The Council of Ministers is expected to approve today a Report prepared by the Office of Competition and Consumer Protection on state aid granted to undertakings in 2003. The amount of the support totalled over 28 billion zloty and was over 2.5 times as high as in 2002. The aid was used primarily by large state-owned enterprises

The analysis conducted by UOKiK shows, that in 2003 undertakings were supported primarily in reaction to current difficulties in certain industries. Much less state aid was directed at pro-development economic activities, such as adjustment of companies to the requirements of the European Union in the sphere of environment protection, support to small and medium-sized enterprises and research and development outlays.

The total amount of the aid granted to enterprises in 2003 was 28 627.5 million zloty (EUR 6 509.5 million) and accounted for 3.5 percent of GDP. This is a substantial growth in relation to 2002 when the support constituted 1.3 percent of GDP.

Most of the aid was directed to large entities (80 percent), only 13 percent was received by small and medium-sized enterprises. An analysis of the legal form showed that companies with a dominating participation of State Treasury or municipal companies received in 2003 as much as 70 percent of the total aid while private entities - just over 21 percent.

61.2 percent of total aid in 2003 supported the coal mining industry - about 40 mines. They received almost 17.5 billion zloty, which is an increase of 15.8 billion zloty in relation to 2002. The average amount of aid per one mine was very high. For instance: Rybnicka Spółka Węglowa received 3.1 billion zloty, Kompania Węglowa 2.7 billion zloty. The other large sectors which received much aid were iron and steel metallurgy and shipbuilding.

Significant aid was received by Polskie Koleje Państwowe (Polish State Railways) - 907 million zloty in the form of guarantees by the State Treasury for restructuring. Much less was granted to subsidiary companies: PKP Przewozy Regionalne - 208 million zloty, PKP Intercity - 15 million zloty.

In 2003, similarly to previous years, the most frequent form of aid were subsidies or tax relieves accounting for 74.9 percent (64.8 percent in 2002).

From among all the institutions, the largest amount of aid was granted by: Zakład Ubezpieczeń Społecznych (30 percent) and tax and customs authorities - 24.2 percent. Regional institutions: marshals of provinces, communes had a small share in the total amount of aid granted (jointly 5.8 percent).

Last year almost 71 percent of state aid was granted to enterprises from the Silesia province. This was followed, with respect to the volume of support, by entities from the Małopolskie province (almost 5 percent) and the Mazowieckie province (3.5 percent).

Altogether, in 2003 aid was granted to about 85 thousand entities (excluding agriculture). Almost all  of the aid was granted to 16.5 percent of beneficiaries and was mainly earmarked for restructuring, which means that one enterprise received an average of about 1.6 million zloty. Those data are alarming as they indicate a hazard to breaches of competition. UOKiK has doubts weather social benefits resulting from the aid exceed the adverse effects of State interference in free market.

The structure and volume of state aid granted in Poland, differs much from the average in other EU Member States. In accordance with a report prepared by the European Commission and containing the year 2002 data, the average share of state aid in GDP was 0.56 percent (in Poland it was 3.5 percent in 2003 and 1.3 percent in 2002).

The largest differences in the structure of aid refer to support to research and development works (in Poland only 0.4 percent was granted for this purpose while in the European Union it was 15 percent), coal mining (the EU average is over three times less than in Poland ) and aid to small and medium-sized enterprises (4.7 percent in Poland and 14 percent in the EU). Another phenomenon of concern is a small share of subsidy as one form of aid (the most transparent form of support, accounts for 58.6 percent in the European Union while it constitutes only 9.6 percent in Poland).

Additional information:
Elżbieta Anders, Spokesperson of UOKiK
International Relations and Communication Department
Office of Competition and Consumer Protection
Pl. Powstańców Warszawy 1, 00-950 Warsaw
Ph.: (+48 22) 827 28 92, 55 60 106, 55 60 314
E-mail: [SCODE]ZWFuZGVyc0B1b2tpay5nb3YucGw=[ECODE]