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Was the Cohesion Policy 2007-2013 in Poland
effective in terms of goals achieved and if not, in
which fields it failed and why?
Effectiveness, efficiency and side effects of Cohesion Policy 2007-2013 in Poland
Abstract
This paper aims at answering the question of whether the cohesion policy 2007-2013 in Poland was effective in terms of goals achieved. Furthermore, the study points out the fields, in which the policy executors failed to meet the targets and lists the reasons for these failures. In addition, a broad impact of the policy, as reflected by social and institutional changes, is presented. The author of this paper made an extensive use of the National Strategic Reference Framework, a government document listing 48 numerical targets of CP 2007-2013 in Poland. All the targets were checked with respect to their realization. A literature review was carried out to provide explanation for multiple failures. All in all, the paper concludes that only 19 indicators met their assumed values and the reasons for it vary from crisis impact, demand & supply issues and ill-designed domestic policies to institutional/political issues and low social capital.
Student Denis Aleksandrowicz (10434771)
Field Development Economics
Supervisor Oana Furtuna
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Statement of Originality
This document is written by Student Denis Aleksandrowicz who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
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1. Introduction
1.1 Three funds of cohesion policy
Cohesion policy (CP) is the regional policy of the EU and one of its main characteristics next to the single market and monetary union. The idea of European cohesion dates back to 1957, when it was stated in the Treaty of Rome that: “the Community shall aim at reducing the disparities between the levels of
development of the various regions”(EC, 2014). At that time, it was believed that
progressive politico-economic integration will lead to convergence of the member states in terms of development, and only young and poorly qualified workers will suffer from this process. Accordingly, the European Social Fund was set up in 1958 to support them. Following a slight adjustment to the rationale behind the policy in 1975, the European Regional Development Fund was formed to compensate whole regions which are economically disadvantaged as a result of integration, meaning mainly peripheries of the EU (the theory behind it is laid out in the section 2.). The last of three major financial tools of the policy, the Cohesion Fund, was enacted in 1994 and today they are all known as the European Structural and Investment Funds (ESIFs) (Marzinotto, 2012). Depending on the needs of the Member States, the policy supports projects from a variety of categories: transport and social infrastructure, environmental protection, R&D, human capital, administrative capacity, entrepreneurship and ICT (MRR, 2007).
1.2. Governing principles of cohesion policy
All the projects are carried out according to four main principles and several auxiliary ones. The contents of the rules do not result from economic
theories, but are mainly the product of experience and extensive research.
Firstly, the concentration principle postulates that the funds shall be allocated primarily to the least developed regions. Secondly, the policy does not support individual investments, but instead they need to be part of a well-designed programme to get allotment. Thirdly, the partnership principle was put in place to urge regional government and social organizations to cooperate, since it is commonly deemed that such collaboration delivers actions, which are best-suited to local needs. And, last but not least, the additionality principle was established to ensure that CP is only complementary to national policy and may not replace domestic funding (EC, 2014).
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1.3 Policy objectives, experience of selected beneficiaries, uncertain effectiveness of cohesion policy
Under the Multiannual Financial Framework (MFF) 2007-2013, three objectives were distinguished: Convergence, Regional Competitiveness and Employment, and European Territorial Cooperation (ETC). Over the years, a little evolution of the goals can be observed, as they merged from five in 1989 to the current three, remaining almost intact with respect to the content (EC, 2014).
The extent to which these objectives are realized, meaning effectiveness, is what lies at the core of this paper. Experience of beneficiaries in this regard varies widely. Ireland is an example of a country which has converged and even surpassed EU-28 in terms of GDP average. Its experience proves that it is an appropriate design of the policy and its responsible implementation, which determines success, and not the absolute scale of support (Dorożyński, 2012b). Similarly, the lessons of Greece and, to a lesser extent, Spain show that even largest funds may not be effectively employed, as both countries emerged as the black sheep of Europe in the post-crisis reality (Dorożyński, 2012b).
The available data on effectiveness of the policy is ambiguous as not all cohesive states seized the opportunity offered by CP in its fullness. One can find papers which prove that CP significantly contributes to international
convergence within the EU (Brasili & Gutierrez, 2004; Bosca et al., 1999), but
studies claiming the opposite are equally common (Boldrin & Canova, 2001; Canova & Marcet, 1995). However, one needs to bear in mind that rationale behind the existence of the EU is largely political and the same holds true for cohesion policy. From the very beginning it is an economic experiment in one part, and in other part an expression of European solidarity (EC, 2014). What is of main interest in this paper is how this experiment worked out for Poland under the MFF 2007-2013.
1.4 Cohesion policy 2007-2013 in Poland - background information Poland has accessed the EU as one of ten countries in the enlargement of 2004. It was one of the most meaningful events in Polish history and it can be compared to the baptism of 966, which was a factual incorporation to the circle of Western culture (Gorzelak, 2014). It accessed the EU as the sixth biggest labor market and as one of the most backward countries (Dorożyński, 2013). One may judge that CP is an equivalent of the Marshall Plan, which was rejected by the communists in 1947. Under both the MFF 2004-2006 and MFF 2007-2013, all 16
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polish provinces were qualified for support under the Convergence objective, which is tailored for less developed regions with GDP per capita less than 75% of the EU-25 average. In the programming period of 2007-2013 Poland was the biggest beneficiary of European funds with 67 billion euro allocated (45.6 billion euro after deduction of the union dues). Only 1% of it was earmarked for realization of the ETC objective and hence it’s excluded from the scope of this paper. Poland has translated its strategic goal of “creation of the conditions for the growth of competitiveness of knowledge based economy and entrepreneurship which are to assure an increase in the employment and in the level of social, economic and territorial cohesion” and 6 minor goals into 21 programmes. The exact division of funds is presented in Table 1.
Table 1. Division of funds between programmes under the CP 2007-2013
Programme Fund allocation
(in billion euro) Source
Infrastructure and Environment 28 ERDF, CF
Human Capital 10 ESF
Innovative Economy 10 ERDF
Eastern Poland Development 2.4 ERDF
Technical Assistance 0.6 ERDF
16 ROPs 16 ERDF
Source: own based on Eurostat database
In accordance with the subsidiarity rule, a large share of money was split into 16 regional operating programmes (ROPs) in order to decentralize spending and consequently to secure appropriate efficiency of the EU cohesion policy (MIR, 2014). In the current MFF 2014-2020, Poland was again allocated the biggest share of budget of all cohesive countries and this time the amount, 78 billion euro, is even more substantial. It is forecasted that the European funds for this period will impact Polish economy the most from all the Member States (EC, 2014). It seems worthwhile to examine the credibility of these ex-ante analyses and it is done in this paper by checking if the CP 2007-2013 in Poland has really delivered on its promises. Firstly, economic rationale behind the policy is presented and it is followed by sections devoted to efficiency-equity trade-off and methodological issues concerned with the RQ. Then, general effects of CP in Poland are laid out. The analysis of objective realization of CP 2007-2013 together with a list of reasons for CP failures and presentation of within-country divergence phenomenon come after. It is followed by the conclusion.
