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Administration Agreement between the European Commission and the International Bank for Reconstruction and Development concerning the Part II Europe 2020 Programmatic Single-Donor Trust Fund Trust Fund (No.TF072592) (EC Contract No CCI2014) ACKNOWLEDGEMENTS This report was prepared by a core team comprised of Paul Kriss (TTL), Marcel Ionescu-Heroiu (TTL), Grzegorz Wolszczak, Margo Hoftijzer, Dorota Tekieli-Bisiñska, Elista Panayotova, Dariusz Wiatr, Jerzy Toborowicz, Krzysztof Malicki, Andrzej Kaznowski, Micha³ ¯ukowski, Anwar Aridi, Piotr Stronkowski, Jakub Rozenbaum, Maciej Gruza, Austin Kilroy, Jan Szczucki, Maciej Gajewski, Maciej Drozd, Wojciech Sacha, Tomasz Ka³u¿ny, Dmitry Sivaev. The team would like to thank Commissioner Corina Cret‚ u for initiating the Initiative, Minister Jerzy Kwieciñski from Poland’s Ministry of Economic Development for his invaluable support, and the European Commission’s team for outstanding engagement and support, especially Mr. Patrick Amblard, Mr. Wolfgang Munch, Ms. Justyna Podralska, Ms. Magdalena Horodyñska, and Ms. Karolina Tilman. The team would also like to thank Arup Banerji, Marina Wes, David Sislen, Carlos Pinerua, Cristian Aedo, Paulo Correa, Jean-Francois Marteau, Christian Bodewig, Isfandyar Zaman Khan and John Nasir for the advice and guidance provided throughout the elaboration of this report and Agnieszka Boratyñska, Barbara Nowakowska, Ma³gorzata Michnowska and Piotr Bezmian for their excellent support, and the other World Bank team members, who helped allowed this initiative to take place: Patrizia Poggi, Daria Goldstein, Ma³gorzata Garlicka, Ma³gorzata Bargilewicz, Filip Kochan, Adina Vintan, George Maier, Marius Cristea. The team is also indebted to all counterparts for the support offered in the elaboration of this study, the timely feedback, the excellent collaboration throughout, and their passion for developing their regions, especially: from the Podkarpackie Marshal Office: Danuta Cichoñ, Bartosz Jadam, Anna Lorynowicz, Agnieszka £apa-Krzywonos; Jerzy Baran; from the Œwiêtokrzyskie Marshal Office: Grzegorz Orawiec, Tomasz Janusz, Sylwia Mucha, Kamila Kêpczyñska-Kaleta, Stanis³aw Janiszewski, Aleksandra Marcinkowska, Ma³gorzata Muzo³, from the Ministry of Economic Development: Renata Calak, Joanna Koœcicka-Posiewka, Anna Banaszczyk, Piotr Krasuski, Pawe³ Zdun, Hanna K¹dziela, Beata Pojawa; from the Ministry of Justice: Minister £ukasz Piebiak, Aneta Jakubiak-Miroñczuk; from Rzeszow University: Sylwester Czopek, Józef Cebulski, Barbara Oskroba, Grzegorz Wisz; from Rzeszow University of Technology: Mariusz Oleksy, Grzegorz Budzik, Maciej Sza³acha, Artur Polakiewicz, Agnieszka £abaj; from University of Information, Technology and Management: Wergiliusz Go³¹bek, Agata Jurkowska-Gomu³ka, Grzegorz Karpiuk, Wojciech Pitura; Members of the VET Working Group: Joanna ¯urawka, Renata Antos, Dominik Kraska, Dariusz D¹browski, Aleksandra Marcinkowska, Stanis³aw Piskorek, Ma³gorzata Krawczyk-Blicharska, Bogumi³a Wyrzykowska, Mariusz Urbañski, Marianna Poddêbniak, Tomasz Tworek, Marcin Perz, Mi³osz Pamu³, Anna Jastrzêbska, Czes³aw Golis, Krzysztof £ysak, Dorota Tekieli- -Bisiñska, Bart³omiej Zarzycki, Edyta Smolich, Mariusz Majewski, Micha³ Zubek, Jerzy Krawczyk, Katarzyna Bilska; representatives of local authorities of Staszów and Sandomierz: Leszek Kopeæ, Marek Bronkowski, Micha³ Skotnicki, Stanis³aw Masternak, Benedykt Kozie³, Marian £atkowski; representatives of enterprises and business support institutions: Michael Sven Popiel de Boisgelin, Marian Guz, Wojciech Skowron, Karol Kaczmarski, Marek Mika, Halina Siemaszko, Janusz Stasiak; from the Dolnoœl¹ski Development Fund: Marek Ignor and the representatives of all the financial intermediaries implementing projects within the Podkarpackie Regional Operational Program 2007–2013; from courts in Kielce, Kraków, Rzeszów, and Bia³ystok: Tomasz Wojciechowski, Bogumi³a Majcher-Gniewek, Les³aw Zawada, Gra¿yna Gubernat, Wojciech Major, Jan Klocek, Halina Ci¹g³o, Anna Rurarz, Justyna Bartkiewicz-D¹bek, Katarzyna D¹browska- -Doroszczyk, Bo¿ena Koncerewicz, Pawe³ Hempel, Iwona Ciborowska; the researcher team responsible for background analysis of both regions: Tomasz Komornicki, Konrad Czapiewski, Grzegorz Gorzelak, Maciej Smêtkowski, Adam P³oszaj. The report was completed in March 2017. The European Commission’s Catching-up Regions Initiative in Poland – An Overview /9 Background /10 Why was Poland chosen as one of the pilots /11 Why were Podkarpackie and Œwiêtokrzyskie chosen as the target regions /12 Why was the World Bank selected to provide technical CONTENTS assistance /12 How was the scope of work defined? /13 Project implementation /14 Key success factors /15 Next steps /16 Overview of Initiative Results /19 Vocational Education and Training (Swietokrzyskie) /21 Why? /22 How? /22 What was achieved? /23 Lessons learned /24 The Podkarpackie Center for Innovation (Podkarpackie) /27 Why? /28 How? /29 What was achieved? /30 Lessons learned /33 Activating Entrepreneurship in Deprived Areas (Podkarpackie and Swietokrzyskie) /37 Why? /38 How? /39 What was achieved? /41 Lessons learned /43 Easier Business Registration (Podkarpackie and Swietokrzyskie) /45 Why? /46 How? /46 What was achieved? /50 Lessons learned /51 Financial Instruments (Podkarpackie) /53 Why? /54 How? /54 What was achieved? /55 Lessons learned /56 THE EUROPEAN COMMISSION’S CATCHING-UP REGIONS INITIATIVE IN POLAND – AN OVERVIEW POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 9 Background The mandate of the EU Cohesion’s Policy The purpose of the Initiative is to identify is to narrow development gaps and re- constraints to growth in less developed duce disparities between Member Coun- regions, and to provide targeted assistan- tries and regions. To this extent, around ce and actions, aiming to unlock their €454 billion of ESI (European Structural growth potential. Thus, lagging regions and Investment) Funds have been allo- will be assisted, involving a broad range of cated to help EU regions become more stakeholders (regional and local admini- competitive in the 2014–2020 Program- strations, educational institutions, business ming Period. However, not all EU regions support institutions, SMEs, entrepreneurs, have been able to fully take advantage investors, NGOs, IFIs) to help respond of the benefits, due to the effects of the to concrete needs they have. This is meant 2008 economic crisis and to a host of to maximize the impact of regional invest- structural problems. ments. Two types of lagging regions have been identified in the EU: Consequently, Corina Cret ‚ u, the Commis- sioner for Regional Policy, with the Task LOW GROWTH REGIONS, which co- Force for Better Implementation, has ini- ver the less developed and transition tiated the Lagging Regions Initiative. regions that did not converge to the EU average between the years 2000 and Figure 1. Lagging Regions in the EU 2013 in Member States with a GDP per Capita (PPS) below the EU average in 2013. These include almost all the less developed and transition regions in Gree- ce, Italy, Spain and Portugal. LOW INCOME REGIONS, covering all the regions with a GDP per Capita (PPS) below 50% of the EU average in 2013. This group covers the less developed re- gions of Bulgaria, Hungary, Poland and Romania. Poland and Romania are the first coun- tries to pilot this initiative, with two regions each – Œwiêtokrzyskie and Pod- karpackie in Poland, and North-West and North-East in Romania. In Poland, the initiative (subsequently renamed the Poland Catching-up Regions Initiative) was undertaken with the World Bank as a partner, while in Romania it was the Joint Research Center of the European Commission that has coordinated the activities. Following the work carried out in the four selected low-income regions in Poland and Romania, the European Commission plans to also focus on a se- lection of low-growth regions. Source: DG REGIO 10 | THE EUROPEAN COMMISSION’S CATCHING-UP REGIONS INITIATIVE IN POLAND – AN OVERVIEW Why was Poland chosen as one of the pilots The choice to focus on Poland was quite wastewater, environmental, educational, purposeful, both because of Poland’s sanitary, and other infrastructure assets. size and the wide-ranging challenges its regions face, and because of its re- During the 2014–2020 programming pe- markable development story. Poland’s riod, there was a shift in focus, away economy took off in early 1990s and from hard infrastructure assets towards continued its growth into the new mil- addressing systemic aspects of compe- lennium. In 2004, Poland joined the EU titiveness, innovation, and entrepreneur- and in 2008, it officially became a High ship. This shift acknowledges that while Income Country, according to the GNI it is critical to consolidate the progress per Capita Atlas method of the World made, it is equally important to ensure Bank. As such, Poland is one of the few that the Cohesion Policy achieve a better countries that managed to overcome leverage effect than in other EU Member the ‘middle-income trap’ in recent deca- Countries (e.g. Greece, Portugal, Spain, des, and one of the very few big coun- or Italy). These countries invested heavily tries (it had a population of around in connective and other infrastructure 38 million in 2014) that has well mana- yet did not significantly improve the ged this transition1. quality of their human capital resources and business environment. The objective Poland is also a very good performer of the policy change is also to identify with regards to the absorption of EU ways in which Poland could soon com- funds. For the 2007–2013 Programming pete with the top performing econo- Period, it had the largest allocation of mies in the world. structural funds in the EU (around 67 bil- lion Euro). While Poland’s performance The Polish Government and the Euro- over the last years is remarkable, its pean Commission were particularly continuous concern in the context of interested to find ways to improve the the EC’s cohesion policy is the impact performance of lagging regions, and of EU funds. Over the 2007–2013 Pro- identify ways to spur growth and inno- gramming Period, Poland absorbed vation in their economies. Consequently, most of the EU funds allocated through in April 2016, Commissioner Cret ‚ u, offi- various operational programs. A large cially launched the Lagging Regions percentage of these funds was directed Initiative together with Marshall Jarubas to bridging the infrastructure gap and in Œwiêtokrzyskie and Marshall Ortyl constructing transport, urban, water and in Podkarpackie. 1 A majority of countries that have overcome the middle-income trap are city states (e.g. Singapore, Hong Kong, Taiwan) or relatively small countries (e.g. Israel, Lithuania, Latvia, Estonia, Slovenia) POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 11 Why were Podkarpackie and Œwiêtokrzyskie chosen as the target regions According to the DG REGIO definition their geographical proximity, and be- of lagging regions, in 2016, five NUTS 2 cause of the potential of scaling up the regions (voivodships) in Poland were relevant lessons learnt from the initiative considered to be lagging (i.e. they to other lagging regions. For example, had a GDP per Capita (PPS) below Podkarpackie has registered in recent 50% of the EU average): Warmiñsko- years a relatively high level of private -Mazurskie, Podlaskie, Lubelskie, Œwiê- R&D expenditure (particularly in the tokrzyskie and Podkarpackie. To better aviation industry), but a low rate of for- address the challenges they faced, mation of spin-offs and innovative start- the Polish Government set up a sepa- -ups, in addition to a relatively poor con- rate national operational program – the nection between private companies and OP Eastern Poland, with a total alloca- academic institutions. Œwiêtokrzyskie tion of 2 billion Euro for the 2014–2020 also registers a low level of entrepre- Programming Period. In addition, the neurship and innovation, while at the European Commission was interested same time facing difficulties in matching to identify ways these funds can the skills of school graduates to actual achieve the highest potential impact, needs of private companies (particularly by honing on specific bottlenecks industrial enterprises). and challenges, and identifying ways in which the bottlenecks could be re- Another key factor in choosing these two moved and the challenges addressed. regions was the willingness of the regio- nal governments in Podkarpackie and The DG Regio Poland Desk team prepa- Œwiêtokrzyskie to actively participate red detailed analytical sheets on all five in the implementation of the Initiative. lagging regions in Poland. Podkarpackie Finally, the Ministry of Economic Deve- and Œwiêtokrzyskie were chosen as tar- lopment was consulted throughout the gets for the Catching-up Regions Initia- selection process, to ensure seamless tive (CRI) pilots because of the relatively coordination between the Government’s different challenges they faced despite planning and operational work. Why was the World Bank selected to provide technical assistance The European Commission and the World as well as its convening power and role Bank share a long-standing partnership as an honest broker to address some of for development, ranging from the joint the constraints facing the lagging regions. financing of infrastructure projects to the It was assumed that by combining its provision of technical assistance to EU operational expertise with its global and non-EU countries. The EC considered knowledge, the World Bank would deli- the World Bank to be capable of bringing ver strategic development outcomes and its technical and operational expertise, respond to key development challenges. 