Leszek Wojtasiak, Deputy Marshal of the Wielkopolska Region, PL

BRUSSELS2 June 2008

Is JEREMIE able to support the economic development based on innovations at the regional level?

General information General information

• Area 29 826 sq km - comparable to such countries as Belgium or Holland

• Population density 113 persons per square kilometer

• Population 3.4 mln – comparable to Lithuania

• In urban areas 1.93 mln,

• In rural areas 1.43 mln

• Number of sub-regions - 5

• Number of districts - 35

Key assets of Wielkopolska Region

Viable economy

•It takes third place among polish region when it comes to economic growth, measured by share of GNP per capita•Wielkopolska generate 9.3 % of the Gross National Product•great economic potential in comparison to other regions of Poland. •high and fast-growing number of businesses (particularly SMEs), •significant and constantly improving economic and manufacturing potential, •highly-skilled labor, •vast majority of private ownership, •significant share of foreign capital, •favorable type structure of businesses, •relatively fast-growing export, •relatively high (and quickly accelerating) productivity,•Fitch Ratings, the international rating agency, increased the Polish longterm rating for the Wielkopolska Region from AA(Polish) to AA+(Pol) (double A+ (Pol))

Key assets of Wielkopolska Region

Dynamic society•the unemployment rate was the lowest in the country – just 7.9 percent•Poznań is the country’s leading academic center, and universities also operate in sub-regional cities •36 universities in the region, with over 177,000 students

Big investment potential •The amount of foreign direct investment located in Wielkopolska (FDI) is about 10% of total volume in Poland•The value of the foreign capital invested in Wielkopolska amounts to over 8 billion USD • The inflow of direct foreign investment till now has led to the establishment of over 5,000 enterprises with a share of this capital

Availability of financial support instruments for SMEs in Wielkopolska

GUARANTEES• Wielkopolska Regional Development and Promotion Fund (Fundusz Rozwoju i

Promocji Województwa Wielkopolskiego S.A. ) in Poznań – regional operation (share capital of PLN 13.35 million, another PLN 13.35 million from EU grants – a total of PLN 26.7 million).

• Four guarantee funds – local operation (PLN 6.71 million – total share capital).• PLN 85.40 million – forecast value of guarantees to be issued by Wielkopolska

Regional Development and Promotion Fund in 2007 – 2013LOANS

• Wielkopolska Agency For Enterprise Development (Wielkopolska Agencja Rozwoju Przedsiębiorczości Sp. z o.o.) – regional operation (share capital of PLN 8.05 million, PLN 17.5 million from EU grants – a total of PLN 25.55 million)

• PLN 64 thousand – average loan granted by Wielkopolska Agency For Enterprise Development from June 30, 2004 to June 30, 2006.

• Three loan funds – local operation (PLN 7.96 million – total loan capital)

Allocation of ERDF resources for WROP 2007 - 2013

PRIORITIES ERDF COMMUNITY CONTRIBUTION

PRIORITY 1: Competitiveness of Enterprises

Measure 1.3: Development of the system for financial business support instruments – JEREMIE

328 887 000 (ca.26%)

60 000 000 (ca. 5%)

PRIORITY 2: Communication infrastructure 493 361 547

PRIORITY 3: Environment 173 821 000

PRIORITY 4: Revitalization of problem areas 54 060 000

PRIORITY 5: Infrastructure for human capital 121 284 097

PRIORITY 6: Tourism and cultural environment 61 470 000

PRIORITY 7: Technical assistance 39 909 000

TOTAL 1 272 792 644

Benefits from implementation of JEREMIE initiative in Wielkopolska

1. Owing to the renewable nature of support (multiplier effect), assistance available for SMEs increases by up to 400%.

2. The assistance returns to Wielkopolska budget after 2013, which means ca. EUR 60 million for further SMEs support. Option of establishing institutions similar to German regional investment banks e.g. InvestitionsBank Berlin

3. Reinforcing the position of business support institutions, as intermediate bodies; the possibility of obtaining substantial operating resources should translate into enhancement of their potential

4. Implementation of JEREMIE initiative will also bring about new financial support instruments available for SMEs (so far only loans and guarantees). More risky instruments in the fields of innovation can be applied.

Benefits from implementation of JEREMIE initiative in Wielkopolska

1. Holding Fund: flexible selection of financial instruments means possible reallocation to reflect changing market situation.

2. The lack of n+2/n+3 rule facilitates seven-year implementation with variable intensity, with no fear of losing the resources.

3. Advance payments, i.e. possibility of quick use of HF resources. Jeremie is treated as a project, individual loans to SMEs do not have to be accounted for; therefore, once money is forwarded to HF – an application for interim payment to the European Commission can be filed.

Problems with JEREMIE implementation

• Weakly developed market of the financial instruments– low level of awareness among the regional actors

• Lack of existing institution supporting financing innovation on the regional level – creation

• The entry level is EUR 60 million – it is more country- rather than region-adjusted (average annual income of Polish regions is ca EUR 300 million).

• Lack of information about JEREMIE initiative, in particular regarding:– Financial engineering,– Financial instruments (so far only loans and guarantee available)– Economical efficiency of JEREMIE initiative implementation effects

• Implementation costs:– Establishment of own institution– at least 2-3 years, problems with obtaining

qualified personnel from the market of financial services – well-paid specialists. – EIF charges: ca. 2% of the project’s budget per annum, i.e. 8,5 M EURO during

implementation period

Problems with JEREMIE implementation

• Difficulties in defining of market gap analysis in EIF report –too general data• Share of responsibility between Managing Authorities and Holding Fund Manager• No clarification in case of grant obtaining by Financial Intermediaries, beyond JEREMIE• Lack of preparation on the central government level ie. state aid (coordinative function)• Problems with compliance with polish regulation • The breach of interests of the current players in the market of financial services is an

outcome of decapitalization (shrinking equity), particularly for the shareholders of the existing funds – strong negative lobbing.

Conclusions• All legal doubts must be clarified before starting implementation process

(polish low compliance, share of responsibility, obtaining grants)• Preparation of precise implementation strategy is needed, in particular

regards:– Defining scope of public intervention (particularization of market gap

analysis by MA)– Efficiency analysis of high-risk instrument (danger of loosing money)

• Regional Authorities should be equipped with the knowladge how to create new instruments and institutions – help of EIF and EC is warmly welcomed

• Preparation of prospective beneficiary in applying new instruments – financial Intermediaries – long distance process, patience is needed

• Change of EIF approach to more „regional driven” in negotiation process with polish region (higher tendency to knowledge sharing, focus on PR aspects in Poland)

• Necessity of creation of the European Regional Sharing Experiece Plantorm regarding to the implementation Jeremie initiative

e-mail: leszek.wojtasiak@umww.pl www.umww.pl

Leszek WojtasiakMarshal Office of the Wielkopolska Region

Thank you for your attention