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2. Economic rationale behind the policy
2.1 Growth determinantsThe central goal of the policy since its commencement is the reduction of regional disparities in development. However, in order to be able to tackle them one needs to know the underlying reasons for them to occur. In the Sixth Report on economic, social and territorial cohesion three different kinds of reasons are distinguished (2014). The inherent characteristics of a region such as geographic remoteness, low supply of natural resources or vicinity of mountains are called the first-nature determinants of growth and it is assumed that the policy cannot influence them. As it is socially unacceptable to acknowledge some lagging regions to be condemned for ever, policymakers focus largely on the second-nature determinants of growth, which can be improved by appropriately directed investments. These are the following:
1. Transport accessibility 2. Human capital
3. Level of innovation 4. Institutional quality
2.2 Convergence would occur in a customs union: neoclassical growth theory
The third factor which is of interest to the policymakers is the impact of economic integration on development. It is particularly important when one strives to understand the origin of cohesion policy. The neoclassical growth theory, which was the economic rationale behind the intervention since 1957 up to the 80’, implies that convergence is a consequence of free movement of production factors and resulting from it efficient allocation of resources (Marzinotto, 2012). Nonetheless, prior to the introduction of customs union and common market in the EU, there was a popular fear that gradual economic integration of Europe will produce loser regions, which need to be compensated. Consequently, compensation was the original policy objective, together with the objective of strengthening the capacity of regions to develop in the context of single market.
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2.3 Limitations of the neoclassical growth theory due to the realities of the EU
Ultimately, the neoclassical growth theory was abandoned as it turned out to be far from explaining the reality. There are two phenomena, which were rationalized under the new scheme and which the neoclassical theory failed to encompass - low labor mobility and ever-rising socio-economic disparities (Marzinotto, 2012).
2.4 Three elements of the alternative rationale: endogenous growth theory, role of institutions, new economic geography
The new rationale comprises three elements. First of them - the endogenous growth theory - posits that regions can move up the development ladder by adequately investing in the second-nature determinants of growth (Marzinotto, 2012). The second element is a strong belief that institutions are a driving force of development as they shape the ability of an economy to use and develop its resources (Marzinotto, 2012). Finally, the last building block of the current rationale is new economic geography formed by Paul Krugman, which presupposes divergence of regions and formulates clear reasons for it. According to this theory, factors such as home market effects and economies of scales lead to agglomeration of economic activity in technologically advanced regions as they promise higher returns to investments than less developed ones. Furthermore, these returns attract more and more mobile production factors (e.g human capital flight) to the developed areas draining disadvantaged provinces. These processes establish the core-periphery system with regions closer to the innovation centers being more developed than the other and this pattern is present at both the national and European scales (Marzinotto, 2012). Moreover, economic integration only precipitates the course of action by reducing or completely removing the barriers to trade and migration. Nonetheless, Marzinotto states that the agglomeration is a natural economic force and fighting it can be detrimental to the overall productivity (2012).
3. Efficiency vs. equity
It seems reasonable to ask first if a policy is efficient, before inquiring if it
can be effective1. In case of CP the issue is not that clear-cut, since as its political
1 CP economic efficiency – CP is deemed to be efficient if funds are allocated in such a way that CP’s
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usefulness is unquestionable, its economic efficiency, in turn, may appear dubious in light of Krugman’s new economic geography.
In Dorożyński’s opinion, despite the fact that official language of cohesion policy eschews the idea of trade-offs between efficiency and equity, they hold true by all means (2012b). From the economic point of view, the CP is not a perfect instrument as it would be more growth-enhancing to support regions promising higher returns to investment, and besides, the intervention carries the risks of distorting the markets, crowding-out private investment and creating the culture of dependency (Dorożyński, 2012a; Marzinotto, 2012). However, from the social point of view, persistent underdevelopment undermines the legitimacy of the EU and hence cohesion policy is very much needed to mitigate political tensions in the short run and to ensure social support for the existence of the union in the long run (Heller, 2013). All in all, the policymakers being aware of the facts mentioned, design the policy which aims at increasing returns to investment in the periphery, and which concurrently supports the core regions to increase overall efficiency (Marzinotto, 2012).
4. Methodological issues
4.1 What this paper really isThis paper is an examination of the degree to which the objectives of CP 2007 – 2013 in Poland were realized, and on top of that it aims at delivering possible explanations for failures. All the objectives with specific numerical targets are listed in the National Strategic Reference Framework (NSRF) published in 2007 and this study makes an extensive use of it.
4.2 Methodological approach
Throughout the paper, the policy effectiveness is treated as a function of the intended objectives and the assumed approach to measure it is a plain investigation of target realization. All the 48 targets are considered to be of equal weight and the outcome of investigation is far from a straightforward verification of effectiveness versus ineffectiveness as the author expects only a subset of targets to be met, which consequently precludes such an unambiguous statement.
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4.3 Approach imperfections
However, the author is aware of many imperfections of such approach as, for example, a level of innovation is crucial for the long-term growth according to the Solow’s growth model, and hence a larger weight should possibly be attached to it. Nonetheless, no target is prioritized throughout this paper. A major imperfection of the assumed approach is that simple checking for target realization conveys little information about the true impact of CP on the Polish economy. This issue is set out clearly in the following section. What is more, the author is cognizant of a questionable informative content of multiple government reports, which often are simply success–focused “description of product” (Kozak, 2011). For the purpose of this study, these reports were thoroughly filtered in search for facts only.
5. Suggestions for further research
The research proved the issue of the CP’s impact on Polish economy to be very extensive, intricate and probably impossible to fully capture and quantify. If one ever attempted to measure this impact suitably, he or she would face a methodological challenge involving multiple questions, all of which deserving individual research. This section may appear helpful.
5.1 Link between outcome and CP funding
A serious issue arises with respect to an extent to which the outcome of a particular project can be attributed to the CP funding. One needs to keep in mind that cohesion policy is only complementary to national regional policy and that projects realized within these policies are co-funded. And hence the question: shall one attribute a share of an outcome of a particular project proportionately to the degree of funding, be it national or European, or one shall attribute more than this share if, for example, a given project would not be undertaken without European funds (EC, 2014)?
Moreover, cohesion policy is aimed at ever-tighter cohesion, but one needs to be aware of the fact that there are two other major factors which foster achieving cohesion targets. Primarily, it is the implementation of the EU law - aquis communautaire – which affected political credibility of Poland, increased the safety of running business, and hence encouraged European firms to invest in Poland contributing to reinforcement of the EU’s cohesion (MIR, 2014). The other factor is the common market which positively influences the cohesion
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through the four main mechanisms: product and process specialization, foreign direct investments, strengthening of competition and the reduction of market disruptions (Dorożyński, 2012b). Therefore, when considering the realization of CP objectives, one needs to bear in mind that beside the domestic and CP funds, these two factors must also be credited with the result.
5.2 Quantification of the intangible effects of investments
And how to capture the effect of some life quality improving investments such as urban renewal and cultural activities if they are intangible? One approach to evaluation would involve the creation of an artificial indicator. However, this would be an imperfect measure and probably it would leave out part of the effect (Misiąg, 2013).
