KE raport EN - World Bankdocuments.worldbank.org/curated/en/693011496056300360/pdf/115314... · Maciej Gruza, Austin Kilroy, Jan Szczucki, Maciej Gajewski, Maciej Drozd, Wojciech

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OVERVIEW REPORT

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March, 2017

© 2017 International Bank for Reconstruction and Development / The World Bank1818 H Street NW, Washington DC 20433Telephone: 202-473-1000; Internet: www.worldbank.org

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ACKNOWLEDGEMENTS

This report was prepared by a core team comprised of Paul Kriss (TTL), Marcel Ionescu-Heroiu (TTL), GrzegorzWolszczak, Margo Hoftijzer, Dorota Tekieli-Bisiñska, Elista Panayotova, Dariusz Wiatr, Jerzy Toborowicz,Krzysztof Malicki, Andrzej Kaznowski, Micha³ ¯ukowski, Anwar Aridi, Piotr Stronkowski, Jakub Rozenbaum,Maciej Gruza, Austin Kilroy, Jan Szczucki, Maciej Gajewski, Maciej Drozd, Wojciech Sacha, Tomasz Ka³u¿ny,Dmitry Sivaev.

The team would like to thank Commissioner Corina Cret‚u for initiating the Initiative, Minister Jerzy Kwieciñskifrom Poland’s Ministry of Economic Development for his invaluable support, and the European Commission’steam for outstanding engagement and support, especially Mr. Patrick Amblard, Mr. Wolfgang Munch,Ms. Justyna Podralska, Ms. Magdalena Horodyñska, and Ms. Karolina Tilman.

The team would also like to thank Arup Banerji, Marina Wes, David Sislen, Carlos Pinerua, Cristian Aedo,Paulo Correa, Jean-Francois Marteau, Christian Bodewig, Isfandyar Zaman Khan and John Nasir for the adviceand guidance provided throughout the elaboration of this report and Agnieszka Boratyñska, BarbaraNowakowska, Ma³gorzata Michnowska and Piotr Bezmian for their excellent support, and the otherWorld Bank team members, who helped allowed this initiative to take place: Patrizia Poggi, Daria Goldstein,Ma³gorzata Garlicka, Ma³gorzata Bargilewicz, Filip Kochan, Adina Vintan, George Maier, Marius Cristea.

The team is also indebted to all counterparts for the support offered in the elaboration of this study,the timely feedback, the excellent collaboration throughout, and their passion for developing their regions,especially: from the Podkarpackie Marshal Office: Danuta Cichoñ, Bartosz Jadam, Anna Lorynowicz, Agnieszka£apa-Krzywonos; Jerzy Baran; from the Œwiêtokrzyskie Marshal Office: Grzegorz Orawiec, Tomasz Janusz,Sylwia Mucha, Kamila Kêpczyñska-Kaleta, Stanis³aw Janiszewski, Aleksandra Marcinkowska, Ma³gorzata Muzo³,from the Ministry of Economic Development: Renata Calak, Joanna Koœcicka-Posiewka, Anna Banaszczyk,Piotr Krasuski, Pawe³ Zdun, Hanna K¹dziela, Beata Pojawa; from the Ministry of Justice: Minister £ukasz Piebiak,Aneta Jakubiak-Miroñczuk; from Rzeszow University: Sylwester Czopek, Józef Cebulski, Barbara Oskroba,Grzegorz Wisz; from Rzeszow University of Technology: Mariusz Oleksy, Grzegorz Budzik, Maciej Sza³acha,Artur Polakiewicz, Agnieszka £abaj; from University of Information, Technology and Management: WergiliuszGo³¹bek, Agata Jurkowska-Gomu³ka, Grzegorz Karpiuk, Wojciech Pitura; Members of the VET Working Group:Joanna ¯urawka, Renata Antos, Dominik Kraska, Dariusz D¹browski, Aleksandra Marcinkowska, Stanis³awPiskorek, Ma³gorzata Krawczyk-Blicharska, Bogumi³a Wyrzykowska, Mariusz Urbañski, Marianna Poddêbniak,Tomasz Tworek, Marcin Perz, Mi³osz Pamu³, Anna Jastrzêbska, Czes³aw Golis, Krzysztof £ysak, Dorota Tekieli--Bisiñska, Bart³omiej Zarzycki, Edyta Smolich, Mariusz Majewski, Micha³ Zubek, Jerzy Krawczyk, KatarzynaBilska; representatives of local authorities of Staszów and Sandomierz: Leszek Kopeæ, Marek Bronkowski,Micha³ Skotnicki, Stanis³aw Masternak, Benedykt Kozie³, Marian £atkowski; representatives of enterprisesand business support institutions: Michael Sven Popiel de Boisgelin, Marian Guz, Wojciech Skowron,Karol Kaczmarski, Marek Mika, Halina Siemaszko, Janusz Stasiak; from the Dolnoœl¹ski Development Fund:Marek Ignor and the representatives of all the financial intermediaries implementing projects withinthe Podkarpackie Regional Operational Program 2007–2013; from courts in Kielce, Kraków, Rzeszów,and Bia³ystok: Tomasz Wojciechowski, Bogumi³a Majcher-Gniewek, Les³aw Zawada, Gra¿yna Gubernat,Wojciech Major, Jan Klocek, Halina Ci¹g³o, Anna Rurarz, Justyna Bartkiewicz-D¹bek, Katarzyna D¹browska--Doroszczyk, Bo¿ena Koncerewicz, Pawe³ Hempel, Iwona Ciborowska; the researcher team responsiblefor background analysis of both regions: Tomasz Komornicki, Konrad Czapiewski, Grzegorz Gorzelak,Maciej Smêtkowski, Adam P³oszaj.

The report was completed in March 2017.

The European Commission’s Catching-up RegionsInitiative in Poland – An Overview /9

Background /10

Why was Poland chosen as one of the pilots /11

Why were Podkarpackie and Œwiêtokrzyskie chosen as the targetregions /12

Why was the World Bank selected to provide technicalassistance /12

How was the scope of work defined? /13

Project implementation /14

Key success factors /15

Next steps /16

Overview of Initiative Results /19Vocational Education and Training (Swietokrzyskie) /21

Why? /22

How? /22

What was achieved? /23

Lessons learned /24

The Podkarpackie Center for Innovation (Podkarpackie) /27

Why? /28

How? /29


Lessons learned /33

Activating Entrepreneurship in Deprived Areas(Podkarpackie and Swietokrzyskie) /37

Why? /38

How? /39


Lessons learned /43

Easier Business Registration(Podkarpackie and Swietokrzyskie) /45

Why? /46

How? /46


Lessons learned /51

Financial Instruments (Podkarpackie) /53

Why? /54

How? /54


Lessons learned /56

CONTENTS

POLAND CATCHING-UP REGIONS – OVERVIEW REPORT | 9

THE EUROPEANCOMMISSION’SCATCHING-UP REGIONSINITIATIVE IN POLAND– AN OVERVIEW

Background

The mandate of the EU Cohesion’s Policyis to narrow development gaps and re-duce disparities between Member Coun-tries and regions. To this extent, around€454 billion of ESI (European Structuraland Investment) Funds have been allo-cated to help EU regions become morecompetitive in the 2014–2020 Program-ming Period. However, not all EU regionshave been able to fully take advantageof the benefits, due to the effects of the2008 economic crisis and to a host ofstructural problems.

Consequently, Corina Cret‚u, the Commis-sioner for Regional Policy, with the TaskForce for Better Implementation, has ini-tiated the Lagging Regions Initiative.

The purpose of the Initiative is to identifyconstraints to growth in less developedregions, and to provide targeted assistan-ce and actions, aiming to unlock theirgrowth potential. Thus, lagging regionswill be assisted, involving a broad range ofstakeholders (regional and local admini-strations, educational institutions, businesssupport institutions, SMEs, entrepreneurs,investors, NGOs, IFIs) to help respondto concrete needs they have. This is meantto maximize the impact of regional invest-ments. Two types of lagging regions havebeen identified in the EU:

LOW GROWTH REGIONS, which co-ver the less developed and transitionregions that did not converge to the EUaverage between the years 2000 and2013 in Member States with a GDP perCapita (PPS) below the EU averagein 2013. These include almost all the lessdeveloped and transition regions in Gree-ce, Italy, Spain and Portugal.

LOW INCOME REGIONS, covering allthe regions with a GDP per Capita (PPS)below 50% of the EU average in 2013.This group covers the less developed re-gions of Bulgaria, Hungary, Poland andRomania.

Poland and Romania are the first coun-tries to pilot this initiative, with tworegions each – Œwiêtokrzyskie and Pod-karpackie in Poland, and North-Westand North-East in Romania. In Poland,the initiative (subsequently renamed thePoland Catching-up Regions Initiative)was undertaken with the World Bankas a partner, while in Romania it was theJoint Research Center of the EuropeanCommission that has coordinated theactivities. Following the work carried outin the four selected low-income regionsin Poland and Romania, the EuropeanCommission plans to also focus on a se-lection of low-growth regions.

10 | THE EUROPEAN COMMISSION’S CATCHING-UP REGIONS INITIATIVE IN POLAND – AN OVERVIEW

Figure 1. Lagging Regions in the EU

Source: DG REGIO


Why was Poland chosen as oneof the pilots

The choice to focus on Poland was quitepurposeful, both because of Poland’ssize and the wide-ranging challengesits regions face, and because of its re-markable development story. Poland’seconomy took off in early 1990s andcontinued its growth into the new mil-lennium. In 2004, Poland joined the EUand in 2008, it officially became a HighIncome Country, according to the GNIper Capita Atlas method of the WorldBank. As such, Poland is one of the fewcountries that managed to overcomethe ‘middle-income trap’ in recent deca-des, and one of the very few big coun-tries (it had a population of around38 million in 2014) that has well mana-ged this transition1.

Poland is also a very good performerwith regards to the absorption of EUfunds. For the 2007–2013 ProgrammingPeriod, it had the largest allocation ofstructural funds in the EU (around 67 bil-lion Euro). While Poland’s performanceover the last years is remarkable, itscontinuous concern in the context ofthe EC’s cohesion policy is the impactof EU funds. Over the 2007–2013 Pro-gramming Period, Poland absorbedmost of the EU funds allocated throughvarious operational programs. A largepercentage of these funds was directedto bridging the infrastructure gap andconstructing transport, urban, water and

wastewater, environmental, educational,sanitary, and other infrastructure assets.

During the 2014–2020 programming pe-riod, there was a shift in focus, awayfrom hard infrastructure assets towardsaddressing systemic aspects of compe-titiveness, innovation, and entrepreneur-ship. This shift acknowledges that whileit is critical to consolidate the progressmade, it is equally important to ensurethat the Cohesion Policy achieve a betterleverage effect than in other EU MemberCountries (e.g. Greece, Portugal, Spain,or Italy). These countries invested heavilyin connective and other infrastructureyet did not significantly improve thequality of their human capital resourcesand business environment. The objectiveof the policy change is also to identifyways in which Poland could soon com-pete with the top performing econo-mies in the world.

The Polish Government and the Euro-pean Commission were particularlyinterested to find ways to improve theperformance of lagging regions, andidentify ways to spur growth and inno-vation in their economies. Consequently,in April 2016, Commissioner Cret‚u, offi-cially launched the Lagging RegionsInitiative together with Marshall Jarubasin Œwiêtokrzyskie and Marshall Ortylin Podkarpackie.