12 | THE EUROPEAN COMMISSION’S CATCHING-UP REGIONS INITIATIVE IN POLAND – AN OVERVIEW In turn, the World Bank sees the Euro- of its Member Countries overcome the pean Commission not only as a strategic middle-income trap and become high- development partner, but also as an in- -income economies (see table below). valuable source of knowledge for pro- This is one of the reasons the World perly tailoring development solutions. Bank has dubbed the EU the “Conver- The European Commission is arguably gence Machine“2. It is looking to learn one of the most efficient development relevant and applicable lessons, from institutions in the world, and is to a large the EC’s activities, to its other client extent, responsible for helping several countries. Table 1. Development performance of a selection of EU countries Year EU Candidacy Year the country Year the country became Negotiation was started became a EU member a high-income country Croatia 2003 2013 2007 Czech Republic 1995 2004 2004 Estonia 1995 2004 2006 Greece 1975 1981 1987 Hungary 1994 2004 2006 Ireland 1968 1973 1986 Latvia 1995 2004 2008 Lithuania 1995 2004 2008 Poland 1994 2004 2008 Portugal 1977 1986 1994 Slovak Republic 1995 2004 2005 Spain 1977 1986 1987 For the Poland Catching-up Regions been set-up in the Bank’s Warsaw office, Initiative, the teams working together to ensure efficient and expedient com- mobilized both international and local munication between the teams on the experts, to properly respond to the va- ground, the regional and national stake- riety and complexity of the issues to be holders, the project leadership, and the addressed. A core coordination team has European Commission’s team. How was the scope of work defined? The European Commission has a deep on key challenges (e.g. unemployment, engagement with the national govern- lack of innovation, structure of the econo- ment of Poland and with the regional my) that need to be addressed and key governments. As such, one of the first bottlenecks (e.g. slow business registration, steps in the preparation of the Poland Lag- poor interactions between research insti- ging Regions Initiative was the definition tutions and the private sector, poor coor- of action plans. The Action Plans focused dination between private companies and 2 World Bank. 2012. Golden Growth: Restoring the lustre of the European development model POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 13 vocational training schools) that need to be tify the actions the Poland LRI would focus overcome to achieve better regional deve- on. Once these key actions were identi- lopment outcomes. fied, further discussions helped identify detailed sub-actions and the final scope of Once the action plans have been prepa- work. The World Bank organized and hel- red, they were used as a foundation by ped facilitate these discussions in its War- the regional authorities in Podkarpackie saw Office. Enabling all the stakeholders and Œwiêtokrzyskie to prepare a list of key to meet on “neutral ground“ made for actions needed to address these bottle- a much smoother discussion and amore necks and challenges. The Bank team expeditious decision making process. provided advice and recommendations throughout, but it was the representatives Once the scope of work was properly of the regional governments, the Ministry defined, with all vested stakeholders of Development, and the European Com- in agreement, the European Commission mission which steered the discussion. signed an Administration Agreement with the World Bank. The Bank was thus After a comprehensive list of actions was formally engaged as a provider of tech- prepared for both regions, a number of nical assistance and operational mana- meetings were organized with all relevant gement for the Poland CRI. The whole stakeholders (the regional governments, process moved quite quickly, with the the Ministry of Economic Development, Administration Agreement being signed the European Commission, and the World in June 2016, two months after the multi- Bank), to prioritize the action list and iden- stakeholder negotiations were started. Project implementation The first step of implementation was the technical team. In addition, a core coordi- identification of the team. A mix of inter- nation team was established in the Bank’s national and local experts (a total of 22) Warsaw Office, to ensure proper com- were interviewed over a two-week period, munication between the various stakehol- and 7 were selected to be part of the core ders and experts involved in the project. Arrangements were made for frequent Figure 2. A Poland CRI Steering Committee meeting interactions with local and regional stake- holders on the ground. Autonomous teams were established for each defined activity, with the technical work coordina- ted by an activity leader and a team of experts. Each activity team was present in the field at least once per month, to ensure the proper collection of data and information, and to swiftly respond to the needs and requests of regional stakehol- ders. This ensured progress was steadily made on the defined actions. In addition, monthly Steering Commit- tee meetings were organized with all stakeholders present. The scope of the Steering Committee meetings was to: 1) assess progress of the work to date (short monthly progress reports were 14 | THE EUROPEAN COMMISSION’S CATCHING-UP REGIONS INITIATIVE IN POLAND – AN OVERVIEW prepared in preparation for the mee- frequency of the steering committee tings); 2) discuss problems/issues en- meetings ensured that all problems/ countered along the way; 3) propose issues that arose were identified and next steps to be taken; and 4) agree on addressed in a timely manner, avoiding a change of approach or additional/ wasting time and resources later in the different work to be completed. The process. Key success factors While the first phase of the Poland CRI It was actively involved throughout. has just been completed, it is safe to say The EC team did not only review all that it has been a success. The docu- of the outputs produced; it monitored ments that summarize the key results the activities on the ground and work- and findings of the Initiative are a good ed as a mediator when difficult deci- testament to what could been achieved sions had to be taken. The involvement in a short amount of time. Some of the of the EC in every step of the process, factors that have helped make the Po- ensured a smooth progress of the work land CRI a success are listed below: and an efficient and effective response to the challenges and bottlenecks that • Buy-in and involvement of regio- appeared along the way nal stakeholders. Development is all about people. The best ideas, tools, • Periodic steering committee meet- and policies cannot achieve the proper ings. While preparing frequent pro- development impact if they are not gress reports and meeting at short time accepted by the right people. The fact intervals can be quite demanding for that the regional stakeholders in Pod- all involved, it turned out that these karpackie and Œwiêtokrzyskie as well frequent meetings and discussions as in the Ministry of Economic Deve- were a key ingredient to the success of lopment and the European Commis- the Initiative. Without these meetings, sion were fully involved in the project, it would have been possible for small from the definition of its activities to problems to turn into big problems, the implementation of the recom- which in the end would have been mendations, made the difference much more difficult to overcome • Integration with existing opera- • Local coordination. While internatio- tional programs and strategies. nal experts helped provide key tech- While the actions that were targeted nical knowledge, it would have been under the Poland CRI are distinct and very difficult to keep the Initiative well-defined, it was important that together and running smoothly. Over they were not designed indepen- the course of the project, 75 people dently of existing strategies and pro- worked on 5 activities and delivered grams, and rather in a complementa- 25 distinct outputs. While international ry fashion – i.e. they helped achieve experts helped provide key technical some of the key issues proposed knowledge, it was crucial to combine in the existing national and regional it with and adjust to the local context strategies and programs and needs. Without the proper coor- dination of all these efforts on the • Dedication, commitment, and le- ground, it would have been difficult verage of European Commission to deliver all the required results in the team. The European Commission allotted time-frame. While internatio- team did not only finance the Initiative. nal experts helped provide key techni- POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 15 cal knowledge, it would have been just a proposal of recommendations. very difficult to keep the Initiative As such, concrete results were achie- together and running smoothly ved throughout the implementation of the project, with different stakehol- • World Bank expertise. The World ders responsible for achieving these Bank combines operational expertise results with sectoral know-how, and has unique advantage in dealing with • Ambitious but pragmatic objecti- technical assistance projects focused ves. The EC team has defined from on development issues, particularly the start a number of ambitious objec- projects that have a strong operatio- tives, which could realistically be nal/implementation focus. In addi- achieved within the allotted time-line tion, the World Bank acts as an honest (i.e. 9 months). For example, the World broker, focused on achieving concre- Bank’s sub-national Doing Business te development results (rather than in Poland3 report identified a number generating a profit), and has the con- of concrete steps that could have vening power required to bring diffe- been undertaken by national, regio- rent stakeholders around the table nal, and/or local public administra- tions to improve the ease of registe- • Hands-on approach. The European ring a business. Several of these steps Commission has designed the acti- (e.g. changes to the governmental vity as a hands-on activity, with the portal on e-business registration, bo- purposeful direct involvement of all nuses for district court staff, advertise- relevant stakeholders. This approach ment of e-business registration plat- was geared towards achieving con- form) were followed through to crete, tangible results rather than achieve concrete results Next steps With the completion of the activities Some of the key findings of the Poland defined under the Poland LRI, the Euro- CRI have been captured in a Commis- pean Commission asked the World Bank sion Staff Working document titled to continue its engagement, with a focus “Competitiveness in low-income and on another three activities. This, in essen- low-growth regions: The lagging re- ce, will be the second phase of the gions report“4. It includes both an over- Poland CRI. Some of the activities will be view of the key recommendations made a continuation of activities from phase 1 under the Poland CRI, as well as a num- of the Poland CRI (the Podkarpackie ber of concrete results that have been Center for Innovation in Rzeszow), while achieved during the implementation of others will be completely new (proposal the project. of a program to encourage thermo- -modernization of single family houses Separate from the Poland CRI, the World in high air-pollution areas and help pre- Bank allocated resources of its own to pare terms of reference for the develop- research and identify solutions to the ment of spatial plans for two localities/ challenges faced by lagging regions all areas). over the EU. This work is coordinated 3 The report can be accessed at: http://www.doingbusiness.org/~/media/WBG/DoingBusiness/Documents/Subnational-Reports/ DB15-Poland.pdf 4 The report can be accessed at: http://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/lagging_regions%20report_en.pdf 16 | THE EUROPEAN COMMISSION’S CATCHING-UP REGIONS INITIATIVE IN POLAND – AN OVERVIEW with the programming unit of DG Regio, ment so that regions are more attractive with a focus on re-thinking EU’s regional to private investment. This strand of development policy for the 2021–2027 work will be finalized in June 2017, with Programming Period. Some of the key a second phase planned for July 2017 activities included in this Lagging Re- – June 2018. gions work include: a proposal of alter- native definitions for lagging regions At a larger scale, the European Com- (beyond using simple GDP thresholds); mission is discussing extending the ini- a look into the importance of cities and tiative to other EU Member Countries functional urban areas for regional and regions, including low-growth re- growth and development; an inquiry gions. Within Poland, the DG Regio into alternative financial instruments Poland Desk is working with the Polish that could complement EU grants; solu- Government to roll-out the results of the tions for improving the business environ- Poland CRI to other regions in Poland. POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 