EN    EN EN 
 
EN    EN  EUROPEAN COMMISSION 
Brussels, 28.10.2010 
SEC(2010) 1272 final 
COMMISSION STAFF WORKING DOCUMENT 
Member States competitiveness performance and policies  
 
Accompanying document to the 
 
COMMUNICATION FROM THE CO MMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMI TTEE OF THE REGIONS 
 
An integrated Industrial Polic y for the Globalisation Era 
Putting Competitiveness and Sustainability at Front Stage 
  
{COM(2010) 614} 
{SEC(2010) 1276} 
 
EN 2   EN TABLE OF CONTENTS 
1. Introduction................................................................................................................ 10 
1.1. Background and Conceptual Framework................................................................... 10 1.2. Key trends regarding macroeconomic variables related to competitiveness ............. 13 2. Overview of Progress by Broad Policy Area ............................................................. 18 2.1. Towards an innovative industry................................................................................. 20 2.2. Towards a sustainable industry .................................................................................. 23 2.3. The business environment.......................................................................................... 26 2.3.1. Introduction............................................................................................................ .... 26 
2.3.2. Overview of the situation and of polic y measures in Member States 2009/2010...... 27 
2.4. Entrepreneurship and SME policy ............................................................................. 30 2.5. Summary ................................................................................................................... . 34 
3. Country chapters ........................................................................................................ 36 3.1. Belgium................................................................................................................... ... 36 
3.1.1. Indicators graph........................................................................................................ .. 36 
3.1.2. Introduction............................................................................................................ .... 37 
3.1.3. Towards an innovative industry................................................................................. 38 3.1.4. Towards a sustainable industry .................................................................................. 39 3.1.5. The business environment.......................................................................................... 39 3.1.6. Entrepreneurship and SME policy ............................................................................. 40 3.1.7. Conclusions............................................................................................................. ... 41 
3.2. Bulgaria.................................................................................................................. .... 42 
3.2.1. Indicators graph........................................................................................................ .. 42 
3.2.2. Introduction............................................................................................................ .... 43 
3.2.3. Towards an innovative industry................................................................................. 44 3.2.4. Towards a sustainable industry .................................................................................. 44 3.2.5. The business environment.......................................................................................... 45 3.2.6. Entrepreneurship and SME policy ............................................................................. 46 3.2.7. Conclusions............................................................................................................. ... 47 
3.3. Czech Republic .......................................................................................................... 48  
 
EN 3   EN 3.3.1. Indicators graph........................................................................................................ .. 48 
3.3.2. Introduction............................................................................................................ .... 49 
3.3.3. Towards an innovative industry................................................................................. 50 3.3.4. Towards a sustainable industry .................................................................................. 50 3.3.5. The business environment.......................................................................................... 51 3.3.6. Entrepreneurship and SME policy ............................................................................. 52 3.3.7. Conclusions............................................................................................................. ... 53 
3.4. Denmark................................................................................................................... .. 54 
3.4.1. Indicators graph........................................................................................................ .. 54 
3.4.2. Introduction............................................................................................................ .... 55 
3.4.3. Towards an innovative industry................................................................................. 56 3.4.4. Towards a sustainable industry .................................................................................. 56 3.4.5. The business environment.......................................................................................... 57 3.4.6. Entrepreneurship and SME policy ............................................................................. 58 3.4.7. Conclusions............................................................................................................. ... 58 
3.5. Germany................................................................................................................... .. 60 
3.5.1. Indicators graph........................................................................................................ .. 60 
3.5.2. Introduction............................................................................................................ .... 61 
3.5.3. Towards an innovative industry................................................................................. 62 3.5.4. Towards a sustainable industry .................................................................................. 63 3.5.5. The business environment.......................................................................................... 64 3.5.6. Entrepreneurship and SME policy ............................................................................. 65 3.5.7. Conclusions............................................................................................................. ... 66 
3.6. Estonia................................................................................................................... ..... 67 
3.6.1. Indicators graph........................................................................................................ .. 67 
3.6.2. Introduction............................................................................................................ .... 68 
3.6.3. Towards an innovative industry................................................................................. 69 3.6.4. Towards a sustainable industry .................................................................................. 69 3.6.5. The business environment.......................................................................................... 70 3.6.6. Entrepreneurship and SME policy ............................................................................. 70 3.6.7. Conclusions............................................................................................................. ... 71 
 
EN 4   EN 3.7. Ireland ................................................................................................................... ..... 72 
3.7.1. Indicators graph........................................................................................................ .. 72 
3.7.2. Introduction............................................................................................................ .... 73 
3.7.3. Towards an innovative industry................................................................................. 74 3.7.4. Towards a sustainable industry .................................................................................. 75 3.7.5. The business environment.......................................................................................... 75 3.7.6. Entrepreneurship and SME policy ............................................................................. 76 3.7.7. Conclusions............................................................................................................. ... 77 
3.8. Greece .................................................................................................................... .... 78 
3.8.1. Indicators graph........................................................................................................ .. 78 
3.8.2. Introduction............................................................................................................ .... 79 
3.8.3. Towards an innovative industry................................................................................. 80 3.8.4. Towards a sustainable industry .................................................................................. 81 3.8.5. The business environment.......................................................................................... 81 3.8.6. Entrepreneurship and SME policy ............................................................................. 82 3.8.7. Conclusions............................................................................................................. ... 83 
3.9. Spain..................................................................................................................... ...... 85 
3.9.1. Indicators graph........................................................................................................ .. 85 
3.9.2. Introduction............................................................................................................ .... 86 
3.9.3. Towards an innovative industry................................................................................. 87 3.9.4. Towards a sustainable industry .................................................................................. 88 3.9.5. The business environment.......................................................................................... 88 3.9.6. Entrepreneurship and SME policy ............................................................................. 89 3.9.7. Conclusions............................................................................................................. ... 90 
3.10. France................................................................................................................... ...... 91 
3.10.1. Indicators graph....................................................................................................... ... 91 
3.10.2. Introduction........................................................................................................... ..... 92 
3.10.3. Towards an innovative industry................................................................................. 93 3.10.4. Towards a sustainable industry .................................................................................. 94 3.10.5. The business environment.......................................................................................... 95 3.10.6. Entrepreneurship and SME policy ............................................................................. 96 
 
EN 5   EN 3.10.7. Conclusion............................................................................................................. ..... 97 
3.11. Italy .................................................................................................................... ........ 98 
3.11.1. Indicators graph....................................................................................................... ... 98 
3.11.2. Introduction........................................................................................................... ..... 99 
3.11.3. Towards an innovative industry............................................................................... 100 3.11.4. Towards a sustainable industry ................................................................................ 101 3.11.5. The business environment........................................................................................ 102 3.11.6. Entrepreneurship and SME policy ........................................................................... 103 3.11.7. Conclusions............................................................................................................ .. 104 
3.12. Cyprus ................................................................................................................... ... 106 
3.12.1. Indicators graph....................................................................................................... . 106 
3.12.2. Introduction........................................................................................................... ... 107 
3.12.3. Towards an innovative industry............................................................................... 108 3.12.4. Towards a sustainable industry ................................................................................ 109 3.12.5. The business environment........................................................................................ 109 3.12.6. Entrepreneurship and SME policy ........................................................................... 110 3.12.7. Conclusions............................................................................................................ .. 110 
3.13. Latvia................................................................................................................... ..... 112 
3.13.1. Indicators graph....................................................................................................... . 112 
3.13.2. Introduction........................................................................................................... ... 113 
3.13.3. Towards an innovative industry............................................................................... 115 3.13.4. Towards a sustainable industry ................................................................................ 116 3.13.5. The business environment........................................................................................ 116 3.13.6. Entrepreneurship and SME policy ........................................................................... 117 3.13.7. Conclusions............................................................................................................ .. 118 
3.14. Lithuania ................................................................................................................ .. 119 
3.14.1. Indicators graph....................................................................................................... . 119 
3.14.2. Introduction........................................................................................................... ... 120 
3.14.3. Towards an innovative industry............................................................................... 121 3.14.4. Towards a sustainable industry ................................................................................ 121 3.14.5. The business environment........................................................................................ 122 
 
EN 6   EN 3.14.6. Entrepreneurship and SME policy ........................................................................... 123 
3.14.7. Conclusions............................................................................................................ .. 123 
3.15. Luxembourg ............................................................................................................. 12 5 
3.15.1. Indicators graph....................................................................................................... . 125 
3.15.2. Introduction........................................................................................................... ... 126 
3.15.3. Towards an innovative industry............................................................................... 126 3.15.4. Towards a sustainable industry ................................................................................ 127 3.15.5. The business environment........................................................................................ 127 3.15.6. Entrepreneurship and SME policy ........................................................................... 128 3.15.7. Conclusions............................................................................................................ .. 128 
3.16. Hungary.................................................................................................................. .. 129 
3.16.1. Indicators graph....................................................................................................... . 129 
3.16.2. Introduction........................................................................................................... ... 130 
3.16.3. Towards an innovative industry............................................................................... 131 3.16.4. Towards a sustainable industry ................................................................................ 132 3.16.5. The business environment........................................................................................ 132 3.16.6. Entrepreneurship and SME policy ........................................................................... 133 
3.16.7. Conclusions............................................................................................................ .. 134 
3.17. Malta .................................................................................................................... .... 135 
3.17.1. Indicators graph....................................................................................................... . 135 
3.17.2. Introduction........................................................................................................... ... 136 
3.17.3. Towards an innovative industry............................................................................... 137 3.17.4. Towards a sustainable industry ................................................................................ 137 3.17.5. The business environment........................................................................................ 138 3.17.6. Entrepreneurship and SME policy ........................................................................... 139 3.17.7. Conclusions............................................................................................................ .. 139 
3.18. The Netherlands ....................................................................................................... 140  
3.18.1. Indicators graph....................................................................................................... . 140 
3.18.2. Introduction........................................................................................................... ... 141 
3.18.3. Towards an innovative industry............................................................................... 142 3.18.4. Towards a sustainable industry ................................................................................ 143 
 
EN 7   EN 3.18.5. The business environment........................................................................................ 143 
3.18.6. Entrepreneurship and SME policy ........................................................................... 144 3.18.7. Conclusions............................................................................................................ .. 145 
3.19. Austria.................................................................................................................. .... 146 
3.19.1. Indicators graph....................................................................................................... . 146 
3.19.2. Introduction........................................................................................................... ... 147 
3.19.3. Towards an innovative industry............................................................................... 148 3.19.4. Towards a sustainable industry ................................................................................ 149 3.19.5. The business environment........................................................................................ 150 3.19.6. Entrepreneurship and SME policy ........................................................................... 150 3.19.7. Conclusions............................................................................................................ .. 151 
3.20. Poland................................................................................................................... .... 152 
3.20.1. Indicators graph....................................................................................................... . 152 
3.20.2. Introduction........................................................................................................... ... 153 
3.20.3. Towards an innovative industry............................................................................... 153 3.20.4. Towards a sustainable industry ................................................................................ 154 3.20.5. The business environment........................................................................................ 155 
3.20.6. Entrepreneurship and SME policy ........................................................................... 156 
3.20.7. Conclusions............................................................................................................ .. 157 
3.21. Portugal ................................................................................................................. ... 158 
3.21.1. Indicators graph....................................................................................................... . 158 
3.21.2. Introduction........................................................................................................... ... 159 
3.21.3. Towards an innovative industry............................................................................... 160 3.21.4. Towards a sustainable industry ................................................................................ 161 3.21.5. The business environment........................................................................................ 161 3.21.6. Entrepreneurship and SME policy ........................................................................... 162 3.21.7. Conclusions............................................................................................................ .. 163 
3.22. Romania .................................................................................................................. . 165 
3.22.1. Indicators graph....................................................................................................... . 165 
3.22.2. Introduction........................................................................................................... ... 166 
3.22.3. Towards an innovative industry............................................................................... 167 
 
EN 8   EN 3.22.4. Towards a sustainable industry ................................................................................ 168 
3.22.5. The business environment........................................................................................ 169 3.22.6. Entrepreneurship and SME policy ........................................................................... 170 3.22.7. Conclusions............................................................................................................ .. 172 
3.23. Slovenia................................................................................................................. ... 173 
3.23.1. Indicators graph....................................................................................................... . 173 
3.23.2. Introduction........................................................................................................... ... 174 
3.23.3. Towards a sustainable industry ................................................................................ 176 3.23.4. The business environment........................................................................................ 177 3.23.5. Entrepreneurship and SME policy ........................................................................... 178 3.23.6. Conclusions............................................................................................................ .. 179 
3.24. Slovakia................................................................................................................. ... 181 
3.24.1. Indicators graph....................................................................................................... . 181 
3.24.2. Introduction........................................................................................................... ... 182 
3.24.3. Towards an innovative industry............................................................................... 183 3.24.4. Towards a sustainable industry ................................................................................ 184 3.24.5. The business environment........................................................................................ 185 
3.24.6. Entrepreneurship and SME policy ........................................................................... 186 
3.24.7. Conclusions............................................................................................................ .. 187 
3.25. Finland.................................................................................................................. .... 188 
3.25.1. Indicators graph....................................................................................................... . 188 
3.25.2. Introduction........................................................................................................... ... 189 
3.25.3. Towards an innovative industry............................................................................... 190 3.25.4. Towards a sustainable industry ................................................................................ 190 3.25.5. The business environment........................................................................................ 191 3.25.6. Entrepreneurship and SME policy ........................................................................... 192 3.25.7. Conclusions............................................................................................................ .. 192 
3.26. Sweden ................................................................................................................... .. 194 
3.26.1. Indicators graph....................................................................................................... . 194 
3.26.2. Introduction........................................................................................................... ... 195 
3.26.3. Towards an innovative industry............................................................................... 196 
 
EN 9   EN 1.1.1. Towards a sustainable industry ................................................................................ 197 
3.26.4. The business environment........................................................................................ 198 3.26.5. Entrepreneurship and SME policy ........................................................................... 199 3.26.6. Conclusions............................................................................................................ .. 200 
3.27. The United Kingdom................................................................................................ 201 3.27.1. Indicators graph....................................................................................................... . 201 
3.27.2. Introduction........................................................................................................... ... 202 
3.27.3. Towards an innovative industry............................................................................... 203 3.27.4. Towards a sustainable industry ................................................................................ 203 3.27.5. The business environment........................................................................................ 204 3.27.6  Entrepreneurship and SME policy ........................................................................... 205 3.27.6. Conclusions............................................................................................................ .. 205 
4. Methodological ANNEX ......................................................................................... 206 4.1. Main Sources............................................................................................................ 20 6 
4.1.1. General ................................................................................................................. .... 206 
4.1.2. Towards an innovative industry............................................................................... 207 4.1.3. Towards a sustainable industry ................................................................................ 207 
4.1.4. The business environment........................................................................................ 207 
4.1.5. Entrepreneurship and SME Policy........................................................................... 208 4.2. Data set and methodol ogical approach .................................................................... 208 
4.2.1. Data set................................................................................................................ ..... 208 
4.2.2. Definitions of the indicators..................................................................................... 213 4.2.3. MICREF.................................................................................................................. . 218 
4.2.4. Indicators graphs in the country chapters................................................................. 218 
4.2.5. Methodological remarks to the introducto ry sections of the country chapters ........ 219 
4.2.5.1. Taxonomy by labour skill intensity.......................................................................... 219 4.2.5.2. Taxonomy by technology intensity.......................................................................... 220 4.2.5.3. Taxonomy by growth intensity ................................................................................ 220 
 
EN 10   EN 1. INTRODUCTION  
1.1. Background and Conceptual Framework 
The Communication on the Europe 2020 Strategy1, formally adopted by the European 
Council in June 2010, puts forward as a key prior ity for the Union the promotion of a more 
resource efficient, greener and more competitive  economy. More specifically, the Strategy 
proposes seven flagship initiatives, four of which – “Innovation Union”, “A Resource 
Efficient Europe”, “An Industrial Policy for the Globalisation Era” and “An Agenda for New 
Skills and Jobs” – relate directly to industrial competitiveness. 
The main objective of the present report is to analyse industrial competitiveness across the 
Union and to present the measures Member States carry out to improve their competitiveness and, by implication, the competitiveness of Eur ope as a whole. It aims to provide an 
information basis for a process of dissemination of best practice and po licy advice regarding 
competitiveness in the context of Europe 2020. The report is factual in nature and is published 
as part of the Indus trial Policy package. The key me ssages drawn from the report and 
proposals on a framework for annual Member State monitoring and for the exchange of best practice are presented in the Communi cation on the new Industrial Policy. 
The report starts with a discussi on of the analytical approach and some stylised facts. The 
following horizontal section gives an overvie w on progress by broad policy area: innovation, 
transition to a sustainable econom y, business environment, and en trepreneurship policies. The 
third section consists of country chapters, whic h give a more detailed picture of the situation 
in individual Member States. A technical annex provides more detailed information on 
indicators, concepts  and sources used. 
The report is based on articl e 173 of the Treaty on the Func tioning of the European Union 
(TFEU) which provides for regular monitoring  of Member State actions. The economic and 
financial crisis forcefully demonstrated the interdependence of our economies, and the need 
for stronger economic policy coordination has b een recognised by the Heads of State or 
Government. The Commission will use the full ra nge of available inst ruments to strengthen 
policy coordination, and this across a wide  range of existing Community policies. 
Conceptual Approach: How competitivene ss is understood in the present report 
Article 173 TFEU stipulates that  “[t]he Union and the Member States shall ensure that the 
conditions necessary for the competitiveness of the Union's industry exist.” Article 173 
further specifies a number of objectives conc urring to this end, such as speeding up the 
adjustment of industry to structural changes, a favourable business environment, particularly 
for SMEs, and fostering better exploitation of th e industrial potential of  policies of innovation, 
research and technological development. The Commission is invited to take any useful 
initiative to promote coordinati on, in particular initiatives aiming at the establishment of 
guidelines and indicators, the organisation of exch ange of best practice, and the preparation of 
the necessary elements for periodic monitori ng and evaluation. Article  173 further specifies 
                                                
 
1 Communication from the Commission, Europe 2020 – A strategy for smart, 
sustainable, and inclusive growt h, COM(2010) 2020 from 3 March 2010. 
 
EN 11   EN that the action by the Union and the Member St ates shall be undertaken  in accordance with a 
system of open and competitive markets. 
Article 173 TFEU acknowledges that industrial competitiveness is a multifaceted concept. As 
such, it touches for instance upon the ability to  adjust to structural changes or on the 
framework conditions for innovation. This suggest s already that a single indicator does not 
suffice to measure competitiveness in a compre hensive and operational manner, but that the 
various dimensions of competitiveness alluded to in Article 173 have to be captured by separate and distinctive means. This is the approach which the present report has adopted. 
However, to allow for the identification of a suitable set of competitiveness measures and 
indicators, the notion of competitiveness has to be further clarified.  
For this purpose, competitiven ess has to be under stood in a way, which remains economically 
meaningful for that a sector of activity and wh ich is closely related to  the policies designed to 
improve its performance. In other words, comp etitiveness so conceived should be responsive 
to policy action with a view to guide the de sign of policies and to allow their ex-post 
evaluation. Accordingly, a macroeconomic  approach focusing as it does on output-variables 
such as GDP growth may be too broad  and hence may provide lit tle added value if the 
performance of, and policies for, a specific se ctor such as industry are to be assessed. 
Moreover, the financial and economic crisis ha s shown that high growth  rates can, at least 
temporarily, go hand in hand with decreasing shares on foreign markets and increasing 
external deficits. Hence, from this perspective too, GDP growth is poorly suited to serve as a 
proxy for competitiveness. 
At the same time, there are reasons to suggest that a sub-sector-based microeconomic  notion 
of competitiveness such as Revealed Comparative Advantage (defined as a measure of the share of a given industry’s exports relative to the average exports in  the rest of the world) is in 
turn too narrow  since, by construction, RCA cannot be  applied to industry as a whole. 
Therefore, RCA cannot capture, in particular in the context of EMU, the underlying determinants of sector-wide competitiven ess concerns and, ulti mately, economy-wide 
imbalances. Such determinants may for instance result from the institutional set-up and the functioning of the labour market. They are then likely to affect a sector horizontally without 
being rooted in that sector and thus without being in the purview of traditional industrial 
policy for that matter. In addition, the con cept cannot be applied for industry as a whole 
because an improvement for one industrial sub-sector must be mirrored by a deterioration for another sub-sector. That is, if th e (relative) share of sub-sector i increases then the (relative) 
share of at least one sub-sector has to declin e to compensate for the increase. Note moreover 
that export-shares are also influenced by, fo r instance, exchange rate-misalignments. RCA 
may therefore give a distorted pictur e of an industry's competitive position. 
In a globalised economic setting where market s often span over continents and where the 
division of labour has reached unprecedented le vels, Europe’s future welfare and growth 
depend crucially on its capacity to compete succe ssfully on these markets and on its aptness to 
participate profitably in the international division of lab our. On this background, then, 
Europe’s industrial competitiveness will be unde rstood in the present report more concretely 
as the ability of its industrial s ector to maintain and strengthen its competitive position in the 
world market relative to that of other countrie s, focusing on price and cost developments of 
production and other parameters potentially affec ting the growth performance, market shares, 
and investment and location decisions of firms in the industrial sector. 
 
EN 12   EN Obviously, it is essential for Europe to draw on its strengths and to build on the advantages 
which are at the root of the cu rrent pattern of industrial special isation and which have helped 
Europe to erect its impressive industrial ba se. Therefore, these have to be captured 
appropriately. Yet it is equally important to recognise that comparative advantages do not 
only stem from different factor endowments as in traditional trade theory. They follow from a 
variety of sources, many of which can be  summarised under the heading of framework 
conditions  and many of which are novel in the se nse that they are motivated by, and 
conditioned upon, the economic and environmenta l challenges Europe is currently facing. 
No less significant is the removal of bottlenecks to broad-based innovation and 
entrepreneurship. Innovati on is crucial in order to create high added value and spearhead the 
development of new markets. Yet Europe often fa iled in the past to turn excellent ideas into 
marketable products and thus create new ma rkets. This suggest the need to have a 
comprehensive approach to innovation which covers  all steps from the fi rst inspiration to the 
final product, from knowledge foundations and breakthrough ideas to access to finance and 
the creation of a single innovation market.  
Last but not least, the transition towards a low carbon and resource efficient economy is 
crucial for raising Europe’s competitiveness, as increasingly scarce resources present greater 
risks of political and economic shocks to thei r supply. It is significan t challenge for the EU 
economy and, in particular, industrial sectors which, for technological reasons, will remain 
energy intensive. 
Another clarification regards th e notion of industry used th roughout this report. While the 
primary focus is on manufacturing as a main engine for productivity growth and innovation, 
the framework conditions that determine its comp etitiveness also apply to the service sector, 
which grows faster and provides the overwhelmi ng majority of jobs a nd incomes in modern 
economies. Moreover, the competitiveness of busine ss services is an impor tant determinant of 
the competitiveness of the indus try. Subsequently, the presenta tion of policy m easures and the 
discussion on challenges that follo w cover in fact the whole of th e (private) enterprise sector. 
The report reviews the competitive position of th e Member States' industry based on statistics 
(external performance and specialisation) a nd a graphic presentation of a common set of 
indicators. In the light of the foregoing consider ations, two consideratio ns have inspired the 
final selection of indicators.  
First, macroeconomic variables such as unit labour  costs or the real effective exchange rate 
have to be included in order to put industrial competitiveness developments into perspective. 
Although these variables are not wi thin the purview of traditional industrial policy, they are 
crucial for determining price competitiveness and hence the degrees to which comparative 
advantages are translated into lower prices for specific goods. Moreove r, unit labour costs are 
in the absence of exchange rates a key reason for prices differences wi thin EMU and thus can 
contribute to the emergence of imbalances. 
Second, indicators should give a comprehensive pi cture of the determinants of price and non-
price competitiveness and of the policies that try to foster them . That is why indicators have 
been selected with a view to shed light on important features of the business environment and 
the framework conditions under which European en terprises operate. In addition to the set of 
indicators, the present report will draw on both qualitative and quantitative information from 
various sources within and without the Commission. Key among these are the  European 
Innovation Scoreboard , the National Energy Efficien cy Action Plans (NEEAPs), the SBA Fact 
 
EN 13   EN Sheets and the MICREF data base which has been developed in order to monitor reform 
policies in Member States2.  
The natural starting point for assessing competiti veness performance and policies is to look at 
what other Member States are doing and how well they perform – either as a group or 
individually. That is why this report will mo stly use the EU27 average as a first benchmark. 
Evidently, however, the global challenges and the tasks Europe is confronted with cannot be 
met successfully if Europe does not aspire to more than improving the performance of those 
countries that are trailing behi nd. Hence, where data allows, Europe should compare itself 
with those countries that are world leaders no  matter whether they are located within or 
outside the Union.  
1.2. Key trends regarding macroeconomic var iables related to competitiveness 
The development of some key macroeconomic variab les at EU level, also in relation to trends 
in other industrialised countri es, is instructive for putting Eu rope's industrial competitiveness 
into perspective. The real effective exchange rate of the EU (REER) (Graph I) appreciated by 
about 25 percentage points be tween 2000 and 2005 while appreci ating much slower thereafter 
and even depreciating slightly in  2009. Overall, this implies a ne t deterioration of EU’s price 
competitiveness against its main trading partners. To some extent, a mirror image of this 
development is the depreciation of the REER  of both the US and Japan during the same 
decade. Thus, both countries have gained in pr ice competitiveness, not least vis-à-vis Europe. 
Switzerland’s REER by contrast has only shown a slight upward trend implying that its price 
competitiveness has not deteriorated significantly. 
                                                 
2 For a detailed presentation of main sources please refer to the Tec hnical Annex of this 
report. 
 
EN 14   EN Graph I: Real effective exchanges rates de flated by nominal unit labour costs (total 
economy) against a panel of 36 countries (1999=100) 
405060708090100110120130140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009EU 27 Euro Area (16 Member States) USA JP
 
Source: European Commission, Directorate-General for Economic and Financial Affaires, 2010 
 
Despite the appreciation of EU's  REER, overall trade performan ce, as measured by the trade 
balance, has remained virtually unchanged sinc e 2005 (Graph II). This is in stark contrast to 
the considerable US deficit and the sizable surp lus of China and suggests that the EU has been 
able to compensate for the appreciation of its  REER by relying increasingly on elements of 
non-price competitiveness.  
 
EN 15   EN Graph II: Trade balance of goods and services as a % of GDP 
-20-15-10-505101520253035
EU27 BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK 2005
 2009
 
Source:  Eurostat, 2009  
 
While the real effective exchange  rate (REER) is influenced by a number of factors such as 
exogenous exchange rate movements, whic h are by and large beyond the purview of 
economic policy, it is the combination into a si ngle indicator of labour cost and productivity, 
which is commonly seen as an important targ et of economic policy making. Via its impact on 
unit labour costs, labour productivity influences international price competitiveness. Over the 
last decade, European labour productivity has increased stead ily up until 2007/2008 when the 
economic crisis led even to an absolute decline (Graph III), mo st likely due to labour hoarding 
in the wake of mounting over capacities during the financial crisis. However, the initial 
increase did not suffice to close the gap with the US, which remains the benchmark in this 
respect.  
 
EN 16   EN Graph III: Labour productivity per person employed in Purchasing Power Standards 
(PPS) 
01020304050607080
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Thousand PPS EU 27 USA
 
Source:  Eurostat, 2010  
 
However, these observations should not be take n to suggest that Europe’s macroeconomic 
landscape is flat and that macroeconomic deve lopments within the European Union do not 
raise significant issues. Regard ing labour productivity per hour worked (G raph IV), there are 
still huge differences between Member Stat es, ranging from less than 40% of the EU27 
average to almost 140% of the EU average in  Belgium and the Netherlands and even more 
than 180% of the EU average in Luxembour g. However, as Graph IV illustrates labour 
productivity has improved measurab ly in virtually all the new Memb er States also relative to 
the EU average, which is bound to increase, while labour productivity in many old Member 
States has declined relative to the EU averag e. This means that the productivity gap between 
old and new Member States is cl osing, albeit not across the board. 
 
EN 17   EN Graph IV: Labour productivity per hour worked (EU27=100) 
020406080100120140160180200
BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK
2005
 2008
 
Source:  Eurostat, 2010  
Note:  The second columns for Bulgaria and France relate to 2007 (not to 2008).  
 
In particular in the context of the Economic  and Monetary Union and in the absence of 
flexible exchange rates between Member States , nominal unit labour costs impact prices and 
thus price competitiveness. Significantly diverging nominal unit labour costs may therefore contribute to macroeconomic imbalances. Nomina l unit labour costs in manufacturing are of 
particular relevance in this context (Graph V)  since manufactured goods are mostly tradables 
while many services are not. 
 
EN 18   EN Graph V: Change in Nominal Unit Labour Costs in Manufacturing 
 
-30-20-10010203040506070
BE BG C Z D K D E E E IE E L ES FR I T CY LV LT LU H U N L A T P L P T R O SI S K FI SE UK%
20 00-2 005  (200 0=10 0) 20 05-2 00 9 (20 00=1 00) 20 00-2 00 9 (20 00=1 00) W ei gh te d E U-Ave rag e 20 00 -2 00 9 
Source:  European Commission (2000-2005) and OECD (2005-2009) 
 
Graph V indicates that nominal  unit labour cost trends dive rged significantly across the 
Member States during the last decade, both w ithin and outside the euro zone. While the 
highest increases could be observed in several new Member States, nominal unit labour cost 
growth went also markedly beyond the weighted  EU average (which is slightly below the 
ECB inflation target of 2% p.a.) in some of the old Member States. By contrast, nominal unit 
labour costs grew at rates sign ificantly below the EU average in Germany, France, Ireland, 
Sweden, Austria Finland and the Czech Republic a nd even substantially d ecreased in some of 
the new Member States (Poland, Slovakia). These countries therefore experienced an 
improvement of their price competitiveness. Although the analysis does not hold across the board, some of the trade surpluses and deficits de picted in Graph II can th erefore be attributed 
to diverging nominal unit labour costs and thei r impact on price competitiveness. Moreover, 
unit labour costs in the EU as a whole increase d by almost 20 % over the last decade, thereby 
contributing also to an appr eciation of Europe’s REER. 
2. O
VERVIEW OF PROGRESS BY BROAD POLICY AREA 
Reform profiles of individual Me mber States (calculated as sh are of reforms in a specific 
policy area) differed considerably dur ing the last five years (Table I)3. In most Member 
                                                 
3 Table I and graph VI are based on data  from MICREF, a data-base that the 
Commission has developed to provide a systema tic record of the actual implementation of 
 
EN 19   EN States, reforms aimed predominantly at improvi ng the business environm ent and at fostering 
R&D and innovation. The only exception was Greece  where reforms in sector specific 
regulation took prominence with more  than 30% of all reforms.  
Table I: Reform Profiles by Co untry (date of adoption 2005-2009) 
 Improving 
the (small) 
business 
environmentStart-up 
conditions R&D and 
Innovation EducationCompetition 
policy Market 
integration Sector 
specific 
regulation
AT 40% 2% 34% 4% 8% 10% 2% 
BE 31% 8% 40% 6% 3% 0% 13% 
BG 42% 3% 24% 24% 3% 0% 3% 
CY 22% 6% 34% 20% 4% 8% 6% 
CZ 25% 14% 35% 16% 0% 2% 8% 
DE 43% 10% 18% 4% 4% 5% 15% 
DK 6% 6% 36% 17% 2% 11% 21% 
EE 16% 14% 30% 32% 3% 0% 5% 
EL 23% 5% 15% 15% 5% 5% 31% 
ES 34% 10% 23% 14% 3% 3% 14% 
FI 31% 8% 42% 12% 0% 6% 2% 
FR 42% 19% 11% 13% 3% 0% 13% 
HU 28% 7% 29% 13% 1% 5% 16% 
IE 26% 6% 27% 5% 5% 11% 19% 
IT 26% 8% 33% 6% 3% 7% 18% 
LT 30% 3% 33% 30% 0% 5% 0% 
LU 24% 7% 45% 7% 0% 10% 7% 
LV 19% 11% 40% 13% 4% 4% 9% 
MT 22% 4% 27% 22% 4% 0% 22% 
NL 15% 6% 60% 10% 2% 2% 6% 
PL 46% 9% 18% 0% 2% 3% 22% 
PT 15% 5% 30% 28% 3% 3% 15% 
RO 29% 6% 25% 10% 8% 0% 23% 
SE 33% 2% 31% 13% 4% 9% 9% 
SI 27% 7% 23% 11% 1% 4% 27% 
SK 34% 7% 29% 17% 2% 2% 7% 
UK 61% 10% 14% 12% 0% 0% 3% 
Average 29% 7% 30% 14% 3% 4% 12% 
Source : MICREF 
 
On average (calculated as the unweighted averag e of the percentage shares), almost 60% of 
Member States’ reforms aimed at improving th e business environment and at fostering R&D 
and innovation. Sector specific regulation and education came next with 12% and 13% 
respectively. Reform profiles did not differ significantly between "old" and "new" Member States.  
                                                                                                                                                        
 
microeconomic reform measures in the EU. MI CREF covers microeconomic reform measures 
in the 27 EU Member States which were  implemented between 2004 and 2009 (EU15: 2000-
2009). The database also provides information on the design and scope of  reforms undertaken. 
 
EN 20   EN The evolution of reforms over time in the EU shows several interestin g aspects (Graph VI). 
First, the share of reforms addressing sector specific regulation decrea sed considerably during 
the first half of the last decade from an initial share of 50% to roughly 15%. This clearly reflects the results of market opening initiatives.  By contrast, the share of reforms that aim at 
improving the business environment has increased trendwise from sligh tly above 10% in 2000 
to almost 50% in 2010. The share of R&D increased in the mid 2000s and then remained at a somewhat higher level for several years. For th e remaining policy areas, reform shares have 
not changed much over time.  
Graph VI: Reform profile over time (d ate of adoption of the measure) 
0%10%20%30%40%50%60%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Education R&D and Innovation Improving the (small) business environment
Start-up conditions Competition policy Sector specific regulation
Market integration
Source : MICREF 
 
2.1. Towards an innovative industry 
The main instrument for measuring Member St ates' innovation performance, the European 
Innovation Scoreboard (EIS) 2009, includes innova tion indicators and tre nd analyses for the 
EU Member States. On this base, four gr oups of countries emerge: Innovation Leaders, 
Innovation Followers, Moderate Innova tors, and Catching-up Countries. 
Denmark, Finland, Germany, Sweden and the UK ar e the Innovation Leaders, with innovation 
performance well above the EU27 average. Of these countries, Germany and Finland are 
improving their performance fastest while Denmark and the UK s how less progress. 
Austria, Belgium, Cyprus, Estonia, France,  Ireland, Luxembourg, the Netherlands and 
Slovenia are the Innovation Followers, with  innovation performance below those of the 
Innovation leaders but close to or above that of the EU27 av erage. Cyprus, Estonia and 
Slovenia have shown a strong im provement compared to 2008, providing an explanation why 
 
EN 21   EN these countries have moved from the Moderate  Innovators in the EIS 2008 to the Innovation 
Followers. 
Czech Republic, Greece, Hungary, Italy, Lithua nia, Malta, Poland, Portugal, Slovakia and 
Spain are the Moderate Innovators, with innova tion performance below the EU27 average. 
The EIS 2009 Moderate innovators  are a mix of five Member States which were Moderate 
innovators in the EIS 2008 and fi ve Member States which were Catching-up Countries in the 
EIS 2008. 
Bulgaria, Latvia and Romania are the Catchi ng-up Countries with innovation performance 
well below the EU27 average. All three countries are rapidly closing their gap to the average 
performance level of the EU27, and Bulgaria  and Romania have been improving their 
performance the fastest of all Member States. 
The economic and financial crisis led companie s and entire sectors to face declining demand 
both in domestic and global markets. R&D spen ding by businesses had incr eased in almost all 
Member States in the period preceding the crisis (Graph VII). The most common effects of 
the crisis was the severe decl ine in economic activity  further aggravated by difficulties in 
access to external private finance in almost al l the sectors across Europe. Financing of R&D 
and innovation activities has hence become mo re difficult. Preliminary evidence does not 
seem to suggest a massive decline of innovation expenditure s a result of  the crisis. In some 
cases virtually no crisis impact has been noted  (e.g. Finnish ICT sector  or biotechnology and 
pharmaceuticals in Hungary and Ireland). Howeve r, firms' investment in R&D generally 
displays a lag with respect to the business cy cle and therefore a furt her decline in business 
R&D cannot be excluded. 
 
 
EN 22   EN Graph VII: Business R&D expenditure (% of GDP) 
00,511,522,53
EU 27 BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK
2005
 2008 Unweighted average 2005 Unweighted average 2009
 
Source:  Eurostat, 2010  
 
Member States reacted to the challenge of  preventing a decline in private R&D and 
innovation expenditure in various ways, spa nning from a forward-looking and proactive 
approach to a short-term defensive appro ach. The European Innovation Progress Report 20094 
identified four types of Member States' anti-cr isis responses in terms of type and speed.  
Finland, Germany, Luxembourg and the Nether lands form the group of proactive and 
forward-looking countries. Their crisis res ponse comprised not only the present access to 
finance challenge but also potential or futu re challenges across various areas (e.g. eco-
innovation).  
Adequate and timely responses were recorded in Belgium, Cyprus, the Czech Republic, 
Denmark, France, Ireland, Italy, Malta, Poland, Spain, Sweden and the UK. These Member 
States implemented crisis measures in a tim ely manner albeit less focused on innovation than 
the first group of countries. 
                                                 
4 It should be kept in mind that the conc lusions of The European Innovation Progress 
Report 2009 are drawn from country reports cove ring a limited time period (mid-2008 to mid-
2009) and that it is certainly t oo early to draw any definite conclusions about effectiveness 
and efficiency of the introduced policy measures, or estimations about innovation 
performance following the crisis.  
 
EN 23   EN The reaction of the third Member State group wa s defensive and often de layed. The anti-crisis 
interventions in Austria, Bulgaria, Estonia, Greece, Hungary, Portugal and Slovakia contained 
only a few additional innovation-specific initiatives or reinforcements of existing instruments. 
The remaining Member States Latvia, Lithua nia, Romania and Slovenia did not introduce 
innovation-specific measures to mitigate the effects of the crisis on R&D and innovation spending. 
According to the preliminary conclusions of  the European Innovation Progress Report 2009, it 
is not surprising that Member States which ar e classified as Innovation Leaders and Followers 
have in general reacted in a proactive or timel y manner to the challenges of the effects of the 
economic and financial crisis in the innovation field. In contrast, Moderate Innovators and 
Catching-up Countries largely reacted defensively or even  failed to address innovation 
problems resulting of the crisis. The way in which Member States reacted may induce a 
reopening of the funding gap between the Innov ation Leaders and the Catching-up Countries 
that has recently narrowed to some extent. 
Access to finance and funding of innovation is, however, only one element of a successful 
innovation policy. The European Innovation Progre ss report concludes, ba sed on a decade of 
monitoring of innovation policies across Europe  that sustained good innovation performance 
is based also on a good governance structur e. Good governance includes certain common 
elements of a policy cycle including coordina tion, priority setting, st akeholder involvement 
and evaluation. Most Member Stat es demonstrate increasing effort s to follow such principles; 
changes are however slow and evolu tionary due to path dependency. 
The current financial crisis is likely to be  only a prologue of a need for greater policy 
innovation with climate change, finite natural re sources, demographic change or globalisation 
as much larger societal challenges ahead.  
2.2. Towards a sustainable industry 
The policy response of the majority of Memb er States in making their industries more 
sustainable is generally framed by two main instruments: the National Energy Efficiency 
Action Plan (NEEAP)
5 and some sort of a broader sustai nable development strategy to turn 
the challenges related to climate change and degr adation of environmental assets into business 
opportunities. Almost all Member States have introduced energy savings targets of 9% for 
2016 as part of their NEEAPs, whilst some have committed to higher ones. For a number of Member States, the NEEAPs form part of thei r strategy to reach the 20% reduction in primary 
energy demand by 2020, including Au stria, Ireland and Sweden.  
The NEEAPs of Hungary, Malta and the Slov ak Republic place a strong focus on energy 
efficiency in industry, and expect the highe st share of savings to come from industry 
measures. A number of NEEAPs introduce subsid ised energy audit schemes in the industrial 
                                                
 
5 Member States are required to submit the National Energy Effici ency Action Plans in 
accordance with Article 14(2) of the Directiv e 2006/32/EC on energy end-use efficiency and 
energy services. The NEEAP is the EU-wide instrument to improve energy efficiency in sectors outside the EU Emissions Trading Sche me while the national allocation plans (NAPs) 
promote resource efficiency and climate change  mitigation within the heavy industry of 
Member States. 
 
EN 24   EN sector, including Bulgaria, the region of Fla nders (audit covenant scheme), Finland, Germany 
(SMEs), Portugal (mandatory audits for larg e users) and Slovakia (SMEs). In the Czech 
Republic, mandatory audits combined with support for the preparation of pr ojects that lead to 
energy services are an example of a well-integrated initiati ve in the industrial sector. 
Mandatory energy audits are also featured in Portugal where they are related to a plan for 
rational use of energy where bi annual implementation and progr ess reports are required.  
Voluntary agreements (VAs) with industries ar e a key policy instrument used in Denmark, 
Finland, Greece, the Netherlands, Portugal, Slove nia, Sweden, and the UK. Both Finland and 
the Netherlands have a long tradition of using VAs, gradua lly extending thei r coverage. Some 
Member States envisage making use of energy management measures and standards, as well 
as energy reporting and benchmarking in industry (e.g. Ireland, Denmark, Greece and 
Hungary).  
The UK combines voluntary agreements (Vas) and tax breaks in its Climate Change 
Agreements (CCAs) introduced as part of the Climate Change Levy package. Similarly, Slovenia grants exemptions from its CO
2 tax to industrial installati ons that enter into VAs to 
reduce their total annual emissions. Portugal pr ovides tax incentives and audit subsidies for 
industrial operators under VAs. The UK has also notified a so-called Carbon Reduction 
Commitment – a mandatory emission trading scheme for the large non-energy intensive 
sectors, covering both the pr ivate and the public sector. Fr ance has introduced an innovative 
system of state-issued carbon credits to en courage the reduction of greenhouse gas emissions, 
particularly through reducing th e domestic use of fossil fuel s. Any project in the non-ETS 
sectors that saves carbon compared with a re ference baseline may benefit from credit system. 
In most Member States, energy intensity in indu stry had decreased before the crisis (Graph 
VIII). More recently, almost all Member States implemented measures to enhance energy efficiency also as part of their anti-crisis plan s. In most cases, the anti-crisis measures aimed 
at improving the energy efficiency of buildings (private, business or public), with their main 
aim was to support the construction sector rather than improve the general energy 
performance of industry. Some of these prog rammes were particularly successful. For 
example, it was estimated that the funding of  €100 million through low-interest loans in 
Austria led to a seven-fold increase in total i nvestment and to a reduction of 5.3 million tons 
of CO
2 emissions. Other initiatives comprised accel eration of EU-funded projects to increase 
energy efficiency (e.g. Estonia) and installati on of intelligent metering (e.g. Portugal).  
 
EN 25   EN Graph VIII: Energy intensity in industry in kg of oil equivalent per euro of 
gross value-added at constant prices 
00,250,50,751
EU 27 BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU NL AT PL PT RO SI SK FI SE UK2005 2008 EU 26 Unweighted average 2005 EU 26 Unweighted average 2008
Source:  Eurostat, 2009   
 
Many Member States aimed specifically at the development of renewable energy sources, 
mainly solar (e.g. Italy, Malta and Portugal), wind (e.g. Denmark, Estonia, Finland, Hungary 
and the UK) or biomass (Slovaki a). Practically all the Member States have recently increased 
public investments in infrastructure, also ofte n in the context of the greening the economy. 
For example, Denmark frontloaded 5% of it s long-term Green Transport Infrastructure 
Investment Plan (2009-2020).  
Most recovery plans included measures to encourage eco-innovation, e.g. to promote fuel 
efficiency or electrical and hybr id cars via the specific desi gn of temporary car scrapping 
schemes. Finally, more than half of the Member  States have come forward with new fiscal 
instruments, including taxes on environmentally harmful activities and fiscal incentives for "green" behaviour. At the same time, very few Member States have promoted "green" public 
procurement.  
Decreasing further the energy in tensity of industry, as well as increasing the share of 
renewable energy sources and ensuring their succe ssful integration into the existing energy 
systems remain the two principal challenges facing the EU. Many measures outlined in the 
NEEAPs are still awaiting implementation, with thei r latest status to be reported in the second 
generation of the NEEAPs expected by 30 June  2011. The new NEEAPs are also expected to 
set out plans for further steps in increasing energy efficiency. According to a study on the 
 
EN 26   EN competitiveness of the EU eco-industry6, the EU12 are lagging behind the EU15 in terms of 
development of the various subsectors of the eco-industry. However, the EU12 market is 
expected to develop str ongly and provide many invest ment opportunities. As the 
consequence, the availability of financing for i nvestment in industrial su stainability is getting 
more important. 
2.3. The business environment 
2.3.1.  Introduction 
Despite progress made over the last decade, comp anies that operate in the EU still perceive 
weaknesses in the business environment, such  as fragmentation of the internal market7, 
unnecessarily high administrative burdens and bu rdensome procedures for dealing with public 
administrations. Such weaknesses can lead to u nnecessarily high costs to businesses or even 
inhibit business activity. They also reduce the attractiveness of the EU as a location for 
international investment. 
Existing studies8 point to large differences among the Me mber States in terms of the quality 
of the business environment and the modernis ation of public administrations. The cross-
country differences suggest that there is sc ope for further improvements in many areas.  
The Europe 2020 strategy contains two flagship  initiatives which di rectly concern the 
business environment: "An Industrial Policy fo r the Globalisation Era" and "An Agenda for 
New Skills and Jobs". The latter draws attention to the fact that the availability of a well-
educated and well-skilled workforce is an essential element of a favourable business 
environment. Both initiatives foresee actions at the EU level, but also increased efforts at the 
national level to promote a good business enviro nment. For the business environment the new 
Broad Economic Policy Guidelines9, this guideline fore sees that Member St ates should ensure 
that markets work for businesses, put in pla ce predictable framework conditions and ensure 
well-functioning, open and competitive markets fo r goods and services. In particular, Member 
States should develop the necessary physical in frastructure, also with  a view of reducing 
regional disparities, modernize public administ rations, eliminate unnecessary administrative 
burdens and avoid unnecessary new burdens by applying smart regulation instruments, 
including by developing further inter-opera ble e-government services, support small and 
medium-sized enterprises (SMEs), improving thei r access to the Single Market in line with 
the ‘Small Business Act for Europe’ and the ‘Thi nk Small First’ principl e, remove remaining 
barriers to the internal market, facilitate access to finance, and support the internationalisation 
                                                 
6 Study on the Competitiveness of the EU  eco-industry, ECORYS, October 9, 2009. 
7 Commission Communication on a Single Market Act COM(2010) 608. 
8 European Commission, e.g. SEC(2010) 114 – 
http://ec.europa.eu/archives/growthandjobs_2009/pdf/lisbon_strategy_evaluation_en.pdf of 2.2.2010  
COM(2009) 680 – http://ec.europa.eu/enterprise/policies/sme/small-business-
act/implementation/files/sba_imp_en.pdf   
World Bank, Doing Business - http://www.doingbusiness.org  
OECD, Better Regulation in Europe - The EU 15 project  
9 http://register.consilium.eur opa.eu/pdf/en/10/st11/st11646.en10.pdf 
 
EN 27   EN of SMEs. A further reference point for Member  States' action on the business environment is 
the Small Business Act for Europe (SBA)10, which is discussed below. 
2.3.2.  Overview of the situation and of polic y measures in Member States 2009/2010 
Infrastructure  
The quality and availability of infrastructure  varies significantly across the EU, and major 
new investments are still needed  in particular in the Southern and Eastern Member States. 
Maintenance projects need to be financed also in the current front-runner countries. 
Moreover, energy grids with neighbouring coun tries could be reinforced in many Member 
States.  
Reducing administrative burden and impr oving the quality of legislation  
Ernst & Young estimated in 2010 that: “Western Eu rope is still perceive d as the second most 
popular destination for FDI but in 2010 investor s rank China the world’ s most attractive FDI 
destination, repeating its 2008 distinction. […] China has prove d that political stability, 
advancing infrastructure and a va st internal market can co-exist  with rapid growth, earning it 
.an attractiveness rating of  39%, a point ahead of Western Eur ope. […] In the past three years, 
international investors responded to trends in  the global marketplace, recognizing that their 
return on investment could be as stable — a nd possibly more profitable — in emerging — or 
high growth markets, while their risks there coul d be made manageable. This partly explains 
why Western Europe’s appeal as the most a ttractive destination for FDI collapsed from 68% 
of votes in 2006 to 38% in 2010. Enthusiasm fo r North America fell from 48% to 22% over 
the same period, while China’s attractivenes s ranking hovered at 40% and India’s grew 
steadily during the years 2006-2010.”11 
Setting a target for the reduction of administrativ e burdens can act as a driver for reform in 
this sector. All Member States have adopted  national targets for reducing administrative 
burden, normally by about 25% between 2008 a nd 2012. But not all Member States have 
effectively started to measure the current admini strative burden which is needed as a baseline 
against which its reduction can be  monitored. The Netherlands is  an interesting example of 
successful reduction of administrative burden; th e Dutch model has been replicated in other 
countries. Denmark but also other Nordic counties are also implementing ambitious 
programmes of reduction of administrative burdens. 
Almost all Member States have administra tive simplification programmes in place. An 
interesting example is Belgium where ci tizens and companies can submit ideas for 
simplification to a “Kafka cont act point”. The Czech Republic concentrates on the ten most 
burdensome legal acts. In Italy, a promising motto is “cutting laws, cutting burdens and 
cutting organisational bodies”;  it will be important to follow its implementation closely. 
                                                 
10 COM(2008) 394 - http://ec.europa.eu/enterprise /entrepreneurship/sba_en.htm  of 
26.06.2008 
11 Ernst & Young: Waking up to the new Ec onomy, European Attractiveness Survey 
2010, 
http://www.ey.com/Publication/vwLUAsse ts/Attractiveness_survey_2010_EU/$FILE/A
ttractiveness_survey_2010_EU.pdf , pages 5-12. 
 
EN 28   EN Substantive progress has been made in the implementation of the Services Directive 
(Directive 2006/123/EC), which lead Member Stat es to take a broad ra nge of simplification 
measures, such as the reduction and lightening of  authorisation schemes, the abolishment of 
excessive formalities (such as certified translations and certified copies), the removal of discriminatory or disproportionate conditions an d the setting-up of Points of Single Contact 
(see below). Good progress has been made in most  Member States but work still needs to be 
finalised in those countries that have accumu lated delays in the implementation of the 
Directive. 
Use of impact assessment in preparing legislatio n can also be an important tool in preventing 
that new legislation complicates conditions in the business environment. However, progress in 
developing and implementing impact assessment systems remains limited. Impact assessments for new legislative proposals are mandatory in a number of Member States; 
however, they are often only partial and superf icial. Full impact assessments to analyse all 
significant economic, social and environmental impacts should be  carried out. Fr ance has now 
enshrined impact assessments into its constitu tion. Some more countries (e.g. Spain) have 
recently made significant progress in making thei r assessments more relevant. Transparency 
can be further improved by making all impact assessments publicly av ailable, which is 
currently the case only in a few Member Stat es (e.g. Czech Republic, Denmark, France, and 
United Kingdom). 
The role of stakeholders in designing legislatio n is equally important Fo r consultation to have 
a significant impact on the qua lity of new legisla tion, early involvement  of stakeholders 
remains crucial. A formal requirement to consu lt stakeholders exists in almost all Member 
States; however, implementation modes differ. Memb er States still not consulting interested 
parties on a regular basis would gain from introducing minimum consultation requirements 
for major policy proposals. 
Modernising public administration 
A highly performing and innovative public sector , enabling the deliver y of sustainable, 
modern and quality public services, is a prereq uisite for economic competitiveness. Given the 
deteriorating public finances, many Member Stat es see only limited ro om for manoeuvre in 
delivering good public services. At the same time, public services need to respond to 
changing citizens' and businesses' needs in an evolving society. Thus, improving the 
efficiency and effectiveness of public spendi ng has to feature high on the political agenda. 
High-quality, reliable public services and legal certainty were historically a major pre-
condition for the economic success of today’s fr ont-runner countries. An interesting example 
for considerable progress in the quality of legislation and administrative burden reduction over the last decade is Estonia which now scores considerably above the EU average in these 
two categories. 
The general reform of public administration is high on the age nda of several Member States 
(e.g. Bulgaria, Greece, Hungary, Portugal, Roma nia) for which weak administrative and 
judicial capacity as well as legal uncertainty  constitute key impediments in addressing 
economic development challenges. 
Electronic commerce offers new EU-wide busine ss opportunities for SMEs, especially with 
the electronic payment market's integration in to a Single Euro Payment Area (SEPA) and the 
resulting potential for innovation at European le vel in areas such as electronic invoicing or 
 
EN 29   EN internet payments. Yet e-commerce figures dem onstrate that these opp ortunities are not yet 
fully exploited. Also, further developing e-gove rnment could permit SMEs spending less time 
on administrative procedures and gain new business opportunities. In particular, fully 
implementing EU legislation on e-procur ement, practical e-Identification and e-
Authentication for cross-border services would open up numerous new business opportunities 
across borders. 
Usage of fully available online e-government basic services12 by businesses was 71% in 2009 
for the EU-27 (up from 57% in  2005; Graph IX). Usage by business was above 60% in all 
Member States, with the exception of Romania (41%). Almost half of the Member States 
have usage rates above 80%, while some of th em approach saturation (Denmark, Finland, 
Lithuania and Slovakia), with rates above 90%. 
In order to implement the Services Directive al l Member States had to set up "Points of Single 
Contact" (PSCs), which are e-government portals  allowing businesses to get all relevant 
information and complete procedures online. Such portals are now operational in 22 Member 
States. In 17 MS it is already possible to complete procedures online. Availability and user-friendliness of the PSCs will need to be improved in the future (in particular aspects such as 
cross-border accessibility and translation of information content). 
Graph IX: E-government usage by enterprises (%) 
0102030405060708090100
EU 27 BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK
2005
 2009 Unweighted average 2005 Unweighted average 2009
 
Source:  Eurostat, 2010 
Note : The second column for Belgium relates to 2008 (not to 2009). 
 
                                                 
12 Source: Smarter, Faster, Better eGovernment: 8th Benchmark Measurement', 
Capgemini, 2009 
 
EN 30   EN Market functioning and competition policy 
A well functioning Internal Market results in increased opportunities for business and 
ultimately improves competitiveness of European industry. In order to exploit the Internal 
Market's full potential the legislation needs to be timely and correctly tr ansposed into national 
law and properly applied by all Member States.  
In May 2010, the EU average transposition deficit of Internal Market di rectives stood at 0.9%, 
which is still in line with but very close to th e interim target of 1% set by Heads of State and 
Government. 18 Member States achieved the 1% target. Belgium, Denmark, Italy, Malta, 
Slovakia, Finland and the U.K made the strongest  progress in reducing their deficits. Most of 
the outstanding directives were in the areas transport and environment. 
The number of infringement procedures remain s high. Belgium records th e highest number of 
infringement procedures (111 open procedures) in the EU, increasing its number of cases by 
68% since November 2007. Greece, Belgium, Italy and Spain have more than 80 infringement procedures each, which compares to the EU average of 47 pending cases. 
The level and quality of  state aid granted by national gove rnments has a significant impact on 
the functioning of the Internal Market. Stat e aid should not distort competition and trade 
inside the Internal Market. To this end, Member States committed to reduce the general level 
of state aid and to sh ift the emphasis from supporting individual companies or sectors towards 
tackling horizontal objectives, envi ronment, SMEs or training.  
Between 2002 and 2007, the level of state aid to  industry and services  decreased annually on 
average by 2% and stood at 0.5% of EU GD P in 2007. The economic and financial crisis 
abruptly ended low levels of state aid. The overa ll level of State aid al most quintupled in 2008 
compared to 2007 and increased to 2.2% of GDP  because of aid granted to the financial 
sector. Crisis aid to the real economy gran ted through the Temporary State Aid Framework 
started only in 2009 and data are not yet ava ilable for all Member States. When excluding 
crisis measures, the largest gr antors of aid to industry and services in 2008 are Germany, 
France, Italy and Spain. In relative terms, Hungary, Malta and Portug al grant the highest 
shares of state aid to industry and serv ices in relation to their GDP in the EU. 
2.4. Entrepreneurship and SME policy 
Many Member States have introduced entrep reneurship programmes to make young people 
aware of the possibility to start an enterprise, either by integrating it in to school and university 
curricula or by setting up extra projects. Inte resting examples are Slovenia, Lithuania and 
Sweden where all stages of the educational system are covered and teachers receive extra 
training. In Latvia, hundreds of students can subm it business plans annually in the context of a 
competition. The Netherlands established a programme for young entrepreneurs to do 
networking in the United States. Some count ries are involved in programmes encouraging 
female entrepreneurship (e.g. Cyprus, Denmar k, Greece, Finland, France, Germany, Iceland, 
Ireland, Italy, Norway, Poland, Slovakia and Sweden). Several Member States use 
considerable amounts of the Structural Funds for these programmes. 
 
EN 31   EN In all Member States, although with considerable variation13access to finance became more 
difficult during the financial and economic crisis. SMEs in part icular experienced tightening 
credit conditions. Most governments have ther efore introduced or expanded public guarantee 
schemes or provided direct state aid. In the m eantime, the situation has slightly improved, but 
access to finance remains a critical bottleneck for future growth.  
Most Member States benefited from the temporary framework for State aid measures14 to 
support access to finance in the cu rrent financial and economic cris is increase in allowed state 
aid during the crisis to provide considerable financial support to bus iness. These measures 
will need to be phased out again15.  
The April 2010 Bank Lending Survey of the Eur opean Central Bank indicated that the net 
tightening of credit standards on loans to SMEs in the euro zone remained almost unchanged, 
since 83% of surveyed banks kept their tight co nditions. The survey also pointed to a weaker 
net demand for loans in the first quarter of 2010. Net demand for loan s to enterprises was 
negative (-13%, as against -8% in  the fourth quarter of 2009). 
Some governments have permanently reduced or abolished the minimum capital requirements 
to set up a company (e.g. Germany, Netherlands, Latvia, Luxembourg), others relaxed the rules for business angels (e.g. Netherlands). Germany is an interes ting example because it 
now allows a limited company to be set up with very small start capital. Many simplifications 
in legislation (including on issues  such as legal form requirement s, fixed tariffs or territorial 
restrictions) were made as a result of  implementing the Services Directive. 
Generally, not much progress has been made to reduce late payments (Graph XI). The 
situation only improved for Portugal and, to a le sser extent, Italy; both remain on a very high 
level. Worryingly, payment delays increased in several Member States, particularly in Spain 
and Germany. The shortening of payment terms a nd delays remains of particular importance 
for SMEs active in Greece, Italy, Portugal and Spain. These Member States have the largest 
scope for improvement in terms of payment pe riod by public authorities  (about 140 days on 
average). 
                                                
 
13 Comparing the change in stock of outst anding loans to non-fi nancial companies by 
Member State before and after the beginning of the crisis reveals that some countries have 
been more seriously hit than others. 
14 OJ C 83, 7.4.2009, p.1 
15 The Temporary Framework has been exte nded until 2011, with reinforced conditions. 
 
