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it a COMMISSION OF THE EUROPEAN COMVIUNITIES 
C0M(94) 82 final 
Brussels, 16.03.1994 
Comunity initiative on the modernisation of the textile 
and clothing industry of Portugal 
Explanatory memorandum 
Community initiative on the modernization of the textile 
and clothing industry of Portugal 
1. Throughout the GATT negotiations the Portuguese authorities 
stressed that its textile and clothing industry, which represents 
one third of Portuguese employment and industrial exports, was less 
able than industry in the rest of the Community to face the 
increasing international competition which will result from the 
gradual abolition of import restrictions. When agreement was 
reached on the results of the GATT negotiations, the Commission and 
the Council recognized the specific and vital nature of the textile 
and clothing sector for Portugal and agreed on the following text: 
"To help Portugal resolve the core problem of the future of its 
textile industry, having regard to the specific nature of its 
economic structures, the Council noted, and endorsed, the 
Commission's intention of drawing ECU 400 million from the 
resources set aside for the Community initiative programmes. This 
exceptional allocation will serve to modernize Portugal's textile 
sector, supplementing the programme submitted by Portugal under the 
Community support framework for Objective 1; it will also be 
additional to the Retex initiative operative until 1997. 
Moreover, as part of the same modernization drive, Portuguese 
textile and clothing undertakings will, alongside other 
undertakings, have access to European Investment Bank loans. To 
facilitate this type of financing, Portuguese undertakings will 
qualify for interest subsidies to be financed, up to 
ECU 100 million over the six years covered by the period 1994-1999, 
from the exceptional ECU 400 million allocation". 
2. This initiative, although it concerns only one Member State, is in 
accordance with Article 3 of the ERDF Regulation, which provides 
that, among the tasks assigned to the Funds, the purpose of 
Commission initiative is "to help resolve serious problems directly 
associated with the implementation of other Community policies and 
affecting the socio-economic situation of one or more regions". 
3. A major part of the textile and clothing industry is highly 
susceptible to the on-going or expected growth in international 
competition. At a technological level, this susceptibility is 
leading to a very low rate of investment, which is less than half 
the Community average for the same sectors. At a commercial level, 
it is linked to an excessive concentration of production in work 
done to order for customers located outside. 
Being heavily concentrated in the north and centre of Portugal, 
where in some regions it accounts for more than 50% of industrial 
employment, the textile and clothing industry must undergo a 
process of sustained restructuring. 
There is a risk that this process will involve significant job 
losses, as was the case in most of the other countries in the 
European Union in the seventies and eighties. 
4. By contributing towards the modernization of the textile and 
clothing industry in Portugal, this initiative will help the 
regions in that country which are heavily dependent on the sector 
to overcome a difficult stage in adapting their entire industrial 
base which, due to a lack of alternatives and a favourable 
environment, have so far been unable to sufficiently diversify 
their economic activities or modernize their industry. 
5. In addition to this initiative, these regions are benefiting from 
the Retex initiative, which should make it possible for them to 
speed up the diversification of their industrial base. 
Furthermore, the textile initiative complements the measures 
provided for in the Portuguese CSF, which covers all Portuguese 
industry, by means of measures specifically intended for the 
textile and clothing sector to enable it to meet the challenges it 
faces. 
This major challenge to adapt makes a cultural change in the 
internal organization of undertakings necessary, and a change in 
cooperation between them and external bodies. Therefore these 
undertakings should be given assistance to modernize, on a sound 
basis, by taking account of developments in organizational methods, 
technologies and the international market. 
To this end the emphasis will be on improving know-how in 
undertakings, an exchange of experience, and cooperation between 
businesspeople, with the aid of teams of experts and promotion 
agents. 
In order to strengthen undertakings in the technological field, and 
raise the level of Portuguese industrial productivity to the 
Community average, adaptation under this initiative may also cover 
the modernization of production equipment. 
6. In order to prevent aid for the modernization of the Portuguese 
textile and clothing industry from leading to an unacceptable 
distortion of competition conditions on the Community market, the 
Commission proposes, in its general guidelines relating to this 
initiative, to make the grant of Community aid conditional on the 
following: 
- projects to be financed under this initiative must be part of 
the existing horizontal aid schemes in Portugal. Therefore, no 
specific aid scheme will be introduced for the textile and 
clothing sector. 
furthermore, the financing of investments in production 
equipment under this initiative will be limited to improving 
business access to risk capital, interest subsidies and/or 
guarantees. 
the projects must form part of a strategy of adjustment in the 
textile and clothing industry agreed between the Commission and 
the Portuguese authorities. The latter will ensure that, for 
Portugal as a whole, modernization does not lead to an increase 
in production capacities in terms of volume. 
Implementation of the measures financed under this initiative must 
be checked periodically for consistency with the above conditions, 
by the appropriate monitoring committee on the basis of progress 
reports and an independent assessment of the programme. 
Draft notice to the Member States, laying down 
guidelines for the initiative concerning 
the modernization of the 
Portuguese textile and clothing industry 
1. At its meeting on , the Commission of the European 
Communities decided to establish a Community initiative forming 
part of a general regional development framework and concerning the 
modernization of the Portuguese textile and clothing industry, 
within the meaning of Article 11 of Council Regulation (EEC) 
No 4253/88, as amended by Regulation (EEC) No 2082/93(1), and 
Article 3 of Regulation (EEC) No 4254/88, as amended by Council 
Regulation (EEC) No 2083/93<2). 
