Opinion of the Committee of the Regions on:

- the "Report of the Business Environment 'Simplification Task Force (BEST)'", and

- the "Commission Communication 'Promoting Entrepreneurship and Competitiveness' - The Commission's Response to the BEST Task Force Report"

(1999/C 293/09)

THE COMMITTEE OF THE REGIONS,

having regard to the Report of the Business Environment Simplification Task Force from 30 April 1999 and the Commission's communication "Promoting entrepreneurship and Competitiveness - The Commission's Response to the BEST Task Force Report and its Recommendations" [COM(1998) 550 final];

having regard to the decision of its Bureau of 15 July 1998, under the fourth paragraph of Article 198c of the Treaty establishing the European Community, to draw up an opinion on the subject and to direct Commission 6 - Employment, Economic Policy, Single Market, Industry, SMEs,- to undertake the preparatory work;

having regard to the draft opinion (CdR 387/98 rev. 1) adopted by Commission 6 on 30 November 1998 (rapporteur: Mr Unterrieder);

whereas various recommendations by the BEST Task Force can best be implemented at local or regional level;

whereas the Committee of the Regions has several times drawn attention to the role played by the local and regional authorities in promoting entrepreneurship and small businesses, for example in the following opinions: the proposal for a Council Decision on a Third Multiannual Programme for small and medium-sized enterprises (SMEs) in the European Union (1997-2000) (CdR 211/96 fin)(1); the Commission Communication on Community structural assistance and employment (CdR 306/96 fin)(2); the Green Paper on Innovation (CdR 112/96)(3); and the Communication from the European Commission on the first action plan for innovation in Europe (CdR 68/97 fin)(4); the Proposal for a Council Decision on measures of financial assistance for innovative and job-creating small and medium-sized enterprises (SMEs) - the growth and employment initiative (CdR 46/98 fin)(5) and the role of local and regional authorities in linking education and training establishments to enterprises (CdR 346/96 fin)(6),

unanimously adopted the following opinion at its 29th plenary session of 2 and 3 June 1999 (meeting of 3 June).

1. Preliminary comments on the BEST Task Force report and the Commission Communication

1.1. The Committee of the Regions (COR) welcomes the action taken by the European Council to make the environment for small and medium-sized enterprises (SMEs) as conducive as possible to entrepreneurship. After all, the 18.5 million SMEs in the EU, which account for 60 % of total turnover and 66 % of employment, play a crucial role in enhancing Europe's competitiveness and economic growth.

1.2. The COR would also point out that local and regional authorities have an important role to play in the simplification of the business environment, as SMEs operate primarily at their level. However, it is also very important to simplify administrative procedures at European and national level.

1.3. The report by the BEST Task Force, which was set up by the Commission for this purpose, covered a broad range of topics divided into four key areas:

1. Employment and taking on employees

2. Access to finance

3. Training, education and research, and

4. Business environment and administrative simplification.

1.4. The aim of the report is to present proposals to the Commission and the Member States for concrete measures to improve the quality of legislation and eliminate the unnecessary burdens which restrain the development of corporate Europe.

1.5. In response to the BEST Report, the European Commission adopted on 30 September 1998 a Communication on Promoting Entrepreneurship and Competitiveness - the Commission's Response to the BEST Task Force Report and its Recommendations(7). This Communication includes concrete action plans for the following areas:

- New approaches in education, training and the workplace environment

- Access to finance and helping innovation

- Better public administration.

1.6. The COR welcomes the BEST Report and hopes that the future blueprints for action will help to improve conditions for business.

1.7. In the face of increasing globalization, SMEs are forced to operate in an ever wider economic area. The aim of a business-friendly environment must therefore be to improve the flow of information to SMEs which in very many cases do not have the time or staff resources to acquire the information they need to remain competitive. It is thus also important in this respect to provide support at regional level for cross-border trade, joint ventures and exports.

1.8. The flexibility of business people and their staff, which is demonstrated in acceptance of the principle of life-long learning, is nevertheless insufficient to make SMEs competitive. The European institutions and the Member States, particularly the regions and localities, must also consider new forms of cooperation between public institutions and the private sector (Public Private Partnership). They must be receptive to business at all levels of administration and take account of its interests.

1.9. The COR believes that one of the most important and beneficial ways of helping SMEs is to remove red tape and reduce external costs on them (taxes, duties, bureaucratic charges etc.). This should be kept in mind when considering this opinion.