EN 32   EN Graph XI: Duration of payments  by public authorities (days) 
020406080100120140160180
BE CZ DK DE EE IE EL ES FR IT CY LV LT HU NL AT PL PT SK FI SE UK
2004
 2009 Unweighted average 2004 Unweighted average 2009
 
Source:  Eurostat, 2010   
 
Many governments support the internationalisa tion of SMEs, e.g. by financial support for 
export promotion, market access strategies, partic ipation in trade fairs, etc. (e.g. Belgium, 
Bulgaria, Czech Republic, Estonia, Italy, Hungar y, Lithuania, Austria, Portugal and Sweden). 
Some of them (e.g. Denmark, Slovenia) fo cus on high-growth companies willing to 
internationalise, some others have establ ished new export promotion agencies (e.g. 
Luxembourg). Others have stepped up efforts to  increase foreign direct investment to 
disadvantaged regions (e.g. Hungary). 
As part of their recovery measures a majority of Member States reinforced their export credit 
schemes (Belgium, Bulgaria, the Czech Republic, Denmark, Germany, Luxembourg, Latvia, Lithuania, the Netherlands, Aust ria, Poland, Portugal and Sweden). 
Implementing the Small Business Act (SBA) 
The Small Business Act (SBA) was adopted by the Heads of State and Government in 2008. 
It consists of ten principles which should gui de the conception and im plementation of policies 
both at EU and national level. The aim is to create a level playing field for SMEs throughout 
the EU and to improve the administrative and le gal environment so that these enterprises can 
realize their full potential. 
All Member States have acknowledged the import ance of a rapid implementation of actions 
agreed in the Small Business Ac t (SBA) at the end of 2008, but the approaches taken and the 
results achieved vary considerably between Member States. The overall assessment by major 
 
EN 33   EN SME stakeholder organisations points to a slow uptake of the SBA in a number of Member 
States16. 
Member States are increasingly integrating the "Think Small First" principle in policy-
making. Only few Member States (e.g. Belgiu m, Denmark, Finland, Germany, Slovenia and 
Sweden) have integrated an SME Test in to their national decision making approach. 
Several Member States consult SMEs representatives, in some cases in the framework of 
SME councils or fora (e.g. Spain, Estonia, Hung ary, Ireland and Lithuania). Specific bodies 
such as SME agencies have b een established to promote SME interests e.g. in Portugal and 
Bulgaria. 
Considerable progress has been made to reduce the average time and cost to start up a 
company (Graph X). The average time to start-up a company was 15 days in 2009 according to the World Bank
17.  
Graph X: Time needed to start a business (days) 
010203040506070
BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU NL AT PL PT RO SI SK FI SE UK
2005
 2009 Unweighted average 2005 Unweighted average 2009
 
Source:  World Bank Doing business, 2010  
 
Some twenty Member States have set up an operational physical one-sto p-shop which is able 
to serve the creation of private limited compan ies and has developed pr e-defined procedures 
                                                 
16 COM(2009) 680 –  
 http://ec.europa.eu/enterprise/policies/sme/small-business-
act/implementation/files/sba_imp_en.pdf  
17 Word Bank, Doing Business project , see http://www.doingbusiness.org/ 
 
EN 34   EN (company registration, tax registration, etc). De nmark is a good example, may provide one of 
the best services. At the same time, only a fe w countries (e.g. Cyprus, Netherlands, Spain, 
Malta) have a one-stop-shop system that can take  care of recruitments (especially concerning 
the first employee). A few countries have procedur es that are so simple that only one contact 
with a public administration is required (e .g. France, Ireland, Latvia, Sweden, Belgium). 
Some Member States aim at a zero-stop shop with a simple on line registration (e.g. Poland). 
Another good example is Hungary where online registration of a company is now possible 
within one hour. 
There is still scope to shorten the time needed  to wind up a business in case of non-fraudulent 
bankruptcy. So far, only a few countries (e.g. Belgium, Estonia, Finland, Ireland, Latvia, 
Spain and the United Kingdom), have approached th is issue. Estonia aims  at a procedure that 
can be concluded within 3 months. Some count ries have taken measures to facilitate 
restructuring instead of winding up companies (e.g. Czech Republic). 
A “European Code of Best Pr actices” to facilitate SMEs’ access to public procurement 
contracts was adopted as a part of the SBA; some of the countries which have started to 
promote it effectively are Fran ce, Hungary, Ireland, Lithuania,  Poland and Sweden. In the 
overwhelming majority of Member States, SMEs ’ access to public procurement is not subject 
to a specific strategy or policy. The most widespread SME friendly measures remain cutting 
tenders into lots and facilitating access to  information through centralised websites, 
interactive web pages, and ot her e-procurement developments . An important measure to 
encourage the participation of i nnovative SMEs is to define t echnical specifica tions in terms 
of performance or functional requirements. Some countries (e.g. the Netherlands) provide 
specific training and support for public offi cials drafting innovative tender documents. 
Some Member States have expl icitly reported on how they are implementing the SBA in their 
2009 National Progress Reports for growth and jobs (e.g. Belgium, Finland, France, Ireland, 
the Netherlands, Romania and th e United Kingdom). However, se veral Member States (i.e. 
Germany, Italy and Sweden) have already star ted separate SBA monitoring exercises and 
others may follow. To avoid fragmentation, it w ould be preferable to closely coordinate the 
regular monitoring of the SBA implementati on with the National Reform Programmes under 
the Europe 2020 strategy. 
2.5. Summary 
Member States' industries are re covering, at various speeds, from  their worst post war crisis. 
The national economic recovery measures ta ken in 2008-2009 have been effective in 
stabilising the situation. One can expect an a cceleration of structural change because of the 
crisis but measuring and describing the main features of the changes will take more time, 
especially since the effects of the crisis are sti ll felt acutely, particularly as concerns access to 
finance. Indeed, with very few exceptions, co nditions for business bank loans remain tight 
and constitute a bottleneck on the way to faster recovery. 
Only a limited number of Member States is not facing notable and identifiable challenges 
regarding their business environment especi ally for SMEs. Clearly, efforts to reduce 
administrative burden, to introduce better regulation and e-government, to apply the think 
small first  principle and to simplify support scheme s could be more systematic and more 
intense. This is an area where exchange of  best practice can make the difference more 
efficiently as it provides the real life demonstr ation that the same objectives can be achieved 
in less burdensome ways. 
 
EN 35   EN Business environment has more aspects than lengthy and cumbersome procedures. In many 
Member States, increasing competition in the serv ices sector (mainly retail and professional 
services but also network industries in some instances) remains a cha llenge, even if its 
visibility has become lower due to the crisis. Infrastructures (mainly ro ad transport but also 
energy interconnections and generation) and public administration c onstitute important 
bottlenecks to growth in a limited number of cases. 
A striking finding is that the innovation leaders and their imme diate followers reacted in a 
positive and proactive way to the crisis by adding new temporary actions encouraging research and innovation to thos e already existing. This is not  generally the case for the 
countries below the EU average, indicating the po ssibility of a widening gap. Yet, the need to 
strengthen the structures of their production ba sis by increasing the share of technology- and 
skill-intensive activities is even more compel ling in their case. Acce ss to finance is an 
important bottleneck also with respect to inno vation but is often comb ined with a lack of 
complementary skills. Many countries face ad ditional challenges of a more institutional 
nature such as rethinking thei r strategy and priorities (not tr ying to do everything at the same 
time) and simplifying and consolidati ng their support-deliv ery mechanisms. 
Above average energy intensity can be explaine d to some degree by the specialisation of the 
country's manufacturing sector, but not entirely ; room for improvement generally exists. It 
represents a potential risk factor by exposing these se ctors to sudden energy and CO
2 price 
variations. At policy level, whilst actions to  assist enterprises in  reducing their energy 
intensity exist everywhere, the same cannot be said for measures improving the efficiency of 
other resource use. Explicit strategies, togeth er with corresponding concrete action plans, 
aiming at greening existing industries and enc ouraging the development of eco-industries are 
not numerous; in many cases, actions are isolated or fragmented.  
 
EN 36   EN 3. COUNTRY CHAPTERS  
3.1. Belgium 
3.1.1.  Indicators graph 
Belgium
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2004)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2008)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
NANANATowards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) 
always indicate performance which is better (weaker) than the EU average. 
 
EN 37   EN 3.1.2.  Introduction18 
Belgium’s labour productivity, measured either per person occupied or per hour worked, is 
significantly above the EU average. Belgium’s real effective exchange rate appreciated 
moderately since 1999, al beit less than for most other EU  countries, indicat ing a slightly 
decreased competitiveness. In parallel, nominal unit labour costs in Belgian manufacturing increased by 11% between 2000 and 2009 with a remarkable acc eleration during the second 
half of the decade. However, the overall increase remained below the EU average of 19%. 
Belgium is specialised in sectors dema nding high skills and, decreasingly, in high-
intermediate skill sectors. The role of low-in termediate skill sectors has been stable on a 
below average level from 1995 to 2005 while low skill sectors lost ground from an already low level. Nevertheless, Belgium shows a d ecreasing specialisation towards sectors with 
medium high technology intensity and an incr ease for medium low-technology sectors. There 
is a moderate specialisation towards sector s with above average growth in the EU. 
Manufacturing plays a similar role  for Belgium than for the EU in total (16% vs. 17% of 
value added in 2008). The only sub-sectors wi th clear above EU average importance are 
chemicals and refined petroleum. There is so me specialisation in the service sector for 
education as well as for transport and comm unication and, in earlie r years for financial 
intermediation. Employment figures also s how the slowly decreasing importance of 
manufacturing over time and a growing importan ce of “real estate an d business activities”. 
Forecasts until 2020 expect an increase in empl oyment in business and other services by some 
9% while employment in manufacturi ng might drop further by some 12%. 
Belgium’s balance in the trade of goods showe d, relative to the tota l volume of exports, a 
moderate surplus in 2005 and 2009. The trade surplus in manufacturing mainly resulted from 
surpluses in chemicals, basic metal products and food/drinks/toba cco while mainly electrical 
and optical equipment, transport equipmen t and other manufacturing showed noteworthy 
trade deficits. The Revealed Comparative Advant age (RCA), measured re lative to the EU and 
concentrating on manufacturing, shows particular  strengths for Belgium in 2008 in chemicals 
and refined petroleum. 
Exit from the crisis In Belgium production in manufact uring sectors decreased by more than 20% as a result of 
the economic crisis; in June  2010, it reached again  87% of  the pre-crisis level. 
In response to the economic a nd financial crisis Belgium set up a major guarantee scheme 
under the Temporary State aid Framework with a total budget of EUR 1.5 billion. The use of 
the scheme by businesses was, however, not very intensive. The Belgium state also made export credits available with a total budget of EUR 300 million. For this purpose a new complementary export credit insurance scheme  (Belgacap) has been introduced to secure 
inter-enterprise credit and help companies in th eir business transactions. It will remain into 
force until the end of 2010. On top of this, the 9.25% tax on insurance contracts covering 
commercial and country risks linked to exports has been suppressed.  
                                                
 
18 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 38   EN The Federal Government introduced  a reduction of the VAT rate  for residential construction 
to soften the impact of the crisis on the c onstruction sector. Although it was initially planned 
only to remain in force until the end of 2009, it  was later extended to the end of 2010. The 
budgetary cost of this measure is estimated  at EUR 300 million in 2009 (0.1% of GDP) and 
EUR 150 million in 2010 (less than 0.1% of GDP)19. 
Moreover companies were allowed to postpone certain tax payments  during 2009, in 
particular VAT and income tax, to ease their liquidity constraints. 
3.1.3.  Towards an innovative industry 
Belgium's research and innovation performance is characterised by high investments by the 
business sector, off-setting a relative under- investment by the public sector. These 
investments are precarious due to  the dominance of a few large and foreign firms in the total 
expenditure. Belgium has a relatively well-educ ated population but is losing ground in the 
area of new science and tec hnology (S&T) graduates; a situation worsened by the 
uncompetitive net wages paid to researchers an d engineers. Finally, the low propensity to 
become an entrepreneur remains a cause for concern. 
The extensive Belgian public support systems o ffer a large variety of measures focusing on 
R&D cooperation and promoting entrepreneurship  and can be considered as complete. The 
structuring of public-private research efforts in the form of strategic research centres, 
competitiveness poles etc. is attractive for large, foreign R&D players. The high tax burden and relatively high labour costs remain, nonetheless, a negative element for conducting 
research in Belgium. Federal tax incentives ar e meant to decrease th e burden, but are not at 
such a level that total costs fo r R&D are lower than in neigh bouring countries with lower tax 
levels. 
Industrial Policy is mainly implemented at th e regional level through clusters and technology 
centres: In Flanders, after an evaluation of existing in itiatives in 2008–2009, two new 
technological centres have been set up. In the Walloon re gion, networking between the 14 
existing clusters is promoted (73% of the part icipating enterprises are SMEs) and greening the 
general orientation of the clusters and "pôles de compétitivité" is intended.  
As regards the Belgian innovation system in pa rticular, among the three major challenges is, 
first, the innovation skills mismatch. There is a low share of new S&T graduates, as well as a 
growing under-utilisation of lifelong learning. These two elements are essen tial to maintain an 
upsurge of skills and qualifications and, thus , to enhance the country's competitiveness. 
Second, creating and growing knowle dge-intensive enterprises is essential. To achieve this, 
there is a need to boost the attractiveness of starting up innovative busi nesses, and to foster 
new businesses. The reliance on a few large and foreign firms is a risk, especially in the 
current economic context, and finally it seems n ecessary to create a fa vourable environment 
for the exploitation of resear ch results in Belgium. R&D and innovation efforts do not yet 
bring sufficient results that en sure economic development.  
                                                
 
19 The legality of this measure is questioned by the European Commission. 
 
EN 39   EN 3.1.4.  Towards a sustainable industry 
The main policy orientations c oncern increased energy efficiency in buildings (with financial 
public incentives) and research activities (n ew clusters on materi als, buildings, eco 
innovation, renewable energi es). Green investments in the fe deral Recovery Plan represented 
0.3% of GDP. The Federal Government has introdu ced a system of "Eco cheques" that has 
been included in the 2009-2010 general salary agreement allowing the purchase of green 
consumer products. 
There is a wide variety of actions put fo rward by the three Belg ian regions. Flanders 
encourages existing enterprise reducing their e nvironmental impact through investment grants 
(reinforced for SMEs) allocated through an annua l call for projects scheme. In addition, there 
is public support for the establishment of collaborative networks around eco-innovation 
themes that can generate concrete proposals a nd pilot experiments. Th eir utility resides in 
identifying opportunities and barrie rs of new business models and policy concepts. In parallel, 
after an evaluation of existing initiatives in  2008 – 2009, two new technological centres have 
been set up in Flanders: Flanders Synergy and Fl anders Plastic Vision. In the light of the Opel 
crisis, the scope of the Flanders  Drive cluster has been extende d to cover all aspects of the 
"car of the future". 
Investment grants, networking, covering environmental issues in R&D and innovation support 
are also used in the Walloon region. In addi tion, the region pursues sectoral agreements 
(commitments to reduce CO ² emissions against various a dvantages) and intends to use 
systematically environmental clauses in re gional public procurement. The Region also 
supports the greening of industry via clusteri ng policy: a dedicated call in 2008 focused on 
projects in relation with sust ainable development and climate change, and the creation of a 6th 
competitiveness pole in the field of eco-technologies is planned in 2010. 
The Brussels region uses as well investment grants, networking faci litation and support to 
research and innovation to promote environmen tal objectives (e.g. the implementation of a 
strategic plan for developing environmental value chains, the Brussels Greenbiz business 
incubator, Bruxelles-Ecopôle etc). 
The higher energy intensity is to some extent explained by the industrial structure of the 
country. Nevertheless it represents  a potential disadvantage due to overexposure to energy and 
CO ² price volatility. 
3.1.5.  The business environment 
Belgium presents a mixed picture regarding th e business environment as negative perceptions 
about the legal and regulatory framework and administrative bur den coincide with rather good 
performance on specific issues such as regulati on of business start-up. Infrastructure has a 
positive contribution to the business environment. 
Belgium has pursued a range of initiatives in  recent years to consolidate or simplify the 
regulatory stock, to reduce administrative burdens for businesses and to promote 
eGovernment and impact assessment. Policies ra nge from projects shared between the federal 
and regional levels, to projects sp ecific to each level within it s area of competence, but these 
initiatives are not explicitly developed within  the framework of an overarching policy strategy 
for Better Regulation. Shared project s include initiatives such as the Kafka  contact point 
where citizens, businesses and pub lic servants can propose ideas for cutting red tape and the 
 
EN 40   EN Business Cross Roads Bank , which is a register of business identification aimed at connecting 
different databanks of the administration and a llowing re-use of data across administration.  
Different approaches have b een engaged to reduce admini strative burdens: the federal 
government, the Walloon Region and, since 2009, th e Brussels Capital Region have used a 
selective approach, based on testing and favouri ng a gradual evolution; the Flemish Region 
has taken a more systematic approach. Belg ium has adopted in 2009  the target of 25% 
reduction of the administrative burden by 2012. Th e biannual surveys of the Federal Planning 
Bureau indicate that administra tive burdens on business decreased  from an estimated 3.5% of 
GDP in 2000 to 1.72% of GDP in 2010.  
Belgium has taken steps to integrate ex ante  impact assessment in the development of new 
regulations. At the Federal level, two tests exist: the Kafka Test  to assess administrative 
burdens in new regulation (obligatory since October 2004) and the Sustainable Development 
Impact Assessment  (SDIA, introduced in 2007). The Fl emish Region introduced guidelines 
for regulatory impact assessments (RIA), including consultation. The Walloon Region focuses on the Kafka test (since May 2007) and pursue s a general approach to encourage self-
regulation. Consultation of stakeholders on new regulations is comprehensive in coverage and 
is based on institutionalised bodies per policy area.] 
eGovernment in Belgium is an instrument helping the back office coordination and 
integration of different levels  of governments and departments.  It supports a range of Better 
Regulation initiatives, incl uding databases on the stock of re gulations and specific data banks 
such as the Cross Roads Bank for Enterprises, the Cross Roads Bank of Social Security, the 
data bank on vehicles (DIV), the data bank for VAT and Tax on the web. An e-ID for every Belgian has been introduced to simplify and mode rnise interaction with the administration for 
businesses and citizens. However, the business utilisation of public services online stands 
below the EU average. Belgium has a non-manda tory public eProcure ment platform, that 
serves as a knowledge base for all public procurement related as pects and which is also the 
point of entrance towards e-Procurement tool s such as e-Notificatio n and e-Catalogue for 
public administration.  
The one-stop-shop to start-up an en terprise (Guichet d'entreprises agréés) is fully  operational.  
Belgium scores above the EU average concer ning the availability of high-speed broadband 
lines. However, electricity prices for medium size industry over the past ye ars rose faster than 
in neighbouring countries and we re higher than EU average in  2009 for the first time, 
indicating that the competition framework may not be strong enough. The market share of the 
dominant players is  eroding slowly.  
Belgium's business environment is characterized  by a high administrativ e burden at different 
levels of administration. In spite  of sustained efforts in this ar ea, the reduction of burden of 
government regulation remains a challenge.  
3.1.6.  Entrepreneurship and SME policy 
The SME sector in Belgium has a similar struct ure to that of the EU: the percentages of 
micro, small and medium sized enterprises and their contributions to employment and value 
added are on a par with the European averag es. Concerning general SME policy, the federal 
government adopted in 2008 an action plan insp ired by the European "Small Business Act" 
comprising 40 measures. An "SME te st" is also in preparation.  
 
EN 41   EN In 2009, at federal level, a new legal entity fo r start-ups was introduced : the BVBA-starter. A 
Flemish Agency for Entrepreneurship was created in 2009. In 2007, the Walloon government introduced a program for entr epreneurship aimed at maki ng young people aware of the 
possibility to start an enterprise. It followed a similar 'Ondernemend Onderwijs' plan that the 
Flemish government approved in 2006. 
Concerning access to credits, in particular for SMEs, federal and regional governments have 
taken measures to reinforce the capital of SMEs and other structural or  short-term measures: 
for instance creation of a credit ombudsman, the export guaranty scheme Belgacap and a 
reduction of public payment delays. 
The Regions support private investments through the Participatie Maatschappij in Flanders 
and the SOWALFIN (“Coupole wallonne des PM E”). Public investments projects, in 
particular for transport, energy or telecoms infrastructures, are ongoing.  
3.1.7.  Conclusions 
Apart from the short-term concerns related to  the economic crisis, such as getting easier 
access to bank financing, the main challenge facing industry is the Belgium's business 
environment which is characterized by high administrative burden and heavy legal and 
regulatory framework. 
Moreover, the innovation system which has a low share of new science and technology 
graduates and a low share of high-tech e xports in total exports , needs structural 
improvements, for example better international orientation of clusters  and poles – general 
support measures for private research, in particular for SMEs. 
 
EN 42   EN 3.2. Bulgaria 
3.2.1.  Indicators graph 
Bulgaria
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2007)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2005)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
NA
NATowards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs-4,0
-3,8
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) 
always indicate performance which is better (weaker) than the EU average. 
 
EN 43   EN 3.2.2.  Introduction20 
Bulgaria’s labour productivity did not improve significantly since 2005. It was quite stable 
and did only reach some 40% of the EU aver age in 2008/9, measured per hour and per person. 
Bulgaria’s real effective exchange rate depr eciated slightly from its 1999 level to 2005 but 
appreciated very strong from 2005 to 2009, indicating significantly decreased 
competitiveness. Concomitantly, nominal unit labour costs in Bulgarian manufacturing decreased between 2000 and 2005 and then sharply increased resulting in an overall increase 
of 26%, which was significantly above the EU average of 19%. 
Bulgaria had a deficit in the trade of goods  in 2005 and 2009. After the significant economic 
slowdown in 2009, the currently ex panding share of exports is a sign of a slight improvement 
of the Bulgarian competitiveness position. 
Manufacturing plays a slight ly bigger role for Bulgaria than for the EU in total (19% versus 
17% of value added in 2008). This is mainly due to specialisation in textiles and clothing, 
refined petroleum, non-metallic mineral product s and leather and footwear. In the service 
sector, only “transport and co mmunication” and “electricity, ga s and water supply” have an 
above EU average weight. The primary sector is larger than for the EU  in whole due to the 
highest share of agriculture. In  general, the Bulgarian economy  is dominated by sectors with 
low and medium-low technology intensity. Sectors,  with a total negative growth rate for the 
EU, play a strong and growi ng role in Bulgaria. Export gr owth is high in industries 
specialised in labour-intensive manufacturing, pr ocessing of natural reso urces and agriculture. 
Employment figures show a low level of productivity in agriculture. Forecasts until 2020 
expect an increase in employment in busin ess and other services by some 40% while 
employment in the primary sector and in  manufacturing might decrease by 25 to 30%. 
Exit from the crisis Bulgaria was confronted with one of the bi ggest drops of manufa cturing output in the 
European Union. It fell by almost 35%, but re gained 17% up to July 2010. Bulgaria did not 
introduce specific business and financial suppor t measures under the Temporary State Aid 
Framework until 2010. 
In reaction to the economic and financial crisis, Bulgaria introduced a li mited number of other 
measures. The measures to support product ma rkets mainly aim to improve the business 
environment (e.g. reduction of the initial capital required for the establishment of a company 
to 1 EUR, accelerated reimbursement of VAT), facilitate market entry, and enhance effective 
competition through strengthening the powers of  the regulatory authorities. The effective 
implementation of the Energy Efficiency Act of  2007 will promote the use of energy saving 
technologies and higher energy efficien cy in both production and consumption. 
To ease access to financing for SMEs, the capita l of the state-owned Bulgarian Development 
Bank was increased (0.75% of GDP) as well as that of the FLAG (Fund for Local Authorities 
and Governments) fund to suppor t municipalities to absorb EU  funding. Moreover, raising the 
                                                
 
20 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 44   EN credit limit of the Bulgarian Export Insuran ce Agency is expected to boost private sector 
exports. 
3.2.3.  Towards an innovative industry 
According to the European Innovation Scor eboard (EIS) 2008, Bulgaria is one of the 
catching-up countries with an innovation performance well below the EU average. The 
relative strengths are in human resources,  while the relative weaknesses are in 
entrepreneurship. Although rese arch and development (R&D) e xpenditures in Bulgaria are 
increasing, they are still much lower than th e EU average level. The structure of R&D 
expenditure remains strongly imbalanced. The shar e of public sector financing is double that 
of businesses. The percentage of SMEs with innovation activities a nd the share of innovative 
SMEs co-operating with others are below the EU average. 
Measures have been proposed within the fr amework of the National Innovation Strategy in 
2008 and 2009 aimed at strengthening the links between research and business (technology 
transfer centres), building the innovation in frastructure, strengthening the skills in 
entrepreneurship and innovation (entrepreneurs hip centres in universit ies), supporting existing 
clusters, developing new financial support sc hemes for innovation (Bulgarian Development 
Bank, business angels), etc. The Innovation Strategy is complemented by one major 
instrument – the Operational Programme “Competitiveness 2007-2013” funded by the 
European Regional Development Fund. However, only 2% of EU funding is dedicated to 
innovation and R&D. 
Despite the above mentioned measures, no subs tantial changes took pl ace in 2008 and 2009 in 
the research and innovation policy of the country. The lack of cl ear priorities at the highest 
levels of governance continues to be the majo r problem in the implementation of Bulgaria’s 
innovation policy. The development of innovati on policy is not accompanied by discussion 
between policy-makers and society and there is no monitoring and assessment of the measures 
which have been implemented. A prerequisi te for the success of investments in new 
technologies is the implementation of a coordina ted national policy in science, technology and 
innovation. The currently fragmented and uncoordin ated policy support system is unsuited to 
the implementation of the unified research, technological and innovation policy that is 
needed. 
3.2.4.  Towards a sustainable industry 
The robust economic growth in Bulgaria during  the past decade is mainly explained by the 
investment boom in construction, real estate and the financial sector. Although, sustainability 
indicators are continually impr oving in the past years, the Bulgarian industry still remains 
several times more energy-intensive than the EU average. It also lags behind the EU average 
in terms of carbon intensity, wa ste generation by enterprises and exports of environmental 
goods. 
Bulgaria has set an ambitious target of  improving energy efficiency by 50% by 2020. The 
National Energy Efficiency Action Plan will need to be reinforced to meet this target. Legislation has been revised in view of  encouraging introduction of energy-saving 
technologies in manufacturing and households. Increased ener gy efficiency is the main 
priority of the government, with the aim to redu ce the energy intensity by 20% by the end of 
its mandate. Various possibilities for supporting these policies, including financial stimuli and 
regulatory measures will be sought. A second pr iority is to increase the share of local 
 
EN 45   EN renewable energy sources (RES) to 12% of tota l final energy consumption by the end of its 
mandate, and to at least 16% by 2020. In this re gard, projections are being analysed to put 
forward an optimal RES technologies mix at the lowest public cost  for achieving the 
objectives, as well as the necessary mechanisms and financial stimuli. 
The absence of clearly defined national strategies  in key areas such as resource efficiency, 
access to raw materials and development of envi ronmental industries, constitutes a weakness 
in this area. The Operati onal Program "Environment 2007-2013"  provides important funding 
resources for the development of "environmenta l" infrastructure. Timely implementation and 
the design of quality projects may prove challenging but they are essential for fostering the development of related industries, mainly in  the field of water and waste management. 
The Energy Strategy 2020 sets ambitious goals, whose completion will be very demanding in 
terms of new legislation, increased private inve stment and public acceptance. This implies the 
development and the adoption of a detailed plan for R&D, infrastructure and energy market 
regulation in light with EU developments in the field.  
3.2.5.  The business environment 
Financing of SMEs and credit conditions have deteriorated during the past two years due to 
the financial crisis. But, despite the crisis, Bulg aria managed to leave tax rates at low levels 
(below the EU average). Bulgaria performs  clearly better the EU average concerning 
electricity prices for medium size enterprises and the take-up  of high-speed broadband lines, 
but it performs worse concerning infrastructure expenditures and satisfaction with the quality of infrastructure.  
Bulgaria adopted in 2008 its Better Regulation Progra mme 2008-2010 with concrete 
objectives as regards simplification of mo re than 30 regulations, new centralised ex-ante  
impact assessments system for new laws, new more comprehensive scheme for consultation 
with stakeholders and screening of local authority regulations to  eliminate non-legal 
municipal regulations and trade licence fees. Bulgaria  adopted in 2009 the target of reduction 
of administrative burdens by 20% until 2012. The Action Plan for the implementation of the 
national target was finalised in April 2010  and includes 136 reduction proposals of 
information obligations such as submission of  data and documents electronically and data 
collection by state authorities rather than bus iness. If implemented, these measures could 
generate savings for businesses of up to EUR 13 million. 
All eGovernment activities are now coordinated by the Ministry  of Transport, Information 
Technology and Communications and have been developed w ithin the framework of the 
Information society strategy (2008) and the Law on eGovernance (2008 ). In 2009, the usage 
by enterprises of eGovernment services still st ands below the EU average, despite significant 
progress since 2005. Bulgaria intr oduced a web-based Public Procurement Register where 
contracting authorities are obl iged to publish their tender notices (alongside with the 
Bulgarian State Gazette and the European Jour nal). The one stop shop to start-up a company 
is also fully operational.  
In April 2010, the Government adopted a Strate gy for development of transport system in 
Bulgaria by 2020. It defines the main priorities a nd measures that need to be implemented by 
2020 in order to transform the transport system into a modern, safe, and secure system highly 
integrated into the European transport sy stem. The current effo rts to accelerate the 
construction of important infrastructural projec ts (e.g. Trakia highway, Sofia subway) will 
 
EN 46   EN have positive effects on the business environment in terms of putting in place new key 
transport infrastructure and an anti-cri sis measure stimulating local businesses. 
A major challenge for Bulgaria  is to undertake important re forms to improve the business 
environment in the country. The actions, in th e spheres of improving the functioning of the 
judicial system and fighting against corrupti on and organised crime, could be strengthened 
further. 
Meanwhile, providing stability an d predictability in the policy and regulatory environment is 
essential for the investment pl ans and business development of the enterprises operating in 
Bulgaria. It will also be an im portant challenge to take steps to encourage further competition, 
simplify licensing and authoris ation procedures, optimise tax administration and develop 
professional skills/competency in the work force as well as in the administration. 
After implementing the law on Protecti on of Competition in 2009, the Commission on 
Protection of Competition needs to continue improving its supervision on the functioning of 
national markets. It has to effectively pr event concerted practic es, abuses of monopoly 
position, and harmful concentrations which nega tively affect the business environment (e.g. 
energy sector).  
The modernisation of the tran sport infrastructure is a major challenge after years of 
underinvestment in important core areas such as  highways, ports, and rail. The better usage of 
European structural funds will be a prerequisite for the successful comple tion of these projects 
as Bulgarian public funding is limited. The deve lopment and effective management of public-
private partnerships could accelerate a nd attract the investment needed.  
3.2.6.  Entrepreneurship and SME policy 
The contribution of SMEs to the overall econo my, as measured by the value added, is 
somewhat lower in Bulgaria th an in the EU (54 vs. 58%). However, in the period 2002-2008, 
employment growth of Bulgarian SMEs showed  an overall increase of 41%, which is well 
above the EU average (12%). 
In 2009, a National Export Strategy was develope d. It includes measures to increase the 
efficiency of the SMEs' export through activitie s in the field of marketing, information, and 
promotion and through support for SMEs' participat ion in international exhibitions and fairs, 
organisations of business fora and missions. 
The Operational Programme "Competitiveness 2007-2013" envisages special support to 
export oriented SMEs. The support includes enc ouragement of SMEs to benefit from the 
growth of the markets, support for participation in internatio nal economic, trade, investment 
and innovation events, creation of electronic  portals and increase  of export training. 
Regarding entrepreneurship, in 2008/2009, Bu lgaria supported young entrepreneurs from 
universities willing to start their own businesses. The project, named ‘Technostart’, had a budget of EUR 100 000. 
Weaknesses exist in contract enforcement and lengthy administrative procedures. SMEs face 
severe credit conditions with excessive inte rest rates and require ments for collateral. 
Moreover, the number of government unpaid obligations to SMEs is a concern.  
 
EN 47   EN Concerning the field of innovation in SMEs, the available figures show that Bulgaria 
performs significantly below the EU average. Th is is a serious challenge for the Bulgarian 
SME policy as the overall result is mainly due to the relatively small share of SMEs that have 
new products or income from new products (37% as opposed to 64% of EU SMEs on average). 
3.2.7.  Conclusions 
Bulgaria has to undertake important structural reforms to improve its competitiveness such as: 
cutting red tape at different le vels of the state and local authorities, fo stering innovation in 
view of increasing productivit y, improving the energy efficiency across all sectors of the 
economy and developing the transport infrastr ucture. In the short term, absorption of 
structural funds which is cruc ial in supporting these undertakings  remains dramatically low. 
Hence, it has been urgent to ensure the prope r mechanism for management and control of the 
funds. 
There are still weak cooperation and coordinatio n between research inst itutions and business. 
Attribution of patents is rather slow and th e same applies to the implementation of the 
measures being part of the existing innovati on and R&D programmes. Bulgaria needs to 
improve its administrative capacity and simplif y existing rules and pro cedures in order to 
accelerate the absorption of funding in all sectors. 
In the short term, excessive interest rates, re quired collateral and securities and government 
arrears remain a signific ant burden to business. 
 
EN 48   EN 3.3. Czech Republic 
3.3.1.  Indicators graph 
Czech Republic
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 49   EN 3.3.2.  Introduction21 
The Czech Republic’s labour productivity was, measured per hour, at around 60% of the EU 
average in 2005 and 2008; measured per person, labour productivity reac hed some 70% of the 
EU average in 2009. Nominal unit labour costs in Czech manufacturing remained broadly 
stable between 2000 and 2009, underlying a solid  competitiveness pos ition of the Czech 
manufacturing sector. At the same time, the Czech Republic showed one of the strongest 
appreciations in the real e ffective exchange rate from its 1999 level to 2005 and 2009.  
The Czech Republic remains specialised ma inly in sectors demanding low and low-
intermediate skills. The importance of high-interm ediate skill sectors has been  stable at the 
average level from 1997 to 2007 and high skill sectors are clearly underrepresented. This 
picture is supported by a rather low and dec lining share of high technology sectors, while 
there is a clear specialisation in medium low technology categories. Sect ors with a negative 
growth rate for the EU in to tal are still important , although medium-high growth sectors are 
becoming more prominent. 
Manufacturing plays a much bigger role for the C zech Republic than for the EU in total (25% 
vs. 17% of value added in 2008). This is mainly  due to specialisation on transport equipment, 
electrical and optical equipm ent, non-metallic minerals, basi c metal products, rubber and 
plastics and wood products. In the service sector, only the “t ransport and communication” has 
an above average weight. The primary sector is  larger than for the EU in total due to 
agriculture and to mining and quarrying. Em ployment figures show a low level of 
productivity in agriculture and manufacturing and a slow shift to servi ces over time. Forecasts 
until 2020 expect an increase in employment in bus iness and other services and in non-market 
services by almost 10% while employment in manufacturing might decrease moderately. 
The Czech Republic’s shows a small trade surplus. The positive trade balance in 
manufacturing mainly resulted from a surplus in transport equipment while only chemicals 
showed a noteworthy trade deficit. The Reveal ed Comparative Advantage (RCA), measured 
relative to the EU and concen trating on manufacturi ng, shows particular strengths for the 
Czech Republic in 2008 in non-metallic minera l products, electrical and optical equipment 
and rubber and plastics. 
Exit from the crisis Czech manufacturing output fell  by 23% but it stands in July 2010 again at 85% of pre-crisis 
level. The crisis hit the Czech Republic relati vely late and economic recovery is expected 
within the next two years. Its speed will depend on the recovery abroad and particularly of the 
main trading partners
22.The government adopted various temporary measures to ease financial 
constraints in the business sector, SMEs and expor ters in particular, presented more in detail 
in the SME section.  
                                                 
21 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
22 2009 Analysis of the C zech Economy and Sectors: 
http://www.mpo.cz/dokument66054.html 
 
EN 50   EN 3.3.3.  Towards an innovative industry 
The innovation performance of the Czech Republic  has been improving and it is slowly but 
steadily converging to the EU-27 average. The strong inflows of FDI led to an important 
technology and knowledge transfer, in particular  in the manufacturing and automotive sector. 
Regarding research and innovation policy in ge neral, a revision of the law on support for 
R&D from public funds became effective as of 1 July 2009. Based on this law, the Czech 
Technological Agency was established with the ta sk of allocating most of the public funds for 
the support of applied research and innovation. This should result in a significantly simpler 
and more transparent system of public  support for research and innovation.  
Another milestone was the approval of the ne w ‘National Policy of Research, Development 
and Innovation of the CR for 2009-15’ in June 2009. This policy focuses on nine areas of the 
national innovation system for wh ich it sets partial targets and a set of associated measures. 
Its main objectives are: to implement strategi c management at all levels; to focus public 
support on sustainable development; to enhance e ffectiveness of the sy stem of public support 
for R&D; to use R&D results in innovation a nd improve the cooperation of public and private 
sector in R&D; to improve the participation of the Czech  Republic in international 
cooperation in research and innova tion; to ensure quality huma n resources for research and 
innovation; to create in the Czech Republic an environment stimulating research and 
innovation; to ensure links to other policies; and finally to thoroughly evaluate the research 
and innovation system.  
A specific programme supporting industrial R&D, called "TIP"23, is operational since 2009. 
Its budget for the 5-years period reaches up to 11 billion CZK (EUR 433 million in 2009 
exchange rates). 
A number of challenges can be identified: fi rst, cooperation betwee n research sector and 
industry could be strengthened to  tackle insufficient linkages in the process of creation, 
transfer and utilization of new knowledge; second, researchers and S&E graduates are 
lacking, which can negatively influence the further development of a knowledge-based 
economy in the Czech Republic. The lack of qua lified research staff has already become an 
essential limiting factor in further develo pment of industrial R&D. Third, IPR are 
insufficiently protected, which hinders the commercialisation of R&D results and transformation of new knowledge into innovation. A nd fourth, there is a persistent lack of 
financial resources in the form of ventur e capital or other forms of risk capital. 
3.3.4.  Towards a sustainable industry 
The Czech industry is one of the most energy intensive ones in the EU. On the other hand, the 
share of environmental goods in the exports of C zech enterprises is high and they generate a 
relatively low volume of waste. 
Sustainable industrial developmen t is defined as a horizontal priority in the Operational 
Programme Enterprise and Innovation (OPEI), co -financed by the Structural Funds, in the 
current period 2007 - 2013. In manufacturing, the emphasis lies on material and energy-
intensive segments, as well as on preferen tial use of secondary raw materials.  
                                                
 
23 http://www.mpo.cz/dokument73229.html 
 
EN 51   EN An update of the State Programme in Support of  Energy Savings and the Usage of Renewable 
Energy Sources, the EFECT Programme, was adopted in July 2009. The aim of the 
programme is to support energy saving and renewable energy as  well as further development 
and commercial use of technological innovations.  
As of 2010, the Czech Republic is involved in  the pilot project of the Environmental 
Technologies Verification system (ETV). Its aim is to verify the effectiveness and potential 
impact of new technolog ies on the environment. 
In June 2010, he Government adopted 'Rules of  the application of e nvironmental criteria in 
public procurement and purchases of government and public administration'. These rules contain a binding procedure for two selected product groups (office and computer equipment 
and office furniture) and five pr oduct groups for which the requirement to use the procedure is 
binding by 30 June 2011. For anot her 12 product groups the pr ocedure will be used in 
response to developments at the international level.  
The increase of energy efficiency and the use of renewable energy remains the main 
challenge. The level of ambition of the ongoing re vision of the waste management policy will 
be a decisive factor stimulating reduction and recycling of the produced industrial waste. 
Implementation of the new 'green' public procurement rules will require close scrutiny. 
3.3.5.  The business environment 
Although the Czech Republic scores above the EU  average concerning the take-up of high-
speed broadband lines, only 78% of business ha ve broadband fixed access compared to the 
83% of EU average. The Czech Republic  provides  relatively higher levels of state aid and has 
higher electricity prices for medium-size en terprises than the EU average. The score 
concerning the legal and regulatory framewor k as well as the burden of government 
regulation is also below EU average, as well as the usage of eGovernment services by enterprises. 
The Czech Republic has made significant progre ss in bringing the better regulation agenda 
forward over the period 2007-2009. Several initiatives were la unched, in particular the 
adoption of the Smart Administration Strategy, the Action Plan for Reducing Red Tape and 
guidance documents on impact assessment s and consultation of stakeholders.  
In 2007, the Czech Republic adopted the target to reduce the administrative burdens by 20% 
until 2010. The Action Plan for th e reduction of administrative burden for entrepreneurs was 
launched in 2008. Until the end of 2008, approxim ately 8% reduction was already achieved 
(this corresponds to some CZK
24 6.1 billion – EUR 0.24 billion in 2009 exchange rates). The 
Report on the implementation of the 2010 Action Plan published in 2009 proposed inter alia 
to speed up the whole process by focusing on 10 acts generating the hi ghest administrative 
burden (CZK 55 billion/EUR 2.2 billion in 2009 ex change rates each year). By the end of 
2010 the reduction of administrative burden is expected to reach 20.05%. 
A comprehensive review of the impact assessment system conducted in 2009 resulted in 
several proposals as regards reducing assessments’ formalism, extending its scope also to strategic and concept documents, promoting its application to non-Governmental draft 
                                                
 
24 1 EUR = 25,42 CZK 
 
EN 52   EN regulation and its possible application during the phase of formulating national positions on 
EC legislation under preparation. 
The Czech Republic has an ambitious eGovernment  strategy but its implementation is being 
delayed. The data boxes (electronic delivery syst em destined for the sending and receiving of 
documents relating to the public authorities) were launched on 1 November 2009 and are still 
in a start phase. The system of electronic nationa l registries is yet to be launched. The number 
of Czech POINTs (public administration cont act points) reached 6000 in June 2010. The 
national eProcurement platform is mandatory fo r the publication of tenders above the national 
threshold, which remains rather high and does no t bring about the desired transparency of the 
public procurement system. 
A revision and simplification of the existing regul atory framework will be needed to create 
conditions conducive to economic growth. In this respect, full im plementation of the 
administrative burden reduction programme and its continuation is a key for further progress. 
Similarly, recommendations on the improvement of  the impact assessment are still awaiting 
implementation. Launch of the e-government rema ins slow and rather limited and awareness 
is low. Full benefits of the eProcurement platfo rm are still to be reap ed, also depending on its 
future scope.  
3.3.6.  Entrepreneurship and SME policy 
The Czech Republic has adopted several measur es recently to support entrepreneurship and 
its SMEs. For example, curricula in gene ral secondary education include economic 
background education and essential competen ces for entrepreneurship since 2009. The 
approach is to introduce entrepreneurship  education into the school curriculum via 
General Education Programmes (GEPs) with in the overall framework of the national 
Lifelong Learning Strategy, which is designed to establish a "new approach to education". Entrepreneurial activities are included as components of the new key 
competences within the National Curriculum. Other measures concern financing conditions where the Czech Republic scores clearly abov e the EU average concerning the payments 
duration by public authoritie s, but below concerning early stage financing.  
The Marketing Programme is focused on the development of the activities of Czech 
exporters on foreign markets and on increasing the exploitation of export opportunities that exist on the global market. This Programme is also part of the Operational Programme Enterprise and Innovation 2007-2 013, co-financed by the Structural Funds. 
Measures included are e.g. acquisition of marketing information, conducting studies of entry into these markets, presentations and participation of companies at trade fairs and exhibitions abroad and the creation of promotional materials.  
Regarding access to finance, the Operationa l Programme includes new measures focusing on 
the use of venture capital funds and business an gels to support innovati ve projects of young 
and high growth enterprises. In  addition, financial support for SMEs  is foreseen in the form of 
interest-free and advantag eous subordinated loans. 
Several temporary measures to support busine sses, in particular by easing the financial 
constraints during the crisis and stimulating inve stment, were implemented in the course of 
2009. These include faster write-offs of investment goods, faster VAT refunds and 
cancellation of advance payments  of personal and corporate in come tax for small businesses 
with up to 5 employees.  
 
EN 53   EN Guarantee and support schemes for lending to SMEs amounting to CZK 2.1 billion (0.05% of 
GDP, EUR 83 million in 2009 exchange rates) we re provided in 2009 to ease the access to 
finance during the crisis period. Additional funds from the state budget were provided to the Czech-Moravian Guarantee and Development Bank as a one-off measure. The Bank used the 
resources to provide additional credit and guarantees for SMEs.  
In order to facilitate trade and export financ ing, the Czech authorities  decided to provide a 
one-off increase in capital of the Czech E xport Bank, the Export Guarantee and Insurance 
Corporation (EGAP) and the Czech-Moravian Gu arantee and Development Bank. Overall, the 
capital injections amounted to more than CZK 3 billion/EUR 118 million in 2009 exchange 
rates (0.1% of GDP). Additiona l capital was aimed at increasing the capacity to provide 
credits to Czech exporters in a situation when  commercial banks tightened conditions for 
export credits. At the same time , the EGAP decided to temporar y increase insurance cover of 
risks related to export credits, Letters of Credits and bank guarantees. 
The Act on Insolvency and its Resolution was amended with the aim to ease the 
restructuration rather than the bankruptcy of insolvent companies.  
Access to finance remains extremely difficult fo r small and medium sized enterprises. The 
situation has considerably dete riorated during the economic cris is. The impact of anti-crisis 
measures is still to be evaluated and the most efficient measures identified. On this basis, 
follow-up measures of a more structural nature will need to be designed in a comprehensive 
manner.  
3.3.7.  Conclusions 
Despite the relatively low labour costs which have been clearly below the EU average in 2005 
and 2009 and strong inflows of FDI bringing ab out an important technology and knowledge 
transfer, the Czech Republic f aces one of the strongest appreci ations of its real effective 
exchange rate. Moreover, the Czech Republic  remains mainly specialised in sectors 
demanding low and low-intermediate skills and its business regulatory environment is still 
relatively burdensome. In the light of these trends, a number of challenges will need to be addressed to facilitate a transition of the C zech economy to an innovation-driven economy.  
The lack of cooperation between research sector and industry hi nders the process of creation, 
transfer and utilization of ne w knowledge. Moreover, the lack of  qualified research staff has 
already become an essential limiting factor in further development of industrial R&D. 
Positive developments of 2009 in this regard are the establishment of the Czech Technological Agency and the launch of the progr amme supporting industrial R&D. There is 
a considerable potential fo r the increase of energy efficiency  and the use of renewable energy.  
The existing regulatory framew ork does not sufficiently crea te conditions conducive to 
economic growth and its revision and simplificati on has become a necessity. In this respect, 
continuation of the administrative burden re duction programme implementation is a key.  
E-government services and e-procurement are ye t to be widely disseminated and extended. 
Access to finance remains extremely difficult for small and medium sized enterprises. 
 
EN 54   EN 3.4. Denmark  
3.4.1.  Indicators graph 
Denmark
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology gradua tes (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEsNA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) 
always indicate performance which is better (weaker) than the EU average. 
 
EN 55   EN 3.4.2.  Introduction25 
Denmark's labour productivity was, measured per hour, clearly above the EU average in 2005 
and 2008 and approaching the average from a bove measured per person. However, Danish 
labour productivity growth has lagged behind most OECD countries for a decade and a half and labour costs have increased more than in th e main trading partner countries, leading to a 
deterioration of the competitive position, part icularly accentuated in  the years after 2004. 
Denmark’s real effective exchange rate appreciated since 1999, indicating decreased 
competitiveness. Concomitantly, nominal unit la bour costs in Danish manufacturing increased 
by 27% between 2000 and 2009, thus 8 percentage poi nts faster than the EU average of 19%. 
However, during the first half of 2010 the real  exchange rate of the DKK has depreciated. 
Manufacturing plays a smaller role for Denmark than for the EU in total (15% vs. 17% of 
value added in 2008). Denmark is specialised in  sectors demanding high-intermediate skills. 
While specialisation on high and low-intermediate  skill sectors remained stable at the EU 
average, low skill sectors gained some ground at a low level. Denmark tends to be specialised 
on sectors that have a growth rate belo w the average for the EU in total.  
Compared to the EU, the Danish manufacturing s ector is specialised to some degree in other 
machinery and in other manufacturing (notably  furniture). Regarding services industries 
Denmark is specialised  in services providing transport and communication, and health and 
social work. In the primary sector, Denmar k shows a strong specialisation in mining and 
quarrying and fishing.  
Denmark’s balance in the trade of goods shows a surplus; rela tive to the total volume of 
exports it was the third-largest in the EU in 2009. The positive trade balance mainly resulted 
from surpluses in mining and quarrying for th e primary sector, and from food, drinks and 
tobacco for manufacturing. The manufacturing industries producing chemicals, including 
pharmaceuticals, and other machinery also genera ted significant trade surpluses. Imports of 
transport equipment, basic metals  and metal products were consid erably larger th an exports of 
these products, generating significant trade de ficits. High technology manufacturing industries 
accounted for 50% of both exports and import s. The Revealed Comparative Advantage 
(RCA), measured relative to the EU and c oncentrating on manufacturing, shows particular 
strengths for Denmark in 2008 in foods, drinks  and tobacco, other ma nufacturing and textiles 
and clothing. 
Exit from the crisis Relative to the peak before the crises, Dani sh manufacturing output at the trough had dropped 
by 26%. In July 2010, 16% were rega ined which means that output  remains at 90% of the pre-
crisis level. In reaction to the economic and financial crisis the Danish Export Credit Fund 
(Eksport Kredit Fonden,  EKF) was significantly incr eased. Funding for the EKF was 
increased by DKK 20 billion (EUR 2.7 billion) and EKF has been give n the possibility to 
provide re-insurance agreements of up to DKK 10 billion pr. year with private insurance companies.  
                                                
 
25 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 56   EN Although interest rates are at a five year low a substantial numbe r of companies face 
difficulties in access to finance. Bottlenecks al so remain in short term credit insurance 
markets. 
3.4.3.  Towards an innovative industry 
The European Innovation Scoreboard (EIS) indi cators continue to place Denmark among the 
top performing EU countries with an innovati on performance well above the EU average. 
Furthermore, the country has been labelled an 'innovation leader' in the EIS 2008 along with Sweden, Switzerland, Finland, Germany, and UK. However, together with Sweden and UK, 
Denmark is in the sub group of ‘slow grower s’ on innovation performance. The Danish 
Government's Globalisation Strategy  and corresponding and matc hing national policies in 
areas including innovation, education, energy a nd the environment, indicate how Denmark 
aims at being a country with industrie s able to be highly competitive.  
The Danish government has reformed and reor ganised more or less  all aspects of the 
innovation system over the last eight years. The most importa nt reforms have targeted 
universities, public re search institutions, th e technology service system, the advisory and 
funding structures and the regi onal innovation system. At the sa me time, new strategies and 
action plans have been formulated regardi ng national and regional growth, collaboration 
between the public and private spheres, knowledg e development, strategic research, etc.  
It seems there is no reason for dramatic or radical changes to the Danish innovation policy 
system. A number of challenge s nevertheless remain. Indeed, despite the growth-friendly 
business environment, there are concerns abou t the relatively limited innovation capacity and 
relatively high price levels, especially in the service sector and especially the sectors not 
exposed to international competition. This is partly due to insufficient competition which 
discourages the uptake of new technologies a nd productivity. In the medium term, further 
expansion of R&D is at risk of being limited by increased scarcity of  science and technology 
graduates. 
3.4.4.  Towards a sustainable industry 
On the basis of existing indicators the pe rformance of the Danish industry can be 
characterised as rather strong. This relates to, for example, the relatively low energy and 
carbon intensity in the industry. 
The Government has set a target of additiona l 1.5% in annual savings in the end use of 
energy, with energy companies expected to deli ver considerable proportion of these savings. 
A climate commission has been set up to devise comprehensive policy proposals for 
significantly reducing greenhouse gas emissions,  and eventually make  the Danish energy 
systems independent from fossil fuels. In March 2009, the Government published its new 
strategy on sustainable development. It forms th e basis of strategic nature and environment 
policy by focusing on targets and re sources to be promoted. The st rategy also deals with ways 
in which environmental, economic and social targets can support each other in an integrated strategy for sustainability. In April 2009, new catalogues have been published on grants and 
funding possibilities, and the comp etencies of the various Danish  research institutions in the 
environment sector. In June 2009, the Government agreed on a 'Green Growth' initiative, 
which includes a strategy for a green agriculture and food production industry. 
 
EN 57   EN In October 2009, the Government launched a Bu siness Strategy on Climate Change with the 
aim of transforming the challenges of climate change into opportunities for Danish companies 
for new business, exports and jobs. The green pa rt of the Danish tax reform in the Spring 
Package 2.0 will contribute to reducing emi ssions of greenhouse gases. The reform will 
account for almost two percentage  points of the total Danish reduction target of 20 per cent up 
to 2020 for sectors outside the EU emission tr ading system (ETS). A Secretariat for Eco-
efficient Technologies was established in th e Environmental Protection Agency to offer 
advice to businesses and entrepreneurs on enviro nment focus areas, upcoming legislation and 
finance opportunities. A new website was al so launched (www.ecoi nnovation.dk) to follow 
development in environmental technology. 
Based on an analysis of 639 CO MEXT trade codes, Danish e xports of energy technology and 
energy equipment grew by 400% between 1995 and 2008 compared with 200% for EU as a 
whole. Looking at export trends in specifi c sub-areas of energy technology and energy 
equipment, Denmark has a clear position of stre ngth in the field of wind-turbine components 
and insulation materials. 
3.4.5.  The business environment 
Denmark scores clearly above the EU average in  all indicator categorie s with the exception of 
the level of state aid. Denm ark ranks among Member States with the lowest burden of 
government regulation, with a legal and regulat ory environment that highly encourages the 
competitiveness of enterprises. 
Regulatory reform has been on the agenda of the Danish government for over two decades 
with the aim of modernisi ng the public sector and prom oting an efficient business 
environment. Denmark has launched a range of in itiatives to ensure continued focus on better 
regulation, multi-level regulatory governance, re duction of administrative burden for business 
and strengthening impact assessment procedures.  
As regards the reductio n of the administrative burdens fo r businesses, the Government's 
objective is to achieve the target of 25% reduc tion in 2010 relative to the 2001 level. Over the 
period 2001-2009, 20% of the 25% target has been ach ieved. If all of the 37 initiatives of the 
plan were implemented, the total administ rative costs would be reduced by 25%.  
The third strategic programme to develop eG overnment is focused on improving digital 
services, efficiency and collaboration across all levels of governments. It includes the 
ambitious objective of digitalising all rele vant communication between government and 
business by 2012. In 2009, the online availability of  public services was 100% for enterprises 
and eGovernment usage by business one  of the highest in the EU.  
Denmark is one of the best performing count ries regarding the one-stop-shop (Danish 
Commerce and Companies Agency, DCCA) whic h is fully operational and web based. 
Denmark was the first Member State to implem ent the new public procurement directives. As 
far as public service contracts below the EU threshold value are c oncerned, Denmark also 
revised the Danish Public Tender Act, increasing competition and reducing the administrative burden. 
 
EN 58   EN 3.4.6.  Entrepreneurship and SME policy 
The SME sector in Denmark contributes almost the same as in the EU in total employment 
(66% vs. 67.4%) but significantly more in te rms of value added (67.8% vs. 57.9%). SMEs in 
Denmark tend to be larger, as the small a nd medium size classes are markedly larger. 
Denmark scores clearly above the EU average concerning time required to start a business, 
business churn, early stage financing and payments  duration by public aut horities. However, it 
performs below average concerning the shar e of high-growth enterprises and bank loan 
conditions. 
Denmark launched a national stra tegy for education and training in entrepreneurship in 2009 
with objectives for each education level for how supply pupils and students  with the ability to 
think innovatively, see opportunitie s and turn ideas into value.  To strengthen and create a 
coherent national commitment a Foundation for En trepreneurship was established to become 
a national knowledge centre for educa tion and training in entrepreneurship. 
The Gazelle Growth Programme was set up in 2007 aiming at strengthening innovation 
and growth among growth-oriented SMEs. The programme is an action-orientated business development process that provides hands-on  support and know-how to businesses with 
strong growth potential. 'Erhvervspakken' which was launched by the Government in the autumn 
of 2009 encompassed a number of initiatives aimi ng at supporting SMEs by in creasing possibilities 
to get access to finance, financing export proj ects, and developing markets within the Danish 
welfare system, e.g. h ealth-care services.  
Two SME programmes, coordinated by the Trade Council of Denmark, support the export 
activities of SMEs. The programme ‘export preparation’ provides SMEs with individual concrete advice on export opportunities. Sec ondly, the programme ‘export start’ offers 
concrete information to SMEs on export markets, e.g. market studies, partner search, competitor analysis, etc. In addition, a clos er coordination between the regional Business 
Links and the Trade Council of Denmark has been established. The aim is to provide specific advice to SMEs with growth  potential on export opportunities and 
internationalization. 
The Export Credit Fund (Eksport Kredit Fonden)  finances export projects in uncertain 
markets. By the end of 2008, the overall engagement funded by this Fund was of EUR 494 million (DKK 31 billion). In September 2010 the Government extended the 
programme for financing export projects until 2011.  
The low share of high-growth enterprises may ha ve negative consequences for future growth 
of the Danish economy. Since the relatively high le vel of early stage financing does not 
constitute an obstacle, there might be other fa ctors in play. Their identification should give 
hints as to the policy measures n eeded to address this issue.  
3.4.7.  Conclusions 
Apart from the short-term concerns related to the financial crisis, such as unfavourable bank 
loan conditions, the main challenges facing  the Danish industry ar e the low shares of 
innovating enterprises, high-tech exports and hi gh-growth enterprises.  Despite impressive 
efforts to increase R&D and innov ation, the results in terms of the variables mentioned above 
are below EU average. The limited innovation perf ormance is partly due to weak competition 
especially in the services sector.  
 
EN 59   EN Further policy actions aiming at fostering comp etition could also spur innovation and increase 
the share of innovating enterprises.  An especially important area is the services sector where 
there are a large number of SMEs who would bene fit from more competitive service markets. 
Policies addressing the increasing shortage of scie nce graduates could lower the risk of future 
lower R&D and high-growth firms. 
 
EN 60   EN 3.5. Germany 
3.5.1.  Indicators graph 
Germany
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEsNA
NANA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) 
always indicate performance which is better (weaker) than the EU average. 
 
EN 61   EN 3.5.2.  Introduction26 
Germany’s labour productivity, m easured either per hour worked  or per person employed, is 
clearly above the EU average. Germany is one of the very few EU members where the real 
effective exchange rate depr eciated between 1999 and 2009, i ndicating increased price and 
cost competitiveness. Concomitantly, nominal unit labour costs in German manufacturing 
first declined somewhat and then increased agai n, resulting in an overall increase of 7%, thus 
12 percentage points below the EU average of  19%. The overall high competiveness (driven 
by productivity, price and co st, quality and specialisation fact ors) is reflected in the high 
surplus in the trade of goods.  
Germany is increasingly specialised in high-intermediate and low skill sectors. While the 
importance of high skill sectors has remained constant from 1997 to 2007, low-intermediate 
skill sectors are clearly losi ng ground. Germany is specialised  in medium high technology, 
whereas specialisation in high technology has decreased significantl y from 1997 to 2007. This 
picture is completed by a clear trend towards sectors with a growth rate above the EU average. 
Manufacturing plays a much bigger role for Germ any than for the EU in total (24% vs. 17% 
of value added in 2008). This  is mainly due to specialisation on transport equipment
27, 
electrical and optical equipment and other machinery as well as, to  a lesser extent, chemicals. 
In the service sector, only the (important) se ctor “real estate and business activities” and 
“other services” have an above average weight. The primary sector is much smaller than for 
the EU in total. Employment figures show the high level of productivity  in manufacturing but 
also its decreasing importanc e over time. Forecasts until 2020 expect an increase in 
employment in business and other services by almost 10% while employment in manufacturing might drop by some 6%. 
Germany’s surplus in the trade of  goods is, relative to the total volume of exports, the second-
largest in the EU. The positive trade balance in manufacturing mainly resulted from surpluses in transport equipment, other machinery and ch emicals while only textiles and to a lesser 
degree leather/footwear and re fined petroleum showed a noteworthy trade deficit. The 
Revealed Comparative Advantage (RCA), measur ed relative to the EU and concentrating on 
manufacturing, shows particular  strengths for Germany in 2008 in transport equipment and 
other machinery. 
Exit from the crisis In the peak of the economic and financial cr isis output in manufact uring dropped by almost 
25%. In July 2010, output was still 10% below pre- crisis levels. In r eaction to the crisis, 
Germany introduced a wide range of measures targeting the real ec onomy. A car scrapping 
premium for private households with a total volume of EUR 5 billion ended in September 2009. Under the Temporary State aid Framework Germany set up guarantee, subsidised loans and export credit insurance programmes with a total amount of EUR 115 billion. The 
                                                
 
26 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
27 The sector transport equipment covers the manufacture of motor vehicles, 
shipbuilding, railway rolling stock, aerospace e quipment, motorcycles and bicycles, and a 
residual category of othe r transport equipment. 
 
