Investment - how do you find out if you are eligible to receive EU funds?
Mrs. Agnieszka Miter, Senior Consultant, EU Advisory Services at Ernst & Young
Following Poland's accession to the EU, financial aid allocated to Poland will increase further. Structural funds are expected to amount to E11.4 billion between the years 2004-2006, and this amount will be supplemented further by E3.5 billion of Polish public funds. The largest share of this E15 billion will go to Polish entrepreneurs.
To check whether the planned investment is eligible for EU funding, the following need to be taken into account: the type of investment, the relevant EU aid program, the size of the enterprise, as well as the impact of the investment project on environmental protection, the local labor market (creation of new jobs) as well as whether the technological development will be beneficial for the regional economy.
Moreover, since EU funds are a form of public aid, the entrepreneur must take into account the limits of admissible public aid for the region where the investment is being implemented. This is essential information for companies operating in the Special Economic Zones. Additionally, if the project is co-financed by other public funds, for example, the state budget or international financial institutions such as the European Investment Bank, the European Bank of Restructuring and Development, then the amounts will be added and treated as public aid.
Identify the right source of EU funding
Several investments are eligible for the funding: transport-related infrastructural investments, such as road construction; environmental protection, for example waste utilization and management according to EU standards or using alternative energy sources; the implementation of new production technologies; the implementation of IT systems in enterprises; training schemes; etc. The aid may be granted for both the investment planning process (e.g. development of business plans, feasibility studies) and for the investment itself.
Enterprises operating in Poland are offered non-returnable EU support and grants in three major forms: (1) pre-accession funds, such as PHARE, ISPA or SAPARD; (2) EC programs, for example, the Sixth Framework Program, Intelligent Energy - Europe; and (3) structural funds, such as the European Regional Development Fund (ERDF) or the European Social Fund (ESF). Pre-accession and structural funds are oriented more towards investments related to increasing Poland's economic and social cohesion with the EU, whereas the EC programs provide funding for innovative investments, related to scientific research for economic purposes and implementation of state-of-the-art technological solutions in enterprises.
Contact the institutions or agen-cies co-ordinating EU programs
Moreover, in the case of structural funds, financial support applications should be filed with the Ministry of the Economy, Labor and Social Policy (MELSP) whose task is to co-ordinate the project application process before Poland's accession to the EU, and in general to manage structural funds distribution after May 1 2004. For example, SAPARD program application forms should be submitted to the regional branches of the Agency for Restructuring and Modernisation of Agriculture (ARMA).
In the case of EC programs, the majority of which are directly coordinated by the European Commission, international cooperation is needed and a consortium must be set up. Entities applying for support must, with few exceptions, file applications along with the necessary project documentation with the appropriate Directorate-General of the European Commission in Brussels.
New opportunities for SMEs
Small and medium-size enterprises (SMEs) have additional privileges in the EU. Some of the programs are intended especially for them; in some cases the conditions they must meet to obtain EU financial support are more favorable. The data published so far suggests that the structural funds will provide zł.521 million of public funds to support investment in SMEs, while zł.113 million will be earmarked for the support of micro-enterprises, and zł.154 million for tourism development. Investment support will also be available to owners of farms, as well as fishermen, for things such as the modernization of old, or the purchase of, new fishing boats.
Entrepreneurs may use most of the funds, either independently or in co-operation with local authorities or other partners. For example, in Austria, 13 hotels located around the Alpine lake of Millstätter presented a joint project involving the use of EU funds for undertakings that would contribute to halting the decline in the number of tourists visiting the region. The co-operation of hotels as part of the project lasted for two years and included raising the standard of hotel services. This was achieved by purchasing kitchen equipment, hotel insurance, improved use of the laundry rooms, as well as staff training and marketing. The project implementation cost E165,000, of which E12,800 came from EU funds.
Structural funds for new
investments - something for large investors
As regards structural funds, funding will also be available for large new investments involving the establishment, extension or purchase of an enterprise, both in the production and service sectors. It is also used for the implementation of fundamental changes to the product, production process modernization or introduction of new production technology. This includes: investments in fixed assets or intangibles involving obtaining a patent, purchasing a license or non-patented technical/technological know-how or know-how related to business organization or management.
This is an opportunity for firms operating all over Poland. They will be eligible to apply for EU financial support if their new investment amounts to no less than E10 million. This also applies in the case of projects of no less than E0.5 million involving the extension or improvement of an existing enterprise and the creation of 50 to 100 jobs, for no less than five years. The other condition that must be met (if the first two are not) in order to receive the support, concerns either the creation of at least 20 new jobs for no less than five years, or the introduction of process-related technological innovation or projects improving the state of the environment.
Structural fund grants related to new investments include the following: an investment grant and a grant for creating new jobs, amounting to no more than the equivalent of E4,000 for a newly created job. The investment grant is calculated based on the value of eligible investment costs, at a maximum amount of 50 percent of admissible aid for a given region, which constitutes no more than 25 percent of eligible project costs for large investors and no more than 32.5 percent for SMEs.