1 A majority of countries that have overcome the middle-income trap are city states (e.g. Singapore,Hong Kong, Taiwan) or relatively small countries (e.g. Israel, Lithuania, Latvia, Estonia, Slovenia)

Why were Podkarpackieand Œwiêtokrzyskie chosenas the target regionsAccording to the DG REGIO definitionof lagging regions, in 2016, five NUTS 2regions (voivodships) in Poland wereconsidered to be lagging (i.e. theyhad a GDP per Capita (PPS) below50% of the EU average): Warmiñsko--Mazurskie, Podlaskie, Lubelskie, Œwiê-tokrzyskie and Podkarpackie. To betteraddress the challenges they faced,the Polish Government set up a sepa-rate national operational program – theOP Eastern Poland, with a total alloca-tion of 2 billion Euro for the 2014–2020Programming Period. In addition, theEuropean Commission was interestedto identify ways these funds canachieve the highest potential impact,by honing on specific bottlenecksand challenges, and identifying waysin which the bottlenecks could be re-moved and the challenges addressed.

The DG Regio Poland Desk team prepa-red detailed analytical sheets on all fivelagging regions in Poland. Podkarpackieand Œwiêtokrzyskie were chosen as tar-gets for the Catching-up Regions Initia-tive (CRI) pilots because of the relativelydifferent challenges they faced despite

their geographical proximity, and be-cause of the potential of scaling up therelevant lessons learnt from the initiativeto other lagging regions. For example,Podkarpackie has registered in recentyears a relatively high level of privateR&D expenditure (particularly in theaviation industry), but a low rate of for-mation of spin-offs and innovative start--ups, in addition to a relatively poor con-nection between private companies andacademic institutions. Œwiêtokrzyskiealso registers a low level of entrepre-neurship and innovation, while at thesame time facing difficulties in matchingthe skills of school graduates to actualneeds of private companies (particularlyindustrial enterprises).

Another key factor in choosing these tworegions was the willingness of the regio-nal governments in Podkarpackie andŒwiêtokrzyskie to actively participatein the implementation of the Initiative.Finally, the Ministry of Economic Deve-lopment was consulted throughout theselection process, to ensure seamlesscoordination between the Government’splanning and operational work.


Why was the World Bankselected to provide technicalassistanceThe European Commission and the WorldBank share a long-standing partnershipfor development, ranging from the jointfinancing of infrastructure projects to theprovision of technical assistance to EUand non-EU countries. The EC consideredthe World Bank to be capable of bringingits technical and operational expertise,

as well as its convening power and roleas an honest broker to address some ofthe constraints facing the lagging regions.It was assumed that by combining itsoperational expertise with its globalknowledge, the World Bank would deli-ver strategic development outcomes andrespond to key development challenges.

In turn, the World Bank sees the Euro-pean Commission not only as a strategicdevelopment partner, but also as an in-valuable source of knowledge for pro-perly tailoring development solutions.The European Commission is arguablyone of the most efficient developmentinstitutions in the world, and is to a largeextent, responsible for helping several

of its Member Countries overcome themiddle-income trap and become high--income economies (see table below).This is one of the reasons the WorldBank has dubbed the EU the “Conver-gence Machine“2. It is looking to learnrelevant and applicable lessons, fromthe EC’s activities, to its other clientcountries.


Table 1. Development performance of a selection of EU countries

Year EU CandidacyNegotiation was started

Year the countrybecame a EU member

Year the country becamea high-income country

Croatia 2003 2013 2007

Czech Republic 1995 2004 2004

Estonia 1995 2004 2006

Greece 1975 1981 1987

Hungary 1994 2004 2006

Ireland 1968 1973 1986

Latvia 1995 2004 2008

Lithuania 1995 2004 2008

Poland 1994 2004 2008

Portugal 1977 1986 1994

Slovak Republic 1995 2004 2005

Spain 1977 1986 1987

2 World Bank. 2012. Golden Growth: Restoring the lustre of the European development model

For the Poland Catching-up RegionsInitiative, the teams working togethermobilized both international and localexperts, to properly respond to the va-riety and complexity of the issues to beaddressed. A core coordination team has

been set-up in the Bank’s Warsaw office,to ensure efficient and expedient com-munication between the teams on theground, the regional and national stake-holders, the project leadership, and theEuropean Commission’s team.

How was the scope of workdefined?The European Commission has a deepengagement with the national govern-ment of Poland and with the regionalgovernments. As such, one of the firststeps in the preparation of the Poland Lag-ging Regions Initiative was the definitionof action plans. The Action Plans focused

on key challenges (e.g. unemployment,lack of innovation, structure of the econo-my) that need to be addressed and keybottlenecks (e.g. slow business registration,poor interactions between research insti-tutions and the private sector, poor coor-dination between private companies and

vocational training schools) that need to beovercome to achieve better regional deve-lopment outcomes.

Once the action plans have been prepa-red, they were used as a foundation bythe regional authorities in Podkarpackieand Œwiêtokrzyskie to prepare a list of keyactions needed to address these bottle-necks and challenges. The Bank teamprovided advice and recommendationsthroughout, but it was the representativesof the regional governments, the Ministryof Development, and the European Com-mission which steered the discussion.

After a comprehensive list of actions wasprepared for both regions, a number ofmeetings were organized with all relevantstakeholders (the regional governments,the Ministry of Economic Development,the European Commission, and the WorldBank), to prioritize the action list and iden-

tify the actions the Poland LRI would focuson. Once these key actions were identi-fied, further discussions helped identifydetailed sub-actions and the final scope ofwork. The World Bank organized and hel-ped facilitate these discussions in its War-saw Office. Enabling all the stakeholdersto meet on “neutral ground“ made fora much smoother discussion and amoreexpeditious decision making process.

Once the scope of work was properlydefined, with all vested stakeholdersin agreement, the European Commissionsigned an Administration Agreementwith the World Bank. The Bank was thusformally engaged as a provider of tech-nical assistance and operational mana-gement for the Poland CRI. The wholeprocess moved quite quickly, with theAdministration Agreement being signedin June 2016, two months after the multi-stakeholder negotiations were started.


Project implementationThe first step of implementation was theidentification of the team. A mix of inter-national and local experts (a total of 22)were interviewed over a two-week period,and 7 were selected to be part of the core

technical team. In addition, a core coordi-nation team was established in the Bank’sWarsaw Office, to ensure proper com-munication between the various stakehol-ders and experts involved in the project.Arrangements were made for frequentinteractions with local and regional stake-holders on the ground. Autonomousteams were established for each definedactivity, with the technical work coordina-ted by an activity leader and a team ofexperts. Each activity team was presentin the field at least once per month,to ensure the proper collection of data andinformation, and to swiftly respond to theneeds and requests of regional stakehol-ders. This ensured progress was steadilymade on the defined actions.

In addition, monthly Steering Commit-tee meetings were organized with allstakeholders present. The scope of theSteering Committee meetings was to:1) assess progress of the work to date(short monthly progress reports were

Figure 2. A Poland CRI Steering Committee meeting

prepared in preparation for the mee-tings); 2) discuss problems/issues en-countered along the way; 3) proposenext steps to be taken; and 4) agree ona change of approach or additional/different work to be completed. The

frequency of the steering committeemeetings ensured that all problems/issues that arose were identified andaddressed in a timely manner, avoidingwasting time and resources later in theprocess.


Key success factorsWhile the first phase of the Poland CRIhas just been completed, it is safe to saythat it has been a success. The docu-ments that summarize the key resultsand findings of the Initiative are a goodtestament to what could been achievedin a short amount of time. Some of thefactors that have helped make the Po-land CRI a success are listed below:

• Buy-in and involvement of regio-nal stakeholders. Development is allabout people. The best ideas, tools,and policies cannot achieve the properdevelopment impact if they are notaccepted by the right people. The factthat the regional stakeholders in Pod-karpackie and Œwiêtokrzyskie as wellas in the Ministry of Economic Deve-lopment and the European Commis-sion were fully involved in the project,from the definition of its activities tothe implementation of the recom-mendations, made the difference

• Integration with existing opera-tional programs and strategies.While the actions that were targetedunder the Poland CRI are distinct andwell-defined, it was important thatthey were not designed indepen-dently of existing strategies and pro-grams, and rather in a complementa-ry fashion – i.e. they helped achievesome of the key issues proposedin the existing national and regionalstrategies and programs

• Dedication, commitment, and le-verage of European Commissionteam. The European Commissionteam did not only finance the Initiative.

It was actively involved throughout.The EC team did not only review allof the outputs produced; it monitoredthe activities on the ground and work-ed as a mediator when difficult deci-sions had to be taken. The involvementof the EC in every step of the process,ensured a smooth progress of the workand an efficient and effective responseto the challenges and bottlenecks thatappeared along the way

• Periodic steering committee meet-ings. While preparing frequent pro-gress reports and meeting at short timeintervals can be quite demanding forall involved, it turned out that thesefrequent meetings and discussionswere a key ingredient to the success ofthe Initiative. Without these meetings,it would have been possible for smallproblems to turn into big problems,which in the end would have beenmuch more difficult to overcome

• Local coordination. While internatio-nal experts helped provide key tech-nical knowledge, it would have beenvery difficult to keep the Initiativetogether and running smoothly. Overthe course of the project, 75 peopleworked on 5 activities and delivered25 distinct outputs. While internationalexperts helped provide key technicalknowledge, it was crucial to combineit with and adjust to the local contextand needs. Without the proper coor-dination of all these efforts on theground, it would have been difficultto deliver all the required results in theallotted time-frame. While internatio-nal experts helped provide key techni-

cal knowledge, it would have beenvery difficult to keep the Initiativetogether and running smoothly

• World Bank expertise. The WorldBank combines operational expertisewith sectoral know-how, and hasunique advantage in dealing withtechnical assistance projects focusedon development issues, particularlyprojects that have a strong operatio-nal/implementation focus. In addi-tion, the World Bank acts as an honestbroker, focused on achieving concre-te development results (rather thangenerating a profit), and has the con-vening power required to bring diffe-rent stakeholders around the table

• Hands-on approach. The EuropeanCommission has designed the acti-vity as a hands-on activity, with thepurposeful direct involvement of allrelevant stakeholders. This approachwas geared towards achieving con-crete, tangible results rather than

just a proposal of recommendations.As such, concrete results were achie-ved throughout the implementationof the project, with different stakehol-ders responsible for achieving theseresults

• Ambitious but pragmatic objecti-ves. The EC team has defined fromthe start a number of ambitious objec-tives, which could realistically beachieved within the allotted time-line(i.e. 9 months). For example, the WorldBank’s sub-national Doing Businessin Poland3 report identified a numberof concrete steps that could havebeen undertaken by national, regio-nal, and/or local public administra-tions to improve the ease of registe-ring a business. Several of these steps(e.g. changes to the governmentalportal on e-business registration, bo-nuses for district court staff, advertise-ment of e-business registration plat-form) were followed through toachieve concrete results


Next stepsWith the completion of the activitiesdefined under the Poland LRI, the Euro-pean Commission asked the World Bankto continue its engagement, with a focuson another three activities. This, in essen-ce, will be the second phase of thePoland CRI. Some of the activities will bea continuation of activities from phase 1of the Poland CRI (the PodkarpackieCenter for Innovation in Rzeszow), whileothers will be completely new (proposalof a program to encourage thermo--modernization of single family housesin high air-pollution areas and help pre-pare terms of reference for the develop-ment of spatial plans for two localities/areas).

