EMCC European Monitoring Centre on Change

Poland: ERM Comparative Analytical Report on ‘Public policy and support for restructuring in SMEs’

  • Observatory: EMCC
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  • Published on: 14 May 2013



About
Country:
Poland
Author:
Ewelina Kuzmicz
Institution:

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

Questions of public support for SMEs in restructuring have been present in the Polish policy debate since the early 1990s when free market was formed. The perspective of privatisation and restructuring of loans for enterprises were topics in that discussion. Until today ‘restructuring of enterprises’ in the policy debate is understood in a narrow way. With time, state programmes, agencies and funds aiming at SME support were formed. Issues that dominate the debate today are the need for simplifying the legal environment of SMEs and raising SMEs’ competitiveness by innovation. Since the economic crisis has not affected Poland strongly, it has not influenced the debate on SMEs strongly, either.

QUESTIONNAIRE

Part 1: Overall policy context

1.1. Has there been public or policy debate on the specific challenges for SMEs and/or their employees in restructuring before the global recession of 2008/09? Please specify, for example:

Yes, there has been a public policy debate referring specifically to SMEs in restructuring before the global recession of 2008/09.

• If so, since when (e.g. up to 3 years before, 3-10 years before, longer), at which level (national, regional, sectoral, all of them) and in which form (‘real’ policy debate mirrored in policy documents or rather public debate mirrored in media, or both)?

The debate has been on since the beginning of the 1990s when Poland entered the transformation period after communism and the debate has been reflected in both specific documents and the actual forming of institutions.

The first programme for SMEs was adopted by the Polish government in 1995 for the period 1995 – 1997. The National Loan Guarantee Fund was created and the programme also stimulated the emergence of a number of local and regional funds that granted (and still grant) loan guarantees for SMEs.

The next national programme for SMEs was adopted for the period of 1999 – 2002. Its aim was to increase the competitiveness of the SME sector, its exports as well as investment expenditure in the sector.

In 2001, the Polish Agency for Enterprise Development (PARP) was formed. Until today, it remains the principal institution for public support of SMEs in Poland. PARP supports entrepreneurs from SMEs in the implementation of competitive and innovative projects using funds from the State budget and European Funds. Most PARP grants are for training, advisory and information services, but also for investments.

2002 was another important year for the debate on public support for SMEs. First, a national programme, ’Entrepreneurship – Development – Jobs’ was established in order to facilitate setting up of an enterprise and improve the legal environment of SMEs . Second, there was the government initiative ‘Plan of Crisis Response Measures to Protect Jobs and the Labour Market’. It identified a number of legal and organisational measures concerning for example the restructuring of the liabilities of state owned enterprises; introducing a tax credit for newly formed small enterprises that create new jobs; strengthening the system of funds grating loan guarantees to SMEs.

In 2003, the third state initiated programme for SMEs was adopted. It defined the state’s policy towards SMEs, including any changes to be brought about by Poland’s accession to the EU and it included the recommendations of ‘The European Charter for Small Enterprises’.

With time, more and more attention has been drawn in the national documents to the issues of reducing administrative burdens and simplifying the law that governs the operation of SMEs. This is reflected, for example in the amendments to the Act on Freedom of Economic Activity in 2004 and even more strongly, in documents adopted in or after 2008, such as the ’National Reforms Programme 2008 – 2011’ (the Polish equivalent of the Lisbon Strategy).

• Which policy areas (for example, SME policy, entrepreneurship policy, employment policy, social policy, regional policy etc.) were involved? Particularly: Does SME policy specifically deal with restructuring? Does ‘restructuring policy’ specifically deal with SME issues?

Entrepreneurship policy has been dominating the policy debate since the beginning, but with time, other areas have been gaining focus as well.

Entrepreneurship perceived as freedom to set up one’s own enterprise was one of the most important freedoms appreciated by the Polish people after the fall of communism, as the report of the Public Opinion Research Centre (CBOS) shows.

From a more practical point of view, entrepreneurship policy has always been strongly connected to employment policy in the public and policy debate: it was always assumed that entrepreneurial activities create jobs. In the early 1990s, the state hoped for entrepreneurship to become one of the most important tools against the rising wave of unemployment caused by privatisation and restructuring of state owned enterprises (unemployment rate had not been recorded prior to 1989, officially it was 0%, in 1991 it reached 12.2%). The growing availability of funding for setting up one’s own business, which came with the EU Funds after 2004, had much impact on the cause-effect relationship between entrepreneurial attitudes and job creation being imprinted on the public debate even more strongly.

Regional policy has always been an important context for the debate on SMEs, but has definitely gained significance after 2004, when Poland entered the EU and policy making became more explicitly focused on regions.

