Conditions for the development and experiences in the implementation of entrepreneurship support

instruments in rural areas in Poland

Dr Iwona Nurzyńska

Institute of Rural and Agricultural Development Polish Academy of Sciences (IRWiR PAN)

Structure of the presentation:1. Rural and agricultural economy - need for off-farm jobs2. Rural entrepreneurial ecosystem - strengths and

weaknesses of rural areas as place to run a business3. Barriers for the rural entrepreneurship development in

Poland4. Institutional system of the EU CAP implementation in

Poland 5. EU support programs for job creation in rural areas6. Lessons learnt

Rural and agricultural economy in Poland

Why do we need non-farm jobs in Poland? • Decreasing role of agriculture in the national economy – a 3,3% contribution to

Poland’s GDP• Agriculture as „a reservoir” of the labor force - still12,8% (2,0 million people in 2011)

of the employed work in agriculture but the agricultural productivity accounts only for 30% of the EU27 average productivity (hidden unemployment

• Decreasing number of farms but only some 100-150 thou. competitive farms (> 30 ha and 16 ESU)

• Rural households income disparity – disposal income per capita in urban areas over 41% higher than in rural areas (2009)

• Unemployment among non-farming populationon in rural areas 12,9%• Deagrarization - some 60% of rural population has no links with farming land and only 1/3 • of rural population lives on agriculture • Entrepreneurship index lower than in urban areas (only 25% of the registered enterprises in

RAs)• Depopulation of rural areas (migration of the young) and land abandonment

Source: RDR 2012, FDPA, Nurzynska & Wilkin (editors)

Farm structural change in Poland over 2002-2010

Source: National agricultural census. 2010, GUS, Warszawa 2011

Years Agricultural holdings

[in thou.]

AUA [in thou.

ha]

Average [in ha]

2002 2 933 16 899 5,76

2010 2 278 15 534 6,82

2010:2002 [in %]

77,6 91,9 118,4

Number of farms in 1990-2010 by size (in ’000 ha)

020040060080010001200140016001800

up1ha

1-5 5-10 >10 10-20 20-30 30-50 >50

1990199620022010

Socio-economic groups in rural areas

  % Employees of public sector 7,1Employees of private sector 15,5Farmers 7,9Retired and pensioners 22,5Private business 2,3Unemployed 4,6Non economically active (others than the unemployed)

16,5

Studens and pupils 21,6No data 2,1Source: Halamska M. (2011), IRWiR PAN, based on Diagnoza społeczna 2009

Klasy ocenywg Jenks' N atura l B reaks(udział k lasy w zbiorze)

korzystna (46% )przecię tna (25% )niekorzystna (29% )

© M onika S tanny

poglądowa granica rozb iorowa

obszar m iejski

Weaknesses of rural entrepreneurial

ecosystem 1. Low level of development of the local market: insufficient local demand resulting from lower rural households’ income (income disparity = ~40% );

2. Difficult access to the final customer and users of services and products – lower population density; peripheral location

3. Lower qualifications and education level of rural people which limits the access to the qualified specialists (lower willingness to commute to rural areas for jobs);

4. Underdeveloped technical infrastructure compared to urban areas (roads, water supply and sewage system, energy and telecommunication networks - Internet), which implies higher costs for potential investors;

5. Hindered access to financial infrastructure in rural areas – difficulties to acquire capital for start ups

Weaknesses of rural entrepreneurial

ecosystem 6. Hindered access to training and advise for rural entrepreneurship development (often inadequacy of entrepreneurship support)

7. Underdeveloped entrepreneurship culture (attitudes, perception, roles);

8. Low level of social capital (trust, cooperation).

9. Lack of more targeted policies differentiated between potential entrepreneurs and existing enterprises.

Strengths of RAs 1. Natural resources for the development of on-farm

food processing (local, regional and traditional food)2. Lower labor costs - access to relatively low-paid

employees (key for start-ups)3. Potentially easier access to investment areas4. Informal human relations;5. Individual and friendly approach of local public

authorities6. Dedicated EU-funded aid programs for rural areas

Source: Institutional barriers for rural entrepreneurship development (2011), Nurzynska and others, EFRWP

Rural entrepreneurship development barriers in Poland

• Complicated, costly and time-consuming regulations and implementation procedures;

• Inadequate regulations to the small and micro-enterprise scale of operation (Think Small First, KE);

• Insufficient number of advise and training organizations (access)

• „Overregulation” – not proportional to the problem addressed

• Administrative barriers „red tape” (elimination of redundant regulations: one in – one out; sunset clauses)

• Need for better educational system promoting „entrepreneurship” attitude and economic education

Institutional framework of EU CAP support implementation in Poland

The institutional structure of the institutions involved in the accreditation process of the Polish system of management and implementation of EU support

Source: Ex-post Evaluation of RDP. Final Report. MARD, Warsaw 2009.