1. OBJECTIVES 
2. The reason for the initiative is to promote the modernization of 
textile and clothing undertakings in Portugal to facilitate their 
adaptation to increasing international competition. 
The grant of Community aid under this initiative is subject to 
approval by the Commission of a strategy of adaptation for the 
textile and clothing industry for the period 1994-99 to be 
submitted by the Portuguese authorities. The strategy will also 
define rules governing aid for undertakings, in particular as 
regards compliance with the requirement that there is to be no 
overall increase in Portuguese production capacity in the textile 
and clothing industry in terms of volume. 
II. ELIGIBLE MEASURES 
3. The measures cover undertakings in the textile and clothing sector 
at present situated on Portuguese territory. The programme 
submitted by the Portuguese authorities should comprise a balanced 
set of measures consistent with the general framework of regional 
development in Portugal and the overall strategy for the adaptation 
of the textile and clothing sector, centring on the preparation and 
implementation of individual modernization plans for the 
undertakings in the sector, the development of cooperation between 
undertakings, and an improvement in their environment in terms of 
services. 
(1) OJNoL 193, 31.7.1993, p. 24, 
(2) OJ No L 193, 31.7.1993, p. 36. 
Eligible measures may cover: 
(a) Aid for the financing of external expert reports intended to assist 
undertakings in preparing their modernization plans and improving 
their know-how, for example in the fields of design, quality 
policy, computer-assisted design and production, marketing, 
internal business organization and employee health and safety; 
(b) Vocational training measures linked to the preparation and 
implementation of modernization plans and retraining for personnel 
threatened by unemployment or already unemployed; 
(c) In the case of SMEs which already have a modernization plan drawn 
up with the aid of external experts, a temporary contribution 
towards the financing of the salaries of engineers, technicians or 
management personnel employed to assist in the implementation of 
those plans; 
(d) The financing of business modernization plans to cover non-material 
investments, improvements in know-how or material investments, 
including equipment intended directly for production. 
Investments in production equipment will be promoted only by means 
of providing access for undertakings to risk capital, by means of 
loans from the EIB or other financial bodies with interest 
subsidies and by means of guarantee funds; 
(e) The setting up of promotion and advisory teams for the textile and 
clothing sector responsible for making businesses more aware of the 
need to improve their know-how, and helping them to develop 
cooperation amongst themselves and with their suppliers and 
clients. 
(f) Aid for the adaptation of textile and clothing undertakings, in 
particular to Community environmental requirements, intended to 
reduce pollution by textile and clothing undertakings by 
facilitating the treatment and recycling of liquid effluents and 
industrial waste, and by providing technical assistance for the 
development of less polluting production or maintenance processes. 
III. CONDITIONS FOR GRANTING COMMUNITY ASSISTANCE 
4. When each decision on the financing of business modernization plans 
is taken, the Portuguese authorities, who are responsible for 
laying down rules governing the aid, must verify that the plans are 
consistent with the overall adaptation strategy agreed with the 
Commission. They must make the grant of aid conditional upon 
subsequent compliance with the agreed plan. 
The necessary provisions governing the examination of aid 
applications, monitoring the implementation of the adaptation plans 
and the penalties to be applied in the event of failure to comply 
with the conditions for aid, shall be determined by joint agreement 
between the Portuguese authorities and the Commission of the 
European Communities. 
Investment projects financed under this initiative are part of the 
framework of existing horizontal aid schemes in Portugal. Thus, the 
projects must meet the eligibility criteria laid down for those 
schemes. Therefore, no specific aid scheme will be established for 
the textile and clothing sector. 
Undertakings receiving aid will have to prove that they comply with 
national legislation on working conditions. 
IV. THE COMMUNITY'S CONTRIBUTION TO THE FINANCING OF THE INITIATIVE 
5. The Portuguese textile operational programme is to be joint-
financed by the Member State and the Community. The total 
Structural Fund contribution to this initiative for the period 
1994-99 is ECU 400 million. There may also be loans from the 
European Investment Bank. In order to facilitate this type of 
financing, Portuguese undertakings will qualify for interest 
subsidies to be financed, up to ECU 100 million, from the 
exceptional allocation provided for this initiative. 
V. IMPLEMENTATION 
6. Portugal must submit a detailed proposal for the operational 
programme within four months of publication of this Notice in the 
Official Journal. 
Every six months the Commission and the Portuguese authorities will 
check for compliance with the overall strategy agreed with the 
Commission, within the appropriate monitoring committee, on the 
basis of reports on the progress of programme implementation and, 
where appropriate, independent assessments. 
7. All correspondence relating to this Notice should be addressed to: 
Mr E. Landaburu 
Director-General 
Directorate-General for Regional Policies, 
Commission of the European Communities, 
200 Rue de la Loi, 
B-1049 Brussels. 
ISSN 0254-1475 
COM(94) 82 final 
DOCUMENTS 
EN 10 
Catalogue number : CB-CO-94-092-EN-C 
ISBN 92-77-66448-7 
Office for Official Publications of the European Communities 
LP2985 Luxembourg 
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