Restructuring policy doesn’t seem to heave dealt particularly with SME issues, at least not until the economic crisis in 2008/2009 (see section 1.2).

SME policy has always dealt with restructuring, especially in the area of anticipating change, but has rarely referred to it as restructuring (see point below).

• Did the public and policy discussions deal with restructuring as such or were specific types or phases of restructuring covered?

Polish policy discussions have used the term ‘restructuring’ only in a narrow sense, to refer to the restructuring of loans of enterprises or, more generally, to companies in difficulty that are trying to restore viability in a given period of time . More positive, proactive policies are always referred to as innovation or growth policies without referring to the term ‘restructuring’.

It seems that the restructuring policy for SMEs (although not officially called ‘restructuring policy’, as restructuring is understood in a narrow sense) has focused on many aspects of anticipation of change rather than on the management of change. This is best reflected in the activities of PARP, which implements programmes to support and develop competitiveness of enterprises, human resources, business environment institutions and regions.

Public restructuring management policy is reflected in the operation of loan guarantee funds, both at a national and regional levels.

• Which were the issues/contents that have been discussed? Which specific characteristics of SMEs in restructuring were considered in this context? Was the specific case of SMEs as subcontractors a topic for discussions?

In the area of management of change financial liquidity has been discussed, and hence the focus on loan guarantee funds.

In the area of anticipation of change a number of aspects have been discussed, for example:

  • The structure of SMEs and their legal environment. Poland is the EU leader in the number of micro enterprises. The process of transforming micro enterprises into small enterprises is not sufficiently developed and this implies significant barriers that hinder the development of Polish small businesses. Hence the need for both structural change (deregulation and simplifying of law) as well as individual change (improving human capital and entrepreneurial attitudes of entrepreneurs to-be and those already in business). In fact, the hierarchy of the main obstacles to growth, listed by the SMEs has remained stable over the years: fiscal and parafiscal burden has been named the major hindrance, then come the issues of insufficient sales and complicated legal environment.
  • More limited access to information of SMEs, including more limited human resources (expertise knowledge).
  • Weak position of SMEs in foreign trade. They supply mainly to regional and national markets. Goods or serviced exported by SMEs are very rarely innovative or Hi-Tech.
  • Sources of funding for SMEs. Figures show that around 75% of investments are covered from company’s own resources and 15% - 20% from bank loans.
  • The need for research on trends and conditions of SME functioning to help the programming of the support instruments. PARP conducts research activities on a regular basis. On the one hand, it serves Polish economic development policy and stimulating enterprise and innovation of the SME sector. On the other hand, the Agency carries out activities with a view to preparing information materials for the central and regional administration (at voivodeship level, for example for the purposes of developing Regional Innovation Strategy), as well as for entrepreneurs, researchers and students.

• Did the discussions rather deal with the enterprise perspective or with the employee perspective or both?

The discussions rather deal with the enterprise perspective. The employee is rather discussed in terms of human capital for a more innovative or competitive operation of the enterprise.

1.2. Did the global economic and financial crisis of 2008/09 cause any change in focus of the above (for example, increased/decreased focus on SMEs and their employees in restructuring, change in policy areas or issues covered)?

Although Poland has not been affected by the economic crisis, but rather experienced an economic slow down (in 2009 Poland has created the most GDP growth in the EU), anti-crisis measures had to be adopted anyway.

The general debate around anti-crisis legislation (the Act on Alleviation of Economic Crisis Effects on Employees and Employers), did not focus specifically on SMEs (for more details see PL1010039Q).

The policy debate on SMEs, at that time, did focus however on the needs of companies losing their financial liquidity. This debate has been largely supported by the EU-level debate and the introduction of ‘“State aid for rescuing and restructuring SMEs in difficulty’ that was conducted in line with the ‘Handbook on community state aid rules for SMEs’.

Although not directly connected to the global economic crisis, the Small Business Act was introduced in 2008 and its influence is visible in policy documents. Perhaps it hasn’t shifted the focus of the debate on SMEs but has definitely helped to put it on track, which is reflected, for example in PARP’s reports.

1.3. Are social partners or employers’ and employees’ organisations involved in public and policy debate on restructuring in SMEs?• If so, which (types of) organisations and at which levels?

Employer organisations at central level, mainly Confederation of Private Employers Lewiatan (PKPP Lewiatan), Employers of Poland and Business Centre Club (BCC). Employee organisations seem to be involved only in an indirect way and use SMEs only as one of many contexts in discussing issues of working conditions or barriers to setting up new union organisations.

• What are their opinions, perspectives, recommendations?