Some of the key findings of the PolandCRI have been captured in a Commis-sion Staff Working document titled“Competitiveness in low-income andlow-growth regions: The lagging re-gions report“4. It includes both an over-view of the key recommendations madeunder the Poland CRI, as well as a num-ber of concrete results that have beenachieved during the implementation ofthe project.

Separate from the Poland CRI, the WorldBank allocated resources of its own toresearch and identify solutions to thechallenges faced by lagging regions allover the EU. This work is coordinated

3 The report can be accessed at:http://www.doingbusiness.org/~/media/WBG/DoingBusiness/Documents/Subnational-Reports/DB15-Poland.pdf4 The report can be accessed at:http://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/lagging_regions%20report_en.pdf

with the programming unit of DG Regio,with a focus on re-thinking EU’s regionaldevelopment policy for the 2021–2027Programming Period. Some of the keyactivities included in this Lagging Re-gions work include: a proposal of alter-native definitions for lagging regions(beyond using simple GDP thresholds);a look into the importance of cities andfunctional urban areas for regionalgrowth and development; an inquiryinto alternative financial instrumentsthat could complement EU grants; solu-tions for improving the business environ-

ment so that regions are more attractiveto private investment. This strand ofwork will be finalized in June 2017, witha second phase planned for July 2017– June 2018.

At a larger scale, the European Com-mission is discussing extending the ini-tiative to other EU Member Countriesand regions, including low-growth re-gions. Within Poland, the DG RegioPoland Desk is working with the PolishGovernment to roll-out the results of thePoland CRI to other regions in Poland.



OVERVIEWOF INITIATIVERESULTS


VOCATIONALEDUCATIONAND TRAINING(SWIETOKRZYSKIE)

Why?

Worldwide, Vocational Educationand Training (VET) is receiving in-creasing attention, particularly asa potentially useful instrument toaddress high unemployment ratesamong youth. With the general two-pronged objective of (on the one hand)improving the employment and ear-nings potential of VET graduates, and(on the other hand) addressing skill con-straints of firms, VET is considered asa possible means to improve the align-ment of skill supply with demand.

The benefits of gaining practical workexperience through in-firm learningas part of VET are widely recognized.Work-Based Learning (WBL) is the ap-proach through which students acquireessential skills by participating in activitiesin enterprise premises, including on-sitetraining as well as particularly by participa-ting in actual business operations. WBL,when implemented effectively, providesstudents both with relevant practical skills,as well as with essential socio-emotionalskills, such as the ability to work in teams,problem solving, and discipline.

In Œwiêtokrzyskie (as in Poland ge-nerally), VET provision in upper-se-condary level technical schools isstill largely school-based. Less than9 percent of Polish students engagein practical activities on firms’ premisesbeyond the obligatory four weeks thatstudents are required by education re-gulations to spend in firms throughouttheir training program. While data onthe scope of in-firm learning experien-ces of students of technical schoolsare not available at the regional level,it is generally assumed that the inciden-ce and duration of WBL for studentsin Swietokrzyskie are below the nationalaverages.

The absence of a sound WBL mecha-nism in upper secondary VET is con-sidered both to prevent studentsfrom building the skills that preparethem for a productive workingcareer, and to constrain private sec-tor growth by not exploiting oppor-tunities to build a labor force thatis equipped with market-relevantskills.

22 | VOCATIONAL EDUCATION AND TRAINING (SWIETOKRZYSKIE)

How?The approach taken to strengthenWBL implementation in Swietokrzy-skie consisted of four phases, ofwhich three were supported bythe Catching-Up Regions Initiative.The first phase comprised the identifi-cation of the main strengths and challen-ges to effective WBL implementationin Œwiêtokrzyskie – and to an extentin Poland as a whole. The second phaseconsisted of a review of practices appliedin other countries to address the main

challenges that were identified in thepreceding analysis, and an assessmentof the replicability of these practicesin Œwiêtokrzyskie. During the third phase,a program to pilot interventions tostrengthen WBL was designed, and ap-proved to benefit from EC funding. Thefinal phase, implementation of the pilotproject, is expected to take place duringthe period of 2017–2020, and is thereforebeyond the scope of the Catching-UpRegions Initiative. (Figure 3.)

The approach applied was characte-rized by an intensive involvement ofkey stakeholders in the region. Con-sidering that a crucial element of soundWBL implementation comprises effec-tive coordination and collaboration ofvarious stakeholders (firms, VET provi-ders, public authorities, social partners),intensive efforts were made to engagethese actors in the implementation of

this activity as well as with each other.This included regular consultations withthe regional VET Working Group (esta-blished to inform the Catching-Up Re-gions Initiative on VET), regular consul-tations with individual and groups ofstakeholders in the region, and partici-pation of a varied group of stakeholdersin a study tour on WBL that was organi-zed in Latvia.


Figure 3. Sequence of activities in the ‘Catching-up regions’ initiative

What was achieved?Successful outcomes were achievedin three key areas: (1) stakeholderengagement and capacity building;(2) knowledge generation; and (3)a clear design for a pilot project thatis expected to be financed by the ESF.Combined, these three elements havecreated a strong foundation for impactfulfuture interventions to strengthen WBLboth in Swietokrzyskie and in other re-gions in Poland.

Adequate engagement of WBL sta-keholders, particularly enterprises,is notoriously difficult to achievein contexts where VET provision islargely school-based. Through the in-tensive consultations and stakeholderengagement activities that were carriedout as part of this activity, key stake-

holders in the region (including privatesector representatives) have become in-creasingly engaged and have contribu-ted substantially to the design of the pi-lot project (see below). Moreover, as partof this engagement, crucial stakeholdercapacity on the benefits of WBL and oneffective implementation approacheshas been developed.

The analysis on strengths and weak-nesses for WBL implementationin the region, complemented withthe review of relevant internationalapproaches to address key weak-nesses, has resulted in substantialknowledge generation on the bestway forward to promote WBLimplementation in Swietokrzyskie.The main conclusions and recommenda-

tions resulting from these analyses arethe following:

• The key areas for improvementto strengthen WBL implementa-tion are: 1) strengthen the governan-ce and financing framework for WBL;2) establish effective mechanisms forstakeholder consultation and coordi-nation; 3) create adequate incentivesand capacity of VET providers; 4) cre-ate adequate incentives and capacityof firms; 5) establish appropriate qua-lity assurance mechanisms for WBL;and 6) ensure a facilitating role byCentres for Practical Training (CPT);

• It is recommended to strengthenWBL in Swietokrzyskie by applyinga comprehensive approach, simul-taneously addressing all identifiedareas for improvement, since they arestrongly intertwined and mutually rein-forcing. This approach will allow crea-ting a ‘virtuous cycle’ where improve-ments in each dimension will also pro-mote improvements in the others.

• It is recommended to focus onthe main structural impediments,through a pragmatic approach tar-geting the ‘lowest hanging fruit’which will allow showcasing earlyresults. Concretely, this approachimplies that in the early stages of WBLimplementation, participating stake-holders will most likely be concentra-ted among larger-size and more com-petitive firm, better-managed VETproviders, and higher performing stu-dents for which there is particularlystrong demand in the labor market.

As WBL implementation becomesmore entrenched, increasing partici-pation is expected of smaller-sizedfirms, weaker VET providers, and stu-dents who are more difficult to placein firms.

The pilot project that was designedwith support from the Catching-UpRegions Initiative will pilot a varietyof approaches to strengthen WBL.In addition to strengthening VET imple-mentation in the region during the pro-ject implementation period (2017–2020),the project is expected to generate les-sons learned that will serve to informfurther interventions to strengthen WBLafter 2020, both in Swietokrzyskie andin other regions in Poland. The projectwill establish a grant mechanism to pro-vide financing to regional stakeholderswho develop viable pilot approachesfor WBL implementation which meetthe minimum criteria established forproject implementation. The pilot pro-ject will address identified constraintsrelated particularly to capacity and in-centives through a combination of finan-cial support and technical assistance.In addition, the project’s design includesvarious elements to ensure that the les-sons learned generated through thepilots can feed into future activities tostrengthen WBL in Swietokrzyskie andbeyond (including the development oftemplates and other guidance material,the inclusion of stakeholders that mayemerge as leading actors of future struc-tural support mechanisms, and a soundmonitoring and evaluation mechanismwhich will record lessons learned andgood practices).

24 | VOCATIONAL EDUCATION AND TRAINING (SWIETOKRZYSKIE)

Lessons learnedA main takeaway from this activityis that, with the right mix of activi-ties (see section 2 above), substantialprogress can be made in a relativelyshort period of time. Moving froma starting point characterized by a limi-

ted knowledge base, weak stakeholdercommunication, and the absenceof a clear and shared understandingamong key stakeholders of the benefitsand objectives of WBL, to a point wherea sound project has been designed

through a strong consultative processwith stakeholder who are committedto its implementation, is evidence thatinitiatives such as the Catching-Up Re-gions Program can be a very effectiveway to ‘kick-start’ important reforms,particularly in case of interventionswhich require the involvement of a largenumber of stakeholders and there isno obvious ‘champion’ to initiate theseactivities.

Particularly considering the manystakeholders involved, transactioncosts are relatively high and couldpotentially be reduced in future ini-tiatives. In addition to the relativelylarge number of regional actors, stake-holders involved in this activity includedvarious national level ministries, EC direc-torates, and World Bank departments.Transaction costs related to ensuringeffective coordination among these va-rious actors could potentially be reducedby ensuring strong(er) up-front clarity onboth the objectives and approach to

implementation of this activity, and onthe coordination mechanisms that willbe applied during implementation.

Whereas the Pilot Project will ensurethat activities to strengthen WBLwill continue in the short to mediumterm, additional efforts will be requi-red to ensure that lessons learnedgenerated to the project are dissemi-nated and applied. The likelihood ofsuccessful implementation of the pilotproject (including the generation ofgood practices and lessons learned) is in-creased through the envisaged procure-ment of strong external technical assis-tance under the pilot project. However,ensuring that lessons learned are usedto strengthen WBL beyond the projectand, particularly, beyond the Swieto-krzyskie region, is beyond the scope ofthe project and will require additionalefforts, which would potentially be mostappropriately led by a national-levelactor such as, for example, the Ministryof Education.



THE PODKARPACKIECENTER FORINNOVATION(PODKARPACKIE)

Why?

This report is an implementationfocused document that proposesa solution for addressing the problemof unexploited potential in the Pod-karpackie R&D ecosystem (in particu-lar, relatively low, although graduallyincreasing, level of intensity of busi-ness – university collaboration). Thisproblem was jointly identified by theproject partners: the European Commis-sion, the Podkarpackie Marshal Office(MO), the Ministry of Economic Develop-ment (MoED) and the World Bank (WB).A single regional technology transferoffice (TTO) was found to be a preferredoption to tackle the challenge. The maingoal of this report is to present a model ofsuch a TTO – a proposed PodkarpackieCenter for Innovation (PCI) – that resultedfrom a joint effort of key local stake-holders: MO, universities, local enterprisesand their representatives. The PCI is a de-tailed and comprehensive concept whichincludes specific organizational and go-vernance solutions as well as their legaland financial underpinnings.

The Podkarpackie region is performingcomparatively well on some key indi-cators of innovation. R&D expendituresper capita were on par with the nationallevel in 2014 (€90), and almost five timeshigher than in 2007 (€20). On this measurethe region ranks fourth among 16 Polishregions. In terms of private R&D expen-ses the Podkarpackie regions ranks thirdamong Poland’s regions, after Mazowiec-kie and Malopolska. Despite negative na-tional trends, the number of students (andin particular, students of technical universi-ties) in Podkarpackie grew significantlyover the last years, making Rzeszow thetop European city in terms of the numberof students per 1000 inhabitants (almost50 thousand students in a city of nearly190 thousand citizens).

