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Up to speed

Czech firms turn to EU funds for technology

By Bibiána Duhárová
Staff Writer, The Prague Post
October 22nd, 2008 issue

JAN PŘEROVSKÝ/THE PRAGUE POST
Zdeněk Jana of UniCredit Bank says there are risks to the Czech program as it's still in its infancy.
In an effort to build up small to midsize businesses in the Czech Republic, the government is investing in a program to distribute European Union funds to entrepreneurs to improve their Information and Communications Technologies (ICT).
The Entrepreneurship and Innovation program will be further divided into 15 smaller initiatives that address the needs of companies in different stages of growth. Of these, two programs have already started: ICT and Strategic Services, which began accepting applications January 2008, and ICT in Businesses, which began accepting applications in May.
The umbrella program is under the governance of the Industry and Trade Ministry, which has received 3 billion euros ($4.1 billion/74.2 billion Kč) from general EU funding and will run through 2013.
The ICT and Strategic Services program aims to increase the competitiveness of businesses as well as create demand in the ICT sector itself, generating software development and creating new jobs in the industry. The ICT in Businesses program model focuses on the regional development of smaller businesses with the aim to broaden and implement ICT software and equipment within companies.
Grants available through the ICT and Strategic Services program range from 2 million Kč to 75 million Kč.  The Industry and Trade Ministry began accepting full applications for ICT and Strategic Services in July and will continue through October. The ministry began receiving registration, or initial applications, for ICT in Businesses in July and will continue to until the end of next February. Grants for this second program will range from 500,000 to 20 million Kč. Full applications will be evaluated beginning Nov. 14, and the process will remain open through May 2009.
“Interest from applicants so far has been huge. It actually exceeds our financial budget, which we want to increase next year,” said Tomáš Bartovský, spokesman for the Industry and Trade Ministry.
Getting the timing right
Each program has a two-year implementation period and is reimbursed from funds only after a project is successfully completed. Until then, the applicant must get a bank loan or pay out of pocket. New businesses must offer even stronger proof of success and are reimbursed after five years of operations. The risk means companies must seek out advice from financial experts who are well versed in the EU subsidy program.
“It is important not to start implementing the project until an application is submitted. There are cases in which entrepreneurs cannot wait and start a project without filing an application, which is a risky move,” said Zdeněk Jana, director of UniCredit Bank European Competence Center, consultancy for EU fund subsidy applicants.
Funds are directed toward SMEs that are limited-liability companies with fewer than 250 employees focusing on production and services. The projects companies pitch for EU funding must prove that they can stand on their own, should grants not be awarded.
“No project can count on 100 percent support from fund subsidies. The applications must elaborate how the plan can be implemented without subsidies,” explains Bartovský.
According to the Industry and Trade Ministry, 343 businesses have applied for subsidies under the ICT and Strategic Services program, totaling requests of 772 million Kč. Complete statistics for ICT in Businesses are not yet available, since the applications deadline isn’t until February 2009, but the ministry has so far reported that 69 companies have applied for 135 million Kč.
Following strict rules
The Czech Republic’s program is an especially difficult one to navigate, Jana added, as it is one of the largest and is still in its infancy. Although an earlier version of the program was funded in a timely manner, 2006–07 political interruptions slowed the negotiation process of certain projects. The amount of money from fund subsidies being dedicated to this and other business developmental programs is the largest in the modern history of the Czech Republic, he said.
“The implementation of these programs is a distressful journey due to complex decision mechanisms, and we are still at the beginning of all this,” said Jana.
The program, which claims regional development as one of its goals, is out of reach for any company based in Prague. EU programs typically fund areas that are below the average GDP of larger cities, a qualification that eliminates Prague.
“The Prague region is the only one ineligible for EU funds in the Czech Republic, because Prague’s GDP exceeds the average GDP of European states, Bartovský said.
Part of the government’s directive from the EU is to focus on education, so companies are actually aware these funds are available. A television ad campaign was first launched this September.
“We have strict rules from the EU on how we manage the money, and one of the requirements is to launch campaigns and inform the public about this possibility,” explains Bartovský.
The message has not quite trickled fully into the regions that qualify for the funds, and some businesses remain in the dark about the program.
“I strongly doubt we could get any money from the EU, even though I must say it would help us very much. We need to upgrade expensive software on a regular basis,” said Ctibor Bilič, executive director of CYBI graphics studio in Děčín, who did not know about subsidy financing.

Bibiána Duhárová can be reached at bduharova@praguepost.com


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