ECONOMIC IMPACTS OF THE ENTRANCE OF THE CZECH REPUBLIC TO EU ON CZECH CORPORATE SECTOR Ing. Martin Krištof (kristof@econ.muni.cz) Brno, Autumn 2006 1. The Background The Czech Republic - from the beginning of the transformation: • best starting performance and economic results • stabilized macroeconomic situation • institutional and legal framework less adopted to market economy than in Poland or Hungary In the process of transformation ,, lodernization of the Czech economy and corporate sector • problems with legal framework and competition 2. The relations between the Czech Republic and the European Union Mmriuiii 1992- Czechoslovak Socialist Republic European Commission opened its Delegation in Prague -Contractual agreements, such as the "Trade and Co- operation Agreement"? and then the "Europe Agreement" were agreed Grant assistance program supporting the reform in Central and Eastern Europe, known as Phare. The Member States of the European Union first decided in Copenhagen that the countries of central and eastern Europe could join the European Union if they fulfilled a number of criteria 1996 - Czech Republic applied for membership. 1993- 2. The relations between the Czech Republic and the European Union 31st March 1998 - Official negotiations for membership were launched after the European Commission's positive Opinion on the Czech application 9th December 2000 - An Intergovernmental Conference agreed in Nice, on 9 December 2000, on a new Treaty reforming the institutional framework of the European Union. Febuary 2002 - up-date screening 15-16 June 2003 - Referendum on the accession of the Czech Republic to EU - successful 1 May 2004 - Entrance of the Czech Republic to European Union, take part in the next elections for the European Parliament in 2004. 2. The relations between the Czech Republic and the European Union - Referendum Number of eligible citizens Turnout Nr. of Votes "Yes" I %„YES" I Nr. of Votes „NO" I % „NO" 8 259 525 55.21 % 3 446 758 77.33 % 1 010 448 22.67 % 3. Entrance of the Czech Republic to European Union - SW analysis STRENGTHS The Czech Republic is a traditionally economically strong country with great potential • One of the economically most developed Central and Eastern European candidates (the only stronger country is Slovenia) • Czech HDP per capita (in purchasing power parity) is more than 60% of EU average and even the recent slow down of the economy has not threatened its second position at all. • The Czech republic has a very low cumulative inflation. • It has been very successful in attracting FDI in 2000-2003 (measured per capita in nominal exchange rate) reaching 75% of the average level of EU 3. Entrance of the Czech Republic to European Union - SW analysis STRENGTHS • The Czech Republic has the best trade balance from candidates » over 80% of its export are directed to EU member states. This shows a fast adaptability of the Czech economy; • The level of public debt is quite low (is expected to increase), • The structure of the Czech economy is favorable (less than 5% of GDP produced in agriculture and thus not be a burden to the EU budget and CAP (comparing to Poland) • The Czech Republic exhibits a stable social environment, low unemployment and small social diversification. • Czech workers are traditionally well educated and skilled. technologically the most advanced country from all the former communist countries. 3. Entrance of the Czech Republic to European Union - SW analysis WEAKNESSES zech economy went through crisis resulting in a slow-down of growth(and even decline) of GDP levels. • The Czech Republic is a small market with an internationally relatively weak purchasing power with low price levels. 