Employer organisations represent mainly SMEs since it is SMEs that make up most of Poland’s economy. In many ways all or almost all of employer organisations’ activity relates to SMEs. The most important recommendation in the context of SMEs is to ease fiscal and parafiscal burdens and to simplify the legal environment. This opinion/recommendation is expressed in a whole spectrum of employer organisation’s activities: monitoring of law, opinions on the law, formulation proposals for legal acts etc.

• Did they succeed in convincing governments or public authorities at various levels of their viewpoints?

They play an important role in stimulating the debate around SME issues and help to raise awareness of any existing or upcoming problems.

Part 2: Support instruments

2.1. Please provide an overall assessment about how accessible and suitable public and social partner based restructuring support for companies in general are for SMEs or their employees.

It’s very difficult, if not impossible, to provide an overall assessment since the state policy towards enterprises in restructuring (or even towards SMEs specifically) is so multidimensional.

• Do SMEs and/or their employees generally have access to the available instruments and are these suitable for their specific needs in restructuring?

There is no hard data to show to what extent SMEs have access to the available instruments, but in general they do and in general the available instruments are suitable for SMEs (for specific examples see Eurofound’s Database on support instruments for restructuring).

Some research reports show, however, that although support instruments are available, they are not being applied for because of a poor information policy with regard to their existence. Entrepreneurs also underline that at many times formal requirements towards obtaining public support are overgrown and that once those instruments are obtained (this concerns mainly grants for investments) there are problems with the pace of implementing those instruments by the public authorities.

• Are there specific (types of) instruments (for example, targeting specific types or phases of restructuring, offered at specific administrative levels) that are more/less accessible and suitable for SMEs and/or their employees than for larger firms? If so, why?

Almost all instruments provided by PARP are aiming specifically at SMEs. This means that state policy recognises SMEs as a very important sector to address. This is because of the importance of the SME sector for the economy (for more details on SMEs and their evolution in the Polish economy see PL1010039Q).

2.2. Do there exist specific public or social partner based support instruments explicitly targeting at SMEs and/or their employees in restructuring? Please specify, for example:

There exist a number of public support instruments explicitly targeting at SMEs. These instruments refer to restructuring in the broad sense, as defined by Eurofound, but they are not explicitly called support instruments for companies in restructuring, as the ‘term’ restructuring is understood in a narrow sense (see Point 1.1)

• If so, by whom are they offered (public vs. social partners/employers’/employees’ organisations) and at which administrative levels (national, regional)?

Public institutions at national and regional levels and, to some extent, by employer organisations, mainly at national level.

• Are the activities of different support service providers coordinated? If so, how and how well does this work?

Public support is almost entirely coordinated by PARP. There are no hard indicators that show how well the support is coordinated (it’s known how much money is spent but the question of how well the spending is coordinated is not well researched), but in general PARP has an opinion of an effective and well organised institution.

• Which phases of restructuring do they target?

Mainly anticipation of change, but also management of change.

• Which types of restructuring do they target?

Potentially all types of restructuring but in practice most instruments can be used for internal restructuring, business expansion and bankruptcy/closure.

• Do they target SMEs in general, or specific size classes, sectors, regions, legal forms, roles (for example, as subcontractors) etc.? Do they target employees of SMEs in restructuring?

SMEs in general, but there are also a number of instruments targeted specifically at micro and small enterprises (for more details see PL1108039Q)

• What type of support do they provide? What specific challenges for SMEs in restructuring do they address?

They provide, for example:

  • loan guarantees;
  • micro-loan funds;
  • grants for investments;
  • tax benefits for SMEs operating in special economic zones;
  • advice and counselling, especially in fields like legal and fiscal issues, quality issues, company management, preparing applications for public support instruments, obtaining capital from external resources etc, for example National SME Services Network (KSU) (see Part 3 for more detail), Akademia PARP,
  • networking on international markets (internationalisation of SMEs), for example Enterprise Europe Network;
  • networking with Business Angels, in Technology Parks and in Business Incubators;
  • developing human capital in SMEs: training for management and employees; skills and jobs forecasting (for more details see for example The information portal Inwestycja w Kadry);
  • promoting creative and entrepreneurial attitudes, for example Club of Innovative Enterpreneurs; social campaigns to promote those attitudes;
  • ensuring SMEs have easy access to information on available public tenders;
  • grants for R+D activities and implementing research findings;
  • linking companies with research institutions/knowledge providers, for example ‘Token for innovation’ programme.

• Is there some information about how well they are known among SMEs and their advisors and about how they are generally assessed by the SME sector? What are their strengths and weaknesses? Are there recommendations for improvement?