5.3 The treatment of time
Another problem emerges when time is considered (Dorożyński, 2012b). According to the N+2 rule, the projects of the MFF 2007-2013 can be carried out even two years after the period is finished and actually a bulk of money is spent then. Moreover, the supply effects of the policy manifest themselves in the long run, so it is possible to observe them only after a number of years. As a matter of fact, since one of the goals of CP is “sustained and sustainable growth” its effects are supposed to be long-lasting and can be measured over decades.
5.4 The lack of a non-policy counterfactual
Furthermore, in order to gain full knowledge of the impact of the CP, economists need to find out what would have happened if the policy had not been in place. The Sixth report on economic, social and territorial cohesion
names the counterfactual method2 as the most satisfactory way of distinguishing
the effects of financial support and urges to use it commonly (2014). Today, only 5% of all evaluations of cohesion policy are based on this method and unfortunately we lack such on the CP 2007-2013 in Poland. Applying counterfactuals to CP is not a clear-cut process and in many cases it is simply technically impossible to carry out. Instead, in the ex-ante reports one can find various econometric models (e.g. QUEST, HERMIN, MaMoR2) which forecast
2 Counterfactual impact evaluation (CIE) is a method of comparison which involves comparing the outcomes of
interest of those having benefitted from a policy or programme (the “treated group”) with those of a group similar in all respects to the treatment group (the “comparison/control group”), the only difference being that the comparison/control group has not been exposed to the policy or programme. The comparison group provides information on “what would have happened to the members subject to the intervention had they not been exposed to it”, the counterfactual case.
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different impact of the policy. The GDP growth targets stated in the NSRF were based largely upon the estimates of these models. Reality outsmarted each of them, because outbreak of the crisis in 2008 was not expected and accounted for (Gorzelak, 2014). Moreover, the credibility of the mentioned models is further undermined when one considers the fact that the estimates they produce totally abstract from management failures and the actual allocation of EU aid across sectors (Marzinotto, 2012). Another question emerges: shall one consider the CP as ineffective if it has not delivered on its set ex-ante targets, possibly unattainable in the crisis-stricken Europe?
5.5 Data limitations
Lack of some data is another factor which hinders complete assessment of the impact of CP. For example, it is not possible to check if funds stay in the domestic economy as in case of an investment executed by domestic firms or if it exits as in case the contractors are from abroad (Misiąg, 2013). Additionally, in both cases it’s not full amount which goes one way or the other, since construction firms often employ a mixture of workers from Poland and other countries, and the same holds true for materials they buy (Gorzelak, 2014). This argument refers only to the potential loss of CP’s short-term benefits, for in the long-run all investments in Poland carried out by foreign contractors indeed contribute to increasing the productive potential of the country.
6. CP 2007-2013 in Poland: structure of funds, counterfactual
scenarios, side effects
6.1 Structure of funds
The structure of funds correspond clearly to the second-nature growth determinants discussed in the subsection 2.1. However, what was not yet mentioned is that the traditional intervention of regional policy in the least developed regions is focused on hard infrastructure, meaning mainly roads and railways, and this can observed in case of Poland (Gorzelak, 2014). It was estimated by the government that these investments in the transportation system will enable saving around 0.3% of GDP annually in the years to come (MIR, 2014).
12 Table 2. Structure of expenses of CP 2007-2013 in Poland
Category of expenses Share of total
allocation (%)
Transport infrastructure 36
Human capital development 17
R&D, entrepreneurship 16
Environmental protection infrastructure 15
Energy infrastructure, social infrastructure, culture,
tourism, town renewal, information society 16
Source: own based on GUS database
One can detect little variation in the design of expenses between particular Polish provinces with one exception – the regions of Eastern Poland (EP) allocated more money for social infrastructure at the cost of environmental infrastructure (MIR, 2014).
6.2 The concentration principle and the regional distribution of funds Overall, the provinces which were allotted the most in nominal terms are the most populous ones: Mazowieckie, Śląskie, Wielkoposkie. However, since the majority of useful economic parameters are on per capita basis, one needs to take into account regions which were supported the most under this scheme. In accordance with the concentration principle these are the least affluent peripheral voivodships of EP and Lubuskie (see Table 3.) (Gorzelak, 2011). These parts of the country are backward due to many reasons. Lubuskie appears to be still unable to overcome the heritage of collapse of state farms and EP demonstrates obsolete socio-economic structures with a high share of agriculture, and additionally is distant from country growth centers (Gorzelak, 2011). It is Eastern Poland which gained the most from CP when the funds are considered as a share of regional GDP as they accounted for almost 4.5% of regional GDP on average in 2007-2013 (MIR, 2014). Moreover, even 15-20% of public spending in EP in this period can be attributed to CP and since the system is overburdened with social insurance, national education and debt service, almost all investments of growth-enhancing character in EP were paid from the CP budget (Misiąg, 2013). When the focus is shifted from EP to Poland as a whole, it can be noticed that CP accounts for 7% of public outlays, 35-40% of public investment and for 15% of all investments in the considered period (Gorzelak, 2014).
13 Table 3. Funds per capita by regions (EP – red bold)
Voivodeship Funds per capita allocated (Polish currency złoty)
Dolnośląskie 7 445 Kujawsko-Pomorskie 7 179 Lubelskie 7 858 Lubuskie 10 091 Łódzkie 6 859 Małopolskie 5 233 Mazowieckie 7 456 Opolskie 4 921 Podkarpackie 7 669 Podlaskie 9 850 Pomorskie 6 443 Śląskie 5 965 Świętokrzyskie 9 249 Warmińsko-Mazurskie 10 050 Wielkopolskie 5 332 Zachodniopomorskie 7432
Source: Dorożyński, 2012a
6.3 Selected data on the impact of CP
Although development measured in terms of GDP growth was very diversified between provinces with the biggest progress made by regions relatively better developed in the base-year 2006, all the regions grew at a faster pace than the EU-27 average (MRR, 2012). Furthermore, in the group of 20 fastest converging regions of the New Member States (NMS) in 2007-2013 one can find 9 Polish provinces (MIR, 2014). Globally, the impact of CP on Polish GDP was third biggest among the cohesive countries, after Latvia and Lithuania. Estimates point that in 2007-2013 owing to CP funds, the Polish economy expanded yearly a 1.3% faster on average than otherwise (MRR, 2012). It can be translated into 20% of annual growth, but there were years when CP’s contribution was even more substantial. For example, avoiding recession in 2009 can be almost fully credited to public investments financed by CP (see Graphs 1. & 2. & 3.), and in 2012 CP accounted for even 50% of growth (see Graph 3.) (MIR, 2014).
14 Graph 1. Investment rate 2004-2012
Source: MIR, 2014
Graph 2. Investment rate in Poland and in the EU-27 in 2004-2012
Source: MIR, 2014 0,2 0,6 1,4 1,9 1,6 2,6 3,0 3,3 3,6 0 5 10 15 20 25 2004 2005 2006 2007 2008 2009 2010 2011 2012
CP contribution in pp Investment rate without CP
0 5 10 15 20 25 2003 2004 2005 2006 2007 2008 2009 2010 2011
Total investment rate in Poland Total investment rate in the EU- 27 Public investment rate in Poland Public investment rate in the EU-27
15 Graph 3. GDP growth 2004-2012
Source: MIR, 2014
It allowed to sustain an uninterrupted GDP growth in Poland since 1992 (Misiąg, 2013). What is more, the labor market owes an unprecedented improvement in 2007-2013 largely to the CP programs. In the considered period, 78% more new work places were created than without the European funds (MIR, 2014). In 2004 – 2012 Poland experienced the highest increase in employment of people aged 15-64 among the NMS (see Graph 4.) and it’s 3.5 % above what would have been expected without CP (Dorożyński, 2013). Moreover, a substantial part of domestic firms supported by CP registered improvement of performance parameters (MIR, 2014).