3. Entrance of the Czech Republic to European Union - SW analysis WEAKNESSES • Its labor force is relatively immobile. • Czech Republic has problems with proper functioning of institutions and the enforcement of legislation and law • The economy is not yet fully restructured, so in the global comparison, the Czech Republic displays relatively low results in terms of competitiveness. • Consequently, this might lead to a situation where a number of companies will not be able to compete with the economic pressures of the EU single market. 3. Entrance of the Czech Republic to European Union - OT analysis Opportunities 1) Historical 2) Economic 3) Better International Position 4) Global „Shelter" 5) Social 6) Cultivation of Institutions 7) Financial 3. Entrance of the Czech Republic to European Union - OT analysis Opportunities 1) HISTORICAL • The entrance to the EU symbolized that the transformation period has come to an end. 2) ECONOMIC Full access to single market is gained. Changes will be felt especially in agriculture and other sensitive goods and in removal of non-tariff barriers. Great new specialization opportunities for some industries (the most likely to profit are glass-blowing, cement works, chemical industry, metallurgy and engineering industries). 3. Entrance of the Czech Republic to European Union - OT analysis Opportunities 2) ECONOMIC • Czech companies will have access to public tenders of EU states (and all EU comp. Access to Czech tenders) Specialization within the EU will bring cheaper imports, thus raising consumer welfare. Companies are forced to restructure and modernize due to these opportunities and threats from competition, domestic wage level will steadily increase and thus strengthen the consumer purchasing power due to freedom of movement and lower domestic price level 3. Entrance of the Czech Republic to European Union - OT analysis Opportunities 3) Better International Position • The Czech Republic will gain far stronger international position by becoming a member state. Leaving the category „emerging markets", • Czech businesses will be able to carry the tag "made in EU" which has a far stronger reputation than the present "Czech made" 4) Global „Shelter" Czech Republic will be a part of a strong and stable economic sphere, able to deal better with the global changes. 3. Entrance of the Czech Republic to European Union - OT analysis Opportunities 5) SOCIAL • Long term increase in living standards together with open borders will make the possibility to travel freely in Europe even more attractive. • It is expected that highly skilled workers, sciencists and graduates will be the most likely group to migrate to EU countries 6) CULTIVATION OF INSTITUTIONS • The improvement of political and business ethics Political, juridical and other institutions will be standardized ■ more transparency into public governance and transactions • It is expected that it would provide even better environment for FDI 3. Entrance of the Czech Republic to European Union - OT analysis Opportunities 7) FINANCIAL • the Czech Republic has been receiving significant amounts of pre-accession help (0,9-1% of Czech GDP), membership in the EU will bring an increase of these funds by 1, 5 % of Czech GDP (estimated net income from the funds as members will be 2,3-2,4% of Czech GDP). Czech companies lacking investment capital will have a better access to finances thanks to the higher international competition Less developed regions can expect a stronger and more better targeted financial support from the EU structural funds. 