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The European Union is a community of 27 Member States and 493 million citizens. The variety of economies, cultures and institutional frameworks is both the strength and the weakness of the EU. On the one hand, EU enlargement and CEE countries accession opened new markets, created demand and built favorable institutional framework for “old” EU members market expansion, which contributed to development of Western Europe economies. On the other hand, economic and social disparities among EU countries resulted in differing pace of their development, thus strengthening the phenomenon of “differentiated” Europe, disturbing the stability of European economy. To transform this fragmented community of EU member countries into a sustainable, common market, the EU Cohesion Policy1 has been established and implemented through: the European Regional Development Fund (ERDF), the European Social Fund (ESF), also known as the Structural Funds, and the Cohesion Fund. Using these financial mechanisms, the European Union invests in thousands of projects across all Europe’s regions to achieve economic and social cohesion and reduce disparities between the Member States and the regions. Cohesion Policy represents the single largest source of financial support at EU level for investment in economic growth and creation of new workplaces, designed to enable all regions to compete effectively within internal market.
Poland and CEE countries – European growth engines
However, effectiveness of the Cohesion Policy implementation also varies among its beneficiaries – in some cases the positive impact is clearly visible, while in other cases ineffective national strategies and policies undermined the results of Cohesion Policy implementation. The distance to “the EU core” of these countries has dramatically increased. As a result, in the last decade, the roles of countries and regions in Europe have significantly changed. It is especially visible in Poland, which position in the European patchwork has been constantly evolving. Since 2004, Poland has transformed from the „poor cousin” to the development „engine” of European economy, that is not just catching up with the European median2, but also shows significant potential for further dynamic growth.
Among CEE countries, only Poland and Slovakia have reached the GDP growth rate of 49% above the 2004 level in 2013. They were followed by Lithuania (38%), Romania (37%) and Bulgaria (34%). At the same time, since the emergence of the global economic crisis in 2008, southern parts of Europe started to follow the deepening recession path, tripling the unemployment rates and dramatically increasing national debt in
Chart 1: Cumulated chain linked GDP volumes in CEE region in 2004-2013 (2003=100%)
Source: Eurostat, GDP and main components
Good years for the economies of CEE countries, to a larger extent, attributed to their EU membership. As indicated in European Policy Centre analyses3, lower business risk, higher attractiveness for investors and financial credibility, reduced barriers in the flow of people, cargo and capital, increasing investments and export have resulted in the catch-up of GDP dynamics. Also, the inflow of EU funds for public investments and entrepreneurship support catalyzed the growth potential and increased the effectiveness of structural, political, institutional and economic changes and reforms.
EU funds 2004 – 2013: from infrastructure to innovation
In Poland, in 2004–2007, nearly 85,000 projects worth EUR 22.5 billion were implemented. A priority was given to infrastructure development with special focus on transport sector modernization. By the end of 2007, 3,700 km of roads and over 200 km of motorways were built or modernized, 350 km of railway tracks were upgraded, over 100 sewage treatment plants were put into operation and 49 programmes related to separate collection, storage or recycling of waste and management of municipal waste were implemented. Another important area to which EU funds contribute and which has positively influenced to Polish economy, was business and innovation support. Over 15,000 projects were implemented in this area. Namely, 78 research or specialist laboratories were modernized and developed, 19 technology incubators were established. Support was also provided to 27 business parks and 17 research and technology parks. Research and specialist laboratories have provided services to 1,120 enterprises. The entities, which received support, introduced 17 new products or technologies.
However, between years 2007 and 2013, Poland started even more intensive investment programme, with dedicated EU budget of EUR 67.19 billion, which was the biggest amount received by any CEE country. Although the vast majority of EU funds were still invested in infrastructure development, the portion for business and innovation support increased and again resulted in creation of more than 43,000 jobs and over 600 projects in the area of R&D.
Financial framework 2014 -2020 - a unique growth opportunity
The focus on innovation and entrepreneurship continues in the current budgetary period 2014 – 2020, for which Poland has been allocated EUR 82.5 billion. This time, the share for business and innovation support increased to almost 40% of total allocation, with the main focus on scientific research and commercialization, strengthening the cooperation between R&D and enterprise sector and development of high quality human capital.
Chart 2: Breakdown of EU funds allocation for Poland for 2014-2020
Source: Summary of the Partnership Agreement for Poland, 2014-2020, European Commission, 2014
Within the area of Research & Innovation sector (allocation of EUR 10 billion), businesses can apply for development and implementation of new products, processes and services, including product formulas development, optimization of product characteristics, development of new production methods, designing new machinery for manufacturing processes and improving production lines.
The need for meeting European goals in a low-emission economy resulted in strong focus on renewable energy and environmental protection investments. About EUR 9.2 billion is allocated to implement this kind of projects. Companies are eligible for the co-financing of investment projects promoting clean energy, energy efficiency and environmental actions, both at the energy production stages and in manufacturing processes. The support is addressed to projects involving the efficient use of resources, creating an energy-efficient economy, reducing emissions and promoting renewable energy sources.
The fundamental role of SME development and prosperity for economic growth stands as a base for specific support for this type of businesses. Special programmes were designed to facilitate the implementation of innovative technologies by such entities, encourage cooperation between business and science and implement environmental solutions, with the budget of about EUR 9.4 billion.
Poland’s shift to innovation
All these investments are supposed to lead to a significant change in Poland’s economy – as stated in Partnership Agreement for Poland, the crucial objective in this financial framework is the shift from imitation-based to an innovation-based development and to substantially lever business R&D expenditure, which implies commercializing indigenous innovative ideas and requires closer cooperation between enterprises and researchers. This shift is supposed to materialize in measurable increase of R&I expenditure in relation to GDP from 0.9% to 1.7%, increasing private R&I spending from 0.3% to 0.8% of GDP.
European regions need to move upwards on the innovation ladder. Member States that invest a lot in innovation fare better than those that could make it better. – stated Jose Manuel Barroso, former European Commission President. But the success of the pro-innovation strategies in Poland and other CEE countries is based not only on the amount of money invested in R&D programmes, but also on member countries’ capacity to develop structures, institutions and cooperative networks supporting innovation and technology transfer. Cooperation and sharing experience is a key in stimulating a dynamic, forward-looking innovation-based development process and has to be the baseline for any investments and pro-innovative activities. Therefore, there is a need to develop and strengthen the role of clusters and technology brokers, which create supportive environment for sharing ideas and charting new and innovative ways of harnessing European investment. Also the EU has an important role to play in incentivizing and supporting such organizations and partnerships, both within and outside the EU. Thousands of EU projects have shown the benefits for international cooperation and knowledge transfer. This is also true for Poland and CEE countries, where several such initiatives have emerged. Only few of them show strong international focus and prospects to have a significant impact on European market, but this is the area for further development and utilization of EU funds for 2014 - 2020. One of the good examples is European Green Technology Alliance (www.egta.eu) and its European Technology Transfer Platform. This international network provides access to knowledge, experts and technologies and creates business and cooperative environment which supports national and EU efforts to increase innovativeness of the whole European continent.
Source: Green Economy