Graph 4. Employment 20-64 change in 2004-2012 in the NMS (Polska = Poland)
Source: MIR, 2014 2 0, 0,5 1,2 0,8 0,2 6 , 1 1,5 0,8 0,9 1 0 1 2 3 4 5 6 7 8 2008 2004 2005 2006 2007 2009 2010 2011 2012
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6.4 Investments which would not be realized without CP
The cohesion policy enabled realization of many projects which would not have been undertaken otherwise. For example, the market failed to deliver appropriate broadband infrastructure to many regions of Poland, for it is not profitable to install kilometers of cables in areas of low density (Dorożyński, 2012a). However, in pursuance of meeting the targets of the Digital Agenda for Europe, the EU urges Member States to invest in this costly infrastructure to the benefit of all rural inhabitants (EC, 2014). Another example is investing in
environmental protection, notably - renewable energy.From the perspective of
local authorities such undertakings are of secondary significance and if subgovernments had not been obliged to abide by the EU directives in this regard and had not been provided with appropriate funds, such investments would have not been carried out (MIR, 2014). Last but not least, in times of the economic downturn when companies considered R&D expenses redundant, CP finance helped sustain the dynamics of it. In 2008 – 2010 almost 35% of all R&D undertakings were supported by the policy (MRR, 2012).
6.5 Side effects of CP
The role of CP goes far beyond its influence on economic parameters and tangible infrastructure. CP 2004-2006 and CP 2007-2013 catalyzed multiple desirable political and social changes in the last decade, influencing the fourth determinant of growth mentioned in the subsection 2.1 – institutional quality. First of all, by introducing multiannual programming culture and high standard management of public resources, CP shapes a modern national administration (Misiąg, 2013). The Polish authorities learn habits of good governance and institutions undergo the process of Europeanization, which will hopefully result
in breaking the pattern of path dependency3 (Dąbrowski, 2008). Second of all,
the aquis communautaire law required an administrative reform, which established decentralized regional units capable of administering the ESIFs (Dąbrowski, 2008). The role of regional governments in management of funds grows gradually and Lackowska-Madurowicz calls this process “creeping decentralization”, foreseeing that in the long term regional authorities may liberate from the state’s trusteeship inherited from the communist regime (2013). The last of major side effects of the policy is that by promoting
3 “…given the high costs of change, initial institutional choices determine the trajectories of institutional
development, and this favors the continuity of public policies and implies difficulties in implementing programs of major reforms.” – Dąbrowski, 2008
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partnership it contributes to development of civil society. The cooperation of actors coming from different environments (e.g. NGOs, local government) and being engaged in the projects financed by CP results in the falling level of mutual mistrust (Lackowska-Madurowicz, 2013).
One may distinguish also an economic side effect of the policy. As CP undertakings enhance the investment attractiveness, many foreign companies decide to invest in Poland (MRR, 2012). In 2007-2013 these firms spent 104
billion dollar, which can be largely credited to CP (Misiąg, 2013). Moreover, it’s
mainly the European MNFs which invest in regions supported by CP, thereby contributing to even further economic integration (Basile, 2007).
7. The analysis of the objective realization
In this section, the realization of all 7 objectives of CP 2007-2013 in Poland is investigated and the most plausible reasons for failures of meeting particular targets are pointed out. In the section 9 elaborate phenomena underlying these failures are presented.
7.1 Strategic objective
Four strategic targets out of nine were met (see Table 4.). The planned annual GDP growth was not attained largely due to the economic downturn 2008-2009 and its consequences (Misiąg, 2013). However, concurrently the crisis fostered the catch-up with the EU, for it affected the rest of Europe harder than Poland (see Graph 5.) (Misiąg, 2013). Although, the convergence was supposed to be levelling up, as a consequence of the crisis the EU levelled down to Poland and it resulted in the convergence target being attained. The structure of employed persons by sectors in 2013 was quite far from the plan as the industry employment, contrary to the expectations, did rise. However, predicting a decrease in times of construction boom, which Poland experienced in 2007-2013, seems questionable (Dorożyński, 2012a). The investment rate and inflow of FDIs fell both short of the targets, again, due to the crisis. Over the last decade, the private sector has corresponded to two thirds of all investments in Poland, and naturally in the face of downturn such expenses were cut due to financial problems of multiple companies (MRR, 2012). Another unattained target is productivity parameter. Despite the sizable growth of 18 p.p., to which CP funds contributed in around 20%, productivity grew by less than expected (MRR, 2012). The last strategic goal (number of new work places), although attained,
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presents little informative value as it does not include work places which vanished from the market (Misiąg, 2013).
Table 4. Green = target met; red = target not met
Objective Indicator Indicator value in 2006 Assumed indicator value in 2013 Actual indicator value in 2013 Last available indicator value Stra tegi c o b jec tiv e: e sta b lis h m en t o f co n d itio n s for gro w th o f co m p etit iv en es s for kn o w le d ge b ase d econ o m y a n d en trep re n eu rs h ip t h at a ss u re s e m p loy m en t growth a n d social co h es ion lev el in cre as e
Average annual increase rate of GDP (%) 4.2 (2004−2006) 5.2 (2011-2013) 2.6 (2011-2013) 3.6 (2015)
GDP per capita according to
PPS (EU 25=100) 51.1 65.0 65.0 66 (2014)
Structure of employed persons by sectors of the economy (I/II/III)
17.4/29.2/53.4 12.0/26.0/62.0 12.0/30.5/57.5 11.5/30.5/58.0 (2014) Employment indicator for
persons aged 15−64 Total/women/men People aged 55-64 52.8/46.8/58.9 27.2/19.7/35.9 60/56.5/63.5 35/28/45 60.0/53.4/66.6 40.6/31.0/51.3 61.7/55.2/68.2 42.5/32.9/53.1 (2014) Final energy intensity of GDP
(EURO, in fixed prices from 2000 )
0.27 0.22 0.21 0.21 (2013)
Average investment rate (%) 18.8
(2004-2006) 24.0 20.7 (2007-2013 20.2 (2015)
Work productivity per
employed person (EU 25=100) 50.0 75.0 68.0 68.0 (2013)
Annual inflow of direct foreign
investments in billion USD 9.6 10 2.7 11.9 (2014)
Number of new work places (in
thousand) 0 approx. 3500
approx. 3500
614.8 (2014)
19 Graph 5. Dynamics of GDP per capita in Poland and the EU-27 (1998-2012)
Source: Misiąg, 2013
7.2 Objective 1
Two out of five targets of the objective 1 were met (see Table 5.). There is a lack of data on one rate. These indicators signal general changes which take place with regard to the quality of administration and how it is perceived by Polish society. However, the CP’s contribution to these changes is almost impossible to capture and the trends of considered indicators are volatile as they largely depend upon particular authorities in power (Misiąg, 2013).