2. Specific comments on the BEST Task Force Report and the Commission Communication

2.1. The two papers contain many good proposals for improving the business environment for SMEs. The COR will be following these with great interest as SMEs come into contact primarily with local and regional authorities.

Employment

2.2. Given that 66 % of jobs are created by SMEs, it would seem to be a good idea to give their European associations the opportunity to have a direct input into the social dialogue. Their practical and regional expertise would help to prevent implementation problems at regional level. At the same time, modern, participation-based management methods can be applied to a greater extent in the SME sector. A study by the European Foundation for the Improvement of Living and Working Conditions has shown that direct communication between employers and workers produces the best results in social and business terms when combined with collective representation of interests in individual establishments. In this way EU-level social dialogue is supplemented and implemented at establishment level in a meaningful way.

2.3. Any SME-friendly policy must be founded on the maintenance and improvement of the high European quality standard with high productivity, with due regard for the principles of human rights which have evolved over time. This means that there can be no move towards lowering minimum quality standards in the working environment (environment, consumers, employers) set at European level, or towards trying to compete with low-wage countries. The COR believes that the administrative and legislative conditions needed to create a favourable environment for entrepreneurs and workers are best shaped at the local level. Local authorities and institutions should make it easier for entrepreneurs to maintain and improve on the minimum standards already achieved.

2.4. Against this background, the COR welcomes the fact that the Commission recommends extending the collective representation of workers within business establishments for the design, development and introduction of improvements of all types affecting this level, but without diluting existing mechanisms for consultation and bargaining between the representatives of employers and workers, i.e. not allowing any undermining of collective agreements.

2.5. In many cases, the Commission's proposals for improving the lot of SMEs pay too little attention to the repercussions for workers, consumers and the environment. Most existing protection provisions, which prima facie incur costs, bring savings for businesses and the economy as a whole in the longer term through indirect returns.

2.6. For example, high standards of worker protection result in improved working conditions, which translate into fewer accidents at work, less work-related sickness and an improvement in the de facto pensionable age. These business and economic advantages also benefit SMEs. The COR feels that this aspect is not taken into account enough by the Commission. As an example, health and safety inspectors should be as "user-friendly" as their remit allows. Effective checks are only possible if contraventions of worker protection regulations can be penalized.

2.7. Contented workers make a major contribution to increased productivity. A common minimum standard should therefore be maintained in Europe in such areas as working hours(8), workers' health and safety(9), posting of workers(10). The appropriate framework for this would be the collective agreements. When it is necessary to make collective agreements more flexible to take account of regional circumstances with a view to creating more jobs, divergences at company level must not fall below the common minimum standard. Account should also be taken of the cost implications for SMEs when collective agreements are concluded.

2.8. With regard to the question of basic provision ("people's pension"), the COR is in favour of such provision; private insurance should be supplementary. However, in the interests of stability and security, pension funds should only be allowed to invest in venture capital where appropriate guidelines are in place.

Access to finance

2.9. The transition from wage-earner to self-employment can be facilitated by changing the way state grants are deployed. For example, allowing people to continue to claim unemployment benefit for a certain period while they are starting self-employment would increase willingness to take the risk of becoming self-employed. Particular attention should be paid to promoting entrepreneurship among women.

2.10. To make it easier for SMEs to raise money and to have access to start-up capital, enterprise boards should be set up at regional level to act as clearing points between public funding agencies, banks and entrepreneurs with the capacity to grant or refuse finance quickly. In addition, enterprise boards should help individual entrepreneurs by bringing them together with third persons who are interested in a shareholding or stake in the business in return for financial investment. An example of a pilot project of this kind is "The Fund of North Sweden" which sets up local stock markets to help businesses in the region to make venture capital available through public subscription and private placement.

2.11. The COR shares the Commission's view that a significant contribution is being made to improving conditions by expanding the network of European Business Angels, promoting the provision of risk capital and dismantling cultural, tax and regulatory obstacles. In particular, incentives should be provided for so that existing European stock markets step up the provision of risk capital to SMEs. In this connection, the European Commission is called upon to submit proposals on how to facilitate access to these stock markets for SMEs from all European regions.

2.12. The COR would point out in particular that SMEs are in most cases labour-intensive operations. It is therefore important when examining this question to look into options to ease labour costs and provide further forms of relief.