The Podkarpackie innovation ecosy-stem has five specific opportunitiesfor improvement in the university-

business R&D cooperation realm.The issues include: (1) the rate of creatingtechnology start-ups (in particular, a lowrate of R&D-based start-ups foundedas a result of research performed at thelocal universities) is below the region’spotential; (2) the levels of licensing re-venues generated by the region’s univer-sities may be significantly improved;(3) the level of utilization of the localuniversities R&D equipment for com-mercial purposes is low and could besignificantly increased (this applies as wellto the level of revenues derived fromcontract research that is based on thatequipment); (4) the involvement of thelocal corporations in the joint university--business collaboration, even thoughgood in some areas by Polish standards(example: the Aviation Valley clustercompanies and their cooperation withthe Rzeszow University of Technology,RUT), falls short of its potential; (5) localstudent successes in national and interna-tional level competitions could be moresystematically translated into subsequententrepreneurial success. In recent yearsthe Podkarpackie universities and com-panies have achieved significant succes-ses in these five areas, however, theirfurther intensification is necessary forthe Podkarpackie innovation ecosystemto become one of the leaders in thecountry.

The root causes behind the unex-ploited potential of the Podkarpackieinnovation system lie first in the still--limited competencies, financial re-sources and capacity to deliver (main-ly in areas of valorization and structu-red contract research), and secondlyin the fact that an entrepreneurialethos at the main two local state--owned universities is still in the earlystage of development. This problemaffects researchers, students and universi-ty support personnel alike. While the localuniversities began efforts to strengthentheir commercialization capacity (e.g.,

28 | THE PODKARPACKIE CENTER FOR INNOVATION (PODKARPACKIE)

the RUT operates both a sizeable techno-logy transfer center (TTC) and a specialpurpose company (SPC)), the schoolstypically lack the concentrated criticalmass of skills necessary for successfulcommercialization of university-born R&Dresults. This stems in part from their over-all shortage in Podkarpackie, and partlyfrom a dispersion of these skills acrossmultiple players of the Podkarpackieinnovation ecosystem (such as univer-sities, regional development agencies,technology parks, clusters, incubators,accelerators, etc.). The limited business--science R&D collaboration stems prima-rily from the misaligned incentive sys-tem for the researchers, constraints notallowing commercial utilization of theuniversities’ R&D equipment and diffe-rences in the organizational cultures ofcorporate and science worlds that areadifficult to match. As of today R&D colla-boration with business does not generatesufficient benefits (e.g., in terms of pa-rametric evaluation by the Ministry ofHigher Education, revenues and researchopportunities) for either the universitiesor researchers to more evenly balancetheir priorities among basic research,education and applied research. In addi-tion, leading European universities andTTOs acknowledge that the presenceof a strong entrepreneurial ethos at the

universities is an important ingredientof successful innovation ecosystems.For that reason, initiatives that shapeinnovation-oriented attitude among stu-dents and provide them with opportu-nities to prototype and experiment havebeen gaining popularity.

The aforementioned improvementopportunities are only partially ad-dressed by the existing TTCs of thelocal universities and by the national--level programs and instruments.The TTCs do a very good job at sometasks, mostly internally focused (e.g.,support on IP issues, administration ofresearch grants, etc.), but have neitherthe scale, nor the required competenciesor resources to significantly ramp up mar-ket-oriented, demand-generating activi-ties: grow licensing revenues, increasethe level of university-originated start--ups that base on R&D, proactively mar-ket services, which leverage the universi-ty R&D equipment or spur the entrepre-neurial efforts of the students. The reportalso shows that PCI will be complemen-tary (and not duplicative) to the national-level programs meant to stimulate com-mercialization of university-born R&D(such as BRIdge Alfa or the Fast Track)and entrepreneurship (such as Starter andothers).


How?Project was divided into several sub-tasks with clearly described outputs.These were: i) designing a unified data-base that describes universities’ R&Dequipment with the greatest commer-cialization potential, ii) describing re-gion’s supply of and demand for R&Dservices, iii) supporting universities in de-vising of the methodology for freeing--up the 20% of capacity of their R&Dequipment purchased with the contri-bution of EU funds, iv) designing a modelof a single TTO for the Podkarpackie re-gion.

The concept of PCI is a result of con-sultations with all key local stakehol-ders. The MO, universities (universitymanagement, TTCs, researchers, stu-dents) and enterprises have been activepartners in designing the PCI model,and during multiple individual interviewsand workshops they have contributedcomments and tested the feasibilityof subsequent versions of the proposedmodel. They also expressed support forthe three-platform PCI concept, thoughthe design is still a work-in-progressand its details are likely to evolve during

the implementation stage through 2017.The Podkarpackie universities will bevitally interested in such a design of thePCI that will enhance the progress re-cently achieved by their TTCs (e.g., RUT).Subsequent iterations helped improvethe model, but also raised awarenessand mutual understanding of variousperspectives among the stakeholders.This report proposes a number of detai-led solutions, especially regarding PCI’sactivities, governance, team selectionand financing to illustrate the currentstate of the concept’s development, and

set up a foundation for further imple-mentation work.

Combining national and internatio-nal knowledge made the PCI modelmore robust. Study visits to successfultechnology transfer offices in Europe,such as the Toulouse Tech Transfer(France), LRD Leuven (Belgium) and theAalto Design Factory (Finland), as wellas learning from Polish case studieshelped incorporate good practices anddistill some key success factors for a re-gional TTO.


What was achieved?This report recommends creatinga professional business-university in-terface, the Podkarpackie Center forInnovation (PCI), to comprehensivelyaddress identified needs of the Podkar-packie innovation ecosystem. In prin-ciple, the PCI will help link businesses anduniversity researchers, develop key skillsof university researchers and administrativestaff necessary for R&D collaboration, sup-port R&D projects by providing resources(money, skills, knowledge), and stimulatestudents’ entrepreneurship. By intensifyingsuch a collaboration thanks to a proactive,market-oriented attitude and envisagedearly commercialization successes, the PCIwill contribute to further strengtheningthe ethos of business-university coopera-tion at the local universities. An alternativeapproach was also considered; it wouldfocus on building up the capacity of indi-vidual TTCs and SPCs currently operatingat the universities. However, this approachwas found to be suboptimal due to thelack of economies of scale (a certain criti-cal mass is needed to make a TTC work),scope (it involved too big fragmentation ofneeded skills and competencies), and thepossible lack of additional financing thatwould need to come from the universities.

Creation of a relatively independentprofessional entity (PCI) to help acce-lerate commercialization and techno-

logy transfer processes seems an ef-fective and efficient choice. Such anapproach allows attracting private sec-tor talent to intensify business-academiacollaboration, while also building up ca-pacity of the universities in a mid-termhorizon (by working hand-in-hand withthe PCI, the universities will learn in prac-tice key principles and good practicesof commercialization). Creating an entitythat gathers competencies in R&D pro-ject valorization and contract researchunder one roof (thus creating scale andscope economies), and has a stable mid--term financing model will help jumpstart business-university collaboration.R&D-based innovation usually requiresseveral years to yield results. A five-yearperiod seems sufficient to prove effec-tiveness of the proposed solution andto demonstrate to the local stakeholdersthe value added of such an entity.

The PCI will aim at increasing univer-sities’ revenues from licensing of R&Dresults and certain kinds of contractresearch, and enhancing the rate ofcreation of IP-driven start-up compa-nies. These are the three key measure-able indicators that will define the successof the PCI. Increasing revenues fromcommercialization of universities’ IP andcontract research can further translateinto their enhanced R&D capacity and

stronger acceptance of the entrepre-neurial ethos among academics. This cancreate a virtuous circle mechanism and,in turn, lead to a continuous increase ofuniversity revenues.

The PCI will complement the work ofTTCs and SPCs in several ways. First,by providing experienced private sectorpeople, who could coach and assist re-search teams in developing their inven-tions. Second, by proactively reaching outto entrepreneurs and marketing servi-ces that could be offered by universities.Third, by co-financing promising appliedresearch work performed by scientists.Fourth, by helping upgrade existing R&Dequipment to increase its commercialpotential. Collaboration with the PCI willbenefit TTCs and SPCs at least in threeimportant ways, while at the same timewill not add an extra burden to theirongoing operations. First, enhancing thecapacity of TTC/SPCs’ staff (learning bydoing); secondly, raising awarenessand entrepreneurial ethos among re-searchers, staff and management; finally,accruing real financial benefits from theenhanced business-science collaboration

(i.e., increased revenues from licensingand royalties from spin-offs based on theuniversity-originated R&D and revenuesfrom structured contract researched per-formed at the university equipment).

A PCI team will operate three activityplatforms (R&D project valorization,structured contract research, and theProtoLab). Platform 1 will perform R&Dproject valorization tasks, thus raisingthe TRL (Technological Readiness Level) ofthe funded projects to the point wherecommercialization becomes possible. Plat-form 2 will focus on taking advanta-ge of universities’ R&D equipment beingfreed up5; it will do so by marketing struc-tured, repeatable contract research servi-ces that leverage this R&D equipment.Platform 3 will target Podkarpackie uni-versity students; it will foster entrepreneu-rial culture among them by providinga facility and tools to prototype theirinventions and experiment in an interdisci-plinary atmosphere. Through those plat-forms, the PCI will support the local uni-verses (and their TTCs and SPCs), as well asPodkarpackie innovative enterprises, stu-dents, and young researchers (Figure 4).


Figure 4. A model of the Podkarpackie Center for Innovation

Description: SPC – Special Purpose Company, SLA – Service-Level Agreement, PCI – Podkarpackie Center for InnovationSource: The World Bank

5 The “freeing up” of universities’ R&D equipment means that up to 20% of that equipment’s capacitycan be used for ancillary purposes; in practice, this means for commercial use

Selecting and nurturing promisingR&D projects (Platform 1) will be thefocal point for PCI. These will be R&Dprojects at a Proof-of-Principle (PoP) andProof-of-Concept (PoC) stages that aremainly initiated at the local universities.

PCI will add value to these projects in se-veral ways:

• Increase the TRL of the projects (e.g.,by providing external market andtechnical expertise) from the level of

approximately TRL 2-3, which isa standard technology level whena R&D project leaves the basic re-search stage, to the TRL 6-9, whichare close to commercialization eithervia licensing (direct commercializa-tion) or setting up a start-up company(indirect commercialization)

• Prepare grant applications for obtain-ing financing for further R&D workthat aim at raising the projects’ TRL,e.g., from the Fast Track program runby the National Center for Researchand Development or EU’s Horizon2020 (synergy with the national, inter-regional and European programs),as well as help attract external inve-stors (e.g., venture funds, businessangels, etc.)

• Provide advisory services (strategicand tactical) and hands-on assistanceon securing the intellectual propertyrights (IPR) position of the selectedR&D projects

• Provide advisory services and hands--on assistance on business strategy,marketing, staffing and businessdevelopment to the selected R&Dprojects.

