1. Grzegorz BYKOWSKI, Marshal Office of the Wielkopolska Region, PL OPEN DAYS BRUSSELS 8-11 October 2007 Advantages of introducing the JEREMIE initiative under Wielkopolska Regional Operational Programme 2007-2013

2. WIELKOPOLSKA – Facts & Figures GDP per capita – 54% of UE average (27) By the end of 2005 more than 334 000 businesses registered ( 9.4% of all businesses registered nationwide). In Wielkopolska, there were 1 012 entities per 10 000 citizens (Poland – 948 entities), 1 011 of which were SMEs. Wielkopolska, as well as Śląskie, Mazowieckie and Łódzkie Provinces, are the fastest-developing regions in Poland – average growth rate in Wielkopolska – 6.00%, as compared to 5.5% nationwide (2001 – 2004). By the end of 2005 about 4 900 foreign capital enterprises were registered in Wielkopolska. The number of SMEs in Wielkopolska represents over 9% of the total number of SMEs in Poland. Wielkopolskas SMEs generate 15.8% of the total exports volume of Polish SMEs – Wielkopolska ranks 2nd in the country. 2004: 1,209,900 jobs, out of which 77.1% in SMEs (national average: 74.2%)

3. Vast majority of SMEs employ up to 50 people. SMEs maximum involvement in the implementation of the Integrated Operational Programme for Regional Development in Poland in 2004-2006 – the largest number of applications per available allocation. Large number of foreign capital companies (over 5,000). High growth rate of Wielkopolska foodstuffs exports to other EU countries. Steadily growing position of companies producing vehicles, machinery, electrical appliances and furniture. Highly developed and diversified industry; efficient, large-scale agriculture; well- established sector of banking and financial services. Industrial activities are a source of income for 25% of the regions business workforce. Foodstuffs production prevails in the industrial production. Wielkopolska is one of the 4 regions producing jointly over 50% of Polands meat, milk, butter and cheese. WIELKOPOLSKA – Facts & Figures

4. Availability of financial support instruments for SMEs in Wielkopolska - GUARANTEES Wielkopolska Province Development and Promotion Fund (Fundusz Rozwoju i Promocji Województwa Wielkopolskiego S.A. ) in Poznań – regional operation (share capital of PLN 13.35 million, another PLN 13.35 million from EU grants – a total of PLN 26.7 million). Four guarantee funds – local operation (PLN 6.71 million – total share capital). 1519 – number of guarantees issued by Wielkopolska-based guarantee funds since the beginning of their operation for a total amount of over PLN 81.77 million. PLN 85.40 million – forecast value of guarantees to be issued by Wielkopolska Province Development and Promotion Fund in 2007 - 2013

5. Availability of financial support instruments for SMEs in Wielkopolska - LOANS Wielkopolska Agency For Enterprise Development (Wielkopolska Agencja Rozwoju Przedsiębiorczości Sp. z o.o.) – regional operation (share capital of PLN 8.05 million, PLN 17.5 million from EU grants – a total of PLN 25.55 million) 401 – number of loans granted by Wielkopolska Agency For Enterprise Development as for June 30, 2007 for the total amount of PLN 27.2 million. PLN 64 thousand – average loan granted by Wielkopolska Agency For Enterprise Development from June 30, 2004 to June 30, 2006. Three loan funds – local operation (PLN 7.96 million – total loan capital – as for December 31, 2006) 76% - loan fund capital growth from June 30, 2004 to June 30, 2006; 250% - capital increase of Wielkopolska Agency For Enterprise Development

6. Allocation of ERDF resources for WROP 2007 - 2013 PRIORITIESERDF COMMUNITY CONTRIBUTION PRIORITY 1: Competitiveness of Enterprises Measure 1.3: Development of the system for financial business support instruments – JEREMIE 328 887 000 (ca.26%) 60 000 000 (ca. 5%) PRIORITY 2: Communication infrastructure493 361 547 PRIORITY 3: Environment173 821 000 PRIORITY 4: Revitalization of problem areas54 060 000 PRIORITY 5: Infrastructure for human capital121 284 097 PRIORITY 6: Tourism and cultural environment61 470 000 PRIORITY 7: Technical assistance39 909 000 TOTAL 1 272 792 644