EN 62   EN programmes are operated by the Kreditanstalt für Wiederaufbau (KfW), with SMEs as major 
beneficiaries (EUR 90 billion). In additi on, Germany temporarily introduced declining-
balance depreciation rules for moveable fixed a ssets and a relaxation of VAT rules for small 
companies. The measures ensured access to finance. Nevertheless, credit conditions 
temporarily tightened and the availability of  private equity clearly declined since the 
beginning of the crisis. In combination with a rising demand for financ ing in the face of 
economic recovery and a parallel downgrade in many companies’ ra tings based on their 2009 
business figures, this might lead to increasing rejection rates. However, a credit crunch has 
not been observed and is not to be expect ed. Demand for insurance cover of exports is 
constantly high in the absence of pr ivate supply, in particular by SMEs.. 
3.5.3.  Towards an innovative industry 
Germany has a large and diversified science an d knowledge base. It belongs to those world 
nations with the biggest research and devel opment (R&D) capital stoc k. The output of R&D 
and innovation activities in terms of patent s, new products and high productivity is 
remarkable. From a global perspective, however , Germany is only at the lower end of leading 
countries in terms of innovation performance. The availability of new science and technology 
graduates is below EU average.  
Education and knowledge is the only area that has got increased budget allocations between 
2007 and 2010 and which was not s ubject to budgetary cuts in the context of the budgetary 
consolidation package of the Federal Government presented in June 2010. Relevant policy 
developments to support innovation are not ably taking place under the continued 
implementation of the "High-Tech Strategy", which is an overarching strategy to boost 
research and innovation until 2011 and focuses on 17 thematic areas. This includes the implementation of nine innovatio n alliances which constitute  publicly supported strategic 
cooperation between industry and public resear ch in key technology ar eas and lead markets 
(e.g. in the areas of ICT, mob ility and climate protection). They have mobilised EUR 3 billion 
in private resources. The strategy also comp rises the Top Cluster Programme which funds 
regional thematic clusters that bring together  public research and enterprises to further 
develop high technologies in various areas. Finally, the strategy cove rs SME funding via the 
Central Innovation Programme for SMEs (ZIM ), totalling EUR 2.4 billion for 2009 and 2010, 
and the programme Innovative SMEs which attempts to ease the access of SMEs to thematic R&D programmes by simplifying a nd accelerating application procedures. A renewed “High-
Tech Strategy 2020” has been published in Ju ly 2010. Continuing the initiatives mentioned 
above, there will be stronger emphasis on the “major societal challenges”, i.e. climate, health, 
mobility, security und communication. The Fede ral Government decided to invest an 
additional EUR 12 billion in education and R&D until 2013. 
In the short-term, the main challenge will be to ensure the financing of innovation in the 
context of tight and potentially further tighten ing credit conditions. A timely limited and in 
substance restricted (e.g. to  SMEs) continuation of the “ Wirtschaftsfonds Deutschland ” could 
constitute a remedy in this respect. 
In the long-term, the main challe nge is to avoid the shortage of  high-skilled labour force in the 
context of the demographical challenge of the co untry (low birth rates and ageing society) and 
its relative low availability of new science a nd technology graduates. Germany’s initiatives in 
this respect, such as the “ Exzellenzinitiative ” of the universities, go in to the right direction, but 
might be complemented by further measures, if  evaluations show that  they do not suffice. 
 
EN 63   EN 3.5.4.  Towards a sustainable industry  
The environmental performances of Germany’ s industry can be characterised as good. The 
energy intensity in manufacturing is below the EU average. The carbon  intensity in the non-
energy supplying industry is close to EU av erage and in terms of waste generated by 
enterprises and exports of environmental goods Germany scores better th an the EU average. 
Additionally, the support to environmentally frie ndly technologies has been a focus of both 
Germany’s structural reform agenda and its economic recovery packages. 
Public funds for improving energy efficiency of  buildings have been significantly increased 
(by ca. EUR 3 billion) in the period 2009-2011. As part of its comprehensive “ Integrated 
Energy and Climate Programme ”, Germany is inter alia im plementing: a support programme 
“Special Fund for Energy Efficiency in SMEs“,  covering up to 80% of costs for SMEs to 
receive professional advice in th e area of energy efficiency and offering low-interest loans 
from the KfW to implement the recommended measures; an energy efficiency export initiative; the Eco-Design Dire ctive for 19 product groups;  various measures to implement 
Directive 2006/32/EC of 5 April 2006 on energy  end-use efficiency and energy services; a 
funding programme for micro combined h eat power plants; f unding programme for 
commercial refrigeration systems; a nation al “Electric Mobility“ development plan. 
Importantly, this energy and climate programme also includes the implementation of the 
“Renewable Energy Law” , whose aim is to contribute to the target of at least 30% electricity 
from renewable energy sources by 2020. Th e renewable energy law, amended in 2010, 
regulates the feed-in tariffs to  be paid by network providers to producers of renewable energy. 
These tariffs are differentiated by type of renewa ble energy. The law also stipulates the tariffs 
for renewable energy which can be passed on to th e final customers. In view of significant 
efficiency improvements of photovoltaic appliances, the recent amendment stipulates significant reductions in the leve l of the degressive feed-in tariffs for appliances with 
commissioning dates after June 2010, which will further decrease, if the market volume of photovoltaic electricity exceeds a ce rtain threshold. However, since the feed-in tariffs for both 
old and new appliances are significantly ab ove the average electricity prices and the 
photovoltaic electricity which is not inserted into el ectricity networks but  directly used by 
households or small enterprises with photovoltaic appliances is similarly subsidised (via a 
“Direktverbrauchsvergütung” ), the current contribution of final customers to financing 
photovoltaic electricity is significant and likely to  increase. It is also noteworthy that the 2010 
amendment of the “ Renewable Energy Law” includes reduced renewable energy tariffs for 
electricity intensive enterprises and railway  companies. The entire support system for 
renewable energy will be reviewed in the context of the next amendment of the law, foreseen 
for 2012. 
Germany’s interregional and international energy grids need to be developed to allow a wide 
distribution of energy produced with rene wable sources. Several regulatory and non-
regulatory measures, such as the “ Energieleitungsausbaugesetz ”, are addressing this issue. An 
effective implementation is required to ensure the intended progress. Given the high importance of the automotive sector for Germ any, progress regarding the promotion of 
electric mobility (which needs to be coupled with the use of renewa ble energy in order to 
have a significant positive environmental impact) will be crucial for the competitiveness of its 
industry. 
 
EN 64   EN 3.5.5.  The business environment 
The quality of Germany’s business environment is altogether aver age. It scores clearly above 
the EU average concerning the satisfaction wi th the quality of infrastructure and around 
average regarding the regulator y framework and administrative burden. The German public 
procurement system is still complex and lack s transparency. The degree of competition in 
services is relatively low, especially with regard to the energy market and regulated services including crafts. The current federal policy on Better Regulati on is structured around the 
"Bureaucracy Reduction and Better Regulation Programme of the federal government" 
adopted in 2006 whose flagship initiatives are the programme  to reduce administrative 
burdens for businesses and a range of initiatives to take forward eGovernment.  In June 2010, 
the German government submitted an implementation plan listing the measures under way or planned for reaching the 25% net reduction targ et of administrative costs stemming from 
information obligations by the end of 2011. A full baseline measurement on information obligations embedded in federal legislation was carried out in September 2006, revealing 
administrative costs to business in Germany amounting to EUR 48 billion, out of which 
EUR 25 billion would result from EU legi slation and EUR 23 billion from national 
legislation. A net reduction of more than EUR 6 billion has already been achieved so far. In 
this respect, the “ Drittes Mittelstandsentlastungsgesetz ”, in force since March 2009, includes 
23 measures reducing administrativ e burdens notably for SMEs, su ch as regarding statistical 
reporting. Furthermore, in selected legal fields and “areas of life”, the total measurable effort 
necessary for fulfilling administrative requirements, i.e. the compliance costs, will be taken into account and additional possibilities for reducing this overall effort shall be identified. It is 
also intended to examine the to tal measurable effort of all new federal legislation. Other 
recent developments include pilot projects of the Länder  to introduce the Standard Cost 
Model, which would also cover regulatory costs for citizens.  
Ex ante  impact assessments are mandatory for initiatives of the federal government, not for 
those emanating from Bundestag  or Bundesrat , but the latter w ould rather be exceptions. The 
Länder  use increasingly impact assessments. An SM E specific impact assessment as part of 
the general impact assessment is fo reseen at the federal level, to be verified together with the 
stakeholders and the Ministry of Economy (B MWi). The BMWi has also issued a supporting 
'check list' that shall help federal ministries in their assessment of costs to business and prices. The Länder  and local levels which have legal comp etency in many policy areas are not bound 
by these developments. 
Public consultation by the federal govern ment is formally regulated by the Joint Rules of 
Procedures  which specifies that ministries must c onsult early with an extensive range of 
stakeholders, but there are no binding rules at  federal level beyond the common rules of the 
GGO . Consultations take place in so-called “Arbeitskreise”  (working groups ) composed of 
representatives of the Ministri es and stakeholders. Informal pre-consultation rounds involving 
the Länder , municipalities and associat ions are conducted at an ear ly stage in the regulatory 
process. E-consultation, seen as a tool to increase the transp arency of the decision-making 
process,  is at an early stage of implementation. 
Germany has a comprehensive eGovernment pr ogramme, which is evolving towards the new 
Web 2.0 for eParticipation a nd administrative innovation. Th e national eProcurement 
platform is not mandatory.  
Given the Länder competencies, a federal unique one -stop-shop cannot be envisaged, but 
some Länder,  such as North Rhine Westphalia and Rh ineland Palatinate are front-runners in 
 
EN 65   EN setting up regional one-stop-shops. There is also a project to ensure that data from companies 
are pooled to be used at all public aut hority levels (federal, regional and local).  The project to 
pool data from employees in order to reduce admin burden for employers (ELENA) has been 
frozen due to data security reasons.  Länder  have also set up points of  single contact (PSC) for 
the Services Directive.  
The company law governing private limited companies was revised in 2008 to simplify 
registration procedures for start-ups and create a new legal form called “ haftungsbeschränkte 
Unternehmergesellschaft (UG) ” for very low budget start-ups.  
Some measures have been unde rtaken to strengthen competi tion in regulated trades and 
services (specifically regarding tax advisers, notaries and lawyers). In  the area of public 
procurement the government has announced that it will present in 2010 a draft law to make 
the public procurement system more transparent and simple. Given that such reform attempts 
were to a large extent po stponed in the course of the last year s, a reform backlog in this area 
can be noticed, despite some revisions of the system in 2009. For energy networks, the 
comprehensive incentive regulation ( Anreizregulierung ) has been completely implemented in 
early 2009. By imposing to all network providers individual revenue caps which are geared to 
the most cost efficient provi der, and by reducing gradually these caps (sectoral productivity 
growth: requirements to enhance efficiency), the regulation provides for each provider the 
incentive to reduce the cost s and fees of its network. 
While regulation has strengthened competition in energy networks, the production and 
provision of energy at regional level still charac terised by oligopolies or monopolies. It is the 
task of the competition authority to monitor clos ely the situation and to intervene in case of 
potential market abuse. The increasing in terregional interconnection might improve 
competition in the future. In the area of railway transport and infrastructure, various bottlenecks to competition persist, as analysed by the Monopolkommission  in September 
2009. Further progress could also be achieved in the area of regulated trades and services. 
3.5.6.  Entrepreneurship and SME policy 
SMEs in Germany tend to be, comparatively, la rge: the shares of small and medium-sized 
enterprises in the total number are approxima tely twice the European averages while the 
contribution of micro firms to employment is in Germany lower than the European average 
(19% vs.30%). German SMEs score well as rega rds innovation activities; the share of SMEs 
with innovation activities in gene ral is for instance si gnificantly higher than on average in the 
EU. In the area of skills, however, the results are more mixed, as indi cated by the relatively 
low share of SME staff that has tertiary educ ation. In 2010 the Federal Ministry of Economics 
and Technology launched a start-up initiative “ Gründerland Deutschland ” with several 
programmes and activities. The aim is to rais e awareness of entrepreneurship and self-
employment throughout Germany. The “ German Entrepreneurship Week ” in November 2010 
shall spur the entrepreneur ial spirit of pupils, apprenti ces, students and young adults. 
Furthermore, the initiative “ Entrepreneurial spirit in schools ” led by the Federal Ministry of 
Economics and Technology shall be extended. Finally, a new excellen ce competition for 
universities in Germany is launched: the three uni versities with the best concept for a strategy 
fostering entrepreneurship culture throughout  the university will receive money for 
developing the strategy and win the title “ Die Gründerhochschule ”.  
Since 2007, the federal government has supporte d financially young entrep reneurs with up to 
EUR 4,500 for consulting on organisa tional, financial or manageme nt aspects within the first 
 
EN 66   EN five years after the start-up. The programme has an overall budget of  EUR 260 million until 
2013. It has comprised since 2008 a special su pport for start-ups by formerly unemployed 
persons. Private pension provisi ons of self-employed have b een benefiting since 2007 from 
the same protection as those of employees against garnishment. The inheritance tax rates were reduced in 2009 and 2010 in order to  facilitate the tran sfer of businesses, if the aggregated 
wage sum of the business remains unchanged fo r seven years. Other deductions apply in 
further specified cases.  
A new law (Arbeitsmigrationssteuerungsgesetz ) which eases the access of highly qualified 
migrants from non-EU countries by loweri ng the required minimum investments for 
entrepreneurs seeking residence perm it entered in force in January 2009.  
The main challenges are in the short- and medi um-term to secure access to finance and in the 
long-term to avoid a shortage  of high-skilled labour. 
3.5.7.  Conclusions 
Germany’s economy and industry is highly competitive and benefits from framework 
conditions which are conduciv e to R&D and innovation a nd to the deployment of 
environmental technologies. The business en vironment is overall also favourable for 
entrepreneurial activiti es. There remain some weaknesses though, such as the framework for 
competition in services (such as railways) and the need to over haul public procurement. Over 
the long term, the main risk is to  face a lack of qualified labour if the education system is not 
adapted rapidly enough to changing requi rements of technology and innovation. 
 
EN 67   EN 3.6. Estonia 
3.6.1.  Indicators graph 
Estonia
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs
NA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) 
always indicate performance which is better (weaker) than the EU average. 
 
EN 68   EN 3.6.2.  Introduction28 
Estonia’s labour productivity was, measured bot h per hour and per person, very much below 
the EU average in 2005 and 2008/2009. However, it showed a slight in crease over time, both 
per hour and per person. Estonia is one of the EU members with the highest appreciation of 
the real effective exchange rate between 2009 and 1999, indicating a si gnificantly decreased 
competitiveness. In parallel, nominal unit labour costs in Estonian manufacturing increased by 44% between 2000 and 2009 with a remarkable acceleration during the second half of the 
decade. As a result, the overall increase wa s more than twice the EU average of 19%. 
Manufacturing plays for Estonia as  a big role as it does for th e EU in total (17% in 2008). 
Even though decreasingly, Estonia is still spec ialised in sectors demanding low skills and, 
increasingly in low-intermediate skill sectors. This picture is confirmed by an increased specialisation on sectors with low and medium-low  technology intensity. 
Compared to the EU, the manufacturing sector is particularly specialised on wood and wood 
products and textile and clothing. In the service sector, el ectricity, gas and water supply, 
construction, wholesale and retail and transp ort and communication had an above average 
weight in 2008. The primary sector, fishing in part icular, is more important than for the EU in 
total. Employment figures show a decreasing impor tance over time of the primary sector and 
a clear change towards the service sector. Forecasts until 2020 expect an increase in 
employment in business and other services (16%),  in distribution and transport (12%) as well 
as in manufacturing (20%), while a continued cl ear decline in the primary sector (-30%) is 
expected. 
Estonia showed a deficit in the trade of goods in 2009. The negative trade balance in 
manufacturing mainly resulted from deficits in refined petroleum and chemicals, while only 
wood and wood products showed a noteworthy tr ade surplus. The Revealed Comparative 
Advantage (RCA), measured relative to the EU and concentrating on manufacturing, shows 
particular strengths for Est onia in 2008 in wood and wood products, refined petroleum and 
textiles and clothing. 
Exit from the crisis Estonia saw the biggest reducti on of manufacturing output in th e European Union. It fell by 
over 38% in the course of the cr isis. Production increased to 81% of pre-crisis level in July 
2010. Estonia implemented a de minimis  aid scheme under the Temporary State aid 
Framework. The scheme provided loans and guar antees to SME in the manufacturing sector. 
Other existing state aid instrument s were also used to tackle the effects of the economic and 
financial crisis. The situation on the financial markets will continue to be difficult during 2010 
and micro enterprises are particularly affected. Most vulnerable sectors during the crisis are 
transport, textiles and timber. 
The key recovery measures focus on lending s upport and loan guarantees to enterprises in 
particular to exporting companies. Thes e measures amounted to approximately 
EUR 390 million (2.8% of GDP), with only EU R 109 million of state co-financing. These 
measures are, however, neutral in te rms of short-term budgetary impact. 
                                                
 
28 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 69   EN The objective of the programme is to support exporting companies as well as the innovation 
and growth capacity of enterp rises. Depending on the type of support considered, the 
measures are directed at small, medium or la rge enterprises. Loans and guarantees are issued 
for a maximum period of 3-5 years. The i ssuing period covers th e years 2009-2010 only. 
However, the total duration of the programme depends on the actual rhythm of the loans 
servicing and repayments. The limit to the i ssuing period (end-2010) constitutes an implicit 
sunset clause and broadly corresponds to the ex pected resumption in private lending activity. 
Moreover, a new state-owned insurance company, w hose role is to provide credit insurance as 
a guarantee for exports became operational in July 2010 ensuring further support to exporting 
companies. 
3.6.3.  Towards an innovative industry 
Since 2007, Estonia has been catching up to the EU27 average in terms of innovation 
performance. Estonia displayed also extraordinary progress over several years in increasing 
total expenditure on R&D in relation to GDP, reaching 1.14% at the onset of the crisis. 
However, the crisis is likely to lead to more  effort being put into solving the underlying 
structural problems in the Estonian innovation sy stem, in particular the low productivity in the 
manufacturing industry. As a consequence of th e end of the real-estate boom, it can also be 
expected that various types of  non-R&D related investments in finance and real estate will 
lose some attraction thereby allowing a window  of opportunity for rene wed interest in R&D 
in high-tech and medium-h igh-tech investments.  
One of the largest innovation support measure so far was renewed, namely the funding of 
Competence Centres in health, food, electroni cs, ICT, and nanotechno logy. It nevertheless 
remains a great challenge to maintain the hi gh level of R&D and Innovation expenditure that 
was scheduled in the national reform progr amme for the period 2008-2010 including the 
important investment programme to update the infrastructure of research and development 
institutions.  
Notwithstanding the fact that public support for innovation in Estonia has corresponded rather 
well with the main identified bottlenecks in the Estonian innovation system, a number of 
bottlenecks remain: (a) below-av erage productivity of industr y; (b) the difficulties in 
developing smooth cooperation between busine ss and academia; (c) Strengthening the export 
position of Estonian producers of know ledge-intensive goods and services. 
3.6.4.  Towards a sustainable industry 
Estonia is doing relatively well in terms of re newable energy provision. The energy intensity 
of the industry remains high. Moreover, there is  still a considerable environmental burden 
from Estonian energy production because the ener gy is mostly produced on the basis of fossil 
fuels, i.e. oil shale.  
In 2009, the Government has in cooperation with  the Parliament strengthened the policy to 
support energy efficiency and renewable ener gy use. The Government has initiated the 
preparations for an action plan for renewable en ergy. In the next years, the Government plans 
to design a broader policy of green growth of the economy. In addition to energy efficiency 
and renewable energy, an important part of it will be improving the environmental technology 
innovation. An Energy and Climate Agency has been  established to improve the co-ordination 
of the energy saving and renewable energy prog rammes and to provide options for additional 
measures. 
 
EN 70   EN It can be concluded that energy efficiency an d the sustainability of  energy provision in 
particular the production of electricity through  oil shale remain important challenges. The 
potential for improving energy efficiency has not been utilised in Estonia. Increasing energy 
efficiency is not only likely to have a positiv e impact on inflation but also on the environment 
and on the security of energy supply. 
3.6.5.  The business environment 
Estonia scores clearly above the EU average in  most indicator catego ries presented in the 
indicator graph. In particular , the legal and regulatory fr amework and the burden of 
government regulation appear as  good. However, the country scores slightly below EU 
average concerning infrastructure expenditure s and the satisfaction with the quality of 
infrastructure.  
Since 2007, Estonia has been working on a bett er regulation programme consisting of two 
parts: codification (administrative burden reduction and simplification) and effective 
structures (impact assessment framework). An overarching better regulation strategy 
combining these two factors has been develope d The simplification programme, scheduled to 
last until 2013, included four main sectors over the period 2007-2009: environmental law, 
construction law, social law, permits and lic ences. In order to reduce the administrative 
burden for businesses further, these four sectors have been screened in  order to identify the 
most burdensome obligations. A database is cu rrently developed to centralise information 
related to the administrative bu rden in Estonian regulations. 
Ex ante  impact assessment is a relatively new policy in Estonia, and still  work in progress. 
The reform of the ex ante impact assessment system conducted in 2009 extended the scope of 
impact assessments to aspects of policy analysis beyond budgeting, including economic, 
social and environmental impacts. Usage by ente rprises of eGovernment services is above the 
EU average and one of the highest in Centra l and Eastern Europe. Estonia has a national 
eProcurement platform mandatory for the publica tion of contract notices and contract award 
notices. The one-stop-shop to start-up a company is fu lly operational and further 
developments to facilitate business activities include e-invoicing in order to accelerate the 
payment procedure.  
As shown by the indicator on infrastructure in vestment, the Estonian  business environment 
would benefit from more investments oriented  towards the mobility of goods and factors. A 
renewed focus on public infrastr ucture (transport and inform ation technologies) with the 
support of EU structural funds), both cros s-border and internal, would contribute to 
investment, product and labour mob ility within Estonia and the EU. 
Indicators show that Estonia performs relatively well in term s of regulatory framework and 
the burden of government regula tion. However, there remains an  important challenge in terms 
of infrastructure investment both in terms of quantity and quality. 
3.6.6.  Entrepreneurship and SME policy 
Estonia's SME sector is characterised by marked differences from the EU as a whole. Estonia 
scores clearly above the EU average concerning time required to start a business, the business 
churn, the share of high-growt h enterprises and the payment duration by public authorities. 
However, it scores clearly below the EU av erage concerning bank loan conditions deemed 
acceptable by companies and concerning the ente rprise survival rate after two years. 
 
EN 71   EN In 2009, a concept for fostering entrepreneurship education in higher education was 
developed which is now under discussion. EU Structural F unds are used to foster 
entrepreneurship among Estonians, for instance  via the ‘SPIRIT’ pr ogramme which includes 
an entrepreneurship award, entrepreneurship week and a competition of business ideas among young people.  
Regarding the SME-friendly business environmen t, the so-called Reorganisation Act should 
make the winding-up of non fraudulent businesses possible in 3-4 months and so companies 
in financially difficult situation could restart th eir activities. As an extra-ordinary recovery 
measure, Estonia devised a support package fo r exporting companies (see also above) which 
mainly targets SMEs. The main elements of the measure consist in offering lending support 
and loan guarantees. 
The immediate challenge for the business sector and in particular SMEs is to overcome the 
crisis. The export support packag e can play an important role in this regar d. Labour skills 
could be improved through skill-matching, trai ning and qualification. The introduction of 
entrepreneurship education in higher educa tion without further dela y would also be an 
important step. 
3.6.7.  Conclusions 
Estonia has been considerably affected by the crisis with the biggest reduction of 
manufacturing output in the European Union. As wage growth outpaced productivity growth, 
competitiveness eroded resulting in increasing tr ade deficits. After a period of overinvestment 
in booming sectors such as construction and real  estate, resources need to be reallocated 
towards the tradable goods sectors. In order to  increase productivity, lab our skills need to be 
improved and productive investments to be ensu red including in R&D and innovation. While 
the business environment is relatively good, infrastructure  investments oriented towards 
mobility of goods and factors will further improve the business environment and support 
growth. Energy efficiency and the sustainability of energy provision remain important challenges. 
 
EN 72   EN 3.7. Ireland 
3.7.1.  Indicators graph 
Ireland
- 3 - 2 - 1 0123
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2004)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs NA3,5
-3,5 NA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) 
always indicate performance which is better (weaker) than the EU average. 
 
EN 73   EN 3.7.2.  Introduction29 
Ireland's labour productivity was, measured both per hour and per pe rson, constantly above 
the EU average in 2005 and 2008/2009. Ireland’s overall price competitiveness has been 
deteriorating during the last decade, as reflect ed by the significant appreciation of the real 
effective exchange rate, there by contributing to an increasing current account deficit. This 
was mainly due to strong wage increases, whic h not only fuelled consumption, but led also to 
one of the strongest increases  in unit labour costs in the euro zone since concurrent 
overinvestment in non-producti ve housing resulted in a mark ed decline in productivity 
growth. 
Nominal unit labour costs in Ir ish manufacturing declined slightly between 2000 and 2009, 
resulting in a more than 20 per centage point gap compared to th e EU average increase of 19% 
but by and large in line with developments in  other major export-oriented countries of the 
euro zone. As a result, the relative position of  Irish manufacturing has not changed markedly 
in this respect. 
Net exports of goods are positive and so the curren t account deficit is largely driven by high 
outflows of investment income and, to a lesser extent, by negative net services exports. The 
services deficit is somewhat lower now than in the early 2000s, but whether this reflects 
already a successful shift towards stronger services exports remains to be seen. 
Going forward, wage moderation in  the private and the public s ector has already contributed 
to improving Ireland’s price compe titiveness in 2009 and is expected  to continue doing so in 
2010. This suggests that the current account deficit is likely to improve although much depends on the global and European  economic context. In fact, from  its peak at just above 5% 
of GDP in 2007, the deficit has already narrowed to some 3% of GDP in 2009, mainly due to 
a strong decline of imports. 
Ireland shows no clear specialisation with regard to skills intensity. The importance of low-
skill sectors has decreased from 1997 to 2007. There is a high degree of specialisation in 
sectors with high technology and low technol ogy intensity. Moreover, Ireland tends to 
specialise in sectors with a high growth rate co mpared to the EU average. Nevertheless, low 
growth sectors continue to  play an important role. 
Manufacturing plays a bigger role for Ireland than for the EU in  total (22% vs . 17% of value 
added in 2008), although the share has been de clining since the mid 1990s. Compared to the 
EU average, the manufacturing sect or is particularly specialised  in chemicals, electrical and 
optical equipment and pulp, pa per and publishing. In  the service sect or, only financial 
intermediation and construction show a clear above average weight, although the latter was 
clearly driven by the housing boo m and is therefore likely to decline. Employment figures 
confirm the relevance of the manufacturing se ctor, but also its de creasing importance over 
time.  
Ireland’s surplus in the trade of  goods is, relative to the tota l volume of goods exports, the 
largest in the EU. The positive trade balance in  manufacturing mainly resulted from a very 
high surplus in the chemicals sector  and, to a lesser extent, in el ectrical and optical equipment, 
                                                
 
29 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 74   EN with food, drinks and tobacco al so showing a strong surplus. Transport equipment and other 
manufacturing are the sectors with the most  noteworthy trade deficit. The Revealed 
Comparative Advantage (RCA), measured re lative to the EU an d concentrating on 
manufacturing, shows particular  strengths for Ireland in 2008 in chemicals, electrical and 
optical equipment and food, drinks and tobacco. 
Exit from the crisis Ireland has faced a reduction of manufacturing production of up to 24% during the crisis. Up 
to July 2010 output regained to  100% of pre-crisis level. 
Due to budget constraints, the response to the crisis was mainly geared towards mitigating its 
effects on companies’ access to finance and facilitating structural change. Thus Ireland put in place two schemes to help companies in difficu lties as a result of th e economic and financial 
crisis – the Enterprise Stabi lisation Fund (ESF) to ease financ ing constraints of viable but 
vulnerable companies in the manufac turing and internationally traded services sectors, and the 
Employment Subsidy Scheme (ESS) to support  restructuring measur es with a budget of 
EUR 100 million and EUR 133 million respectively.  
In the longer run, the main challenge for Ireland is to return to a balanced growth path and to 
pursue a sustainable growth and development strategy, which takes account of the changing 
circumstances under which the Iris h economy is likely to operate.  This implies in particular 
that resources, which until recently have been tied  up in construction, have to be reallocated to 
other sectors of the economy or to the upgradin g of the existing housing stock rather than to 
its extension. 
3.7.3.  Towards an innovative industry 
With the labour-cost advantage of traditiona l Irish exports diminishing, Ireland is committed 
to use R&D and innovation as key drivers of future economic growth for both manufacturing 
and services. The aim is in particular to  improve the competitiveness of indigenous 
enterprises and to attract new knowledge intensive investment. Ireland's innovation 
performance has already been in creasing fastest within the gro up of Innovation Followers, i.e. 
countries with innovation perfor mance above that of the EU- 27 average but below those of 
the innovation leaders. A key ta sk in the years to come is  therefore to further upgrade 
Ireland’s innovation record. 
The Irish government recognizes the importance of innovation in services for export growth 
and has therefore proposed further actions in its Services Strategy to ensure the continued 
development of the services sector. These actions include integrated inter-disciplinary education for service activities, dedicated bus iness support measure to promote R&D and the 
use of public procurement to st imulate innovation in services.  
Concrete measures have also been taken to further promote R&D and innovation in general. 
Together with the tax exemption for small star t-up companies, the R&D Tax Credit has been 
increased to boost R&D and innovation expenditur es. The latter had already contributed to 
fostering R&D in the past and thus is  likely to have similar effects now. 
Among the main challenges for the Irish innovation system is the higher education sector. The 
sector has received significant re search funds since the year 2000. The focus must now be on 
the deliverables from this investment while main taining adequate funding levels in the future. 
 
EN 75   EN Another important challenge is to help medium -sized indigenous companies to increase their 
financial and managerial capacity to innov ate and undertake R&D. On top of the 
aforementioned tax measures, a key element in this regard would be to promote closer 
cooperation with third- level institutions. 
3.7.4.  Towards a sustainable industry 
The environmental performance of the Irish indus try is broadly in line  with EU trends. If 
anything, energy intensity is somewhat lower th an on average in the EU. The relatively low 
share of environmental goods in total goods e xports indicates though that Ireland does not yet 
fully benefit from the emergence of green markets.  
Moreover, buoyant economic growth ha s led to significantly increasing CO 2 emissions, in 
particular from transport, and the existing housing stock often suffers from poor thermal 
efficiency. These challenges do not  affect industry as such, but they provide an  opportunity to 
mitigate the necessary reallocati on of resources from the construction sector through sustained 
investment in transport infrastructure, to pr ovide new markets for dom estic appliances and 
building materials, and thus, to help ach ieving a more balanced growth path.  
Ireland has taken a number of policy measures and initiative to improve sustainability and to 
foster the development of a genuine enviro nmental products and services sector. The 
Environment and Green Technologies Department of Enterprise Ireland offers a GreenTech 
Support scheme to its clients, pa rticularly in the SME sector. Th e scheme is designed to help 
these companies take advantage of the opportun ities presented by inte grating environmental 
sustainability into their business.  Enterprise Ireland has a Clean tech Department dedicated to 
business in this sector. It supports Irish comp anies to capitalise on the economic opportunities 
arising in the Environmental Pr oducts and Services sector. The Dublin Airport Authority is 
pursuing the establishment of a specialist 'Cleant ech Incubation Facility' at the airport. It is 
intended to house up to 20 high po tential start-ups’ in  a concentrated e nvironment allowing 
research synergies, shared services and access to trade services to take place. The re-
capitalised banks have given a commitment to increasing their lending capacity to SMEs by 
10% and have established a EUR 100 milli on Environmental and Clean Energy Innovation 
fund. Capital allowances of 100% of the cost are available as of 2009  to those companies 
investing in high energy-efficient equipment.  The Home Energy Savings Scheme provides 
grants of up to 30% of the cost of retro-fitting insulation an d other energy efficiency measures 
to housing stock built before 2006. The measure is  likely to help the c onstruction sector to 
reallocate resources towards more sustainabl e purposes. The Nationa l Action Plan on Green 
Public Procurement which is currently subject to public consultation aims to harness public 
procurement to move the market in favour  of eco-efficient goods and services.  
The main issue for Ireland in the years to come  is to grasp the opportu nities a comprehensive 
greening of the economy is likely to offer. Existing initiatives in this context will bear all the 
more fruit if efforts to strengthen R&D and innovation do not run in parallel but are also 
harnessed to foster sustainability. 
3.7.5.  The business environment 
Ireland is generally perceived as  one of the most attractive bu siness locations. For instance, it 
ranks 7th in the World Bank’s Doing Business inde x, in Europe surpassed only by Denmark 
and the UK. Together with being an English-la nguage location and due to historically close 
 
EN 76   EN ties with the US, these factors have contribu ted to attracting a c onsiderable amount of 
overseas FDI. 
Going more into detail, Ireland scores sign ificantly above the EU average concerning 
infrastructure expenditures and clearly abov e average concerning the legal and regulatory 
framework and e-government usage by enterprise s. However, Ireland still scores below the 
EU average concerning satisfaction with the qual ity of infrastructure and the availability of 
high-speed broadband lines. Electricity prices fo r medium size enterprises are equally a matter 
of concern.  
Ireland has taken a number of policy measures to  further improve the business environment. 
The government has initiated in  2010 the construction of a smart broadband network called 
the Exemplar Network that makes use of multiple  colours of fibre to dramatically boost the 
speed of fibre-based communications. The amb itious Transport 21 programme is currently 
being implemented and foresees major investme nt projects for all tran sport modes, although 
the budgetary situation led to some reassessmen t of investment priori ties. Transport 21 is 
complemented by Ireland's new transport polic y, which contains ambitious targets with 
respect to modal shift, fuel efficiency and planning. As regards simplification, several major consolidation projects have been initiated in  recent years in sectors such as Land Law, 
Planning Law, Health and Safety and Compa ny Law. The five main areas of regulation 
identified as the most burdensome for business are taxation, statistical returns, environmental 
regulation, health and safety regulation, an d employment and company law. Revised 
guidelines for Regulatory Impact  Analyses (RIAs) were publis hed by the government in June 
2009. They include guidance on the measurement of  potential administrative and compliance 
costs, especially on entrepreneursh ip and on enterprise development. 
In particular infrastructure development did not  always keep pace with high growth in recent 
years and may therefore lead to bottlenecks once growth picks up again. Against this 
background, the relatively high level of infrastructure expe nditures for both transport and 
communications must be seen as an attempt to compensate for insufficient outlays in the past. It is essential therefore that infrastructure in vestment in real terms is maintained at an 
adequate level. 
As to electricity prices for medium size enterp rises, their current leve l is a drag on Ireland’s 
attractiveness as the domicile of choice for investment. Further action appears therefore 
necessary to foster competition among suppliers with a view to reduce prices to the level 
encountered in other countries. 
3.7.6.  Entrepreneurship and SME policy 
The economic significance of SMEs in Ireland is broadly in line with the Europ ean average. 
In terms of employment, the contribution of SMEs is slightly higher than the European 
average (69% instead of 67%) whereas in terms of value-added the share of SMEs is 
somewhat lower than the European average (52% instead of 58%).  
The economic crisis had a measurable impact  on business creation. Numbers for 2009 showed 
a 9% decrease when compared to 2008, a year  which had already witnessed a decrease of 
21%. 
In terms of the specific framew ork conditions for SMEs, Ireland scores slightly above the EU 
average for the payment duration by public au thorities. Nevertheless, there is mounting 
 
EN 77   EN criticism from businesses complaining about lengthening payment periods. As to financing, 
Ireland scores slightly below average concer ning the rate of busin ess bank loan demands 
rejected by banks or bank loan offers to comp anies that were rejected by the latter. As a 
consequence of the economic and financial crisis, however, there is now even more 
widespread concern about access to finance. 
Ireland has taken a number of policy measures  which are of particular relevance for 
entrepreneurship and SMEs and which also ad dress some of the aforementioned issues. As 
part of the anti-crisis measures, the governme nt has announced that the payment period by 
central government departments to their business suppliers is to be reduced from 30 to 15 
calendar days. However, to date, no concrete action has been identified. A credit review 
system has been set up to ensure that SMEs, sole traders and farm enterprises will have recourse to an independent, ex ternal review of bank’s credit  refusal decisions. A new pilot 
initiative called ‘Going for Growth’ develops training for female entrepreneurs. A 3 year 
corporate tax and capital exemption for start- up companies was introduced in 2009 and has 
been extended in 2010. New guidelines for public procurement are currently in the implementation phase. They aim to encourage greater SME participa tion in tendering for 
public contracts. A nation-wide one-stop shop allowing entrepreneurs to carry out all the 
necessary procedures – including registration, tax,  VAT and social security – at once and at 
one administrative point had been announced for December 2009 but  is not yet fully 
functional. 
Ireland does not face major challenges with resp ect to entrepreneurship and SME policies. 
However, to facilitate business creation and growth once economic growth picks up again, a 
timely and comprehensive implementation of th e broad range of initiatives and measures 
which are currently on the ag enda would be helpful. 
3.7.7.  Conclusions 
The main challenge for Ireland is to return to  a balanced growth pa th and to restore the 
competitiveness of its export sector  where this had deteriorated in  recent years. At the same 
time, the undisputed need to consolidate public finances nece ssitates a careful review of 
spending and taxation priorities with a view to  avoid the emergence of future bottlenecks to 
growth, in particular with regard to infrastructure.  
Ireland’s efforts to shift growth from traditi onal labour cost-driven FDI and, more recently, 
construction to more innovative sectors and serv ices had already born so me fruit before the 
onset of the current crisis. Recent efforts to pr ovide incentives for more sustainable growth 
also go in the right direction. In addition, Ire land scores significantly above the EU average 
concerning many aspects of the business enviro nment and the work force. The country is 
therefore relatively well-placed to overcome th e crisis although some challenges remain. In 
particular the capacity of indigenous firms to innovate could be stepped-up further, 
capitalising as much as possible on the increased investment in public R&D and the development of a Green Tech sector. 
 
EN 78   EN 3.8. Greece 
3.8.1.  Indicators graph 
Greece 
- 3 - 2 - 1 0123
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2007)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEsNA
NANA
NA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) 
always indicate performance which is better (weaker) than the EU average. 
 
EN 79   EN 3.8.2.  Introduction30 
Greece’s labour productivity per person employed is slightly above the EU average, but on a 
per hour basis stands at around 80% of the EU  average. Greece faces a serious problem of 
competitiveness, which is reflected in a large defi cit in goods trade. While services trade is in 
surplus, mainly due to tourism and shipping, th e deficit in goods trade has led to a current 
account deficit of around 11% of GDP in 2009. 
The real effective exchange rate appreciated mo derately over the past ten years, indicating a 
slight weakening in price and cost competitivene ss. In parallel, nominal unit labour costs in 
Greek manufacturing increased by 21% betw een 2000 and 2009, thus 2 percentage points 
more than the EU average of 19%. These developments suggest that among the main 
determinants of the trade deficit are also non-p rice factors, such as quality and specialisation. 
However, price competitiveness may have hampered the development of the tourism sector. Overall, the increase in the cu rrent account deficit over the pa st decade reflects the weakness 
and misalignment of the productive basis at large in compar ison to domestic and external 
demand. 
Manufacturing plays a much smal ler role in the Greek economy than in the EU on average 
(11% vs. 17% of value added in 2008). Greece is  specialised in sectors demanding low skills 
and, increasingly, in low-intermediate ski ll sectors. The importance of high and high-
intermediate skill sectors has remained at a low level from 1997 to 2007. This picture is 
confirmed by the dominance of sectors with me dium-low or low technology intensity and a 
very limited role of higher technology sectors. In addition, Greece tends to specialise in low-growth sectors (as measured by the av erage growth rate within the EU). 
Compared to the EU, the manufacturing s ector is particular ly specialised on 
food/drinks/tobacco and on refined petroleum. Greek manufacturing exports specialise in 
textiles, basic metals and chem icals with refined petroleum and food also being important 
exporting sectors. No manufacturing sub-sect or showed a trade surplus. The Revealed 
Comparative Advantage (RCA), measured re lative to the EU an d concentrating on 
manufacturing, shows particular strengths for Gr eece in 2008 in textiles and clothing, refined 
petroleum and food, drinks and tobacco. In the service sector, hotels and restaurants, wholesale and retail, transport and communica tion as well as public administration have a 
larger weight than EU in total. The same applies for agriculture and fishing. 
Exit from the crisis Greece entered the crisis later th an the other euro area members.  Manufacturing output is still 
in a continuous downward trend hitting -23% of  pre-crisis levels in  July 2010. Construction 
mining and quarrying, capital goods, clothing a nd shoes and consumer durables are hit the 
hardest.  
Given the lack of room for fiscal manoe uvre, the Greek government did not adopt a 
comprehensive stimulus package in response to  the economic slowdown but opted instead for 
targeted support for disadvantaged groups and sectors of the economy hit hardest. The Greek 
authorities put forward a number of temporary measures to support the sectors mostly hit by 
                                                
 
30 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 80   EN the economic crisis, such as the tourism sect or, automotive retailers  and the construction 
industry. Providing loan guarantees to small and very small enterprises has been the main 
instrument for alleviating the impact of the crisis on the business sector and it has been used massively (more detail in SME section below). In general, there were not many recovery 
measures that addressed long term structural  weaknesses, with the possible exception of 
actions taken in the area of energy efficiency. 
In the memorandum of understa nding (MoU) between Greece on one part and the European 
Commission, the European Central Bank and the International Monetary Fund on the other, 
which was concluded in May 2010 amidst a pub lic finance crisis, the Greek government 
committed itself to a number of important reforms relating to product markets which accompany the actions relating to public finance and the labour market. 
3.8.3.  Towards an innovative industry 
The structure of the Greek ec onomy (specialisation in low to  intermediate low skills and 
technology sectors in manufacturing, predominance of services and micro to small, family 
owned enterprises) is not conducive to a strong R&D activity. Consequently, R&D 
investments in relation to GDP, particularly in  the private sector, are amongst the lowest in 
EU and the innovativeness of the Greek ec onomy depends heavily on imported technology 
and know-how. It flourishes thanks  to organisational and marketi ng innovations and very little 
on the production and exploitation of new knowledge. EU programmes (the Research 
Framework Programme and the Structural Funds) play a major role in both R&D and innovation activity in Greece. 
Public financial support to R&D investments is expected to triple in the present Structural 
Funds programming period (2007-2013) in comp arison with the previous one. The main 
infrastructures for innovation, such as incubato rs, innovation poles, clusters, etc were already 
created in the previous period. The following  actions were launch ed in 2009: Innovation 
vouchers for SMEs (EUR 8.4 million); creation and support of new innovative and knowledge-intensive enterprises (spin-off and spin-out) (EUR 25 million); support to R&D 
activities of young enterprises (EUR 11.280 millio n); support of R&D activities of SMEs 
acting jointly (in groups) (EUR 23.730 million) and support to collaborative R&D projects 
bringing together enterprises and rese arch institutions (EUR 76.1 million). 
The law adopted in 2008 to over haul the instituti onal framework governing research did not 
enter into force on 1.1.2009 as planned. Instead, the new government has attached R&D and 
innovation policy to the ministry of education, and it is likely that policy in this area will be 
redesigned. 
In the context of the MoU, Greece committed to carry-out an in depth evaluation of all R&D 
and innovation actions, includi ng in various Operational Pr ogrammes under the Structural 
Funds, in order to adjust the national strategy,  and to create an external advisory council 
financed through the 7th R&D Framework Programme , to consider how to foster innovation, 
how to strengthen links between public research  and Greek industries and the development of 
regional industrial clusters. 
Producing new technology and tran sferring it to the market are both problematic. Bottlenecks 
are funding (R&D investments an d early venture capital are t oo low) but also  structural 
issues, since existing instruments do not seem to be very effective. This  points to a need to 
improve innovation policy design and impl ementation, notably through evaluating and 
 
EN 81   EN drawing lessons from past experience. However, improvi ng drastically the business 
environment would probably do more fo r improving innovation performance as new 
investments will help bring about  new process and product innovation. 
3.8.4.  Towards a sustainable industry 
On the basis of existing indica tors the environmental performa nce of the Greek industry can 
be characterised as rather poor. This re lates to weaknesses in the regulatory and 
administrative environment (inspection and enforcem ent, absence of land-use codes, delays in 
delivering environmental permits and licensing re newable energy projects) and to the absence 
of basic infrastructures (waste treatment faci lities, but also organi sed industrial zones). 
The main current funding instrument for envi ronmental policy is the Operational Programme 
Environment and sustainable development  with a total envelop of EUR 2550 million 
(EUR 1800 million Community funds and EUR 450 million national participation) over 2007-
2013. Some targeted actions focusing on bus inesses are also funded by the OP 
Competitiveness and entrepreneurship . 
The main recent initiatives in th is area with direct relevance to  industry are the action Green 
Enterprise 2010, subsidising investments of SMEs in the manufacturing sector aiming at 
reducing their environmental impact (total  budget of EUR 30 million), the action Green 
Infrastructures 2010, subsidising investments of SMEs active in r ecycling, collection, 
treatment and disposal of waste and reha bilitation (total budget of EUR 30 million), 
preparatory actions in identifyi ng projects for the treatment of dangerous industrial waste, and 
preparatory actions on the draft new development law (national scheme for investment grants) 
which will prioritise "green" economic activities. 
At institutional level, the ma in developments were the passing in 2010 of the law 
implementing Directive 2006/32 on energy efficiency  at final use and energy services, which 
included provisions for establishing the framew ork for Green Procurement, and of the law on 
accelerating the development of renewable energy sources against climate change. The latter 
law simplifies the licensing of renewable ener gy projects and exempts from licensing the 
smaller ones and adapts tariffs so as to ma ke them attractive. Finally, the government 
launched a consultation to prepare the appli cation of environmental responsibility (i.e. 
obligatory insurance agains t environmental damage). 
Steps are being taken to adapt the regulator y framework and reinfo rce incentives towards 
bringing about a more sustaina ble industry. Timely and effec tive implementation, including 
through overhauling enforcement, will be crucial in  order to improve the situation in existing 
enterprises and to create a vi able market for eco-industries. 
3.8.5.  The business environment 
Greece emerges from the various international benchmarking exercises as among the weakest 
EU countries. Also, the very low level of inward FDI bears testimony to its lack of 
attractiveness as a business location. In comparis on with other EU or OECD countries, Greece 
displays a higher number of procedures and a hi gher cost –monetary or in time- in carrying 
out routine business operations while basic instruments, such as land use codes, are not 
operational. Moreover, slow (ene rgy, port services) or inexistent  liberalisation in some key 
markets (road haulage, professional se rvices) contributes to higher costs. 
 
EN 82   EN The reform of the public administration has been  recognised as high priority and a specific 
Operational Programme "Administrative Refo rm 2007-2013" has been set up to prepare it. 
Among its main objectives are the adoption of  better regulation practices and cutting down 
administrative burden to enterprises. Howe ver, only preparatory actions have been 
implemented so far. 
Few new developments took place in this area  in 2009 due to the econ omic crisis and the 
national elections. The most signi ficant were the privatisation of Olympic Airlines and the 
partial privatisation of the Piraeus port. 
In the context of the MoU the government has committed itself to introducing a number of 
important reforms by the end of 2010 that shou ld contribute towards improving the business 
environment. These include to simplify the st art up of new businesses and make the General 
Commercial Registry (GEMI) fully operationa l (new law published on  17/6/2010), to simplify 
and accelerate the process of licensing enterp rises, industrial activities and professions 
through legislation and by making the spatial plans operational,  to introduce a fast track 
procedure for authorising large scale FDI projects  (already in application), to liberalise road 
freight transport, to legislate on a Better Re gulation agenda, and to reinforce the Hellenic 
Competition Commission. 
The effective implementation of the services directive in some key sectors (horizontal 
legislation has already been adopted), the prof essional qualification dire ctive in 2010, and the 
completion of the liberalisation of the domestic energy market  (2010-2011) are also covered 
in the MoU and should contribute towards ope ning-up the Greek economy  and increasing its 
efficiency. The Structural Funds also play an  important role in improving and modernising 
network infrastructures that increase economic efficiency. 
Regarding public administration, an independent  review of the organisation and functioning 
of the central administration will be launched in 2010 to prepare future reforms. Among the 
actions foreseen for 2010 is the adoption throu gh legislation of a Better Regulation agenda 
and unifying the public procurement system for a ll sectors and levels of  government, together 
with a introducing an electronic platfo rm supporting the use of e-auctioning.  
The measures being planned address some bus iness environment bottlenecks identified over 
the years in Greece, such as excessive red tape  and insufficient competition in the services 
sector. The reform of the Greek public admini stration remains a crucial undertaking, not only 
because it can raise the productivity of the publi c sector but also, and even more importantly, 
because it can contribute to raising the overa ll efficiency of the economy by improving the 
state's capacity to deliver th e necessary policies and by redu cing its burden on the business 
sector. Indeed, the main challenge in the i mmediate future is the effective design and 
implementation of the planned measures. 
Over the longer term, it would be  useful to address also othe r determinants of the business 
environment, including reducing excessive delays in the judici ary and restoring stability in 
business taxation. 
3.8.6.  Entrepreneurship and SME policy 
The SME sector in Greece is more prominent th an in the EU as a whole, and dominated by 
micro enterprises, which account for 58% of total employment or twice as  much as in the EU 
on average. Entrepreneurship activity is more intense than the EU average, with a business 
 
EN 83   EN ownership rate double the EU average. The eco nomic crisis has put Greek enterprises under 
considerable stress both through  a credit squeeze and, more  recently, an internal demand 
shock. 
The national scheme of investment support (t hrough grants, tax breaks and subsidisation of 
long-term loans) is being redesigned and its  basic principles have been put in public 
consultation. The other measures to be mentione d here are of a more temporary nature, either 
because they are linked to the crisis or because they are initiatives financed by the EU structural funds. 
Providing loan guarantees to small and very sm all enterprises through the Guarantee Fund 
(TEMΠMΕ) for small and very small enterprises has been the main instrument for alleviating 
the impact of the crisis on the business sector  and it has been used massively. A first phase 
(January-March 2009) included interest rate s ubsidisation in addition to guaranteeing the 
principal. The second phase used more relaxed elig ibility criteria and is s till running. In total, 
the amount of loans covered is of around EUR 5.2 billion for about 57000 enterprises. Two 
new actions were launched by TEM ΠMΕ in 2010, one to pay-out de bts to suppliers (total 
covered of EUR 1.25 billion), also covering new enterprises, and one to pay-out tax and social 
security debts (total covered of EUR 1.25 billio n). Another temporary measure in the same 
area has been a law freezing bank debt of enterp rises hard hit by the crisis and providing for 
debt-rescheduling. 
Regarding support to new investments there are several actions running financed by the OP 
Competitiveness and entrepreneurship . In addition to those already presented above, one can 
mention the actions targeting investments by micro (less than  10 employees) and small (less 
than 50 employees) active in ma nufacturing, tourism, commerce a nd services (total budget of 
EUR 650 million); the tertiary sector – t ourism and commerce (EUR 668 million) and 
professionals (EUR 70 million), in the clothing and shoes sector (EUR 15 million) and women and young entrepreneurship  projects (EUR 70 million). 
The immediate challenge for the business sect or is to survive the crisis, and the policy 
response to restore liquidity th rough massive loan guarantees seems adequate. Over the longer 
term, the real challenge will be to strengthen  the structure of the productive base towards 
higher value-added and high-grow th activities. This is a task mainly for the individual 
entrepreneurs but policy can help by facilitating structural change, providing the right incentives and removing the numerous obstacles to growth. 
3.8.7.  Conclusions 
Apart from the short-term concer ns related to the economic cris is, such as getting access to 
finance and adjusting to the in ternal demand shock, the main challenge facing industry, but 
also the real economy overall in Greece is a business environment that is not delivering 
optimally. 
Addressing the public finances cris is should alleviate the liquidity  problems in the economy in 
the medium term and restore expectations at  a level conducive to growth. Improving the 
business environment through actions such as those planned in the Memorandum of 
Understanding (MoU) will contribute to this  by reducing the costs of doing business in 
Greece across the board. However, there remains th e structural problem of specialisation in 
low-skills, low technology and low growth sector s. The policy response to this problem calls 
for actions to facilitate structural change, some of which, such as increasing maximum rates 
 
EN 84   EN of collective dismissals, or making mergers a nd acquisitions easier are included in the MoU, 
and to adjust incentives so as to induce sust ainable growth. This implies product market 
reforms to eliminate rent seeking behaviour and to permit a more rational allocation of 
resources as well as actions to raise the knowledge base. 
The public administration constitutes an importa nt bottleneck to econom ic growth, through its 
huge cost to the rest of the economy, both through its size and through its way of functioning, 
through regulatory capture, low quality of servi ces and ineffective enforcement that puts at 
disadvantage those playing by the rules. We not e, however, that the efforts undertaken by the 
Greek government, also within th e context of the MoU, are exp ected to redress the situation 
within a reasonable amount of time. 
 
EN 85   EN 3.9. Spain 
3.9.1.  Indicators graph 
Spain
- 3 - 2 - 1 0123
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2004)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs-3,2
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) 
always indicate performance which is better (weaker) than the EU average. 
 