The structured contract research (Plat-form 2) will concentrate on matchingdemand for and supply of such R&Dresearch services. The supply side willmostly focus on the local universities(20% of the freed-up capacity), while thedemand side should encompass entitiesbeyond the Podkarpackie region andbeyond Poland. Acting in accordancewith its demand-driven mission, the PCIwill not simply act as an intermediaryin the re-sale of R&D services providedby the universities, but instead it willassist companies in seamlessly acquiringthese R&D services and will assure thehigh quality level of such a service.The PCI will focus on a specific sub-seg-ment of R&D services that are performedat the universities’ R&D equipment,namely ones that are of standardized,repeatable nature, hence the name “stru-ctured contract research”. This meansthat the PCI will not deal with highlyspecialized, one-off research projects

that require specialized consulting ex-pertise of researchers. These expertise--based services will continue to be provi-ded by the individual professors andlabs, while the existing TTCs will conti-nue to be the primary conduit for suchwork.

The ProtoLab (Platform 3) is a physi-cal space equipped with basic toolsand machines that allow for construc-ting prototypes. The main idea behindthe ProtoLab is to offer students and re-searchers from all Podkarpackie universi-ties an opportunity to learn and experi-ment with various production technolo-gies in interdisciplinary teams. Studentsand young researchers will be ableto build Proof-of-Concept prototypesresulting from their R&D projects, as wellas learn using some rather basic equip-ment (e.g. electrical equipment, basic 3Dprinters, basic lathe, milling machines,etc.) which will be accessible 24 hoursa day. Experimentation could be targe-ted at students and researchers’ ownideas or it can be focused on ideassourced from the public and private sec-tors. When more sophisticated equip-ment is needed to complete a proto-type, appropriate arrangements couldbe made with a university to use its facili-ties. Hence the ProtoLab will offer stu-dents an opportunity to prototype in theway that is currently difficult to matchin the framework of the existing studentscientific associations (interdisciplinarycharacter, flexible access, availability oftools, etc.).

Key players in Podkarpackie under-stand that PCI’s success is a long--term undertaking and requires con-tinuous nurturing and support fromthe region’s business, political andacademic leaders. Its success dependson visionary decision makers, effectiveplanning and implementation, andstable strategic support from the privateand the public sector. Podkarpackiestakeholders are aware of that and ex-press desire to develop the PCI, selectthe best possible management team,offer it a degree of autonomy and finan-ce it in the start-up years, because theyunderstand that its success can benefitall of them.


The PCI should be set up as a limitedliability company, with mixed public--private shareholding and managedby the competitively selected teamof top professionals. PCI’s sharehol-ding will include a private entity repre-senting the management team, the MO,and possibly other parties (e.g., the Cityof Rzeszow or local corporations). The lo-cal universities will be actively engagedin PCI’s operations thanks to participa-tion in its governing bodies (the Supervi-sory Board and Resource AllocationCommittee). At the current stage, uni-versities are not expected to contributefinancially to the PCI, their CTTs andSPCs will have a status of the main“client” of the PCI.

The PCI’s management team has to becompetitively selected in an openprocedure to ensure that best possi-ble professionals manage the Cen-ter. The management team has to havehands-on experience in both technologyinvesting and R&D commercialization,and has to be willing to commit to imple-ment PCI’s mission on the ground in Pod-karpackie. An agreement between the

MO and PCI will spell out clear goalsto attain and well-aligned incentivesto motivate the management team toachieve high performance.

Approximately PLN 70M is neededto fund the launch and the initial5 years of PCI operations. The PCI willaim at full financial sustainability in thelong-term, yet public resources will con-stitute indispensable support in theshort- and medium-term. Internationalexperience shows that it usually takesaround ten or more years for a TTOto become nearly or completely finan-cially self-sufficient and that public fundsplay a facilitating role in their success.It is assumed that the PCI will generateincreasing revenues, thus its dependen-cy on public funds will diminish overtime. Initially, the PCI will be funded fromthe Podkarpackie Regional OperationalProgram (ROP). It is expected that about16% of the initial 5-year period PCI ex-pense base can be covered by revenuesgenerated from PCI activities. That per-centage will gradually increase, allowingfor PCI to reach a break-even point afterapproximately 15 years from its launch.


Lessons learnedResearch commercialization is a com-plex non-linear process. Over the lastdecade, the Podkarpackie and nationalinnovation support programs have beenstrongly investing in the supply sideof R&D. Thanks to these initiatives, thePodkarpackie universities are currentlyequipped with top quality R&D equip-ment. This project addresses the issue ofR&D demand as well as provision of thehigh quality R&D services. This will beaccomplished by the creation of PCI,which will act as a platform to facilitatecommunication and collaboration be-tween businesses and researchers.

Top-level leadership encouragedthe development of the concept andoversaw its design. There were two

champions of the concept. First, thePodkarpackie Marshal Office devoteda lot of energy into the work on thePCI concept and in the assembling ofa coalition supporting the PCI concept.The MO is willing to implement this inno-vative concept that requires a conside-rable amount of flexibility, vision andhard work. Second, the European Com-mission supported the PCI idea, givinga green light to ROP modification in or-der to allow PCI financing. The two par-ties also gave a strong backing to theidea that PCI’s management should bemade up of the most competent profes-sionals available on the Polish (and evenEuropean) market, and that it should beselected in an open and competitiveprocess. Such a strong top-down leader-

ship and support should also ensure pro-per implementation of the PCI conceptas well.

To exploit the commercial potential ofthe R&D equipment, the universitieshave to first free up the so-called“20% of capacity” of their equipment.The term “freeing-up of R&D equipment”refers to the process of amending thecontracts (annexing) to purchase R&Dequipment and accompanying infrastruc-ture, which were signed by universitiesseveral years ago. Recent decisions by theEuropean Commission make it possibleto amend those contracts in a way thatallows “up to 20% of equipment’s capaci-ty” be used for “non-essential purpose”(ancillary). Because the R&D equipmentand infrastructure was purchased with theintention of being used for primary re-search or educational purposes, in practice“non-essential purpose” means the use ofR&D equipment for applied research andcommercial applications. Amending thesecontracts in underway and requires pre-paring a methodology and proceduresfor monitoring the utilization of the R&Dequipment’s capacity that was freed-up.

Pooling together universities’ resour-ces for commercialization seems com-plex; accomplishing it will require

time and goodwill. Specialized profes-sional skills for R&D commercializationare in short supply at the Podkarpackieuniversities. Early in the PCI design,the universities ruled out a proposal ofcreating a single, joint SPC (owned byall universities) that would pool theirresources to tackle R&D commerciali-zation. For that reason, the PCI modelassumes that each university will conti-nue with own SPC (that will be thecounterparty to the PCI). By showinga commercialization success, the PCIconcept is to gradually convince the uni-versities that scale and scope matter, andmake them more receptive to collabora-te with each other and pool resources.

To ensure the sustainability of thePCI, it has to have a clear value pro-position for the key stakeholders.The PCI will have to prove that it is ableto generate higher rate of R&D colla-boration between the universities andbusiness that could be measured bya higher rate of innovative R&D projectsand start-up companies, higher licen-sing fees or royalties, higher rate of stu-dent collaboration with businesses.Table 2 presents selected benefits tothe stakeholders of the Podkarpackieecosystem from increased intensity ofthe R&D collaboration.


Table 2. Selected benefits for major stakeholders resulting from a high intensity of R&D collaboration

Universities(SPCs, TTCs) Inventors Students Enterprises Region Investors

• More potentialclients foruniversity IPand contractresearch work

• Potential forprivate fundingof research work

• Increasedattractiveness ofuniversitiesto potentialstudents

• Ease of attractinginvestors

• The “networkingeffect” (easierto find skilledpeople, makebusinesscontacts, etc.)

• Attractive localemploymentopportunities

• Supportiveenvironmentfor youngentrepreneurs

• Increased valueof degrees fromlocal universities

• Access to skilledstudent baseand R&D

• Innovation flowsup and downthe supply chain

• Easier access touniversity-basedR&D

• Higher taxrevenue base

• Ability to attractdirect investment(including FDI)

• Positivespill-over effectinto otherindustries

• Attractive pipelineof potentialprojects

• The “networkingeffect” (easierto find the rightmanagers, skilledpeople for targetcompanies)

Source: The World Bank

Some universities may require moretime to realize full benefits of the PCIand enhanced R&D collaborationwith business. The Rzeszow University(RU), can be a more demanding partnerfor the PCI to collaborate with, becausetheir R&D cooperation with businessis at an earlier stage of developmentcompared with that at the technicalschools, like the RUT. For instance, theRU has to still set up its own SPC anduse it to commercialize its IP. The RUTalready possesses a SPC, its TTC employsover twenty staff, and the school hasmuch longer tradition of successfulR&D collaboration with business.

Quality matters – the top professio-nals are a “must-have” for the successof the PCI. All interviews with successfultechnology transfer offices pointed outthe same key success factor, i.e., the qua-lity of people. They are the driving forceand they will decide about the successor failure of the PCI. Good, experiencedprofessionals who understand the sensi-tivities of the university environmentand are devoted to the mission of thePCI will have to form the core of the PCImanagement team. Involving compe-tent and committed people will also beimportant for other parties involved,such as the MO, the universities and thePodkarpackie companies.



ACTIVATINGENTREPRENEURSHIPIN DEPRIVED AREAS(PODKARPACKIEAND SWIETOKRZYSKIE)

Why?

Increased growth and competitive-ness of SMEs is a key part of Podkar-packie and Œwiêtokrzyskie regionalefforts to address ‘lagging regions’.At the voivodeship level, both regionshave a relatively low number of registe-red enterprises and low number of start--ups per capita. Moreover, exports forma relatively low share of regional income(see Figure 5). This is problematic, sinceexports have a symbiotic relationshipwith firm-level productivity and innova-tion, as well as bringing new income intothe regional economy. At the poviat

level, some areas suffer particularly seve-rely from a lack of jobs, low incomes,and uncompetitive firms.

Preparatory research by the WorldBank team revealed some key in-sights on SMEs in the lagging areas.These insights are described in more de-tail in the main report and its Annexes,and are based upon in-depth interviewswith 40 SMEs in the two regions duringmid-2016.

• Almost all interviewed SMEs werefinding it tough to compete, insideand outside their region. Most SMEswe interviewed were competing oncosts and price, because of a lack ofdifferentiation of their product com-pared to competitors (thus makingit difficult to earn a premium price).Most SMEs compete in markets whereonly minimal quality standards are re-quired, thus they are stuck in a race tothe bottom on price. SMEs (especiallysmaller ones) are often subcontractorsto larger firms, and have little power tonegotiate prices because their pro-ducts are widely available, and thusthey cannot exercise market power.

• However, SMEs in both regionshave potential to grow. Examplesare demonstrated by a few SMEs,producing tradable goods and servi-ces, that have successfully differen-tiated their products, establisheda ‘niche’ or brand, and have quicklyexpanded, creating more jobs and in-creasing their revenues from exports.Examples include: a producer of hand-made glass decorations that now hasnational and foreign buyers and isincreasing its production capacity;a manufacturer of specialized mirrorsthat has increased its production ca-pacity 25 times in the last 10 years.

In recent years, publicly-funded bu-siness support measures have focu-sed on Business Support Institutions(BSIs) as interlocutors to providemarket advisory and other servicesto SMEs. However, our team’s inter-views suggested there is a shortage ofsuch services. SMEs declared a need anda willingness to pay for a range of con-sultancy services, but often would pay,“as long as it is of good quality. Some-times it turns out we know more thanthe ‘expert.’” SMEs also recognizedthe need, and the potential benefits,of group services, but were unwilling to

38 | ACTIVATING ENTREPRENEURSHIP IN DEPRIVED AREAS (PODKARPACKIE AND SWIETOKRZYSKIE)

Figure 5. Exports as a share of GDP – lowerin Podkarpackie and particularly in Œwiêto-krzyskie than elsewhere in Poland

Source: Analysis of Chamber of duty data fromKomornicki & Czapiewski, 2016.

pay for them (fearing difficulties in imp-lementation, and a risk of ‘free-riding’by SMEs who did not pay). Thus thereis a desire to make these services moreresponsive to firms’ needs.