7.3 Objective 2
The accomplishment of the objective 2’s targets was reasonably successful as four out of seven indicators met their assumed values (see Table 6.). The unemployment rate was most unstable during the considered period. On the one hand, more work places coupled with a massive economic emigration (more than 2 million since 2004) fostered decreasing of this rate (MRR, 2012). On the other hand the crisis brought about employment reductions (MRR, 2012). In the end the former factors outweighed the second as the target was met. At the same time, people yearning social and economic advancement together with the state-funded academic institutions fulfilled fundamental education targets (MIR, 2014).
20 Table 5. “X” = no data Objective Indicator Indicator value in 2006 Assumed indicator value in 2013 Actual indicator value in 2013 Last available indicator value Ob jec tiv e 1: I m p ro vin g t h e fu n ctio n in g sta n d ar d o f p u b lic in stit u tio n s a n d d ev elop m en t o f p ar tn er sh ip me ch an is m
s Average time of execution of court
sentences (days)
approx.
1000 Approx.. 200 685 685 (2014)
Corruption perception indicator
3.4 5.0 6.0 6.2 (2015)
Quality of imposed legal regulations
0.8 1.0 1.04 1.06 (2014)
Governance effectiveness (indicator)
0.58 0.9 0.71 0.82 (2014)
Average payment time for resources on the basis of application for payments in operational programmes
4 months 1 month X X
Table 6.
Objective Indicator Indicator value in 2006 Assumed indicator value in 2013 Actual indicator value in 2013 Last available indicator value Ob jec tiv e 2: I m p ro vin g t h e q u alit y o f h u m an ca p ita l a n d en h an cing so cial co h e sion
Share of population aged 15−64 according to education level (total/women/men) (%) secondary tertiary 59.4/56.0/63.2 13.4/14.6/12.2 65/61/69 17/18/15 61.3/57.9/64.7 22.6/26.7/18.5 60.7/57/64.4 23.8/28.1/19.5 (2014)
Graduates of higher schools on faculties of mathematics, natural sciences and technical sciences (total/women/men) (%) 14.7/7.8/27.5 22/13/31 20.9/13.0/35.8 22.6/14.4/37.8 (2014) Unemployment rate (total/women/men) (%) 13.9/14.9/13.0 10.0/12.0/9.5 10.3/11.1/9.7 9.0/9.6/8.5 (2014) Percentage of persons aged
25−64 years learning or acquiring additional education in the general number of population of that age (total/women/men)
5.0/5.6/4.3 10/11/9 4.3/4.9/3.8 4.0/4.3/3.6
(2014)
Unemployment rate of young persons aged 15−24
(total/women/men) (%)
36.9/38.3/35.7 20/21/19 27.3/30.1/25.3 23.8/25.6/22.8 (2014) Relative poverty risk
indicator following social transfers (total/women/men) (%)
21/20/21 14/13/14 17.3/17.3/17.3 17.0/16.8/17.2 (2014) Average life expectancy in
years
(women/men)
79.4/70.8 80.9/73.9 81.0/73.5 81.6/73.8
(2014) Source: own based on GUS database
21
7.4 Objective 3
A half of the objective 3’s goals were realized (see Table 7.). Despite a colossal improvement in the field of infrastructure, a majority of the targets were undershot. These and many other aims which lack a clear reason for failure simply appear to be overambitious given persisting social, economic and legal circumstances of the CP’s implementation. Notwithstanding the EC’s recommendation to set “ambitious yet realistic” goals, such situations are common in the cohesive countries (EC, 2014). The social infrastructure target, in turn, was over-realized. The reason is simple – such investments are
relatively easy to carry out, highly demanded by the people and hence practical for politicians (Gorzelak, 2014).
Table 7. Objective Indicator Indicator value in 2006 Assumed indicator value in 2013 Actual indicator value in 2013 Last available indicator value Ob jec tiv e 3: D ev elop m en t an d mod ern iza tio n o f techn ical an d social in fra stru ctu re wh ich h as fu n d ame n ta l im p o rta n ce for gro w th o f t h e comp etit iv en e ss o f P o lan d
Total length of highways (km) 552 1754 1481.8 1556.4 (2014)
Total length of expressways (km) 258 2555 1244.3 1447.5 (2014)
Road traffic safety (fatalities per
100 thousand inhabitants) 14.3 7.4 8.72 8.32 (2014)
Passenger traffic using municipal transport means (million passengers)
4150 4225 3620.9 3711.1 (2014)
Length of railway lines adapted
to speed of 160 km/h + (km) 1303 1786 2027 2569 (2014)
Population using services of sewage treatment plants
(town/village) (%) 85.2/20.4 90/30 93.3/35.3 93.9/37.4
Share of electric power from renewable sources in total use of electric power (%)
2.9 7.5-8.5 10.7 10.7 (2013)
Emission of glasshouse gas (base year 1988 = 100 – equivalent CO2)
70.9 89 67.87 65.6 (2014)
Source: own based on GUS database
7.5 Objective 4
Only one out of eight objective 4’s goals was accomplished (see Table 8.). There is a lack of data for two indicators. The main reason for failure of the innovativeness-related targets is low social capital, but this issue will be elaborated in the following sections. Another justification for the R&D goals being unattained is non-existence of cooperation between academics and entrepreneurs (MRR, 2012). People lack awareness that such cooperation could possibly be very beneficial but this is perfectly understandable given that for
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years there was no need for innovation since there was a huge demand for products which were unavailable under the communist regime (MRR, 2012).
Table 8.
Objective Indicator Indicator value in 2006 Assumed indicator value in 2013 Actual indicator value in 2013 Last available indicator value Ob jec tiv e 4: I m p ro vin g t h e co m p etit iv en e ss a n d in n o vat iv en es s o f en terp ris e s, in clu d in g in p articu lar th e man u fact u rin g s ec to r w ith h igh ad d ed v alu e a n d d ev elop m en t o f t h e s erv ice s s ec to
r Total outlays on research and development (as % of GDP)/
including outlays of the sector of enterprises (as % of GDP)
0.57/0.18 1.5/0.4 0.87/0.38 0.94/0.44
(2014) Share of industrial enterprises
bearing outlays on innovative operation (%)
38 60 29.6 29.5 (2014)
Share of high and medium
technology products in sold produce in industry (%)
30.6 37.5 32.1 32.1 (2013)
Number of issued patents 59 240 < 240 99 (2010)
Expenditures for informatic and telecommunication technologies (as
% of GDP) 6.1 8.5 < 8.5 4.5 (2010)
Accessibility of e−government on−line services (as % of 20 elementary services)
64 80 > 80 79 (2010)
Share of population with access to
broadband Internet (%) 3.9 23.0 X X
Share of market services in gross
added value (%) 49.6 53.0 X X
Source: own based on GUS databases
7.6 Objective 5
Out of five objective 5’s goals, only the divergence target was met (see Table 9.). In other words, the level of differentiation in GDP per capita by regions rose less than expected. It seems contradictory to other cohesion goals and the mere purpose of the policy that regional divergence is assumed, but it shows at least that authorities are aware of the existence of powerful agglomeration tendencies (Misiąg, 2013). Another goal of this objective was a faster development of EP than of the rest of the country. Given that a large bit of EP’s funds was earmarked for non-growth-enhancing infrastructure, which additionally generates maintenance costs and taking into account lower administrative capacity of EP, the target seems to be unattainable (Misiąg, 2013).