3. Entrance of the Czech Republic to European Union - OT analysis Opportunities 7) FINANCIAL - FINAL ENLARGEMENT "PACKAGES" PPROVED AT COPENHAGEN SUMMIT BUDGETARY ESTIMATES 2004 pre-accession aid agr ic ult ure structural actions internal actions additional expendit cash flow lump-sum total allocated exp 3. Entrance of the Czech Republic to European Union - OT analysis Threats 1) LOSS OF DOMESTIC SOVEREIGNTY 2) "second rate" membership 3) GLOBALIZATION GONE TOO FAR 4) TOO CLOSE TO STRONG NEIGHBOURS 5) SOCIAL: 6) FINANCIAL 7) INSTITUTIONAL XEROX 8) CONCERNS OVER THE DEMOCRACY IN SOME INSTITUTIONS. 3. Entrance of the Czech Republic to European Union - OT analysis Threats and Concerns 1) LOSS OF DOMESTIC SOVEREIGNTY • the argument of losing some aspects of domestic economic sovereignty is the most commonly used by Czech politicians The loss of privately negotiated economic treaties with the non-EU parties 2) "second rate" membership • concerns that the Czech citizens will become a "second rate ■ members" as some of the fundamental EU rights (movement of workers, Schengen rights etc.), will not be immidiately available at the time of accession.). 3. Entrance of the Czech Republic to European Union - OT analysis Threats and Concerns 3) GLOBALIZATION GONE TOO FAR • it is feared that some "typically Czech" cultural forms will be lost in "uniform Europe" Multinational companies will have an unfair advantage over the newly formed, internationally inexperienced small domestic companies. 4) TOO CLOSE TO STRONG NEIGHBOURS rising price level, the inflation, if not well mastered and spread in time (price of foodstuff is expected to rise cumulatively by 40-45% till the year 2006) the strongest competition will be felt in textile industry, foodstuff and banking (especially SMEs) • wave of bankruptcies will accompany accession, resulting in short term local unemployment. 3. Entrance of the Czech Republic to European Union - OT analysis Threats and Concerns 5) SOCIAL: THE MOST MOBILE WINNERS TAKE IT ALL » Potential outflow of highly skilled population to neighbouring EU countries Social income inequalities are expected to rise especially in the border regions In the border regions the foreign nationals will be able purchase the land and Czech Republic is asking for a transition period in this area. • Social inequality and unequal purchasing power is expected to rise short term unemployment. 3. Entrance of the Czech Republic to European Union - OT analysis Threats and Concerns IAL the costs of compliance to the EU norms are relatively costly The EU regulations will also mean extra costs for the Czech businesses. (On the average they could mean a rise of costs by 5-10% of an „average" company turnover) Fiscal policy will have to comply with the EU regulations and some industries will loose their state funding. The Czech state will be forced to offer tenders not only to domesticcompanies, but to all companies in EU. 3. Entrance of the Czech Republic to European Union - OT analysis Threats and Concerns 7) INSTITUTIONAL XEROX • having the same legal framework does nor necessarily imply same behavioral patterns across countries. One of the threats is that the unofficial institutions will not copy the development of official institutions and thus things will change "only on the paper". 8) CONCERNS OVER THE DEMOCRACY IN SOME INSTITUTIONS. entering an institution which has some mistakes 4. Economic Impacts of the Accession •EU membership will boost economic growth leading to a convergence in income levels and purchasing power. •Economists reckon that accession itself could bring around 5-9% points of additional real GDP within ten years. That belief is based on three arguments: • Integration will provide a further stimulus to trade and capital flows. • Income transfers to the new members (from structural funds) will speed the development of hard and