European Cash to Support Polish Innovation
January 30, 2014
Deputy Prime Minister and Infrastructure and Development Minister Elżbieta Bieńkowska talks to Andrzej Jonas and Andrzej Ratajczyk.
European funds have played an important role in how Poland has developed in recent years. But isn’t their importance often overestimated? In reality, they are only a tool for supporting public and private investment.
That’s true. Funds are a tool for carrying out planned investment projects. And, as I often say, even without European money, we would certainly be undertaking the necessary projects. However, we would not be able to complete them within 10 years. It would take 30 years to do so. So without any doubt EU funds have accelerated Poland’s development.
EU funds are not an unconditional gift. To get them we need to invest a lot of money from our own coffers as well...
First of all, European funds are not a gift because some of these resources come from Poland’s own contributions to the EU budget. At the moment we meet the criteria that enable us to be a net recipient and not a net contributor during the next seven-year-long budget period. But this will end in 2020. Secondly, we need to supplement these funds with a lot of our own funds. For example, under the 2007-2013 budget, which ends in 2015, we will invest about 70 billion euros from European funds and 45-50 billion euros as our own contribution. In total, this will amount to 115-120 billion euros worth of investment.
Under the EU’s next multiannual financial framework, we will be spending even more money from our own coffers. We estimate that we will need to add almost twice as much to the around 82.5 billion euros that we have received. Total spending by 2023 may amount to 150 billion euros. Due to the fact that we have decided to invest much more in private businesses, companies will have to finance half the value of their project from their own resources. Meanwhile, in the case of public investment projects, the minimum contribution is often only 15 percent.
It seems that the public in this country is not aware of Poland’s own contribution to investment projects involving EU funds...
We have been trying to highlight this contribution of the Polish government and businesses, but perhaps this is not sufficiently clear. The Ministry of Regional Development [the predecessor of the Ministry of Infrastructure and Development] primarily focused on getting its job done.
Because there’s not enough information, a section of the public in Poland believes that the government is not making any investment effort on its own, and that the country’s development is exclusively due to European funds.
That is a completely mistaken belief. It is proved wrong by the amount I quoted earlier when it comes to the value of investment projects financed from Poland’s own coffers under the 2007-2013 multiannual financial framework, which is coming to an end— 45-50 billion euros. And it’s worth remembering that an investment project must be fully financed from the Polish budget first and Brussels refunds part of the costs only after the project is completed. Therefore, in terms of accounting, these projects had to be included among the government’s expenses and then we have to wait for reimbursement from the EU budget. And this involves hefty amounts, reaching zl.60-70 billion in 2010-2011.
To what extent do projects undertaken by the government and involving European funds contribute to public debt? The general impression is that public debt in Poland is growing exclusively due to poor government policies. Isn’t it the case that it’s also growing because of all of the projects that have been carried out in Poland in recent years?
Certainly, to an extent, investment projects influence public finances. That’s why, together with the finance minister, we try to plan projects so that public debt is under control all the time. And this is not easy. It is worth noting that, for example in 2010, we spent about zl.60 billion from the national budget, while we received under zl.30 billion in reimbursement from the EU. Each [Polish] budget from 2008 onward had to take into account these huge amounts. And there had to be a very precise plan for spending this money. Therefore, since 2008 the amount of investment spending and the detailed spending program have required the approval of the whole government. We’ve been closely watching the level of spending. This is one of our most important tasks.
How will EU funds available under the 2014-2020 budget be distributed? Will the government’s investment policy priorities change?
The priorities will be different, yet the changes will be evolutionary rather than revolutionary. We are still going to spend a lot on infrastructure—clean transport, railways, public transit. There will be a lot of money for that. Energy will be important, including the security of energy supply, renewable energy sources, and energy efficiency.
Businesses will surely feel the biggest changes. There will be significantly more funds than in the previous budget, but these will be made available in the form of loans rather than grants. And this means that it will be possible to use the same funds several times. After one businessman returns the loan, the money will be used to support another businessman.
The allocation of funds targeted at businesses will also change considerably. Our goal is to change the approach of Polish businesses to creativity. Polish companies are doing well in business terms and are already experienced on foreign markets, but they are not very innovative. They rarely use their own technology in their production processes; they tend to buy licenses and know-how abroad instead.
And we need to change that. The point is to make sure that Poland is no longer seen as a country of well-educated but relatively cheap labor. Given the size of the country and its economic and scientific potential, we should have several areas that will be our hallmark internationally. And they will provide ideas and solutions that will be bought by foreign companies. Because that’s where the biggest money is to be made.
How can European funds help develop innovation in Poland?
This purpose will be served by the Smart Growth program, which is 90 percent targeted at businesspeople. A view has been repeated over the years in Poland that not enough money is being spent on research and development and innovation. This is not entirely true. Public spending on research and development is sufficient, but private spending is very small. In all Western European countries or the United States, which are the main suppliers of technology, research is primarily financed by private businesses, not from the state budget.
Funds available under the Smart Growth program will go to businesspeople, who will themselves decide how these funds should be spent. Businesspeople themselves will decide what kind of research should be carried out to enable the development of new, innovative products. Researchers should offer services that companies will be able to use in their business. We hope the proposed solutions will bring new quality to the collaboration between business and science and stimulate the development of innovative companies in Poland.
What will happen after the end of the EU’s new budget?
