Export support for entrepreneurs from eastern Poland

NIK about internationalisation of small and medium-sized enterprises

Entrepreneurs who took advantage of support under the Operational Programme Eastern Poland 2014 – 2020 (OPEP) used the subsidies effectively and efficiently. Thus they achieved results specified in the agreements. The funding was provided by the Polish Agency for Enterprise Development (PARP). In case of 76 of 122 completed projects the value of revenues from the export of goods (services) of companies from eastern Poland increased. The remaining 46 projects did not generate any revenues although the companies were ready to start selling in new foreign markets. In some cases beneficiaries reported revenues from countries that were not defined in OPEP as target countries.

In 2013, foreign trade in eastern Poland was much less intensive as compared with other regions of Poland. It made up only 10% of domestic export. To increase the activity of small and medium-sized enterprises (SMEs) from eastern Poland, support as part of the OPEP was offered. It assumed an increase in the export of goods and services and thus an increase in those companies’ revenues.

It was assumed that in 2023 the revenues of eastern Poland SMEs from the sale of products, goods and materials would total PLN 27 billion. As many as 530 enterprises were to be offered support including consultancy, assessment of their potential related to their entry in foreign markets, preparation of companies and their offers for export and active search of business partners to help bring goods to foreign markets. The support was addressed to SMEs starting their activity in a given market. Since 2016, entrepreneurs could receive funds to cover the costs of consultancy services related to the development and preparation for implementation of a new business model related to the internationalisation of their activity. Projects could also cover the costs of purchasing tangible and intangible assets related to preparation for export activity and related consultancy. The support could also include the companies’ participation in domestic and international fairs and trade missions.

The calls for proposals related to subsidising projects were organised by PARP.

PARP properly discharged its obligations

The Polish Agency for Enterprise Development properly prepared and conducted calls for proposals as a result of which projects were selected to be subsidised as part of the OPEP. From 2016 to 2021, in the first 7 competitions, 1361 requests were filed with projects’ worth exceeding PLN 627 million. Upon including terminated agreements and signed annexes to the subsidy agreements, 532 subsidy agreements with 470 entrepreneurs were in force  as of 13 January 2022 (it was assumed in the OPEP that the number would reach 530 in 2023). As part of the signed agreements, PLN 231 million was granted, where private capital involved in the execution of those 532 projects totalled PLN 92.6 million.

Not all subsidies were used effectively

The obtained information and results of NIK’s parallel audits related to 336 projects show as follows:

• over PLN 12.5 million of subsidies did not translate in any way into revenues from the sale of products, goods and materials to be exported to countries indicated in projects as target countries in case of 46 projects (of 122 completed ones);
• in other 33 cases revenues ranging  from PLN 0.4 thousand to PLN 356.2 thousand did not exceed the subsidies (totalling PLN 11 million);
• revenues from target foreign markets ranging from PLN 18.3 thousand to over PLN 26 million in case of 43 projects exceeded the subsidies (over PLN 11 million in total).

An analysis of 122 completed projects revealed that beneficiaries received over PLN 153 million revenues from foreign markets.

The great majority of beneficiaries audited by NIK (214 z 217 of all audited tasks) performed their planned tasks in line with agreements signed with PARP. Irregularities found in the NIK and PARP audits dealt with two tasks (of 127) related to external and consultancy services provided to beneficiaries and one task (of 48) related to participation in an international fair (exhibitions, trade missions). It was established that:

• an external company specialising in making advertising and promotional materials for foreign markets failed to develop required catalogues for the beneficiary, describing the beneficiary’s company, its activity and products;  
• one beneficiary failed to conclude required cooperation agreements as part of consultancy service in any of the target markets;
• one beneficiary failed to document the purchase of a service of mailing distribution to the base of 500 contacts and receipt of that base, which was part of expenditures incurred during an international fair.

The beneficiaries of completed projects did not infringe their durability principles. They maintained results of the projects measured with output and outcome indicators. Irregularities were related to delays in submitting a statement to PARP or recognising inaccurate data there about indicators achieved.

The projects’ execution was impacted by the COVID-19 epidemic and related restrictions. The beneficiaries were forced to make changes to subsidy agreements or give up some of the tasks planned. The epidemic also influenced revenues from the markets indicated in the internationalisation business model as target markets.

Recommendations

In some cases beneficiaries recognised revenues from the sale of products to be exported to countries not being target countries as part of the 1.2 OPEP activity in statements on maintaining durability and results of projects. Therefore, NIK recommends that PARP should include revenues from the countries being target countries as part of 1.2 OPEP activity projects in the evaluation of results of the support provided as part of the 1^st OPEP priority axis planned for 2022‑2023.