The European Commission asked theWorld Bank to assist in the develop-ment and implementation of a sys-tem to stimulate uptake of servicesby SMEs. The World Bank was askedto propose how SMEs can better takeadvantage of services offered by publicinstitutions in lagging areas, and to re-commend how to adjust services provi-ded to SMEs by the BSIs in the region.The team was asked to focus on fourpoviats as a means to understand theeconomic opportunities and needs of‘lagging areas’: Brzozów and Le¿ajskin Podkarpackie; and Sandomierz andStaszów in Œwiêtokrzyskie.

The aim of an Enterprise Competi-tiveness Scheme (ECS) would be tohelp SMEs compete more successful-ly in local, regional, and international

markets. In practice, this means helpingdeclining and stagnating SMEs get outof their downward trend, and helpingSMEs with constrained potential beco-me ‘rising champions’. Some SMEs havestrategic investment plans, but had notimplemented them; others had no planto get out of their situation; and the mostsuccessful firms will need to furtheradapt and sustain their competitiveniche in existing or new markets.

Based on this range of needs, a di-versity of services will be required– often customized at the individualSME level. Consulting services to sup-port the growth of SMEs must be specia-lized according to particular industriesand particular firms. For example, marketopportunities to export apples will bedifferent to those to export glass decora-tions, and assistance needs will vary bybusiness size, management structure,willingness to take risks, and so on. It isreasonable to assume that delivery ofthese services will need to be tailored tothe needs of each firm.


How?The proposed Enterprise Competiti-veness Scheme (ECS) was designedthrough the following process:

(i) Assessment of demand and needsfor business development servi-ces by SMEs – including though

in-depth, one-on-one interviews

with 40 SMEs in the targeted lag-

ging districts;

(ii) Assessment of current supply ofbusiness development services,through interviews with approxima-tely 20 BSIs;

(iii) Stakeholder group meetings (dis-cussion seminars) with the autho-rities in the four targeted poviats du-ring June 2016;

(iv) Review of prior schemes and‘good practice’ documentation.The team accounted for patterns

observed in successful schemeselsewhere in the world;

(v) Internal team design proposals.In order to lessen the risk of ‘group-think,’ the team of five core mem-bers split into two groups and in-dependently designed proposals.The team coordinator then selectedthe best features from each one;

(vi) Technical discussions with theMarshals’ Offices of Œwiêtokrzy-skie and Podkarpackie, during tech-nical seminars in November/Decem-ber 2016;

(vii) Key decisions put to the projectSteering Committee, which consi-dered several alternative options foreach major element in the scheme’sdesign;

(viii) Economic and Financial Analysis,

which aims to forecast the approxi-

mate impact of the ECS scheme,including an analysis of the coreassumptions and their effects on thescheme;

(ix) Final report drafted and peer re-viewed. Three peer reviewers withsubstantial and diverse experiencewere chosen: two from within theWorld Bank (senior and lead econo-mists), and one Professor from War-wick Business School, UK, who isa recognized expert on SME vou-cher schemes;

(x) Feedback and comments incor-porated. Comments were received

from the European Commission, thePolish Ministry of Economic Deve-lopment, the Marshal’s Office ofŒwiêtokrzyskie, and the Marshal’sOffice of Podkarpackie. A SteeringCommittee in February 2017 deci-ded on the remaining unresolvedissues, and the final report was re-vised accordingly.

In designing this project, the teamwas keen to mitigate a number of keyrisks associated with supportingcompetitiveness of SMEs. These aresummarized below in Figure 6.


Figure 6. Opportunities and typical problems with enterprise support schemes

Therefore, several ‘good practices’of successful comparison projectswere incorporated in the design ofthis scheme:

• Scheme is based on SMEs’ needs ana-lysis (i.e. the scheme design is demand--led);

• Clear policy objectives (i.e. increased abi-lity of SMEs to compete successfully);

• Simple and clear application criteria,and low-entry barriers comparedwith traditional grant programs;

• Flexibility in use of vouchers (i.e. reci-pients should have some freedom todecide on the best uses);

• Availability of an independent advi-sor, to provide objective guidance toSMEs.

What was achieved?

The Enterprise Competitiveness Sche-me (ECS) is proposed to offer threewindows for enterprise support ser-vices: Operational; Strategic; andGroup. In all three windows, SMEs will

receive public financial support for co-fi-nancing of business advisory services toimprove competitiveness and contributeto regional economic growth. A summaryof each window is provided in Table 3.


Table 3. Three windows for SMEs: Operational, Strategic, and Group

1. OPERATIONAL 2. STRATEGIC 3. GROUP

Target SMEs

SMEs need to improve, refine,or expand existing operations– but perceive servicesas expensive and of uncertainquality / benefit.

SMEs need to change firms’orientation, develop newproduct(s), or enter newmarket(s) – but perceiveservices as expensive and ofuncertain quality / benefit.

SMEs need to release someconstraints that afflict severalSMEs collectively – butperceive services asexpensive and of uncertainquality / benefit.

Eligible SMEsTradable goods & services only (agribusiness, light manufacturing, tourism, etc).

Excludes retailers and other non-tradable local services.

Example services

• Smaller, simpler marketingactions, website preparation;

• Assistance entering foreignmarkets (basic information);

• Elaboration of applicationsfor commercial financing;

• Legal services;

• Specialized training;

• Managerial training.

• Strategic business planning,product development(branding; differentiation;innovation);

• Production processimprovements (costoptimization & efficiency);

• Assistance entering newforeign markets (tailoredstrategy).

• Services provided to a groupof firms to achieve jointobjectives (e.g. regionalbranding; tourism jointproducts; export promotion;market intelligence; industrytrends; client recognition).

Anticipated budget6 Approx. 14% of total Approx. 42% of total Approx. 22% of total

Rate of co-financingECS provides

50% of contract valueECS provides

60% of contract valueECS provides

85% of contract value

Value per voucher7 5 000 PLNto 12 500 PLN

15 000 PLNto 120 000 PLN

120 000 PLNto 2 000 000 PLN

Max duration 12 months 18 months 24 months

Application processby SMEs

Simple single-stage (formaleligibility of SME and service)

Two-stage (eligibility +diagnostic assessment)

Via a consortium

Information platformAll service providers and tenders searchable on single centralized website

(one per voivodeship)

Verification Short report on completion Report every 3 months

6 These window sizes are guidelines and can be reviewed according to demand. The remaining 22%is estimated for overhead costs: the ECS Administrator; ‘ECS marketplace’ website; IAs; EvaluationCommittee; and internal costs of the Marshal’s Offices.7 These values show the contribution from public resources. The total size of the services contractwill be larger, e.g. the 12 500 PLN maximum for an operational voucher will yield a 25 000 PLN servicescontract (@ 50% co-financing rate), and the 120 000 PLN maximum for a strategic voucher will yielda 200 000 PLN services contract (@ 60% co-financing rate).

Full eligibility criteria are providedin the report on this activity, but weshould highlight two ‘radical’ propo-sals here:

• Recommendation to exclude firmsof less than three employees. Therationale for this proposal is that95% of all firms in the two regions aremicro-size (less than 10 employees),but firms of between zero and twoemployees have yet to prove them-selves capable of scaling-up andcontributing to regional job growth.Other programs exist to assist microfirms and start-ups; meanwhile, thisscheme is designed to help existingsmall firms scale-up and increase theircompetitiveness. Firms with three tonine employees can be consideredto have ‘self-selected’ as possessinggrowth potential.

• Recommendation to include onlyfirms engaged in the productionof tradable goods and services.Tradable goods and services are thosethat can be traded across geography,rather than produced and consumedonly in a local market8. The exclusivefocus on tradable goods and servicesis for three reasons:i. Tradable goods and services in-

crease export revenue, or diminish

leakage of income through im-

ports, hence contributing most di-rectly to regional income growth;

ii. Firms engaged in producing tra-dable goods and services are com-

peting predominantly with firms

outside the poviats and regions

(therefore there is less danger ofsupporting some firms at the ex-pense of other firms in the samearea – i.e. a ‘win-lose’ situation);

iii. Export-oriented tradable goodsand services are a route to higher

productivity and innovation.

This eligibility requirement does notmean that recipient firms are already

exporters: rather, they are engagedin products and value chains thathave the potential to be exported.

In terms of service providers, serviceproviders will not be limited to BSIs.BSIs will compete with commercial pro-viders of business development andconsultancy services, to provide servicesto SMEs. Additionally, service providerswill not be limited to those only in Pod-karpackie or Œwiêtokrzyskie. In pursuit ofgreater efficiency and competency, ser-vice providers outside the two regionswill be able to bid on contracts under theECS scheme.

This transition will not be easy forBSIs. Our background research in Pod-karpackie and Œwiêtokrzyskie showedthat few BSIs are skilled in respondingto market needs, according to demandfrom SMEs. BSIs have become adeptat implementing projects financed byEU Funds, but are focused largely onthese publicly-funded services, withrelatively few offers on a commercialbasis. Furthermore, most BSIs providegeneral services and do not specializein specific economic sectors or typeof services. This low-level of specializa-tion also means that BSIs’ services arerather basic, and only some of themare able to provide more advanced ser-vices (usually through mobilizing exter-nal experts). Interviews with SMEs revealthat they perceive BSIs’ services to besusceptive to poor quality delivery.BSIs will need to make efforts to buildcloser links with enterprises and focus ontailored, accessible, services for enterpri-ses. In Œwiêtokrzyskie, some support forthis effort may remain available underROP measures 1.3 and 2. In Podkarpac-kie, BSIs should be ready for to movetowards the commercialization of theirservices on their own accord.

Three additional ingredients are pro-posed to ensure that the EnterpriseCompetitiveness Scheme functionsefficiently:

• Administrator. The role of the admi-nistrator is to publicize and promotethe scheme, administer vouchers(including selection of successful


8 Examples of tradable goods and services include: agricultural products, manufactured goods, ICT services,and tourism. Examples of non-tradable goods and services include: retail (shops), taxi services, hairdressing,household cleaning services, cafés, plumbing services, and motor vehicle repair

applicants, quality control, paymentsand financial control), maintain theonline ‘marketplace’ platform, andcontinually monitor the program toincrease efficiency.

• Independent Advisor (IA). The roleof the IA is to catalyze the ECSsystem, by proving advisory servi-ces to SMEs to assist in diagnosingtheir needs, preparing good qualityapplications, and selecting serviceproviders. In essence, the IA actsas a ‘broker’ to ensure a smoothtransaction between the SME, theservice provider, and the ECS Admi-nistrator.

• ‘Marketplace’ website. The role ofthe ‘marketplace’ is to provide an effi-cient way for SMEs to find and pro-cure the best service provider for theirneeds. It provides an online databaseof service providers, together withreviews of those providers left byclient SMEs.