MARD COORDINATION

BODY

MINISTRY OF FINANCE COMPETENT AUTHORITY

CERTIFICATION UNIT

EXTERNAL AUDITOR

ARMA (PA)

OTHER ENTITIES (DELEGATED BODIES)

Accreditation issues Supervision over public

spendings. Certification of accounts to the

EC

Supervision over the operation

Examination of accreditation criteria for

EU CAP budget transfers over 2004-

2011 Transfers 2004 2005 2006 2007 2008 2009 2010 2011* 2004-2011

Market measure 10,7 166,7 181, 8 56,7 134,6 409,0 66,3 136, 6 1 162 ,7

RDP 286, 6 662, 1 1 149,5 1 550, 8 846, 5 1 043,8 1 571, 9 1 385 8 496,5

Direct payment 0 702 ,6 811,5 545,3 1 037,6 1 446 ,1 1 827,7 2 392,4 8 763,6

Other transfers 0 10,6 11,1 400,3 12,4 14,86

12,5 2,9464,8

SAPARD 118 ,2 339 0,012 0 34,7 0 0 0 492,1

Total transfer 415,7 1 881,1  2 154, 1 2 553,3 2 065,9 2 913 ,9 3 478,6  3 917  

19 379,8

 

Source: own calculations based on the data of Ministry of Finance

EU Cohesion Policy and the CAP in Poland

in 2007-2013 in MEUR

BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK0.0

10,000.0

20,000.0

30,000.0

40,000.0

50,000.0

60,000.0

70,000.0

EPS alokacje krajowe w mln euro w latach 2007-2013 ROW alokacje krajowe w latach 2007-2013 w mln euro

EU-funded aid for rural job creation

Program MeasureNumber of

projectsPayments/allocation*

Share in the program budget in %

SAPARD

Diversification of economic activities in rural areas 4 071 342,3 mln zł 6,75%

SOP Agriculture 2004-2006

Diversification of agriculural activities in rural areas 4015 282 mln zł 6%

RDP 2007-2013Diversification towards non-farm activities 21530 1380 mln zl* 2,00%

RDP 2007-2013Creation and development of microenterprises 28670 4 092 mln zł* 5,90%

RDP 2014-2020 (planning) Non-agricultural activieties in rural

areas n/a 450 mln euro (plan) 4,03%

PROW 2014-2020(planning)

Support for existing SMEs (under LEADER budget – 5% of RDP) n/a ? ?

Polish RDP 2007-2013 (Share of Axes in %)

RDP 2007-2013 Axis 3Objective – improvement of quality of life and job creation in rural areas via:

• Access to capital for start-ups and development of rural SMEs ;

• Access to training and advise services;• Improvement of rural technical infrastructure;• Village renewal• Creation of support network for enterprises and

local development (LEADER approach)

Some business ideas under the measure „Establishment and development of micro-enterprises” of RDP 2007-2013:

- Hospital for horses, Wielkopolska region, 2 jobs - Hotel modernization and equipment purchase „Dwór Korona Karkonoszy”,

Dolnośląskie region, 2 jobs- Polish-English artistic kindergarten, Małopolska region, 1 job- Purchase of modern equipment (3D laser scanner with software),

Świętokrzyskie region, 2 jobs - Cosmetic and SPA services – expansion of existing business , Lubelskie region,

2 jobs - Textile business expansion (purchase of machinery and transportation means),

Pomorskie 2 jobs- Rural sport and recreation center (Factory Fitness Club ) under LEADER, 1 job

RDP 2007-2013 Job creation measures

MeasuresAxies 3

Limit in MPLN

Projects submitte

d

Contracts

concluded

Value of contracts concluded in MPLN

Relation of

contract value to

limit value

Payments

done MPLN

Payments as % of the limit

311 1 428,5 28 999 15 045 1 329 91,47% 1 011,3 91,47%

312 4 232,5 45 450 11 738 1 624 29,60% 1 078,8 24,62%

Total 5 661,0 74 449 22 698 2 953 52,10% 2 090,1 36,90%

Source: own caculations based o the Ministry of agriculture weekly reports as of July 2013

Rural Development Program Off-farm jobs

2014-2020 Objective: off-farm jobs (start-ups, existing SMEs support under LEADER)Target groups: farmers and farmer family members, existing SMEs (2 years), LAGs Share in RDP budget: 8,06%

2007-2013 Objective: off-farm jobs (start-ups, micro-firms creation and development, LEADER) Target groups: farmers and farmer family members, SMEs, Share in RDP budget: 7,9%

Conclusions:1. More integrated approach towards programming of the EU

funds (CSF 2014-2020) for job creation at regional level2. Less money under RDP 2014-2020 for job creation3. Need for domestic policy more targeted at job creation in

rural areas.4. Need for the complex entrepreneurial ecosystem –

„tailored” composition of information sources, training and advice institutions supporting nascent entrepreneurs, suppliers of goods and services, local demand, technologies, financial support, access to external capital etc.

5. Role of NRDN (KSOW) in 2014-2020

Thank you for your attention