2.13. The BEST Report does not mention how the plethora of proposed tax cuts and increased support are to be implemented in financial terms, with the coming of monetary union and the need to meet the Maastricht criteria. This question is particularly relevant given the ever decreasing proportion of tax revenue from businesses. Since 1990 tax on capital has fallen from 37 % to around 33 %, while tax on labour has increased from 37 % to around 40 %.

Training, education and research

2.14. One of the most important aspects of the push to improve the business environment is fostering an entrepreneurial spirit, which means boosting the motivation and skills required to make the move to self-employment.

2.15. The COR also supports improvements in the mutual recognition of vocational qualifications by schools and universities, and steps to promote the recognition of training credits standardized at European level, thereby enhancing the mobility of workers and promoting the upskilling of workers and employers in the various Member States (lifelong learning).

2.16. Training in business skills must be integrated into the education system at an early stage. For example, secondary schools in Denmark run projects whereby pupils and teachers learn how to run a business over a certain period of time. Experience shows that being brought round at an early age to the view that anyone can run a business and promoting and stimulating an entrepreneurial spirit within the teaching community (teaching staff, auxiliary services ...) both in technical colleges and university faculties (engineering, sciences ...) and in secondary schools are very effective ways of promoting the entrepreneurial spirit.

2.17. There must be good cooperation between schools and businesses to ensure that practical experience is passed on more effectively within the education system. Local districts and regions have a key role to play in promoting such cooperation and creating new forms of collaboration. To achieve this it is necessary to coordinate the initiatives launched by different institutions involved in the training of potential entrepreneurs (state, regions, universities, local authorities, employers' associations ...).

2.18. In this context the COR would emphasize the importance of promoting innovation. Its opinion on the First Action Plan on Innovation(11) has already expressed the view that regional measures should be put in place Europe-wide to keep a record of technological developments so as to make it easier for national authorities, businesses and research centres to keep abreast of, and participate in, the tide of innovation in Europe.

2.19. Particularly welcome is the proposed introduction of diplomas for life partners working in an enterprise. A number of Member States have already included previous practical experience in their vocational training certification and developments to recognize the importance of this experience within broader training qualifications is to be welcomed.

2.20. SMEs make a considerable contribution to innovation in the European Community. Because of the costly and time-consuming procedure involved in obtaining a patent, this important legal instrument is much underused by SMEs. The evaluation must therefore address the question of how the existing system, or the harmonized Community patent proposed in the Commission Green Paper(12) can be set up on a low-cost basis without this being achieved by passing costs on to other enterprises. Consideration should be given to creating a fund or insurance policy to cover part or all of the translation costs incurred by SMEs.

2.21. The fact is that the EU's R& D programmes must be geared much more towards the needs of SMEs. This means that a proportion of expert posts in the consultation and assessment processes and project audits should be reserved for representatives of SME employers and workers.

2.22. SMEs are particularly disadvantaged by the fact that recognized European conformity assessments are often not accepted in practice at national level. This represents a major obstacle to trade despite legal harmonization. Tighter monitoring of laws applicable to SMEs is therefore essential.

Administrative simplification

2.23. The COR welcomes the proposals for simplifying administrative procedures. Dealings with public authorities are seen as a considerable burden by many companies.

2.24. The COR shares the Commission's view that, faced with the globalization of the economy and the competitive pressure it brings, it is important to make public authorities as transparent, service-oriented and cooperative as possible. For example, Danish municipalities achieved successes in the field of environmental monitoring by maintaining a dialogue with businesses in order to nip problems in the bud.

2.25. Another very welcome development is the setting up as part of the European, national and regional legal process of central bodies to assess the cost and impact on SMEs of proposed laws. Nevertheless, the COR feels it is essential that consultation should include not only representatives of SMEs, but also other stakeholders, such as consumers and workers.

2.26. It is the task of regional and local authorities to create a good administrative environment, for SMEs in particular, with user-friendly structures at local level. Territorial authorities are best placed to adjust so as to provide SMEs with adequate services. In addition, through cooperation with other authorities, especially as part of cross-border and inter-regional partnerships, they can improve the range of services they offer. Horizontal support at European level should be used to enable the regions and localities to compare examples of best practice. On this point, the COR would emphasize the importance of support from the European institutions, especially the Commission for initiatives to standardize and simplify the procedures necessary for restructuring and setting up new businesses.

2.27. "One-stop-shops" i.e. single locations for registration purposes with one person responsible and one procedure, are to be welcomed and should be used at all levels of administration.