23 Table 9. Objective Indicator Indicator value in 2006 Assumed indicator value in 2013 Actual indicator value in 2013 Last available indicator value Ob jec tiv e 5: In cr eas e o f t h e comp etit iv en e ss o f P o lis h r egi o n s a n d p re ve n tin g t h eir s o cial, e con o m ic a n d territo rial m ar gina liza tio n
Average level of differentiation in GDP per capita value by voivodships (in relation to Poland =100) (%)
18.5 not higher than
25 20.7 20.7 (2013)
Average indicator of unemployment rates in 3 subregions (NUTS III) with the highest rates (%)
27.4 22.0 24.8 21.6 (2014)
Major urban centres included in the network of expressways or
motorways
6 18 12 13 (2015)
Average yearly GDP per capita increase rate for 5 voivodships of Eastern Poland (%)
7.5
Not lower than on average in Poland Lower than on average in Poland X Urbanisation indicator 61.4 65 60.4 60.3 (2014)
Source: own based on GUS databases
Table 10.
Source: own based on GUS databases
7.7 Objective 6
Three out of six targets of the objective 6 were met (see Table 10.). A special attention should be given to two dramatically increased indicators which still manifest favorable dynamics: pre-school education and internet access rates. Cohesion policy can be credited with almost 80% of the increase of the
Objective Indicator Indicator value in 2006 Assumed indicator value in 2013 Actual indicator value in 2013 Last available indicator value Ob jec tiv e 6: Ba lan cing growth o p p o rtu n itie s a n d su p p o rtin g s tru ctu ra l ch an ge s o n r u ra l a re as
Unemployment rate on rural
areas (total/women/men) (%) 16.1/14.4/18.3 13.5/11.0/14.5 10.4/11.8/9.4
9.5/11.6/8.6 (2014) Employment indicator for
persons aged 15−64 on rural areas (total/women/men) (%)
47.0/39.1/55.1 53/44/62 50.3/41.3/59.4 50.9/42.2/59.8 (2014) Number of persons employed
per 100 hectares of arable lands
15 11 14.1 14.1 (2014)
Share of households using access to the Internet in villages (%)
25 70 70 72 (2014)
Population aged 15 and more (total) continuing education – rural areas (%)
13.6 (2002) 17 14.2 13.2 (2014)
Percentage of children inhabiting rural areas, covered by the pre−school system aged 3-5
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latter (MRR, 2007). The unattained goals seem to be set too high given that the EU’s agricultural policy with its unconditional payments to farmland do not encourage small farmers to changing occupation (Kozak, 2011).
8. Within-country divergence
The strategic objective, objective 2 and objective 5 all refer directly to increasing economic, social, and territorial cohesion in Poland, but what was really observed in 2007-2013 was a within-country divergence (Misiąg, 2013). It is not a unique phenomenon in the EU. The Community has witnessed parallel processes of cross-national convergence, and within-country divergence (Farole, 2011) and it is the core regions of each state which catalyze the former and deepen the latter (Marzinotto, 2012). The forces for within-country convergence such as organizational fragmentation and geographical delocalization of production as well as improvement of institutional capacity in the cross-border areas appear to be not powerful enough to counteract divergence forces (Farole, 2011) such as agglomeration tendencies and more effective implementation of CP in core regions (Dorożyński, 2012a). In Poland, a particularly severe divergence was registered between the growth leaders (Mazowieckie, Dolnośląskie) and some EP provinces (Podlaskie, Warmińsko – Mazurskie) (Dorożyński, 2012a). It partly results from the fact that as the latter were significantly affected by the crisis, the former were still on the rise (Rubacha, 2014).
Graph 6.
Vertical axis: Scale of CP support 2007-2013 (Poland average = 100) Horizontal axis: Cumulative GDP growth (fixed prices) in 2007-2013
Source: Misiąg, 2013 0 20 40 60 80 100 120 140 160 180 0 10 20 30 40 50 60 WARMIŃSKO -MAZURSKIE MAZOWIECKIE MAŁOPOLSKIE PODKARPACKIE PODLASKIE ŚWIĘTOKRZYSKIE LUBELSKIE
25
However, it is not a full story. From the analysis of Graph 6 one may infer that CP funds 2007 -2013 were not the most influential determinant of regional GDP growth. It is conspicuous that despite the largest funds directed to Eastern Poland (especially Podlaskie & Warmińsko-Mazurskie), these provinces have grown the least from all Polish voivodships, which is contrary to what was expected (Misiąg, 2013). Misiąg openly stated that given its low administrative capacity and lack of clear development plan, EP might have been overinvested. Furthermore, the inevitable result of the over-absorption was a decrease in marginal effectiveness of the projects realized by EP regions (Orłowski, 1998). In addition, Misiąg carried out the analysis of correlation rates between the change of regional development parameters and the scale of support and concluded that it were global sums, not per capita, that mattered for growth. Bearing in mind that regions which were allotted the most in nominal terms, were the most populous, core regions with more competent administration staff than in EP, it can mean that a common perception of CP being a country-level divergence inhibitor may be false (Dorożyński, 2012a). Consequently, the opposite may actually hold true. The higher administrative capacity and resulting from it higher effectiveness of policy implementation in core regions that in periphery may contribute further to within-country divergence (Gorzelak, 2009) (see Graph 7.).
Graph 7. GDP per capita in 2004 (blue) and 2004-2011 increment (red) [in thousands zloty, current prices]
Source: Misiąg, 2013
In order to complete the picture of this process, the appropriate data will be presented. In 2007-2013 the rising GDP disparities between Polish regions
0 10 20 30 40 50 60 70 Lubelskie Podkarpackie Podlaskie Świętokrzyskie Warmińsko-Mazurskie Opolskie Małopolskie Lubuskie Kujawsko-Pomorskie Łódzkie Zachodniopomorskie Pomorskie Polska Dolnośląskie Wielkopolskie Śląskie Mazowieckie
26
were registered. The GDP of the most developed voivodship of Poland – Mazowieckie – expressed in terms of the EU average, rose in the considered period by 29 p.p. (from 78% to 107%), whereas the GDP of the poorest voivodship – Lubelskie – rose only by 12 p.p. (from 35% to 47%). The development spread between Lubelskie and the second richest region – Dolnośląskie – did increase too. The process of divergence seems understandable and natural when one considers the facts. In 2007-2013, 43% of all investments carried out in Poland were concentrated in only 3 core regions (15% in the capital city) and 84% of the increase of registered enterprises in this period can be credited to the economies of just 6 core provinces. At the same time, a number of enterprises in Podlaskie decreased by 2.3% (Heller, 2013). The disparities in R&D outlays and productivity rose as well, and only the employment spreads stayed constant (people aged 15-64) or even decreased (people aged 55-64). One of the Misiąg’s results proves the point that the EU
funds did not alter the economic hierarchy of Polish regions. The correlationrate
found between regional GDP per capita in 2003 and regional GDP growth 2004-2012 is exceptionally high – 0.988. All things considered, all 16 polish provinces preserved the status quo with the EP regions being the least developed and the core regions being the most prosperous.
