objectives.

15. Please, indicate the percentage of remuneration of each of contractors in the total expenditure.* The share of particular contractors should be indicated as a percentage. The sum of entered values must not exceed 100 %.

107 The contractors should be entered according to the volume of remuneration paid to them, beginning with the one with the highest amount. Please, round the entered value to full percentage value, e.g. 54.33 % should be entered as 54 %, 35.79 % as 36 %. Contractor 1 56 % of total expenditure Contractor 2 12 % of total expenditure Contractor 3 2 % of total expenditure Total 70 % of total expenditure

Contractor 1 16. Name of the contractor* ......

17. Legal form of the contractor* • A single entity • A consortium If the objectives were implemented by a consortium of companies, please, provide details about the consortium leader in the following questions.

18. Where is the registered office of the contractor?* • Poland • Another country

108 Survey of the beneficiaries of the European Union structural funds 20. What was the type of the task the contractor was implementing?* If the contract concerned more than one of the following fields, please, indicate the one that constituted the largest part of the contract. • Supplies • Construction works • Provision of services

Survey of the beneficiaries of the European Union structural funds 21. Please, detail the field of supplies:* • Supply of industrial products (highly processed ones) e.g. supply of machinery, electronics, chemical products, wood products, textiles, food products • Supply of energy and water • Supply of low‑processed products e.g. supply of products of the agricultural, forestry, fishing and extraction sector

109 Survey of the beneficiaries of the European Union structural funds 22. Which industrial commodities did the supplies concern?* • Machinery and electronics e.g. office equipment, electrical devices, video/audio equipment and telecommunication devices, precision mechanical devices, transport equipment • Textiles, wearing apparel e.g. any textile products, wearing apparel, leather products • Products of the metallurgy, glassworking industry and mineral processing e.g. non‑metallic mineral products, primary and processed metal products • Other industrial products e.g. furniture, jewellery (including coins), music instruments, sports products and recycling • Products of the petrochemical or chemical industry, rubber, plastics e.g. fuel, fertilisers, rubber, plastics • Foodstuffs, beverages and tobacco e.g. any food and tobacco products • Wood products (excluding furniture) e.g. products of wood processing, pallets, wooden chests • Paper, publishing and printing products e.g. paper, paper products, publishing and printing products (books, magazines), sound processing

110 Survey of the beneficiaries of the European Union structural funds 23. Please, provide further details of the subject of supplies* • Office equipment and computers e.g. computers, office equipment • Electrical equipment e.g. electric engines, generators, lighting, accumulators • Audio/video devices and telecommunication equipment e.g. broadcasting equipment (radio, television, telephone), receiver equipment (radio, television, telephone) • Precision mechanical devices, medical equipment e.g. equipment controlling industrial processes, medical equipment, optical and camera equipment, watches • Motor vehicles (lorries and cars) and parts thereof e.g. lorries, cars and parts thereof • Other transport equipment and parts thereof e.g. ships, rail vehicles, air vehicles and other • Other machinery equipment e.g. electricity generating devices, general‑purpose machinery (e.g. refrigerating devices, cranes, furnaces, manual mechanical tools), equipment used in forestry and agriculture, manual mechanical tools

111