7. JEREMIE IMPLEMENTATION TIMETABLE IN WIELKOPOLSKA 1.Signing of a letter of intent with the EIF – July 11, 2007 (apart from Wielkopolska the letter was signed by Pomorskie, Zachodniopomorskie, and Łódzkie Provinces) 2.Regional gap analysis – mid-October 2007 3.EIF subsidies agreement negotiations (October) 4.HF account opening – December 2007 5.Opening of EIF office in Poznań – January/ February 2008 6.Appointment of financial intermediaries – April 2008

8. Direct benefits from implementation of JEREMIE initiative for Wielkopolska 1.Owing to the renewable nature of support ( multiplier effect ), assistance available for SMEs increases by up to 400%. 2.The assistance returns to Wielkopolska budget after 2013, which means ca. EUR 60 million for further SMEs support. Option of establishing institutions similar to German regional investment banks. 3.Change of regional authorities attitude towards financial engineering – a new institution must be ready by 2013 – KEY ISSUE.

9. Indirect benefits from JEREMIE initiative implementation for Wielkopolska Reinforcing the position of business support institutions, as intermediate bodies; the possibility of obtaining substantial operating resources should translate into enhancement of their potential ; also: possible income from money lent. The minimum entry barrier forced provincial authorities to allocate more resources for this measure, which means larger support for SMEs. Implementation of JEREMIE initiative will also bring about new financial support instruments available for SMEs (so far only loans and guarantees). Holding Fund: flexible selection of financial instruments means possible reallocation to reflect changing market situation.

10. Benefits for Managing Authority of Wielkopolska Regional Operational Programme The lack of n+2/n+3 rule facilitates seven-year implementation with variable intensity, with no fear of losing the resources. Advance payments, i.e. possibility of quick use of HF resources. Jeremie is treated as a project, individual loans to SMEs do not have to be accounted for; therefore, once money is forwarded to HF – an application for interim payment to the European Commission can be filed.

11. Wielkopolska – EIF cooperation benefits Wielkopolska does not have enough HR qualified in financial engineering ( so far it was outside the Offices remit ). As regional administration authorities we are of the opinion we do not have to be experts also in this field – al though we realize that it should be developed. Problem with demarcation line – under the Regional Operational Programme only loans and guarantees can be awarded, whereas capital instruments are available under national programmes. Under the Regional Operational Programme quasi-capital instruments can be offered. In terms of products offered to SMEs, regional loan and guarantee funds lag behind and cannot process the entire amount until 2015. EIF is a specialized institution operating on the EU financial services market since 1994. Operating capital: ca EUR 12. 5 billion (2005). Rated AAA+. It has a ready-made, well-prepared and already tested mode of action. It can propose mixed instruments, without challenging the demarcation line.

12. Expected effects of JEREMIE initiative implementation 1.Through adoption of the financial leverage effect the results can reach EUR 400 million. 2.Resources earmarked for JEREMIE can be renewably used to implement regional policies for all 7 years (unlike one-off assistance available before). 3.More risky instruments (especially in the fields of innovation) can be applied, provided that regional authorities specify the acceptable risk rate. 4.Changes in the market of SMEs support institutions in Wielkopolska in 2015.

13. Problems with JEREMIE implementation The entry level is EUR 60 million – it is more country- rather than region- adjusted (average annual income of Polish regions is ca EUR 175 million). A need to pre-finance the measure during the initiative launch (resources must be forwarded to HF from time to time). The breach of interests of the current players in the market of financial services is an outcome of decapitalization (shrinking equity), particularly for the shareholders of the existing funds – strong negative lobbing. Implementation costs: –Establishment of own institution– at least 3 years, problems with obtaining qualified personnel from the market of financial services – well-paid specialists. –EIF charges: ca. 1.5-2% of the projects budget per annum.

14. Had it been not for JEREMIE, … … Wielkopolska would have not earmarked EUR 60 million for financial instruments for SMEs (entry barrier), … only traditional loans and guarantees would be available; portfolio of services offered to SMEs would not have expanded, … only loan grants would have been available – no capital renewal option, … the support for SMEs would have been less efficient, as resources must be awarded only once and then can only be deposited on an interest bearing account, …resources spent once on a grant would have not contributed to implementation of various political goals of the regional authorities – no economies of scale, …establishment of one comprehensive financial institution after 2013 would have been impossible (regions budgets are too scarce; thus, a number of smaller funds) … provision of support through more risky instruments would not have been possible, funds (shareholders) are not interested in high-risk projects.

15. e-mail: gbykowski@umww.pl www.umww.plgbykowski@umww.plwww.umww.pl Grzegorz Bykowski Department of Economy Marshal Office of the Wielkopolska Province Thank you for your attention