soft infrastructure: roads, information, etc. • EU membership will decrease the risk for business by introducing common standards, a common regulatory environment and more political and macroeconomic stability. Lesson from accession of poorer countries The different outcomes are largely to do with three factors: IJilítmailMilWllKlJiltUIMJiHtHllWiPaiB direct investment flows, but also to infrastructure and education levels. • Macroeconomic policies -Ireland managed to cut its foreign debt and turn a huge budget deficit into a surplus, Greece only started tackling its deficit problem in the late 1990s as part of its move to join the eurozone. • Structural reform. Spain, Portugal and Ireland underwent enormous and painful economic restructuring, helped by EU funds. Greece, until recently, used the funds to avoid tackling structural problems. 5. Impacts of the Membership on Czech firms 1) Changes for the businesses and consumers 2) Changes in trade levels 3) EU Funding 4) Transparency and corruption 5) Unemployment 5. Impacts of the Membership on Czech Firms Changes for the businesses and consumers The market for firms that supply other businesses, will gradually improve The competitive impact of accession will encourage local companies to look for international partners. For local companies, the threats and opportunities of EU membership depend largely on competitiveness and resources. Firms that want to break into the EU market will face high marketing costs, encouraging them to work more closely with foreign partners Great threat for under-resourced companies (esp. heavy industry) Increased competition and costs for local-oriented companie A big shake-out of inefficient companies, leading to a greater Specialisation of local businesses in services and in the supply chain of multinationals. embers 2) Changes in trade levels •Over 80% of exports enter the EU tariff-free already. Accession will open up trade in agricultural goods (still heavily protected) •It will also facilitate trade in services. •The removal of real and threatened anti-dumping quotas will ease the flow of trade in areas with cost advantage like steel, textiles, etc. •The immediate impact will be modest. •Full participation in the Single Market will change the structure and scale of trade over time. •Standardisation of product quality, labelling requirements, health and safety regulations and customs procedures will make it relatively cheaper 5. Impacts of the Membership 2) Changes in trade levels Local firms will be encouraged to exploit economies of scale and produce for a larger market, cutting costs and increasing production •Trade level increase not only between the EU but also between the new members themselves 5. Impacts of the Membership 3) EU Funding - Preaccession Aid > Phare SAP ARD (Special Accession Programme for Agriculture and Rural Development) projects mainly finished or in progress, no new projects PHARE 2003 - municipalities - Part I. (19,1 mil. €), Part II. (41 mil. €) - programmes for municipalities (regions, towns, etc.) - entrepreneurial and touristic infrastructure PHARE 2003 - SMEs (20,1 mil €) programme for SMEs - SME development Investments for SMEs (technology, ISO, reconstruction, etc.) 5. Impacts of the Membership 3) Structural funds Basic documents: National Development Plan (NDP) Community Support Framework Operational Programmes: jint Regional Operational Programme Operational Programme Industry and Enterprise • Operational Programme Infrastructure • Operational Programme Human Resources Development • Operational Programme Rural Development and Multi-Functional Agriculture Global objective of NDP Sustainable development based on competitiveness. 