EN 86   EN 3.9.2.  Introduction31 
Productivity growth has been slow during the last  decade, with high allocation of investment 
to low productivity sectors, especially constr uction and low-productivity services. However, 
equipment investment had been also increasing steadily until the beginning of the crisis, with 
rates of real change in terms of national acc ounts, more than 9% in 2005, 2006 and 2007. 
Spain has a labour productivity above the EU average, by around 6% if measured per hour 
worked and 11% per person employed. There was a notable increase between 2008 and 2009 
in this last indicator, attributable more to the sharp contraction of the construction sector 
rather than to improvements in the struct ural drivers of tota l factor productivity. 
The real effective exchange has appreciat ed markedly between 1999 and 2009 indicating a 
loss of competitiveness to third countries. This  conclusion is underpinned by the fact that 
nominal unit labour costs in  Spanish manufacturing incr eased by 31% between 2000 and 
2009, thus 12 percentage points a bove the EU average of 19%. 
Spain is specialised in low and in low-intermed iate skill sectors. The importance of high skill 
and high-intermediate sectors has been stable  on a low level from 1997 to 2007. This picture 
is confirmed by a clear trend towards sectors wi th medium-low technology intensity, a stable 
specialisation on low technology sectors and a quite low and decreasing share of high 
technology sectors. Spain tends to  specialise in sectors with a growth rate below the EU 
average.  
Manufacturing plays a smaller role for Spain th an for the EU in total (15,1% vs. 18,1% of 
value added in 2009). Compared to the EU, the manufacturing sector shows some specialisation on non-metallic mineral products , basic metal products, food, textiles, other 
machinery and leather and footwear . In the service sector, hotels and restaurants have a clear 
above average weight. A relevant fact is the high share of  the construction sector (11.50% in 
2008). This is the result of a la rge increase in the last decade. Agriculture and, in particular, 
fishing are much more important than for the EU in total. Employment figures show the low level of productivity in agriculture but also  its decreasing importance over time and a 
structural change towards service sectors. Spai n has a deficit in the tr ade of goods; relative to 
the total volume of exports, it decreased markedly from 2 005 to 2009. The negative trade 
balance in manufacturing mainly resulted from deficits in el ectrical and optical equipment 
chemicals and textiles and clothing while onl y transport equipment and non-metallic mineral 
products showing a trade surplus. The Reveal ed Comparative Advantage (RCA), measured 
relative to the EU and concentr ating on manufacturing, shows partic ular strengths for Spain in 
2008 in non-metallic mineral products, transport equipment, leather and footwear and food, drinks and tobacco. 
Exit from the crisis The economic and financial crisis hit Spain ha rd. The oversized constr uction sector and its 
supplying sectors (e.g. cement, bricks, ceramic s, iron and steel, fu rniture) as well as 
automotive were hit the hardest. Manufacturing output decreased by 27 %. In July 2010, the 
production is still 24% below pre-crisis level. New and less competitive companies are most 
                                                
 
31 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 87   EN affected by the crisis and still face problems in access to finance. Direct grants of less than 
EUR 500 000 were granted to over 8000 enterpri ses mostly SMEs in the tourism, road 
transport, services, car supplie r and manufacturing sectors.  
In addition,  there have been numerous cr edit lines either set up or enlarged  in 2009 and often 
renewed for 2010, managed by the Official Credit In stitute (ICO), which target in particular 
SMEs.  
There have been several initiatives to provide  temporary relief for the car industry including 
funds to maintain and enhance competition in the automobile industry from the Central 
Government's special fund to vitalise the ec onomy and employment, industrial measures and 
support for demand (including a car scrapping scheme), labour measures, support for the 
logistic sector, support for R+D+ I and financial measures with the endowment of credit lines. 
These measures are temporary and either have already been phased out at the end of 2009 or 
they are expected to disappear in 2010. 
3.9.3.  Towards an innovative industry 
Spain’s total R&D expenditure increased fr om 0.95% of its GDP in 2001 to 1.35% in 2008, 
with a private participation of 56.1%. This tre nd is based on a substan tial increase in both 
private and public expenditures. EU Structural Funds have made a significant contribution to 
such progress. Thus, for the ERDF 2007-2013 pr ogramming period, almost €9 billion were 
allocated to R&D and innovation.  
The authorities have been adopting measures to catch up in terms of innovation, especially for 
the private-sector. Measures ha ve been adopted to stimulate business creation and facilitate 
funding and incentives, and efforts are ongoing to  reduce those labour-market rigidities to 
provide a more favourable environment and stim uli to the different ag ents of the innovation 
system at national and regional levels. The INGENIO 2010 Programme, wh ich represents the 
main programme within the National Reform Program regarding the R&D&I issues, continues being particularly detailed and generously funded. It proposes a number of 
instruments to increase the focus and funding of government research , stimulate technology 
transfers by encouraging public/p rivate partnerships and enhance the incentives for private-
sector research and the diffu sion of new technologies.  
The National Strategy for Innovation (e2i), recently adopted intends to accelerate the 
transformation of the Span ish productive model and increase the economy’s innovative 
capacity. It focuses on 5 axes around know ledge transfer: finance, markets, 
internationalisation, regional cooperation and human resources. 
General Guidelines of the Integral Plan on Industrial Policy 2020 (PIN-2020) have recently 
been approved, aimed at orien ting structural change in in dustry towards higher value and 
knowledge intensive activities.  
At the same time, Spain continues applying  reindustrialization programmes on certain 
territories, according to the Guidelines on National Regiona l Aid for 2007-2013. Their target 
is to create sustainable development through the deployment of new indust ry, or regeneration 
of the old one. 
Spain would gain from continuing efforts to impr ove the quality and excellence of research, to 
absorb knowledge spill-over from other countries  and to connect to the expanding European 
 
EN 88   EN research system. A number of challenges remai n. Firstly, the research sector, developed in a 
wide net of researching centres a nd universities, is not adequately oriented to enterprises. It 
will be important to increase public-private c ooperation and incentivise enterprises and public 
centres to learn to work together. Secondly, bus iness R&D expenditures ar e low and efforts to 
encourage their rise should cont inue. Thirdly, the av ailability of qualified RDI human capital, 
for example PhDs, is an issue of concern. 
3.9.4.  Towards a sustainable industry 
Energy intensity is still hi gher than the EU average, but improved by 4.6% in 2008. 
Promoting renewable energies continues to be a priority of the Government. A new 
Renewable Energy Plan (PER) 2011-2020 is being drafted and will include new technologies 
such as geothermal and wave power. Both ar e in response to commitments assumed by Spain 
in the Energy and Climate Change Packag e for 2020.The Government implemented the 
Energy Saving and Efficiency Plan 2008-2011 comp rising 31 measures. Th e part of the Plan 
implemented to date would provide about 75% of the annual target saving. These measures 
include notably a new incentive mechanism to reduce losses in the distribution network. The Plan for Energy Saving and Efficiency w ill be reviewed and updated for the period 2013-
2020. In addition, a plan to foster internationalisa tion of Spanish enterprises in sectors related 
to climate change (such as renewables and environmental technologies) was approved in 
March 2009. 
In 2008, the State General Administration Gree n Procurement Plan set a goal of achieving 
50% green public procurement by the administ ration by 2010. The measures defined in the 
plan are being put into practice, including trai ning courses for procurement personnel and the 
drawing up of good practice codes for product groups . There has also been progress in the use 
of EU Eco-Management and Auditing Scheme  (EMAS) and the EU eco-label system. 
Significant progress has also been made in the development of eco-design guidelines. 
3.9.5.  The business environment 
The legal and regulatory framework in Spain is seen as being less favourable to businesses 
than the EU average and the count ry's rank in the last Doing Bu siness report lost 10 places, 
not because the situation worsened in Spain in  absolute terms (it even improved in some 
cases) but because other countries progressed much faster. Procedures regarding business 
start-up are particularly numer ous, resulting in lengthy delays. 
Spain has put a high priority on improving infra structure as corresponding expenditures and 
user satisfaction indicate. 
Spain has established in 2007 the target of  reducing by 30% by 20 12 the administrative 
burden on businesses. In the framework of the Plan to Reduce Red Tape, the Cabinet approved over the period June 2008 - April 2009 three packages to reduce administrative burden involving a total of 159 measures.  
A Royal Decree (RD) regulating the report on the analysis of regulatory impact was approved 
in July 2009, with the aim of facilitating an d strengthening the assessment of the legal, 
economic, budgetary, gender and social impacts th at the new regulations  may have, including 
the impact on the resulting administrative burden . The publication of the impact assessments 
is non-mandatory. This RD does not apply to regional legal procedures, but regions are 
developing their own impact a ssessment regulations (their sc ope is more limited). According 
 
EN 89   EN to the new RD, consultation of stakeholders would be  done before starting the legal procedure 
proper. A public internet consulta tion tool is not yet available.  
eGovernment usage by enterprises is below the EU  average but is increas ing fast (from 58 to 
65% in the last 3 years). eGovern ment policy is part of the over all in the Spain's Information 
Society policy dating from 2007 and renewed in 2010 through the Plan Avanza 2.  Identified 
measures are being introduced timely. The Natio nal eProcurement Platform is mandatory only 
for the central government procurement authorities.  
With a view to improving the business envir onment and increase competition in professional 
services, the Spanish authorities implemented the ambitious "Omnibus" and Umbrella Laws, which aim at transposing the gene ral principles of the Services  Directive in sector-specific 
laws and also include a number of certain measures to reduce the administrative burden for 
start-ups. The system will be supported by an inte grated virtual one-stop-shop. In addition, the 
draft law on Sustainable Economy of March 2010 included additional measures in this field 
such as a further reduction in time and admini strative costs for in setting up businesses. A 
reform of the Bankruptcy Act is planned in or der to simplify procedures and reduce costs. 
Measures to modernise the Justice administration will also be introduced in the next 3 years. 
Regulated tariffs for electricity  were abolished in 2009 and the progressive elimination of the 
tariff deficit is planned, although a freeze in electricity prices wa s announced recently in order 
to help households and businesse s cope better with the crisis . The operations proceedings to 
reinforce the electric interc onnections with France and Portugal have been approved. 
The Strategy for Sustainable Economic Gr owth approved in the end of 2009 includes 
measures to streamline bureaucracy, improve education and encourage companies to have a more international focus as well as tax breaks for firms that innovate and the promotion of 
investment in the renewable en ergy sector and high-tech indu stries. The law on Sustainable 
economy also includes measures to help the reor ientation of the construction sector towards 
rehabilitation and urban renovation. 
Continue improving the conditions for the creation of new companie s is a key challenge in the 
current context of change in the productive structure of the Spanish economy. Moreover, 
professional services need to keep on movi ng away from the trad itional anti-competitive 
regulation with the use of reco mmended tariffs (which often exceed the cost of the service 
provided), or a number of prior administrative authorisations to deliver certain services. 
Restrictive regulations in the retail sector have resulted in higher prices for the consumers and 
limited productivity increases and efforts to increase. 
3.9.6.  Entrepreneurship and SME policy 
The contribution of the total SME sector to em ployment (78%) is in Spain higher than in the 
EU on average (67%), particularly in micro firms (38%). The cost to close a business’ is also 
above average. The share of population that alr eady started a business or see entrepreneurship 
as an opportunity is only 49% in Spain as oppos ed to almost 58% in the EU). The attitude 
towards allowing people a second chance with a new business is the least positive within the entire EU. 
Regarding access to finance, a
lthough n ew extraordinary credit lines have been introduced in 
order to help the liquidity of SMEs, the effici ency of the system is not optimal, since the 
 
EN 90   EN Official Credit Institute (ICO) does not have its own network to  operate directly with SMEs, 
independent workers or families and needs to go through banks. 
Spain is the second worse perfor mer in the EU regarding paym ent duration. The shortening of 
payment terms remains of particular importanc e for SMEs, which often have a weak equity 
position, which is further undermined by the late payment. Improving the cash flow is particularly important in times of crisis.  
Since 2006/2007, the programme ‘Emprendemos juntos’ aims at promoting the social 
recognition of entrepreneurs and developing a po sitive image of business people. One of the 
main actions is the organisation of an ‘Entre preneur Day and similar activities at regional 
level. Regarding entrepreneur skills, a law introducing entrepreneur ship into the school 
curriculum was adopted in 2006 an d started to be implemented in 2009 at loca l level by the 
autonomous regions. Since 2008, the capitalisati on percentage of unemployment aids was 
increased to enhance the chances of th e unemployed to become self-employed. 
The ‘Local Investment Fund', part of the 'E-Pla n' aimed at increasing public investments at a 
local level by financing newl y planned public works in 2009. Its aim was to favour the 
viability and involvement of enterprises (espec ially SMEs) carrying out activities related to 
the construction sector, while improvi ng public local infrastructures.  
A law laying down measures to combat late payment has been passed in July 2010, which 
should reduce the time of payment by the public sector to 30 days, 60 days for payments 
between companies.  There are also new measures in place to support exports. 
It is relevant to note the substantial fi nancial contribution of the European Regional 
Development Fund (ERDF) to the above activitie s: 3,5 billion to SMEs and entrepreneurship 
and 1,1 billion for ICT. Also the new Technology Fund, devoted to Innovation by and for the benefit of Enterprises, mainly SMEs, receiv ed a special allocation of about €2 billion.  
Furthermore, in the last few years Spain has la unched three JEREMIES (venture capital funds 
co-funded by the ERDF), holding funds amoun ting over EUR 430 million. These financial 
instruments are targeted to enterprises needs by providing guarantees, loans, equity 
participations and/or venture ca pital for innovative enterprises. 
Spain continues to lag behind on entrepreneurial culture. Liquidity problems continue to be 
acute and further measures will be necessary to ensure sufficient access to finance, in particular for SMEs. In terms of late payment,  despite some recent measures there is still 
room for improvement. 
3.9.7.  Conclusions 
The crisis has taken in Spain a heavy toll on competitiveness, jobs and public finances. The 
expansionary fiscal measures taken in 2009 will  be discontinued, reducing relief to hard hit 
sectors. Under these circumstances , having access to fina nce will be particularly important for 
SMEs. 
Spain would benefit from continuing to faci litate structural change towards a more 
knowledge-intensive economy. The challenge is therefore to enhance productivity and 
facilitate wage and price adjustments. Impr oving innovation and investme nt by firms, making 
the regulatory framework more favourable for business creation and growth, training 
 
EN 91   EN (including permanent training of workers) and en couraging competition, especially in services 
are also crucial for achieving this objective. 
3.10. France 
3.10.1.  Indicators graph 
France
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2007)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2004)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEsNA
NANA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 92   EN 3.10.2.  Introduction32 
France’s overall competitiven ess position is shown in its labour productivity which is, 
measured both per hour and per person, clearly above the EU average. The real effective 
exchange rate has appreciated moderately  between 1999 and 2009, indicating a slightly 
decreased price-competitiveness; however, this decrease was less pronounced than for the EU 
in total. Moreover, while nominal unit labour costs in French manufacturing first declined somewhat and then increased again resulting in  an overall increase of 5%, this increase 
remains 14 percentage points below the EU average of 19%. 
France is specialised in sectors demanding high skills while the specialisation of the other 
sectors is slightly below the EU average.  Nevertheless, France shows a decreasing 
specialisation towards sectors with high techno logy intensity and an increasing specialisation 
in the medium-low technology sectors from 1997  to 2007. There is no clear profile regarding 
sectoral growth intensity as bot h sectors with relatively high and relatively low growth play 
an important role. 
Manufacturing plays a significantly smaller role for France than for the EU in total (12% vs. 
17% of value added in 2008). The only sub-sect or which is approaching an EU average 
importance is food/drinks/tobacco (actually tob acco's share is negligible). Above average 
values can be found in the service sector for “r eal estate and business activities”, “health and 
social work” and public administration as well as for agriculture and fishing. Figures for 
earlier years showed a sub-sectoral structure for manufacturing which was somewhat more in 
line with the EU average. Employment figures also show the slowly decreasing importance of 
manufacturing over time. Forecasts until 2020 exp ect an increase in employment in business 
and other services by almost 10% while empl oyment in manufacturing might drop further by 
some 8%. 
France shows a moderate deficit in the trade of  goods, relative to the total volume of exports. 
The negative trade balance in ma nufacturing mainly resulted from  deficits in electrical and 
optical equipment, textiles and clothing and basic metal products while mainly transport 
equipment, chemicals and food/drinks/tobacco  showed noteworthy trade surpluses. The 
Revealed Comparative Advantage (RCA), measur ed relative to the EU and concentrating on 
manufacturing, shows particular strengths for France in 2008 in food, drinks and tobacco and 
transport equipment. 
Exit from the crisis French manufacturing output dropped by 20%  during the economic and financial crisis. 
Production increased by 9% in July 2010 comp ared to the bottom of the crisis.  
The anti-crisis measures mainly focused on easing  the access to finance for companies (for an 
amount of EUR 15.9 billion out of EUR 33 billion spent under the Recovery Plan by March 
2010). This primarily included early  reimbursement of fiscal de bts, such as VAT, corporate 
tax or Research Credit Tax, and combined with  higher pre-financing in public procurement, 
fiscal relief for job creation in very small enterprises, loan guarantees to small and mid-size 
enterprises as well as more than EUR 1.5 billion of direct investment in various companies by 
                                                
 
32 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 93   EN the Fonds Strategique d’Investissement . Such measures were characterised by very rapid 
implementation, and their combination with suppor t to the banking sector contributed to avoid 
a credit crunch and prevented short-term liquidity disrupt ion for most enterprises. 
Additional anti-crisis measures were largel y based on public investments in transport, 
research and building infrastructures (for an amount of EUR 9.8 billion out of EUR 33 billion 
spent under the Recovery Plan in March 2010) fr om public undertakings, local authorities and 
central government. Such investment was slow er to implement but had some multiplying 
effect on economic activity. 
Other notable budgetary measures regard sector al aids to the automotive industry (car 
scrapping scheme, which benefited more than  700,000 individuals so far, and state aids 
including a 5-year ‘green’ loan of EUR 6 billio n to the car builders PSA and Renault, aimed 
at supporting the developmen t of cleaner vehicles).   
The recovery measures, which were targeted, timely and temporary, contributed to sustain 
domestic demand and to avoid a deeper recession.  
3.10.3.  Towards an innovative industry 
In terms of innovation performance, Fran ce remains among 'innovation followers', as 
measured by the European Innovation Score board. While public sector investment is 
significant, France’s main weakness lies in a re latively low private inve stment in R&D and a 
low innovative behaviour of companies, notably SMEs. 
In 2008-2009, in a context of economic cris is, public funding to encourage business 
expenditures in research and innovation was increased and focu sed on a few key instruments, 
namely the Research Tax Credit (CIR), the innovative start-up scheme ( Jeunes Entreprises 
Innovantes ), financing by the Innovation Agency OSEO and support to competitive clusters 
(pôles de compétitivité ). In 2009, an evaluation demonstr ated the effectiveness of the 
innovative start-up scheme.  
EUR 7 billion out of the EUR 35 billion dedicated to ‘investments for the future’ (financed by 
the Grand Emprunt launched in December 2009) were allocated so far, out of which EUR 4.5 
billion directly relate to innovation, incl uding EUR 1.8 billion for eco-innovation. Fund 
allocation is consistent with the priorities set in the National Strategy for Research and 
Innovation (2009).  
Most Regional Innovation Strategies  were adopted in 2009, which can contribute to the 
consistent implementation of the pr inciples and priorities of the National Strategy for 
Research and Innovation , based on the strengths and weaknesses of the competitive situation 
and of the ‘innovation ecosystem’ identified at local level, and thr ough coherent use of 
existing policy tools.  
In 2010-2011, in a context of constrained public finances, it is expected that a systematic 
evaluation of the added value and effectiveness of existing financ ial schemes and state aids in 
promoting additional business investment in R&D&I based on performance indicators would allow refocusing public spending on key innovators (such as innovative SMEs). This could be 
combined with a reflection on the insufficient private funding of i nnovation (e.g. venture 
capital and bank loans), for example as rega rds possible substitution effects from public 
intervention or lack of compe tition in the financial sector.  
 
EN 94   EN Technological but also non-t echnological innovation (incl uding product differentiation 
through design or branding and innovation in servi ces and processes) can play a key role in 
strengthening the non-price co mpetitiveness of export-orie nted production (goods and 
services). To this end, several possibili ties exist to further improve the ‘innovation 
environment’, e.g. pursuing efforts to improve the governance of the pôles de compétitivité ; 
improving the efficiency of public structures in research and innovation and higher education 
(e.g. mergers of institutions to  reach ‘critical mass’); stre ngthening incentives to public-
private cooperation including th rough ‘valorisation’ of pub lic research findings; through 
public procurement etc. Efforts to strengthen  the cooperation between  secondary and higher 
education and the business community may be us efully pursued and amplified, as well as the 
development of vocationally-ori ented curricula with techni cal or engineering background 
(notably at regional scale).  
3.10.4.  Towards a sustainable industry 
Greenhouse gas emissions in 2008 decreased by  6.4% overall compared to 1990. Emissions 
from electricity generation are low compared to most developed coun tries due to nuclear 
power, but emissions from transports and build ings increased until 2008 compared to 1990, 
and energy consumption from buildings increas ed by 4.8% between 2000 and 2007. This is to 
be compared with the targets of the Grenelle de l’Environnement  (-38% in energy 
consumption from buildings and stabilisation of greenhouse gas emissions from transport by 2020). The share of renewable energy in gross inland consumption is 7% in 2007, to be 
compared to a target of 23% by 2020, and main ly comes from biomass (for heat and power) 
and hydropower. Two French producers of bioma ss heating are in the world top 10, but there 
is no significant French manufacturer in the se ctor of solar and wind energy, where France 
seems to have lost the competitive race so far.  
Energy intensity decreased by 15% between 1 991 and 2006 and energy efficiency is high 
compared to most developed countries. Electrici ty prices (including for industrial customers) 
are relatively low and energy dependency remains below the EU average.  
The Recovery Plan did not contra dict with long-term environmental targets. “Green” recovery 
measures in rail, waterways, ports, energy e fficiency in agriculture, thermal renovation of 
buildings, car scrapping scheme, green R&D a nd energy infrastructure s accounted for more 
than 15% of the Recovery Plan.  
2009-2010 measures for the energy performance of  buildings consistently address the main 
market failures by encompassing regulation, audit and certification, tax and financial 
incentives, consumer information and training of  professionals. Installation of plug-and-ride 
terminals, combined with ‘green’ loans to car manufacturers and public procurement, is 
expected to allow selling of electrical vehicles  as of 2011. Heavy transport will be charged on 
free roads as of 2011. But the consistency between Grenelle I  targets and Grenelle II  
provisions is less obvious in the field of  renewable energy, notably as regards the 
development of solar and wind energy at indust rial scale. A draft ‘national strategy for 
sustainable development 2009-2013’, consistent with EU targets and policies, is being 
discussed. In January 2010, a national conferen ce on ‘green growth j obs’ identified future 
skill needs in 11 ‘green’ sectors.  
Promoting export-oriented speci alisation areas in the ‘green’ sectors through integrated 
sectoral strategies is reported as a means to  strengthen France’s industrial competitiveness 
while contributing to the ‘greening’ of its overall economy and the achievement of its 
 
EN 95   EN environmental targets. This may include environmental industries (e.g. air, water and waste 
treatment) and eco-technologies (e.g. new tech nologies in renewable energy), transportation 
(e.g. rail, electrical and hybrid ca rs), energy (e.g. biomass hea ting), ‘sustainable cities’ (e.g. 
sustainable urban mobility & urban planning), su stainable agriculture, ‘green’ chemicals etc, 
and may be connected with the priorities set in the National Strategy for Research and 
Innovation (2009 ) and the future National Strategy for Sustainable Development .  
3.10.5.  The business environment 
France scores significantly better than the EU  average concerning electricity prices for 
medium size enterprises, infrastructure expe nditures and satisfaction with the quality of 
infrastructure. eGovernment usage by enterprise s in 2009 is slightly below the EU average. 
France scores clearly below the EU average concerning the burden of government regulation 
and the legal and regulatory framework. The latt er indicates some potential for clarifying the 
business environment (e.g. corporate law and co rporate taxation), streamlining administrative 
structures (e.g. Balladur report, duplication of services) and systematically reviewing state aid 
and financial support schemes (e.g. 6000 support schemes for enterprises, including 120 for creating a new firm).  
Since 2008, France has undertaken a set of initia tives in order to improve the regulatory 
quality. Since 1
st September 2009, impact assessment ha s been a constitutional requirement 
and any bill proposed by the government must be accompanied by an impact assessment made public online. Impact assessments have  a significant scope, but no recommendation is 
made concerning SMEs. The streamlining of pe rmanent consultation bodies (abolishment of 
40% of the advisory boards) in 2009 and th e increased use of temporary consultation 
mechanisms such as the ‘ Grenelle’  method and ‘ Etats généraux ’ and of publicly available 
consultation documents are positive.  
The most recent simplification law (May 2009) includes few provisions for enterprises. The 
initial national objective was to reduce the bu rden of the most burdensome or ‘irritating’ 
procedures by 25% before end 2011. 700 admini strative obligations or procedures were 
analysed so far, and 250 simplified. Besides,  the measurement methodology was enlarged to 
“users’ expectations” (including pr ivate individuals). Following ‘ Etats Généraux de 
l’Industrie ’, a new initiative was launched in May 2010 to “simplify the legal and regulatory 
environment of businesses for their competitiveness”, including all administrative procedures and laws applicable to enterprises, and to reduce corresponding costs and delays.  
In 2009, the transposition of the Services Directive strengthened one-stop-shops for creating, 
modifying or closing a company. New e-Government services a llow enterprises to pay their 
taxes and social c ontributions online. 
The ongoing State Modernisation Programme  (RGPP) implies huge efforts for streamlining 
the state’s organisation to improve public fina nces. There are obvious synergies between this 
exercise and a systematic review of the busin ess legal and regulatory environment from the 
‘competitiveness’ angle, as proposed following ‘ Etats Généraux de l’Industrie ’. The overall 
business environment would also benefit from  enhanced domestic competition (e.g. banking 
sector; business and other services). 
 
EN 96   EN 3.10.6.  Entrepreneurship and SME policy 
The SME sector in France employs, in total, re latively less people than in the EU (61.7% vs. 
67.4%). France scores above the EU average concerning the time required to start-up a 
business and slightly above th e average concerning early st age financing and bank loan 
conditions deemed acceptable by companies, desp ite deteriorated acces s to venture capital 
and payment delays in 2009. France scores sli ghtly below the EU average concerning the 
business churn.  
The rate of SMEs which import, export and i nvest abroad and the rate of SMEs which 
innovate internally and place new products on the market remain below the EU average (according to the SBA fact sheet 2009). This mi ght be correlated to th e lower share of high-
growth SMEs and to an overa ll insufficient growth of SM Es. To enhance their innovation 
capacity, non innovative SMEs primarily need information and contacts (e.g. through OSEO, 
chambers of commerce, regional authorities, co mpetitive clusters etc.) while innovative SMEs 
need financing, especially in the expansion stag e (including from venture capital). Both need 
enhanced access to skilled workforce.  
320,000 enterprises were created under the new stat ute of ‘auto-en trepreneur’ in 2009 (against 
260,000 creations with other statutes), mainly by employees and unemployed benefiting from 
the new programme for business creation and takeover (employm ent policy). Annual sales by 
‘auto-entrepreneurs’ are low (EUR 6 300 on aver age) and the conversion rate into ‘normal’ 
companies is unknown, but this measure certainly promotes entrepreneur ial spirit. Assessment 
in the mid term is necessary.  
The OSEO financing capacity (guarantees) was significantly increased  in 2008 within the 
Recovery Plan, and EUR 2.5 billion were a dded in 2009, including EUR 1 billion for 
innovative SMEs. The introduction of the Cr edit Ombudsman can be considered as a good 
practice. The deterioration in payment delays in  2009 due to the crisis was partially offset by 
the positive impact of the Loi de Modernisation de l’Economie  on the duration of payments; 
the early reimbursement of the Research Tax Credit  contributed to relieve short-term 
financing constrains for key i nnovators (i.e. innovative start- ups and high-growth SMEs).  
In 2010, the creation of regional “single cont act points” providing SMEs with overall 
information about all administra tive procedures and obligations  (including taxation and state 
aids) was decided following the ‘ Etats Généraux de l’Industrie ’.  
Easier access to bank loans (t hrough support to mutual guarantee mechanisms) and private 
funding (including venture capital ), simplification of  the regulatory environment, enhanced 
domestic competition (e.g. in business services ) and a more dynamic and open research and 
innovation system are key levers to set the righ t conditions to promote the growth, export and 
innovation capacity of SMEs.  
Efforts to improve reduced payment delays  from public undertakings should be pursued. 
Derogations to the rule on payment delays should be suppressed by 2012.  
Efforts to improve the efficiency of pub lic support to exporting firms (e.g. avoiding 
duplication and overlaps of effort s by various structures), esp ecially in emerging countries 
such as India and China, should be pursued.  
 
EN 97   EN 3.10.7.  Conclusion 
Challenges for France are to improve its external competitiveness and to facilitate structural 
change. To this end, efforts should continue to improve the overall research and innovation 
environment, including through stronger link s between the business community, higher 
education and vocationally-oriented curricula, and to implement the Regional Innovation 
Strategies  which are more accessible to SMEs. 
The legal and regulatory environment for businesses, including administrative procedures and 
financial schemes such as state aids, needs furt her simplifying to reduce  associated costs and 
delays; improving the competition framework would also benefit the overall business environment. Easier access to finance and hu man capital, information and networking within 
an ‘open’ innovation system, simplified busine ss environment for SMEs, and efficient support 
to exporting firms would also cont ribute to the growth of SMEs. 
 
EN 98   EN 3.11. Italy 
3.11.1.  Indicators graph 
Italy
- 3 - 2 - 1 0123
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2004)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (Euro per kWh; 2007)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEsNA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 99   EN 3.11.2.  Introduction33 
Italy’s labour productivity, measur ed per hour, was sli ghtly above the EU average in 2005 and 
2008; measured per person, it was stable at some  110% of the EU average. Real and nominal 
unit labour costs increased more than in the EU as  a whole between 2005 and 2009. 
Moreover, nominal unit labour costs in Italia n manufacturing increased by 45% between 2000 
and 2009, thus more than in any other EU-15 Member State except Luxembourg. As a result, 
the overall increase was more than twice th e EU average of 19%. It aly's real effective 
exchange rate has appreciated markedly in the past ten years, indicating decreased 
competitiveness against third countries. 
Italy is specialised in sect ors demanding low-intermediate labour skills and in low skill 
sectors though the importance of the latter is decreasing from 1997 to 2007. The share of high 
skill sectors remains slightly below the EU av erage. The sectoral structure by technology 
category remained partly stable with a low weight of sectors with high and medium-high 
technology intensity.  
Manufacturing accounts for a larger share in th e Italian economy than in the EU in total 
(18.5% vs. 17% of value added in 2008). This is  mainly due to specialisation on leather and 
footwear and textiles and clothing as well as, to  a lesser extent, othe r machinery, basic metal 
products and non-metallic mineral products. In serv ices, Italy’s sectoral structure follows the 
broad picture of the EU in total; only the hot els and restaurants sect or has a clearly higher 
weight. Agriculture and, in part icular, fishing are more important than in the EU as a whole. 
Employment figures point to a below-average level of pro ductivity in manufacturing; the 
share of manufacturing in total employment has decreased over time. Forecasts until 2020 
predict an 18% increase in employment in busin ess and other services, while employment in 
the primary sector might decline by almost 30%. 
Italy’s trade in goods has been in balance. Its strengths relate to the export of a wide range of 
medium-technology consumer and investment  goods. The rapidly growing high-technology 
information and communications sectors play a sm aller role in exports. Transport equipment, 
other machinery, and chemicals showed a strong export performance, with also basic metal 
products, electrical and optical equipment, and textiles and clothing being important exporting 
sectors. The trade balance in manufacturing re sulted from surpluses in, above all, other 
machinery; textiles and clothing; and other ma nufacturing. Electrical and optical equipment 
and chemicals showed a noteworthy trade defi cit. The Revealed Comparative Advantage 
(RCA), measured relative to the EU and c oncentrating on manufacturing, shows particular 
strengths for Italy in  2008 in leather and footwear, te xtiles and clothing and other 
manufacturing. 
Exit from the crisis Italian industry has been hit ha rd by the crisis. Production in th e manufacturing sector in July 
2010 stands at 80% of the pre-crisis level. Mo st industrial sectors are in difficulty. Those 
which suffered first from the contraction of the international demand were the metal-mechanic and textile industries. Since September 2008, also sectors such as agro-food, construction, commerce, and chemical industry have been hit. 
                                                
 
33 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 100   EN Given the high public debt, the Italian fiscal stimulus and support to the real economy were 
prudent and focused on target ed support measures. On the product market, the government 
has temporarily subsidised the purchase of durable goods – such as domestic energy efficient 
appliances and furniture, and energy-efficien t and innovative cars with low-environmental 
impact – while, at the same time, fostering environmental goals through energy saving and 
emissions reduction. Measures were also ta ken to foster industrial innovation, reduce 
administrative burden and accelerate investment in priority infrastructure such as railways and 
public works. Italy has also taken a number of measures for allevi ating the impact of the crisis 
on the business sector (more detail in SME section below). 
In general, measures taken to mitigate the impact of the crisis have relied mainly on 
reallocation of funds, trying to  shift them towards action with high growth multipliers and 
future-oriented areas, such as environmentally friendly technologies, resource efficiency and renewable energy, as well as smart infrastructure. 
3.11.3.  Towards an innovative industry 
In terms of innovation performance, Italy is belo w the EU average and its relative position has 
not significantly improved over the past five years. Accord ing to the European Innovation 
Scoreboard (EIS), Italy positions itself in th e group of 'moderate innova tors', showing slow 
progress and registering a below-average annua l growth rate. Italy is behind its main 
European partners in many indicators of t echnology and innovation such as lifelong learning, 
tertiary education, patents,  and business R&D expenditure . Expenditure on R&D was only 
1.2% of GDP in 2008, with the priv ate sector accounting for less th an half of the total. This 
low performance reflects the prevalence in the productive sector of SMEs, which are 
specialised in manufacturing with  a medium high-technology output , as well as of small firms 
such as family businesses. Although they have traditionally been a source of dynamism, their 
limited financial resources hamper the ability to invest in research ac tivities and innovation.  
In the area of innovation, a number of relevant  measures were taken, including the creation of 
public-private joint-labs in strategic sectors to sustain new high-tech industries, the establishment of eleven Technol ogy Districts, the promotion of  the Italian participation in 
Technology Platforms set up by the European Union and the establis hment of incentive 
schemes that target sectors or activities identified  as priority investment  areas and that foster 
linkages between SMEs and research institutions.  
Funding mechanisms in support of innovation include a mix of direct and indirect 
instruments. Although direct public support to companies through grants and loans has been 
the traditional approach to fi nance research and innovation activ ities, the system has changed 
since 2006, with the reform of the public ince ntive system and the transition from capital 
subsidies to risk-taking by banks.  
The main initiatives launched between Ju ly 2008 and July 2009 include: the National Fund 
for Innovation, to promote innovative projects based on strengthening and exploitation of 
industrial property (tot al budget EUR 60 million); a risk cap ital fund for SMEs, to favour the 
influx of risk capital in sout hern Italy and support the crea tion and development of SMEs 
involved in investment programmes related to  product and process innovation through the use 
of digital technologies (tot al budget EUR 160 million, of which EUR 80 million from public 
funds); a tax exemption on capital gains from st art-ups, to reinforce the role of private 
investors, especially business angels; funds de dicated to finance innova tion projects proposed 
by start-ups operating in medium/h igh-technology sectors in biot ech, ICT, materials, robotics 
 
EN 101   EN and energy (total budget EUR 55 million); funds for research and innovation in the energy 
sector (total budget EUR 210 million) and a 'Bra in return' measure to counteract the brain 
drain phenomenon and to attract Italian res earchers living abroad through a tax incentive 
(10% tax applied to pers onal income) during the first five year s of fiscal residence in Italy as 
of January 2009. 
Measures were also envisaged to strengthen in dustrial competitiveness by enhancing patent 
and trademarks institutions and procedures and reinforcing protection against fraud and counterfeiting.  
Under the shortage of finance both from public and private sources and the tightening of 
credit conditions which limits the firms' access to funds, the main outstanding challenge is innovation financing, including thro ugh a more efficient allocation of resources via the capital 
market. Related to this, a major weakness is  the high degree of fragmentation of the 
institutions and actors that support new firms and innovation as well as a high number of 
instruments and measures at national and regiona l level. Thus, efforts to avoid fragmentation 
and overlapping between initiative s at national and regional levels , as well as to improve the 
current policy mix through an increased focus on key technology innov ation areas would be 
useful. Another challeng e relates to improving technology transfer mechanisms to reduce the 
existing gap between research and the market , especially through systemic public-private 
partnerships, and cooperation among companies. Furthermore, the shortage of high-skilled 
labour force and the brain drain phenomenon ar e concerns for Italy. Finally, the low 
propensity of companies to i nvest in innovative technologies  and undertake organisational 
change is also due to strict regulations affecting certain sect ors (e.g. entry barriers, price and 
quantity restrictions). 
3.11.4.  Towards a sustainable industry 
Italy's environmental performances as regard  the energy intensity of the economy and the 
carbon intensity of energy consumption in indus try can be characterised as good. This reflects 
Italy's significant efforts to support the modernis ation of the industrial base and to implement 
energy efficient technologies in order to reduce the need for energy imports. By contrast, Italy 
scores below the EU average concerning wa ste generated by enterprises and exports of 
environmental goods.  
The development and the competitiveness of the Italian productive system are embedded in 
the Industria 2015  Strategy. Its main instrument, the Industrial Innovation Projects (IIP), 
supports the implementation of specific projects  in energy efficiency, sustainable mobility, 
new technologies for "made in  Italy" products, new technol ogies for cultural and tourism 
properties, and new life technologie s. All three calls already issu ed in this framework contain 
measures focused on the environmental impact, energy efficiency and spread of clean technologies.  
In the framework of its recovery measures, Italy has supported invest ments in greening the 
economy, with emphasis on energy efficiency and use of renewable energies. The main recent 
initiatives in this area with direct relevan ce to industry included projects to sustain the 
diffusion of renewable sources  and energy saving in SMEs , public buildings, secondary 
schools, sport centres, penitentiaries, sma ll islands, and protecte d areas (total budget 
EUR 74 million for 2009) as well as a fund to de velop and enhance the use of high-efficiency 
industrial motors and the produc tion of electricity, heat and refrigeration via small co-
generators (budget EUR 200 million per year over the period 2007-2009). In addition, Italy 
 
EN 102   EN introduced a tax break between July 2009 and Ju ly 2010 for investment in new machinery, 
incentives introduced by the Febr uary 2009 stimulus package to purchase low-emission motor 
vehicles (including some cate gories of commercial ones) in exchange for scrapping old ones 
(estimated budgetary cost of the incentives  for 2009 was around EUR 1.1 billion, 0.07% of 
GDP), and funds allocated by the February 20 10 incentive scheme to stimulate sales for 
motorbikes, including electric and hybrid mode ls, home appliances and modular kitchens, 
energy-saving homes, alterna tive energy inventers and ma rine engines (total budget 
EUR 216 million). 
At institutional level, the main development c onsisted in the reform of monitoring of waste 
from industrial activities adopted and impl emented in 2009. The latter introduces an 
electronic Industrial Waste Monitoring System  (SISTRI) to which enterprises are obliged to 
adhere.  
Other relevant initiatives in this area are th e adoption in 2008 of th e Action Plan for green 
public procurement, which defines minimum standards for every category of goods and 
services purchased by the admi nistration, and the establishmen t of a working group on green 
chemistry (a working group on green cars is also foreseen).  
Italy's productive structure is heavily depende nt on imported energy and the policy response 
to encourage a greater diversification of energy sources and suppliers seems adequate. 
Moreover, Italy has channelled resources  towards future-oriented areas, such as 
environmentally friendly technol ogies, resource efficiency and renewable energy, as well as 
smart infrastructure. Building on the achievement s of the first National Energy Efficiency 
Action Plan, Italy could develop further a more comprehensive energy efficiency strategy. 
The shortage of skills in science and technology also  needs to be addressed if Italy wants to be 
competitive in innovation and the devel opment of low-carbon technologies. 
3.11.5.  The business environment 
Italian regulatory environment is characterised by lengthy and costly procedures for enforcing 
contracts and dealing wi th licences and, in general, high ad ministrative burden on firms. The 
degree of competition in services is relatively lo w, especially with regard to energy market 
and financial and professional services. The qua lity of infrastructure lags behind other 
Eurogroup countries and despite massive public inve stment over last decade s, large disparities 
persist between the north and the south of the country. In this  light, Italy scor es clearly below 
the EU average concerning the satisfaction with the quality of infrastructure, the legal and 
regulatory framework, the burden of government  regulation and elec tricity prices for 
enterprises. By contrast, Italy scores signi ficantly above the EU average concerning the e-
government usage by enterprises and slightly ab ove average concerning the level of state aid 
to industry and services.  
Italy adopted in 2008 a law on urgent arrangements for economic development, 
simplification, competitiveness, stabilisation of public finances as well as tax equalisation. 
This law is structured around three main inst ruments: 'cutting laws', 'cutting-burden' and 
'cutting bodies'. In this context, a target to  reduce the administrative burden on businesses by 
25% until 2012 has been set, with  over EUR 4 billion of annual  savings for businesses already 
achieved. In addition, a new simp lified regulatory impact asse ssment system was elaborated, 
focusing on the impacts on enterprises, citizen s and public administration. The law has also 
introduced the one-stop-shop ( Sportello unico ), which allows a busine ss to be opened directly 
via Internet by sending a single communication. 
 
EN 103   EN Italy plans to extend administrative simplificatio n measures to regions.  Provisions annexed to 
the 2010 budget law indicate that this undertak ing would imply for SMEs savings up to 
EUR 5 billion per year. 
The reform of the public administ ration is ongoing. Its structuring principles are better linking 
pay with performance, increasi ng mobility and introducing furt her competitive elements in 
the appointment of public ma nagers. Furthermore, the e-Government 2012 Plan , launched in 
2009, aims to modernise the public administra tion and to promote innovation through ICT. 
The Plan is expected to generate important savings (circa EUR 40 billion in 4-5 years) from 
the increase in productivity in the public sector.  
Other recent institutional developments aiming at creating a responsive administration are the 
law regulating the ‘delegation to the governme nt on mediation and c onciliation of civil 
disputes and trade’, which aims  at saving SMEs time and costs in case of a dispute, and the 
law providing an option for cooperative societie s to submit an annual communication instead 
of requiring full annual account s (both adopted in 2009).  
In order to improve infras tructure, a part of the Funds for Underutilised Areas  (FAS) was 
committed to design and construction of new infrastructure. With the 2010-2013 Economic 
and Financial Planning Document  (DPEF), the Italian government approved measures 
entailing approximately EUR 30 billion of invest ments in infrastructures. By the end of 2009, 
new construction sites were opened for work s with a value of roughly EUR 14 billion. 
With regard to deregulation, an  important law was adopted in 2009, whose aim is to remove 
obstacles that hinders opening up of markets,  promote the development of competition and 
ensure consumer prot ection through a closer cooperati on between the government and the 
Competition Authority. The law was designed to overcome anti-competitive regulations often established at regiona l and local levels. 
Italy has made efforts to improve its business environment, especially with regard at the 
quality of existing regulations though abolishi ng a high number of obs olete laws. Improving 
further the quality of new regulations, incl uding by making better use of tools such as ex ante  
impact assessment and consultation, remains an important undertaking in  this area. Moreover, 
an overarching strategy for regulatory reform  would help to keep  the focus on reducing 
further the operating costs for businesses,  streamlining implementation and better 
coordinating national and region al governments. Progress has been made towards improving 
the efficiency of public administration by adopting the law reforming this sector, but its effect 
will depend on the effective implementation. Fu rthermore, strengthening competition in the 
service sector remains an important undertakin g to improving the business environment and 
competitiveness. 
3.11.6.  Entrepreneurship and SME policy 
The business sector in Italy is characterise d by a large number of small and medium-sized 
firms specialised in products that require high-qual ity design and engineering. Their average 
size in terms of number of employees is signi ficantly lower than in the EU. Italy scores 
clearly above the EU average concerning the sh are of high-growth enterprises and slightly 
above average concerning time required to start a business, the enterprise  survival rate after 
two years and bank loan conditions deemed accepta ble by companies. However, it scores very 
badly concerning the payment duration by public authorities and clearly below the average 
concerning early stage financ ing and the business churn.  
 
EN 104   EN Italy has taken a number of measures for allevi ating the impact of the crisis on the business 
sector: a permanent partial de ductibility of the regional tax on economic activities (IRAP) 
from corporate income tax (IRES); the postp onement of two deadlines for business tax 
payments; a tax deduction equal to 50% of th e cost between June 2009 and July 2010 for 
reinvested profits in industrial machinery; and the acceleration of late payments by the state to 
business for goods and services. 
Italy also made largely use of the possibili ty to grant state aid up to EUR 500 000 under the 
Temporary State aid Framewor k. Over EUR 1 billion was made available to SMEs in 
manufacturing, services, automobile and tr ansport sectors. More over, Italy provided 
guarantees with a budget of EUR 40 million under the Framework.  
To foster skills and innovation potential, apar t from measures presented above (section on 
knowledge-intensive production), three other initi atives launched in 200 9 are relevant with 
regard to SMEs. These include the Biennial Na tional Plan for the commercial exploitation of 
intangible assets by small and medium ente rprises, to stimulat e innovation and economic 
growth though use of intell ectual property, the Italian Network for Innovation and 
Technology Transfer to SMEs (RIDITT), con ceived as an information hub and a reference 
point for centres for innovation and technology transfer, and a call for proposals providing 
grants, to support start-ups in the high a nd medium-high technology, launched in the 
framework of the National Operational Progr amme Research and Competitiveness for the 
period 2007-2013.  
A major undertaking to s upport the Italian firms sp ecialised in the produc tion of high-quality 
goods on the global market is the appr oval in March 2010 of the law on a Made in Italy  
stamp. According to this law, the 'made in Italy'  label will be assigned only to those finished 
products whose manufacturing stages for the most part took place in It aly, in textile, home 
furniture, shoes, leather and clothes.  
Regarding the internationalisation of SMEs , financial support for programmes improving 
access to foreign markets, development of feas ibility studies and technical assistance related 
to Italian investments abroad is provided under a law adopted in 2008. In addition, a law adopted in 2009 charges the government with coordinating all legislative arrangements 
related to internationalisation, including exports, promotion of investments, agreements between public organisations  and the bank system using foreign bank services. 
Furthermore, an anti-crisis expo rt promotion plan ha s been introduced in the framework of the 
recovery measures, with an overa ll budget of EUR 185 million for 2009.  
Despite measures taken to alleviate the impact of  the crisis, the business sector is confronted 
with difficulties in accessing finance and is suffering the shrink of both global and domestic 
markets. Facilitating the access of companies to international markets could help offset the 
decline in demand. The policy response through th e export promotion pla n, together with the 
other export supportive measures, seems adequate in this regard. Furthe rmore, enhancing the 
capacity of enterprises, partic ularly SMEs, to grasp global economic changes and respond to 
global challenges and risks are a concern.  
3.11.7.  Conclusions 
Whilst Italy's short-term priority is to consolidate public finances, a gradual shift of the 
productive structure towards more high-tec hnology and innovative activities would enhance 
the country's competitiveness in the medium to long-term.  
 
EN 105   EN A number of measures have been adopted with  regard to knowledge, innovation and industry. 
Increasing enterprises' innovation potential, enc ouraging a higher level of  private expenditure 
on research and innovation activiti es, as well as an increased focus on key innovation areas 
and better governance to a void fragmentation a nd overlapping between various initiatives 
could all be useful approaches for Italy.  
Considerable efforts have been made to improve  the business environmen t, especially through 
a range of measures addressi ng the regulatory quality. Developi ng an overarching strategy for 
regulatory reform would help to keep the fo cus on reducing further the operating costs for 
businesses, streamlining impl ementation and better coordi nating national and regional 
governments. In addition, importa nt cross-cutting issues are the shortage of high-skilled 
labour force, the efficiency and the effectiven ess of the public admini stration at central and 
local level, the competition framework as well as  the efficiency of local public services. 
 
EN 106   EN 3.12. Cyprus 
3.12.1.  Indicators graph 
Cyprus
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2007)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs
NANANA
NA4,8-3,5
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 107   EN 3.12.2.  Introduction34 
Cyprus’ hourly labour productivity per hour work ed reached about 80% of the EU average 
while it reached 90% per person employed. Howeve r, nominal unit labour  costs in Cypriote 
manufacturing increased almost twice as fast as the EU average of 19%, resulting in an 
overall increase of 36% between 2000 and 2009. 
Cyprus faces a chronic competitiveness problem, which is reflected in its large goods trade 
deficit. Cyprus' real effective exchange rate clearly appreciated between 1999 and 2009 
indicating decreased competitiveness. However,  this decrease was less pronounced than for 
the EU on average. Cyprus’ trade deficit in goods is by far the largest in  the EU if measured 
as a share in total exports. These developments s uggest that the main determinants of the trade 
deficit are due to structural reasons such as specialisation and linked to low productivity 
growth. On the other hand, services (73.8%  of GDP in 2008) e xhibit strong dynamism, 
reflected in high rates of growth and an expans ion of global market share. However, they do 
not compensate the defic it in the trade of goods.  
Cyprus is characterised by a marked but declining specialisation in low skill sectors, while 
high-intermediate and low-intermediate skill se ctors are stable at th e average from 1997 to 
2007. Cyprus is specialised in low and medium-low technolo gy sectors, and high technology 
sectors have been growing gradually, from a ve ry low level. Generally speaking Cyprus tends 
to specialise in sectors having low growth and productivity rates with respect to the EU 
average. 
Manufacturing represents a sign ificantly smaller portion of th e economy compared to the EU 
(8 vs.17% of value added in 2008), specialising in non-metal mineral products, wood products 
and increasingly food/drinks/tobacco. In the se rvice sector, hotels and restaurants, public 
administration, financial intermediation and construction are above the EU average (2008 
figures). 
Employment figures show structural changes ta king place in the service sector. Forecasts up 
to 2020 indicate strong increases in construction, business and ot her services as well as non-
marketed services and stable employment in all other sectors. 
Exit from the crisis Cyprus was affected be the crisis later than most EU members. Manufacturing output in June 
2010 was 15% below its pre-crisis level and only 3% higher than at the bottom of the crisis. 
While in 2008 no problems were reported regard ing access to finance, both in 2009 and 2010 
domestic credit growth dropped due to the more restrictive lending policies of financial 
institutions. Sectors most affected by the cr edit squeeze are manufacturing, construction and 
tourism. The Cypriot government did not im plement specific measures under the Temporary 
State aid Framework and relies on regular State aid rules.  
Specific support measures were introduced to help the tourism and co nstruction industries, 
consisting of the: 
                                                
 
34 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 108   EN • Increase of the government grant provide d to the Cyprus Tourism Organisation 
(CTO) by EUR 12 million (0.07% of GDP) enabling the CTO to adopt a more 
extrovert and aggressive strategy to stim ulate demand and mitigate the effects of 
the crisis on tourism. 
• Reduction of VAT from 8% to 5% for the hotel industry for the period 1.5.2009 – 
30.4.2010 (EUR 15 million). 
• Support scheme for domestic (social ) tourism, i.e. increase of the available budget 
provided to low income families, pensione rs, welfare recipients and people with 
disabilities for subsidizing vacations at  local destinations during the summer 
period of 2009 (EUR 10 million). 
• Reduction of landing fees at airports levied on airline companies for the period 
1.4.2009 – 31.12.2009 (EUR 16 million). 
• Cancellation of overnight stay fees levied  by local authorities on hoteliers for the 
period 1.4.2009 – 31.12.2009 (EUR 10 million). 
3.12.3.  Towards an innovative industry 
The European Innovation Scoreboard 2008 classi fies Cyprus among 'Moderate innovators'. 
R&D spending and businesses R&D remain at part icularly low levels in comparison to GDP 
in spite of rapid growth in ab solute terms; due to the struct ure of the produc tive sector, a 
significant increase of business R&D expenditu res is unlikely in the near future.  
The government has introduced a series of measures to encourage stronger industry 
participation in R&D and innovation activities a nd has reinforced the role of the Research 
Promotion Foundation. The latter's 2009-2010 program me for calls includes a separate section 
on research and innovation in the business sector that supports specific  research projects, 
networking, technology transfer and innovation in SMEs. The annual budget for these actions 
is EUR 8.3 million. The most important action ( new products and services ) targets the phase 
of development of existing research.  
Innovation policy focuses on the utilisation of R&D results, diffusion of new technology and 
entrepreneurship. It almost exclusively takes th e form of direct supp ort; fiscal incentives 
would not be effective since ta x rates are very low anyway. Th e creation of the ‘Mediation 
Centres for Research and Innova tion’ targets the design of the intermediation mechanism 
between SMEs and research organisations, while 'Thematic Innovation Networks' aims 
directly at the creation of the cooperation networks between enterprises, research institutions 
and intermediate bodies. Important actions su ch as the launch of the high-tech business 
incubator programme and the establishment of the Science and Technology Park are under 
way.  
A parallel scheme under the authority of the ministry for Commerce and Industry aims at 
upgrading labour productivity by  subsidising training and c onsulting expenditures by 
businesses having more than 10 employees. 
While public research capabili ties and innovation policy have been considerably improved 
over the last decade, the business sector is still considerably under-investing in R&D and 
innovation. Innovation policy has evolved rapi dly but in a rather fragmented way. 
 
EN 109   EN 3.12.4.  Towards a sustainable industry 
The energy intensity and the CO2 intensity of the business sector in Cyprus are both high.  
Cyprus being heavily dependant on imported oil for its energy supply and having a small and 
isolated energy grid has set energy efficiency  as a top priority alongside addressing climate 
change. For this purpose, an energy centre that would enable the importation of natural gas to the 
island is under construction and expected to commence its operation by 2013. The New Support 
Scheme for electricity generation from large sc ale units from renewable energy sources (wind 
and photovoltaic systems, concen trate solar power systems, biomass and biogas installations) 
was approved by the Council of Ministers in December 2009. The first wind park is being 
built in the Paphos area, with a capacity of 82M W, amounting to about a third of the targeted 
energy to be produced from renewable sources by 2015.  
Additional incentives schemes encourage energy saving investments in SMEs and 
households. 
The high energy and CO2 intensity of the Cyprio t business sector, in combination with the 
heavy dependence  on imported oil for energy generation a nd a small and isolated energy grid 
represent a potential risk in case of high volatility  in oil and CO2 prices. Promoting energy 
efficiency and the generation of energy from renewable sources clearly remain strategic 
priorities for Cyprus. 
3.12.5.  The business environment 
Cyprus offers a generally favourable business environment. Satisfaction with the regulatory 
burden and the quality of infrastructure is a bove the EU average. The small size and the 
relative isolation of the ec onomy pose some challenges re garding the functioning of 
competition. 
In order to strengthen admi nistrative capacity, Cyprus init iated over the period 2008-2009 
several initiatives including i.a. the project " Re-organisation and improvement of the 
administrative capacity of the Public  Administration and Personnel Department " (PAPD). 
The Action Plan to facilitate the disseminati on of the Performance Assessment System (CAF) 
in the public sector together with a new C ode of Conduct for civil servants is being 
developed. The new Management Information Syst em (MIS) for the Structural Funds, which 
went into operation in September 2009, is expect ed to increase the effi ciency of EU funds 
management and thei r absorption rate.  
The national Action Plan to promote Better Re gulation in Cyprus, approved by the Council of 
Ministers in July 2007 and revised in April 2009, is structured around three pillars: the 
simplification of the le gislation, the reduction of administra tive burden and the introduction of 
an impact assessment which will be realised  by a simplified mechanism based on a standard 
questionnaire and supported by a consultation guide addressed to civil servants. This will help 
the establishment of a more structural approach  towards consultation of  stakeholders. Cyprus 
adopted in 2008 the target of reducing by 20% the administrative burden on businesses by 
2012. It is planned to acquire consulting services  for the implementation of a pilot project to 
reduce the administrative burden in  the real estate market, esp ecially for planning permissions 
and building permits. 
Usage of eGovernment services by enterprise s is still below the EU average in 2009, despite 
significant progress over the period 2005-2009. The eGovernment policy is embedded in the 
 
EN 110   EN National Information Society strategy (revised in 2009). The national eProcurement Platform, 
completed in February 2009, covers all the phas es of the process from eNotification to 
eInvoicing and is mandatory for all Contracting Authorities. The one-sto p-shop to start-up a 
company started its operation in 2007 and is currently upgraded to  serve as the point of single 
contact foreseen in the Services Directive. The eFiling project, which allows a complete online registration of a new company, starte d in April 2008 but is not yet completed.  
The new strategy to promote ICT uptake by upgrading ICT- infrastructure and expanding 
broad-band coverage will contri bute to the improvement both of the diffusion of information 
and the functioning of th e business environment. 
The results of an independent study on the degree  of competition in the sector of Professional 
Services are examined by the Commission for the Protection of Comp etition (CPC), which 
will consequently proceed with the necessary actions. 
The liberalisation of the energy market is continuing;  it is anticipated to be fully liberalised by 
2014. 
3.12.6.  Entrepreneurship and SME policy 
The contribution of Cypriot SMEs to the overall economy compared to that of large firms is 
significantly higher than for the EU average. In particular, the contribu tion of micro firms to 
employment is in Cyprus (39% ) higher than the European av erage (30%) and the contribution 
of the total SME sector to employment (84%) is  in Cyprus higher than in the EU on average 
(67%). 
Cyprus continued its efforts to  set up a Loan Guarantee Gran ting Facility to support SMEs 
that are not able to provide su fficient collateral. In April 200 9, the government entered into a 
Financing Agreement with the European Investment Fund for an amount of EUR 20 million, with a view of providing  funds to SMEs. The financial products offered in the Agreement are: 
a) Micro-loans with co-funding and b) Micro-loans Cash De posits. In addition, Cyprus 
introduced schemes (co-financed by ESF) to  promote women and youth entrepreneurship 
through facilitation of access to finance, fo stering an entrepreneurship culture and 
encouraging them to create their own business.  The schemes have been amended and included 
in the new programming period 2007-2013 with  total budgets of EUR 5 million and 
EUR 6 million respectively. An additional sche me (EUR 23 million) supports investments 
and acquisition of know-how in SMEs active in manufacturing and business services. Finally, 
one-stop-shops for business registration are operat ional and cover the recruitment of the first 
employee. 
The main challenge for both general and SME sp ecific measures is the promotion of highly 
skilled, high productivity SMEs that will increase the economy's competitiveness and promote its diversification. 
3.12.7.  Conclusions 
Cyprus faces a chronic competitiveness prob lem linked to its structural problem of 
specialisation in low-skills, lo w technology and low growth sectors, which is reflected in its 
current account deficit. The policy priority ther efore remains to adjust  the structure of the 
economy towards high skill, high growth activities, primarily in services and tourism, through 
 
EN 111   EN investing in education, R&D and innovation and encouraging entr epreneurial activ ity in high 
value added sectors.  
The high energy and CO2 intensity  of the Cypriot business sector, in combination the heavy 
dependence  on imported oil for energy generation and a small and isolated energy grid 
represent a potential risk in case of high volatility  in oil and CO2 prices. Promoting energy 
efficiency and the generation of energy from renewable sources clearly remain strategic 
priorities for Cyprus. 
 
EN 112   EN 3.13. Latvia 
3.13.1.  Indicators graph 
Latvia
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2005)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEsNA
NANA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) 
always indicate performance which is better (weaker) than the EU average. 
 
EN 113   EN 3.13.2.  Introduction35 
Measured both per hour and per person, Latvia's  labour productivity is below the EU average 
albeit showing a slight improve ment. Labour shortages, aggravat ed by significa nt emigration, 
contributed to the emergence of a wage-price sp iral, with increasingly rapid wage growth 
outstripping productivity in 2005-20 07. Inflation rose to very hi gh levels, peaking at 15.4% in 
2008. Concomitantly, nominal unit labour costs in  Latvian manufactur ing increased by 85% 
between 2000 and 2009 with virtua lly all of the increase occurri ng during the second half of 
the decade. As a result, the overall increase was more than four times the EU average of 19%. 
As a result, Latvia's competitiveness has seriously suffered. This is confirmed by the real effective exchange rate which by 2009 had appr eciated sharply, also compared to the EU 
average, indicating a signifi cant loss of competitiveness. 
In the four years up to 2007, Latvia's real GDP  growth averaged over 10% p.a., driven 
primarily by a credit boom that fed private c onsumption and real esta te investment. Equally, 
the inflows of FDI, which increased consider ably after EU accession, went mainly into the 
domestic-demand-oriented sector s and the share of manufacturing within total FDI inflows 
remained tiny. On the other hand, investment by domestic companies in the manufacturing 
sector was significant over the past decade. This  has been driving the restructuring of the 
manufacturing sector from labour-intensi ve to more capital-intensive production. 
Accordingly, the changes within the com position of manufacturing output have been 
substantial, with significant shifts taking place among its different branches. 
Latvia has now embarked on a strategy of signi ficant fiscal consolidation and increase in 
competitiveness, based on the retention of the current exchange rate and the restoration of competitiveness through structural reforms and in ternal devaluation. This strategy is reflected 
in the January 2009 Memorandum of Understanding between the Latvian authorities and the 
Commission in support of Latv ia's programme to maintain domestic and international 
confidence in the financial system, contribute to  the reversal of the cost competitiveness and 
inflationary trends, as well as to st rengthen the economy’s growth potential.  
In 2008, Latvia had a trade deficit in all ma jor groups of goods, except wood and articles 
thereof. This partly reflects the consequences of the recent domestic demand boom, but is also 
a result of the high share of services in th e country's economy and exports. The wood and 
textile industries, historically the most important export sector s along with the metal industry, 
were hit by large domestic cost increases  between 2004 and 2008. At the same time, the 
deficit in goods relativ e to total exports has been decr easing significantly from 2005 to 2009.  
The previously high current account deficit was due  to a large deficit in trade in goods (spread 
widely across product categories), traditionally partly counterbalan ced by a surplus in trade in 
services. Despite the deteriorating cost compe titiveness, Latvian export performance has been 
very dynamic: its share in total exports of the EU-27 and the world doubled between 1999 and 2007. This gain has been continuous and widespr ead across product categories. A number of 
factors can explain the increase in Latvia's market shares desp ite the strong cost pressures: 
better market access and deepenin g regional trade integration, the high growth of the CIS 
economies, the still very low le vel of wages (at around only a qua rter of the EU average in 
                                                
 
35 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 114   EN 2008) and the recent productivity in crease, as well as the increa se in prices of commodity 
exports. 
The share of manufacturing in Latvia has been considerably below the EU average level (for 
example, 11% vs. 17% of value added in 2008). La tvia is increasingly sp ecialised in sectors 
requiring low-intermediate skills, while there ha s been a decrease in specialisation for the 
high-intermediate and low skills sectors. There is an increase in specialisation on medium-low technology sectors, and a high de gree of specialisation in the low technology sectors. Latvia 
tends to specialise in sectors, which in the EU  as a whole have record ed above average growth 
over the last ten years.  The sectoral specialisation indi ces of 2000 and 2006 show particular 
focus on wood and wood products, textiles and clothing, food processing and other 
manufacturing. In the service sector, wholesal e and retail, transport and communication as 
well as construction had a clear above average weight in 2008. Agriculture and forestry are 
much more important than for the EU in tota l. Employment figures for the period 1996-2006 
show the decreasing importance of the primary sector as we ll as manufacturing, and a shift 
towards service sectors, especially in real esta te and other business ac tivities. Forecasts until 
2020 expect a further employment increase in business and other services (+32%),  as well as 
continued decline in the primary sector (- 15%) and manufacturing (-11%), but also in 
construction (-28%) and non-marketed services (-9%). 
The export product structure of Latvia has beco me more diversified over the past decade. 
Latvian exports are still characte rised by raw material and labour  intensive products, but there 
has been a favourable shift towards capital and technology intensive products, especially since 
2005. Even though the share of low-tech and medi um-to-low-tech goods in total exports is 
still high compared to the other new Member St ates, exports of capital intensive and easy-to-
imitate research intensive goods  have increased very rapidl y. While the shares of wood, 
mineral products and textiles in total exports declined, more  capital and rese arch intensive 
segments, such as chemicals, base metals, m achinery, and transportation equipment gained 
share
36. This observation may suggest that the co st pressures, stemming from rapid wage 
growth and labour shortage in th e previous years of rapid grow th, forced Latvian exports in 
goods to shift towards research a nd capital intensive segments.  
Latvia has an established tradition in serv ices due to its geographic position and a well-
developed transit infrastructure. It is interest ing to note the relative resilience of Latvian 
services exports during the economic crisis, desp ite the high inflation and the appreciation of 
the lats against some regional currencies. Serv ices exports have been increasing by about 19% 
p.a. since Latvia joined the EU. Amidst the very severe recession in the first nine months of 
2009, the value of services exports reached 56% of  that of exports in goods. This was mainly 
due to the value of services exports dr opping only by some 10% y-o-y, whilst the goods 
exports fell by around 21%. However, even in  2008 the value of services exports was 
comparable to almost half of the goods exports . Around half of all serv ices exports is in 
transportation, some 18-19% in tourism and the rest mainly in financial and other business services.  
Exit from the crisis 
                                                
 
36 The quality of trade data might be influenced  by the difficulty to exclude transit trade. 
Furthermore, caution is needed in interpreting th is data, since the broa d classifications do not 
always capture the true nature of the activity performed in the country. 
 