17 OVERVIEW OF INITIATIVE RESULTS POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 19 VOCATIONAL EDUCATION AND TRAINING (SWIETOKRZYSKIE) POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 21 Why? Worldwide, Vocational Education In Œwiêtokrzyskie (as in Poland ge- and Training (VET) is receiving in- nerally), VET provision in upper-se- creasing attention, particularly as condary level technical schools is a potentially useful instrument to still largely school-based. Less than address high unemployment rates 9 percent of Polish students engage among youth. With the general two- in practical activities on firms’ premises pronged objective of (on the one hand) beyond the obligatory four weeks that improving the employment and ear- students are required by education re- nings potential of VET graduates, and gulations to spend in firms throughout (on the other hand) addressing skill con- their training program. While data on straints of firms, VET is considered as the scope of in-firm learning experien- a possible means to improve the align- ces of students of technical schools ment of skill supply with demand. are not available at the regional level, it is generally assumed that the inciden- The benefits of gaining practical work ce and duration of WBL for students experience through in-firm learning in Swietokrzyskie are below the national as part of VET are widely recognized. averages. Work-Based Learning (WBL) is the ap- proach through which students acquire The absence of a sound WBL mecha- essential skills by participating in activities nism in upper secondary VET is con- in enterprise premises, including on-site sidered both to prevent students training as well as particularly by participa- from building the skills that prepare ting in actual business operations. WBL, them for a productive working when implemented effectively, provides career, and to constrain private sec- students both with relevant practical skills, tor growth by not exploiting oppor- as well as with essential socio-emotional tunities to build a labor force that skills, such as the ability to work in teams, is equipped with market-relevant problem solving, and discipline. skills. How? The approach taken to strengthen challenges that were identified in the WBL implementation in Swietokrzy- preceding analysis, and an assessment skie consisted of four phases, of of the replicability of these practices which three were supported by in Œwiêtokrzyskie. During the third phase, the Catching-Up Regions Initiative. a program to pilot interventions to The first phase comprised the identifi- strengthen WBL was designed, and ap- cation of the main strengths and challen- proved to benefit from EC funding. The ges to effective WBL implementation final phase, implementation of the pilot in Œwiêtokrzyskie – and to an extent project, is expected to take place during in Poland as a whole. The second phase the period of 2017–2020, and is therefore consisted of a review of practices applied beyond the scope of the Catching-Up in other countries to address the main Regions Initiative. (Figure 3.) 22 | VOCATIONAL EDUCATION AND TRAINING (SWIETOKRZYSKIE) Figure 3. Sequence of activities in the ‘Catching-up regions’ initiative The approach applied was characte- this activity as well as with each other. rized by an intensive involvement of This included regular consultations with key stakeholders in the region. Con- the regional VET Working Group (esta- sidering that a crucial element of sound blished to inform the Catching-Up Re- WBL implementation comprises effec- gions Initiative on VET), regular consul- tive coordination and collaboration of tations with individual and groups of various stakeholders (firms, VET provi- stakeholders in the region, and partici- ders, public authorities, social partners), pation of a varied group of stakeholders intensive efforts were made to engage in a study tour on WBL that was organi- these actors in the implementation of zed in Latvia. What was achieved? Successful outcomes were achieved holders in the region (including private in three key areas: (1) stakeholder sector representatives) have become in- engagement and capacity building; creasingly engaged and have contribu- (2) knowledge generation; and (3) ted substantially to the design of the pi- a clear design for a pilot project that lot project (see below). Moreover, as part is expected to be financed by the ESF. of this engagement, crucial stakeholder Combined, these three elements have capacity on the benefits of WBL and on created a strong foundation for impactful effective implementation approaches future interventions to strengthen WBL has been developed. both in Swietokrzyskie and in other re- gions in Poland. The analysis on strengths and weak- nesses for WBL implementation Adequate engagement of WBL sta- in the region, complemented with keholders, particularly enterprises, the review of relevant international is notoriously difficult to achieve approaches to address key weak- in contexts where VET provision is nesses, has resulted in substantial largely school-based. Through the in- knowledge generation on the best tensive consultations and stakeholder way forward to promote WBL engagement activities that were carried implementation in Swietokrzyskie. out as part of this activity, key stake- The main conclusions and recommenda- POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 23 tions resulting from these analyses are As WBL implementation becomes the following: more entrenched, increasing partici- pation is expected of smaller-sized • The key areas for improvement firms, weaker VET providers, and stu- to strengthen WBL implementa- dents who are more difficult to place tion are: 1) strengthen the governan- in firms. ce and financing framework for WBL; 2) establish effective mechanisms for The pilot project that was designed stakeholder consultation and coordi- with support from the Catching-Up nation; 3) create adequate incentives Regions Initiative will pilot a variety and capacity of VET providers; 4) cre- of approaches to strengthen WBL. ate adequate incentives and capacity In addition to strengthening VET imple- of firms; 5) establish appropriate qua- mentation in the region during the pro- lity assurance mechanisms for WBL; ject implementation period (2017–2020), and 6) ensure a facilitating role by the project is expected to generate les- Centres for Practical Training (CPT); sons learned that will serve to inform further interventions to strengthen WBL • It is recommended to strengthen after 2020, both in Swietokrzyskie and WBL in Swietokrzyskie by applying in other regions in Poland. The project a comprehensive approach, simul- will establish a grant mechanism to pro- taneously addressing all identified vide financing to regional stakeholders areas for improvement, since they are who develop viable pilot approaches strongly intertwined and mutually rein- for WBL implementation which meet forcing. This approach will allow crea- the minimum criteria established for ting a ‘virtuous cycle’ where improve- project implementation. The pilot pro- ments in each dimension will also pro- ject will address identified constraints mote improvements in the others. related particularly to capacity and in- centives through a combination of finan- • It is recommended to focus on cial support and technical assistance. the main structural impediments, In addition, the project’s design includes through a pragmatic approach tar- various elements to ensure that the les- geting the ‘lowest hanging fruit’ sons learned generated through the which will allow showcasing early pilots can feed into future activities to results. Concretely, this approach strengthen WBL in Swietokrzyskie and implies that in the early stages of WBL beyond (including the development of implementation, participating stake- templates and other guidance material, holders will most likely be concentra- the inclusion of stakeholders that may ted among larger-size and more com- emerge as leading actors of future struc- petitive firm, better-managed VET tural support mechanisms, and a sound providers, and higher performing stu- monitoring and evaluation mechanism dents for which there is particularly which will record lessons learned and strong demand in the labor market. good practices). Lessons learned A main takeaway from this activity ted knowledge base, weak stakeholder is that, with the right mix of activi- communication, and the absence ties (see section 2 above), substantial of a clear and shared understanding progress can be made in a relatively among key stakeholders of the benefits short period of time. Moving from and objectives of WBL, to a point where a starting point characterized by a limi- a sound project has been designed 24 | VOCATIONAL EDUCATION AND TRAINING (SWIETOKRZYSKIE) through a strong consultative process implementation of this activity, and on with stakeholder who are committed the coordination mechanisms that will to its implementation, is evidence that be applied during implementation. initiatives such as the Catching-Up Re- gions Program can be a very effective Whereas the Pilot Project will ensure way to ‘kick-start’ important reforms, that activities to strengthen WBL particularly in case of interventions will continue in the short to medium which require the involvement of a large term, additional efforts will be requi- number of stakeholders and there is red to ensure that lessons learned no obvious ‘champion’ to initiate these generated to the project are dissemi- activities. nated and applied. The likelihood of successful implementation of the pilot Particularly considering the many project (including the generation of stakeholders involved, transaction good practices and lessons learned) is in- costs are relatively high and could creased through the envisaged procure- potentially be reduced in future ini- ment of strong external technical assis- tiatives. In addition to the relatively tance under the pilot project. However, large number of regional actors, stake- ensuring that lessons learned are used holders involved in this activity included to strengthen WBL beyond the project various national level ministries, EC direc- and, particularly, beyond the Swieto- torates, and World Bank departments. krzyskie region, is beyond the scope of Transaction costs related to ensuring the project and will require additional effective coordination among these va- efforts, which would potentially be most rious actors could potentially be reduced appropriately led by a national-level by ensuring strong(er) up-front clarity on actor such as, for example, the Ministry both the objectives and approach to of Education. POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 25 THE PODKARPACKIE CENTER FOR INNOVATION (PODKARPACKIE) POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 27 Why? This report is an implementation business R&D cooperation realm. focused document that proposes The issues include: (1) the rate of creating a solution for addressing the problem technology start-ups (in particular, a low of unexploited potential in the Pod- rate of R&D-based start-ups founded karpackie R&D ecosystem (in particu- as a result of research performed at the lar, relatively low, although gradually local universities) is below the region’s increasing, level of intensity of busi- potential; (2) the levels of licensing re- ness – university collaboration). This venues generated by the region’s univer- problem was jointly identified by the sities may be significantly improved; project partners: the European Commis- (3) the level of utilization of the local sion, the Podkarpackie Marshal Office universities R&D equipment for com- (MO), the Ministry of Economic Develop- mercial purposes is low and could be ment (MoED) and the World Bank (WB). significantly increased (this applies as well A single regional technology transfer to the level of revenues derived from office (TTO) was found to be a preferred contract research that is based on that option to tackle the challenge. The main equipment); (4) the involvement of the goal of this report is to present a model of local corporations in the joint university- such a TTO – a proposed Podkarpackie -business collaboration, even though Center for Innovation (PCI) – that resulted good in some areas by Polish standards from a joint effort of key local stake- (example: the Aviation Valley cluster holders: MO, universities, local enterprises companies and their cooperation with and their representatives. The PCI is a de- the Rzeszow University of Technology, tailed and comprehensive concept which RUT), falls short of its potential; (5) local includes specific organizational and go- student successes in national and interna- vernance solutions as well as their legal tional level competitions could be more and financial underpinnings. systematically translated into subsequent entrepreneurial success. In recent years The Podkarpackie region is performing the Podkarpackie universities and com- comparatively well on some key indi- panies have achieved significant succes- cators of innovation. R&D expenditures ses in these five areas, however, their per capita were on par with the national further intensification is necessary for level in 2014 (€90), and almost five times the Podkarpackie innovation ecosystem higher than in 2007 (€20). On this measure to become one of the leaders in the the region ranks fourth among 16 Polish country. regions. In terms