5. Impacts of the Membership 3) Structural funds Support Areas Allocations of Structural Operations for the Czech Republic (inmillion EUR, 1999prices) Total 2004 2005 2006 Cohesion Fund maximum 932.1 319.2 262.8 350.1 minimum 740.5 253.2 208.4 278.9 average 836.3 286.2 235.6 314.5 Structural Funds 1,491.2 371.4 498.1 621.7 Objective 1 1,286.4 307.0 431.1 548.3 Objective 2 63.3 21.1 21.1 21.1 Objective 3 52.2 17.4 17.4 17.4 Community Initiatives INTERREG 60.9 19.0 19.0 22.9 EQUAL 28.4 6.9 9.5 12.0 Total Structural Operations 2,327.5 657.6 733.7 936.2 ource: National Developmen 5. Impacts of the Membership 3) Structural funds Share of OP Industry and Enterprise 15.0 % OP Infrastructure OP HR Development i-Functional Agriculture Total JROP ofwhichTACSF Total OP 13.5% 21.0% 38.5 % 100.0 % Currency 2004 million EUR million CZK million EUR million CZK million EUR million CZK million CZK million EUR million CZK million EUR million CZK million EUR 45.889 1,422.556 41.300 1,280.301 64.244 1,991.579 36.711 2005 64.439 1,997.603 57.995 1,797.842 90.214 2,796.644 51.551 2006 81.957 2,540.676 73.762 2,286.609 114.740 3,556.947 65.566 1,138.045 118.855 3,684.519 1.074 33.292 307.000 1,598.082 166.901 5,173.929 1.508 46.749 431.1001 2,032.541 212.275 6,580.528 1.918 59.459 548.300 million CZK 9,517.000 13,364.100 16,997.300 4,768.668 498.032 15,438.977 4.500 139.500 1,286.400 39,878.400 European Commission data and Ministry for Regional Development calculations, 2004 1 776 mil. € from Structural Funds 444 mil. € national contribution (state and regional budgets) 2 220 mil. € available for the applicants It also means: • Almost 24 000 applications (projects) until 14.10.2006 • More than 1 000 individual calls • 7 Operational programmes (including two programmes for Prague) Quite complicated system of the implementation cJii«TtRI£U ßi i rA ŕ: m ící á k\ i i of the present period learnin* bodies; eriod for applicants as well as for implemention • slow progress in using Structural Funds with huge differences among programmes; • disparity between the interests of applicants and allocations (e.g. in tourism activities excess of requierements - 500 %, modern technologies and other investments - 250 %); most active applicants - SMEs and municipalities Grants (mil. EUR) Requested Contracted Paid to 2004 1 385,4 14,3 6,3 to 2005 3 743,7 708,3 68,2 to 2006 (14.10.2006) 4 448,3 1 594,8 364,1 Grant (mil. EUR) Contracted to VvVvVvVvWVvVvVVWvVvW Allocation 04-06 Paid to VWVWvW Allocation 04 Paid to 1 Allocation 04-06 to 2004 0,6% 1,2% 0,3% to 2005 31,9% 13,5% 3,1% | to 2006 (14.10.2006) 71,8% C 72,2%) 16,4% | Period 04-06 - Grant Exploitation (2) Progress of grant usage progress in the Czech Republic 5 000,0 -i 4 500,0 - 4 000,0 - 3 500,0 - 57 3 000,0- = 2 500,0 - — 2 000,0" 1 500,0 - 1 000,0 - 500,0 0.0 2004 2005 2006 (14.10.2006) D Requested D Contracted Paid Allocation 04 Allocation 04-06 Operational Programmes - Marks Programme Contracted to VvWvVvVvVv\\VvVAV/v Allocation 04-06 Paid to WWvWV Allocation 04-06 Paid to Allocation 04 WvWvWvWvVAVvWvVv (N+2 rule) Mark VWvVWvW JROP 86,3% 16,2% 73,2% C OPHRD 74,3% 6,4% 28,9% E OPIE 68,2% 19,8% 91,9% B OPI 63,6% 24,5% 110,8% A+ OP ARD 46,4% 25,2% 114,3% A SPD2 68,8% 8,8% 28,5% E SPD3 77,1% 7,4% 24,0% E Total ■.."..■..■..■..-..■..■..