EN 115   EN Manufacturing production fell by 27% between February 2008 a nd February 2009 as a result 
of the economic and financial crisis. By Ju ly 2010, output had recovered by 20% from the 
trough. In 2009, mainly due to the rapid correction of th e trade deficit and the improvement in 
the services balance, the current account balanc e turned into a 9.6% of  GDP surplus and it is 
expected to remain at co mparable levels in 2010. 
In view of the crisis, the Latvian government introduced de minimis  aid under the Temporary 
State aid Framework. More than EUR 80 million was made available to over 120 businesses, 
mainly SMEs. The beneficiary enterprises are mainly active in manufacturing, services and 
transport. One individual guarantee case concer ned the metal sector. The main problem for 
business remains access to finance due to the very high collateral requirements. Moreover, 
there is limited availability of s hort-term export credit insurance.  
In November 2009, the Government approved th e report by the Ministry of Economy on 
Policy Directions for Economic Recovery over the Medium Te rm. This report proposed the 
identification of priorities for public suppor t programmes on the basis of the following 
criteria: competitive enterprises with high gr owth and export capacity; processing industry 
sectors with significant contri bution to value-added and exports or potential for high future 
growth and export (food industry; wood industr y; chemical industry and pharmaceuticals; 
electric and optical equipment, machinery and metal processing) and e xport-oriented service 
sectors (transport and logistics, tourism and ICT). 
3.13.3.  Towards an innovative industry 
The financial and economic crisis of the c ountry has a profound impact on public policies. 
The substantial reduction of all public expe nditures in 2009 has c onsiderably endangered 
implementation of a range of R&D and innovati on support measures and further advancement 
of innovation policy as a whole. The European  Innovation Scoreboard 2009 identified Latvia 
as one of the three countries in the catch ing-up group, with an innovation performance 
considerably below the EU-27 average, but an above average rate of improvement.  
A range of support measures addressing the identifi ed challenges have also been launched in 
the new planning period of the EU structur al funds for 2007–2013. Those include such state 
aid schemes as ‘Investments in development of  micro, small and medium-sized companies in 
specially supported te rritories’, ‘Liaison offices for tec hnology transfer’, ‘Development of 
new products and technologies’, ‘Support for bringing new products a nd technologies into 
production’, and ‘High value added investment s’. A new nationally funded pre-seed support 
instrument for innovative business ideas has also  been launched. A range of other state aid 
programmes crucial for the promotion of inno vation have been elaborated, yet these are 
currently on halt due to th e budgetary restrictions. 
Latvia has so far not leveraged public procurement to boost innovation. 
The main remaining challenge is the poor innova tion activity of the majority of SMEs, which 
makes enhancing the innovation capacity and perf ormance of the enterprise sector a clear 
priority. Latvian companies take almost no advant age of the research potential at universities 
and state research institutes and science-i ndustry cooperation has been one of the most 
pressing and persisting challenges in the nati onal innovation system. Given the generally low 
level of technological de velopment in the private sector, a dditional emphasis could be put on 
the promotion of skills and resources that enable application of  existing technologies. 
 
EN 116   EN 3.13.4.  Towards a sustainable industry 
Latvia's economy is characterised by below average performance in terms of energy intensity 
of its industry. The measure of  exports of environmental goods  as a percentage of total 
exports is also lagging behind. 
During the period 2008–2009, Latvia implemented the Environmental Policy Integration 
Programme, using the EEA financial instru ment via two open tenders for subproject 
applications. Ten projects were approved, in cluding two pilot projects where energy is 
produced from renewable energy res ources that are not widely used  in Latvia (biodegradable 
municipal waste and applicati ons involving solar en ergy and pellets). In 2009, these pilot 
projects were approved and th eir duration runs until Janua ry 31, 2011. Work continued on 
updating recommendations for the promotion of “g reen procurement” in public administration 
and local government institutions, as well as for the promotion of environmentally friendly construction standards. Recommend ations for three new groups of  products/services were also 
under development. In 2009, the legislative basi s for electricity production from renewable 
energy resources and on pricing procedure was also approved.  
The main challenge of Latvia is to decrease th e energy intensity of its industry where targeted 
measures are lacking. 
3.13.5.  The business environment 
Latvia scores slightly above the EU average co ncerning state aid for industry and services and 
electricity prices for medium size enterprise s, but slightly below average concerning the 
satisfaction with the quality of infrastructure  and the e-government usage by enterprises. 
In 2009, a regulation setting common pr inciples for policy planning and ex ante  impact 
assessment practice was adopted. Latvia has also  drafted a new Construc tion Law to decrease 
the number of public institutions involved in the process from five to one and to cut the time 
required for obtaining a construction permit from 180 days to 60. The draft law was subject to 
public consultation in the sec ond half of 2009. Latvia is con tinuing to improve its new 
Insolvency Law that entered into force in 2008. Amendments were sc heduled to make the 
insolvency process more rapid, flexible and efficient. The Public Procurement Law (June 
2009) was amended by altering substantially the requirements for the selection procedure and 
standardising the re quired documentation. 
In 2009, the e-government programme 2010-2013 was revised, providing for development of 
system-to-system interfaces for government-to- business e-services to improve the uptake. 
Since June 1, 2010 the Enterprise Register enab les business start-ups to apply simultaneously 
for VAT registration. However, entrepreneurs are consequently asked to appear in person at 
the premises of the State Revenue Service (SRS ) where an additional questionnaire has to be 
filled in. On the basis of this questionnaire , a special SRS commi ttee makes a decision 
whether to grant a VAT number or not. Officia lly, up to 15 days are needed to obtain a VAT 
number, but the countdown is started only af ter the entrepreneur has filled in the SRS 
questionnaire. Thus, Latvia  still does not satis fy the requirements for a fully functional one-
stop-shop for business start-ups.  
In 2009, Latvia adopted 2010-2016 guidelines for attracting FDI and promoting exports. A 
specific Action Plan for 2010-2011 was adopted  in March 2010. At the same time, the 
Government adopted its annual Plan for the Improvement of Business Environment, which 
 
EN 117   EN envisages 22 measures (38 sub-measures) in  the areas of company registration, micro-
enterprises, tax administration, real estate, as  well as e-procurement and e-government. Eight 
of the planned measures and 20 sub-measures  were already implemented by August 1, 2010.  
Despite a significant rise between 2005 and 2009, the use of e-government services by 
enterprises is still below the EU average. The use of eCommerce by both enterprises and 
private individuals is also underdeveloped. Anot her feature of the Latvian economy is that 
ICT has so far been mainly used for support fu nctions instead of core business activities both 
in the private and public sectors. Thus, th e ICT potential in raising productivity remains 
largely unexploited. 
3.13.6.  Entrepreneurship and SME policy 
The SME sector in Latvia has a structure which is  skewed towards larger size classes, with the 
percentages of medium- sized and small enterpri ses much higher than the European averages 
and the percentage of micro enterprises mu ch lower. The contribution of SMEs to 
employment (76%) in Latvia is significantly higher than the Eu ropean average (67%). This is 
partly due to the particular st ructure of the SME sector: the relatively few Latvian micro firms 
contribute less to employment (22%) than EU micro firms do on average (30%) in all the 27 
Member States. In 2008, Latvian SMEs acc ounted for 74% of value added in the non-
financial business economy, far a bove the EU average of 58%. 
A programme to promote self-employment a nd entrepreneurship (co-financed by the 
European Social Fund) was established in 2009, which provides complete support, including 
consultations, training, financial loans and grants for starting a business. Since the start of the 
programme, 101 start-ups have been supported with a total loan amount of LVL 1.57 million, 
92 projects were granted additi onal funding and 435 persons partic ipated in training courses. 
A competition “Ideas Cup” has been held annua lly since 2007 where thousands of applicants 
submitted their business plans in order to re ceive mentoring. Since the beginning of the 
competition about 1500 ideas were entered a nd 500 persons participated in training. The 
competition project has received the Eur opean Commission’s recognition in 2009.  
In October 2009, the Government approved a c oncept paper on support measures to micro-
enterprises, aimed at: decreasing business star t-up costs; enabling a friendlier tax policy; 
facilitate bookkeeping and access to finance; as well as promote access to information. In the 
framework of this initiative, individuals enga ged in small business activities may opt for a 
combined "patent" fee not exceeding EUR 100 pe r month, instead of personal income tax and 
social security contributions. A special law on simplified taxation of micro-enterprises is in 
force since September 1, 2010. The law applies to businesses with an annual turnover below 
EUR 100,000 and less than five employees. As of  May 2010, a series of simplifications have 
also entered into force as regards company regi stration, notably a possib ility to establish an 
enterprise with decreased (instant) st atutory capital – going as low as EUR 1.43.  
The support measures for entrepreneurship also include various financia l instruments: loan 
instruments, guarantees, as well as seed, star t-up and risk capital support programmes. For 
example, the Mortgage and Land Bank programme “Loans for the Improvem ent of Enterprise 
Competitiveness” accounts for LVL 140.2 million financing. Since the beginning of 
programme (2008), a total of LVL 106.6 million in loans has been approved, including LVL 
38.4 million of loans co-financed from the ERDF. The Latvian Guarantee Agency (LGA) provides credit guarantees and  export credit guarantees in th e framework of the programme 
 
EN 118   EN “Guarantees for the Improvement of Enterprise Competitiveness” . By August 31, 2010 the 
LGA had issued credit guarantees to 136 co mpanies for a total of LVL 51.3 million and 
export credit guarantees to 29 companies for total amount LVL 1.5 million.  In the framework 
of the European Investment Fund loan instrument , investment and working capital loans to 
SMEs are available. The total funding of this measure is LVL 36.5 million or 0.3% of GDP (the bank financing at least 50% of the cred it portfolio) and it is run by two big commercial 
banks. Finally, there are also two risk capit al financing schemes of some LVL 14 million 
each, one of which for seed and start-up financing. 
Access to finance is the most pressing challenge  currently faced by Latv ian SMEs. In general, 
their low level of penetration in global value chains is an additional constraint on innovation and growth. 
3.13.7.  Conclusions 
Latvia's cost competitiveness during the overheating years deteriorated. Given that labour-
intensive products are s till very importan t in Latvia's goods exports  and reflecting the strong 
service orientation of the economy, it seems to be of param ount importance to respond to this 
deterioration in cost competitiveness by cost re ductions in the short- term and by productivity 
increases in the longer-term. Labour market conditions have changed dramatically and 
statistical evidence of nominal wage adjustment is growing. Th is adjustment of the labour 
market is expected to ensure the necessary co rrection of wages and to shift workers to the 
tradable sector, thereby supporting the recove ry, although emigration to other EU Member 
States is a major risk factor. 
An increase in productivity appears to be the only way for Latvia to enjoy higher living 
standards in the future. Hence, new capital an d investment are badly needed exactly at the 
time when access to finance is pa rticularly difficult. The supply  side of the economy could be 
strengthened by making efficient us e of the available EU structur al funds in combination with 
structural reforms aimed at facilitating the shift of resources towards the tradable sector. For example, closer integration of the R&D and innovation policies, further improvement of the 
regulatory environment, as well as fully exploiting the potential of information and 
communication technologies in raising productiv ity, especially as regards core business 
functions on the basis of broadband, could pr ove useful. Recent decisions of the Latvian 
authorities put particular emphasis on specifi c industry sectors. However, a favourable 
business environment, which is conducive to in vestment, innovation and growth, is important 
for all business actors across the board. 
 
EN 119   EN 3.14. Lithuania 
3.14.1.  Indicators graph 
Lithuania
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2007)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2005)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs
NA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 120   EN 3.14.2.  Introduction37 
Lithuania’s labour productivity was, measured both per hour and per person, at around 55% 
of the EU average in 2005 and 2008/2009, increasi ng slightly in-between. The real effective 
exchange appreciated significan tly between 1999 and 2009, indi cating a markedly decreased 
competitiveness, also compared to the EU aver age. Nominal unit labour costs in Lithuanian 
manufacturing remained constant between 2000 and 2005 and increa sed by 23% between 
2005 and 2009, resulting in an overall increase which was somewhat above the EU average of 19%. 
Lithuania is specialised in sectors demanding lo w skills and, increasingly, in low-intermediate 
skill sectors. This picture is confirmed by a clear trend towards sectors with medium-low 
technology intensity, a (decreasing) specialisa tion on low technology sect ors and a very low 
share of higher technology sector s. Lithuania tends to specialise in sectors with a growth rate 
below the EU average but high growth sectors gain in importance. 
Manufacturing plays a slight ly bigger role for Lithuania than for the EU in total (18% versus 
17% of value added in 2008). Comp ared to the EU, the manufactur ing sector is particularly 
specialised on textiles and clothing, wood a nd wood products, food, and other manufacturing. 
In the service sector, construction, wholesale and retail and transport and communication had 
a clear above average weight in 2008. Agricultur e and forestry are much more important than 
for the EU in total. Employment figures show th at agriculture has dram atically decreased its 
importance over time, while they have remained re latively stable in manufacturing. There is a 
clear change in employment distribution toward s service sectors, esp ecially construction, 
wholesale and retail and real estate and bus iness activities. Forecasts until 2020 expect an 
increase in employment in bus iness and other servi ces (+35%) and in c onstruction (+16%) as 
well as a continued clear decl ine in agriculture (-37%) but also in manufacturing (-10%). 
Lithuania has a deficit in the trade in goods, with a noteworthy reduction of this deficit from 
2005 onwards. In the fourth quarter of 2009 extern al trade figures turn ed almost balanced. 
Exit from the crisis The drop of manufacturing output due to the ec onomic and financial crisis amounted to 28%. 
The production regained 16% in July 2010. The Lithuanian government made more than 
EUR 70 million available for business to cope with the economic and financial crisis.  
The Lithuanian "Economic Stimulus Plan" foresees EUR 30 million (0.1% of GDP) for 
export credit insurance. About 50% of the c ontracts have been signed, but only a small 
fraction of the finances have reached the exporting sector. Tw o holding funds, the "Business 
and Investment Guarantee Fund" (INVEGA) and the EIF-managed JEREMIE holding fund 
with a combined volume of over EUR 400 mill ion (LTL 1.3 billion, or 1.5% of GDP), are 
directed at improving SMEs' access to finance th rough several financial engineering measures 
– loans, guarantees, venture capital funds and a co-investment fund for "business angels". To 
date, about 50% of the foreseen  agreements have been signed and about 18% of the financing 
extended. Even 65% of guarantees were extended.  
                                                
 
37 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 121   EN Moreover, a system of delayed tax payments fo r newly-registered SMEs has been introduced, 
delaying due payments up to 5 years fo r up to 80% of the calculated tax. 
3.14.3.  Towards an innovative industry 
The current Lithuanian industry structure re mains disadvantageous for rapid productivity 
growth and high value added manufacturing devel opment. Therefore, the major challenge for 
Lithuania is to upgrade its sustained trad itional industries towards high value added, 
knowledge intensive modern industrial sectors re gardless of their position in low-high tech 
classification. 
There have been some attempts recently to  improve co-ordination and implementation 
regarding innovation policy. Severa l measures directly addressi ng innovation are aiming to 
strengthen innovation support infrastructure and develop its institutional capacities, to 
improve R&D and business co-ope ration in innovation development, to improve quality of 
human resources for R&D and innovation and to strengthen the public and private R&D base. 
EU structural funds are used for seven inst ruments focussing on both technological and other 
forms of innovation across different stages of  the innovation process, beginning with first 
ideas over feasibility studies to more 'hard' me asures supporting the putt ing into practice. For 
all the instruments together, proposals for more than EUR 63 million have been received until 
2009.  
Direct support for innovation in firms is of fered as well. Innovation policy discussion has 
intensified and addressed innova tion culture, cluster developm ent issues, and the problems 
industry is facing - intensifying brain-drain and international mi gration of qualified labour. An 
amendment to the Law on Corporate Income Tax has entered into force in 2009 that encourages companies' investment in R&D by reducing the taxable profit 3 times the 
investment and reducing the amortization proce ss to 2 years. This includes also Income  Tax 
Relief for Investments into New Technologies; a ssessable profit for the enterprises could be 
reduced up to 50 % of expe nditures incurred by investing into equipment, means of 
communication, computers, etc. A key initiative in terms of reorganisation of research and 
innovation activities is the ongoing establishmen t of five integrated science, study and 
business centres – so called Valleys – which are supposed to strengthen the links between the 
public research base, higher education and busin esses and reinforce the strengths of regionally 
concentrated research and innovation networks.  
Key challenges include, first, to improve ski lls for innovation and entr epreneurial attitudes. 
One of the major strengths of Lithuania is the relatively high share of S&E graduates. 
However, there remain concerns about skills shortages in cert ain fields (e.g. highly skilled 
human resources in the specific areas of sc ience and technology). Secondly, R&D capabilities 
in firms, the development of a sound R&D base  and closer links with public research and 
higher education institutions are important. The Lithuanian busin ess sector suffers from the 
relatively low R&D potential in business, both in terms of the number of researchers in the business sector and in terms of R&D funding. Th irdly, there is a need to develop knowledge-
intensive clusters across public knowledge poles. 
3.14.4.  Towards a sustainable industry 
Substantial efforts are needed for Lithuania to reduce its greenhouse gas emissions in line 
with agreed policies.   
 
EN 122   EN With the aim to promote Cleaner Producti on (CP) technologies the PE Lithuanian 
Environmental Investment Fund (LAAIF) provides subsidies to environmen tal projects within 
the de minimis threshold. The main recipients are SMEs that invest in less polluting or waste 
preventing technology. Funding can reach 60-80 pe rcent and shortens the amortisation period 
of the investments to a maximum of three years. 
In the context of the economic stimulus meas ures a budget of Litas 1.8 billion was available 
in 2009 to support renovation and insulation work s of public buildings and private apartment 
blocks, co-financed by EU structural funds (ERDF). 
A Green Procurement Implementation Programme fr om 2007 foresees an increasing share of 
up to 25% (in 2011) of public procurement for wh ich purchased products a nd services have to 
meet established environmental criteria. 
3.14.5.  The business environment 
Policies to systematically improve the busin ess environment are still relatively recent. 
Lithuania scores clearly above the EU av erage concerning the e-government usage by 
enterprises and slightly above average conc erning the availability of high-speed broadband 
lines. However, the country scores below average concerning infrastructure expenditures. 
In 2008, Lithuania adopted its National Progra mme for Better Regulation with the aim of 
creating the adequate institutional framework and strengthening administrative capacities, 
improving the quality and efficiency of regula tions as well as reducing administrative burden 
and unjustified compliance costs for businesses.  In March 2009, the Government adopted the 
target of reducing by 30% the administrative bu rden on businesses by the end of 2011 in the 
seven priority areas: Tax Ad ministration, Work Relations (Labour Law), Statistics, 
Environment Protection, Trans port, Territorial Planning and Construction and Real Estate 
Operations. The mapping of the information ob ligations was completed in the beginning of 
2009, but the corresponding baseline measurement to quantify the administrative burdens is 
delayed to the second half of 2010. An expert  body composed equally by representatives of 
public authorities and businesse s (the Sunrise Commission) was established in March 2009 to 
present concrete proposals to improve the regulatory environment. In 2009-2010, it submitted more than 140 proposals to the Government, out of which 56 have already been implemented, 
e.g. the process of establishment of individu al enterprises and pr ivate limited liability 
companies has been simplified and registration term of legal entitie s in the Centre of Registers 
has been shortened from 5 to 3 working days.  
eGovernment policy is pa rt of the Lithuanian Public Administration Development Strategy  
until 2010 as well as of the Information and Knowledge Society Development  2009-2015. The 
central eProcurement platform is mandatory an d allows contracting authorities to implement 
the whole online process of public procurement.  
Since the closure of the Ignalina nuclear pow er plant in December 2009 which has turned 
Lithuania from a net exporter to an importer of electricity, prices have risen by about 30%. At 
the same time electricity market reforms ar e implemented including the trading exchange 
BaltPool for the Baltic region since January 2010, de regulation of electricity tariffs as well as 
increasing physical and organisational integration in the Nordic and Continental EU energy market. While one link with Es tonia (EstLink I) has been in operation since 2007 a number of 
further interconnections are projected until 2015. 
 
EN 123   EN A major challenge lies in th e field of energy, namely to ensure long term stable and 
diversified supply, among others by strengthening links with the energy grids of its EU 
neighbours. Moreover, consistency between actio ns resulting from the administrative burden 
measurement exercise and the Sunr ise Commission should be ensured. 
3.14.6.  Entrepreneurship and SME policy 
SMEs in Lithuania tend to be, relatively, larger than in the EU. This is consistent with the 
good performance in terms of shar e of high growth enterprises. The total SME sector employs 
proportionally more people in Lithuania than in the EU. 
The national education strategy for 2003-2012 states that entrep reneurship education should 
be introduced at all levels of  the educational system, includ ing secondary, professional and 
university education, as well as in training pr ogrammes for teachers and lecturers. In 2008, the 
government enacted the National Youth Entr epreneurship Education and Incentive 
programme with a budget of EUR 35 million until 2012. It focuses on entrepreneurship education, incentives for businesses run by yo ung people and monitoring as an input for 
governmental institutions and the society. Mentoring and support for entrepreneurs is 
provided by 31 business information cen tres and 6 business incubators.. 
The Economic Stimulus Plan includes policy m easures to support SMEs' access to finance, 
business internationalisation, as well as shiftin g priorities towards ex porting enterprises in 
granting financing. An export promotion strategy for 2009-2013 and its implementation plan 
were adopted by the government in 2009. 
The one-stop-shop to start-up a co mpany (Centre of Registers) is fully operational. An SME 
Council was set up in 2008 to advise st ate authorities on policy developments. 
A short term challenge is to en sure SMEs access to finance un til Lithuania's overall economic 
situation turns normal again. A longer term ob jective would be to promote a culture of 
entrepreneurship, in particular by implementing the respective reforms in the educational system. Many of the problems addressed by the Better Regulation programme and the Sunrise 
Commission are also relevant for SMEs, such as reducing burdens related to starting up a 
business, obtaining licen ces or building permits. 
3.14.7.  Conclusions 
The most imminent challenge to maintain the competitiveness of Lithuania's economy is to 
ensure sufficient access to finance for SMEs in order to avoid that generally healthy firms go 
out of business exclusively because of tight fi nancing conditions resulting from the economic 
crisis. 
Mid to long term challenges ar e to promote structur al change towards more high value added 
and knowledge intensive sectors. Appropriate policies include strengthening links between 
industry and public and private research, increase R&D&I funding and continue the reform of 
the research system. 
The business environment could be contin uously improved through efforts reducing 
administrative burden and unnecessary compliance costs resulting from legislation, through increased investments in infrastructure such  as broadband connections, as well as through 
reforming and liberalising the energy market to  ensure low energy prices and energy security. 
 
EN 124   EN Finally, a long term challenge is  to increase resource effici ency of Lithuanian industry 
significantly and to transform it into a low carbon economy. 
 
EN 125   EN 3.15. Luxembourg  
3.15.1.  Indicators graph 
Luxembourg
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs
NA
NANANA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 126   EN 3.15.2.  Introduction38 
Luxembourg’s overall excellent competitivene ss position is best shown in its labour 
productivity which is, measured both per hour a nd per person, clearly th e highest in the EU. 
However, nominal unit labour costs in Luxe mbourgish manufacturing increased by 45% 
between 2000 and 2009, thus faster than in any other EU-15 Member State except Italy. As a 
result, the overall increase was more than tw ice the EU average of 19%. Luxembourg showed 
a small deficit in the trade of goods in 2009 but its services account generates very high 
surpluses. 
Luxembourg is specialised in sectors demanding skill s.  There is also  a high degree of 
specialisation in medium-low t echnology sectors. This is mirrore d in a clear specialisation on 
sectors that have a relatively high gr owth rate in the EU in total. 
Manufacturing has a much smaller weight in Luxe mbourg than in the EU in total (9% vs. 17% 
of value added in 2008). Only  basic metal production shows an above average share in 
manufacturing in 2008. There is, however, ve ry clear specialisation in financial 
intermediation and, secondarily, in transport and communicat ion. The structural change 
towards services is also unde rpinned by employment figures. Fo recasts until 2020 expect an 
increase in employment in business and other services and distribution and transport by some 
10% while employment in other sectors might remain stable. 
The negative trade balance in manufacturing mainly resulted from deficits in refined 
petroleum and transport equipment while only  basic metal products showed a clear trade 
surplus. The Revealed Comparative Advantage (RCA), measured relative to the EU and 
concentrating on manufacturing, shows particular strengths for Luxembourg in 2008 in basic 
metals products, rubber and plastics and non-metallic mineral products. 
Exit from the crisis Luxembourg faced a very significant reduction of  almost 33% in manufacturing output during 
the crisis. However, manufacturing quickly recove red to 81% of pre-cris is level in June 2010. 
In the light of the economic and fina ncial crisis Luxembourg introduced a de minimis  aid 
scheme, guarantees and export credits unde r the Temporary State aid Framework. 
Beneficiaries are mainly SMEs with the excep tion of export credits. Conditions on the credit 
markets improved. In the export credit market problems remain in some sectors, such as construction and automobile. State support for export credits and guara ntees therefore still 
appears to be necessary. 
3.15.3.  Towards an innovative industry  
The European Innovation Scoreboard 2008 (EIS ) ranks Luxembourg in  the category of 
Innovation follower with innovation performan ce above the EU 27 average. The business 
enterprise sector remains the main cont ributor to R&D expenditures in Luxembourg. 
The main developments in public support for innovation are threefold. Firstly, there is an 
effort to energise the economic landscape by increasing the number of new companies and 
                                                
 
38 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 127   EN supporting more extensively the innovation process of enterprise s. To this end, the new law 
on RDI will be a key instrument as it will target other type s of innovation that were not 
eligible for funding until now, and will be able to finance consulting services in innovation. 
The reinforcement of collaborati on between the public organisa tions – in particular public 
research centres – and business is also target ed by the new measures. Finally, to attract and 
retain a high-skilled workforce in Luxembou rg remains a challenge. A bill on the free 
movement and immigration was voted to make ob taining of residence pe rmit for third-country 
nationals easier.  
3.15.4.  Towards a sustainable industry 
Industry in Luxembourg seems to have a higher  than average energy intensity, which can be 
explained to some extent by its specialisation in basic metals production. The waste generated 
by the enterprise sector is also particularly high; however, this is also due to a statistical particularity, i.e. the high number of workers that are not residents in comparison to total 
population. 
In March 2009, a new National Pl an on Sustainable Development was agreed. There is also a 
White Paper on an overall energy strategy. The R ecovery Plan contained a great number of 
specific measures for energy efficiency and re newable energy (public and private buildings – 
financial incentives for domestic equipment - fiscal incentives for the purchase of “cleaner” 
cars (scrapping schemes) etc. The 2006 Action Plan on CO2 reduction will be revised by the 
end of 2010 and a programme to develop sust ainable consumption and production will be set 
up. 
Although explained to some extent by the specia lisation of the Luxembourgian industry, its 
high energy intensity may constitute  a cost handicap and a risk factor that more focused action 
could mitigate. 
3.15.5.  The business environment 
The business environment in Luxemburg is posi tive, with a legal a nd regulatory framework 
and administrative burden clearly above the EU average. 
A sectoral target was set in 2009 to reduce by 15% the administrative burden on businesses by 
2012. In addition to the " Entfesselungsplan für Betriebe ", the 2009-2013 Action Plan for 
Administrative Simplification foresees  a range of measures and tools.  
eGovernment usage by enterprises in 2009 is clearly above the EU average. eGovernment 
policy is focused on back-office improvements a nd the development of specific services and 
applications requiring trust an d security. Luxembourg has a ma ndatory national eProcurement 
portal.  
To improve transport and telecoms infrastructu res, new projects are foreseen, for instance 
better railway connections with Strasbourg  and Saarbrücken, creation of a tram line 
(development of the Lux tram) and railway connections between airport and city, increase of passenger railway capacity between Luxembou rg and Metz – new investments in the 
electronic telecommunications ne tworks (Lux connect project). 
The plan to merge the Competition Inspecti on and the Competition Council has not been 
implemented yet and their staffing remains wea k. Problems are more visible in the retail 
 
EN 128   EN sector but also in regulated professions. Energy prices for enterprises (especially for gas) tend 
also to be higher than in neighbourin g countries, even if not by much. 
3.15.6.  Entrepreneurship and SME policy 
SMEs in Luxembourg tend to be larger than in the EU, with a smaller share of micro 
enterprises and a larger share of small a nd medium sized ones. Their contribution to 
employment follows the same pattern but they are more productive than in the EU as their 
shares of value added are hi gher in all size categories. 
The national action plan in favour  of SMEs of 2008 foresees lower establishment fees for new 
companies and sets out the objective for a new company to be created within one week. It also foresees to facilitate the crea tion of new companies and the transfer of existing companies, to 
stimulate the entrepreneurial spirit, to support SMEs in their cross-bor der development and to 
promote the continuous vocational training. 
The new trade promotion agency Luxembourg for Business was founded in 2008 to promote 
trade and international business in the in terest of the Luxembourg economy. More 
specifically, the agency promotes ‘Made in Luxembourg’ goods and services in foreign 
markets. 
3.15.7.  Conclusions 
Luxembourg shows relatively high energy intens ity in the industry. Im proving this parameter 
could contribute to reduced costs of producti on. Reducing energy prices through additional 
infrastructure and a reinforced competition fram ework would also contri bute to lower costs. 
Nevertheless, these comments should be seen in the light of the specific geographical and economic conditions of the country.  
 
EN 129   EN 3.16. Hungary 
3.16.1.  Indicators graph 
Hungary
- 3 - 2 - 1 0123
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2007)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
NATowards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs-3,3
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 130   EN 3.16.2.  Introduction39 
Hungary’s labour productivity, pe r person employed, reaches some 70% of the EU average. 
Its growth over the last decade was limite d. Hungary showed one of the strongest 
appreciations of the real effective exchange ra te during the last decade, indicating a loss in 
cost and price competitiveness. Still, nomina l unit labour costs in Hungarian manufacturing 
increased by 25% between 2000 and 2009, thus only somewhat faster than the EU average of 
19%. During the last decade Hungary has face d a significant overall competitiveness loss, 
which has reflected in different interna tional competitiveness rankings as well. 
Nevertheless, foreign trade performance has improved considerably since the EU accession. 
Growth of exports accelerated in 2006 and 2007, while it decelerated in 2008 and exports fell 
dramatically in the period of crisis. The c ontribution of net exports  (goods and services 
together) to GDP has been positive since 2004.  
Manufacturing plays a bigge r role for Hungary than for the EU  in total (21% vs. 17% of value 
added in 2008, before the crisis). The Hungar ian economy is specialized in transport 
equipment and electrical and optical equipmen t. These subsectors are particularly export-
oriented and very important both in output performance and employment. The share of high-
tech products in total exports is far above the EU average. Manufacturing of transport 
equipments, machinery, electrical and optical equipments and chemicals as well as food 
products have experienced continuously increa sing large trade surplu ses during the decade. 
The Revealed Comparative Advantage (RCA), meas ured relative to the EU and concentrating 
on manufacturing, shows particul ar strengths for Hungary in 2007 in electrical and optical 
equipment and transport equipment. 
In the service sector, public s ector has the clearest above aver age weight. The share of gross 
value added has increased in busin ess services, retail trade and transport in the last years. 
Agriculture has a bigger role than for the EU average; however, its weight has been 
diminishing.  
Hungary is specialised in sectors demanding low skills. There is, at the same time,  a clear and 
growing specialisation on high technology sect ors and, to some extent, medium-high 
technology sectors. Sectors with a negative growth rate have lost dramatically in importance; 
medium-high growth sectors are gaining ground. Hungary has experienced significant inflow 
of FDI in regional comparison, however, foreig n enterprises are located overwhelmingly in 
the developed regions and less developed region s can hardly benefit from the positive spill-
overs of FDI.  
Exit from the crisis The Hungarian economy was hit by the crisis especially hard: the GDP fell by 6.3% in 2009. 
Output and employment in the manufacturing s ector dropped significantly as both external 
and internal (due to drastic fiscal conso lidation measures) demand deteriorated. Although 
there was very limited room for fiscal manoeuvre, the government launched several 
programmes in order to support SMEs, mostly hit by the crisis . Already at the beginning of 
the crisis it took measures to  alleviate tight credit conditi ons for the business sector. In 
                                                
 
39 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 131   EN general, support to SMEs is a priority of EU Cohesion Policy in the current programming 
period. Very important resources are available for such enterprise su pport in Hungary, and 
these resources have even been increased at re quest of Hungary in 2009, in the context of the 
crisis (from EUR 910 million to EUR 1.31 billion in the Economic Development Operational 
Programme). Also, efforts have been made for pr eservation and retraining of the workforce in 
the recession period.  
The recovery of the Hungarian economy depends on the revitalizing of the external markets. 
The output of export-driven industri es is anticipated to accelerate faster than that of domestic 
market oriented sectors, particul arly as the internal demand is still negatively affected by the 
fiscal consolidation. The economy is expected to  enter a sustainable gr owth path only in 2011, 
based on both net exports and domestic demand. 
3.16.3.  Towards an innovative industry 
Hungary belongs to the "catching up" econom ies as regards innovation. R&D investments 
relative to GDP (1%) is far below the EU average. Business R&D spending has been growing since 2004 both in absolute  and relative terms; however, it st ays still at a low level (0.5% of 
GDP). In terms of human resources for R&D and innovation there are also bottlenecks, both 
on the supply and demand sides. Innovation performance, as measured by the Summary 
Innovation Index, has improved since 2004, but innova tion activity remained  at a low level: 
only one fifth of companies are innovative. Moreover, R&D and innovation activities are 
rather concentrated to large fo reign owned enterprises and in a few sectors. Also the regional 
R&D concentration in the most advanced regi ons is characteristic for Hungary. High-tech 
export performance is very favourable in intern ational comparison but is largely attributable 
to activities of foreign-owned enterprises an d thus it does not ne cessarily reflect the 
technology-leader position of the sectors. 
One of the main problems regarding the Hunga rian science, technology and innovation (STI) 
in the past was its low policy priority. In the context of the current reorganisation of the 
government structures, the science and technolo gy institutional system was reformed in 2010. 
A Research and Science Policy Council was estab lished in February 2010 to coordinate and 
decide on STI policy issues of strategi c relevance and related major projects. 
A recent government regulation, on "deregulation of R&D" came into force as of 1 June 2010 
with the aim of simplifying and improving R&D tender procedures. 
The Science, technology and innovation policy st rategy (2007-2013) set the target to reach 
total R&D expenditure of 1.4% and 1.8% of  GDP by 2010 and 2013, respectively. In addition 
to strengthening the role of enterprises in R& D activities, also more budget sources will be 
available. More than EUR 970 million have been allocated in the Economic Development 
Operational Programme through the EU Struct ural Funds for the 2007-2013 period to support 
R&D and innovation, targeting in particul ar R&D cooperation between enterprises, 
universities and research institutes, the establis hment of modern research infrastructure and 
innovation parks and patenting activity. For 2010, the government has earmarked 
HUF 180 billion for R&D purposes. 
The low level of overall innova tion activities, esp ecially among domestic SMEs, is the main 
challenge in this area. Moreover, the links an d networks between public and private research 
are weak or missing and there are still gaps in  the quality and quantity  of scientific human 
 
EN 132   EN resources. Multinationals represent a potential st rength for raising innovation capacities more 
widely if they are better embedded in to the regional innovation systems. 
3.16.4.  Towards a sustainable industry 
Environmental sustainability of the Hungarian industry is poor as compared to more matured 
European economies. The Hungarian  industry is more energy inte nsive than the EU average. 
The share of renewable energy sources in gro ss inland energy consumption has grown during 
the last decade but remains still far from the 2020 target.  
The Hungarian National Climate Change Stra tegy for the period 2008-2025 was adopted in 
2008 by the Parliament. The strategy defines targ ets for the business sector as well: reduction 
of energy and material consumption, enha ncing R&D and innovation activity in green 
products and services, for instance. 
The Renewable Energy Action Plan is curren tly under finalisation. Measures, such as 
abolishment of bureaucratic obstacles, elaborat ion of simpler and fast er processes and green 
procurement, should contribute to the de velopment of the green economy in Hungary. 
The Economic Development Operational Programme (EDOP) and the Environment and 
Energy Operational Programme (EEOP) provide significant financial sources for enabling 
green development. The EDOP contains actions supporting renewable energy production 
(wind power plants, geothermal  power stations, solar, bioga s plants), energy-friendly 
technology investments as well as implementati on of environment management systems. The 
EEOP supports renewable energy production and it provides fi nancing for companies for 
improving the energy efficiency of their buildings. 
One of the main challenges in this policy area is the reduction of energy intensity of 
production. Shifting towards a green economy  requires not only financial sources and 
transparent regulatory framework, but also timely and effective implementation from all type 
of actors. 
3.16.5.  The business environment 
Hungary scores clearly below the EU average in most indicators, with the exception of the e-
government usage by enterprises. In particular, it provides a high level of  state aid for industry 
and services. The burden of government regu lation is significantly higher than the EU 
average.  
In order to create a be tter business environment, Hungary has adopted a reso lution on Better 
Regulation in September 2008 that included 17 actions, covering ad ministrative burden 
reduction, impact assessments, e-government and simplification.  
A target of 25% administrative burden redu ction by 2012 was set in  the 2008. A focused 
survey of the administrative burdens conducte d from November 2008 to June 2009 identified 
a total of 633 information obligations in  the 19 most burdensome focus areas. The 
measurement of administrative burden (2009) c overed the 152 most burdensome Information 
Obligations (IOs) that were identified. An action plan containing measures which do not 
require structural transformation and can be quickly implemented was submitted to the Government in 2009. Several concrete measur es were taken in 2009, i.e. changes in 
construction industry regulation, simplifications  in grant administration, amendment of the 
Public Procurement act in favour of SM Es, and simplified company proceedings. 
 
EN 133   EN According to a decision adopted in 2008, only submissions comprising an impact assessment 
may be presented to the Government as fr om June 2009. In Hungary, it is obligatory to 
consult representatives of the SME sector on each new regulation. In  addition, there are 
different consultative forums with particip ation of SME organisations where the most 
important legislative changes and measures c oncerning SMEs are discussed, the newest one 
being the Economic Consultation Forum (GEF).  E-consultation is in place. Draft bills, 
ministerial resolutions and other important polic y concepts are made public via the relevant 
ministries’ homepages. 
eGovernment is a key element of the administrative reform. The " e-Public Administration 
Strategy 2010 ", coordinated by the Prime Minister's Office, is implemented to extend the use 
of ICT in the public sector and public se rvices. Hungary has a non-mandatory electronic 
procurement platform.  
The new Hungarian government plans to fu rther simplify public procurement rules and 
propose a new legislation in 2011 incorporating additional fa vourable measures for SMEs. 
The one-stop-shop to start-up a company (Count ry Courts) is operational. Company Court 
registration procedure includes al so registration at the Hungari an Tax and Financial Control 
Administration (APEH) and the Central Statis tical Office (KSH). Si nce July 1, 2008, the time 
required for the so called simplified company registration process is  one working hour (in 
accordance with the Act LXI of 2007) as the electronic procedure became compulsory. 
Measures aiming at decreasing the administrative burden of enterprises were identified; there 
is an estimated reduction of HUF 43 billi on forecasted for 2010. To achieve tangible results 
for businesses Hungary could implement the pl anned actions of the resolution on Better 
regulation. In addition, the relativ ely high volume of state aid re mains an issue to tackle.  
3.16.6.  Entrepreneurship and SME policy 
The SME sector in Hungary is dominated by micr o enterprises that provide more than 70% of 
employment in the business economy. Hungary sc ores clearly better than the EU average 
concerning the time required to start a busine ss and bank loan conditions for companies and 
slightly above the average concerning the payment duration by public authorities. However, the country scores clearly below the averag e concerning early st age financing and the 
enterprise survival rate after two years.  
In response to the financial cris is, and to improve the access of  SMEs to financing, a package 
including several financial instruments was gradually introduced since the beginning of 2009. 
This included preferential loans, guar antees and interest rate subsidies. 
Tender schemes financed by the SME Budget Appr opriation (KKC) offer grants for SMEs for 
training and entrepreneurial knowledge, including the promo tion of entrepreneurial and 
financial knowledge for elementary and seconda ry school students, cross-border activities and 
enabling Roma entrepreneurs to write applications. The  ’Junior Achievement Hungary’ 
manages programmes to improve entrepreneurial sk ills of students, so that more than 3,000 
students can meet with successful entrepreneurs yearly. The national curr iculum was modified 
in 2007 to align it with the r ecommendations of the EU key competences framework system, 
including the promotion of entrepreneur ial and economic knowledge in education.  
 
EN 134   EN The investment promotion system was change d to attract investme nts to disadvantaged 
regions. In 2008, a new support programme Export Development Tendering System was 
launched, which gives 70% non-refundable sup port for international marketing packages. 
ITD Hungary, the Hungarian Investment and Trade Development Agency, broadened its services concerning the support of SMEs doing business abroad. 
Surviving the crisis is the principal challe nge for most SMEs in Hungary. The growing 
number of bankruptcies is a cl ear sign of deep concerns. T hough the share of rejected SME 
loan applications is lower than the EU averag e, access to financing for SMEs, and early stage 
financing remains a challenge. The share of EU funds directed to SMEs is around 10% of the 
total. The new Hungarian government plans to reinforce SME support under EU Cohesion 
Policy. 
One way to tackle the lack of loans and early  stage financing is JE REMIE which is a new, 
innovative joint initiative deve loped by the European Commission together with the European 
Investment Fund and the European Investment  Bank (EIB) with the objective to improve 
access to finance for SMEs and new business crea tion through financial instruments, such as 
venture capital funds, loan f unds or guarantees funds. Hunga ry allocated roughly EUR 760 
million to repayable financial instruments for SMEs. The system is already set-up and running 
and financing is being provided to SMEs thro ugh innovative financial instruments such as 
micro-credits or venture capital funds. 
3.16.7.  Conclusions 
The last two years were especially hard for the Hungarian economy as it faced several 
challenges as a result of structural problems that became more acute due to the crisis. One 
challenge for the newly elected government is to  address the significant drop in both internal 
and external demand that results  in a decreasing output and inve stment in manufacturing. The 
programmes launched in order to support SMEs could be maintained and intensified to 
achieve this. Reallocation of EU funds to SMEs  has been an additiona l response to ease the 
lack of financing possibilities fo r small enterprises. Such reallo cation can only be successful if 
further steps are taken to simplify administ rative procedures linked to funding opportunities 
which are currently too burdensome for most co mpanies to effectively apply for funds. The 
improvement of the business environment, esp ecially the reduction of  administrative burden, 
remains a key issue for most businesses. In order to achieve the goa l of 25% reduction by 
2012, Hungary would have to take important steps in the short term.  
 
EN 135   EN 3.17. Malta 
3.17.1.  Indicators graph 
Malta
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEsNANA
NANANANANANA-3,13,1
NANA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 136   EN 3.17.2.  Introduction40 
Malta’s labour productivity was, measured per hour, at some 80% of the EU average in 2005 
and 2008. Measured per person, it reached some 90% . Malta’s real effec tive exchange rate 
appreciated markedly from its 1999 leve l until 2005 and 2009, indicating a decreased 
competitiveness; however, this decrease was less  pronounced than for the EU in total. Malta 
shows a clear deficit in the trade of goods. 
Malta shows a marked and growin g specialisation towards low skill sectors; while there is 
also some shift to high skill sectors at a low leve l,  the high-intermediate skills sectors have 
become relatively important and the low-intermedia te skills sectors have  lost ground. There is  
a clear specialisation in high and in low t echnology sector while the middle ground is under-
represented. Sectors with a medi um-low or negative growth rate  in the EU in total have a 
higher weight in Malta than in the EU in averag e which is mainly due to the important role of 
the sectors “hotels and restaurants” whose gr owth rate was just below the average and 
fisheries where it was clearly negative. However,  while below the EU average, high growth 
sectors still play a major role. 
Manufacturing plays a similar role for Malta than  for the EU in total (both at 17% of value 
added in 2008). Compared to the EU, the manufact uring sector is partic ularly specialised on 
electrical and optical equipmen t, other manufacturing and chem icals; in previous years, 
textiles and clothing had also have an important  weight. In the servic e sector, “hotels and 
restaurants” and “transport and communication”  had a noteworthy above average weight in 
2008. Fishing is much more important than for th e EU in total. Employment forecasts until 
2020 expect an increase in employment in dist ribution and transport by some 15% while 
manufacturing employment might decrease by 10%.  
Exit from the crisis In Malta, the manufacturing output fell by 27% during the cris is. Production regained 11% in 
July 2010. The most significant problem in the Maltese economy remains the drop of exports. 
The anti-crisis measures included infrastructure  investments (mainly via Structural Funds), 
some non-budgetary measures and schemes to suppor t directly affected sectors (like tourism) 
and enterprises (after checking the viability of their investment plans). 
The Maltese government set up a de minimis  aid scheme of EUR 40 million under the 
Temporary State aid Framework. The aim of th e scheme is to provide temporary aid for 
enterprises affected by the crisis, e.g. reduced or ders or lack of  credit. 10 enterprises in the 
manufacturing sector received grants from the scheme. A measure targeted to SMEs and the 
self-employed aims at expanding their activit y and providing the necessary liquidity for 
investment. Its budgetary cost was around 0.1% of GDP in 2009. Support measures to SMEs 
in 2010 have been provided through fiscal bene fits. A tax credit of 40%  (60% for businesses 
based in the Gozo region) is available to self -employed persons and ente rprises with up to 10 
employees and to sole traders who make an invest ment in the next two years in some specific 
fields (upgrading shop facilities, investing in technology to comply with health, safety and 
environmental regulations, creati ng new jobs and recruiting appr entices). The cost of this 
scheme should amount to less than 0.1% of GDP and it is likely to expire at the end of 2010. 
                                                
 
40 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 137   EN 3.17.3.  Towards an innovative industry 
In terms of innovation performa nce, Malta remains in the gr oup of 'catching-up' countries. 
Malta is doing well in terms of sales of new- to-market products and high-tech exports; the 
latter is, however, mainly going hand in hand with a significant dependency on one large 
electronics exporter which gives in itself also  reason for some concern. Broadband penetration 
amongst firms has increased steadily. The innova tion performance of small and medium-sized 
enterprises (SMEs) remains a weakness.  
However, Malta faces general problems regard ing its human capital base since the degree of 
people with secondary education in the workforce is very low (as is the employment rate in 
general); in addition, lifelong learning is not broadly used and the share of early-school 
leavers remains the highest in the EU, alt hough a decline in the number of early-school 
leavers has been registered over recent years, reflecting in part icular the setting up of various 
education institutions whose mission consists in extending higher vocational and academic training to an increasi ng proportion of students . 
The innovation and research measures include a variety of aid schemes for enterprises that 
offer higher intensity aid for SMEs, a res earch and development incentive package for 
industry, and capac ity building for research  and innovation infrastruc tures. Many of these 
measures are co-financed through the second pr ogramming period of structural funds from 
2007 to 2013 and target specific sectors – such as ICT, biot echnology and environment – that 
have been identified as areas offering Malta a comparative advantage. 
The innovation challenges are the following: first, financial resources in R&I in niche areas of 
economic importance are still quite low. The s econd programming period of structural funds 
(2007 to 2013) has provided the opp ortunity to earmark a substant ially larger portion of funds 
for R&I. Second, human resources in science and technology in emerging sectors of the economy could be developed more strongly. The shift to a knowledge-intensive economy 
requires creating jobs in the high-skills end of  the labour market and supporting this with 
adequately qualified people. Third, the environment to nurture innovation and 
entrepreneurship amongst businesse s, including SMEs, could be strengthened. Finally, sector-
specific innovation policies, strategies and meas ures in areas of national priority could be 
developed (namely ICT, energy and environmen t, health and biotech and high value-added 
manufacturing). 
To support a wide-spread knowledg e-intensive production, it seems indispensable to raise the 
qualification level of the workforce, in particular with a view to demographic developments and the expected increa se in skill demands. 
3.17.4.  Towards a sustainable industry 
Malta’s main problem is the almost comp lete dependency on imported energy and on only 
two energy plants; there have be en cases of power cuts in th e recent past (June 2009, March 
2010). So far, there is only limited use of rene wables and the viabilit y of the national energy 
efficiency plan remains unclear. A connection to  the European energy gr id is a long-planned 
and progressing project. However,  this will still need time; a feasibility study has been 
finished and the tender period for the actual pr oject closed in July 2010. Malta published an 
ambitious and comprehensive climate cha nge strategy in 2009. In addition, it seems 
noteworthy that Malta has - afte r Luxembourg, Italy and Cyprus - the fourth highest density 
of car ownership in the EU (a nd the ninth-highest worldwide)  with 557 private cars per 1000 
 
EN 138   EN inhabitants; in total, there ar e close to 300.000 vehicles licensed. This puts sign ificant strains 
on infrastructure and environment. 
Malta has taken many small measures (e.g. grants  for solar water heat ers, tax credits for 
photovoltaic, energy saving light bulbs etc) to promote energy efficiency and use of 
renewables. Malta has embarked on a project to  replace all electricity meters with smart 
meters, a project which is expected to be comp leted within two years. Efficient use of energy 
has become a priority also for the enterprises that want to ensure sustainability. There is a 50% grant for industry on investments in renewa ble resources and energy efficiency (with a 
minimum investment of EUR 25 000 and not exceeding EUR 200 000). Malta is assisting 
such a scheme being funded under the ERDF whic h is open to all enterprises excluding those 
operating in the financial serv ices, agriculture a nd fisheries sectors. The allocated budget 
under this scheme is EUR 10 million. Costs may be claimed on investments in energy saving 
solutions such as solar heati ng, thermal insulation, building management systems, energy-
saving lighting and alternative energy technolog ies such as solar power and wind power. The 
government also offers an investment tax credit to industry on  capital invested on 
photovoltaic panels for energy generation. Malta ha s taken some initiatives to liberalise public 
transport systems in an effort to reduce congestion. 
Despite several initiatives taken, solar water heaters remain the only significant renewable 
energy source on the island; even here, figures for new installations dropped in 2009. Thus, 
the dependence on one main (and imported) en ergy source which is becoming less popular in 
other EU Member States (i.e. oil instead of gas) remains a crucial challenge. Malta has the 
lowest objective in terms of the share of rene wable energy to be reached in 2020 (10% vs. 
20% for the EU in total) but is lagging  far behind in achieving this target.  
3.17.5.  The business environment 
Malta scores above the EU average concerning  the e-government usage by enterprises, but 
clearly below average concerni ng state aid for industry and se rvices, in 2008, a nd concerning 
electricity prices for medium size enterpri ses. However, 2008 was an exceptional year 
regarding state aids. Many deroga tions in the accession treaty e xpired at the end of 2008 and, 
in particular, the final support for the shipyard s was also accounted for in this year. More 
generally, state aids were decreasing, from  a comparatively high level, from 2005 to 2007. 
In October 2008, Malta adopted its Better Regulation Strategy 2008-2010  which addresses a 
range of key areas such as capacity build ing, simplification and administrative burden 
reduction, quality control and resources. Base d on the results of a mapping pilot project 
conducted in four areas (VAT, co mpany law, financial services and food safety) and extended 
in a further step to five additional ar eas (pharmaceutical legislation, working 
environment/employment relations, fisheries,  public procurement, and environment), a 
reduction target for administrative burdens of 15% by 2012 was set in 2008. Malta does not 
have an explicit and mandatory e x ante  impact assessment procedure as such, but all primary 
legislation requires an accompa nying memorandum, the "Legal Notice Checklist" (LNC), 
revised in 2009.  
The Strategic Plan 2009-2012 provides a new, state- of-the-art eGovernment  platform, with all 
public services online by 2012. Malta has a ma ndatory national ePro curement platform. 
While the exceptional situation regarding state aids in 2008 is acknowledged, developments in 
this field need to be monitored; the previous ly decreasing trend should continue clearly given 
 
EN 139   EN the end of the derogations in the accession treaty. Competition policy and its effectiveness 
will always remain crucial for Malta, in general, due to the small market size and its isolated position; the strengthening of the institutional st ructure in this field which has taken place in 
recent years is welcomed.  
3.17.6.  Entrepreneurship and SME policy 
SMEs in Malta tend to be smaller than in the EU as the share of micro enterprises is higher, 
employing around 40% of the workforce in Malta against 30% in the EU. Malta has a higher 
rate of business bank loan demands rejected by banks or bank loan offers to companies that were rejected by the latter. For the rest of the horizontal indicator catego ries looked at in this 
report, no data about Malta are available.  
Malta Enterprise is the agency  responsible for the promoti on of foreign investment and 
industrial development in Malta. It runs severa l schemes one of which (ERDF Small Start-up 
Grant Scheme) is specifically ai med at supporting start-ups, part icularly innovative start-ups, 
and is part of a EUR 20 million industry pack age. In 2009, a local Council Award Scheme has 
been established with a total budget of EUR 10 0 000 to support local councils for initiatives 
that encourage entrepreneurship. 
The ERDF International Competitiveness Gran t Scheme was launched in 2008 and supports 
enterprises to expand into new international markets. This scheme reimburses 50% of the 
marketing costs, trade fair costs, product cert ification, and the wage  costs of a business 
development manager as part of a specified in ternationalisation project. The scope of this 
scheme is to support SMEs to develop their international competitiveness and hence offer their goods and services to other internat ional markets. The ERDF International 
Competitiveness Grant Scheme forms part of the EUR 20 million Industry Package. 
In 2008, only 43 out of 27 682 Maltese enterprise s were not SMEs. This means that the 
general challenges to ensure a diversified en ergy supply, a well-qualified workforce and an 
effective competition policy are valid for SMEs as well. The effective implementation of a stream-lined one stop shop for business that was planned in 2009 is of pa rticular importance, 
given the dominance of SMEs in Malta. The high share of small and, in particular, micro-
enterprises can make some activities, e.g. in rese arch or in training, more difficult. It can also 
blur statistics to some extent as micro-enterprises are often not covered, e.g. in qualitative 
surveys. 
3.17.7.  Conclusions 
Since Malta is a small island economy without own (fossil) energy sources or other natural 
resources, it depends on trade and on the efficient and effective development and 
implementation of its human capital. Given the small market size, the effectiveness of the competition policy and the targeted use of limited reso urces are crucial; this refers inter alia to 
investments in the knowledge economy, the deve lopment of renewable energy and alternative 
energy sources and to energy and resource efficiency. 
 
EN 140   EN 3.18. The Netherlands 
3.18.1.  Indicators graph 
The Netherlands
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2005)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs NANANA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 141   EN 3.18.2.  Introduction41 
The Netherlands enjoys a surplus in its trad e of goods and its labour  productivity, both per 
hour and per person, is clearly above the EU average. The Netherlands’ real effective 
exchange rate appreciated markedly between 1999 and 2009, i ndicating decreased 
competitiveness; however, this decrease was less pronounced than for the EU on average. 
Nominal unit labour costs in Dutch manuf acturing increased by 16% between 2000 and 2009 
with a remarkable acceleration during the sec ond half of the decade. However, the overall 
increase remained below the EU average of 19%. 
The Netherlands is specialised, to some degree, in sectors de manding high-intermediate skills. 
High and low-intermediate skill sectors have  been stable from 1997 to 2007. However, 
already low specialisa tion in high technology sectors droppe d significantly. Low-technology 
sectors play an important and growing role. Sectors with nega tive growth in the EU play a 
relatively strong role in the Ne therlands (3.3% of GDP against 1.6 for the EU as a whole). 
Manufacturing has a smaller weight for the Neth erlands than for the EU in total (13.5% vs. 
17% of value added in 2008). Only refined petroleum and, to a lesser extent, other 
manufacturing, food/drinks/tobacco and chem icals show an above average share in 
manufacturing. There is, however , clear specialisation in mini ng and quarrying (extraction of 
crude oil and gas) and, to a less er degree, in refined petroleum,  in health and social work, 
retail and wholesale trade and financial inte rmediation. Employment figures show the high 
level of productivity in manuf acturing but also the latter’s decreasing importance over time. 
Forecasts until 2020 expect an increase in empl oyment in business and other services by 
almost 8% while employment in manufacturing might drop by some 9%. 
The Netherlands' export and import specialisation pa tterns are quite simila r, with electrical 
and optical equipment, chemicals and refined pe troleum featuring strongl y in both cases. It 
showed a strong export performance in manuf acturing. They differ regarding crude oil and 
gas extraction (export) and transport equipm ent (import specialisation). The Revealed 
Comparative Advantage (RCA), measured re lative to the EU an d concentrating on 
manufacturing, shows particular strengths for the Netherlands in 2008 in refined petroleum, 
food, drinks and tobacco and electrical and opti cal equipment. The positive trade balance in 
manufacturing mainly resulted from surplu ses in refined petroleum, chemicals and 
foods/drinks/tobacco while transport equipmen t, other manufacturing and wood products 
showed a trade deficit. 
Exit from the crisis Manufacturing production is still se ven percent lower in July 2010 than before the start of the 
economic and financial crisis. During the peak of the crisis it fell by more than 15%. Some 
companies in the construction sector received de minimis  grants under the Temporary State 
aid Framework. The Dutch government also set up an export credit scheme under the 
Framework.  
The existing guarantee facilities for bank loans and for risk capital for SME’s were expanded. 
Main changes: loan guarantees (50%) av ailable for bigger SME and higher amounts per 
                                                
 
41 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 142   EN company and 80% guarantee instead of 50% fo r guarantees up to € 200.000. For risk capital 
the maximum guarantee per company was in creased from € 2,5 million to € 12,5 million. 
Also a new temporary 50% guarantee for bank  loans to bigger companies was introduced, 
under which guarantees to an amount of € 1,5 billion can be provided. The maximum 
guarantee per company is € 75 million. In addition, the government eased the depreciation rules, i.e. a temporary increase in depreciation to an annual rate of 50% for investments in 
2009 and 2010. The budgetary cost is projected to be EUR 1¾ billion (0.3% of GDP), evenly 
spread over 2009 and 2010. This m easure is temporary, as it only applies to investments made 
in 2009 and 2010.  
Most of the anti-crisis measures can be expected to have a positive impact on the post-crisis 
economy.  
3.18.3.  Towards an innovative industry 
According to the European Innovation Scor eboard (EIS) 2008, the Netherlands is an 
'innovation follower'. Public R&D expenditure  is decreasing while R&D performed by 
businesses is below the EU average. 
There are improvements in term s of public-private linkages a nd entrepreneurship. However, 
firms are clearly less innovative than EU aver age, indicating that th e opportunities that newly 
developed knowledge offer are not fully utilised. 
The stimulus package of the government did not contain major new public investments in 
knowledge and innovation. It includ ed, however, interesting measur es to prevent the loss of 
knowledge workers by R&D intensive firms (e.g. through temporary secondment of R&D personnel to public research institutes). The Hi gh Tech Top Projects Sc heme with a budget of 
EUR 100 million helped firms in the high-tech sector to keep their R&D workers by giving 
support for large R&D projects in  the fields like high-tech systems, nano-electronics and 
automotive.  
The subsidy for wage costs of R&D personnel (W BSO) is by far the largest measure in the 
Dutch innovation policy, with a budgetary weight of EUR 0.5 b illion per year and has been 
broadened and extended. Second in importance is the “Innovation Box” that replaced the 
"Patent Box" in 2010 with a higher permanent budget (plus EUR 300 million annually. Organisational and managerial  innovation is promoted via a “Social innovation toolkit”. 
In 2008 the scope of the innovation voucher scheme has been enlarged to cover patent 
(application) costs. In 2009 i nnovation vouchers were extended to include priv ate innovation 
vouchers, which can be used for the purchas e of knowledge from private organisations. 
Competitive funding streams for universities (e.g. through research councils) have been strengthened. In addition, pe rsonal grants for researcher s have been introduced and 
scholarships for researchers been increased, w ith improved selection procedures to foster 
multidisciplinary research.  
The Dutch innovation system faces several challenge s. A first challenge is to strengthen the 
innovative capacity of companies. The expenditu res on R&D in the private sector remain low 
and the share of innovative companies in the SME sector is relatively small, in spite of the 
interesting voucher scheme. The prominence of the services sector may explain these results 
to some extent. 
 