9. The reasons for failure
The research carried out by the author demonstrated that all the reasons for the failure to achieve targets along multiple indicators, can be grouped under five fundamental concepts: crisis, demand & supply issues, ill-designed domestic policies, institutional/political issues, and low social capital. The elaboration of these terms in the context of CP 2007-2013 in Poland follows.
9.1 Crisis
As one may distinguish also positive aspects of the downturn such as simplified procedures which precipitated investments, and increased competition in some industries leading to reductions in construction costs, the negative repercussions were definitely more common (Rubacha, 2014). The objective realization was seriously disturbed by the crisis outbreak in 2008, especially given that the situation in the markets, when the goals where set in 2006 was drastically different. The crisis made many small and medium-sized enterprises cut investments, reduce employment or even go bankrupt (MRR, 2012). Moreover many of them refrained from applying for funds, since they had difficulties with own contribution (MRR, 2012). Numerous construction firms
27
suffered from exchange rate variations which brought about unstable industry prices, and consequently problems with payments. What is more, the insolvency of contractors led to contract withdrawals, delays in project realization and ultimately, unattained targets (RS, 2012). Local authorities constrained by tight budgets were also affected. Their increasing debt made them cut spending for the most uncertain, expensive and often growth-enhancing investments (Gorzelak, 2014). Unfortunately, foreign investors were inclined to do the same and hence FDI decreased form 17.2 billion euro in 2007 to 6.7 billion euro in 2010 (RS, 2012). Furthermore, the downturn caused a mismatch between the funding allocated and the demand for it, generating a need for adaptation. Therefore, a part of funds originally earmarked for education and environmental protection was shifted to transport infrastructure and labor market. The reallocation encompassed 8% of the total, which although is much less than in Ireland (43%) and less than the EU-27 average (13%), significantly affected the objective
realization (Dorożyński, 2012a).
9.2 Demand & supply issues
The performance of Polish economy with respect to CP objectives is chiefly a result of demand rather than supply effects of the policy. First two-three years of the MFF 2007-2013 were dominated by investment planning, and hence almost 40 out of 67 billion euro was actually spent only in 2011-2013. Had more projects been undertaken in the initial phase, the objective realization rate would have potentially been higher (Dorożyński, 2013). Alternatively, the assumed targets could have been due in 2015 instead 2013. Moreover, in accordance with the N+2 rule, the investments funded under the considered MFF were carried out even two years after the program was formally finished (MIR, 2014). The large part of expected supply effects, generated by public and private capital accumulation, are hence still awaited and have not manifested themselves in the objective realization (Misiąg, 2013). At the same time, the range of investments which could possibly bring about supply effects was limited, as transport and sanitation infrastructure not coupled with complementary activities, cannot be deemed as such (Dorożyński, 2013). Misiąg concluded that Polish production potential was not sufficiently enhanced and the supply effects may be smaller than predicted (2013). It might be a lost chance, since in general, they are both long-lasting and larger in scale than the short-term demand effects resulted from a financial stimulus. Also more targets could potentially have been met, had more domestic contractors been chosen for the projects and more domestic construction products been used, because
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the money would have not exited the economy (Misiąg, 2013). The argument is only a conjecture, because the exported demand effects cannot be quantified and therefore checked if they were of any significance for the objective realization. Present reporting deems headquarters of beneficiary as a criterion for spending assignment, but factual demand effects are located at investment executor, which is as often domestic as foreign (Misiąg, 2013). Hence, we cannot read from the data neither scale of demand effects nor its distribution. Consequently, we cannot also establish what share of target realization CP can be really accounted for. Another issue that provides justification for objective failures is a potentially disruptive character of demand created by CP. The CP investments can result in deadweight and displacement effects if an undertaken project owing its realization only to the CP funding replaces another one which would be carried out in the no-CP scenario. Therefore, Dorożyński conjectures that possibly some targets had not been met exactly for this reason (2013).
9.3 Bad design of policies
Kozak and Misiąg claim that polish cohesion policy could have been better constructed and they both agree that the major sin of the actual design was too much concentration on hard infrastructure, for it is per se an insufficient condition for development (2011; 2013). Moreover, Kozak stated that true development factors are of “soft” character (e.g. financial system, education system, law enforcement), and that technical infrastructure, instead of creating growth, rather helps to speed it up (2011). Such claim is supported by the
analysis carried out by Komornicki, which indicates, that there is no
unambiguously positive relation between infrastructure investments and economic development in the long run (2014). An associated policy design flaw
is exposed by de la Fuente. His research showsthat peripheral regions shall be
supported mainly in the field of education and core regions in infrastructure (1995). Under the MFF 2007-2013, no such distinction was made, and contrary to this result, most of sanitation, sewage and water system investments was
carried out in Eastern Poland (MIR, 2014). Despite the fact that these
undertakings were very much needed, have improved life standard of inhabitants and created basic conditions for running business, they did not influence dynamics of GDP growth sufficiently, nor contributed to laying foundations for sustained prosperity, for they are simply not of
growth-enhancing character (Kozak, 2011). As regards transport infrastructure, it was
not sufficiently supported by complementary actions such as reinforcing human capital, providing proper administrative service to investors, simplifying
29
procedures, and conducting promotion campaigns. In a consequence of these actions being neglected, the supply effect of infrastructure investments was much weaker than expected, which was detrimental to the effective realization of assumed objectives (Misiąg, 2013).
Thousands kilometers of new transport infrastructure and high investment rates are “numbers on the paper”, and convey little information about the quality of realized undertakings. Unfortunately, in majority of cases it can be assessed as mediocre and such state of affairs is largely attributed to the design of public procurement policy with low price being the key criterion for project selection (Heller, 2013). Regularly, the experience of a bidder and validity of cost estimate is of secondary significance as mostly the cheapest, not the best, offer is chosen. On the one hand, such design is determined by the general scarcity of capital resources relative to the needs, but on the other hand – by the politicians’ fear of being under suspicion of corruption (Dorożyński, 2013). All in all, there are two ways in which this bad policy design could have resulted in multiple CP target failures. First of all, the companies which lost a project tender, often justifiably protested against the result, thereby leading to delays and ultimately to the realization failures of assumed 2013 targets. Second of all, when cost estimates of the tender winners occurred to be unrealistic, they often went bankrupt or quitted the contracts for other financial reasons (e.g. famous COVEC case), leading to tender repetitions and further delays (Gorzelak, 2011). Another policy which, if had been better designed, would have positively influenced the objective realization and plausibly outweighed the imperfections of public procurement policy, is the public-private partnership scheme. As practice shows, the cooperation of these two sectors brings about not only better risk allocation and high quality of projects realized, but it also lowers risk of delays, and ensures substantial savings compared to conventional contracts. It is especially beneficial in the realization of huge infrastructure projects (Baran, 2015). Given the European legislation, it is allowed and sometimes even recommended to apply 3P in the implementation of CP (EC, 2014). However, common in Poland pathological fear of being under suspicion of corruption and general low level of social capital led to overregulation of 3P law and contributed to the economic potential of 3P remaining unrealized (Wąsowski, 2010).