I am convinced that in seven to eight years from now major infrastructure problems will be solved and Poland’s largest cities will be connected by a network of expressways. But my dream is for the country to develop several distinct specializations for which it will be known in the world by then. The beginnings of such specialization can be seen in the aerospace industry, where Polish designers and engineers work with the world’s largest aircraft manufacturers. And we should have at least two or three such areas.
What other areas could become a Polish specialty in the future, in addition to the aviation industry?
It seems to me that one such area is the energy sector, especially when it comes to the use of coal, which is plentiful in Poland. Another Polish specialty should be modern medical technology, particularly that related to cardiology and transplants, for example face transplants.
Do you think that the money from the EU budget will help Poland become a strong and well-developed economy by 2022?
I believe so. I would like us to celebrate when another period of building and developing the country ends in 2023—instead of being worried that we will no longer be getting such big money. Because this will mean that we’ll be at a stage of development where we will no longer need such a level of support.
Poland has already spent most of the funds available under the ending EU budget, but not all the projects financed with European money are up to scratch...
With such a scale of investment, it is difficult to avoid some mistakes. And certainly it is possible to find places where projects have been carried out that do not meet our expectations, that fail to spur the economy and do not contribute to regional development. But this is a marginal percentage. Projects involving aqua parks, whose construction on such a large scale has often been criticized, account for less than 0.2 percent of European funds spent. And half of these facilities are doing well and contributing to the development of local entrepreneurship.
If we compare Poland to other countries, then we really have nothing to be ashamed of. If those evaluating projects in the European Commission—and, after all, not all of them are our friends—shared the view that we do not spend funds effectively, then Poland would not have been granted the 82.5 billion euros in the new EU budget. This was our main argument in the negotiations—that we spend funds at an appropriate pace and with good results. And if there are mistakes, our own supervision system, and not EU officials, detects these. The few cases of irregularities in spending EU funds, involving road projects or information technology, are nothing compared to what is happening in other countries. In some countries, the European Commission has blocked all programs.
The EU’s 2014-2020 budget imposes new terms and conditions for spending EU funds. If a country fails to spend money on a specific purpose, these funds will not come back to that country. Does that mean that the project selection criteria will be tightened and that procedures will become more complicated?
Definitely a finer sieve, so to speak, will be used in the filtering process that projects will have to go through. As far as projects under the Smart Growth program are concerned, an important issue is the selection of very good experts to assess projects, which are often very specialized—to make sure that, on the one hand, dubious projects do not sneak through, and, on the other, that good ideas are not blocked, because we also had such situations in the past.
For sure it will be a more difficult budget because if irregularities are found in some projects or in the way in which they are carried out, it will not be possible, as was done previously, to transfer funds to another project. Instead, the money will revert to the European Commission. And this is where the greatest danger lurks. That’s why we are already working to make sure that potential beneficiaries are prepared for the fact that our procedures will be more demanding.
When will the first projects financed under the new EU budget get under way?
At the beginning of January, the government approved a package of programs that will be negotiated with the European Commission. We want these negotiations to last half a year, instead of a year as was the case under the previous budget. On the other hand, in the case of public investment projects, Jan. 1 was the kick-off date for qualifying projects to be partly funded from the new budget. In practice, it looks that for almost a year we will be financing public investment projects from the Polish budget and only after the negotiations end will we begin to submit invoices to the European Commission.
In Polish politics it is rare for a government minister—let alone a deputy prime minister—to be unaffiliated. Do you intend to keep things this way or are you thinking of joining a political party?
I have been a nonpartisan minister in the government for six years and have no plans for becoming a member of any party.
Elżbieta Bieńkowska comes from Mysłowice, a town in the Silesia region in southern Poland. A graduate of oriental studies at the Jagiellonian University in Cracow, she also studied at postgraduate level at the National School of Public Administration (KSAP) and earned an MBA degree from the Warsaw School of Economics (SGH).
Throughout her professional career, she has dealt with European funds. In 1999-2007 she headed the regional development department at the Silesia Province Chairman’s Office.
In 2007, Bieńkowska became regional development minister. On Nov. 27, 2013, she was appointed deputy prime minister and infrastructure and development minister. She is responsible for the strategic development of the country, including overseeing the spending of EU funds.
She ensured that Poland fully used up the EU funds it was allocated for 2004-2006 and oversaw the distribution of almost 68 billion euros that Poland received for the 2007-2013 period.
One of her responsibilities is to ensure that funds from the EU’s 2014-2020 budget are spent effectively. Her duties also include management of transport infrastructure (roads, railways, air traffic and shipping) and overseeing construction and housing policies.
Married with three children (Michalina, Mateusz and Zofia), Bieńkowska divides her time between her work in Warsaw and her home in Mysłowice. She likes to listen to music, including when at work. Her favorite vacation destination is the Balkans. She likes animals and has always had two or three dogs, most of them adopted from the street.
2013 Chair of the Year Goes to Elżbieta Bieńkowska
EU funds have been driving Poland’s development over the past several years, and managing these resources is the responsibility of Elżbieta Bieńkowska, a government minister since 2007. Until recently she was responsible for regional development; in the wake of a government reshuffle in late November her portfolio was expanded to include transport.
Bieńkowska has earned a reputation as something of an “iron lady” figure. She enjoys an exceptionally strong position in the government. She is a woman of character and energy. She combines her considerable responsibilities at work with her duties as a caring mother of three. Competent and relentlessly practical, she is down to earth and stays away from day-to-day politicking. However, she does not shy away from confrontation if she deems it necessary.