A recent research-based report on the condition of SMEs in Poland recommends, for example:

  • improving information policy of the existing support instruments so that they become more accessible;
  • providing such training that actually answers the needs of SMEs (hence the need for constant monitoring of needs);
  • assuring synergy of public and private support instruments, especially in the area of funding investments and assuring financial liquidity;
  • creating a system in which the entrepreneur does not have to go through similar application procedures each time he/she applies for a different support instrument;
  • assuring quick access to support instruments, so that they respond to the actual needs in a timely manner;
  • for the state to act as a moderator of entrepreneurship, that implements coherent programmes that have a horizontal (but also a sectoral) character.

Part 3: Good Practice

  • Name of the instrument in national language and English: Krajowy System Usług, National SME Services Network (KSU)
  • Justification for selecting this measure as Good Practice: It is an all-Poland programme that has been growing for years and has assisted tens of thousands of entrepreneurs especially micro and small ones, mainly in the fields of business growth and internal restructuring.
  • Date of launch of the instrument and end date (if applicable): launched in 1996, but developed significantly after 2004 and especially after 2008 as the result of the National SME Service network strategy devised in 2008 by PARP, the Ministry of Economy and representatives of the Consultation Centre network. No end date foreseen.
  • Initiator/administrator (organisation): Polish Agency for Enterprise Development (PARP)
  • Other involved actors and their roles:
    • Regional Financing Institutions (RFI): They act as PARP’s partners in the process of implementation of policies towards SMEs (like commerce chambers, foundations). The RFIs are for the most part regional development agencies or other institutions that have an established record in the field of SME development. Every RFI runs Consulting and Advisory Centres. 16 RFIs are in operation, one in each voivodeship, they are public entities.
    • Consultation Centres: they are maintained by entities registered in the National SME Services Network and provide free information services for entrepreneurs and persons planning to start business activity in the scope of broadly understood enterprise development and available forms of support for entrepreneurs. 51 Consultation Centres are currently in operation, they are public entities.
    • National Innovation Centres (KSI): they is a group of service providers rendering advisory pro-innovative services consisting in, inter alia, conducting technology audit, assessment of entrepreneur’s potential and technological needs and conducting the process of technology transfer. 40 KSIs are currently in operation.
  • Source of funding: European Funds, primarily Submeasure 2.2.1 ‘Support and development of institutions providing services for entrepreneurship and its networks’ of the Operational Programme Human Capital.
  • Target group/eligibility/coverage: SMEs and persons planning to start business activity. All-Poland coverage.
  • Phase of restructuring targeted: Anticipation of change
  • Type of restructuring targeted: Potentially all types of restructuring
  • Purpose/content/characteristics/description of services provided: The KSU is a network of approximately 200 non-commercial organisations cooperating with each other, which provide broad advisory, information, training and financial services (both in the form of loans and subsidies) for micro, small and medium-sized entrepreneurs and entities undertaking business activity.
  • Outcome of the instrument (e.g. number of beneficiaries, effects): In the years 2004 – 2006, Consultation Centres provided more than 107,500 information services, free of charge, to almost 77,000 customers. With time the number of services kept rising and in 2010 only, the Consultation Centres serviced almost 68,500 clients. A complex evaluation of the system in 2009–2010 showed the high efficiency and substantial impact of the programme on micro enterprises and start-ups.
  • Strengths/success factors of the measure: When entrepreneurs from SMEs were asked about the greatest strengths of KSU in a survey conducted in 2011, 52.2% of respondents pointed to it as providing advice and assistance to entrepreneurs and all people planning to set up their own business.
  • Weaknesses/bottlenecks of the measure: The same survey asked about the greatest weaknesses of KSU and 61% entrepreneurs answered that the information about this system is insufficient. Same percentage of entrepreneurs, 61%, declared that they have not used the KSU because they didn’t know about it.
  • Was the instrument formally monitored/evaluated? If so, please specify (by whom, how, what were the finding and how were the findings used etc.)
  • Weblink: http://ksu.parp.gov.pl/pl/o_nas or http://en.parp.gov.pl/index/index/1871
  • Information sources used for filling this section: Report from a survey ’the image of National SME Services Network’, PARP 2011 (in Polish); SBA factsheet Poland 2010/2011, European Comission, Enterprise and Industry (in English); Directions of granting public support 2007 – 2013, Ministry of Economy 2008, www.ksu.parp.gov.pl/pl, http://en.parp.gov.pl/index/index/1871

Commentary

State policy towards SMEs in restructuring is multidimensional. It addresses both the anticipation of change and management of change stages, but more instruments are provided for the former. It has the potential to address all types of restructuring but it seems that the focus is largely on business expansion, internal restructuring and bankruptcy/closure.

The issue of actual availability of public support instruments for SMEs remains open. There is still room for improvement in many areas, for example, adapting the bureaucratic procedures of acquiring support to abilities of SMEs, the pace of granting support and popularising public support instruments among entrepreneurs.

Ewelina Kuźmicz, Institute of Public Affairs

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