The last policy which is crucial for prosperous socio-economic development and achievement of CP objectives is the public finance arrangement (MRR, 2012). A long-promised reform of this policy was not
30
implemented and hence during the crisis local authorities struggled with rising deficits, additionally facing strict fiscal targets under the SGP. All things considered, these tensions in public finance led to serious problems with own contribution to CP co-financing, and consequently to forsaking parts of investment plans (MRR, 2012).
9.4 Institutional/political issues
The neglect of the specifics of implementation process (e.g. compliance with the partnership principle) speaks volumes about the character of the main concerns. The major challenge for a new member state is the mere usage of the funds available. Regional politicians most often mentioned high fund absorption and avoiding mishaps of formal nature, when asked to name the most profound success of CP (Lackowska-Madurowicz, 2013). Accordingly, true objective-attainment approach was replaced to a large extent by an orientation to spending at all costs, already manifested half way through the CP 2007-2013 (Kozak, 2011). Due to lack of high-quality human resources and low quality management, the largest difficulties with absorption were experienced by the regions of EP (Misiąg, 2013). This is why, Misiąg claimed that the decision to allot the biggest share of funds to EP was far from optimal and that it seems inadequate to the strategic goal and set of physical targets (2013).
The insufficient care for economic and effective spending resulted in many nonsensical investments (Misiąg, 2013). There were airports built, which are currently hardly exploited (Świdnik, Gdynia); the trains were bought, which cannot and will not be utilized at their velocity potential (Pendolino), the so-called “cold baths” were built in Lidzbark Warmiński, where there are insufficient geothermal conditions for such building, not to mention oversupply of water parks and excessively wide highways. These investments are the testimony of pride of local authorities who used funds to raise political prestige (Misiąg, 2013). Farole states that it is not a unique phenomenon, which is limited only to Poland. In the past, use of the EU funds for electoral purposes was common in other countries as well, since the elites always wish to entrench themselves (Farole, 2011). Under such circumstances, implementing projects that would have a significant impact on regional development in the most desirable direction is of secondary significance (Swianiewicz, 2014). Notwithstanding that such approach can be justified by lack of experience, one need to state expressly that observed practices in Poland differed significantly from the proper strategic management and have negatively impacted the objective attainment (Swianiewicz, 2014).
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Although it seemed that decentralization of fund allocation would foster tailoring CP to suit regional needs, the reality proved otherwise. The RPOs transpired to be “dead documents” as they were not designed in terms of the strategic goals but only to provide justification for almost every CP application (Swianiewicz, 2014). Moreover, such design was intentional and therefore the blame can be put on the incompetent administration. It resulted in RPOs being essentially copies of the national strategy, and hence the average deviation of fund allocation between spending categories from the national average was between 0.6% and 3% for every RPO (Gorzelak, 2011). Defining the goals of RPOs in broad terms made it also difficult to monitor them and evaluate their execution. Not surprisingly, these documents had little bearing on the daily activities of administration and on key decisions. In practice, this inconsistency between declared strategic goals and realized projects handicapped successful objective realization, as funds allocated to ROPs accounted for almost one fourth of the polish CP budget (Misiąg, 2013).
In the absence of strict rules regulating the process of project selection, it is not surprising that the decisions were made by other criteria. An important role among these was played by the applicant’s position in the network of social actors in regional policy (Lackowska-Madurowicz, 2013). Those municipalities which had their representatives in formal ROP management institutions as well as municipalities which members of regional executive board came from were more likely to be granted a major CP subsidy than other local government units (see Graph 8.). The fund allocation organized by regional connections impeded the objective attainment by leading to the inefficient distribution of resources.
The incompetence of people managing funds and assisting civil servants was manifested on multiple occasions. For example, due to incapability of the railway management to efficiently govern fund spending, almost 1.15 billion euro was reallocated to road infrastructure (Gorzelak, 2011). Other examples are provided by beneficiaries complaining about insufficient technical support regarding legal procedures and general lack of help (Mientkiewicz, 2010). The low institutional capacity resulted in additional costs imposed on fund recipients as they needed to seek legal support elsewhere (Lackowska-Madurowicz, 2013). Another manifestation of incompetence is bureaucracy. The division of responsibilities between the institutions involved in the CP fund management was not always evident. One could have gotten the impression that every single institution received some responsibilities in order to prevent it from feeling
32
excluded, no matter if such distribution was efficient or not (Dorożyński, 2012a). All mentioned examples had significant impact on the objective realization.
Graph 8.
Source: Swianiewicz, 2014
9.5 Low social capital
Compared with the countries of western and northern Europe, Poland is “the land of mistrust” as evinced by the bloated bureaucracy and underdeveloped civil society (see Graph 9; Lackowska-Madurowicz, 2013). The lack of mutual trust manifests itself also in the regulation of procedures organizing fund distribution which goes much further than the Commission’s recommendations in this respect (Mientkiewicz, 2010). Dąbrowski claims that it might be historically determined, for a huge amount of attachments required for every application resembles the communist-era administration practices (2008). Notwithstanding the total control desired by the authorities, the smooth functioning and effectiveness of CP is adversely affected by such proceeding (Dorożyński, 2012a). What actually could have been observed in 2007-2013 was the prism of control and appropriateness of the used procedures over substantive dimension and factual range of the projects (Dorożyński, 2012a). Apart from the excessively high expenses of system service, there is another cost to such distrustful approach. Francois asserts that culture highly matters for the
33
economic growth and that countries with a low level of social capital tend to
performworse on average than other countries (2005).Moreover, he states that
the social trust is one of the key factors for development of modern, based branches of the economy. That would explain why almost all innovation-related targets under the 2007-2013 strategy in Poland were undershot. The intrinsic feature of the low social capital, as reflected by the overcomplicated CP procedures, is that it forms a vicious cycle of mistrust. Both administration staff and applicants can easily make a mistake when working under such intricate scheme and they often do. Unfortunately, it is sometimes interpreted as a fraud attempt and consequently it may lead to yet lower mutual trust (Lackowska-Madurowicz, 2013). Furthermore, this unfavorable situation in which there are two mutually hostile groups is detrimental to the social interest. The cooperation of administration and entrepreneurs is of high significance, given that the SME sector, which is heavily supported by CP, accounts for almost 70% of polish GDP (Mientkiewicz, 2010). All in all, the overregulation of procedures and unfriendly relationship of the mentioned groups adversely influenced the fund absorption causing delays, enhancing the propensity to select easy to do projects and consequently disturbing the successful objective realization (Lackowska-Madurowicz, 2013). Graph 9. Source: Lackowska-Madurowicz, 2013 Sweden Denmark Netherlands Finland Luxembourg United Kingdom Ireland Belgium Austria Germany Slovenia France Spain Estonia Malta Italy Cyprus Portugal Czech Republic Slovakia Hungary Greece Latvia Romania Lithuania Bulgaria Poland 0
Index of social capital (trust and the number of organizations people belong to)