of private R&D expen- ses the Podkarpackie regions ranks third The root causes behind the unex- among Poland’s regions, after Mazowiec- ploited potential of the Podkarpackie kie and Malopolska. Despite negative na- innovation system lie first in the still- tional trends, the number of students (and -limited competencies, financial re- in particular, students of technical universi- sources and capacity to deliver (main- ties) in Podkarpackie grew significantly ly in areas of valorization and structu- over the last years, making Rzeszow the red contract research), and secondly top European city in terms of the number in the fact that an entrepreneurial of students per 1000 inhabitants (almost ethos at the main two local state- 50 thousand students in a city of nearly -owned universities is still in the early 190 thousand citizens). stage of development. This problem affects researchers, students and universi- The Podkarpackie innovation ecosy- ty support personnel alike. While the local stem has five specific opportunities universities began efforts to strengthen for improvement in the university- their commercialization capacity (e.g., 28 | THE PODKARPACKIE CENTER FOR INNOVATION (PODKARPACKIE) the RUT operates both a sizeable techno- universities is an important ingredient logy transfer center (TTC) and a special of successful innovation ecosystems. purpose company (SPC)), the schools For that reason, initiatives that shape typically lack the concentrated critical innovation-oriented attitude among stu- mass of skills necessary for successful dents and provide them with opportu- commercialization of university-born R&D nities to prototype and experiment have results. This stems in part from their over- been gaining popularity. all shortage in Podkarpackie, and partly from a dispersion of these skills across The aforementioned improvement multiple players of the Podkarpackie opportunities are only partially ad- innovation ecosystem (such as univer- dressed by the existing TTCs of the sities, regional development agencies, local universities and by the national- technology parks, clusters, incubators, -level programs and instruments. accelerators, etc.). The limited business- The TTCs do a very good job at some -science R&D collaboration stems prima- tasks, mostly internally focused (e.g., rily from the misaligned incentive sys- support on IP issues, administration of tem for the researchers, constraints not research grants, etc.), but have neither allowing commercial utilization of the the scale, nor the required competencies universities’ R&D equipment and diffe- or resources to significantly ramp up mar- rences in the organizational cultures of ket-oriented, demand-generating activi- corporate and science worlds that area ties: grow licensing revenues, increase difficult to match. As of today R&D colla- the level of university-originated start- boration with business does not generate -ups that base on R&D, proactively mar- sufficient benefits (e.g., in terms of pa- ket services, which leverage the universi- rametric evaluation by the Ministry of ty R&D equipment or spur the entrepre- Higher Education, revenues and research neurial efforts of the students. The report opportunities) for either the universities also shows that PCI will be complemen- or researchers to more evenly balance tary (and not duplicative) to the national- their priorities among basic research, level programs meant to stimulate com- education and applied research. In addi- mercialization of university-born R&D tion, leading European universities and (such as BRIdge Alfa or the Fast Track) TTOs acknowledge that the presence and entrepreneurship (such as Starter and of a strong entrepreneurial ethos at the others). How? Project was divided into several sub- The concept of PCI is a result of con- tasks with clearly described outputs. sultations with all key local stakehol- These were: i) designing a unified data- ders. The MO, universities (university base that describes universities’ R&D management, TTCs, researchers, stu- equipment with the greatest commer- dents) and enterprises have been active cialization potential, ii) describing re- partners in designing the PCI model, gion’s supply of and demand for R&D and during multiple individual interviews services, iii) supporting universities in de- and workshops they have contributed vising of the methodology for freeing- comments and tested the feasibility -up the 20% of capacity of their R&D of subsequent versions of the proposed equipment purchased with the contri- model. They also expressed support for bution of EU funds, iv) designing a model the three-platform PCI concept, though of a single TTO for the Podkarpackie re- the design is still a work-in-progress gion. and its details are likely to evolve during POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 29 the implementation stage through 2017. set up a foundation for further imple- The Podkarpackie universities will be mentation work. vitally interested in such a design of the PCI that will enhance the progress re- Combining national and internatio- cently achieved by their TTCs (e.g., RUT). nal knowledge made the PCI model Subsequent iterations helped improve more robust. Study visits to successful the model, but also raised awareness technology transfer offices in Europe, and mutual understanding of various such as the Toulouse Tech Transfer perspectives among the stakeholders. (France), LRD Leuven (Belgium) and the This report proposes a number of detai- Aalto Design Factory (Finland), as well led solutions, especially regarding PCI’s as learning from Polish case studies activities, governance, team selection helped incorporate good practices and and financing to illustrate the current distill some key success factors for a re- state of the concept’s development, and gional TTO. What was achieved? This report recommends creating logy transfer processes seems an ef- a professional business-university in- fective and efficient choice. Such an terface, the Podkarpackie Center for approach allows attracting private sec- Innovation (PCI), to comprehensively tor talent to intensify business-academia address identified needs of the Podkar- collaboration, while also building up ca- packie innovation ecosystem. In prin- pacity of the universities in a mid-term ciple, the PCI will help link businesses and horizon (by working hand-in-hand with university researchers, develop key skills the PCI, the universities will learn in prac- of university researchers and administrative tice key principles and good practices staff necessary for R&D collaboration, sup- of commercialization). Creating an entity port R&D projects by providing resources that gathers competencies in R&D pro- (money, skills, knowledge), and stimulate ject valorization and contract research students’ entrepreneurship. By intensifying under one roof (thus creating scale and such a collaboration thanks to a proactive, scope economies), and has a stable mid- market-oriented attitude and envisaged -term financing model will help jump early commercialization successes, the PCI start business-university collaboration. will contribute to further strengthening R&D-based innovation usually requires the ethos of business-university coopera- several years to yield results. A five-year tion at the local universities. An alternative period seems sufficient to prove effec- approach was also considered; it would tiveness of the proposed solution and focus on building up the capacity of indi- to demonstrate to the local stakeholders vidual TTCs and SPCs currently operating the value added of such an entity. at the universities. However, this approach was found to be suboptimal due to the The PCI will aim at increasing univer- lack of economies of scale (a certain criti- sities’ revenues from licensing of R&D cal mass is needed to make a TTC work), results and certain kinds of contract scope (it involved too big fragmentation of research, and enhancing the rate of needed skills and competencies), and the creation of IP-driven start-up compa- possible lack of additional financing that nies. These are the three key measure- would need to come from the universities. able indicators that will define the success of the PCI. Increasing revenues from Creation of a relatively independent commercialization of universities’ IP and professional entity (PCI) to help acce- contract research can further translate lerate commercialization and techno- into their enhanced R&D capacity and 30 | THE PODKARPACKIE CENTER FOR INNOVATION (PODKARPACKIE) stronger acceptance of the entrepre- (i.e., increased revenues from licensing neurial ethos among academics. This can and royalties from spin-offs based on the create a virtuous circle mechanism and, university-originated R&D and revenues in turn, lead to a continuous increase of from structured contract researched per- university revenues. formed at the university equipment). The PCI will complement the work of A PCI team will operate three activity TTCs and SPCs in several ways. First, platforms (R&D project valorization, by providing experienced private sector structured contract research, and the people, who could coach and assist re- ProtoLab). Platform 1 will perform R&D search teams in developing their inven- project valorization tasks, thus raising tions. Second, by proactively reaching out the TRL (Technological Readiness Level) of to entrepreneurs and marketing servi- the funded projects to the point where ces that could be offered by universities. commercialization becomes possible. Plat- Third, by co-financing promising applied form 2 will focus on taking advanta- research work performed by scientists. ge of universities’ R&D equipment being Fourth, by helping upgrade existing R&D freed up5; it will do so by marketing struc- equipment to increase its commercial tured, repeatable contract research servi- potential. Collaboration with the PCI will ces that leverage this R&D equipment. benefit TTCs and SPCs at least in three Platform 3 will target Podkarpackie uni- important ways, while at the same time versity students; it will foster entrepreneu- will not add an extra burden to their rial culture among them by providing ongoing operations. First, enhancing the a facility and tools to prototype their capacity of TTC/SPCs’ staff (learning by inventions and experiment in an interdisci- doing); secondly, raising awareness plinary atmosphere. Through those plat- and entrepreneurial ethos among re- forms, the PCI will support the local uni- searchers, staff and management; finally, verses (and their TTCs and SPCs), as well as accruing real financial benefits from the Podkarpackie innovative enterprises, stu- enhanced business-science collaboration dents, and young researchers (Figure 4). Figure 4. A model of the Podkarpackie Center for Innovation Description: SPC – Special Purpose Company, SLA – Service-Level Agreement, PCI – Podkarpackie Center for Innovation Source: The World Bank Selecting and nurturing promising PCI will add value to these projects in se- R&D projects (Platform 1) will be the veral ways: focal point for PCI. These will be R&D projects at a Proof-of-Principle (PoP) and • Increase the TRL of the projects (e.g., Proof-of-Concept (PoC) stages that are by providing external market and mainly initiated at the local universities. technical expertise) from the level of 5 The “freeing up” of universities’ R&D equipment means that up to 20% of that equipment’s capacity can be used for ancillary purposes; in practice, this means for commercial use POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 31 approximately TRL 2-3, which is that require specialized consulting ex- a standard technology level when pertise of researchers. These expertise- a R&D project leaves the basic re- -based services will continue to be provi- search stage, to the TRL 6-9, which ded by the individual professors and are close to commercialization either labs, while the existing TTCs will conti- via licensing (direct commercializa- nue to be the primary conduit for such tion) or setting up a start-up company work. (indirect commercialization) The ProtoLab (Platform 3) is a physi- • Prepare grant applications for obtain- cal space equipped with basic tools ing financing for further R&D work and machines that allow for construc- that aim at raising the projects’ TRL, ting prototypes. The main idea behind e.g., from the Fast Track program run the ProtoLab is to offer students and re- by the National Center for Research searchers from all Podkarpackie universi- and Development or EU’s Horizon ties an opportunity to learn and experi- 2020 (synergy with the national, inter- ment with various production technolo- regional and European programs), gies in interdisciplinary teams. Students as well as help attract external inve- and young researchers will be able stors (e.g., venture funds, business to build Proof-of-Concept prototypes angels, etc.) resulting from their R&D projects, as well as learn using some rather basic equip- • Provide advisory services (strategic ment (e.g. electrical equipment, basic 3D and tactical) and hands-on assistance printers, basic lathe, milling machines, on securing the intellectual property etc.) which will be accessible 24 hours rights (IPR) position of the selected a day. Experimentation could be targe- R&D projects ted at students and researchers’ own ideas or it can be focused on ideas • Provide advisory services and hands- sourced from the public and