EN 143   EN There are some indications that the governance  structures in the innovation policy field are 
rather complex and constitute a second challeng e. For instance, an additional structure has 
recently been created (the interdepartmental directorate) and the number of programmes is 
increasing further. 
3.18.4.  Towards a sustainable industry 
There is a strong political commitment to amb itious goals: Energy savings of 2% per year, 
increasing share of renewable energy to 20%  in 2020 and reducing CO2 emissions by 30% by 
2020 compared to 1990. 
The Dutch energy production is oriented towards ga s. A strategy to change this and to 
promote energy savings and ener gy efficiency is called "Schoon en zuinig", adopted in 2007, 
with annual monitoring  of 88 actions. EUR 7.5 billion are planned to be spent until 2011 on 
renewable energy.  
An electricity levy has been introduced to fund renewable energy investments. The flight tax 
has been permanently abolished from 2010, with loss of revenue of EUR 300 million per year. 
This measure may reduce the tax burden but it also reduces the internalisation of external 
environmental costs from flying 
The current measures will most likely not be suff icient to reach the ambitious policy goals and 
commitments mentioned above. 
3.18.5.  The business environment 
The Netherlands ranks among Member States w ith a legal and regulatory environment that 
highly encourages the competitiveness of enterpri ses and scores clearly above the EU average 
concerning the satisfaction with th e quality of infrastructure.  
Regulatory reform has been on the agenda of the Dutch government for over two decades. 
The 2007-2011 Regulatory Burden Action Plan has set a quantitative target of 25% reduction 
of the administrative burdens on businesses to  be achieved by 2011. By the end of the first 
quarter of 2009, a 10.5% net reduction had been ach ieved. It is planned to further lower the 
administrative burden by EUR 1 billion.  Common Commencement Dates (CCD) have been 
introduced.  
Ex ante  impact assessment is mandatory only for cen tral government primar y laws. It includes 
a Business Impact Assessment alongside with the Environmental Imp act Assessment, the 
Practicability Impact Assessment and the Cost-B enefit Analysis. A new approach in the area 
of the public consultation on new regulations  is based on using Internet: a two-year 
experiment was launched by the Mini stry of Justice in summer 2009.  
In December 2008, the Netherlands adopted it s National Implementation Programme for 
Better Services and eGovernment which se ts out agreements between the national 
government, provinces, municipalities and wate r boards to strengt hen the use of the 
eGovernment infrastructure for providing be tter services to businesses and citizens.  
The one-stop-shop as foreseen by the Services  Directive was operational by end of 2009. In 
addition, the Government already introduced a one-stop-shop for hiring the first employee and 
expanded the services of the Answ er for Businesses initiative.  
 
EN 144   EN Concerning infrastructure, project investments have  been speeded up as part of the anti-crisis 
measures (concerning bridges, roads, waterw ays and measures against rising sea level). 
No notable challenges have been  identified in this policy area. 
3.18.6.  Entrepreneurship and SME policy 
SMEs' contribution to employment in the Netherla nds is the same as in the EU (67%) but they 
tend to be larger on average than in the EU , with the share of small and medium sized 
enterprises relatively higher. The Netherlands scores clearly above the EU average concerning 
the time required to start a business and early stage financing, but significantly below average concerning bank loan conditions deemed acceptable by companies and slightly below average concerning the share of hi gh-growth enterprises.  
Regarding entrepreneurship skills, the 'Nati onal Education and Entrepreneurship Programme’ 
provides subsidies to implement entrepreneur ship education across the education system, 
based on a commitment contained in the natio nal Strategic Agenda for Higher Education. 
Research and Science Policy. For 2008-2011 € 33 million is allocate d to the programme 
(including primary, secondary and higher education levels). 
A dozen ‘Centres of Entrepreneurship’ were es tablished in co-operation between universities 
and enterprises to stimulate en trepreneurship among students. In 2009, a pilot programme was 
established to enable students in higher educat ion to acquire entrepreneurship skills in the 
United States.  
Also, a 'Partnership for Entrepreneurship and Education’ was established in 2005. The 
partnership consists of the Mi nistry of Economic Affairs and the Education Ministry, along 
with a range of social partners including education and employers' organisations. The 
partnership aims to stimulate en trepreneurship in education system, with activities including 
establishing a platform for good practice a nd facilitating exchanges of ideas around new 
initiatives and approaches. 
The government intends to limit its focus onto tw o programmes: one for starting enterprises in 
a foreign market (‘prepare2start’) and one for the positioning of enterprises in complex markets (‘2g@there’). The aim is to suppor t the internationalisation of 600 SMEs.  
Registration of a new company within 3 days is possible and minimum capital requirements 
have been abolished in 2009. An  awareness-raising campaign a bout the benefits of taking 
over an existing company has started in 2009.  
A micro-credit pilot project started in 2008 a nd has delivered first results. The rules for 
business angels have also been eased. The mini stry of economy has launched a pilot project 
on combating late payments.  
A programme for fast-growing companies has been  launched with the first 43 entrepreneurs. 
The goal is to support 100 companies over 5 years.  
The public procurement agency “Pianoo” is offe ring trainings to contracting authorities on 
writing their notifications according to the standa rds set out in the EU Code of good practice 
to ease participation of SMEs in public procurement.  
 
EN 145   EN No notable challenges have been  identified in this policy area. 
3.18.7.  Conclusions 
The main structural challenges in the Netherlands are to in crease private R&D investments 
and to promote renewable energy and energy e fficiency. Several structural measures have 
been adopted in the framework of the anti-cris is measures. However, it would be worthwhile 
to review existing policies, including the e ffectiveness of Dutch tax incentives, and to 
consider whether new measures could be useful to reinforce FDI inflow into R&D activities. 
The transition towards a more energy efficien t and low carbon economy could be stepped up 
with further incentives. 
 
EN 146   EN 3.19. Austria 
3.19.1.  Indicators graph 
Austria
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology gradua tes (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (Euro per kWh; 2008)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
NATowards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEsNA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 147   EN 3.19.2.  Introduction42 
Austria’s labour productivity was, measured per hour and per person employed, markedly 
above the EU average in 2005 and 2008/9. Austria is one of the very few EU members where 
the real effective exchange depreciate d between 1999 and 2005, indicating increased 
competitiveness. Although, nominal unit labour costs in Austrian manufacturing increased by 7% between 2000 and 2009 with a remarkable acce leration during the second half of the 
decade, the overall increase remained si gnificantly below the EU average of 19%. 
Austria is specialised in sectors demanding low- intermediate skills and low skill sectors. 
While the importance of high skill sectors has b een stable at a low level from 1997 to 2007, 
high-intermediate skill sector s are somewhat gaining ground. This trend is supported by a 
specialisation in sector s with medium-low technology intens ity. However, while sectors with 
a growth rate below EU average dominated in  1995 those with a growth rate moderately 
above the average clearly gained ground. 
Manufacturing plays a bigger role for Austria than for the EU in total (20% vs. 17% of value 
added in 2008). This is mainly due to specialis ation on wood products and, to a lesser extent, 
non-metallic mineral products, basic metal pro ducts and other machinery. In the service 
sector, only “hotels and restaurants” and “electricity, ga s and water supply”  have a clear 
above average weight. The primary sector is smaller than for the EU in total. Employment 
figures show a high level of productivity in manuf acturing and also a gradual shift to service 
sectors. Forecasts until 2020 expect  an increase in employment in business and other services 
by almost 20% and some losses in ma nufacturing and the primary sector. 
Austria’s trade of goods was almost balan ced in 2005 and 2009. The small positive trade 
balance in manufacturing mainly resulted from  surpluses in other machinery and, to a lesser 
extent, basic metal products and wood products wh ile refined petroleum and textiles showed a 
noteworthy trade deficit. The Revealed Compara tive Advantage (RCA), measured relative to 
the EU and concentrating on manufacturing, shows particular strengths for Austria in 2008 in 
wood and wood products, pulp, paper and publishing and basic metals products. 
Exit from the crisis Austrian manufacturing output fell by almost 20% in the course of the economic and financial 
crisis. In June 2010, 11% of that reduction was regained.  
In reaction to the economic and financial crisis  the government passed two Stimulus Packages 
in 2008 and 2009. For the years 2009 and 2010 th e two packages have a planned overall 
volume of EUR 3.7 billion. The packages comprise inter alia  programmes to support SMEs 
and access to finance, infrastructu re investments and R&D funds.  
Austria made EUR 300 million de minimis aid available under the Temporary State aid 
Framework of which EUR 128 million were actual ly paid to about 4000 enterprises. The 
majority of funds went to SMEs in manufac turing and services sectors for investment 
purposes and to cover working capital. 
                                                
 
42 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 148   EN The state also facilitated access to financia l resources by taking over guarantees for large 
enterprises, under the condition that the company was financially sound before 1 July 2008. The measure is limited to EUR 10 billion and will  expire at the end of  2010. Additional risk 
capital funds were provided to a small number of start-up companies in  order to strengthen 
equity and enhance financing of growth-oriente d investment projects. A participation fund 
was set up for this purpose to provide direct fina ncing in the form of si lent partnerships and 
mezzanine capital. The budgetary impact is es timated at EUR 40 million both in 2009 and 
2010. Export credit facilities were used by a number of exporting SMEs. The measure 
successfully ensured access to fina nce, in particular in the area of risk capital. Nevertheless, 
access to finance will continue to be difficult as a result of stricter  lending policies of the 
financial sector. The situation eased w ith respect to export credit markets. 
The recovery packages contained important infr astructure investments in rail, road, broad-
band internet and buildings with a planned budget  of more than one billion euro. In addition, 
additional R&D funds (EUR 100 million) were made available for the years 2009 and 2010. 
Austria also introduced a car scrapping sc heme. The scheme aimed at supporting the 
automotive sector and encouraging the replaceme nt of the existing stock of cars with more 
environmentally friendly ones. The financial bur den of this measure was shared equally by 
the government and the Aust rian automotive sector. 
3.19.3.  Towards an innovative industry 
The European Innovation Scoreboard 2008 (EIS 2009) assigns Austria’s innovation 
performance to the group of 'innovation followe rs'. Based on low-R&D-intensive industries 
and with a structural bias towards SMEs, the Austrian economy exceeded the EU average in 
R&D intensity. The number of sc ience and technology graduates and researchers is, however, 
below the EU average and may hamper innovative potential in the long run.  
Beside the continuous overall growth of fi nancial resources made available for R&D 
activities, the distribution of different financial sources has changed over time. Whereas the 
relative share of public sources (Federal/States)  has decreased over time , the business sector 
has substantially increased its share. Most interesting is the sharp increase of financial inflow from foreign countries. The basic strength of th e Austrian innovation sy stem lies in the strong 
R&D performance of small and medium-sized enterprises. 
In 2009, the Austrian Government launched a pr ocess to elaborate a national strategy for 
research, technology and innovation.  The main areas for innovati on policies are outlined: the 
confirmation of the strong commitment to inve st more in R&D and to improve indirect 
funding; to develop a balanced mix between generic and applied research and enhance cooperation between science and business (esp. SMEs); the need for a stable funding of 
scientific institutions and the promotion of young researchers; the need for more women in 
R&D and to develop an innovation-friendly mark et framework (strengthen competition in all 
areas, public procurement in  support of innovation).  
However, the concrete measures taken to impl ement these policies are not always clear. In 
addition, service sectors and grand social challe nges as cross-cutting i ssues appear to be 
underrepresented in the overall strategy.  
 
EN 149   EN Despite a substantial level of  public and private R&D&I fundi ng, the economic structure is 
still largely based on low R&D intensive sect ors. R&D policy has not yet significantly 
contributed to structural  change towards high-tech  industry and services.  
Among the key challenges that ha ve been identified is "strengt hening the formation of human 
capital" as there is not only an insufficient numbe r of available researchers, but there are also 
weaknesses of secondary and tertiary education systems. There also seems to be a need to 
improve the conditions for start-ups, including venture capital. Well-known barriers to entry 
as well as weak competition policy remain larg ely unaddressed issues. Efficiency of direct 
and indirect support could increase. The lack  of a clear vision on innovation has produced 
several inefficiencies, especially in innova tion governance (e.g. independence of agencies, 
lack of communication between ministries invo lved, programmatic interventions instead of 
comprehensive). 
3.19.4.  Towards a sustainable industry 
The share of renewable energy production in overall energy consumption is 28.5% which 
represents the fourth rank in the EU in 2008. In terms of energy inte nsity the industry is 
slightly better than the EU weighted averag e. The emphasis of Austrian climate policy 
currently lies on energy e fficiency of buildings. 
The Stimulus Package II foresaw EUR 250 million for measures to increase the thermal 
efficiency of buildings. Uptake was very rapid,  and it is estimated that the funding led to a 
total investment 6 times greater, as well as a reduction of 5.3 million tons of CO2. A further reduction of 2-3 million tons will result from sh ifting fuel consumption for vehicles towards 
bio-fuels and electricity, w ith a target of 10% by 2020.  
In addition, contracts signed under the Joint Implementation/ Clean Development Mechanism 
(JI/CDM) will result in a saving of 8 million tons. For the JI/CDM programme 
EUR 531 million will be made available up to 2012, with EUR 89 million per year.  
Increases in the funding for rail infrastructu re of EUR 900 million (E UR 120 million of which 
included in the Stimulus Pack age I) will serve not only to stimulate demand, but should also 
help reduce energy consumption by making rail travel more attr active and efficient, through 
extensive use of ICT. 
In early 2010 the ministries for environment and economy presented a new strategy to meet 
Austria's energy and environment targets. It ai ms at increasing the share of renewable energy 
in total consumption to 34% by 2020, reducing emissions in non-ETS sectors by 16% in 
relation to 2005 levels and furt her improving energy efficiency.  
Austria announced an additional strategy fo r research, technology and innovation in energy 
related fields. Amendments were introduced to the regime on renewable electricity production 
subsidies to take account of the fast-growing s ector, i.e. cap on indivi dual financial support 
and new technical standards. 
Austria has put in place a comprehensive na tional energy strategy. The main challenge 
remains its effective implementation. 
 
EN 150   EN 3.19.5.  The business environment 
Austria scores above the EU average in almo st all indicator categor ies, in particular 
concerning the legal and regulatory framework  and the quality of infrastructure.  
Austria set in 2007 a reduction target for ad ministrative burden of 25% for the burden 
stemming from national law until 2010 and of  25% for EU induced burden until 2012. In 
addition to the first simplification plan containing 133 reduction measures to reduce 
administrative costs for businesses, an updated simplification plan containing approximately 
200 measures was published in spring 2009. These re present about 2/3 of the reduction target. 
Out of these, about 20% have been completed.  
Public consultation on new regulations tends to take place on a preliminary draft legal 
proposal but if it reveals fundamental problems, a second round of consultations is carried out 
on a revised draft. The recent trend is to use internet consultations in order to increase 
transparency and to involve a wider public. Ea ch legal act is accompanied by a so-called 
"Vorblatt" that summarises the reasons for intervention and the main impacts. However, the scope of the impact assessments is rather lim ited and only in a few cases per year external 
studies can be used for a more detailed assessm ent. There is a reform project for the budget 
that will introduce a requirement as of 2013 to demonstrate in an impact assessment the 
benefits of expenditures as we ll (and not only costs). As rega rds compliance costs for firms, 
the assessment is generally limited to administrative burden impacts rather than more general costs of regulation. There appears to be no amb ition to introduce that in  the medium term.  
e-Government usage by enterprises in 2009 is ab ove the EU average. Austria has a national e-
Procurement platform mandatory for the fede ral government authorit ies. The estimated 
administrative costs reduction of the e-Govern ment applications acc ount for EUR 500 million 
until the end of 2010 and a further EUR 500 million by 2012. 
The one-stop-shop to start-up a company (WKO Gründerservice) is fully operational. The 
enterprise online portal adopted  in March 2009 aims at allowi ng firms to comply centrally 
with all information obligations without having to supply any info rmation twice. It  is a central 
gateway for firms who will be able to use it for any interaction with authorities. The implementation is foreseen  in three steps until 2012. 
Given the favourable business environment compar ed to the EU average, there are no major 
challenges to be addressed. The relative weakness in access to broadband lines has been addressed in the context of the Stimulus P ackage I and a further complementary national 
programme has been announced for 2010. 
3.19.6.  Entrepreneurship and SME policy 
The Austrian SME sector has a re latively large-scale structure, i.e. the percentage of micro 
enterprises (88%) is below average while the percentages of small (11%) and medium-sized 
enterprises (1.7%) are higher the European av erages. SMEs employ 67% of the workforce 
which is in line with the rest of the EU. Aust rian SMEs are slightly more productive than the 
European average. 
Austria clearly ranks above the EU average concer ning the enterprise survival rate after two 
years and slightly above the av erage concerning the payment duration of public  authorities 
and bank loan conditions deemed acceptable by companies. In contrast, Austria scores clearly 
 
EN 151   EN below the average concerning bu siness churn and early stage financing in the World Bank 
ranking. Commission data shows a constant reduc tion over recent years of the time to start a 
business to 11 days. It is however still above the EU average of 7.7 days in 2009. 
The inheritance and gift tax law expired in  2008 (accounting for EUR 140 million tax yields) 
which facilitates transfers of businesses. An action programme for SMEs for the years 
2007/2008 had been jointly implemented by the Fe deral Ministry of Economy, Family and 
Youth (BMWFJ) and the Federal Economic Chamber.  It encompassed pilot- measures in the 
areas ‘Young Entrepreneurs’, ‘Knowledge Mana gement’ and ‘Future Markets Best Ager and 
Health’ and provided young entrepreneurs w ith support or coaching in marketing, 
organisation, controlling and finance. 
The implementation of the Small Business Act pr inciples advanced in many areas, notably 
with respect to export promotion, guarantee sc hemes and entrepreneurship education. Here, 
Austria is currently making progress. A nationa l action plan is in preparation, with the 
objective of expanding entrepreneurship educati on to all types of secondary education. The 
strategy also includes activities related to t eachers training for entrepreneurship. Moreover, 
the revised bankruptcy law en tered into force in 2010. 
SME and entrepreneurship policy is well developed in Austria. Promoting a positive attitude 
towards entrepreneurship remains a societal challenge that requires further efforts beyond 
standard business support measures, such as incr eased efforts in entrepreneurship education.  
3.19.7.  Conclusions 
Overall, the Austrian economy is very compe titive and no major bottlenecks exists that 
hamper competitiveness in the s hort- to medium term. Issues to  be addressed are a reform of 
the education system with the aim of increasing the number of tertiary level graduates and increasing the number of (start-up) entrepre neurs. In addition, R&D&I policy and spending 
could better support structural change from  an economy dominated by low-R&D-intensive 
industries requiring low and low- intermediate skills towards an economy based on high-value 
and high growth sectors that  require high skilled labour. 
 
EN 152   EN 3.20. Poland 
3.20.1.  Indicators graph 
Poland
- 3 - 2 - 1 0123
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEsNA
NANA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 153   EN 3.20.2.  Introduction43 
Poland's labour productivity is, measured both per hour and per person, considerably below 
EU average. While it wa s stable per hour worked, a slight  increase was measured per person. 
Poland is one of the very few EU members wher e the real effective exchange rate has not 
appreciated, remaining almost unchanged si nce 1999. Nominal unit labour costs in Polish 
manufacturing declined by 25% between 2000 a nd 2009 with most of the decline occurring 
during the first half of the decade, resulting in a 44 percentage point gap compared to the EU 
average increase of 19%. 
Poland is specialised in sector s demanding low skills and in low- intermediate skill sectors. 
The importance of high-intermediate skill sector s has been increasing from 1997 to 2007 at a 
low level, while low skill sectors are losing gr ound. This picture is c onfirmed by a clear trend 
towards sectors with medium-low technology  intensity, specialisation in low-technology 
industries and a low share of hi gh-technology sectors. Poland te nds to specialise in medium 
high growth sectors and in sectors wi th a low or negative growth rate. 
Manufacturing plays a slightly bigger role for Po land than for the EU in total (19% vs. 17% of 
value added in 2008). The manufact uring sector is particularly  specialised on wood and wood 
products, refined petroleum and food. In the serv ice sector, electricity /gas/water supply and 
wholesale and retail have a cl ear above average weight. Agri culture and mining/quarrying are 
much more important than for the EU in tota l. Employment figures show the low level of 
productivity in agriculture but also its decr easing importance over time and change towards 
service sectors. Forecasts until 2020 expect an increase in empl oyment in business and other 
services (+39%) and in distribution and transport (+12%), as well as a clear decline in primary 
sector (-36%) and manufacturing (-8%). 
Poland shows a small deficit in the trad e of goods. The negative trade balance in 
manufacturing mainly resulted from deficits in chemicals, electrical and optical equipment 
and other machinery while food, drinks an d tobacco, transport equipment and other 
manufacturing showed a notewor thy trade surplus. The Revealed Comparative Advantage 
(RCA), measured relative to the EU and c oncentrating on manufacturing, shows particular 
strengths for Poland in 2008 in wood a nd wood products and other manufacturing. 
Exit from the crisis Poland was less severely hit by the economic and financial crisis and managed to avoid GDP 
recession. Still, manufacturing output dropped by 17%. This output reduction was, however, 
almost completely regained by July 2010. In contrast, bankruptcies increased by 120% in 
2010 compared to January 2009. Further difficulties are expected in the steel and construction 
sectors as well as the food industry. Poland supplied de mi nimis aid under the Temporary 
State Aid Framework mostly to SMEs in the ma nufacturing, automobile a nd services sectors. 
3.20.3.  Towards an innovative industry 
Compared with other European countries, Poland is not one of the most innovative 
economies. Nonetheless, the level of investme nt in innovation is ra ising. Nevertheless, it 
                                                
 
43 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 154   EN remains that Polish companies do not sufficien tly invest in innovation T and tend to focus 
their investments on new machinery and equipment.  
The analysis of the current policy mix conf irms its horizontal approach which can be 
described as offering generic ra ther than sector-specific sup port to innovation. The financial 
support comes mainly form the structural funds through the Operational Programme – 
Innovative Economy and the Regi onal Operational Programmes . Some additional funding to 
SMEs is provided through state programmes an d projects, such as: "Bon na innowacje" (co-
financing development of innovative products or  technologies), preferential loans for 
investments in innovation, and technological  credits granted by Bank Gospodarstwa 
Krajowego. Until June 2009, there were practica lly no long-term research agendas and only 
recently has the National R&D Centre launched calls for tenders for three large strategic 
projects. This can be considered as a pos itive development in improving the existing 
innovation policy mix, by the launching of progr ammes that had not been previously 
supported. Taking into account the budget allocat ions, the main focus seems to be on 
increasing business R&D and implem entation of new technologies.  
Important challenges remain: (a) stimulate and deepen innovation internal capacities of Polish 
companies; (b) improve science-industry coopera tion especially in sectors that have already 
invested significantly in R&D, not excluding the best projects in  other sectors that show the 
biggest potential for change; (c ) promote multidisciplinary prof ile skills for innovation in 
order to ensure that the supply of i nnovation skills meets the industry demand. 
3.20.4.  Towards a sustainable industry 
The current structure of the indu stry and use of olde r technologies contri bute to higher energy 
and carbon intensity. Poland is performing worse than the EU average in the area of waste 
generation and share of envir onmental goods in export. What is more, Poland has taken few 
steps to use the crisis to green the economy a nd it seems that the commitment to fight climate 
change is still perceived more as  a burden than an opportunity.  
Poland is increasing pub lic investment in renewable ener gy sources by 0.1-0.2% of GDP in 
the period 2009-2012. The increase of spendi ng on renewable energies is a positive 
development. This action is expected to  produce investment worth EUR 250-800 million, 
boosting demand in the construction sector. 
At the end of 2009 the Parliament adopted am endments to the Act on Energy law, which 
addressed some of the problems related to de velopment of energy from renewable sources. 
In addition, in July 2009, the Po lish parliament adopted the Act on the Management System 
for Greenhouse Gas Emissions or Other Substances . Its main objective is to use the surplus 
Assigned Amount Units, granted to Poland under the Kyoto Protocol, to support a national 
system of “green investments”. This law sets up the National Centre for Emission Balancing and Management that will be responsible for the management of the National Emission Rights 
Register.  
Poland has high expectations for the Carbon Capture Stor age technologies th at could make its 
energy production from coal much more ecological . Consequently, relevant legislation as well 
as research on potential deployment of thes e technologies is underway. Poland has even 
launched a demonstration project for an energy power plant. 
 
EN 155   EN According to the negotiated agreement with the EU, by 2020 15% of energy consumption in 
Poland should come from renewable resources i. e. (5% less than the target for the EU). 
However, taking into account that at presen t only 7% of energy consumption come form 
renewable sources, even this ob jective might be difficult to r each, if no additional incentives 
are introduced. Furthermore, re gulating the Polish waste manage ment system would improve 
the functioning of the market of waste tr eatment at municipal and national level. 
3.20.5.  The business environment 
Poland scores slightly above the EU average con cerning the electricity pr ices for medium size 
enterprises, but clearly below the EU average in  all other indicator cate gories, in particular 
concerning the satisfaction with th e quality of infrastructure.  
In March 2008, Poland adopted the target of reducing by 25% the administrative burden on 
businesses until 2010 in seven pr iory areas: environment, la nd development plan, social 
security, economic activity law, hallmarking law, employment law, and t ourist services. In the 
first phase, the mapping of information obligati ons (IO) in these priory areas resulted in the 
identification of over 700 IOs in 50 statues. The next phase, the measurement of costs of each 
IOs, led to the preparation of a summary report. On this basis will be developed concrete solutions for reducing the administrative burden to be proposed for December 2010.  
The Regulatory Reform Programme for 2009-2011 promotes preparation of better Impact 
Assessments, including impacts on SMEs. Training on impact assessment preparation, intended for almost 3 000 public officials from different ministries, started in December 2009. 
The programme also strengthens the role of pub lic consultations in new regulations. Public 
consultation with stakeholders on new regulatio ns may be open consultations, or may target 
stakeholders of a certain prof ile (business associations, soci al partners, trade unions and 
trilateral commission). However, there is no single institutio n which would represent SMEs. 
A manual for conducing public consulta tions was adopted in July 2009.  
eGovernment usage by enterprises in 2009 is  below the EU average and has slightly 
decreased since 2005. eGovernment policy is part  of a wider Information Society strategy 
until 2013 (adopted in 2008) and is focused on imp roving basic infrastructure across all levels 
of government. Poland doesn't have a central e Procurement infrastr ucture, but only a non-
mandatory Public Procurement Office (PPO) Portal managed by the Public Procurement 
Office.  
Positive developments concerning investments in  transport and energy infrastructure can be 
noted especially in the road sector, where many transport projects were advanced during 
2009. Furthermore, a new flexible model for f unding road investments was introduced to 
ensure a more effective use of funding. A poin t of concern is the pr oject pipeline in the 
railway sector where institutional capacity may be insufficient. 
Progress was made in energy market competition and energy infrastructure. Poland's energy 
market has been rather isolated from the rest  of the EU and steps towards energy market 
reforms have been taken at a relatively slow  rate. In recent months, Poland has made some 
progress towards improving the regulatory regi me for third party access to underground gas 
storages. However, third party access to the tr ansmission network is still not fully complied 
with, particularly as regards the important Yamal pipeline. More efforts may be needed to 
open up the Polish energy market to outside competition and to increase the market's flexibility. 
 
EN 156   EN Business regulations and infrastructure remain to be improved. The challenge for the 
government is to implement in a systematic wa y the regulatory reform programme giving it a 
deserved political priority at all levels of the administration and in  partnership, not in 
competition, with the parliament. The expansio n of eGovernment services should lead to 
additional reduction of the bureaucratic burden. Th e infrastructure is still a bottleneck to the 
economic development of the country. To tackle this challenge, significant efforts would have 
to be undertaken to cover the existing gaps in both transport and energy. In the energy field 
there is an urgent need to renew generation capacities and to upgrade and expand the grid. To 
achieve significant progress, more  funds and human resources will have to be allocated to all 
infrastructure projects. The ne xt round of infrastructure pla nning could be more explicitly 
linked to the needs of economi c development of the country. 
3.20.6.  Entrepreneurship and SME policy 
Poland scores slightly above the EU average concerning the payment duration by public 
authorities, but clearly below av erage concerning time required to start a business and early 
stage financing. Some other data are not avai lable for Poland. There is a similar share of 
SMEs in Poland compared to the EU. The main difference consists of a higher share of micro 
enterprises at the expense of small ones. It could be an enterprise growth issue or the artificial 
effect of self-employment visible in the st atistics in the form of micro enterprises. 
The action ‘Support and promotion of entrepreneur ship and self- employment’, covered in the 
EU Structural Fund programme for human capital,  promotes entrepreneurial attitudes and at 
entrepreneurship among women and minorities. It involves financial support and advisory 
assistance during the start- up phase and early operat ions. The budget is about 
EUR 400 million for the period of 2007-2013. 
The one-stop-shop was introduced in March 2009. It brings together the municipal/local 
administration, the tax office, the Central Stat istical Office (GUS) and the Social Insurance 
Institution (ZUS). The possibili ty of setting-up a company fu lly online (zero- stop shop) is 
foreseen to be developed after the adoption of an integrated IT  solution planned only for July 
2011.  
In 2009 Ministries of Economy and of Justice launched a program for overcoming the stigma 
of business failure and for act ivities on a second chance polic y. The program includes (1) 
counteracting bankruptcy of ente rprises, (2) fast and efficient bankruptcy proceeding, (3) 
second chance policy and (4) prom otion and information campaign. 
The ‘Passport to Export ’ initiative supports SMEs in the European market and promotes 
exports as a part of the Innovative Economy Operational Programme. The budget for the 
period 2007-2013 is ca. EUR 410 million largely from  EU Structural funds. Services offered 
include: advice, computer plat form with business informati on, subsidies for international 
business trips and fairs, and for obtaining doc umentation required for market products or 
services in a given foreign market. 
The availability of export finance has been increased, mainly delivered via Bank 
Gospodarstwa Krajowego (BGK) and Export Credit Insurance Corporation (KUKE), 
including export loans in the pre- and post- shipment phases, insurance and guarantees 
connected with loans for expor t activities, including foreign exchange risk insurance and 
foreign investment risk insurance. 
 
EN 157   EN The entrepreneurship attitude is  one of Poland’s main strengths. Almost all remaining areas of 
SME policies could, however, be improved. Fo remost, the general business environment 
could be made more business friendly. A furt her increase of the efficiency of business 
registration procedures and a reduction of its costs would be helpful. The bankruptcy 
procedures should be accelerated as a result of  the programme of the Ministries of Economy 
and of Justice. These general business enviro nment measures, including a duly implemented 
Regulatory Reform Programme 2009-2011, will  yield significant benefits to SMEs. 
SMEs in Poland have limited access to finance, esp ecially at early stage.  It has to be also 
analysed why the government offered guarantee funds have a relatively limited use. The 
challenge can thus be to improve the use of the current system by simplifying it and making 
the information about financing modes more easily available. 
SMEs in Poland are less innovation and less internat ionally oriented than their EU peers. The 
government should continue activ ities in this domain, while  focussing only on the most 
effective measures and achieving a balan ce between the general innovation measures, 
frequently targeting larger  firms, and SME measures. 
3.20.7.  Conclusions 
The Polish economy stood well during the crisis. It could rely on its still flourishing domestic 
market, good prudential financial market regulations and a floa ting exchange rate. Poland 
benefits also from its position as a manufactur ing hub for Europe. Yet, the country faces still 
several challenges and could fare even  better with improved policies.  
Entrepreneurs keep on complaining about persis tent administrative burden and an inefficient 
administration apparatus. Transport infrastructu re is not yet sufficiently developed to match 
the raising transportation needs of an expandi ng economy. Similarly the energy infrastructure 
is not adequate to facilitate competition, to provide long term stable and secure electricity 
provision, and to support th e environment friendly upgrade of the energy system. The 
economy moves forward and, as it develops, the lack of innovation becomes progressively a 
more important challenge to  further long term growth. 
More efficient governance would improve the ge neral business environment. This would 
include simpler and more transparent regulations  and a steadily improved efficiency of public 
administration and of the judi ciary. Better governance would be st go hand in hand with well 
developed infrastructure addres sing both transport and energy. The latter will need to be 
upgraded especially to meet the environmen t challenges and to replace the obsolete 
generation capacity. Finally, a dopting new technologies would help Poland to keep its 
economic activity up and to cope  with external competition. For this to happen, industry 
would have to invest more in innovation. Focussed support and smart policies will be 
necessary to develop growth poles, including measures that will more effectively link 
universities w ith industry. 
 
EN 158   EN 3.21. Portugal 
3.21.1.  Indicators graph 
Portugal
- 3 - 2 - 1 0123
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs NANA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 159   EN 3.21.2.  Introduction44 
Despite some recent improvements, the Portuguese economy continues to suffer from an 
overall low productivity and weak competitiveness position. Portugal has recorded persistent sizeable current account deficits in the curre nt decade (despite important and increasing 
services trade surpluses). 
Portugal’s labour productivity (measured per hour) represents around 60% of  the EU average. 
Measured per person, it reaches almost 75%. The real effective exchange rate continued to 
appreciate in the 1
st half of the current decade but afte rwards (as from 2006) there appears to 
be only a moderate deterioration in cost competitiveness. In pa rallel, nominal unit labour costs 
in Portuguese manufacturing increased by 13 % between 2000 and 20 09, thus remaining 6 
percentage points below the EU average of 19%. 
As regards goods, Portugal tends to specialise in sectors with low or negative growth rates. 
There is also a relatively high degree of specialisation in sectors requiring low skills. Regarding the technology-intens ity, there is a clear underrepr esentation of high and medium-
high sectors and a still relatively high specialisation in low technology sector s. Nevertheless, 
specialisation has increased in sectors of medium and high t echnological intensity, in tandem 
with an improvement in the technological content of output in sectors classified as traditional. 
In the last 10 years, there was a chronic de ficit in the trade of goods, manufacturing exports 
lost market shares overall and remained con centrated in small numb er of countries, the 
reduction observed in the expor ts over-specialisa tion in low technology sectors was followed 
by a modest, partial catchi ng-up in sectors of low-medium and medium-high 
technology.Manufacturing plays a smaller role for Portugal than for the EU in total (14% vs. 
17% of value added in 2008). Despite the cons iderable restructuring and convergence towards 
the EU average, the manufacturing sector is still particularly specialised on leather and 
footwear and on textiles and cl othing. In the service sector, hotels and restaurants, public 
administration, education and fi nancial intermediation have a noteworthy weight above the 
EU average.  
Employment figures show the very low level of productivity in agriculture but also its 
decreasing importance over time and a structural change towards service sectors, trends likely 
to continue in the future. 
The negative trade balance in ma nufacturing mainly resulted from deficits in chemicals, 
electrical and optical equipment, basic metal products a nd transport equipment while only 
textiles and clothing showed a noteworthy trade surplus. The Revealed Comparative Advantage (RCA), measured relative to the EU and concentrating on manufacturing, shows 
particular strengths for Portugal in 2006 in wood and wood products, leather and footwear and 
textiles and clothing. 
As for services, Portugal has shown competi tive advantage in tourism, but also in 
transportation services, cons truction and other services  rendered to companies. 
Exit from the crisis 
                                                
 
44 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 160   EN In Portugal, manufacturing outpu t fell by more than 20% in the course of the economic and 
financial crisis. In July 2010, manu facturing output stands at 85% of pre-crisis level. Several 
measures were taken aimed at helping firms to cope with the severe market conditions, 
including targeted support to SMEs and increasing public investment.  
Access to finance was eased since July 2008 by s ubsidising credit lines for additional funding 
for SMEs (subsidised interests and provision of part of collatera l through the guarantee 
mechanisms of the National Mutual Guaran tee System), for a total amount of over 
EUR 4 billion, implying a cost for the government  of 0.1% of GDP. Before end 2009, almost 
the whole amount had been used (the credit granted under these lines in 2009 may have an 
impact on concerned enterprise s’ activities still in 2010).  
On 8 June 2010, a new credit line (PME Invest  VI) for SMEs of EUR 1.25 billion was created 
(including EUR 450 million to support exporti ng companies and EUR 350 million supporting 
micro and small companies). Altogether, thes e initiatives already allowed 50 000 firms to 
access to credit (over EUR 5.7 billion in total). 
The regime of guarantees requested was str eamlined and VAT reimbursements were speeded-
up (from 90 to 60 days in the general regime or  30 days in the monthly regime) as from the 1st 
July 2010. SMEs with profits below EUR 2 m illion are exempted from the extraordinary 
corporate tax increase of 2.5% adopted on 30 June 2010 for 2010 and 2011.  
Support to export credit insura nce mechanisms was enhance d. This measure aimed at 
temporarily guaranteeing conditions for SMEs to  develop their trade activity in external 
markets in 2009 after the slump in world trad e recorded in late 2008, providing them with 
additional credit risk coverage for sales up to a total of EUR 4 billion (about 2½% of GDP) 
and implying a fiscal cost of 0.01% of GDP. 
These measures helped in achieving the positive developments in net-exports recorded in the 
recent months. The data available for the first four months of 2010, i ndicate that trade flows 
have been partly recovering from  the significant losses verified in the previous five quarters, 
with exports outperforming imports , with obvious beneficial eff ects: on the re duction of the 
current account deficit and growth ( GDP increased by 1.8% y-o-y in the 1st quarter of 2010). 
3.21.3.  Towards an innovative industry  
The European Innovation scoreboard (EIS) 2009 data show that Portugal has continued to 
improve its overall innovation performance and is amongst the fast growing 'Moderate 
innovators' countries, a group joined since 2008, as in 2007 Portugal was still among the 
'Catching-up countries'). Portugal made consider able progress in many areas (such as human 
resources or business R&D) but still reveals relative weaknesse s in a number of areas (e.g. 
business R&D). 
Important structural efforts to boost innovation encompass the Technological Plan, covering 
several measures aimed at strengthening networking and competitiveness factors among business, individuals, territories and the creation of eleven competitiveness poles and eight clusters – ranging from information technolog ies and communication to energy and health, 
among others. 
Against the background of the cr isis, there was an increase in  the corporate tax credit for 
R&D expenses (one of the most generous regi mes in the OECD countries) and there was a 
 
EN 161   EN reinforcement of the capital of FINOVA (guarantee and interest rate sponsored credit line for 
innovation in micro and small firms). At the sa me time, numerous structural measures to 
support R&D and Innovation activi ties are being undertaken such  as: reinforcing the support 
to R&D in different consortia between firms a nd science and technology en tities; set up of the 
international Iberian Nanotechnology  laboratory in Braga in July 2009. 
A number of challenges can be identified. Th ese include the following: first strengthening 
skills, human capital and the dynamic cross-li nkages between the education and research 
systems and the corporate sector; second foster ing the emergence and establishment of new 
companies, both domestic and foreign-owned, to promote employment, particularly in 
knowledge intensive activities; and third stre ngthening of SMEs in -house capabilities. 
3.21.4.  Towards a sustainable industry 
The national strategy for ener gy 2020, recently adopt ed on 15 April 2010, updates the strategy 
defined in 2005 and provides an  integrated and detailed framework of measures for 
promoting: renewable energy, energy efficiency  and associated eco-industries, competition 
and diversification of primary sources of en ergy, security of suppl y, reduction of energy 
dependence and its overall environmental imp act and to achieve the climate change and 
sustainable growth goals. 
Several important measures were implemented  for promoting energy efficiency, renewable 
energy and the development of associated eco -industries, such as: the set up on 20 May 2010 
of a the energy efficiency fund aimed at supporti ng energy efficiency technologies in the field 
of transports, private buildings, services and industry, incentives for the in stallation of thermal 
solar panels adopted in February 2009 a legal ac t regulating the incentives for the utilisation 
of electric vehicles and the developmen t of a pilot supply network, involving 25 
municipalities and a consortium including a public research in stitute and several private 
companies), the foreseen adoption of a ne w national action plan for renewable energy 
(recently object of a public consultation).  
The energy efficiency of industry remains an is sue. The public finance consolidation efforts 
may put the funding and timely implementation of some of these measures and investments at 
risk.  
3.21.5.  The business environment 
Portugal scores significantly above the EU aver age concerning the availability of high-speed 
broadband lines, but clearly belo w average concerning the legal and regulatory framework as 
well as state aid for industry and services.  
Over a period of less than three years severa l initiatives for reduction of administrative 
burdens, enhancing legal quality and e- government have been launched. The  Simplex  
Programme for the reduction of  administrative burdens launch ed in 2006 was strengthen in 
2008 through the introduction of quantified targ ets for 2012 and full compliance cost and was 
extended to cover municipalities ( Simplex Autárquico  Programme). The Legislar Melhor  
Programme for enhancing legal quality (launched in 2006) is the first integrated programme 
for Better Regulation in Portugal an d include the first steps toward ex ante  impact assessment, 
the Simplex  Test. A preliminary version of the Practi cal Guide for Prior Assessments has been 
developed. Further efforts leading to the setup of  an effective mechanis m of regulatory impact 
assessment including their quality monitoring are still needed.  
 
EN 162   EN eGovernment was developed in  association with the administrative and legislative 
simplification programme. Substantial effort ha s been made to provide all public services 
online and to increase the level of sophistication. Busi ness services are fully available online, 
and the usage by enterprises stands above th e EU average. The national e-procurement 
platform is mandatory only for central administrations.  
The one-stop-shop to start-up an enterprise (E nterprise Formality Centres, CFE) is fully 
operational.  
Energy infrastructure investments such as in the National Dam plan continue (foreseen to 
increase from to 70% the contribution of hydroe lectricity by 2020). 5 dams, one of which is 
reversible, with a potentia l power of 1040 MW in total are under construction. 
A plan was adopted to develop and support broadband investment by the private sector 
(estimated to reach EUR 1 billion). 
The natural gas tariffs were lib eralized for companies (custome rs with an annual consumption 
above 10 000 m3) on 11 June 2010. 
Portugal could improve its ov erall business environment by creating more favourable 
framework conditions for investment and entrep reneurship. Examples of concrete bottlenecks 
include: facilitating the conditi ons for hiring workers and the procedures for dealing with 
construction permits, reducing the delays in  the court system, the rationalisation and 
consolidation of existing regulations. 
Full implementation of the measures and calendar  foreseen for the gradual liberalisation of 
tariffs in the natural gas and electricity markets would be helpful. This applies as well to measures to foster the cross-border energy connections and a start-up of a dynamic Iberian 
electricity market. Implementation of the service directive is crucial. Efforts should continue 
to include effectively Municipalities and all leve ls of Public Administ ration within the scope 
of the Simplex Programme, to implement an impact assessment and evaluation systems, to achieve further administrative simplification, bu rden reduction and greater efficiency of 
public services in general and in pa rticular in the judicial system. 
3.21.6.  Entrepreneurship and SME policy 
The SME sector in Portugal is relatively more important than in the EU as a whole and is 
dominated by micro enterprises (accounting for 42% of total employment, compared to 30% 
for the EU). Portugal scores significantly ab ove the EU average concerning the business 
churn and early stage financing, but significan tly below concerning the payment duration by 
public authorities and the enterprise  survival rate after two years. 
Many measures were taken during 2009 and 2010 in  the context of mitigating the effects of 
the crisis, especially on SMEs, with the purpos e of facilitating access to credits and export 
markets (see above).  
Several measures targeted at promoting exports and the interna tionalisation of SMEs, such as: 
i) set up, on 19 January 2010, of the Council for th e Promotion of Intern ationalisation (CPI) 
charged with the definition, follow-up and evalua tion of the internationalisation strategy and 
supporting measures; ii) creation, on 1 June 2010, of a fund (initially EUR 250 million) 
supporting the internationalisati on and exports (FAIE) for SM Es, aimed at increasing the 
number of firms exporting, enlarging the geogra phical scope, number of  products, the valued 
 
EN 163   EN added and the technological content of the exports; iii) set up of network of 14 “export 
support offices” throughout the country and a program “Inov-export” supporting traineeships 
in exporting SMEs. 
A legal act has been adopted to unify and streamline the procedures for granting tax 
incentives for investments in Portugal and for the internationali sation of Portuguese 
companies (including a corporate tax credit of 10% - up to 20% for SMEs - of the relevant 
investments until 2020). 
In order to reduce the delay of payments by public authorities, the ‘Timely Payment 
Programme’ has been implemented in 200 8, complemented by the Programme for 
Extraordinary Reduction of State Debt (‘Program a de Redução Extraordinária de Dívidas do 
Estado’), as one of the measures  to promote the liquidity cond itions for businesses. A new law 
(adopted on 27 April 2010) sets the conditions and makes mandato ry the payment of interest 
by the state and local authorities in case of delay of payments. 
Of a more structural nature, a large number of supporting m easures and programmes, party 
funded by the EU structural and cohesion f unds were set in place by the Portuguese 
government, mostly in 2007 and 2008. The QREN  system is a major funding source of 
government initiatives designed to support th e economic development of the country. The 
programme FINICIA aims at improving access to  credit and equity for companies in early 
stages of their life cycle, while FINCRESCE su pports the transfer of the ownership of SMEs, 
management buy-outs and management buy-ins.  The programme PAECPE that adapted 
previous initiatives was approved in 2009 to s upport recipients of unemployment benefits to 
become self-employed. A training program fo r managers of micro, small and medium 
companies, aimed at improving their manageme nt skills, was put in place on 29 March 2010 
and runs until 30 June 2011.  
Regarding entrepreneurship skills, the Education Ministry is implementing a National 
Education Project for Entrepreneurship Edu cation (Projecto Nacional de Educação para o 
Empreendedorismo or PNEE) which aims at es tablishing entrepreneurship education as a 
cross-curricular subject with in the curriculum. Within the framework of the PNEE, 
elementary, secondary and vocatio nal/professional schools have b een invited to develop a set 
of initiatives leading to the creation of entr epreneurship competencies and attitudes. 
The main challenges in the entrepreneurship a nd SME field are to ensure that public finance 
consolidation and the gradual exit from supporting measures does not undermine general 
liquidity conditions and access to finance for businesses and in particular SMEs and to promote entrepreneurship and the framework conditions and incentives that facilitate 
structural change and growth in the medium and long term. 
3.21.7.  Conclusions 
Portugal could further improve its overall bus iness environment by creating more favourable 
framework conditions for investment and entrep reneurship. The admini strative and regulatory 
environment is the main issue here; effort s should continue to implement an impact 
assessment and evaluation systems, to achieve further administrative simplification, administrative burden reduction and greater effici ency of public services in general and in 
particular in the judicial system. 
 
EN 164   EN Weaknesses regarding skills, human capital and cross-linkages between the education and 
research systems and the corporate sector and low business R&D investments constitute obstacles for the emergence and establishment of  new companies, particularly in knowledge 
intensive activities. The promotion of internationa l partnerships and of research in consortia in 
the context of the national i nnovation system may help in br inging the interaction between 
universities and companies to a new level. 
 
EN 165   EN 3.22. Romania 
3.22.1.  Indicators graph 
Romania
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2007)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
NATowards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 166   EN 3.22.2.  Introduction45 
Labour productivity in Romania wa s growing from 2005 but did only reach some 45% of the 
EU average in 2008/9, measured per hour an d per person. However, even though annual 
productivity growth rates in this period exceeded  5%, significant losses in competitiveness 
were unavoidable as nominal unit labour co sts in Romanian manufacturing increased by 
261% between 2000 and 2009 with almost 2/3 of th e increase occurring dur ing the first half 
of the decade. This increase was higher than in any other EU Member State and more than 10 times higher than the EU average of 19%. Romani a shows a decreasing deficit in the trade of 
goods starting with 2009. The export sector had to cope with Ro mania's strong appreciation of 
the real effective exchange rate si nce 1999 (the strongest in the EU). 
Sectors with negative and low-gr owth rate for the EU in total are still very important in 
Romania (both amounting to 41.2% of GDP in 2007) and exert a negative influence on the 
general performance of the country. However, their share in GDP decreased over the period 
1995-2007, but more growth-intensive s ectors are only slowly gaining ground. 
Manufacturing plays a much bigger role for Roma nia than for the EU in total (24% vs. 17% 
of value added in 2008). Romania ranks among the EU Member States with the highest share 
of manufacturing in GDP and the lowest of ma rket services, while the multiplier effect of 
manufacturing on market servi ces is the lowest in the EU. Compared to the EU, the 
manufacturing sector is particul arly specialised on leather and f ootwear, textiles and clothing, 
food/drinks/tobacco, wood products and fu rniture, and refined petroleum.  
This specialisation in sectors demanding low-ski lls is slowly losing gr ound in favour of low-
intermediate and high-intermedia te skill sectors. The restructur ing of the Romanian industry 
has generated over the last decade a gradual sh ift from labour- and res ource intensive sectors 
towards higher technology sectors largely as a result of  foreign direct inve stment inflows (e.g. 
the case of the automotive sector, ICT, me tallurgy - ferrous and non-ferrous, building 
materials, machinery and equipment). This tren d is confirmed by the export structure of recent 
years characterised by a signifi cant increase of exports of machinery and equipment which 
trebled during the period 2002-2007 and of trans port equipment and accessories which went 
up fivefold, while exports of textiles and f ootwear increased by around 20% during the same 
period.  
In the service sector, only “transport and communication”, construc tion, and wholesale and 
retail trade have a larger weight than EU in total. The primary s ector is larger than for the EU 
in total due to the second-highe st share of agriculture in the EU. Employment figures show an 
extremely low level of productivity in agriculture  even after substantia l job losses. Forecasts 
until 2020 expect an increase in employment in di stribution and transport,  and in construction 
by some 30% while employment in the pr imary sector might decrease by 25%. 
Exit from the crisis After several years of sustained growth, Ro mania was hit hard by the global economic 
downturn starting from the second half of 2008. In July 2010, manufacturing output was 6% 
lower than before the economic and financial crisis. In the course of the crisis it fell by almost 
                                                
 
45 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 167   EN 20%. Construction and real estate, road transport, chemical industries, extraction of crude oil 
and natural gas were among the most affected sectors. 
The need for fiscal consolidation left little room for manoeuvre in la unching costly recovery 
measures. The main stimulus measures affecting product market were the Rabla  car scrapping 
scheme for stimulating the renewal of the nati onal car fleet and the temporary rise of the 
maximum threshold of State aid from EUR 200 000 to EUR 500 000 (the budget of this 
scheme for the period 2009-2011 is of EUR 45  250 000). Moreover, the Government has 
offered state guarantees in support of major i nvestment projects by large companies (Ford 
Romania, Oltchim, Renault Technologie and Renault Mecanique, Pirelli Tyres, Rafo and Romplumb) active in th e manufacturing sector. 
Furthermore, in the framework of the struct ural reform conditionality attached to the 
Memorandum of Understanding (MoU) of the EU financial assistance to  Romania concluded 
in June 2009, a number of structural reforms initiatives have been launched, which have 
limited impact on the 2009 and 2010 budgets. Refo rms include initiati ves towards improving 
the efficiency and effectiveness of public administration, sound use and improved absorption 
of EU funds, increasing the efficiency and e ffectiveness of public R&D spending, improving 
the business environment, a nd tackling undeclared work. 
3.22.3.  Towards an innovative industry 
The structure of Romania's economy is charac terised by the prevalence of low- and medium-
technology sectors, with low knowledge dema nd and low innovation culture. The level of 
innovation infrastructure and mechanisms is still at an early development stage, situation due 
to a large extent to the chronic very low pub lic and private RDI expenditure. The low levels 
of business RDI, both in the case of large firms and SMEs, are rooted in several structural and 
managerial deficiencies, such as the firms' re luctance or inability to  take on financial and 
commercial risks arising from RDI, the poor fina ncial services and instruments to mitigate the 
risk, the little awaren ess of the funding opportunities for innovative enterprises that have 
recently become available, the lack of a clear market supply and demand approach to 
innovation, the excessive reliance on government f unds and the low share of funding attracted 
from EU funds and other sources. In addi tion, the Romanian innovation system faces 
weaknesses as regards its scien tific performance and the governa nce of the RDI activities. In 
this light, the innovation performance is weak co mpared to the EU average (third to last 
among the EU-27) but its growth rate makes Romania one of the growth leaders in the 
‘catching–up’ group of countries, according to the European Innovation Scoreboard. Innovative firms account for less than a fifth of the country’s total number of active firms and 
workforce. 
The current set of innovation policy instruments in Romania includes direct instruments, 
which continue to be the dominant funding mechan ism, and a few indirect instruments, such 
as tax incentives, which are still largely insuffi cient. The main recent initiatives include: the 
main instrument of innovation policy is the National Plan for RDI 2007-2013  oriented 
towards enterprises in or der to support innovation, technological development and 
implementation of research results in industry;  tax allowances of up to 120% of the firm's 
RDI investment (through an increase of the de ductibility of RDI expenditure from 100% to 
120%) and use of the accelerated depreciation method on machinery and equipment used for 
RDI activities, since January 2009.  
 
EN 168   EN Under the severe cut of public RDI spending  in 2009 (50% less than foreseen in the 
multiannual planning and 25% less than in 2008), there are concerns about the capacity to ensure adequate funding for th e ongoing research programmes and projects. In light of this, a 
process of improving the efficiency and e ffectiveness of the public RDI spending was 
launched in 2009 and a Plan  was adopted by the Romanian G overnment in May 2010, in line 
with the conditionality a ttached to the MoU. The Plan  draws a set of measures aiming at 
adjusting to the limited financial resources, ensuring the consistenc y of RDI policies and 
programmes, stimulating private sector RD I activities, as well as establishing and 
implementing uniform procedures for mon itoring and evaluation of RDI activities. 
The number of innovative enterprises in industry and services has slight ly increased in recent 
years. Thus, the challenge is to increase the innovative potential of enterprises, particularly SMEs. Closely related to this, another major ch allenge is to improve technology transfer and 
business support infrastructure (business incuba tors, technology transfer offices, S&T parks, 
clusters etc.). In this respect, there are bottle necks in the absorption of foreign technology as 
well as challenges to mitigate high innovation costs, particularly for SMEs, through provision of assistance programmes, availability of t echnology enriched information, and appropriate 
financing schemes. Moreover, partnerships am ong industry, university and R&D institutions 
could be improved. Public funding c ould be used more to leverage  private sector investments, 
strengthen links between business and research in stitutes and better adjust research to market 
needs. Furthermore, a cross-cut ting issue is the shorta ge of a highly skille d labour force due to 
an inefficient high-education system not ye t reformed and substantial brain drain and 
migration. These challenges are matched with th e need to improve significantly the business 
environment in order to provide th e appropriate framework conditions. 
3.22.4.  Towards a sustainable industry 
The sluggish restructuring of the industrial ba se which, prior to 1989, has been characterised 
by the high-share of energy-inte nsive and non-sustainable industr ies and a poor energy-saving 
culture, resulted in outdated t echnologies and productive equipmen t and lack of conformity 
with the environmental standards. In add ition, foreign direct investment flows in 
manufacturing industries have had a clear pref erence for low-technology and energy-intensive 
sectors. In consequence, the environmental pe rformances of the Romanian industry are poor. 
The levels of the energy-intensity in industry as  well as of waste generated by enterprises are 
the third-highest in the EU, while the export of environmental goods is well below the EU 
average. 
The main funding instrument for environmen tal policy is the Operational Programme 
Environment  with a total budget of EUR 5.6 billion (EUR 4.5 billion EU contribution and 
around EUR 1.1 billion national public participation) over the period 2007-2013. The Operational Programme Increase of Economic Competitiveness  provides also funding for the 
development of an eco-efficient productive sy stem, ncreasing the energy efficiency and 
promoting renewable energy sources. 
The main recent initiatives with direct relevance to industry ar e the state aid scheme for the 
promotion of high-efficiency cogeneration and thermal energy and the Rabla  programme for 
stimulating the renewal of the national car fleet (ongoing in 2010). 
The main developments at institutional level are the government decision to implement the 
Commission's Regulations and Directive 2005 /32/CE on eco-design requirements for the 
energy performance of energy-us ing products, currently  under endorsement, as well as the 
 
EN 169   EN adoption of the 2010-2013 Roadmap for the implementation of the Environmental 
Technologies Action Plan  (ETAP Romania). By cont rast, the approval of the National Action 
Plan on Green Public Procurement  for the period 2010-2013 which sets multi-annual green 
procurement targets for different categories of products and service, planned as for September 
2009, has been delayed. Finally, an inter-ministe rial working group was established in April 
2010, in order to develop the Romanian strategy on electric cars. 
As one of the most energy-intensive economies in Europe, energy effici ency should be a key 
priority in Romania, in line with the EU objectives on climate change and renewable energy 
for 2020. Whilst some measures are already fores een, an ambitious and integrated strategy is 
now required to improve radically the energy effi ciency of production stru ctures in order to 
reduce energy dependency, emissions of CO2 and costs for end-users. Moreover, conformity 
with environmental standards, which is essent ial for industry competitiveness, will require 
significant financial efforts to supporting th e adoption of standards, upgrading productive 
capacities and processes, a nd investing in environmen tally friendly, eco-efficient 
technologies. Thus, another pr iority would be publicly-financed investments, including 
relocating funds from other public investments programmes with less mu ltiplier effect in the 
economy, and an increased use of EU Structural Funds. 
3.22.5.  The business environment 
The Romanian business environment is hampered  by the weak administrative capacity at both 
central and local levels. The la ck of implementation of struct ural and institutional reforms 
resulted in a heavy regulatory environment, characterised by the lack of transparency in the decision-making process and signif icant red tape in all sectors of administration. The high 
number of authorisations and permits and delays in obtaining them, as well as the world 
second highest number of taxes to be paid (113) are mirrored by the weak position of 
Romania in the various international benchm arking exercises. Moreover, the lack of 
development of transport infrastructure, especially motorways - Romania has the least developed motorway network in the EU a nd there is no motorway connection to the 
motorway network of other EU Member States  - represents a shortcoming for increasing 
economic competitiveness. Furthermore, ICT take -up by enterprises and administration is still 
at an early development stage, although the perc entage of high speed lines is very high.  
In accordance with the conditionality attached to the MoU between the European Community 
and Romania and the Stand-By Agreement conc luded between Romania and the International 
Monetary Fund, the Government assumed in September 2009 the responsibility for the Law 
on the reorganisation of public authorities and  institutions, streamlining public spending and 
supporting the business environment . This law includes several m easures to reduce budgetary 
expenditure and to support th e business environment to ove rcome the economic crisis.  
In the context of the MoU, several structural  reforms that should contribute to improving the 
business environment have been initiated ove r the period 2009-2010. A functional review of 
the public administration led by the World Bank– which is aimed at addressing both specific 
performance challenges in individual ministries  and the systemic problems that may require a 
government-wide approach - has started in 2010. Based on its outcomes, the Government 
should prepare an action plan for a strategic re form of public administration to increase its 
efficiency and effectiveness. An inventory ha s been made that totals 275 categories of 
requirements for authorisations/permits focussing on registering property, operating a 
business and building works. A list of 51 fr om the 275 categories issued by the central 
government institutions has been included in a Pl an in view of simplification or elimination. 
 