Lastly, it should be noted that the ECSscheme will co-exist with at least twoother Operational Programmes (OPs):Eastern Poland and Rural Develop-ment. Some similarities exist (particu-larly Measures 1.2 and 1.4 of the EasternPoland OP). However, there are some keydifferences: the Eastern Poland OP is moreselective (it requires SMEs to be ready toexport, while the ECS scheme will supporta wider range of SMEs); it has a broaderrange of eligible expenditures by SMEs(whereas the ECS focuses narrowly onbusiness services); and it will support a fewlarge projects (while the ECS will supporta larger number of SMEs with smallercontributions). Eligible expenditures in theEastern Poland OP can reach a maximumof 3.1 million PLN per company, whileeligible expenditures under the ECS willbe limited to 200 000 PLN per company.In addition, there is some similarity withthe Baza Us³ug Rozwojowych (BUR) sche-me, but BUR focuses on training, whilethe ECS is geared towards expanding thebusiness services sector.


Lessons learnedLessons learned will be identifiedonce the scheme is underway andbeing implemented. During the re-search and design of the scheme, themain lesson learned is that high potentialSMEs exist even in ‘lagging areas’. Duringimplementation, the scheme should bejudged according to its ability to gene-rate an increase in demand by SMEs forbusiness development services, whichare in turn effective in increasing growthand competitiveness for SMEs in thetarget areas. These should contribute toincreased exports and increased jobs,as part of regional economic growth.

During implementation, it will be im-portant to monitor the performanceof the scheme. The financial analysis

prepared by our team estimates thatthe ECS will have a positive net impactif it increases the sales growth rate ofSMEs by 29% (e.g. raising the annualgrowth rate of a beneficiary SME from1% to 1.29%, or from 2% to 2.58%, etc). Thistarget for increases in sales should betaken as a ‘hurdle rate’ for the ECS – i.e.if the rate of a 29% increase in growthrate is not met, then the scheme is notlikely to achieve a positive net impact.If this rate is not reached in a given year,a clear action plan should be formedby the ECS Administrator to succeed thefollowing year. If the target value is notreached two years in a row, the schemeshould be heavily revised or cancelled,since it is not adequately improving thecompetitiveness of SMEs.


EASIER BUSINESSREGISTRATION(PODKARPACKIEAND SWIETOKRZYSKIE)

Why?

All Polish regions share the same re-gulatory framework for registeringa limited liability company. However,according to the World Bank’s “DoingBusiness in Poland 2015” report, there aresignificant differences in the ease of do-ing business among 18 Polish cities. Kielceand Rzeszów, the capitals of the Œwiêto-krzyskie and Podkarpackie voivodshipsare ranked third- and second-to-last inthe ease of business registration, largelybecause registration takes 36–37 days,compared to eight days in Poznañ, thecity with the fastest registration divisions.

The World Bank identified threemain aspects of the problem:

• The uptake of the nationwide S24online registration service was be-

low its potential in Podkarpackieand Œwiêtokrzyskie, with less thanhalf of the applications filed throughit, even though it is two timescheaper, four times faster, and signi-ficantly more reliable than paper re-gistration.

• Approximately one fifth of applica-tions is returned or dismissed, whichin practice doubles or sometimes trip-les the time to register, while creatingadditional workload and backlogsin courts.

• Backlogs, caused by seasonal spikesin caseload and complicated workprocesses in registration divisions,slow down the review of applica-tions.

46 | EASIER BUSINESS REGISTRATION (PODKARPACKIE AND SWIETOKRZYSKIE)

How?The World Bank’s technical assistan-ce on easier business registrationin the Podkarpackie and Œwiêtokrzy-skie voivodships under Activity 3 ofthe Lagging Regions Initiative wasdivided into two phases of sixmonths each. In the first phase (April– September 2016), the World Bankconducted a review of international andnational best practices in business regi-stration and benchmarked them withthe situation in Podkarpackie and Œwiê-tokrzyskie on the basis of its Doing Busi-

ness methodology. This phase produceddetailed recommendations on easier bu-siness recommendations, which werethen implemented in the second phase,from October to March 2017. The work

was carried out in close collaborationwith the institutions represented in theLagging Regions Steering Committee,as well as the Ministry of Justice, Districtand Appellate Courts in Kielce and Rze-szów, the National School for Judgesand Prosecutors, and business supportinstitutions in the two regions.

Three priority areas of interventionwere identified to make it easier toregister a limited liability companyin the Podkarpackie and Œwiêtokrzy-skie voivodships:

• Encouraging online registration;• Limiting returned applications;• Expediting application processing.

Encouraging online registration

Encouraging online registration wasidentified as the most important step thatthe Podkarpackie and Œwiêtokrzyskie voi-vodships could take to make businessregistration easier. This required promo-ting the existing registration service, S24(administered by the Ministry of Justice),through an online advertising campaign,as well as better communication in districtcourts and via business support institu-tions and firm associations in the regions.

The online advertising campaign focu-sed on providing reliable informationabout the advantages of the electronicregistration service to potential appli-cants. The Ministry of Economic Develop-ment’s portal http://www.biznes.gov.plwas identified as best placed to provideauthoritative and comprehensive infor-mation about online registration of com-

panies. Existing information on S24 wasupgraded and new content addedby the World Bank team in collaborationwith the website’s administrator, theMinistry of Economic Development.9

This improved the searchability of theinformation about online registrationand directed users to official, verifiedcontent. Once the landing page hadbeen improved, an online advertisingcampaign was rolled out in November2016. The campaign was restricted tousers in Podkarpackie and Œwiêtokrzy-skie. Between November 2016 and Fe-bruary 2017, the online ads were displa-yed 10.7 million times, which led toalmost 40,000 unique referrals to thelanding page about online registration(see Figure 7). As a result, the websiteis currently being displayed as the topresult for the majority of applicablesearch phrases (it ranked fourth in searchresults at the outset of the campaign).10


9 https://www.biznes.gov.pl/przedsiebiorcy/biznes-w-polsce/zakladam-firme/rejestracja-dzialalnosci/rejestracja-spolki-z-o-o10 Verified on 23.09.2016 and on 28.02.2017 in incognito mode search through www.google.com,the most popular search engine in Poland with 96% market share

Figure 7. Results of online advertising campaign

Source: World Bank staff based on Google Analytics

In addition, conventional hardcopy ad-vertising materials (leaflets and posters,see Figure 8) were prepared and distri-buted through the District Courts in Rze-szów and Kielce, as well as to over 20 bu-siness chambers and support institutionsin the regions. Several business supportinstitutions have also used these mate-rials for e-mail campaigns to affiliatedentrepreneurs. Staff at the help desksin both court registers has been trainedto reach out to potential applicantsabout the online registration service andits advantages.

Limiting returned applications

In order to limit the number of returnedapplications, in August and September2016 the World Bank reviewed morethan 300 cases to identify the most com-mon errors made by applicants. This re-view found that most of the errors couldbe avoided by providing applicants withclear instructions. Applicants adheringto these instructions could reduce therisk of their application being returnedor dismissed by an estimated 96%. TheWorld Bank team used its review of re-turned applications to prepare and pilot

from October 2016 to March 2017 newguidance for applicants. The guidancewas published by the Ministry of Eco-nomic Development on its portalhttp://www.biznes.gov.pl11 and is usedby district courts’ staff in their daily inter-actions with entrepreneurs. The guidan-

ce has been also printed on the back-side of leaflets, which have been madeavailable at various business supportinstitutions and at district courts. Thesematerials were used during the marke-ting campaign and will continue to bepromoted by district courts.


11 For online registration: https://www.biznes.gov.pl/przedsiebiorcy/biznes-w-polsce/zakladam-firme/rejestracja-dzialalnosci/rejestracja-spolki-z-o-o/jak-uniknac-bledow-przy-internetowej-rejestracji-spolkiFor paper applications: https://www.biznes.gov.pl/przedsiebiorcy/biznes-w-polsce/zakladam-firme/rejestracja-dzialalnosci/rejestracja-spolki-z-o.o.-w-sposob-tradycyjny/jak-uniknac-bledow-przy-rejestracji-spolki-z-o.o

Figure 8. Online registration – hardcopy advertising materials

Note: The front of the leaflet, also printed as a poster, communicates the advantages of online registration(it is cheaper, faster, more reliable) and refers to government websites. The backside of the leafletprovides guidance on how to avoid the 12 most frequent errors in applications.

In addition, the World Bank team orga-nized a one-day workshop with adjudi-cating staff from District Courts in Kielceand Rzeszów in January 2017 to upgradetheir skills and unify divergent interpre-tations of the law. The workshop wasorganized in partnership with, and onthe premises of, the National School forJudges and Prosecutors. The adjudica-tors were trained, for the first time sincethe launch of the S24 service, in usingthis platform. They also reviewed andworked out consistent interpretationsfor a number of legally challenging cases.

The World Bank team also prepared andshared in November 2016, with the Mini-stry of Justice, technical recommenda-tions on how to validate automaticallyapplications submitted online and guide

users through the registration process.An improved user experience can signifi-cantly ease business registration as auto-mating the validation of applications andembedding tooltips in the registrationprocess can avoid the vast majority ofreturns. The Ministry of Justice commit-ted to introducing these changes byDecember 2016, but implementation hasstalled.

Expediting application processing

The problems of seasonal spikes in work-load of registration divisions and subse-quent backlogs was addressed by work-ing out flexible staffing arrangementsand offering staff incentives to closemore cases. The World Bank assisted,

among others, in preparing and pilotinga performance-based bonus among theadministrative staff of business registra-tion divisions. In Rzeszów, such a schemewas introduced in the last week of Octo-ber and throughout November 2016.The bonus scheme resulted in closing800–1400 additional cases and providedvaluable lessons in performance mana-gement (see Figure 9). The District Courtin Kielce introduced a similar bonus sche-me in December 2016 for two membersof the administrative staff charged withremoving bottlenecks. In addition, theDistrict Court in Kielce entered into

an agreement with a local university tointroduce paid three to four months trai-neeships for young graduates, allowingregistration divisions to better manageworkload peaks. It is the first time thatthe District Courts in Kielce and Rzeszówused flexible staffing and results-basedrewards, and after successful pilots thecourts are considering to introduce suchschemes in future. The introduction ofbonus schemes was supported throughseveral workshops and working meet-ings in Kielce, Rzeszów, and Warsawin October/December 2016 and March2017.


Figure 9. Number of cases closed by administrative staff in court registration division in Rzeszów

Source: District Court in Rzeszów

Note: Clerk assistants were eligible for a bonus of 20%–40% of base salary from October 24th

to November 30th. Nine clerk assistants participated. Payout depended on the number of cases closed.Even though the registration division was overwhelmed with work during this part of the year,significant output gains were achieved, both in comparison to output in September 2016 (2609 cases),average monthly output in 2016 (2115 cases/month), as well as in relation to the actual output in the sameperiod in 2015 (2340–2766 cases). Staffing levels did not change significantly, with 10 adjudicating staffand 10 assistants employed full-time in the registration division in 2015 and eight adjudicating staff (plus0.1 FTE of one judge) as well as nine assistants + two support staff in 2016. In the last week of October,the daily output increased by 60% after the introduction of the bonus (1283 cases closed in seven workdays between October 24th and 31st vs 1614 cases closed in 15 work days between October 1st and 23rd).

The problem of fragmented workflowsand IT systems was addressed by en-couraging managers to use monitoringtools for management of the case flowin the KRS division. For example, thecase review in Kielce revealed that busi-ness registration is delayed on averageby 4.7 days after the judicial review hasbeen completed, when assistants needto type the applicant’s details into thebusiness registry. This insight inform-ed a reorganization of the workflow.The World Bank advised the Ministry of

Justice, the administrator of four IT sy-stems used in registration divisions,on integrating back office systems toexpedite application processing. WorldBank evidence shows that a full integra-tion of existing systems coupled withother measures could reduce the num-ber of work steps from 17 to five percase. The Ministry included integratingback office systems in its plans, but it hasnot yet submitted a project in this re-gard for co-financing from the Euro-pean Social Fund.