private sec- -on assistance on business strategy, tors. When more sophisticated equip- marketing, staffing and business ment is needed to complete a proto- development to the selected R&D type, appropriate arrangements could projects. be made with a university to use its facili- ties. Hence the ProtoLab will offer stu- The structured contract research (Plat- dents an opportunity to prototype in the form 2) will concentrate on matching way that is currently difficult to match demand for and supply of such R&D in the framework of the existing student research services. The supply side will scientific associations (interdisciplinary mostly focus on the local universities character, flexible access, availability of (20% of the freed-up capacity), while the tools, etc.). demand side should encompass entities beyond the Podkarpackie region and Key players in Podkarpackie under- beyond Poland. Acting in accordance stand that PCI’s success is a long- with its demand-driven mission, the PCI -term undertaking and requires con- will not simply act as an intermediary tinuous nurturing and support from in the re-sale of R&D services provided the region’s business, political and by the universities, but instead it will academic leaders. Its success depends assist companies in seamlessly acquiring on visionary decision makers, effective these R&D services and will assure the planning and implementation, and high quality level of such a service. stable strategic support from the private The PCI will focus on a specific sub-seg- and the public sector. Podkarpackie ment of R&D services that are performed stakeholders are aware of that and ex- at the universities’ R&D equipment, press desire to develop the PCI, select namely ones that are of standardized, the best possible management team, repeatable nature, hence the name “stru- offer it a degree of autonomy and finan- ctured contract research”. This means ce it in the start-up years, because they that the PCI will not deal with highly understand that its success can benefit specialized, one-off research projects all of them. 32 | THE PODKARPACKIE CENTER FOR INNOVATION (PODKARPACKIE) The PCI should be set up as a limited MO and PCI will spell out clear goals liability company, with mixed public- to attain and well-aligned incentives -private shareholding and managed to motivate the management team to by the competitively selected team achieve high performance. of top professionals. PCI’s sharehol- ding will include a private entity repre- Approximately PLN 70M is needed senting the management team, the MO, to fund the launch and the initial and possibly other parties (e.g., the City 5 years of PCI operations. The PCI will of Rzeszow or local corporations). The lo- aim at full financial sustainability in the cal universities will be actively engaged long-term, yet public resources will con- in PCI’s operations thanks to participa- stitute indispensable support in the tion in its governing bodies (the Supervi- short- and medium-term. International sory Board and Resource Allocation experience shows that it usually takes Committee). At the current stage, uni- around ten or more years for a TTO versities are not expected to contribute to become nearly or completely finan- financially to the PCI, their CTTs and cially self-sufficient and that public funds SPCs will have a status of the main play a facilitating role in their success. “client” of the PCI. It is assumed that the PCI will generate increasing revenues, thus its dependen- The PCI’s management team has to be cy on public funds will diminish over competitively selected in an open time. Initially, the PCI will be funded from procedure to ensure that best possi- the Podkarpackie Regional Operational ble professionals manage the Cen- Program (ROP). It is expected that about ter. The management team has to have 16% of the initial 5-year period PCI ex- hands-on experience in both technology pense base can be covered by revenues investing and R&D commercialization, generated from PCI activities. That per- and has to be willing to commit to imple- centage will gradually increase, allowing ment PCI’s mission on the ground in Pod- for PCI to reach a break-even point after karpackie. An agreement between the approximately 15 years from its launch. Lessons learned Research commercialization is a com- champions of the concept. First, the plex non-linear process. Over the last Podkarpackie Marshal Office devoted decade, the Podkarpackie and national a lot of energy into the work on the innovation support programs have been PCI concept and in the assembling of strongly investing in the supply side a coalition supporting the PCI concept. of R&D. Thanks to these initiatives, the The MO is willing to implement this inno- Podkarpackie universities are currently vative concept that requires a conside- equipped with top quality R&D equip- rable amount of flexibility, vision and ment. This project addresses the issue of hard work. Second, the European Com- R&D demand as well as provision of the mission supported the PCI idea, giving high quality R&D services. This will be a green light to ROP modification in or- accomplished by the creation of PCI, der to allow PCI financing. The two par- which will act as a platform to facilitate ties also gave a strong backing to the communication and collaboration be- idea that PCI’s management should be tween businesses and researchers. made up of the most competent profes- sionals available on the Polish (and even Top-level leadership encouraged European) market, and that it should be the development of the concept and selected in an open and competitive oversaw its design. There were two process. Such a strong top-down leader- POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 33 ship and support should also ensure pro- time and goodwill. Specialized profes- per implementation of the PCI concept sional skills for R&D commercialization as well. are in short supply at the Podkarpackie universities. Early in the PCI design, To exploit the commercial potential of the universities ruled out a proposal of the R&D equipment, the universities creating a single, joint SPC (owned by have to first free up the so-called all universities) that would pool their “20% of capacity” of their equipment. resources to tackle R&D commerciali- The term “freeing-up of R&D equipment” zation. For that reason, the PCI model refers to the process of amending the assumes that each university will conti- contracts (annexing) to purchase R&D nue with own SPC (that will be the equipment and accompanying infrastruc- counterparty to the PCI). By showing ture, which were signed by universities a commercialization success, the PCI several years ago. Recent decisions by the concept is to gradually convince the uni- European Commission make it possible versities that scale and scope matter, and to amend those contracts in a way that make them more receptive to collabora- allows “up to 20% of equipment’s capaci- te with each other and pool resources. ty” be used for “non-essential purpose” (ancillary). Because the R&D equipment To ensure the sustainability of the and infrastructure was purchased with the PCI, it has to have a clear value pro- intention of being used for primary re- position for the key stakeholders. search or educational purposes, in practice The PCI will have to prove that it is able “non-essential purpose” means the use of to generate higher rate of R&D colla- R&D equipment for applied research and boration between the universities and commercial applications. Amending these business that could be measured by contracts in underway and requires pre- a higher rate of innovative R&D projects paring a methodology and procedures and start-up companies, higher licen- for monitoring the utilization of the R&D sing fees or royalties, higher rate of stu- equipment’s capacity that was freed-up. dent collaboration with businesses. Table 2 presents selected benefits to Pooling together universities’ resour- the stakeholders of the Podkarpackie ces for commercialization seems com- ecosystem from increased intensity of plex; accomplishing it will require the R&D collaboration. Table 2. Selected benefits for major stakeholders resulting from a high intensity of R&D collaboration Universities (SPCs, TTCs) Inventors Students Enterprises Region Investors • More potential • Ease of attracting • Attractive local • Access to skilled • Higher tax • Attractive pipeline clients for investors employment student base revenue base of potential university IP opportunities and R&D projects and contract • The “networking • Ability to attract research work effect” (easier • Supportive • Innovation flows direct investment • The “networking to find skilled environment up and down (including FDI) effect” (easier • Potential for people, make for young the supply chain to find the right private funding business entrepreneurs • Positive managers, skilled of research work contacts, etc.) • Easier access to spill-over effect people for target • Increased value university-based into other companies) • Increased of degrees from R&D industries attractiveness of local universities universities to potential students Source: The World Bank 34 | THE PODKARPACKIE CENTER FOR INNOVATION (PODKARPACKIE) Some universities may require more Quality matters – the top professio- time to realize full benefits of the PCI nals are a “must-have” for the success and enhanced R&D collaboration of the PCI. All interviews with successful with business. The Rzeszow University technology transfer offices pointed out (RU), can be a more demanding partner the same key success factor, i.e., the qua- for the PCI to collaborate with, because lity of people. They are the driving force their R&D cooperation with business and they will decide about the success is at an earlier stage of development or failure of the PCI. Good, experienced compared with that at the technical professionals who understand the sensi- schools, like the RUT. For instance, the tivities of the university environment RU has to still set up its own SPC and and are devoted to the mission of the use it to commercialize its IP. The RUT PCI will have to form the core of the PCI already possesses a SPC, its TTC employs management team. Involving compe- over twenty staff, and the school has tent and committed people will also be much longer tradition of successful important for other parties involved, R&D collaboration with business. such as the MO, the universities and the Podkarpackie companies. POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 35 ACTIVATING ENTREPRENEURSHIP IN DEPRIVED AREAS (PODKARPACKIE AND SWIETOKRZYSKIE) POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 37 Why? Increased growth and competitive- • Almost all interviewed SMEs were ness of SMEs is a key part of Podkar- finding it tough to compete, inside packie and Œwiêtokrzyskie regional and outside their region. Most SMEs efforts to address ‘lagging regions’. we interviewed were competing on At the voivodeship level, both regions costs and price, because of a lack of have a relatively low number of registe- differentiation of their product com- red enterprises and low number of start- pared to competitors (thus making -ups per capita. Moreover, exports form it difficult to earn a premium price). a relatively low share of regional income Most SMEs compete in markets where (see Figure 5). This is problematic, since only minimal quality standards are re- exports have a symbiotic relationship quired, thus they are stuck in a race to with firm-level productivity and innova- the bottom on price. SMEs (especially tion, as well as bringing new income into smaller ones) are often subcontractors the regional economy. At the poviat to larger firms, and have little power to level, some areas suffer particularly seve- negotiate prices because their pro- rely from a lack of jobs, low incomes, ducts are widely available, and thus and uncompetitive firms. they cannot exercise market power. Preparatory research by the World • However, SMEs in both regions Bank team revealed some key in- have potential to grow. Examples sights on SMEs in the lagging areas. are demonstrated by a few SMEs, These insights are described in more de- producing tradable goods and servi- tail in the main report and its Annexes, ces, that have successfully differen- and are based upon in-depth interviews tiated their products, established with 40 SMEs in the two regions during a ‘niche’ or brand, and have quickly mid-2016. expanded, creating more jobs and in- creasing their revenues from exports. Examples include: a producer of hand- made glass decorations that now has Figure 5. Exports as a share of GDP – lower national and foreign buyers and is in Podkarpackie and particularly in Œwiêto- increasing its production capacity; krzyskie than elsewhere in Poland a manufacturer of specialized mirrors that has increased its production ca- pacity 25 times in the last 10 years. In recent years, publicly-funded bu- siness support measures have focu- sed on Business Support Institutions (BSIs) as interlocutors to provide market advisory and other services to SMEs. However, our team’s inter- views suggested there is a shortage of such services. SMEs declared a need and a willingness to pay for a range of con- sultancy services, but often would pay, “as long as it is of good quality. Some- times it turns out we know more than the ‘expert.’” SMEs also recognized Source: Analysis of Chamber of duty data from the need, and