■■ A. 71,8% 16,4% 72,2% C A - the best, E - the worst (Fail) Period 04-06 Troubles and Barriers - examples 1. Delayed calls of applications - mainly in the Operational Programme Human Resources Development 2. Administratively demanding procedure of application 3. Short calls of applications (in weeks, max. 2-3 months) 4. Objectivity of evaluation of projects - subjective opinions of evaluators and possibility of corruption 5. Information campaign not properly targeted - there is no official point for all calls, information campaign is fragmented - almost no information about successful projects 6. Insufficient capacity of implementation agencies - delays (months) in: - Evaluation of applications - Preparing the grant agreements and contracts - Monitoring and ex-post controlling - Tranfers of a grant to beneficiaries Period 07-13 Basic characteristics • Allocation: 26 302,6 mil. € from Structural Funds 3 945,4 mil. € national contribution (state and regional budgets) 30 248,0 mil. € in total available for applicants Average allocation/year = 3 758 mil. € (nearly 6 more than in 04-06) 24 Operational programmes (including two programmes for Prague and 7 programmes of international regional transnational cooperation • Delay in preparing the programming documents and negotiations wi the European Commission Expected launch of the first programme(s) - 1.Q. 2007 Period 07-13 Operational programmes (1) Thematic: • OP Enterprise and Innovation • OP Research, Development, Innovation • OP Education • OP Human Resources Development and Employment • OP Living Environment • OP Transportation • Integrated Operational Programme • OP Technical Assistance Number of programmes increased by 3 comparing to the period 04-06 Operational programmes (2) Regional OP - 7 NUTS2: ROP NUTS II Southeast ROP NUTS II Southwest ROP NUTS II Moravskoslezsko ROP NUTS II Northeast ROP NUTS II Nortwest ROP NUTS II Central Bohemia ROP NUTS II Central Moravia Ps - Prague: • OP Competitiveness ♦ OP Adaptability Characteristic \Mywwwwwwwwwwwwv\/ 2004-2006 2007-2013 Comment vwwwwvwwwww Numer of VvV-programmes 7 17 ■ 7 regional programmes instead of Joint Regional VvVVh*ÍVvVvVvVW" V^VVvVO*AAAAAyVvVVVvVvVVv VvVvVvVvVvVvVv VvV- WVvVvWv WW\^W\^WWW'v Operational Programme, VvV+VvVvVv^vVvVvVvVvVvV- wwvW^A^^^^^AMVvWV■' ■ 2 HP programmes instead of one V^VVvVO*AAAAAAyvVVVvVvVVv VvVvVvVvVvVvVv VvV- VvWvVv ■ Technical Assistance set aside as a separate WvWvWWvWvWW VvVvVvVvVvVvVvVvVvVvV VvVvVvVvVV WvWVvWWWWW proa ramme ■ Support of innovations has its own programme Programmes of W^^VvVIWvVAVv^VvVvVvV■ VvV-international vwwwwwwwwwww^ cooperation 7 7 No significant changes Total Nr. Of VvVvWVvV- WW WW Programmes 14 24 More complicated implementation system including administration and evaluation of application, transfer VAAAAAAAAAAAAAAAAAAAAAAAAAA" VvVvVvV- VAAAAAAAAAAAAAAAAAAA- VvV- VAAT\AVvVAAAAAAAAAAAAAA"' of grants to beneficiaries Allocation/year WWvWvWWWvWV- "A^vVvVvV-(mil. €) 740 4 321 multiplied by 5,84 Nr. Of VvW- VvW-applications/year 8312 25 786* Number of applications is expected to be multiplied by WWvWWWWW- VvV- W^^VWV^VvVvWvVvWVv^■ VvV- VvVvVvVvVvVvVvVvV- WW VvVvVvVvVvVvVvVvVv -^ 3 (share of large projects will increase) N+Xrule N+2 rule N + 3for VvVw period 2007-2010, then N+2 Expected delay in the launch of OPs, avoiding the VvVvVvVvVvVvVvVvVv WWWAW WWW WvWWWWW VvV- WWWvV-1 WWWWWWWW WWW danaer of not fulfilling the "N+2 rule" VvVvVvVO*A/VvV- VvV- WWVWWWvW VvVvVv Period 07-13 comparing to 04-06 (in numbers) P Absorption capacity 2 004 2 005 2006 Total 04-06 WvWAWAŕ " In projects 3 547 11 388 10 000 24 935 — -^^L L» In mil. € 504,4 748,1 967,4 2 220 Share of consulting companies VAAAAAAAAAA/- \AA/- "—* VAAAAAAAAhAAAAAAAAAA/v - 30% - in projects 1 064 3416 3 000 7 481 '■">.