EN 170   EN So far, 16 categories have already been simplified/ eliminated while in the other 35 work is 
ongoing. Amendments to the bankruptcy legislation aimed at shortening the time necessary to 
close down a business to less than 1 year have  been submitted to Parliament. Furthermore, 
other amendments are under preparation to en able out-of-court corporate restructuring 
negotiations.  
A Better Regulation Strategy  for the period 2008-2013 was adopted in 2008. Romania 
assumed a national target of 25% of administrative burden reduction by 2012. The process of 
identifying the information obligations wa s completed in June 2009 (4430 information 
obligations were identified in 13 sectors) . The next stage consists of measuring the 
administrative costs on the basis of a SCM manual adapted to Romania's specific needs, whose development is funded by the Dutch govern ment. In parallel, the development of a 
sector-specific methodology to improve ex ante  impact assessments in the field of education 
and health was foreseen to be completed by end 2009. Finally, codification work is ongoing to elaborate the Administrative Code  and the Administrative Procedure Code . 
Romania has taken a number of measures to improve the quality of  public services via 
Internet. Ambitious objectives  for eGovernment and eBusine ss have been set through the 
Governmental Strategy for Broadband Co mmunications Development in Romania for the 
period 2009-2015, which was adopted in 2009. More over, the creation of a national portal 
(eRomania) is under way.  
The implementation of the EU Services Dire ctive was scheduled for completion by end 2009. 
In addition, the Govern ment is planning to restructure th e Romanian energy generation sector 
by consolidating the state-owned energy assets in  two companies while maintaining the legal, 
managerial and operational independ ence of the concerned entities. 
The measures already initiated or foreseen address some business environment bottlenecks, 
such as cutting red tape or developing the in formation society. However, strengthening the 
administrative capacity is the key weakness to be addressed. Thus, implementing timely and effectively the recommendations of the functi onal review of the public administration 
currently led by the World Bank would be an important undertaking. Another major challenge 
would be continuing and broadening the scope of the administrative simplification initiated in 
the frame of the MoU conditionality. Whereas many of the categories of authorisations and permits already simplified are not among t hose having a significant impact on business, 
particularly on SMEs, it would be essential to fu rther extend the inventory to other areas of 
the public administration and to carry out the pr ocess in close collabora tion with stakeholders 
and the business community. In addition, a s ubstantial reduction of the number of tax 
payments per year seems also to be essentia l. Furthermore, inves ting in transport and 
communication infrastructure would be critical  to improving competitiveness and attracting 
investment.  
3.22.6.  Entrepreneurship and SME policy 
SMEs are prevailing in the Romanian economy and represent over 99 % of total ente rprises. In 
recent years, the SME sector has consolidated its role in the economy in terms of number of employees and average turnover per enterprise. The economic crisis resulted in much more 
restrictive credit terms for SMEs and large enterprises and the difficult situation on the 
financing markets will be an  issue for economic recovery. The number of SME bankruptcies 
doubled in the first half of 2009 compared to the same 2008 period. Most SMEs are severely 
undercapitalised, despite some na tional initiatives  and support programme s. The shortage of 
 
EN 171   EN finance, lack of business support services, limit ed entrepreneurial skills and experience, and 
insufficient knowledge of how to enter markets ar e the main factors explaining the low rate of 
business survival, lack of growth and competitiveness.  
Romania has taken a small number of stimulus  measures with a view to supporting business 
dynamism. Some of measures announced by the Romanian Government in early 2009 have 
been adopted very late, thus c onsiderably delaying th e expected effects (s uch as the temporary 
tax exemption of the reinvest ed profit starting with Q2-20 09, postponed to October 2009) 
while some of them have not been adopted at all. Financial support to SMEs was provided via 
multi-annual national programmes and guarantee instruments. The National Credit Guarantee 
Fund for SMEs became operational, and a Counte r Guarantee Fund of Loans to SMEs was set 
up in 2009. In addition, legislative measures were  taken in 2009 to ensure the implementation 
of the JEREMIE  initiative. 
Currently, there are several actio ns running, financed by the OP Increase of Economic 
Competitiveness , providing support to new investments, internationalisation of SMEs, support 
for the implementation of international standard s, and advisory services. In addition, support 
to investment projects of micr o-enterprises as well as to de veloping the regional business 
infrastructure is pr ovided through the OP Regional Operational Programme . Several ongoing 
assistance projects, financed through the OP Administrative Capac ity Development, aim at 
implementing a coherent plan for improving the business environment, transposing at national 
level the Small Business Act, and developing an  operational one-stop-shop pilot model.  
The public procurement law was modified with  the aim of acceleratin g and rendering more 
flexible the procedures of absorption of Eur opean funds. In addition, an assessment of the 
participation rate of SMEs in the public pr ocurement process was carried out, showing that 
over 55% of contracts with a total value of EUR 4 billion were allocated to SMEs.  
Concerning entrepreneurship, the government  initiated in 2008 an action to stimulate 
entrepreneurial mindsets of high school pupils and students through the use of interactive 
learning methods such as ‘the simulated fi rm’. Several programmes for entrepreneurial 
education among young people and women were  carried out, with a total budget 
approximately 2.3 higher in 2009 co mpared to 2008. Moreover, the 2006-2009 National 
Multiannual Programme  set up to support SMEs' access to tr aining and consulting services 
was extended until 2012, with a to tal budget for 2009 of EUR 5.1 million. 
Romania's policy response to he lping SMEs to survive the ec onomic crisis was hindered by 
the need for fiscal consolidation, which left little room for manoeuvre in launching costly 
recovery measures. To mitigate the companies' higher costs of financi ng, scarcity of credit 
and guarantees, and lack of worki ng capital, the main challenge in the short term relates to the 
access of companies, especially SMEs, to fi nancing, including through EU funding. Related 
to this, Romania needs to increase support to en terprises, particularly SMEs, in accessing the 
available EU funds, as well as to reduce signifi cantly late payments by public authorities to 
economic agents. Moreover, facilitating the acce ss of Romanian companies to markets could 
help offset the decline in demand. In this respect, incr easing transparen cy of public 
procurement practices and star ting to support the internationa lisation of SMEs could be 
important steps.  
 
EN 172   EN 3.22.7.  Conclusions 
Whilst the short-term priority is to bring th e public finances under control and stabilise the 
macro-economic framework, the implementation of  a number of urgent structural reforms 
should help to significantly improve the business environment. In this light, the effective and 
timely implementation of the measures included in th e MoU will be critical as  it will help exit 
from crisis in good conditions and pave the way for a return to sustainable growth.  
Effective reform of public administration at central and local level would be a key 
undertaking for Romanian economic structure. The weak administrativ e capacity limits the 
possibilities for reform, hinders the absorption of  EU funds and is, in general, dissuasive for 
all economic investors. Strengthe ning the efficiency, effectiv eness and independence of the 
public administration should help improve the qua lity and enforcement of policies as well as 
the effective absorption of structural funds. Maki ng an increase of the low rate of absorption 
of the EU Structural Funds a priority for ec onomic policy would allow raising the necessary 
investment in infrastructure and human capita l without an excessive burden on the national 
budget. Moreover, transparency in the decision-making proce ss and accountability of public 
resource mobilisation and use are essential cross-cutting issues to consider.  
Improving the heavy regulatory environment and reducing the significant red tape in all 
sectors of the administration would contribut e to unlocking the business potential and 
reducing costs of doing business.  Furthermore, developing th e weak transport (especially 
motorways) and communication infrastructure would be critical to improving competitiveness 
and attracting investments.  
In the long term, the challenge will be to en sure a paradigm shift away from unskilled labour 
and energy intensive sectors towards more smar t, low-carbon and resource -efficient activities. 
Upgrading productive capacities a nd processes, investing in e nvironmentally friendly, eco-
efficient technologies, increasing the innovative potential of en terprises, and addressing the 
shortage of highly skilled labour force availabl e due to an inefficient high-education system 
not yet reformed and substantial brain drai n and migration, will be essential for the 
competitiveness of the Romanian industry at 2020 horizon.  
 
EN 173   EN 3.23. Slovenia 
3.23.1.  Indicators graph 
Slovenia
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2005)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs
NANANANA
NA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 174   EN 3.23.2.  Introduction46 
Slovenia’s labour productivity, measured both  per hour and per person, reached around 80% 
of the EU average in 2005 and in 2008/2009. The real e ffective exchange ra te has appreciated 
since 1999. The implied decrease in competitiveness is moderate as the drop is lower than for 
the EU on average. Concomitantly, nominal un it labour costs in Slovenian manufacturing 
increased by 21% between 2000 and 2009, thus only somewhat faster than the EU average of 
19%. Slovenia’s fast growth was held back by the crisis. Due to its export-orientation, it is 
very sensitive to economic setbacks. In that context, labour productivity and cost 
competitiveness are under careful scrutiny. 
Slovenia’s progress (from 1997 to 2 007) towards higher value added activities is reflected in 
its recent specialisation patter ns. Sectors demanding low and low- intermediate skills 
dominate the Slovenian economy wh ile the share of low skill sect ors is decreasing. There is a 
decreasing specialisatio n in high and low technology sector s at the benefit of medium 
technology sectors. In comparison with the re st of the EU in 1995-2007, Slovenia is getting 
more specialised in sectors which had a me dium to high growth rate, and decreasingly 
specialised in sectors with  a negative growth rate. 
Manufacturing plays a larg er role in the Slovenian economy than in the EU (representing 22% 
in Slovenia vs. 17% in the EU of total va lue added in 2008). The country is mainly 
specialized in the pr oduction of wood and wood produc ts, in chemicals (driven by 
pharmaceutical companies), in rubber and plasti cs, in basic metal products and in leather, 
footwear and textiles. In the services sector, electricity, gas and wate r supply and construction 
weight proportionally more than in other EU  countries. Employment figures confirm the 
larger role played by the manuf acturing sector compared to the overall EU. But Slovenia is 
slowly transitioning towards a more services -driven economy. It is forecast that, by 2020, 
employment will decrease by 28% in the prim ary sector and by 13% in the manufacturing 
sector. Conversely, construction services and business and other services would have grown 
respectively by 9% and 10% by 2020.  
Slovenia is very dependent on its trading pa rtners (mainly Germany, Austria, Italy and 
Croatia). Slovenia’s production in  transport equipment, chemi cals and metals (basic and 
transformed) is predominantly exported. Slovenia ’s industries are often part of larger global 
value chains. As a result, Slovenia is a strong importer of intermediates (products imported for production processes purposes and not for local  consumption). Slovenia is mainly a net 
importer in refined petroleum,  in agriculture products a nd in mining and quarrying. 
Conversely, machinery and other manufacturing showed a noteworthy trade surplus. Due to 
the crisis, Slovenia showed a small trade deficit in 2008. The Revealed Comparative 
Advantage (RCA), measured relative to the EU and concentrating on manufacturing, shows 
particular strengths for Sl ovenia in 2008 in wood and wood products. However, Slovenia 
mainly exports raw wood - logs rather than processed wood products with higher value added, 
and other manufacturing. 
Exit from the crisis 
                                                
 
46 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 175   EN The highest level of manufacturing output in th e last three years took place in June 2008. 
When compared with the lowest level of manuf acturing output in April 2009, the difference is 
as high as 28%. In July 2010, output had only r ecovered by 15%. During the crisis Slovenia 
provided support to business in the form of de  minimis aid and guarantees. Limited access to 
long-term financing is expected to continue until the end of 2010. The construction sector is 
particularly affected by the lack of finance. 
The first package of anticrisis-measures was adopted in December 2008. It primarily 
addressed the issues of improving liquidity in the banking sector, of additional incentives to 
business, of reduction of public spending, and of job preservation. The second package, 
adopted in February 2009, consis ted of further measures concer ning the financial sector and 
liquidity of companies, measures in the area of labour market, life-long learning and social 
security, support to sustainable development, and measures aimed at improving the use of 
cohesion funds. The government also in creased its level of R&D spending. 
The state loan guarantee scheme (support scheme for credit institutions) aims at overcoming 
problems of liquidity and of obt aining credit from commercial ba nks. It is to be used for 
financing investments and working capital and fo r converting short-term credits into medium- 
and long-term ones. The state loan guarantee scheme of EUR 1.2 billion is implemented by 
the Slovenian Export and Development Bank (SID Bank) since mid 2009. In total 
EUR 645 million of state loan guarantees has b een auctioned out to commercial banks; the 
state has taken upon itself an average of 34% of  the loan risk. This scheme expires in 
December 2010. The government has envisage d in the new exit strategy through 2013 a new 
instrument to encourage funding of investments in activities of partic ular importance for the 
Slovenian economy. Banks are bidding for guarant ees at regular aucti ons organised by the 
SID Bank, by offering their own funds for the stat e guaranteed part of the credit and the part 
where they take over the risk. The risk is ther efore split between the state and the banks which 
thus multiply the total credit potenti al of the scheme. By December 2009, around 
EUR 533 million loans had been approved by commercial banks, with on average 34% state guarantee. The scheme falls under the temporar y state aid framework and will expire on 31 
December 2010. The government, in January-March 2010, announced plans for a new EUR 1 billion loan scheme to enable large companies to obtain state guarantees for development projects. In addition, the Slovene Enterprise Fund (SEF) has been offering to 
SMEs bank loan guarantees with subsidised in terest rate. In 2009, the favourable financial 
resources of SEF (guarantees, co-guarantees, subs idised interest rates and grants) amount to 
EUR 120 million for 779 projects of SMEs.  
In conclusion, the largest recent employment  declines were observed in the manufacturing 
and construction industries. The recovery process will depend both on banks providing access to finance to companies in the short term an d on restructuration and reinforcement of the 
domestic basis in the long term. 
Towards an innovative industry Slovenia has the highest R&D intensity among ne w Member States. It amounted to 1.7% of 
GDP in 2008. Slovenia has increased its R&D intensity during 2000-2008 by an average 
annual growth rate of 2.3%, as it reached 1.4% in 2000. This growth happened thanks to the 
increase in R&D investment in the private se ctor. From 0.8% of GDP in 2000, it grew to 1.1% 
in 2008, while public R&D intensity remained at 0.6% of GDP (public R&D spending rose 
considerably in 2009, when government increa sed its R&D expenditures by 46 % in nominal 
terms). 
 
EN 176   EN Looking at the European Innovation Scoreboard (EIS) data (EIS, 2009), Slovenia is making 
continuous progress in its innovation performa nce. Slovenia now belongs to the group of 
‘Innovation followers’ along with  countries like Belgium, Au stria, the Netherlands and 
France. These countries have an innovation performance below those of the innovation 
leaders but close to or above that of the EU 27. In the past, Slovenia was one of the best 
performing of the moderate innovators group (with innovation performance below the EU-27 
average). Changing peer group proves the co nsiderable progress made by the country. 
Slovenia’s strengths lie in human resources, in finance and support, in the proportion of firms 
that have introduced innovations onto the market or within their organisa tions. It is also able 
to generate employment, exports and sales th anks to innovation. Conve rsely, the country is 
relatively weaker in firm investments in Inte llectual Property Rights (IPR) and in technology 
balance of payments flows. In 2009, Slovenia’ s market share in high tech products was 
artificially boosted because of  robust demand in the motor vehicle market (through the car 
scrapping schemes) and the pharmaceutical sector. 
In 2008-2009, new measures were introduced or existing ones were m odified by different 
organisations active in the research, development and innovation fields.  
Public sector instruments have been relativel y stable. In 2009, as in 2004 (year of their 
foundation) centres of excellence have been  fostered, supported also by the European 
Regional Development funds. The state has increa sed the co-financing of research equipment 
and infrastructure to increase the internationa l competitiveness of public research, also in 
relation to anti-crisis measures. 
The national research and development progr amme for 2009-2010 intends to strengthen the 
links between the business sector and the research field. There have also been measures to 
strengthen human resources in R&D activities , facilitating mobility and inter-disciplinary 
interactions. The government has allocated gr ants for the purchase of new technological 
equipment to 231 SMEs and start-up of 91 i nnovative companies in technological parks and 
incubators in 2009. 
Numbers of challenges remain outstanding. The level of R&D i nvestment, both in the public 
and the business sector is threat ened by the crisis. Besides, stru ctural funds had a more limited 
impact than it could have had due to delays of calls and complex administrative procedures. 
Better coordination of the innova tion support network is needed, especially among ministries 
as well as with intermediary support organisations. Besides, the Slovenian private sector often complains about the insufficient or compli cated instruments available for R&D and 
Innovation. The frequent changes in support programs make the overall system less 
transparent. 
3.23.3.  Towards a sustainable industry 
While production from emission-in tensive industries tended to in crease in the recent years, 
the crisis has reversed this trend. The pr oduction of emission inte nsive industries has 
decreased by 2.4% in 2008 and by 18.6% in 2009, mainly due to lower production of metals, 
especially aluminium. 
The overall Slovenian economy remains prone  to higher greenhouse gas emissions. Two 
factors drive this tendency: the specialisatio n in manufacturing activiti es and the strategic 
localisation of the country. The lo calisation is both a curse and a blessing. Slovenia is situated 
 
EN 177   EN between Austria, Italy, Hungary, Croatia and is di rected towards the Adriatic Sea. It makes it 
an attractive manufacturing location and transit country. But road transport is eventually the 
largest contributor of greenhouse gas emissions.  
The National energy efficiency action plan 2008-2016 contains 29 instruments. SID Bank 
offers financing of investment in R&D and innovation through the Euro pean Clean Transport 
Facility fund of the EIB and its own funds. The measure would cost EUR 136 million. It prioritises clean and technology advanced indus tries that invest in R&D and innovation.  
Concerning the government’s own actions, public investment and procurement are to favour 
energy efficiency and environmentally-friendly solutions. Public procurement was made more 
environmentally friendly in 2009 thanks to amendments to the public procurement act. Moreover, public tenders favour  a number of environmental criteria including energy 
efficiency, reduction of hazardous  substances and recycling. 
Among recent measures that target individuals a nd companies, sustainable tourism is actively 
encouraged (introduction of environmental st andards). Natural persons are now allowed to 
generate electricity in small power plants with out registering as sole proprietors (since an 
April 2010 amendment of the energy act). Financia l support is provided in the priority areas 
of clean and technologically advanced  industries (e.g. automotive industry).  
Concerning non-budgetary measures, Slovenia has merged all competencies for renewable 
energy and energy efficiency. 
As the current transition from a manufactur ing-driven towards a more services-driven 
economy is a long process, radical measures ar e needed. Technological changes are needed to 
come along to improve the overall performanc e of the country in terms of both energy 
efficiency and greenhouse gas emissions. At a more  sectoral level, it is a challenge to mobilise 
the means to develop railway services that can  offer an alternative to road transport. 
In the first phase of the emission-trading scheme (2005-2012), emission permits were 
distributed for free. By 2013, a transition to the auctioning system will take place. 
Summing up, due to its location that makes it a transit country and its specialisation in 
manufacturing activities, Sloveni a is structurally prone to high gas emissions. The structural 
changes brought by the crisis are an oppor tunity to favour energy efficiency and 
environmentally-friendly solutions. 
3.23.4.  The business environment 
From an international benchmarking perspectiv e, Slovenia ranked 53 (out of 183) in the 
World Bank’s Doing business 2010 progressing 5 pl aces. But there are still number of areas 
where bureaucratic obstacles could be removed. 
Slovenia scores much above the EU average in  terms of infrastructure expenditures, of 
government regulation burden and e-government us age by enterprises. For instance, about 
90% of the basic government se rvices are available online (t hough the actual us age is still 
low). However, it scores clearly below averag e for the legal and regulatory framework and 
electricity prices for medium size enterprises.  
In May 2009, the Government adopted an Action Plan to reduce administrative burdens for 
businesses by 25% by 2012. The aim of the programme  is to simplify procedures, to raise the 
 
EN 178   EN quality of administrative services at national level and to reduce administrative barriers in 
different working areas within ministries. A new politically-b inding document was adopted 
by the Parliament. It extends the scope of the impact assessments and includes the SME test.  
The eGovernment strategy and action plan, in fo rce since 2007, is being refocused from back-
office reform and infrastructure to improvi ng user satisfaction. Slovenia has a mandatory 
national eProcurement platform since June 2007. 
Since July 2005, the one-stop-shop system VE M and its electronic version e-VEM have 
enabled a cost-free registrati on in one day for sole entr epreneurs. In 2007 e-VEM was 
introduced on a large scale. From February 2008 on, all forms of companies could be 
registered either at VEM c ontact points or electronically through e-VEM with cost-free 
registration in maximum 3-4 days.  
Even though Slovenia has the highest rate of SM Es winning public procurement contracts in 
the EU, more changes are expect ed in the public works contract  system that would make it 
even more user-friendly to cont racting authorities and users.  
To push infrastructure investment further, a nu mber of simplifications are considered in the 
area of spatial planning, construction and the acquisition of land and permits for the 
installation of equipment. 
The institutional limitations (in terms of means and) of the competition authority have been 
pinpointed repeatedly. One of th e most pressing objectives is to prevent anomalies in public 
procurement. 
3.23.5.  Entrepreneurship and SME policy 
The SME sector in Slovenia is comparable to the EU average. In both cases, SMEs represent 
more than 99% of enterprises and about 67% of employment. In 2002-2008, the overall 
growth rate of employment in  SMEs in Slovenia amounted to 14% in comparison of an EU 
average of 12%. Slovenia scores well with rega rds to the EU concerning the time required to 
start a business and the enterprise survival ra te after two years, but clearly below average 
concerning business churn.  
Several measures in the two cris is packages target specifically SMEs. To support high growth 
enterprises, the government set up in 2009 a measure providing Bank loan guarantees with 
subsidized interest rate. The objectives of th e instrument are to ensure more favourable 
conditions for SMEs, to support new investment and support future growth of the companies. 
Under this scheme, the Slovenian Enterprise Fund (SEF) is in cooper ation with different 
banks providing guarantees (from 60% to 80%) for the banking investment loans with a 
subsidy rate for existing SMEs. Availa ble budget for this measure was around 
EUR 43 million in 2009. Additional guarantees a nd subsidies of interest rates for SMEs 
(additional EUR 50.6 million in 2010) are implem ented by the Slovenian Enterprise Fund. 
They are combined with EU-backed guarant ees from the EU-CIP (Competitiveness and 
Innovation Programme) and with funds from the ERDF Structural funds  (European Regional 
Development Fund). In 2009, SEF instruments (gua rantees, co-guarantees, subsidised interest 
rates and subventions) backed loans of around EUR 120 million for around 779 projects in 
small firms. Since July 2009, the time to reimburse the VAT was reduced to 21 days. 
 
EN 179   EN The Slovenian Government adopted in mid 2009  ‘The Programme of Financial Engineering 
Instruments for SMEs’ – PIFI in order to redu ce financial gap for SM Es and includes equity 
and debt financial instruments that will be managed through a holding fund. This Holding 
Fund is funded through the EU structural funds . The Slovenian Enterprise Funds published on 
March 2010 the first call worth EUR 33.99 milli on for holding fund’s investments in venture 
capital companies. It intends to develop equity  investments in SMEs in the form of venture 
capital and mezzanine capital. This  should facilitate the growth of  SMEs with high potential.  
Concerning entrepreneurship measures, two type s of actions are worth highlighting. Firstly, 
start-up Slovenia is a competition for start-up companies which has been launched in 2007 by the government and has recently been joined by business angels . It aims at identifying and 
rewarding the best new innovative Slovenian  enterprises in order to support them 
professionally, enable them to connect with potential investors and promote them in the 
general public. Secondly, the ag ency ‘JAPTI’ (that promotes entrepreneurship and foreign 
investments) has updated its programme in  2007 to encourage the integration of 
entrepreneurship topics at all le vels of formal education. It involves successful entrepreneurs 
in the promotion of entrepreneurship in schools.  It trains teachers to promote entrepreneurial 
skills and creates flexible study programs and e ducation of students at foreign universities. It 
promotes entrepreneurship for specific gr oups, with more emphasis on young people and on 
women. Entrepreneurship educa tion is also incorporated in to the Slovenia Development 
Strategy and the programme of measures for promoting entrepreneurship and competitiveness 2007-2013. 
During 2005-2009 the government implemented a new program to promote the 
internationalization of Slovenian companies (Program za spodbujanje internacionalizacije 
podjetij za obdobje 2005-2009). The aim of the progr amme was to offer new opportunities to 
promote the Slovenian economy, organise trade de legations, participate in world fairs, and to 
operate the Slovenian clubs abroad. This progr am is continuing also in the period 2010-2014. 
For the year 2010 the provided budget is about EUR 5 million. 
Despite the two packages of anti-crisis measures, SME’s access to finance has remained an 
issue. Credit growth has decelerated and mo re restrictive bank lending can be observed. 
Among the other difficulties that small businesse s face, one can underline: a decrease in 
orders, a problem of late payments, increases in labour and energy costs (the government intends to introduce new excise duties on electrical energy for companies).  
The venture capital market in Slovenia is undeve loped and immature and little integrated in 
the EU single market. There are only few local venture capital f unds with very limited venture 
capital investments. While the new law on ve nture capital companie s has a good basis, tax 
advantages are only for those venture capital compan ies that are registered in Slovenia. This is 
indirectly preventing cross-bor der inflows of vent ure capital and thus also prevents the 
Slovenian market from attracting additional a nd alternative sources of finance for innovative 
and high-growth firms.  
On the whole, solving the immediate issues such  as late payments is equally important as 
fostering entrepreneurship and risk capital in the long term. 
3.23.6.  Conclusions 
Despite the fact that Slovenia was the fastest growing new EU Member State before the crisis, 
it was still hit hard. The Slovenian Government put in place two crisis packages as a response 
 
EN 180   EN to the crisis. But the temporary anti-crisis meas ures will have to be progressively removed. As 
an export-oriented econo my, many industries have been depe ndant on the recovery of trading 
partners. In order to mitigate the dependence on external demand in the future, it is crucial to 
also reinforce the domestic basis.  
More can be done to strengthen Slovenia’s do mestic competitiveness and to facilitate the 
transition of sectors facing rest ructuration. Apart from the labour  markets reforms that are to 
come along, several improvements in the busine ss environment could be achieved. A level 
playing field of competition (especially in se rvices sectors) could be strengthened. The 
entrepreneurship and innovati on culture could flourish furt her with a clear government 
innovation structure, more debt finance and an  actual venture capital market. Finally, more 
technological changes and investments could im prove the overall performance of the country 
in terms of both energy effici ency and greenhouse gas emissions. 
 
EN 181   EN 3.24. Slovakia 
3.24.1.  Indicators graph 
Slovakia
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology gradua tes (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2004)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
NA
NANATowards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 182   EN 3.24.2.  Introduction47 
Slovakia’s labour productivity per hour and per person reached some 80% of the EU average 
in 2008/2009. Compared to its level in 2005, it s howed a slight increase on both counts. The 
real effective exchange  rate appreciated sign ificantly since 1999, more than in any other 
Member State except Romania, indicating markedly decreased competitiveness. In contrast to this development, nominal unit labour costs in Slovakian manufact uring declined by 28% 
between 2000 and 2009 with most of  the decline occurri ng during the first ha lf of the decade, 
resulting in a 47 percentage point gap comp ared to the EU average increase of 19%. 
The large FDI inflows to Slovakia have been an important source of technology transfer for 
its economy, which has supported a rapid increase  in labour productivity (the third strongest 
in the EU over the five years up to 2008). After a period of slow increase in the 1990s, FDI 
inflows boomed over 2000-2008 and represented almost 50% of annual GDP in cumulative 
terms in 2008. A favourable geog raphical location, relatively low labour costs and taxes, the 
existence of various schemes in support of FDI, important improvements in the overall 
economic and business climate over the pe riod and EU accession largely explain the 
attractiveness of Slovakia for foreign investors.  FDI inflows are concentrated in the energy 
(production and distribution), car manufacturing and financial sect ors, and come mostly from 
other EU countries, notably Austria and the Netherlands. 
Slovakia is increasingly specialised in sect ors with medium-low technology intensity, 
accompanied by a decreasing importance of low technology sectors over time. At the same 
time, the supply of skills has been shifting in favour of both low and low-intermediate skills. 
Slovakia is mainly specialised in sectors with a low or medium-high growth rate. Analysis of 
the revealed comparative advantage (RCA ) index, broken down according to technology 
intensity of goods exports, indicates that Slova kia has developed a comp arative advantage in 
medium-to-high technology goods and ICT industries . This is broadly in line with the RCA 
analysis based on factor intens ity, which indicates that Slovak ia has a comparative advantage 
in capital intensive goods a nd a disadvantage in raw mate rial intensive goods. These 
indicators are consistent with changes in th e composition of exports and point to a gradual 
shift in the structure of Slovakia's ex ports to higher value-added products. 
Manufacturing plays a much bigger ro le for Slovakia than for the EU in total (24% vs. 17% of 
total value added in 2008). The 2006 sectoral specialis ation index reveals Slovakia's strength 
in wood and wood products, leathe r and footwear, refined petrol eum, basic metals, mineral 
products and transport equipment With an aver age share of services in total exports and 
imports of about 10% in 2008 (down from 21% in 1995), Slovakia is the country with the 
lowest intensity of trade in services in the EU. This reflects the very large expansion of trade 
in goods over the last decade. Slovakia showed  a slightly positive balance in the trade of 
goods in 2009, whilst there was a deficit in 2005. The positive trade balance in manufacturing 
mainly resulted from large surpluses in transport equipment, refined petroleum and metal products, while chemicals showed a noteworthy tr ade deficit. In the service sector, only 
electricity, gas and water supply, as well as wholesale and retail  sectors show a clear above 
average weight.  
                                                
 
47 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 183   EN The structure of merchandise trade has ch anged significantly over time, with a strong 
concentration in the car and transport industr y that now accounts for almost a quarter of 
Slovak exports. The import structure is domin ated by machinery and electric equipment goods 
used in the car and energy sector s (43% of total imports), and energy products (13% of total 
imports). In the primary sector, mining a nd quarrying plays a stro ng role in imports. 
Slovakia's export market share in world trad e has more than doubled since 1995, reaching 
0.4% in 2008. The export market share in euro ar ea countries has also in creased significantly, 
from 0.2% in 1995 to almost 0.8% in 2008. The ke y drivers of these increases have been 
greater economic integration, initially significant cost-competitiveness advantage and 
continuous improvements in the qu ality of exported products. Howe ver, the pace of gains in 
market shares has slowed down over time , suggesting an erosion of Slovakia's 
competitiveness, consistent with the developmen ts in the real effective exchange rate. The 
Revealed Comparative Advantage (RCA), measur ed relative to the EU and concentrating on 
manufacturing, shows an interesting shif t for Slovakia from 2005 to 2008. Slovakia had 
particular strengths in 2005 in wood and w ood products and basic metals products, refined 
petroleum and leather and footwear. These sect ors remained important in 2008 (except refined 
petroleum) but were less prominent; electrical and optical equipment and transport equipment 
gained ground and were more important. 
Exit from the crisis Manufacturing output in Slovaki a fell by 32% in the wake of the economic and financial 
crisis. In July 2010, Slovakian output in manufactur ing stands at 87% of pre-crisis levels. In 
response to the crisis, Slovakia adopted thr ee stimulus packages, labour and product market 
reforms, and measures to suppor t the banking sector. In  product markets, the government tried 
to counter the effects of the economic and fi nancial crisis by mean s of the following two 
measures: 
A car scrapping scheme: As in other EU countri es, this scheme was designed to boost demand 
for automobiles and accelerate the change fo r newer models with lower environmental 
impact. The scheme was carried out in two rounds in spring 2009 with state subsidy amounting to EUR 55 mil. .No additional expe nditure on the car-scrapping scheme is 
envisaged. The measure will impact the budget beyond 2009 due to a shift of revenue from 
VAT and car registration fees from latter years to 2009 given the co rresponding shift in car 
purchases. The effects of the measures are expected to be obser vable over the period 2009-
2012 with a budgetary impact of 0.08% of GDP. 
Interest-free loans for projects increasing en ergy-efficiency: This measure was aimed at 
boosting demand in the construction sector and al so providing future benefits in terms of 
energy efficiency. If necessary conditions were met, the loan would cover 100% of eligible 
costs. The programme was time constrained, in force from 1 June 2009 to 31 December 2009. The impact is estimated at less than 0.1% GDP. 
In addition, the anti-crisis measures include d a number of temporary actions encouraging 
R&D. 
3.24.3.  Towards an innovative industry 
Slovakia ranks to countries w ith lowest rates of innovation activity in the EU. Slovakia 
occupied 26th place out of th e 33 countries included in the SII in 2008. Some 80 thousands of 
Slovak small and medium enterprises (SMEs) account for low productivity levels and low 
 
EN 184   EN R&D intensity. Branches of multi-national co mpanies operating in Slovakia have their 
headquarters and R&D centres located outside Slovakia, and express limited interest in 
networking with Slovak R&D facilities. Slova k SMEs in general account for low R&D 
expenditure and compete w ith low costs of labour.  
The innovation policy mix designed for the pla nning period from 2007 to 2013 is fairly 
similar to that applie d in the planning period from 2004 to  2006. Most financial assistance is 
allocated to the technology tran sfers, business and technology  incubators, R&D cooperation 
and risk capital schemes supporting SMEs. The major difference is in the amount of the 
assistance provided which should substantia lly increase. The Innova tion Voucher Scheme, 
support to projects applying for the EU CIP pr ogrammes, and stimuli for R&D activities in 
the business sector have re asonable chances of implemen tation in the above-mentioned 
period.  
To counter the crisis effects,  Slovakia adopted temporary s timuli for business R&D in the 
form of public subsidy and income tax relief fo r the private co-financing part. In addition, the 
R&D Agency of Slovakia was financing three anti-crisis programmes in 2009. 
EUR 3.8 million were allocated for feasibility st udies and projects in applied research and 
experimental development, with additional private co-financing of EUR 2.3 million. Co-
operation within and/or between the academic , public and business sectors was allocated 
EUR 265 551 for 9 projects. However, it is unde rstood that in reality these projects only 
involved public actors, since th e required legislative change to enable public-private co-
operation was still pending. Finally, EUR 1 mill ion was allocated for 40 projects to promote 
applied research to young people.  
Slovakia has also organised successive calls fo r proposals for projects in the R&D field, co-
financed from the EU structural funds, whereby identical calls were mostly published for the Bratislava region and Slovakia as a whole. 57 projects were a pproved in the total amount of 
EUR 23 million for applied research and technology transfer in the public sector, with additional 24 projects amounting to EUR 10.2 million in the Bratislava region. On 15 June 2009, contract was signed with the Slovak Centre for Scientific and Technical Information for 
a EUR 33 million project to devel op a national data centre for R&D. 
The main challenges in the national innovation system have been continuing for many years 
and identified in the key government documents  on innovation policies: first, the low volume 
and quality of R&D activities, poor participation of Slovak fi rms in R&D, and weak ties 
between industry and academia sectors; sec ond, the fragmented national innovation system 
and low numbers of innovation policy tools; and, third, the low shares of innovating 
enterprises in the national economy. All these challenges are strongly entangled and 
necessitate a thorough review of existing policie s and instruments with a view of defining a 
coherent research and innovation strate gy adapted to the Sl ovak situation. 
3.24.4.  Towards a sustainable industry 
Slovakia ranks among countries with higher energy intensity of its industry and the carbon 
intensity of its energy consump tion than EU average. Slovakia scores below EU average also 
in terms of environmental goods exports as a percentage of  overall exports. 
In August 2008, an EUR 80 million call for propos als was launched to ra ise energy efficiency 
in power production, co-financed from the EU structural funds. The programme aims at 
improving the efficiency of co-generation heati ng plants, but also cove rs restructuring of 
 
EN 185   EN industry and services, as well as improvi ng energy efficiency in buildings. A 
EUR 125 million loan from EBRD for the peri od 2009-2010 was also secured to improve 
energy infrastructure in terms of efficiency.  
On 1 September 2009, Slovakia enacted support for renewable energy resources and high-
efficiency cogeneration to achieve savings in primary energy, prevent network losses and to 
reduce emissions. The Renewable Energy Act pr ovides for a stable energy price for 10-15 
years (feed-in tariffs) to ensure investment, de pending on different variables. The tariff can be 
lowered in case some of the i nvestment is co-financed from th e EU structural funds. The same 
feed-in tariff applies, if th e share of bio methane in power production exceeds 20%.  
The Energy Efficiency Act, which is in for ce since 2009, provides for measures to ensure 
sustainable energy consumption, leading to pot ential savings of 12,405 TJ  over a three-year 
period. Special measures with considerable im pact are envisaged in construction (accounting 
for 11% of the total savings), household applianc es, public sector, industry and agriculture, as 
well as transport. The private sector can also draw on the Sustainable Energy Finance Facility 
– a credit line jointly offered by the EBRD and Slovak banks.  
The high energy intensity of the industry must  be seen in the context of the sector 
specialisation of Slovak manuf acturing. Nevertheless it may c onstitute a cost handicap. 
3.24.5.  The business environment 
Slovakia scores significantly above the EU average concerning the e-government usage by 
enterprises, but below average in almost a ll other indicator categories, in particular 
concerning electricity prices for medium size ente rprises. Unlike gas prices, electricity prices 
have not followed a downward pa th after market liber alisation in 2007, poin ting at potentially 
insufficient competition.  
Slovakia has a better regulation agenda that includes an ad ministrative burden reduction 
programme with a 25% reduction target of by 2012. The first measurement was held from 
June to August 2009 and covered 48 Acts in th e following sectors: company law, civil law, 
accounting, market regulation, taxes, tari ffs and charges, labour and employment, 
environment, intellectual property, capital in centives regulation, bankruptcy and rescheduling. 
In the framework of the agenda for better regulation, a pilot project to test a Uniform 
Methodology for Assess ing Selected Impacts  has been ongoing since September 2008, with 
numerous delays. Consequently, the deadline for the introduction of this methodology has 
been repeatedly postponed. The Unified Me thodology for Assessing Selected Impacts was 
finally introduced on July 1, 2010. 
The one-stop-shop for business start-ups is  only operational for sole traders.  
In reaction to the crisis, Slovakia introduced the possibility for rollover of VAT deductions, as 
well as took the more general measures to introduce group VAT registrations, retroactive tax 
registration, as well as simplified VAT and inco me tax administration for small entrepreneurs 
as of spring 2009. The period for refunding  VAT overpayments has been permanently 
shortened from 60 to 30 days as of 1 April 2009, conditional upon absence of tax arrears in the past 12 months. The preliminary data show that some 15% of the entities with 
overpayments used this option, representin g 30% of the total amount due in VAT 
overpayments. In spring 2009, Slovakia also refo rmed its depreciation rules, increasing the 
input price of assets, as well as allowing for component depreci ation and faster depreciation 
 
EN 186   EN of specific asset types. The total cost of the measure was estimated at EUR 34 million for the 
period 2009-2010. 
The business environment in Slovakia needs swif t improvement. In the context of the slow 
progress in tackling this challenge, the 2010 Doing Business survey by the World Bank 
showed deterioration in the country's perfor mance: Slovakia was ranked in position 42, down 
from 35 in 200948. The areas requiring most attention due to perceived worsening of the 
situation include contract enforcement. Better regulation needs to be turned into a fully-
fledged and fundamental principle throughout th e Slovak public administration to achieve a 
lasting improvement. The authorities could al so look into further ways of stimulating 
competition in the electricity sector.  
3.24.6.  Entrepreneurship and SME policy 
The Slovak SME sector has a relatively large-scal e structure as compared to the EU average, 
with much higher shares of medium-sized and sm all enterprises while the percentage of micro 
businesses is considerably lower (76% vs. 92% in the EU). The contribution of Slovak SMEs 
to the overall economy, as measured by the valu e added (47%), is in EU-terms small. On 
average, SMEs in Slovakia also play a less pr ominent role in the local economy: contribution 
of SMEs to employment in Slovakia (55%) is well below the European average (67%). Only 
the group of medium-sized firms seem to break  this trend, being responsible for 23% of the 
work force in the private sector, as compared to the EU average of 17%. 
In the context of its 2009-2010 recovery plan , Slovakia took many initiatives in support of 
corporate cash flows, both in terms of tax administration measures and direct financial 
support. Specific SME support programmes were designed in the form of an extended micro-
loan scheme, incubator care, as well as cons ulting and training support scheme. The budgeted 
cost for 2009 constituted EUR 8 million, of which EUR 5 million for the micro-loan scheme.  
Slovakia has stepped up SME financing by incr easing the equity of two public lenders in 
spring 2009. Over the first six months of 2009, this allowed for raising SME lending by 25% 
in new loans and 8% in total loans outstandi ng in comparison with the end of 2008, whilst the 
total insurance portfo lio of Export-Import Bank grew by 14% y-o-y. Since August 2009, EIB 
funds for SME loans have also been availa ble in the total amount of EUR 50 million. The 
Slovak Guarantee and Development Bank (SZRB) is also providing loan guarantees in the 
value of up to 55% of the loan value to SMEs that seek loans at private banks. There is no 
need to visit the SZRB to obtain a guarantee and th is can be done within as  little as five days. 
During the first six months of 2009, 454 fast-t rack bank guarantees were provided in the 
aggregate amount of EUR 30 million, enabling SME loans in the total value of about 
EUR 59 million. 
Since 2009, new legislation on voc ational education gives opport unities to private firms to 
support professional schools and influence their cu rricula to reflect bett er the labour market 
needs and provide basis for en trepreneurship. One of the priorities in the framework of 
teaching curricula in recent years has been to  support the development of entrepreneurial 
skills and for acquiring basic knowledge about business and the economy at secondary-school level. The Ministry of Education has incor porated this issue into the state education 
                                                
 
48 It should be noted, however, that the 2010 edition includes two additional countries 
compared to 2009. 
 
EN 187   EN programmes by creating a faculta tive subject for all groups of study paths. Secondary schools 
aimed to incorporate the issue into sc hool education programmes by September 2009. 
The main challenges in the entrepreneurship a nd SME policy field relate  to the rather high 
administrative burden that exists in Slovakia.  For example, the time required to wind up a 
business stands at 4 years – well above the EU av erage of 2 years, whilst it takes about twice 
as long for Slovak SMEs to export or import (25 days for both) than in EU (11 and 14 days, 
respectively). According to the 2010 Doing Busi ness survey by the World Bank, the area with 
the most marked deterioration was in  procedures to start up a business. 
3.24.7.  Conclusions 
Taking into account the fact that Slovakia is  now part of the euro zone, whilst the 
neighbouring countries are not and have floating exchange rates,  it is crucial that Slovakia 
gives a further impulse to its  reform programme in suppor t of productivity gains and 
improvements in the non-price competitiveness of its products. Reallocation of resources 
towards education, R&D and in novation would enhance the growth  prospects of the economy, 
while facilitating transition towa rds new types of economic activit ies. Hence, a coherent R&D 
and innovation strategy is required, with a pa rticular focus on the institutional reform and 
substantial improvement of business-research cooperation, while creating further incentives 
for the private sector in R&D and innovation. The shift to project-focussed public support to 
R&D activities is a step in the right direct ion; institutionalising it would provide for 
competition in this area.  
The reform priorities could also include enha ncement of the business environment and market 
functioning, including reduction of  administrative burden on busine sses, particularly SMEs. A 
comprehensive better regulation strategy appears to be helpful, including systematic impact 
assessments with SME tests and continuous simplif ication of the existing legislation. Slovakia 
could also encourage entrepreneurship more, in  particular, by enabling easier company start-
ups and strengthening entrepreneurship education. 
 
EN 188   EN 3.25. Finland  
3.25.1.  Indicators graph 
Finland
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2005)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEsNA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 189   EN 3.25.2.  Introduction49 
Finland’s labour productivity is  10% above the EU average on a per hour basis (+7% per 
person employed). In 2008 labour productivity in manufacturing wa s the fifth highest in the 
EU. Finland’s real effective exchange rate appreciated so mewhat since 1999, indicating a 
small decrease in competitiveness vis-à-vis th ird countries. In parallel, nominal unit labour 
costs in Finnish manufacturing first declined an d then increased again resulting in an overall 
decrease of 2%. This implied a 21 percentage point gap compared  to the EU average increase 
of 19%. Thus the price competitiveness improved. 
Finland is specialised in sectors demanding high-intermediate and low-intermediate skills. 
There is a clear trend towa rds sectors with high techno logy intensity from 1997 to 2007. 
Finland’s sectoral structure regard ing growth intensity is balanced. 
Manufacturing plays a much bigger role for Finla nd than for the EU in total (22% vs. 17% of 
value added in 2008). Finnish manufacturing is  specialised on pulp, paper and publishing as 
well as electrical and optical equipment. In th e service sector, only the sector “transport and 
communication” and “health and social work” ha ve an above average weight. In the primary 
sector, agriculture and forestry play a bigger role for Finland than for the EU in total. 
Employment figures show a decreasing importa nce over time of the primary sector and 
manufacturing and a trend towards service sect ors, especially real estate and business 
activities. Forecasts until 2020 expect an increase of employment in business and other services of almost 16%. 
Finland shows a surplus in trade of goods in 2009. The export structure largely follows the 
sectoral structure of the ec onomy; only transport equipment and refined petroleum have a 
larger export share relative to their importan ce in the economy. The positive trade balance in 
manufacturing mainly resulted  from surpluses in pulp, paper and publishing, electrical and 
optical equipment, other machinery and basic metal products, while food, textiles, chemicals 
and transport equipment showed a noteworthy trade deficit. The Revealed Comparative Advantage (RCA), measured relative to the EU and concentrating on manufacturing, shows 
particular strengths for Finland in 2008 in  pulp, paper and publishing and wood and wood 
products. 
Exit from the crisis During the peak of the economic and financial cr isis the manufacturing se ctor faced an output 
reduction of 28%. In July 2010, output recovered from this trough by only 10%. In response to the crisis Finland provided a total amount  of EUR 23 million to more than 4000 SMEs in 
manufacturing and services sectors. The funds  were allocated under the Temporary State aid 
Framework, mainly as de minimis  aid. In addition, the governm ent introduced a number of 
further measures with the aim of improving  financing conditions for enterprises. The 
government authorised various state-controlle d entities to significa ntly increase their 
provision of guarantees, export cr edits, venture capital, injections of new capital and interest 
subsidies. These will most lik ely expire at the end of 2010. 
                                                
 
49 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 190   EN The crisis measures successfully ensured acc ess to finance of the real economy. The 
willingness of the financial sector to take risk is still relatively low, in particular in respect of 
loans to SMEs. 
3.25.3.  Towards an innovative industry 
Finland has a very good innovation performance that puts this country in the group of 
innovation leaders. Both public and private R&D expenditure is well above EU average.  
The Government agreed in January 2009 on a stimulus package which included a number of 
relevant measures for innovation policy. Appropriations allocated to research and 
development have been further raised on a permanent basis beyond the already high R&D 
support. Funding is available not just fo r technological but also non-technological 
development.  
ERDF funding is supporting measures in favour of enterprise development and the innovation 
system (applied research and interaction a nd cooperation between re search centres and 
enterprises). The Finnish authorities have de cided to frontload ERDF  financial allocation 
from the end of the programmi ng period to the years 2009-2010. 
In view of preparing new innova tion strategies for the future, a number of challenges can be 
identified: first the transformation of firm st rategies and emerging new innovation models. In 
recent years it has become clear that the old innovation policy approach has clung too much to 
traditional science and technology policy perspective. Secondly, it seems important to increase and enforce Finland’s attractiveness for investments. A major fu ture challenge facing 
economic and societal development will be to ke ep Finland sufficiently attractive for business 
and jobs and as a living environment. Thir dly, the base of innovative growth-oriented 
enterprises could be broadened. The overall positive development of  the Finnish economy 
over the past decade disguises uneven pe rformance across the board with sometimes 
individual large domestic multin ational enterprises (e.g. Nokia) having accounted for a large 
part of the impressive progress in  productivity and private R&D inve stments. In this situation, 
a lack of innovative growth-oriented small and medium-sized companies and start-ups is one 
of the major identified weaknesses. 
A new innovation strategy adopted by the Mini stry of Employment and the Economy in 2008 
seeks to the improve to the effectiveness of the innovation policy. The strategy advocates 
transformation of the policy away from the cu rrent supply and grant based measures towards 
market and demand based measures. The scope of the policy will be broader. 
The Ministry of Employment and the Econom y launched in 2010 an action programme to 
implement the strategy. 
3.25.4.  Towards a sustainable industry 
The Finnish industrial sector is energy-inte nsive compared to the EU average. Waste 
generated by enterprises is one  of the highest in the EU.  
The new Climate and Energy Strategy envisages that growth of energy consumption will be 
halted and reduced by 2020. In June 2009, a broad-based Energy Efficiency Committee 
proposed 125 measures to achieve the 37 TW h of energy-savings (of which 5 TWh for 
electricity) by 2020. The committee has put an em phasis on sectors outside emissions trading. 
Urban structure, buildings, transport, househol ds, agriculture and industry as well as the 
 
EN 191   EN public and private service sectors were all un der examination. It was concluded that the 
biggest savings can be achieved through: ne w vehicle technology (8.5 TWh), new building 
and renovation construction regul ations (4.9 TWh), more ch allenging energy efficiency 
agreements (2.8 TWh) and stricter equipmen t energy requirements (2.1 TWh). These four 
measures should account for half of the savings target.  
In the energy-intensive industry, the impact of emissions trading a nd other measures is 
expected to enhance the e fficiency of energy use by ar ound 8 TWh by 2020. New energy 
efficiency measures currently being prepared in clude, for example, a substantial strengthening 
of energy information and advice targeting co nsumers and an Act on energy efficiency in 
public corporations. Resource efficiency will also play a key role towards a low-carbon economy.  
Owing in part to its relatively large share of industry, energy intensity in Finland is higher 
than that of its neighbours. The government  has placed a priority on improving energy 
efficiency and has adopted an active stance. 
Despite the prevalence of energy-intensive in dustrial sectors and the high dependence on 
energy imports, energy efficiency does not ra nk high on the political agenda. Improvements 
are expected only via indirect market-based instruments such the energy tax reform or 
emission trading. It is not certain whether these measures will suffice in the long-run to ensure 
a smooth transition towards a sustainabl e industrial structure in Finland. 
3.25.5.  The business environment 
Finland scores significantly a bove EU average concerning almo st all indicator categories, 
with the exception of the availability of high- speed broadband lines where it scores slightly 
below average.  
In Finland, the Better Regulation Strategy is  embedded in the 2007 Government Programme 
and Strategy Document and includes i.a. to ols and processes such as the forward looking 
legislative plan, the  instructions on effective la w drafting, legal quality and ex ante  impact 
assessment, simplification and administra tive burden reduction for businesses.  
Integrated guidelines for ex ante  impact assessment were adopted at the end of 2007, which 
comprise a part on assessing business im pacts including the impact on SMEs, on 
entrepreneurship and on growth of enterprises. As a continua tion of the SÄVY project on 
business impacts (2004-2007), a working group has been set up for ex post evaluation of legislation. Public consultati on of stakeholders on new regul ations is based on guidelines 
adopted in 2010, and recent trends include electr onic consultation in order to encourage a 
wider participati on. In this respect, the programme Sähköinen asiointi ja demokratia  (e-
services and e-democracy, SADE) will establish a modernised version of an interactive participation environment in 2011. 
In March 2009 the Government approved a deci sion-in-principle on th e action plan for the 
reduction of the administrative burden on busin esses by 25% by the end of 2012 (compared to 
2006). The action plan includes a list of the mo st important administrative sector-specific 
reduction measures whose implementation will be  ensured by the responsible ministries and 
authorities, the seven priority areas being: taxation, statistics, agri cultural subsidisation 
procedures, food safety and quality, employe rs' reporting obligations, financial reporting 
legislation and environmental permit procedures. Public procurement was added as a priority 
 
EN 192   EN area in 2010. Furthermore, the de velopment of eGovernment is c onsidered as a key horizontal 
priority of the action plan.  
Finland ranks first in 2009 as regards the take-up of eGovernment services by businesses. 
Regarding eProcurement, Finland has a mandato ry notification database for ongoing public 
tenders and develops non-ma ndatory common platforms for the other phases of 
eProcurement. 
The one-stop-shop to start-up a company (T rade Register) is fully operational. 
A higher degree of competition in services including retail and wholesale trade, would 
contribute to downward pressure on prices and also to increasing productivity in the sheltered 
sectors. 
3.25.6.  Entrepreneurship and SME policy 
The government programme for the years 2007-2011 contains guidelines and priorities for 
SME policy development. The government implemented the programme "Change Through Entrepreneurship and Skills" (ESF 2007-2013 programme). The aim is to provide the best possible operating environment for entrep reneurship and innovation for increasing 
entrepreneurial activity, creating a positiv e entrepreneurship culture and growth 
entrepreneurship.  
Entrepreneurship is included in school curricul a: It is one of seven main interdisciplinary 
themes in lower secondary school curricula a nd one of six themes in the upper secondary 
study programmes. Recently, entrepreneurship education within the education system has 
been intensified and educational institutions ar e encouraged to intensively collaborate with 
businesses. Female entrepreneurship is promot ed by strengthening business expertise, peer 
guidance and a business mentoring system. In  addition, special pr ojects to promote 
entrepreneurship in the creative sector  and the welfare sector are under way. 
Despite the favourable business environment entr epreneurship culture is not particularly 
pronounced in the Finnish society. Improving atti tudes towards entrepre neurship and risk-
taking remains a challenge in order to furt her enhance business dynamism in the long run. 
From this perspective, the work being done to improve the access to finance of growth 
enterprises is a step to the right direction. 
3.25.7.  Conclusions 
Finland's economy is competitive in relation to the EU average and competitiveness policies 
aim in the right direction. Nevertheless,  Finland faces a number of challenges. 
Finland's innovation policy could be further broadened to incl ude all sectors of the economy 
and centred around major societal challenges, in particular demographic change, in order to 
diversify the economy and reduce the economic dependence on individual sectors or even 
firms. 
Despite a generally favourable business environm ent the availability of early-stage finance, 
and acceptable general conditions relating to acce ss to finance, the Finnish economy, with the 
exception of a few sectors, is not dynamic and "entrepreneurshi p culture" lags behind other 
Member States. Measures to increase the nu mber of high-growth en terprises and start-up 
companies may improve business dynamism. 
 
EN 193   EN Climatic conditions and the industrial structure only partly explain the high energy intensity 
of the Finnish economy. Improving energy efficiency is important both in order to reach the climate change targets and to ensure long-ter m competitiveness of industry. To that end, the 
new Energy and Climate Strate gy is a good starting point. It re mains to be seen, however, 
whether the envisaged measures will suffice. 
 
EN 194   EN 3.26. Sweden 
3.26.1.  Indicators graph 
Sweden
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
NANATowards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 195   EN 3.26.2.  Introduction50 
Sweden ranks among the most competitive econom ies in the world accor ding to international 
comparisons; this is reflected in its labour productivity, which is ab ove the EU average, 
whether measured per hour worked or per perso n. Sweden's real effective exchange rate has 
depreciated since 1999, indicating increased competitiveness. Concomitantly, nominal unit 
labour costs in Swedish manuf acturing first declined strongl y and then increased again 
resulting in an overall increase of 3%, thus 16 percentage points below the EU average of 
19%. 
Sweden specialises in sectors requiring high -intermediate skills and exhibiting medium 
growth rates. There is a marked speci alisation on high-t echnology sectors.  
Manufacturing represents about a similar share of GDP in Sweden  (20%) as in the EU as a 
whole (17%). Notwithstanding the fact that Swed en is one of the least specialised economies 
in the EU, wood and wood products, pulp, paper and publishing, and machinery are 
nonetheless sectors in which Sweden is partic ularly strong. In services, only two sectors 
(health and social work; electricity, gas and water supply) represent a clearly higher GDP 
share in Sweden than in the EU as a whole. Em ployment in the health and social work sector 
as well as in public administ ration has increased rapidly si nce 2000, rendering both sectors 
larger in 2009 than the manufact uring sector in terms of the number of employed persons. By 
2020 employment in the manufacturing sector is fo recast to increase slightly (+3%) while in 
all service sectors it is forecast to increase si gnificantly, in particular in business and other 
services (+ 20%). 
Sweden has a positive balance in the trade of goods, mainly due to surpluses in pulp, paper 
and publishing, machinery, transport equipmen t, metal products and wood products and 
refined petroleum. The only trade deficits wo rth mentioning are in food and textiles. The 
Revealed Comparative Advantage (RCA), measur ed relative to the EU and concentrating on 
manufacturing, shows particular strengths fo r Sweden in 2008 in pulp, paper and publishing 
and wood and wood products. 
Exit from the crisis Swedish manufacturing production fell by one quart er during the crisis. In July 2010, the level 
of manufacturing output stood at 86% of its pre-crisis leve l. The Swedish automobile industry 
was particularly severely hit by the econom ic crisis. As a consequence its two car 
manufacturers and their suppliers have been supported in several ways: (i) through the creation of a limited company with the task of conducting research and development and 
other activities in the automotive cluster (initial  capital amounting to SEK 3 billion); (ii) state 
credit guarantees to companies in the automotiv e cluster for raising loans in the European 
Investment Bank for green technology conversion; (iii) rescue loans of up to SEK 5 billion for 
companies in the automotive cluster that find themselves in financial crisis; any such loans will comply with the European Commission's gui delines on state aid and will be granted 
against adequate security. 
                                                
 
50 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 196   EN In addition, to ease credit constraints on ex port companies, the Swedish Export Credit 
Cooperation (Svensk Exportkredit) has received SEK 3 billion in new equity funding and the 
Swedish state's 100% stake in the holding company Venantius has been transferred to the 
Swedish Export Credit Cooperation to increase the latter's lendi ng capacity. Furthermore, the 
Swedish Export Credits Guarantee Boar d (Exportkreditnämnden – EKN) guarantee 
framework has been raised from SEK 200 billion to 500 billion. 
ALMI Företagspartner, which promotes the development of competitive SMEs and stimulates 
new enterprise, also received new equity funding of SEK 2 billion to enable it to increase its 
lending. 
Companies are not currently experiencing any serious credit restric tions. However, banks 
remain cautious with respect to SME lending. 
3.26.3.  Towards an innovative industry 
The Swedish business sector i nvests substantial resources in  research and development 
(R&D) from an international perspective. In  2008, estimated R&D investment by companies 
with 50 employees or more was equivalent to  2.86% of GDP. Sweden's public investment in 
R&D is estimated to have reached 1% GDP in 2009, thus meeting the agreed EU objective.  
Sweden is among the Innovation Leaders with  innovation performance well above the EU27 
average. With the highest innovation performa nce of all compared countries within the 
European Innovation Scoreboard, the Swedis h national innovation system shows clear 
strengths in several areas: A stable macroeco nomic environment, a relatively well educated 
workforce, a handful of R&D-intensive mu ltinational corporations, ambitious public 
investment in activities related to innovation and state of the art scientific performance. These strengths are reinforced by Sweden’s integratio n into global markets. However, there are 
areas, such as ensuring an adequate skills  supply that need continued attention. 
On 28 January 2009, the parliament approved a Research and Innovation Bill for 2009-2012 
providing for additional resources amounting to SEK 5 billion. New funding for university 
research will be allocated base d on a quality assessment system and to research within fields 
of strategic importance for the competitiveness of Swedish busin ess. The bill also introduces 
an initiative to increase the commercialis ation of research results and support to 
Innovationsbron AB (a publicly owned company aiming at supporting the formation of new 
businesses based on research-related ideas). Inno vation offices will be set up at a number of 
higher education institutions.  
VINNOVA, the Swedish Governmental Agency for Innovation Systems, runs the ‘Research 
and grow’ (Forska och Väx) research a nd innovation programme addressing SMEs (2005-
2009) and promotes Institute Excellence Centres which create international environments for 
research, development and innovation activity with in areas of great importance to the future 
competitiveness and growth of Sweden (2006-2013). 
In 2008, Sweden launched a pilot programme to stimulate growth among medium-sized 
companies (‘Medium-sized companies in change’),  where skills development is an important 
element. It is implemented in 2008-2 010 with a budget of ca EUR 2.5 million. 
Notwithstanding the strong Swedish R&D a nd innovation performance, a number of 
challenges remain: first, the strong dependenc e on a small number of  large and globalised 
firms; second, the challenge to d eal with the global economic cris is and, in particular, with the 
 
EN 197   EN impact on the motor vehicle industry, which suffers from structural overcapacity. The 
Swedish motor vehicle industry accounts for around one quarter of private sector R&D 
investments and for around one fifth of invest ments in machinery and inventory. Third, 
policies for supporting non-techno logical forms of innovation a nd innovation in services are 
lacking.  
The apparent difficulty in c onverting large investments in  R&D into growth-enhancing 
productive innovations (often referred to as "the Swedish paradox") indicates that the 
allocation of these investments could be impr oved. The process by which R&D investment is 
converted into commercially viable innovative pr oducts could also be enhanced by facilitating 
entrepreneurial activity.  
1.1.1.  Towards a sustainable industry 
Sweden has low national emissions per capita an d per unit of GDP compared with most other 
industrial countries. The relatively low emissions are largely due to a high proportion of hydro 
and nuclear power in electricity produc tion and substantial use of biofuels. 
Sweden puts major emphasis on the transition to an “eco-efficient economy” and implements 
a comprehensive policy mix with focus on sustai nable growth, energy, and transport, climate 
change, environmental technologies and green taxes. 
In 2009, the parliament adopted an integrated climate and energy policy. Sweden's climate 
target is a reduction in gree nhouse gas emissions for those act ivities not covered by the EU 
emissions trading system of 40% by 2020 compar ed with 1990. The target for the share of 
renewable energy in total energy consumption was set at 50% by 2020 and an Action Plan to 
achieve it was presented in June 2010. The main in strument is the green electricity certificate 
scheme, which aims at generating 25 TWh of new renewable electricity in 2020 compared to 
2002. The target set for energy efficiency is to  decrease the energy intensity by 20 per cent by 
2020 compared to 2008. The programmes to promote energy efficiency will amount to 
SEK 550 million a year in 2010–2012. 
Several additional measures were taken. In December 2009 the Swedish Environmental 
Technology Council presented a national environm ental technology plan. In the research and 
innovation bill adopted in 2009, SEK 535 million w ill be spent on strategic research on 
environment and climate during 2009-2012. Th e Swedish Governmental Agency for 
Innovation Systems has a mandate to invest SEK 40 million on green solutions and technologies. The Swedish Agency for Economic  and Regional Growth has a mandate during 
2008-2010 to carry out investments (about SEK 55 million) in environmentally driven business development through support directed  at SMEs. The Programme for Energy 
Efficiency (PFE) is a financial instrument ai med at the Swedish energy-intensive industrial 
companies. The Swedish Government suppo rts through the Swedish Energy Agency a 
number of development projects for electric car s. In December 2009 Parliament adopted a bill 
on climate and energy taxes, wh ich will take effect graduall y over the period of 2010-2015 to 
allow industry and other stakeholders to adjust. 
No notable challenge has been identified in this policy area. 
 