the potential benefits, Komornicki & Czapiewski, 2016. of group services, but were unwilling to 38 | ACTIVATING ENTREPRENEURSHIP IN DEPRIVED AREAS (PODKARPACKIE AND SWIETOKRZYSKIE) pay for them (fearing difficulties in imp- markets. In practice, this means helping lementation, and a risk of ‘free-riding’ declining and stagnating SMEs get out by SMEs who did not pay). Thus there of their downward trend, and helping is a desire to make these services more SMEs with constrained potential beco- responsive to firms’ needs. me ‘rising champions’. Some SMEs have strategic investment plans, but had not The European Commission asked the implemented them; others had no plan World Bank to assist in the develop- to get out of their situation; and the most ment and implementation of a sys- successful firms will need to further tem to stimulate uptake of services adapt and sustain their competitive by SMEs. The World Bank was asked niche in existing or new markets. to propose how SMEs can better take advantage of services offered by public Based on this range of needs, a di- institutions in lagging areas, and to re- versity of services will be required commend how to adjust services provi- – often customized at the individual ded to SMEs by the BSIs in the region. SME level. Consulting services to sup- The team was asked to focus on four port the growth of SMEs must be specia- poviats as a means to understand the lized according to particular industries economic opportunities and needs of and particular firms. For example, market ‘lagging areas’: Brzozów and Le¿ajsk opportunities to export apples will be in Podkarpackie; and Sandomierz and different to those to export glass decora- Staszów in Œwiêtokrzyskie. tions, and assistance needs will vary by business size, management structure, The aim of an Enterprise Competi- willingness to take risks, and so on. It is tiveness Scheme (ECS) would be to reasonable to assume that delivery of help SMEs compete more successful- these services will need to be tailored to ly in local, regional, and international the needs of each firm. How? The proposed Enterprise Competiti- observed in successful schemes veness Scheme (ECS) was designed elsewhere in the world; through the following process: (v) Internal team design proposals. In order to lessen the risk of ‘group- (i) Assessment of demand and needs think,’ the team of five core mem- for business development servi- bers split into two groups and in- ces by SMEs – including though dependently designed proposals. in-depth, one-on-one interviews The team coordinator then selected with 40 SMEs in the targeted lag- the best features from each one; ging districts; (vi) Technical discussions with the (ii) Assessment of current supply of Marshals’ Offices of Œwiêtokrzy- business development services, skie and Podkarpackie, during tech- through interviews with approxima- nical seminars in November/Decem- tely 20 BSIs; ber 2016; (iii) Stakeholder group meetings (dis- (vii) Key decisions put to the project cussion seminars) with the autho- Steering Committee, which consi- rities in the four targeted poviats du- dered several alternative options for ring June 2016; each major element in the scheme’s (iv) Review of prior schemes and design; ‘good practice’ documentation. (viii) Economic and Financial Analysis, The team accounted for patterns which aims to forecast the approxi- POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 39 mate impact of the ECS scheme, from the European Commission, the including an analysis of the core Polish Ministry of Economic Deve- assumptions and their effects on the lopment, the Marshal’s Office of scheme; Œwiêtokrzyskie, and the Marshal’s (ix) Final report drafted and peer re- Office of Podkarpackie. A Steering viewed. Three peer reviewers with Committee in February 2017 deci- substantial and diverse experience ded on the remaining unresolved were chosen: two from within the issues, and the final report was re- World Bank (senior and lead econo- vised accordingly. mists), and one Professor from War- wick Business School, UK, who is In designing this project, the team a recognized expert on SME vou- was keen to mitigate a number of key cher schemes; risks associated with supporting (x) Feedback and comments incor- competitiveness of SMEs. These are porated. Comments were received summarized below in Figure 6. Figure 6. Opportunities and typical problems with enterprise support schemes Therefore, several ‘good practices’ • Simple and clear application criteria, of successful comparison projects and low-entry barriers compared were incorporated in the design of with traditional grant programs; this scheme: • Flexibility in use of vouchers (i.e. reci- pients should have some freedom to • Scheme is based on SMEs’ needs ana- decide on the best uses); lysis (i.e. the scheme design is demand- • Availability of an independent advi- -led); sor, to provide objective guidance to • Clear policy objectives (i.e. increased abi- SMEs. lity of SMEs to compete successfully); 40 | ACTIVATING ENTREPRENEURSHIP IN DEPRIVED AREAS (PODKARPACKIE AND SWIETOKRZYSKIE) What was achieved? The Enterprise Competitiveness Sche- receive public financial support for co-fi- me (ECS) is proposed to offer three nancing of business advisory services to windows for enterprise support ser- improve competitiveness and contribute vices: Operational; Strategic; and to regional economic growth. A summary Group. In all three windows, SMEs will of each window is provided in Table 3. Table 3. Three windows for SMEs: Operational, Strategic, and Group 1. OPERATIONAL 2. STRATEGIC 3. GROUP SMEs need to change firms’ SMEs need to release some SMEs need to improve, refine, orientation, develop new constraints that afflict several or expand existing operations product(s), or enter new SMEs collectively – but Target SMEs – but perceive services market(s) – but perceive perceive services as as expensive and of uncertain services as expensive and of expensive and of uncertain quality / benefit. uncertain quality / benefit. quality / benefit. Tradable goods & services only (agribusiness, light manufacturing, tourism, etc). Eligible SMEs Excludes retailers and other non-tradable local services. • Smaller, simpler marketing • Strategic business planning, • Services provided to a group actions, website preparation; product development of firms to achieve joint • Assistance entering foreign (branding; differentiation; objectives (e.g. regional markets (basic information); innovation); branding; tourism joint • Production process products; export promotion; Example services • Elaboration of applications improvements (cost market intelligence; industry for commercial financing; optimization & efficiency); trends; client recognition). • Legal services; • Assistance entering new • Specialized training; foreign markets (tailored • Managerial training. strategy). Anticipated budget6 Approx. 14% of total Approx. 42% of total Approx. 22% of total ECS provides ECS provides ECS provides Rate of co-financing 50% of contract value 60% of contract value 85% of contract value 5 000 PLN 15 000 PLN 120 000 PLN Value per voucher7 to 12 500 PLN to 120 000 PLN to 2 000 000 PLN Max duration 12 months 18 months 24 months Application process Simple single-stage (formal Two-stage (eligibility + Via a consortium by SMEs eligibility of SME and service) diagnostic assessment) All service providers and tenders searchable on single centralized website Information platform (one per voivodeship) Verification Short report on completion Report every 3 months 6 These window sizes are guidelines and can be reviewed according to demand. The remaining 22% is estimated for overhead costs: the ECS Administrator; ‘ECS marketplace’ website; IAs; Evaluation Committee; and internal costs of the Marshal’s Offices. 7 These values show the contribution from public resources. The total size of the services contract will be larger, e.g. the 12 500 PLN maximum for an operational voucher will yield a 25 000 PLN services contract (@ 50% co-financing rate), and the 120 000 PLN maximum for a strategic voucher will yield a 200 000 PLN services contract (@ 60% co-financing rate). POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 41 Full eligibility criteria are provided In terms of service providers, service in the report on this activity, but we providers will not be limited to BSIs. should highlight two ‘radical’ propo- BSIs will compete with commercial pro- sals here: viders of business development and consultancy services, to provide services • Recommendation to exclude firms to SMEs. Additionally, service providers of less than three employees. The will not be limited to those only in Pod- rationale for this proposal is that karpackie or Œwiêtokrzyskie. In pursuit of 95% of all firms in the two regions are greater efficiency and competency, ser- micro-size (less than 10 employees), vice providers outside the two regions but firms of between zero and two will be able to bid on contracts under the employees have yet to prove them- ECS scheme. selves capable of scaling-up and contributing to regional job growth. This transition will not be easy for Other programs exist to assist micro BSIs. Our background research in Pod- firms and start-ups; meanwhile, this karpackie and Œwiêtokrzyskie showed scheme is designed to help existing that few BSIs are skilled in responding small firms scale-up and increase their to market needs, according to demand competitiveness. Firms with three to from SMEs. BSIs have become adept nine employees can be considered at implementing projects financed by to have ‘self-selected’ as possessing EU Funds, but are focused largely on growth potential. these publicly-funded services, with relatively few offers on a commercial • Recommendation to include only basis. Furthermore, most BSIs provide firms engaged in the production general services and do not specialize of tradable goods and services. in specific economic sectors or type Tradable goods and services are those of services. This low-level of specializa- that can be traded across geography, tion also means that BSIs’ services are rather than produced and consumed rather basic, and only some of them only in a local market8. The exclusive are able to provide more advanced ser- focus on tradable goods and services vices (usually through mobilizing exter- is for three reasons: nal experts). Interviews with SMEs reveal i. Tradable goods and services in- that they perceive BSIs’ services to be crease export revenue, or diminish susceptive to poor quality delivery. leakage of income through im- BSIs will need to make efforts to build ports, hence contributing most di- closer links with enterprises and focus on rectly to regional income growth; tailored, accessible, services for enterpri- ii. Firms engaged in producing tra- ses. In Œwiêtokrzyskie, some support for dable goods and services are com- this effort may remain available under peting predominantly with firms ROP measures 1.3 and 2. In Podkarpac- outside the poviats and regions kie, BSIs should be ready for to move (therefore there is less danger of towards the commercialization of their supporting some firms at the ex- services on their own accord. pense of other firms in the same area – i.e. a ‘win-lose’ situation); Three additional ingredients are pro- iii. Export-oriented tradable goods posed to ensure that the Enterprise and services are a route to higher Competitiveness Scheme functions productivity and innovation. efficiently: This eligibility requirement does not mean that recipient firms are already • Administrator. The role of the admi- exporters: rather, they are engaged nistrator is to publicize and promote in products and value chains that the scheme, administer vouchers have the potential to be exported. (including selection of successful 8 Examples of tradable goods and services include: agricultural products, manufactured goods, ICT services, and tourism. Examples of non-tradable goods and services include: retail (shops), taxi services, hairdressing, household cleaning services, cafés, plumbing services, and motor vehicle repair 42 | ACTIVATING ENTREPRENEURSHIP IN DEPRIVED AREAS (PODKARPACKIE AND SWIETOKRZYSKIE) applicants, quality control, payments Lastly, it should be noted that the ECS and financial control), maintain the scheme will co-exist with at least two online ‘marketplace’ platform, and other Operational Programmes (OPs): continually monitor the program to Eastern Poland and Rural Develop- increase efficiency. ment. Some similarities exist (particu- larly Measures 1.2 and 1.4 of the Eastern • Independent Advisor (IA). The role Poland OP). However, there are some key of the IA is to catalyze the ECS differences: the Eastern Poland OP is more system, by proving advisory servi- selective (it requires SMEs to be ready to ces to SMEs to assist in diagnosing export, while the ECS scheme will support their needs, preparing good quality a wider range of SMEs); it has a broader applications, and selecting service range of eligible expenditures by SMEs providers. In essence, the IA acts (whereas the ECS focuses narrowly on as a ‘broker’ to ensure a smooth business services); and it will support a few transaction between the SME, the large projects (while the ECS will support service provider, and the ECS Admi- a larger number of SMEs with smaller nistrator. contributions). Eligible expenditures in the Eastern Poland OP can reach a maximum • ‘Marketplace’ website. The role of of 3.1 