What was achieved?

A rise in the share and absolute num-ber of online registrations in Podkar-packie and Œwiêtokrzyskie (see Table 4)has been observed during the dura-tion of the Lagging Regions Initiative.The share of applications to register a limi-ted liability company that were filed elec-tronically grew faster between the second

and last quarter of 2016 in both regions,than the average in Poland. Consequently,and given the growth in the number ofregistered firms, more companies wereregistered online in Podkarpackie andŒwiêtokrzyskie in the last quarter thanin the second quarter of 2016 (as well asany previous point in time).


Table 4. S24 uptake for online registration of limited liability companies

Kielce RzeszówAll otherregisters

Registeredcompanies in Poland

IV – VI 2016 52.4% 58.1% 50% 13,971

VII – IX 2016 62.3% 62.3% 52% 12,736

X – XII 2016 62.4% 62.4% 56% 15,030

TOTAL 2016: 55,728

Source: Ministry of Justice

With regard to limiting returned ap-plications to register a company, theimmediate results of interventionsare yet to be seen. This is due to thefact that guidance has been only availa-ble since November 2016. It can be ob-served, however, that the Lagging Re-gions Initiative coincided in the last quar-

ter of 2016 with a significant drop in re-turned paper applications, which wasnot observed in the rest of the country(see Table 5). Given delays in usability up-grades of the business registration sys-tem S24, the Lagging Regions Initiativedid not coincide with a decrease in theshare of returned electronic applications.

Table 5. Percentage of rejected or returned applications to register a limited liabilitycompany

Kielce Rzeszów All other registers

S24 paper S24 paper S24 paper

IV – VI 2016 15.7% 34.4% 9.0% 21.1% 11.7% 19.6%

VII – IX 2016 10.0% 32.7% 8.3% 26.3% 11.4% 21.9%

X – XII 2016 16.8% 28.8% 9.8% 14.4% 11.0% 20.7%


The Lagging Regions Initiative coin-cided with an increase in the numberof applications that were processedin the Kielce and Rzeszow DistrictCourts without undue delays (up tothree days for electronic submissionsand up to 14 days for paper submissions).

This improvement has not been obser-ved in other district courts in Poland (seeTable 6). This increase in the number ofapplications was achieved even thoughthe District Courts in Kielce and Rzeszówclosed significantly more cases in the lastquarter of 2016 than in previous quarters.


Table 6. Percentage of applications reviewed within reasonable timeline

Kielce Rzeszów All other registers

S24<– 3 days

Paper<– 2 weeks

casesclosed

S24<– 3 days

Paper<– 2 weeks

casesclosed

S24<– 3 days

Paper<– 2 weeks

IV – VI 2016 75.5% 57.0% 198 76.2% 61.1% 429 80.1% 67.1%

VII – IX 2016 76.3% 61.1% 135 79.2% 55.6% 425 74.9% 51.5%

X – XII 2016 83.2% 60.8% 185 72.9% 64.7% 529 77.9% 55.1%


Lessons learnedThere are many measures at the locallevel to be taken by district courts toease business registration. In the past,efforts to make it easier to register a firmin Poland focused on the national level– reforming laws and regulations, andintroducing electronic registration. Nowthe time has come to supplement theseefforts with adequate implementationon the ground. The Lagging RegionsInitiative demonstrated several ways toimprove the performance of registrationdivisions: promoting e-registration, pro-viding guidance to applicants, simpli-fying work processes, improving workincentives, and monitoring the case flow.Achieving improvements at the locallevel requires strong leadership fromheads of district courts, who need todeal with a large number of veto playerssupervising staffing, budgeting, and in-ternal compliance.

Justice sector reforms require moreattention to detail and involvementof local stakeholders. The experienceof managers in district courts is that thereare many modernization projects happe-ning “above their heads” but there is limi-ted or no effort to bring them on board

with the changes. For instance, five yearsafter the online registration service S24was introduced, staff was not trainedin its application. The court’s manage-ment is open to new ideas, but it needsto be involved closely in the design ofreform to ensure buy-in and smoothimplementation.

Performance pay can boost the effi-ciency of registration divisions in theshort term. The public sector hardlyever uses bonus schemes tying emplo-yees’ remuneration to output, evenwhen it involves routine tasks and is per-mitted by the law. Earlier attempts tointroduce performance pay in Kielceand Rzeszów failed because the bonu-ses were inadequate and output nottracked. The pilot scheme implementedin Podkarpackie was proposed on a vo-luntary basis, with a bonus dependenton the achievement of pre-defined me-trics, scalable to actual performance ofthe employee. The bonus scheme boos-ted the registration division’s monthlyoutput by about one third and shouldbe used to address seasonal spikesin workload.


FINANCIALINSTRUMENTS(PODKARPACKIE)

Why?

A portion of the financial allocationof the 2007–2013 Regional Opera-tional Program (ROP) of the Pod-karpackie voivodship supportedfinancial instruments (loans andguarantees) that were distributedby the financial intermediaries se-lected for implementation by theProgram Managing Authority (Voi-vodship Board). Upon completion ofthe supported projects, the allocatedcapital must be repaid, after adjust-ments for losses and management costsas well as gains (interest on loans andbank deposits). As an external revenuesource, the repaid capital may then beused for similar projects that providefinancial support to micro, small, andmedium- size enterprises (SMEs) deve-lopment. This requires developing andsetting-up a regional mechanism (builtinto the ‘exit strategy’), based on capitalfrom the previous programming per-spective to provide financing to inter-mediaries whose instruments aim to de-crease the region’s financing gap. But,

development of such a program musttake into account the planned sup-port for financial instruments envisagedwithin the current ROP 2014–2020.

The Marshal Office of Podkarpackievoivodship asked for World Bankexperts’ support in order to:

(1) Develop the ‘exit strategy’ for finan-cial instruments supported underROP 2007–2013;

(2) Design the distribution model, inclu-ding setting-up the regional autho-rities’ ‘in-house’ entity, responsible formanaging the process of resourcesdistribution;

(3) Design new financial products as partof the investment strategy of the‘in-house’ entity that address theregional financing gap and reflectthe needs of the regional SMEs(better and easier access to externalsources of finance that are comple-mentary to instruments from theROP 2014–2020).

54 | FINANCIAL INSTRUMENTS (PODKARPACKIE)

How?Technical assistance was based ona participative and cooperative pro-cess with the World Bank’s experts(leading the consulting processwithin the scope of Lagging RegionsInitiative of the European Commis-sion) and stakeholders of the newregional finance delivery mecha-nism. Participants included the bene-ficiaries of projects supported by theROP during 2007–2013 and now are thetarget of the new regional financialmechanism (i.e. a group of non-ban-king financial intermediaries, operatingin the Podkarpackie region, that distri-

bute loans and guarantees for improvingaccess to external capital sources toaccelerate SMEs development in Pod-karpackie). Other participating stakehol-ders were from regional Business Sup-port Institutions. Representatives of thePodkarpackie Marshal Office were enga-ged in the consultancy process, formula-ting specific needs to the future regionalfinancial instruments (summary of me-thods and participants – see Figure 10).

During the design phase of the new so-lutions concerning utilization of finan-cial resources from ROP 2007–2013,

experts relied upon the findings of theEx-ante assessment of financial engi-neering instruments for PodkarpackieVoivodship ROP 2014–2020, orderedby the Marshal Office in 2014. Its fin-dings helped to understand the causes of

the region’s financing gap, re-assess SMEs’needs for access to capital, and determinethe types of financial instruments envisa-ged under ROP 2014–2020. Some otherinformation sources were also referred toby a thorough experts’ desk research.


Figure 10. Sources, methods and stakeholders of the consultancy process

12 Based on the resolution of the Sejmik Województwa Podkarpackiego (Regional Legislative Council)as of 27th, February 2017 on giving consent to establish a company under the name of PodkarpackiFundusz Rozwoju Spó³ka z ograniczon¹ odpowiedzialnoœci¹ (Podarpacki Development Fund, LimitedLiability Company)

In addition, the design team drewupon the experiences of other re-gions in Poland that implementedsimilar regional finance delivery sy-stems (e.g. the Dolnoœl¹ski Develop-

ment Fund Ltd and the Pomorski Deve-

lopment Fund Ltd). World Bank consul-

tants organized a study visit for repre-sentatives of the Podkarpackie MarshalOffice to learn more about the Dolno-

œl¹ski Development Fund, in particular,the practical issues concerning the‘in-house’ model of financial instrumentsdelivery to the regional market.

What was achieved?Consultations by World Bank ex-perts supported the creation of thePodkarpackie Development Fund Ltd(PDF), a regional financial vehiclethat will be an ‘in-house’ entity in thevoivodship. It is currently undergoingthe registration preparatory phase.12 ThePDF’s scope of activity will comprisethe following:

(1) Collection of financial resources frompreviously implemented instruments,

and (in the future) from other availa-ble sources (including resources fromfinancial instruments funded underROP 2014–2020);

(2) Design of new financial productsaccording to survey-based respon-ses reflecting strategic developmentneeds of the regional SMEs;

(3) Place the new financial offer on the re-gional market, based on the activitiesof the PDF and a network of selectedregional financial intermediaries.

Under the supervision of the PDF,financial intermediaries will be res-ponsible for distributing financialresources made available to themby the PDF in the form of ‘quotalimits’. They will manage both thefunding dissemination and recovery(responsible for capital repaymentsover an acceptable, agreed losseslimit/cap).

For the initial implementation pe-riod, the PDF’s investment strategyemphasizes the introduction of twotypes of loans to the regional marketfor: (i) financing SMEs’ working capitalneeds; (ii) pre- or co-financing of pro-jects implemented by regional enterpri-ses within the framework of the Cohe-sion Policy for 2014–2020 (establishedas a response to the financial needs of

SMEs that arose during the ROP2014–2020).

The World Bank’s experts also ana-lyzed and proposed recommendationsfor the strategic development of thePDF. These focused on organizational de-velopment of the entity, and concerned:

(1) Building its financial capacity,(2) Implementation of new financial in-

struments (equity-based) and(3) Human resources development.

The experts also assisted represen-tatives of the Marshal Office in esta-blishing settlements with financialintermediaries concerning repay-ments of resources invested in finan-cial engineering instruments underROP 2007–2013.

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Lessons learnedThe technical assistance was ofutmost importance because of thelimited experience of the regionalgovernment with the financial in-struments, the complexity of esta-blishing such instruments on theregional level, and due to the condi-tions of the instruments’ financialsources. The consultancy process waseffective because stakeholders workedwith World Bank staff thoroughly know-ledgeable about setting up financial in-struments that reflect the developmentneeds of the regional SMEs and financialintermediaries in Podkarpackie voivod-ship and other regions of Poland. Thisenabled experts to act as an indepen-

dent intermediary in the sensitive pro-cess of setting-up the ‘exit strategy’,that requires mutual understanding andopenness for cooperation between con-cerned parties (the regional authoritiesand financial intermediaries).

The future challenges will be ensu-ring that the PDF’s financial instru-ments address the needs of theSMEs in the region and at the sametime do not compete (or only toa limited extent) with the offer ofthe commercial, mostly banking,sector as well as with the other pub-lic funding available nationally andregionally.