EN 198   EN 3.26.4.  The business environment 
Sweden scores above the EU average in all the business environment indicator categories, 
with the exception of the level of state aid.  
The Better Regulation strategy is structured  around five pillars: measurement of the 
administrative costs to businesses, regulatory impact assessment, the Better Regulation Council, consultation with th e business sector, and a rolling Action Plan for Better 
Regulation. The Action Plan fo r Better Regulation, set up in 2006, is updated annually and 
covers a broad range of regulat ory simplification measures. The Government has set a target 
of reducing the administrative burden on busin esses by 25% until 2010, representing a cost 
saving of approximately SEK 25 billion. A ne w Action Plan for Better Regulation for 2011-
2014 is under preparation. 
The Ordinance on Impact Assessment, which ente red into force in Ja nuary 2008, states that 
Impact Assessment should take into account sm all businesses in the regulatory design, if 
relevant. The new Regulatory Council, mandate d with ensuring the quality of impact 
assessments and promoting administrative bur den reduction in regulatory design became 
operational in January 2009.  
eGovernment usage by enterprises in 2009 is above the EU average. In January 2008, the 
Government adopted an eGovernment Action Plan focused on back-office integration and 
infrastructure development. Sweden has a non- mandatory national eProcurement platform.  
Sweden’s state-run retail pharmacy monopoly was abolished with effect from 1 July 2009. It 
is the result of a reform of the Swedish pharmacy system initiated in 2008. In 2009 the government launched the liberalisation of railroad  traffic, which will be completed in three 
stages by 1 October 2010. Since January 2010, the Competition Authority can take action to 
prevent Swedish government bodies from enga ging in business activ ities that distort 
competition, thereby protecting small businesses operating in local markets from unfair competition. 
In November 2009 the Swedish Government presented a national broadband strategy. The 
objective is to achieve  that 90% of all households and businesses should have access to 
broadband of at least 100Mbit/s by 2020. 
The one-stop-shop to start-up a company (För etagsregistering) is fully operational.  
Regarding business environment, Sweden has increased the pace on improving competition. It 
is, however, important that the government  continues to actively follow up on the 
comprehensive report published in 2009 by the Swedish Competition Authority, which identified a number of areas where competition could be strengthened, and to vigorously enforce the new Competition Act, which en tered into force in  2008. Among the areas 
identified were markets, where private and public companies compete with each other and in public procurement. There has been a trend break with administrative costs for business 
declining as a result of  the government’s extensive work. A 7.3% (or almost SEK 7 billion) 
reduction between 2006 and 2010 is, however, only a step in the right direction towards the 
Sweden’s ambitious target of a 25 per cent redu ction in administrative costs for business.  
 
EN 199   EN 3.26.5.  Entrepreneurship and SME policy 
Regarding entrepreneurship, ‘Start-up' offi ces giving support and guidance to people who 
want to become entrepreneurs ha ve been established in nine cities in Sweden. In July 2010 the 
Government extended until 30 March 2011 the period for establishing start- up offices until 30 
March 2011 and allocated SEK 4 million to th is programme. EUR 2 million a year between 
2008 and 2010 is aimed at improving advice and acce ss to credit for immigrant entrepreneurs. 
In its Budget Bill for 2009, the Government announ ced its ambition to make entrepreneurship 
an integrated theme throughout the education system. The Government has already adopted 
decisions on several initiatives in support of the development of entrepreneurship programmes 
in schools and higher education. The initiatives  are brought together in a strategy for 
entrepreneurship published in May 2009.  Mo reover, a national programme aimed at 
promoting women entrepreneurship is runni ng since 2007, allocating SEK 100 million each 
year until 2014. 
In November 2008, Sweden launched a pilot pr ogramme to stimulate growth among medium-
sized companies, where skills development is an  important element. It will be implemented 
during 2008-2010 with a total budget of about SEK 24 million. 
A new law came into force on 1 January 2009 wh ich regulates how Swedish municipalities 
and county councils are to proceed if they deci de to introduce a freedom-of-choice system for 
patients and clients in their health care and so cial care systems. Unde r the new law, more 
people in need of care and assistance will be ab le to choose who they want to provide it. The 
act is an alternative to th e Public Procurement Act. 
All public administrations should be able to im plement public procurements electronically by 
2010. Special efforts are deployed to  make tendering by SMEs easier. 
A number of measures focus on SMEs internationalisation: The Swedish Trade Council has take n the initiative to start the Business Opportunity Project 
(BOP) that targets small companies with a turnover of less than EUR 10 million. It offers companies help in entering international markets through a standardised and subsidised service consisting of three steps: market chec k, visiting programme and follow- up. The Trade 
Council also implements: Steps to Export,  a service offering SMEs free advice on 
planning their international business development. 
Since 2007 financial support thro ugh ‘E xport loans’ is given to small firms with less 
than 50 employees to help them  in their internationalisatio n. The loans are administrated 
by ALMI Företagspartner and initially approximately EUR 50 million has been set aside for this initiative. 
The Internationalisation Guide is a web portal aiming at guiding exporting companies, or 
firms that are about to start exporting, to va rious resources including advisory services, e xport 
financing and expertise on export markets.  
Sweden shows a consistent although mixed perf ormance compared with the EU average. In 
particular, there is scope for improvement in the desire to become an entrepreneur, where 
Sweden (21%) scores below the EU average (30%). 
 
EN 200   EN 3.26.6.  Conclusions 
Sweden ranks among the most competitive economi es in the world and there are no notable 
major challenges identified. However, in th e longer term, Sweden might benefit from 
loosening its dependence on a limited number of large firms and target new markets. This 
involves both developing a str onger sector of fast-growing SM Es and the ability to attract 
green investments. Although total R&D invest ment in Sweden is high by international 
standards, Sweden would benefit from continue d efforts to commercialise R&D, to consider 
non-R&D drivers of innovation, and to bring innovati on closer to market needs. In view of a 
negative demographic trend, secu ring an adequate supply of skills, especially in Maths-
Science-Technology education, is vital for future competitiveness. 
 
EN 201   EN 3.27. The United Kingdom 
3.27.1.  Indicators graph 
United Kingdom
-3 -2 -1 0 1 2 3
Labour productivity per hour worked  (EU=100; 2008)
Labour productivity per person employed  (EU=100; 2009)
Labour productivity per person employed in manufacturing (1000 PPS; 2008)
Share of science and technology graduates (% of 20-29 years old population; 2007)
R&D performed by businesses (% of GDP; 2008)
Share of innovating enterprises as % of all enterprises (2006)
Share of high-tech exports in total exports  (2006)
Energy intensity in industry in kg of oil equivalent per euro of gross value-added at
constant prices (2008)
Carbon intensity per ton of oil equivalent of energy consumption  (industry;
tCO2/toe; 2007) 
Waste generated by enterprises (kg per inhabitant; 2006)
Exports of environmental goods as % of all exports of goods (2008)
State aid for industry and services as % of GDP (2008)
Electricity prices for medium size enterprises (euro per kWh; 2009)
Infrastructure expenditures (euro per inhabitant; 2007)
Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2009)
% of broadband lines with speed above 10 MBps (2009)
Legal and regulatory framework (0= neg. / 10=pos.; 2010)
Burden of government regulation (1 = burdensome 7 = not burdensome; 2008/09)
E-government usage by enterprises (%; 2009)
Time required to start a business (days; 2009)
Enterprise survival rate after two years (2007)
Business churn (enterprise entries and exits as % of existing stock; 2007)
Share of high-growth enterprises as % of all enterprises (2006)
Early stage financing (% of GDP; 2008)
Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)
Duration of payments by public authorities (days; 2010)Distance from the EU average (measured in standard deviations)
Towards a modern and 
competitive industry
Towards a sustainable industry
Business Environment
Entrepreneurship and SMEs NANANANA
NA
Note: For sources and definitions, please see the technical annex. In the graph, data are presented in such a way that data bars po inting to the right (left) always 
indicate performance which is better (weaker) than the EU average. 
 
EN 202   EN 3.27.2.  Introduction51 
The United Kingdom’s labour productivity, measured  per hour and per person, was stable and 
above the EU average. Nominal unit labour costs in UK manufacturing increased by 17% 
between 2000 and 2009 with  a remarkable accelera tion during the second half of the decade. 
However, the overall increase still remained  below the EU average of 19%. The United 
Kingdom is one of the very few EU members where the real effective exchange rate 
depreciated from 1999 to 2009, indica ting increased competitiveness. 
The United Kingdom showed no clea r specialisation with  regard to skills intensity in 2007; 
high-skill sectors have gained ground sinc e 1997 while low-skill sectors became less 
important. This picture is accompanied by a clear and stable specialisation in sectors with high technology intensity; spec ialisation in medium-high tec hnology sectors is decreasing and 
low-technology sectors play an important and growing role. Sect ors with negative growth in 
the EU played a relative ly strong role in the United Kingdom in 1995 and 2007. 
Manufacturing has a smaller weight  for the United Kingdom than fo r the EU in total (13% vs. 
17% of value added in 2008). Only pulp, paper and publishing s hows an above average share 
in manufacturing. There is, however, clearer sp ecialisation in mining and quarrying and in 
financial intermediation. Employment figur es show the high leve l of productivity in 
manufacturing but also its decreasing importance over time. Forecasts until 2020 expect an 
increase in employment in business and other services by almost 25% while employment in 
manufacturing might drop by some 13%. 
The United Kingdom’s showed a deficit in the trad e of goods in 58 of the last 64 years, with 
the last surplus being in 1982. The negative trade balance in manufacturing mainly resulted 
from deficits in virtually every sub-sector of manufacturing, except aerospace, where the UK 
enjoys a very strong, albeit de teriorating, global market shar e. The Revealed Comparative 
Advantage (RCA), measured relative to the EU and concentrating on manufacturing, shows 
particular strengths for the United Kingdom in 2006 only in electrical and optical equipment. 
Exit from the crisis Manufacturing output decreased by 15% in the course of the cr isis. In July 2010, output was 
still almost 10% lower than the level prior to the crisis. The UK introduced a car scrapping scheme for private households that ended in February 2010. In addition, the automotive 
industry is supported by the Automotive Assi stance Programme (AAP), a support package 
that aims to unlock up to GBP 2.3 billi on (0.15% of GDP) in loan guarantees, and, 
exceptionally, loans to the UK automotive sector . The programme support is offered through 
the EU's Temporary State aid Framework. Al so in line with the Temporary State aid 
Framework the UK made a budget of EUR 9.6 b illion available for guarantees, loans and 
green products. In addition, the increased de minimis aid thres hold has been widely used by 
SMEs to reduce the effects of the crisis. Al most 1500 SMEs in manufacturing and services 
received aid under this scheme. The government  also created a Strategic Investment Fund 
(SIF) of GBP 750 million (0.05% of GDP) in 20 09 and 2010 combined to support investment 
in a range of emerging indus trial sectors in the UK. 
                                                
 
51 For main sources used see the methodologica l annex. The cut-off date for all data and 
qualitative information is 31 August 2010. 
 
EN 203   EN Despite increases in margins, th e overall cost of finance for business is now more favourable 
than in 2007 and 2008. In addition, the majority of businesses can obtain financing. For instance, the March 2010 Bank of England Trends in lend ing report shows 85.9% of SME 
loans and overdrafts by value were approved in January 2010. There has been a decline in the demand for finance from SMEs since 2007 and 2008 as SMEs have become more cautious 
about taking on external debt . The February 2010 SME Busine ss Barometer survey shows, 
82% of the SME employers who did not apply fo r finance in the last 6 months gave their 
reason as not needing it and 8% reported they di d not want to take on additional risk. While 
some firms have faced problems with internationa l trade finance, indica tions from the private 
sector are that these are re ducing. There are therefore no cu rrent plans to introduce a new 
trade credit insurance scheme. 
3.27.3.  Towards an innovative industry 
In the field of R&D and innovation, the UK ha s a strong research base, reflected by its 
scientific performance and qua lity assurance system, and es tablished knowledge transfer 
mechanisms, although the engagement of comp anies in innovative activities is not well 
developed particularly in the important se rvices sectors. The UK's strong innovation 
performance is confirmed by its 5
th rank on the summary innovati on index out of 27 Member 
States based on the European Innovation Scoreb oard (EIS 2008). The UK’s good standing is 
due to excellent performance on a few indicators, most notably lifelong learning  and venture 
capital.  
A number of measures can be singled out to support innovation policy. "Make Your Mark" is 
aimed at supporting a favourable innovation c limate via innovation management advice to 
companies. "Enterprise Finance Guarantee" su pports lending where bus inesses are able to 
demonstrate to the lender that they are viable and are able to service the loan but lack the 
collateral and/or track record to secure a normal commercial loan. The "Economic Challenge 
Investment Fund" provided support for a divers e range of activities including ones directly 
supportive of innovation, includi ng support for knowledge transfer , training of researchers, 
recruitment and further devel opment of skilled personnel in  enterprises and support to 
organisational innovation. 
Knowledge-intensive services, such as finance and business services and engineering, are an 
increasingly large part of the UK’s ongoi ng economic success and UK innovation activity. 
However, innovation in these sectors is not usually technology-based. Supporting and 
encouraging innovation in these sectors is a key challenge. A number of other challenges 
include boosting the relatively we ak intensity of innovation activit y in enterprises, translating 
knowledge into ‘new to market products’ and in tellectual capital, improving future skills 
needs, and raising private R& D investment and i nnovation continues to be an important 
challenge for the UK. 
3.27.4.  Towards a sustainable industry 
In addition, the government has introduced target ed measures to help UK enterprises through 
the recession and to lay the foundation for a sust ainable recovery. In this context, the budget 
for 2009 announced a GBP 750 million Strategic Investment Fund to support advanced 
industrial projects of strategi c importance focusing on emerging technologies and regionally 
important sectors. Investment via the Strategi c Investment Fund is well underway and to date 
covers a wide range of industries, but with  a clear focus on high-tech and low-carbon 
industries. In the context of the Low Car bon Industrial Strategy published in July 2009 the 
 
EN 204   EN UK has deployed a comprehensive range of policie s to support the transition to a low carbon 
future. Budget 2009 committed a further £1.4 bill ion in targeted support for the low carbon 
economy and showed how the Government’s po licy framework is enabling £50 billion of 
investment in low carbon over the period 2008-11. 
3.27.5.  The business environment 
The Government announced a ‘one-in, one-out’ rule in the Coalition document published on 
20 May 2010. The rule requires that no new domes tic regulation is brought in without other 
regulation being cut by a greater amount. This commitment is intended to bear down on the 
burden of regulation, boosting enterprise and driving economic growth and innovation.  
The Administrative Burden Reduction Prog ramme was a key part of the previous 
Government’s better regulation agenda. This five year programme, launched in 2005, was 
designed to cut unnecessa ry bureaucracy and remove out-o f-date regulations- making life 
simpler for business and the voluntary sector. The programme has delivered more than £3.5bn 
of net annual savings, representing a reduction of over 26.5% in administrative burden placed 
on business by government. The programme has also  delivered a reduction of over 34% in the 
number of information requests that central departments and agencies request from frontline public sector workers. The Government has co mmitted to publishing a forward programme of 
all regulatory measures due to be implemente d in the UK to inform business and the public. 
The ex ante  impact assessment policy was recently  updated. All new re gulatory and policy 
proposals now require in their impact assessment and explanat ory memorandum consideration 
of exemptions or simplified enforcement fo r small businesses. A guidance document on the 
Small Firms Impact Test and a handbook for officials on regulating for small businesses have also been published. In additi on, the introduction of a forward- looking planning tool has been 
announced to allow companies to predict more clearly the effect of  upcoming regulation. 
Public consultation of stakehol ders on new regulations is embe dded in the Code of Practice 
on Consultation. 
Despite significant improvement over the period 2005-2009, take-up by businesses of 
eGovernment services is still below the EU  average in 2009. The UK has a non-mandatory 
national eProcurement platform (Buying solutio ns) which includes an electronic marketplace 
containing details of Public S ector supplier contracts, a Purc hase to Pay solution and a pan-
Public Sector data warehouse e Procurement.  
The government-run BusinessLink network curren tly operates as a one-s top-shop for business 
advice, including start-ups. It in cludes an online porta l, telephone helpline and face to face 
advice. All necessary forms can be accessed from the Business Link website, but they are not processed by one single organisation. Incorporation of a company still takes place with Companies House (online). Although Companie s House remains a separate entity for 
incorporation of a company, the BusinessLink po rtal may otherwise been considered a "one-
stop-shop" for start-ups and as the portal for accessing th e UK's point of single contact under 
the Services Directive.  
The Government had already prior to 2007 put meas ures in place that an ticipated many of the 
recommendations later included into the Euro pean Small Business Act (SBA). The United 
Kingdom scores slightly better th an the EU average concerning the level of state aid (i.e. 
provides less state aid than the EU average), but slightly belo w average concerning electricity 
prices for medium size enterprises and the availability of high-speed broadband lines. 
 
EN 205   EN 3.27.6  Entrepreneurship and SME policy 
The United Kingdom scores clearly above the EU th e enterprise survival rate after two years, 
business churn and early stage fi nancing. It does not score belo w the average in any of the 
other main indicator categories used. 
The Local Enterprise Growth Initiative (LEG I) was announced in the 2005 budget. A total of 
EUR 482 million has been allocated to the progr amme up to 2010/2011. It intends to help the 
most deprived local areas, through enterprise and investment. Three key outcomes are strived 
for: to increase total entrep reneurial activity, to support sust ainable growth, and to attract 
appropriate inward investment and franchisi ng. In 2007, the women’s enterprise ambassadors’ 
network was launched. Some 1,300 ambassadors are now in place instilling women with the 
confidence to successfully start and run a business. The government started pushing the 
entrepreneurship education agenda in 2003. It is  now integrated into the cross government 
enterprise strategy. Moreover, an Enterprise Ne twork has been established to provide support 
for a sustainable network of Enterprise Lear ning Partnerships (ELP s). The National Council 
for Graduate Entrepreneurship (NCGE) is de veloping its University Enterprise Networks 
which bring together universiti es, private sector businesses, and the regional agencies in 
projects to promote entrepreneurship to st udents and post graduates. From April 2008, the 
NGCE has received additional funding of about EUR 350 000 for this. 
3.27.6.  Conclusions 
The relatively high level of pr oductivity and the depr eciation of the real effective exchange 
rate are clear signs for the generally high level of comp etitiveness of the UK economy. 
However, the economic performance depends to a certain degree the primary sector and on 
financial services which might indicate so me vulnerability to external shocks. The 
manufacturing base is rather small. While th e research base and th e innovation performance 
are, overall, strong this is main ly due to lifelong learning and venture capital. Weaknesses in 
innovation, especially in the important service sectors, remain. There is a comprehensive 
policy towards a sustainable industry. 
 
EN 206   EN 4. METHODOLOGICAL ANNEX 
4.1. Main Sources 
4.1.1.  General 
• CEDEFOP (2010), Skill supply and demand in Europe – Medium-term forecast 
up to 2020 
• Council of the European Union (2010), Broad Economic Policy Guidelines, 
Document No. 11646/10 of 7 July 2010, 
http://register.consilium.eur opa.eu/pdf/en/10/st11/st11646.en10.pdf  
• European Commission (2009), Member States' autumn 2009 reports on the 
implementation of their National Reform Programmes, http://ec.europa.eu/archives/growtha ndjobs_2009/documentation/index_en.htm#i
mplementation  
• European Commission (2009), Implementati on of the Lisbon Strategy Structural 
Reforms in the context of the European Economic Recovery Plan,  COM(2009) 34 
final, Volume II, of 29 January 2009,  
• European Commission (2009), State Aid Scoreboard, Re port on State aid granted 
by the EU Member States, Autumn 2009 update, COM (2009) 661 final, 
download: http://eur-
lex.europa.eu/LexUriServ/LexUri Serv.do?uri=COM:2009:0661:FIN:EN:PDF  
• European Commission (2010): Internal  Market Scoreboard, N°21, July 2010  
download: http://ec.europa.eu /internal_market/score/index_en.htm  
• European Commission (2010): Lisbon St rategy evaluation document, SEC(2010) 
114 of 2 February 2010 - 
http://ec.europa.eu/archives/growtha ndjobs_2009/pdf/lisbon_strategy_evaluation_
en.pdf  
• European Commission, DG Economic and Financial Affairs (2010), Price And 
Cost Competitiveness (quarterly report) 
• European Commission, DG Enterprise and Industry (2010), EU Industrial 
Structure 2009 – Performance and competitiveness, download: 
http://ec.europa.eu/ente rprise/newsroom/cf/itemshortdetail.cfm?item_id=3934  
• Eurostat (2010), Structural indicators, 
http://epp.eurostat.ec.eur opa.eu/portal/page/portal/stru ctural_indicators/indicators 
• National Reform Programmes of th e EU member states, October 2009 
 
EN 207   EN 4.1.2.  Towards an innovative industry 
• European Commission (2008), Euro pean Innovation Progress Report, 
http://ec.europa.eu/en terprise/policies/i nnovation/facts-figures-
analysis/trendchart/index_en.htm  
• European Commission (2009), European  Innovation Scoreboard 2009, Pro Inno 
Europe Paper no 15, http://www.proinno- europe.eu/page/european-innovation-
scoreboard-2009  
• Erawatch Country Report (2009), 
http://cordis.europa.eu/eraw atch/index.cfm?fuseaction=ri.home  
4.1.3.  Towards a sustainable industry 
• ECORYS (2009), Study on the Competitiven ess of the EU eco-industry (within 
the Framework Contract of sectoral  competitiveness studies ENTR/06/054), 
October 9, 2009 
• European Commission (2009), Staff Wo rking Document SEC(2009)889final of 
23/06/2009 "Synthesis of the complete assessment of all 27 National Energy 
Efficiency Action Plans as required by Directive 2006/32/EC on energy end-use 
efficiency and energy services: Movi ng forward together on saving energy" 
• European Commission (2009), Progress re port on the implementation of the 
European Economic Recovery Plan, December 2009 
• Eurostat (2010), Environment, ener gy and external trade databases, 
http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/themes . 
• International Energy Agency (2009), "Imp lementing energy efficiency policies: 
are IEA member countries on track?", October 2009 
• MURE (http://www.isisrome.com/mure ) and IEA energy efficiency 
(http://www.iea.org/textbase/pm/?mode=pm ) databases 
• National Energy Efficiency Action Plans of the EU Member States, June 2007 
4.1.4.  The business environment 
• European Commission (2009), Report on the implementation of the SBA, 
COM(2009) 680 of 15 December 2009 – 
http://ec.europa.eu/enterprise/policies/sme/small-business-
act/implementation/files/sba_imp_en.pdf   
• European Commission ( 2010), SBA Fact Sheets 2009, 
http://ec.europa.eu/enterprise/policies/ sme/facts-figures-ana lysis/performance-
review/index_en.htm#h2-sba-fact-sheets  
 
EN 208   EN • Eurostat (2010), E-governme nt usage by enterprises 2009, 
http://epp.eurostat.ec.eur opa.eu/portal/page/portal/pr oduct_details/dataset?p_prod
uct_code=TSIIR140  
• OECD, Better Regulation in Eu rope - The EU 15 Project, 
http://www.oecd.org/document/0/0,3343,en_2649_34141_41909720_1_1_1_1,00.
html 
• World Bank (2010), Doing Business – Meas uring Business Regulation, database 
under http://www.doingbusiness.org  
• World Economic Forum (2009), The Global Competitiveness Report 2008-2009 - 
http://www.weforum.org/documents/gcr0809/index.html . 
• Ernst & Young: Waking up to the ne w Economy, Ernst & Young’s European 
Attractiveness Survey 2010 - 
http://www.ey.com/Publication/vwLUA ssets/Attractivenes s_survey_2010_EU/$F
ILE/Attractiveness_survey_2010_EU.pdf  
4.1.5.  Entrepreneurship and SME Policy 
• European Commission (2008), Think Small First - A Small Business Act for 
Europe, COM(2008)394 of 26 June 2008, http://eur-
lex.europa.eu/LexUriServ/LexUri Serv.do?uri=COM:2008:0394:FIN:EN:PDF  
• European Commission ( 2010), SBA Fact Sheets 2009, 
http://ec.europa.eu/enterprise/policies/ sme/facts-figures-ana lysis/performance-
review/index_en.htm#h2-sba-fact-sheets  
• Eurostat (2010), Business  demography statistics, 
http://epp.eurostat.ec.eur opa.eu/portal/page/portal/eur opean_business/data/databas
e 
4.2. Data set and methodological approach 
4.2.1.  Data set 
The following data set presents the data underl ying the graphs presented in this report. 
 
EN 209   EN  
Towards a modern and competitive industry Policy objective / indicators 
Labour productivity per hour worked  
(EU=100; 2008)  
Source: Eurostat 
Labour productivity per person 
employed  (EU=100; 2009)  
Source: Eurostat 
Labour productivity per person 
employed in manufacturing (1000 
PPS; 2008)  
Source: Eurostat 
Unit labour costs, level in 
manufacturing (2005 = 100; 2009)  
Source: OECD 
Share of science and technology 
graduates (% of 20-29 years old 
population; 2007)  
Source: Eurostat 
R&D performed by businesses (% of 
GDP; 2008) 
Source: Eurostat 
Share of innovating enterprises as % 
of all enterprises (2006)  
Source: Community Innovation Survey 
Share of high-tech exports in total 
exports  (2006)  
Source: Eurostat 
Real effective exchanges rates deflated 
by nominal unit la bour costs (total 
economy) against a panel of 36 
countries (1999=100; Q4 2009) 
Source: DG ECFIN 
Trade balance of goods as % of total 
exports of goods (2009) 
Source: Eurostat 
Trade balance of services as % of 
total exports of services (2009) 
Source: Eurostat 
BE 135 124 74 109 14.0 1.3 59.8 1 6.6 108 1 5 8 
BG 36 1 37 13 133 1 8.4 0.2 2634 3.3 144 -42 32 
CZ 62 72 32 98 12.0 0.9 47.2 12.7 167 7 7 
DK 110 101 : 114 16.4 1.9 47.9 12.8 124 11 7 
DE 126 105 64 113 11.4 1.8 70.9 14.1 96 17 -10 
EE 54 64 24 134 1 13.3 0.6 62.1 8.0 149 -13 42 
IE 119 135 112 100 18.7 0.9 69.7 1 29.0 130 46 -7 
EL 81 102 52 108 8.5 0.2 1 54.7 5.7 109 -198 47 
ES 106 111 51 117 11.2 0.7 42.0 1 4.9 117 -32 29 
FR 132 1 120 58 106 1,2 20.7 1.3 51.0 1 17.9 108 -16 10 
IT 102 110 50 122 12.1 0.6 52.0 1 6.4 120 -1 -14 
CY 79 89 32 1 116 1 4.2 0.1 58.9 21.4 116 -523 59 
LV 44 50 19 178 1 9.2 0.2 : 4.2 144 -26 43 
LT 55 56 32 1 123 1 18.1 0.2 34.6 4.7 139 -11 22 
LU 190 168 74 127 : 1.3 68.1 40.7 : -17 41 
HU 60 70 35 1 112 6.4 0.5 31.6 20.3 142 7 11 
MT 77 88 : 104 1,2 7.1 0.4 37.7 54.6 121 -72 37 
NL 139 110 71 112 8.9 0.9 45.0 18.3 120 11 8 
AT 113 112 : 106 11.1 1.9 65.9 11.2 100 -4 30 
PL 50 65 27 96 13.9 0.2 36.7 3.1 98 -9 17 
PT 64 74 : 106 1,2 18.1 0.8 59.7 7.0 119 -61 37 
RO 45 47 24 1 134 11.9 0.2 41.5 3.9 215 -34 -5 
SI 84 81 38 106 1 9.8 1.1 : 4.7 112 -1 24 
SK 75 79 39 92 11.9 0.2 31.5 1 5.4 190 1 -28 
FI 110 107 70 105 18.8 2.8 51.9 18.1 116 4 9 
SE 114 111 63 115 13.6 2.8 : 13.4 96 9 24 
UK 112 110 : 114 2 17.5 1.2 : 26.5 87 -37 30 
Weighted EU 
27 100 100 51   1.2 52.9 16.6 127 -10 1 10 1 
EU 
unweighted 92 92 48  12.6 0.9 49.9 14.0    
Max 190 168 112 178 20.7 2.8 70.9 54.6 215 46 59 
Min 36 37 13 92 4.2 0.1 26.3 3.1 87 -523 -28 
Standard 
deviation 37 30 24  4.3 0.8 13.2 12.3    
 
1 2007  1 2007 1 2007 
2 Total 
economy  1 2007 1 2004  1 BE and LU 
together 1 Trade 
with 3rd 
countries 1 Trade 
with 3rd 
countries 
 
 
EN 210   EN  
Towards a sustainable industry Policy objective / indicators 
Energy intensity in industry in kg of 
oil equivalent per euro of gross value-
added at constant prices (2008) 
Source: Eurostat 
Carbon intensity per ton of oil 
equivalent of energy consumption  
(industry; tCO2/toe; 2008)  
Sources: EEA, Eurostat 
Waste generated by enterprises (kg 
per inhabitant; 2006) 
Source: Eurostat 
Exports of environmental goods as % 
of all exports of goods (2008) 
Source: Eurostat (COMEXT) 
BE 0.23 1.7 5.2 0.40 
BG 0.78 2.6 31.1 0.14 
CZ 0.31 2.0 2.1 0.89 
DK 0.09 1.7 2.3 0.43 
DE 0.11 1.9 4.0 1.13 
EE 0.37 2.0 14.2 0.12 
IE 0.05 2.6 6.5 0.23 
EL 0.19 3.2 4.2 0.05 
ES 0.21 2.3 3.1 0.32 
FR 0.15 1.6 6.6 0.47 
IT 0.15 1.9 2.1 0.49 
CY 0.30 4.3 1.9 5.51 
LV 0.36 1.8 0.4 0.20 
LT 0.20 1.8 1.9 0.11 
LU 0.33 2.3 18.8 0.91 
HU 0.22 1.9 1.9 0.73 
MT : 2.2 6.9 0.06 
NL 0.16 1.0 5.2 0.37 
AT 0.15 2.2 6.1 0.77 
PL 0.27 2.6 6.8 0.27 
PT 0.24 1.8 3.2 0.63 
RO 0.59 2.8 15.1 0.21 
SI 0.19 1.8 2.5 0.45 
SK 0.33 2.8 2.4 0.13 
FI 0.26 1.0 13.4 0.48 
SE 0.16 1.0 12.4 0.84 
UK 0.11 1.8 5.2 0.68 
Weighted 
EU 27 0.16 1.9 5.5 0.64 
EU 
unweighted 0.25 2.1 6.9 0.63 
Max 0.78 4.3 31.1 5.51 
Min 0.05 1.0 0.4 0.05 
Standard 
deviation 0.16 0.7 6.8 1.02 
 
EN 211   EN  
Business Environment Policy objective / indicators 
State aid for industry and services as 
% of GDP (2008) 
Source: State Aid Scoreboard 2009 
Electricity prices for medium size 
enterprises (euro per kWh; 2009) 
Source: Eurostat 
Infrastructure expenditures (euro per 
inhabitant; 2007) 
Source: OECD, Eurostat calculation 
Satisfaction with quality of 
infrastructure (rail, road, port and 
airport)  
(1=underdeveloped / 7=extensive and 
efficicient by int'l standards; 2009) 
Source: The Global Competitiveness 
Report 2008-2009 
% of broadband lines with speed 
above 10 MBps (2009) 
Source: DG INFSO 
Legal and regulatory framework (0= 
neg. / 10=pos.; 2010) 
Source: IMD World Competitiveness 
Center 
Burden of government regulation (1 = 
burdensome 7 = not burdensome; 
2008/09) 
Source: The Global Competitiveness 
Report 2008-2009 
E-government usage by enterprises 
(%; 2009) 
Source: Eurostat 
BE 0.36 0.1026 : 6.0 45 2.8 2.7 69 1 
BG 0.12 0.0639 65 3.1 55 3.4 3.1 60 
CZ 0.78 0.1057 214 4.4 23 3.5 2.7 66 
DK 0.71 0.0738 248 6.0 27 5.9 3.8 90 
DE 0.57 0.0975 210 6.5 23 4.4 3.0 65 
EE 0.09 0.0587 162 4.6 1 5.5 4.5 79 
IE 0.38 0.1206 450 4.2 5 6.1 3.1 89 
EL 0.33 0.0948 : 4.2 26 2.7 2.4 81 
ES 0.40 0.1098 300 5.2 13 3.2 2.7 65 
FR 0.39 0.0667 285 6.3 : 3.5 2.3 75 
IT 0.29 0.1027 1 : 3.8 7 3.2 2.2 83 
CY 0.47 0.1164 : 5.5 1 : 4.0 72 
LV 0.20 0.0896 196 4.2 14 : 3.2 64 
LT 0.53 0.0924 121 4.6 23 4.1 2.9 91 
LU 0.15 0.1096 : 5.5 7 5.8 4.2 89 
HU 1.81 0.1221 102 4.0 : 3.0 2.1 68 
MT 1.74 0.1506 : 4.7 10 : 3.0 79 
NL 0.25 0.0940 : 6.0 : 5.1 2.9 83 
AT 0.38 0.0897 2 287 5.8 13 5.7 3.5 79 
PL 0.80 0.0857 110 2.9 1 3.7 2.7 61 
PT 0.92 0.0919 178 6.1 47 2.5 2.8 77 
RO 0.18 0.0811 163 3.0 45 3.7 3.0 41 
SI 0.47 0.1063 322 4.6 21 3.1 3.8 89 
SK 0.42 0.1416 127 3.9 15 3.4 2.9 92 
FI 0.44 0.0663 250 6.2 10 6.1 4.3 96 
SE 0.82 0.0662 299 5.8 35 5.4 4.0 86 
UK 0.17 0.1077 258 5.1 6 4.2 3.0 68 
Weighted 
EU 27 0.42 0.0959 197  16   71 
EU 
unweighted 0.52 0.0966 217 4.8 20 4.2 3.1 76 
Max 1.81 0.1506 450 6.5 55 6.1 4.5 96 
Min 0.09 0.0587 65 2.9 1 2.5 2.1 41 
Standard 
deviation 0.42 0.0228 93 1.0 16 1.2 0.7 13 
  1 2007 
2 2008      1 2008 
 
EN 212   EN  
Entrepreneurship and SMEs Policy objective / indicators 
Time required to start a business 
(days; 2009) 
Source: World Bank Doing Business 
2010 
Enterprise survival rate after two 
years (2007) 
Source: Eurostat 
Business churn (enterprise entries and 
exits as % of existing stock; 2007) 
Source: Eurostat 
Share of high-growth enterprises as 
% of all enterprises (2006) 
Source: Eurostat 
Early stage financing (% of GDP; 
2008) 
Source: Eurostat 
Rejected loan applications, and loan 
offers whose conditions were deemed 
unacceptable, as % of all loan 
applications by SMEs (2009) 
Source: Flash Eurobarometer survey on 
SMEs' access to finance 
Duration of payments by public 
authorities (days; 2010) 
Source: European Payment Index by 
Intrum Justitia 
BE 4 : 12 : 0.029 5 76 
BG 18 51 23 8.8 : 14 : 
CZ 15 65 20 5.1 1 0.000 22 35 
DK 6 66 25 3.9 0.037 29 38 
DE 18 : 15 : 0.019 26 36 
EE 7 78 21 5.9 : 45 24 
IE 13 : 15 : 0.015 28 49 
EL 19 : : : 0.000 36 155 
ES 47 73 17 4.3 0.009 31 153 
FR 7 : 17 : 0.023 19 65 
IT 10 75 16 8.1 0.001 17 186 
CY 8 91 5 : : 20 75 
LV 16 71 24 5.9 1 : 38 33 
LT 26 55 34 8.2 1 : 14 60 
LU 24 78 18 4.0 : 12 : 
HU 4 62 21 4.0 0.002 12 45 
MT : : : : : 37 : 
NL 10 65 : 3.6 1 0.038 54 49 
AT 28 78 14 : 0.004 16 43 
PL 32 : : : 0.005 25 40 
PT 6 54 34 : 0.034 19 141 
RO 10 76 27 1 1.2 0.002 48 : 
SI 6 : 15 : : 19 : 
SK 16 66 24 : : 19 50 
FI 14 73 : 2.9 1 0.033 0 24 
SE 15 86 13 4.0 0.050 14 35 
UK 13 : 26 : 0.040 20 48 
Weighted 
EU 27      2 3   
EU 
unweighted 15 70 20 5.1 0.019 24 66 
Max 47 91 34 8.8 0.050 54 186 
Min 4 51 5 1.2 0.000 0 24 
Standard 
deviation 10 11 7 2.2 0.017 13 47 
   1 2005 1 2005    
 
EN 213   EN 4.2.2.  Definitions of the indicators 
Name of Indicator Definition  
Towards a modern and competitive industry  
(1) Labour productivity per 
hour worked Gross Domestic Product in Purchasing Power Standards 
per hour worked relative to EU-27 (EU-27=100) 
Source: Eurostat  
(2) Labour productivity per 
person employed  Gross Domestic Product in Purchasing Power Standards 
per person employed relative to EU-27 (EU-27=100) 
Source: Eurostat  
(3) Labour productivity in 
manufacturing per person employed Gross value added in Purchasing Power Standards per 
person employed 
Source: Eurostat 
(4) Unit labour costs in 
manufacturing  Development (2000=100) of the following ratio: Total 
compensation of employees in  manufacturing (in nominal 
values) divided by total valued  added in manufacturing (in 
constant prices). 
Source: European Commission (AMECO-Database 2000-
2005) and OECD (2005-2009)  
(5) Share of science and 
technology graduates Number of new science and t echnology graduates (levels 5 
and 6 of the “International Standard Classification of 
Education ISCED 5-6”) di vided by 20-29 years old 
population. 
The term “science” includes the following fields of 
education (ISCED): life sciences, physical sciences, mathematics, statistics a nd computing, while technology 
refers to graduates in engineering, manufacturing and construction. 
The indicator includes new tertiary graduates in a calendar 
year from both public and private institutions completing graduate and post graduate studies compared to the age group of 20-29 years old populati on that corresp onds to the 
typical graduation age in most countries.  
Source: Eurostat 
(6) R&D performed by 
businesses The indicator covers all e xpenditures for R&D performed 
within the business enterprise sector (BERD) on the 
national territory during a given period, regardless of the source of funds.  
The data on this indicator are gathered by Eurostat which 
applies the guidelines laid out in the Frascati Manual, the 
"Proposed standard practice fo r surveys of research and 
experimental development" (OECD, 2002).  
 
EN 214   EN Note: Gross domestic expenditure on R&D is composed of 
Business enterprise expenditure on R&D, Higher education expenditure on R&D, Government expenditure on R&D and Private non-profit expenditure on R&D. 
Source: Eurostat 
(7) Share of high-tech exports  Share (in %) of exports of all high technology products in 
total exports.  
High technology products cove r the following: Aerospace, 
Computers-office machines, Electronics-telecommunications, Pharmacy, Scientific instruments, Electrical machinery, Chemistry, Non-electrical machinery, Armament. 
Source: Eurostat. 
(8) Share of innovating 
companies  Enterprises which have intr oduced during an observation 
period of three years new or  significantly improved goods, 
services and/or processes, marketing or organisational 
innovation or a combination of those, divided by the total 
number of active enterprises at  the end of the observation 
period. 
Source: Community innovation surveys (CIS). Enterprises 
with less than 10 employees do not belong to the total population covered by CIS. 
(9) Trade balance of goods (% 
of total exports of goods) Net exports (exports minus imports) of goods divided by 
total exports of goods (all in current prices). The aggregate 
EU trade balance includes trad e with third countries only. 
Source: Eurostat. 
(10Trade balance of services 
(% of total exports of services) Net exports (exports minus impor ts) of services divided by 
total exports of services (all in current prices). The aggregate EU trade balance includes trade with third countries only. 
Source: Eurostat. 
(11 Real effective exchange 
rate Nominal effective exchange ra te deflated by nominal unit 
labour costs (total economy) relative to a panel of 36 
countries (EU-27 + 9 other industrial countries: Australia, Canada, United States, Japan, Norway, New Zealand, Mexico, Switzerland, and Turkey). 1999=100 for all countries. A rise in the inde x suggests deterioration in 
competitiveness. The figure for each country is calculated against the rest of the countri es belonging to the panel. The 
EU aggregate figure is calcu lated against the non-EU-27 
countries belonging to the panel. 
Source: European Commission (DG ECFIN)  
(12Revealed Comparative 
Advantage (RCA) The RCA gives the share of a given sector in 
manufacturing exports for a given Member State relative to 
 
EN 215   EN the share of the sector in manufacturing exports of 21 EU 
Member States; due to the lack  of data Bulgaria, Cyprus, 
Latvia, Lithuania, Malta and Romania are not covered here. 
Towards a sustainable industry 
(13 Energy intensity in 
industry Energy consumption in kg of oi l equivalent divided by gross 
value-added (constant prices) in  industry (NACE sections C: 
Mining and Quarrying, D: Ma nufacturing, E: Electricity, 
Gas and Water Supply). 
Source: Eurostat (“environment and energy” and “national 
accounts”) 
(14Carbon intensity (industry)  CO2 emissions by industry excl uding the energy sector and 
including the construction sector, per ton of oil equivalent of 
energy consumption in industr y without the energy sector 
and including construction. 
Sources:  
European Environment Agency for the figures on the CO2 
emissions. The relevant categories are NACE 13-22, 24-
37, and 45, sections C, D and F without subsections CA (10-12), DF (23) and section E (40). 
Eurostat  for the figures regarding energy consumption in 
tons of oil equivalent. The relevant categories are 1.A.2 -
 101800 final energy consumption industry + 101022 auto producer input 2 and 3 101600 non-energy consumption.  
(15Waste generated by 
enterprises The amount of hazardous and non-hazardous waste of all 
enterprises divided by the number of inhabitants.  
Source: Eurostat  
(16Exports of environmental 
goods Exports of goods from "eco-industries" divided by total 
exports of goods (all in nominal values).  
The notion of "eco-industry" refers to sectors whose 
products measure, prevent, limit, minimize or correct environmental damage. The trade codes considered to cover eco-industry goods are those iden tified in the Ecorys study 
on the “Competitiveness of the EU eco-industry ” (pages 
190/191) of 22 October 2009, carried out for DG ENTR. 
Source: European Commission (DG ENTR) calculations on 
the basis of Eurostat/COMEXT data.  
 
Business Environment  
(17Burden of government 
regulation Average mark given by business executives in a World 
Economic Forum survey to the question " How burdensome 
is it for businesses in your country to comply with 
 
EN 216   EN governmental administrative requirements (e.g., permits, 
regulations, reporting )?" (1 = extremely burdensome; 7 = 
not burdensome at all) 
Source: Global Competitiveness Report 2008-2009 of the 
World Economic Forum 
(18Legal and regulatory framework  Average evaluation (0 = nega tive; 10 = positive) of the 
statement " The legal and regulatory framework encourages 
the competitiveness of enterprises " in an IMD survey of 
businesspeople. 
Source: World Competitiveness Yearbook 2009, IMD 
(International Institute for Management Development).  
(19E-government usage by enterprises  Share of enterprises using the in ternet to interact with public 
authorities (i.e. having used the Internet for one or more of the following activities: obtai ning information, downloading 
forms, filling-in web-forms, full electronic case handling). Data are expressed in % of enterprises with 10 or more persons employed and belonging to the NACE categories D, F, G, H, I, K, O. 
Source: Eurostat publishing data validated by Cap Gemini 
in association with the Member States. 
(20Infrastructure expenditures per inhabitant Sum of investment and main tenance expenditures on rail, 
road, inland waterways, maritime ports and airports infrastructure.  
Source: OECD International Transport Forum Statistics.  
(21 Satisfaction with the 
quality of infrastructure Average mark given by business executives in a World 
Economic Forum survey to the quality of rail, roads, ports and airports (1 = underdeveloped; 7 = extensive and efficient by international standards). 
Source: Global Competitiveness Report 2008-2009 of the 
World Economic Forum. 
(22Availability of high-speed broadband infrastructure Percentage of broadband lines with speed above 10 MBps 
Source: European Commission, DG INFSO 
Communications Committee Working Document 
(23 Electricity prices for 
medium sized enterprises Average national price in Euro per kWh excluding taxes, 
applicable for the first semest er of each year for medium 
size industrial consumers (a nnual consumption between 500 
and 2000 MWh). The indicator does not cover small enterprises for reasons of da ta availability, nor large 
enterprises, since the latter of ten have individual contracts 
with energy providers. Until 2007 the prices refer to the situation on 1 January. 
Source: Eurostat  
(24State aid for industry and The indicator measures state aid for industry and services as 
% of GDP. State aid as defined under article 107 TFEU that 
 
EN 217   EN services  has been granted by the Member States and has been the 
subject of a final Commission decision, or has been granted 
on the basis of a block exemption regulation. Accordingly, general measures (e.g. a genera l tax break for expenditure on 
research and development), and public subsidies that have 
no effect on trade and do not di stort or threaten to distort 
competition, are not covered, neither is aid compensating for services of general economic interest.  
Source: European Commission, DG COMP State aid 
scoreboard  
Entrepreneurship and SMEs 
(25Starting a business (days) Time needed to star t a business, recorded in calendar days. It 
is the median duration that inco rporation lawyers indicate as 
necessary. It is assumed that the minimum time required for 
each procedure is one day.  
Source: World Bank Doing Business. 
(26Enterprise survival rate 
after 2 years Number of enterprises started in year t and which still 
existed in year (t+2) , divided by the total number of 
enterprises that started in year t 
Source: Eurostat 
(27Business churn Sum of the number of en terprise starts and exits (“births” 
plus “deaths”) in the reference period (year t), divided by the 
total number of enterprises active in year t. 
Source: Business Demography (Eurostat).  
(28Access to loans: rejected 
applications  Survey response on rejected lo an applications and loan 
offers whose terms and conditions were deemed unacceptable by the enterprise, as  % of all applications for 
bank loans of SMEs that applied in the past six months  
Source: Flash Eurobarometer 
(29Early stage financing  The indicator meas ures early stage fina ncing as % of GDP. 
Venture capital investment data  are broken down into “early 
stage” (seed and start-up) and “expansion and replacement” capital. Seed capital is defi ned as financing provided to 
research, assess and develop an  initial concept before a 
business has reached the start-up phase. Start-up is defined as financing provided for pr oduct development and initial 
marketing, manufacturing and sales.  
Source: Eurostat, using data from the European Private 
Equity and Venture Cap ital Association (EVCA). 
(30Duration of payments by 
public authorities Effective payment duration in days. 
Source: European payment Index by Intrum Justitia. 
(31 Share of high-growth Enterprises with  average annualised growth greater than 
 
EN 218   EN enterprises 20% in the number of employees, over a three-year period, 
and with ten or more employees at the beginning of the observation period, divided by the total number of active 
enterprises at the beginning of the three year period. 
Source : Eurostat 
4.2.3.  MICREF 
Graph VI is based on data from MICREF. MICREF is a data-base the Commission has 
developed to provide a systema tic record of the actual implementation of microeconomic 
reform measures in the EU. MICREF covers mi croeconomic reform measures in the 27 EU 
Member States, implemented between 2004 a nd 2009 (EU-15: 2000-2009). The database also 
provides information on the design and scope of reforms undertaken. The following table 
gives the original data used fo r the construction of Graph VI. 
Year EducationR&D and 
InnovationImproving the 
(small) 
business 
environmentStart-up 
conditionsCompetition 
policySector specific 
regulationMarket 
integration
2000 4% 21% 12% 4% 4% 50% 5%
2001 2% 16% 16% 7% 7% 43% 9%
2002 7% 16% 17% 6% 10% 39% 6%
2003 8% 18% 20% 5% 7% 35% 7%
2004 9% 17% 24% 9% 7% 24% 10%
2005 13% 31% 24% 13% 2% 15% 2%
2006 12% 29% 32% 8% 3% 12% 5%
2007 16% 27% 26% 5% 2% 18% 6%
2008 11% 28% 36% 7% 5% 11% 2%
2009 8% 19% 48% 3% 3% 15% 6%  
4.2.4.  Indicators graphs in the country chapters 
The graphs present, for each indicator, the dist ance of the respective Member State from the 
EU average. This distance is expressed in term s of standard deviati ons, which is a common 
measure of the spread of observations in a distri bution (in this case, a measure of the variation 
of Member State performance ar ound the EU average). This enhances the comparability of 
the presentation of i ndicators with different measuremen t units and distributions across 
Member States. 
The data are presented in the c ountry graphs in such a way th at a bar pointing to the right 
always indicates a positive performance. Likewise , a bar pointing to the left always indicates 
a performance below average. This is straight forward for indicators, e.g. labour productivity, 
where high values are strived for. However, for those indicators where low values are the 
objective, e.g. generation of  waste, the data bars in the gra ph have been converted so that a 
positive deviation from the average (bar pointing to the right) represents a lower  generation of 
waste than the average. These conversions enab le an easy reading of the country profiles, 
since all bars presenting positive values in the country profile suggest a level of performance 
of the respective Member State which is better than the EU average and all bars presenting 
negative values suggest a level of  performance of the respective  Member State which is below 
EU average.  
The indicators for which such conversions have been carried out are: (1) energy intensity in 
industry in kg of oil equivalent per euro of gr oss value-added at constant prices; (2) carbon 
 
EN 219   EN intensity per ton of oil equivalent of energy consumption; (3) waste generated by enterprises; 
(4) state aid for industry and services as % of  GDP; (5) electricity prices for medium size 
enterprises, (6) time required to start a business; (7) rejected loan applic ations, and loan offers 
whose conditions were deemed unacceptable, as % of all loan applications; (8) duration of payments by public authorities. 
The indicators presented in the above table (u nder 1.2) for which the distance from the EU 
average would not be meaningful (exchange rate s and trade balances) ar e quoted in the text. 
The EU averages used to show the respective st andard deviations in the country profiles are 
the values for the EU as a whole and, hen ce, weighted averages of Member States 
performance. For the following nine indicator s, however, unweighted arithmetic averages 
have been used due to missing EU totals: share of science and technology graduates, 
satisfaction with quality of infrastructure, le gal and regulatory framew ork, time required to 
start a business, enterprise su rvival rate, business churn, earl y stage financing, duration of 
payments by public authorities, a nd share of high-growth enterpri ses as % of all enterprises. 
4.2.5.  Methodological remarks to the introductory sections  of the country chapters 
The introductory section of th e country chapters refers inter alia  to three different taxonomies  
to analyse the sectoral structure of an economy: the sectoral structure by (1) skill in tensity, (2) 
technology intensity and (3) growth inte nsity. While the first two concentrate on 
manufacturing only [based on the two digit NACE Rev 1 classificati on (31 manufacturing 
sectors) and the OECD Stan database (22 manufact uring sectors)], the la st one covers all of 
the economy and is based on sections of NA CE Rev 1 classifica tion (29 sectors).  
All three taxonomies use as a starting point the sectoral structure of value added. The text 
concentrates on the specialisation of a given co untry on a specific group of sectors, e.g. the 
share of value added of its high skill sectors re lative to the share of high skill sectors in the 
EU in total. It is, thus, important to note that  an increasing or decreasing specialisation does 
not necessarily imply a major impact on the economy as a whole as some sub-groups are 
rather small, in particular the group of sectors with negative growth in the EU. 
For an in-depth presentati on and more sources, see Eu ropean Commission (2009), EU 
Industrial Structure 2009 – Performanc e and Competitiveness, pp 64-72, at: 
http://ec.europa.eu/enterprise/newsr oom/cf/itemshortdetail.cfm?item_id=3934
. The analysis 
in the country chapters uses  updated data for 1997 and 2007. 
 4.2.5.1.  Taxonomy by labour skill intensity 
This taxonomy classifies sectors in four different groups according to the educational 
attainment of the work force of the sector: 
High skill sectors  had a share of 42.6% in EU value added in 2007, up from 41.2% in 
1997. They comprise: Mineral oil refining ; coke and nuclear fuel; chemicals; 
office machinery; electronic valves a nd tubes; telecommunication equipment; 
radio and television receivers. 
High-intermediate skill sectors  had a share of 15.2% in EU value added in 2007, up 
from 14.9% in 1997. They comprise: Scientif ic instruments; other instruments; 
 
EN 220   EN other transport equipment; building and repa iring of ships and boats; aircraft and 
spacecraft; railroad equipmen t and transport equipment not elsewhere classified.  
Low-intermediate skill sectors  had a share of 26.5% in EU value added in 2007, after 
26.6% in 1997. They comprise: Wood and products of wood and cork; pulp, paper and paper products, printing and publishing;  fabricated metal products; machinery 
and equipment n.e.c.; insulated wire; ot her electrical machin ery and apparatus 
n.e.c. 
Low skill sectors  had a share of 15.7% in EU value added in 2007, down from 17.2% 
in 1997. They comprise: Food, drink and t obacco; textiles, clothing, leather and 
footwear; rubber and plastics; non-metallic  mineral products; basic metals; motor 
vehicles; furniture; miscellaneous manufacturing; recycling. 
4.2.5.2.  Taxonomy by technology intensity 
This taxonomy was developed by the OECD a nd classifies sectors in four different 
groups depending on their R&D intensity: 
High-technology sectors  had a share of 9.5% in EU value added in 2007, up from 
8.5% in 1997. They comprise: Pharmaceuti cals; office, accounting and computing 
machinery; radio, television and comm unication equipment; medical, precision 
and optical instruments; aircraft and spacecraft. 
Medium high-technology sectors  had a share of 35.7% in EU value added in 2007, up 
from 32.2% in 1997. They comprise: Ch emicals excluding pharmaceuticals; 
machinery and equipment n.e.c.; electrical  machinery and apparatus n.e.c.; motor 
vehicles, trailers and semi-trailers; railway and transport equipment n.e.c. 
Medium low-technology sectors  had a share of 29.6% in  EU value added in 2007, 
down from 30.5% in 1997. They comprise: Coke, refined petroleum products and 
nuclear fuel; rubber and pl astic products; other non-me tallic mineral products; 
basic metals; fabricated metal products; bu ilding and repairing of ships and boats. 
Low-technology sectors  had a share of 25.2% in EU value added in 2007, down from 
28.8% in 1997. They comprise: Food produc ts, beverages and tobacco; textiles, 
textile products, leather and footwear; wood and products of wood and cork; pulp, 
paper, paper products, printing and pub lishing; manufacturing n.e.c.; recycling. 
4.2.5.3.  Taxonomy by growth intensity 
This taxonomy classifies sect ors in five differe nt groups depending on their average 
annual growth rate in the EU  from 1995 to 2007. Hence, they  are not referring to the 
growth performance of the sector in ques tion in each Member State which may have 
been higher or lower. Cont rary to the other taxonomies, this grouping also covers 
service sectors. 
High growth sectors  with an average annual EU growth rate from 1995 to 2007 
between 3.4 and 6.5%. They had a share of 38.8% in EU value added in 2007, up 
from 35.3% in 1995, and comprise: Real esta te and business activities; financial 
intermediation; transport and communicatio n; chemicals; electrical and optical 
equipment. 
 
EN 221   EN Medium-high growth sectors  with an average annual EU  growth rate from 1995 to 
2007 between 2.5 and 3.0%. They had a shar e of 18.3% in EU value added in 
2007, down from 19.5% in 1995, and comprise : Machinery n.e.c.; wholesale and 
retail trade; basic metals and metal pr oducts; rubber and plastics; transport 
equipment. 
Medium-low growth sectors  with an average annual EU  growth rate from 1995 to 
2007 between 1.5 and 2.3%. They had a share of 17% in EU value added in 2007, up from 16.7% in 1995, and comprise: Pul p, paper and publishing ; activities of 
households; other manufacturing; non-metallic  mineral products; health and social 
work; other services; hotels and restaurants. 
Low growth sectors  with an average annual EU growth rate from 1995 to 2007 
between 0.4 and 1.4%. They had a share of 24.3% in EU value added in 2007, 
down from 26.2% in 1995, and comprise: Re fined petroleum; el ectricity, gas and 
water supply; agriculture and forestry; public administration; education; food, 
drinks and tobacco; construction; wood and wood products. 
Negative growth sectors  with an average annual EU growth rate from 1995 to 2007 
between -3.9 and -1.2%. They had a shar e of 1.6% in EU value added in 2007, 
down from 2.2% in 1995, and comprise: Mining and quarryin g; leather and 
footwear; fishing; te xtiles and clothing.