million PLN per company, while the ‘marketplace’ is to provide an effi- eligible expenditures under the ECS will cient way for SMEs to find and pro- be limited to 200 000 PLN per company. cure the best service provider for their In addition, there is some similarity with needs. It provides an online database the Baza Us³ug Rozwojowych (BUR) sche- of service providers, together with me, but BUR focuses on training, while reviews of those providers left by the ECS is geared towards expanding the client SMEs. business services sector. Lessons learned Lessons learned will be identified prepared by our team estimates that once the scheme is underway and the ECS will have a positive net impact being implemented. During the re- if it increases the sales growth rate of search and design of the scheme, the SMEs by 29% (e.g. raising the annual main lesson learned is that high potential growth rate of a beneficiary SME from SMEs exist even in ‘lagging areas’. During 1% to 1.29%, or from 2% to 2.58%, etc). This implementation, the scheme should be target for increases in sales should be judged according to its ability to gene- taken as a ‘hurdle rate’ for the ECS – i.e. rate an increase in demand by SMEs for if the rate of a 29% increase in growth business development services, which rate is not met, then the scheme is not are in turn effective in increasing growth likely to achieve a positive net impact. and competitiveness for SMEs in the If this rate is not reached in a given year, target areas. These should contribute to a clear action plan should be formed increased exports and increased jobs, by the ECS Administrator to succeed the as part of regional economic growth. following year. If the target value is not reached two years in a row, the scheme During implementation, it will be im- should be heavily revised or cancelled, portant to monitor the performance since it is not adequately improving the of the scheme. The financial analysis competitiveness of SMEs. POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 43 EASIER BUSINESS REGISTRATION (PODKARPACKIE AND SWIETOKRZYSKIE) POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 45 Why? All Polish regions share the same re- low its potential in Podkarpackie gulatory framework for registering and Œwiêtokrzyskie, with less than a limited liability company. However, half of the applications filed through according to the World Bank’s “Doing it, even though it is two times Business in Poland 2015” report, there are cheaper, four times faster, and signi- significant differences in the ease of do- ficantly more reliable than paper re- ing business among 18 Polish cities. Kielce gistration. and Rzeszów, the capitals of the Œwiêto- krzyskie and Podkarpackie voivodships • Approximately one fifth of applica- are ranked third- and second-to-last in tions is returned or dismissed, which the ease of business registration, largely in practice doubles or sometimes trip- because registration takes 36–37 days, les the time to register, while creating compared to eight days in Poznañ, the additional workload and backlogs city with the fastest registration divisions. in courts. The World Bank identified three • Backlogs, caused by seasonal spikes main aspects of the problem: in caseload and complicated work processes in registration divisions, • The uptake of the nationwide S24 slow down the review of applica- online registration service was be- tions. How? The World Bank’s technical assistan- was carried out in close collaboration ce on easier business registration with the institutions represented in the in the Podkarpackie and Œwiêtokrzy- Lagging Regions Steering Committee, skie voivodships under Activity 3 of as well as the Ministry of Justice, District the Lagging Regions Initiative was and Appellate Courts in Kielce and Rze- divided into two phases of six szów, the National School for Judges months each. In the first phase (April and Prosecutors, and business support – September 2016), the World Bank institutions in the two regions. conducted a review of international and national best practices in business regi- Three priority areas of intervention stration and benchmarked them with were identified to make it easier to the situation in Podkarpackie and Œwiê- register a limited liability company tokrzyskie on the basis of its Doing Busi- in the Podkarpackie and Œwiêtokrzy- ness methodology. This phase produced skie voivodships: detailed recommendations on easier bu- siness recommendations, which were • Encouraging online registration; then implemented in the second phase, • Limiting returned applications; from October to March 2017. The work • Expediting application processing. 46 | EASIER BUSINESS REGISTRATION (PODKARPACKIE AND SWIETOKRZYSKIE) Encouraging online registration panies. Existing information on S24 was upgraded and new content added Encouraging online registration was by the World Bank team in collaboration identified as the most important step that with the website’s administrator, the the Podkarpackie and Œwiêtokrzyskie voi- Ministry of Economic Development.9 vodships could take to make business This improved the searchability of the registration easier. This required promo- information about online registration ting the existing registration service, S24 and directed users to official, verified (administered by the Ministry of Justice), content. Once the landing page had through an online advertising campaign, been improved, an online advertising as well as better communication in district campaign was rolled out in November courts and via business support institu- 2016. The campaign was restricted to tions and firm associations in the regions. users in Podkarpackie and Œwiêtokrzy- skie. Between November 2016 and Fe- The online advertising campaign focu- bruary 2017, the online ads were displa- sed on providing reliable information yed 10.7 million times, which led to about the advantages of the electronic almost 40,000 unique referrals to the registration service to potential appli- landing page about online registration cants. The Ministry of Economic Develop- (see Figure 7). As a result, the website ment’s portal http://www.biznes.gov.pl is currently being displayed as the top was identified as best placed to provide result for the majority of applicable authoritative and comprehensive infor- search phrases (it ranked fourth in search mation about online registration of com- results at the outset of the campaign).10 Figure 7. Results of online advertising campaign Source: World Bank staff based on Google Analytics In addition, conventional hardcopy ad- Limiting returned applications vertising materials (leaflets and posters, see Figure 8) were prepared and distri- In order to limit the number of returned buted through the District Courts in Rze- applications, in August and September szów and Kielce, as well as to over 20 bu- 2016 the World Bank reviewed more siness chambers and support institutions than 300 cases to identify the most com- in the regions. Several business support mon errors made by applicants. This re- institutions have also used these mate- view found that most of the errors could rials for e-mail campaigns to affiliated be avoided by providing applicants with entrepreneurs. Staff at the help desks clear instructions. Applicants adhering in both court registers has been trained to these instructions could reduce the to reach out to potential applicants risk of their application being returned about the online registration service and or dismissed by an estimated 96%. The its advantages. World Bank team used its review of re- turned applications to prepare and pilot 9 https://www.biznes.gov.pl/przedsiebiorcy/biznes-w-polsce/zakladam-firme/rejestracja-dzialalnosci/ rejestracja-spolki-z-o-o 10 Verified on 23.09.2016 and on 28.02.2017 in incognito mode search through www.google.com, the most popular search engine in Poland with 96% market share POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 47 from October 2016 to March 2017 new ce has been also printed on the back- guidance for applicants. The guidance side of leaflets, which have been made was published by the Ministry of Eco- available at various business support nomic Development on its portal institutions and at district courts. These http://www.biznes.gov.pl11 and is used materials were used during the marke- by district courts’ staff in their daily inter- ting campaign and will continue to be actions with entrepreneurs. The guidan- promoted by district courts. Figure 8. Online registration – hardcopy advertising materials Note: The front of the leaflet, also printed as a poster, communicates the advantages of online registration (it is cheaper, faster, more reliable) and refers to government websites. The backside of the leaflet provides guidance on how to avoid the 12 most frequent errors in applications. In addition, the World Bank team orga- users through the registration process. nized a one-day workshop with adjudi- An improved user experience can signifi- cating staff from District Courts in Kielce cantly ease business registration as auto- and Rzeszów in January 2017 to upgrade mating the validation of applications and their skills and unify divergent interpre- embedding tooltips in the registration tations of the law. The workshop was process can avoid the vast majority of organized in partnership with, and on returns. The Ministry of Justice commit- the premises of, the National School for ted to introducing these changes by Judges and Prosecutors. The adjudica- December 2016, but implementation has tors were trained, for the first time since stalled. the launch of the S24 service, in using this platform. They also reviewed and worked out consistent interpretations Expediting application processing for a number of legally challenging cases. The problems of seasonal spikes in work- The World Bank team also prepared and load of registration divisions and subse- shared in November 2016, with the Mini- quent backlogs was addressed by work- stry of Justice, technical recommenda- ing out flexible staffing arrangements tions on how to validate automatically and offering staff incentives to close applications submitted online and guide more cases. The World Bank assisted, 11 For online registration: https://www.biznes.gov.pl/przedsiebiorcy/biznes-w-polsce/zakladam-firme/ rejestracja-dzialalnosci/rejestracja-spolki-z-o-o/jak-uniknac-bledow-przy-internetowej-rejestracji-spolki For paper applications: https://www.biznes.gov.pl/przedsiebiorcy/biznes-w-polsce/zakladam-firme/ rejestracja-dzialalnosci/rejestracja-spolki-z-o.o.-w-sposob-tradycyjny/ jak-uniknac-bledow-przy-rejestracji-spolki-z-o.o 48 | EASIER BUSINESS REGISTRATION (PODKARPACKIE AND SWIETOKRZYSKIE) among others, in preparing and piloting an agreement with a local university to a performance-based bonus among the introduce paid three to four months trai- administrative staff of business registra- neeships for young graduates, allowing tion divisions. In Rzeszów, such a scheme registration divisions to better manage was introduced in the last week of Octo- workload peaks. It is the first time that ber and throughout November 2016. the District Courts in Kielce and Rzeszów The bonus scheme resulted in closing used flexible staffing and results-based 800–1400 additional cases and provided rewards, and after successful pilots the valuable lessons in performance mana- courts are considering to introduce such gement (see Figure 9). The District Court schemes in future. The introduction of in Kielce introduced a similar bonus sche- bonus schemes was supported through me in December 2016 for two members several workshops and working meet- of the administrative staff charged with ings in Kielce, Rzeszów, and Warsaw removing bottlenecks. In addition, the in October/December 2016 and March District Court in Kielce entered into 2017. Figure 9. Number of cases closed by administrative staff in court registration division in Rzeszów Source: District Court in Rzeszów Note: Clerk assistants were eligible for a bonus of 20%–40% of base salary from October 24th to November 30th. Nine clerk assistants participated. Payout depended on the number of cases closed. Even though the registration division was overwhelmed with work during this part of the year, significant output gains were achieved, both in comparison to output in September 2016 (2609 cases), average monthly output in 2016 (2115 cases/month), as well as in relation to the actual output in the same period in 2015 (2340–2766 cases). Staffing levels did not change significantly, with 10 adjudicating staff and 10 assistants employed full-time in the registration division in 2015 and eight adjudicating staff (plus 0.1 FTE of one judge) as well as nine assistants + two support staff in 2016. In the last week of October, the daily output increased by 60% after the introduction of the bonus (1283 cases closed in seven work days between October 24th and 31st vs 1614 cases closed in 15 work days between October 1st and 23rd). The problem of fragmented workflows Justice, the administrator of four IT sy- and IT systems was addressed by en- stems used in registration divisions, couraging managers to use monitoring on integrating back office systems to tools for management of the case flow expedite application processing. World in the KRS division. For example, the Bank evidence shows that a full integra- case review in Kielce revealed that busi- tion of existing systems coupled with ness registration is delayed