* ^ V,- 56 Share of consulting companies - 30 % - in mil. € 151 224 290 0* Absorption capacity 2007 2008 2009 2010 2011 2012 2013 Total 07-13 WWvWvVv In ßno[ects 18 000 25 000 30 000 30 000 27 500 25 000 25 000 180 500 In nil. i 3 758 3941 4125 4 317 4 510 4 701 4896 30 248 Share of consulting companies - 30% - in ßrojects 5400 7500 9 000 9 000 8 250 7 500 7500 54150 Share of consulting companies VvWvVvWvV \W '■J WvWvWMVvWvWvVv -30% -in mil. § 1127 1182 1237 1295 1353 1410 1469 9074 Absorption capacity of the periods 2004-2006 and 2007-2013 6 000 35 000 30 000 25 000 ■-. CO 20 000 f 15 000 £ 10 000 E. 5 000 0 2 004 2 005 2 006 2 007 2 008 2 009 2 010 2 011 2 012 2 013 i-----1 Absorption capacity (mil. €) »Absorption capacity (projects) ZAml*l*m*Mi M tl^i ŕ Itj •]*•!• a i •ic-i Objective 1 - Thematic OPs and Regional Operational Programmes Pro aram m e Allocation VAAAAAAAAAAAAAAAAAAAVv 07-13 (mil. €) Share in % WWWWvWv from vwwww^ Objective 1 OP Enterprise and Innovation (OPEI) v^y^y^yy^yj^y^yy^y^s wwwv. wmwawwawaw I ' 3 041 11,75% OP Research, Development, Innovation (RDI) 2 071 8,00% OP Education v^^yy^yy^y^yy^yy^jV. 1 812 7,00% OP Human Resources Development and Employment VvVvWvVvWvVv -^y^y^yy^yy^yy^yy^yy^yy- ■^y^y^y^y^y^y^f^y^yyy^yy^^y- vw^y^x- wwva^vva^/avvVvVVVvV 1 815 7,00% OP Living Environment 4918 19,00% OP Transportation 5 759 22,25% Inte orate d Operational Programme ■^yyy^y^v^yyy^y^yy^y ^yv^y4v^^y^^yv^y^^y^^y^^yv^yv^Jv■ ^y^^^^^^v^^^^^^v^y^^v^y■ 1 553 6,00% Operational Programme Technical Assistance M ^A/.^l^y^^^^^y^^y^^^^y^y^y. ^y^^^^^v^v^^^^^^y. ^y^^^^^/^^^^y^^y. ^y^^^^^^^^^v^Ay^x. 259 1,00% Regional Operational Programmes ViVvVaWiV/VvVvV x^y^lv^y^^y^y^rx^y^^y^x^y^y- vv^v^^^v^v^^^^rv^^v 4 659 18,00% Centra/ Bohemia 559 2f16% V^VvVv^V^VvVVVv^VvVV 620 2,39% A/orŕ/?wesŕ vwwwwwwwwvv- 746 2,88% Souŕ/?easŕ ■^yyy^y^yy^yyy^y^yy^y 704 2, 72% Northeast Vv\yvVv\yvVv\yvVv\yvVvV 656 2,54% AÍ ora vskosiezsko 716 2, 77%, Centra! Moravia VAAAAAAAAAAAAVv VAAAAAAAAAAAAAAV- 657 2} 54%o Objective 1 - total 25 887 100,00% _______________ Period 07-13 - Operational programmes in numbers (2) Objective 2 - OPs for Prague Pro aram m e VvVvVvVW/vVWWWWWVv Allocation VvVvVWWWWWWWW 07-13 (mil. €) OP Competitiveness (Prague) 295 |0P Adaptability (Prague) 121 [Total 416 Estimation of applicant distribution Applicant/Beneficiary Nr.of VvWv VvW projects Amount of VvW^W^WvW^W■ VvVv grants (mil. í) W ÍMWM4 * ' Companies (SMEsincl. sole entrepreneurs) 48 735 6 957 Lame companies 5415 3 791 Municipalities 81225 5445 The rest (NGOs, universities, etc.) 45125 814 Total 180500 17 006 Estimated share of applicants by type 100% ■w. 70 70% 60% 50% •w 70 30% 20% 25,00% 3% 10,00% 60% 45% 7% 27% 23% Share ■ projects Share ■ amount of grants DThe rest (NGOs, universities, etc.) D Municipalities ■ Large companies ■ Companies (SMEs incl. sole entrepreneurs) 5. Impacts of the Membership 4) Transparency and corruption • Organisations like Transparency International, which try to compare suggest that while most accession candidates rank below EU members, The differences are not so dramatic. • The pre-accession process has improved the situation by I focusingattention on the existence of corruption and forcing governmentsto develop "clean hands" policies. • Directly - a difference in one main area - government procurement,where blatant favouritism will no longer be possible in large projects. 54th place in Corruption Perception Index (Transparency Int. survey) 5. Impacts of the Membership 5) Unemployment Accession will certainly increase the pressure to close down unviable plants and sell off those with a chance of survival, Boosting unemployment in the early years. • Since there will be limits on the free movement of labour, there will be few possibilities to exporting unemployment. • Due to the structural funds which focus heavily on retraining and job creation, particularly in the small and medium-sized sectoi • Higher levels of foreign direct investment. Peer pressure to open up labour markets is also increasing in the EU in its attempts to become more competitive.