on average other measures could reduce the num- by 4.7 days after the judicial review has ber of work steps from 17 to five per been completed, when assistants need case. The Ministry included integrating to type the applicant’s details into the back office systems in its plans, but it has business registry. This insight inform- not yet submitted a project in this re- ed a reorganization of the workflow. gard for co-financing from the Euro- The World Bank advised the Ministry of pean Social Fund. POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 49 What was achieved? A rise in the share and absolute num- and last quarter of 2016 in both regions, ber of online registrations in Podkar- than the average in Poland. Consequently, packie and Œwiêtokrzyskie (see Table 4) and given the growth in the number of has been observed during the dura- registered firms, more companies were tion of the Lagging Regions Initiative. registered online in Podkarpackie and The share of applications to register a limi- Œwiêtokrzyskie in the last quarter than ted liability company that were filed elec- in the second quarter of 2016 (as well as tronically grew faster between the second any previous point in time). Table 4. S24 uptake for online registration of limited liability companies All other Registered Kielce Rzeszów registers companies in Poland IV – VI 2016 52.4% 58.1% 50% 13,971 VII – IX 2016 62.3% 62.3% 52% 12,736 X – XII 2016 62.4% 62.4% 56% 15,030 TOTAL 2016: 55,728 Source: Ministry of Justice With regard to limiting returned ap- ter of 2016 with a significant drop in re- plications to register a company, the turned paper applications, which was immediate results of interventions not observed in the rest of the country are yet to be seen. This is due to the (see Table 5). Given delays in usability up- fact that guidance has been only availa- grades of the business registration sys- ble since November 2016. It can be ob- tem S24, the Lagging Regions Initiative served, however, that the Lagging Re- did not coincide with a decrease in the gions Initiative coincided in the last quar- share of returned electronic applications. Table 5. Percentage of rejected or returned applications to register a limited liability company Kielce Rzeszów All other registers S24 paper S24 paper S24 paper IV – VI 2016 15.7% 34.4% 9.0% 21.1% 11.7% 19.6% VII – IX 2016 10.0% 32.7% 8.3% 26.3% 11.4% 21.9% X – XII 2016 16.8% 28.8% 9.8% 14.4% 11.0% 20.7% Source: Ministry of Justice The Lagging Regions Initiative coin- This improvement has not been obser- cided with an increase in the number ved in other district courts in Poland (see of applications that were processed Table 6). This increase in the number of in the Kielce and Rzeszow District applications was achieved even though Courts without undue delays (up to the District Courts in Kielce and Rzeszów three days for electronic submissions closed significantly more cases in the last and up to 14 days for paper submissions). quarter of 2016 than in previous quarters. 50 | EASIER BUSINESS REGISTRATION (PODKARPACKIE AND SWIETOKRZYSKIE) Table 6. Percentage of applications reviewed within reasonable timeline Kielce Rzeszów All other registers S24 Paper cases S24 Paper cases S24 Paper < 3 days – < 2 weeks – closed < 3 days – < 2 weeks – closed < 3 days – < 2 weeks – IV – VI 2016 75.5% 57.0% 198 76.2% 61.1% 429 80.1% 67.1% VII – IX 2016 76.3% 61.1% 135 79.2% 55.6% 425 74.9% 51.5% X – XII 2016 83.2% 60.8% 185 72.9% 64.7% 529 77.9% 55.1% Source: Ministry of Justice Lessons learned There are many measures at the local with the changes. For instance, five years level to be taken by district courts to after the online registration service S24 ease business registration. In the past, was introduced, staff was not trained efforts to make it easier to register a firm in its application. The court’s manage- in Poland focused on the national level ment is open to new ideas, but it needs – reforming laws and regulations, and to be involved closely in the design of introducing electronic registration. Now reform to ensure buy-in and smooth the time has come to supplement these implementation. efforts with adequate implementation on the ground. The Lagging Regions Performance pay can boost the effi- Initiative demonstrated several ways to ciency of registration divisions in the improve the performance of registration short term. The public sector hardly divisions: promoting e-registration, pro- ever uses bonus schemes tying emplo- viding guidance to applicants, simpli- yees’ remuneration to output, even fying work processes, improving work when it involves routine tasks and is per- incentives, and monitoring the case flow. mitted by the law. Earlier attempts to Achieving improvements at the local introduce performance pay in Kielce level requires strong leadership from and Rzeszów failed because the bonu- heads of district courts, who need to ses were inadequate and output not deal with a large number of veto players tracked. The pilot scheme implemented supervising staffing, budgeting, and in- in Podkarpackie was proposed on a vo- ternal compliance. luntary basis, with a bonus dependent on the achievement of pre-defined me- Justice sector reforms require more trics, scalable to actual performance of attention to detail and involvement the employee. The bonus scheme boos- of local stakeholders. The experience ted the registration division’s monthly of managers in district courts is that there output by about one third and should are many modernization projects happe- be used to address seasonal spikes ning “above their heads” but there is limi- in workload. ted or no effort to bring them on board POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 51 FINANCIAL INSTRUMENTS (PODKARPACKIE) POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 53 Why? A portion of the financial allocation development of such a program must of the 2007–2013 Regional Opera- take into account the planned sup- tional Program (ROP) of the Pod- port for financial instruments envisaged karpackie voivodship supported within the current ROP 2014–2020. financial instruments (loans and guarantees) that were distributed The Marshal Office of Podkarpackie by the financial intermediaries se- voivodship asked for World Bank lected for implementation by the experts’ support in order to: Program Managing Authority (Voi- vodship Board). Upon completion of (1) Develop the ‘exit strategy’ for finan- the supported projects, the allocated cial instruments supported under capital must be repaid, after adjust- ROP 2007–2013; ments for losses and management costs (2) Design the distribution model, inclu- as well as gains (interest on loans and ding setting-up the regional autho- bank deposits). As an external revenue rities’ ‘in-house’ entity, responsible for source, the repaid capital may then be managing the process of resources used for similar projects that provide distribution; financial support to micro, small, and (3) Design new financial products as part medium- size enterprises (SMEs) deve- of the investment strategy of the lopment. This requires developing and ‘in-house’ entity that address the setting-up a regional mechanism (built regional financing gap and reflect into the ‘exit strategy’), based on capital the needs of the regional SMEs from the previous programming per- (better and easier access to external spective to provide financing to inter- sources of finance that are comple- mediaries whose instruments aim to de- mentary to instruments from the crease the region’s financing gap. But, ROP 2014–2020). How? Technical assistance was based on bute loans and guarantees for improving a participative and cooperative pro- access to external capital sources to cess with the World Bank’s experts accelerate SMEs development in Pod- (leading the consulting process karpackie). Other participating stakehol- within the scope of Lagging Regions ders were from regional Business Sup- Initiative of the European Commis- port Institutions. Representatives of the sion) and stakeholders of the new Podkarpackie Marshal Office were enga- regional finance delivery mecha- ged in the consultancy process, formula- nism. Participants included the bene- ting specific needs to the future regional ficiaries of projects supported by the financial instruments (summary of me- ROP during 2007–2013 and now are the thods and participants – see Figure 10). target of the new regional financial mechanism (i.e. a group of non-ban- During the design phase of the new so- king financial intermediaries, operating lutions concerning utilization of finan- in the Podkarpackie region, that distri- cial resources from ROP 2007–2013, 54 | FINANCIAL INSTRUMENTS (PODKARPACKIE) experts relied upon the findings of the the region’s financing gap, re-assess SMEs’ Ex-ante assessment of financial engi- needs for access to capital, and determine neering instruments for Podkarpackie the types of financial instruments envisa- Voivodship ROP 2014–2020, ordered ged under ROP 2014–2020. Some other by the Marshal Office in 2014. Its fin- information sources were also referred to dings helped to understand the causes of by a thorough experts’ desk research. Figure 10. Sources, methods and stakeholders of the consultancy process In addition, the design team drew tants organized a study visit for repre- upon the experiences of other re- sentatives of the Podkarpackie Marshal gions in Poland that implemented Office to learn more about the Dolno- similar regional finance delivery sy- œl¹ski Development Fund, in particular, stems (e.g. the Dolnoœl¹ski Develop- the practical issues concerning the ment Fund Ltd and the Pomorski Deve- ‘in-house’ model of financial instruments lopment Fund Ltd). World Bank consul- delivery to the regional market. What was achieved? Consultations by World Bank ex- and (in the future) from other availa- perts supported the creation of the ble sources (including resources from Podkarpackie Development Fund Ltd financial instruments funded under (PDF), a regional financial vehicle ROP 2014–2020); that will be an ‘in-house’ entity in the (2) Design of new financial products voivodship. It is currently undergoing according to survey-based respon- the registration preparatory phase.12 The ses reflecting strategic development PDF’s scope of activity will comprise needs of the regional SMEs; the following: (3) Place the new financial offer on the re- gional market, based on the activities (1) Collection of financial resources from of the PDF and a network of selected previously implemented instruments, regional financial intermediaries. 12 Based on the resolution of the Sejmik Województwa Podkarpackiego (Regional Legislative Council) as of 27th, February 2017 on giving consent to establish a company under the name of Podkarpacki Fundusz Rozwoju Spó³ka z ograniczon¹ odpowiedzialnoœci¹ (Podarpacki Development Fund, Limited Liability Company) POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 55 Under the supervision of the PDF, SMEs that arose during the ROP financial intermediaries will be res- 2014–2020). ponsible for distributing financial resources made available to them The World Bank’s experts also ana- by the PDF in the form of ‘quota lyzed and proposed recommendations limits’. They will manage both the for the strategic development of the funding dissemination and recovery PDF. These focused on organizational de- (responsible for capital repayments velopment of the entity, and concerned: over an acceptable, agreed losses limit/cap). (1) Building its financial capacity, (2) Implementation of new financial in- For the initial implementation pe- struments (equity-based) and riod, the PDF’s investment strategy (3) Human resources development. emphasizes the introduction of two types of loans to the regional market The experts also assisted represen- for: (i) financing SMEs’ working capital tatives of the Marshal Office in esta- needs; (ii) pre- or co-financing of pro- blishing settlements with financial jects implemented by regional enterpri- intermediaries concerning repay- ses within the framework of the Cohe- ments of resources invested in finan- sion Policy for 2014–2020 (established cial engineering instruments under as a response to the financial needs of ROP 2007–2013. Lessons learned The technical assistance was of dent intermediary in the sensitive pro- utmost importance because of the cess of setting-up the ‘exit strategy’, limited experience of the regional that requires mutual understanding and government with the financial in- openness for cooperation between con- struments, the complexity of esta- cerned parties (the regional authorities blishing such instruments on the and financial intermediaries). regional level, and due to the condi- tions of the instruments’ financial The future challenges will be ensu- sources. The consultancy process was ring that the PDF’s financial instru- effective because stakeholders worked ments address the needs of the with World Bank staff thoroughly know- SMEs in the region and at the same ledgeable about setting up financial in- time do not compete (or only to struments that reflect the development a limited extent) with the offer of needs of the regional SMEs and financial the commercial, mostly banking, intermediaries in Podkarpackie voivod- sector as well as with the other pub- ship and other regions of Poland. This lic funding available nationally and enabled experts to act as an indepen- regionally. 56 | FINANCIAL INSTRUMENTS (PODKARPACKIE)