2.28. In order to facilitate the passing on of businesses to the next generation, the company should be seen as a living organism and the transaction should not be taxed as if it were a straight asset transfer. Consultancies should also be set up to bring together those wishing to take on a business and those who have no one to whom they can hand over their business.

2.29. The COR welcomes an extensive harmonization of administrative procedures at the various levels so as to minimize red tape. This is especially relevant in the case of selection and clearing procedures for Community programmes. Information technologies could prove to be highly beneficial for simplifying red tape and seeking to ensure that the information provided by the administration better corresponds to requests made by businesses.

3. Conclusions

3.1. The COR remains critical on the following points:

3.1.1. The European institutions and the Member States should explore new forms of public/private cooperation, especially at regional and local level.

3.1.2. Since most SMEs are labour intensive, it is essential to examine the scope for cutting labour costs especially via tax reliefs and incentives.

3.1.3. In the light of monetary union and the Maastricht criteria, the European Commission should submit proposals on how the plethora of proposed tax cuts and increased support are to be paid for.

3.1.4. Not enough consideration has been given to the fact that high standards of worker protection result in improved working conditions, which translate into fewer accidents at work, less work-related sickness and better health at retirement. These business and economic advantages also benefit SMEs.

3.1.5. In the interests of stability and security, the COR proposes that pension funds should only be allowed to invest in venture capital where appropriate guidelines are in place.

3.1.6. The COR supports the proposal to set up an Enterprise Panel, but would like to see employers' and workers' associations involved. The COR would also propose that they should be authorized to appoint a certain proportion of experts for the consultation and assessment processes and project audits.

3.2. The COR welcomes the following proposals:

3.2.1. Encouraging the passing on of practical experience through collaboration between schools and businesses.

3.2.2. The introduction of diplomas for life-partners working in an enterprise, thereby ensuring that practical experience is recognized as a qualification.

3.2.3. The setting up of "one stop shops", i.e. a single location for registration purposes and a single registration document for start-ups.

3.2.4. The creation of central bodies - as part of the European, national and regional legal process - to assess the cost and impact on SMEs of proposed laws.

3.2.5. Greater collective representation of workers' interests at plant level.

3.3. Lastly, the COR would make the following recommendations:

3.3.1. Support measures for SMEs should at least be geared to the number of jobs created, giving priority to measures to promote local enterprise initiatives especially by young people.

3.3.2. In order to encourage wage-earners to take the risk of becoming self-employed, member governments and regions should look into the possibility of allowing them to claim unemployment benefit for a certain period while setting themselves up in self-employment.

3.3.3. Support should be provided for SMEs that are willing to take part in the sandwich training, i.e. in-company inculcation of practical skills.

3.3.4. The COR suggests introducing a 'Europass' to enable trainees to take part in cross-border training in different countries. A harmonized recognition procedure would ensure that the various different national training modules would be recognized in all Member States. A standard form has already been drawn up.

3.3.5. The COR calls on the Commission to expand the network of European regional advice centres for SMEs, especially those giving advice on R& D programmes, and to fund it more generously. An example of these centres are the National Relais Centers. Action here would ensure a vigorous information and advice strategy which would also address those businesses that have not so far made use of such centres.

3.3.6. Business start-up grants should foster adequate capital and skills for businesses. Notably, Member States should encourage the establishment of new businesses by developing fresh business ideas. To this end, seminars fostering entrepreneurship should be promoted.

Brussels, 3 June 1999.

The President

of the Committee of the Regions

Manfred DAMMEYER

(1) OJ C 34, 3.2.1997, p. 34.

(2) OJ C 42, 10.2.1997, p. 15.

(3) OJ C 182, 24.6.1996, p. 1.

(4) OJ C 244, 11.8.1997, p. 9.

(5) OJ C 251, 10.8.1998, p. 41.

(6) OJ C 116, 14.4.1997, p. 98.

(7) COM(1998) 550 final.

(8) Directive 93/104/EC of 23.11.1993 - OJ L 307, 13.12.1993, p. 18.

(9) Directive 96/71/EC of 16.12.1996 - OJ L 183, 29.6.1989, p. 1.

(10) Directive 89/391/EEC of 12.6.1989 - OJ L 18, 21.1.1997, p. 1.

(11) CdR 68/97 fin - OJ C 244, 11.8.1997, p. 9.

(12) COM(97) 314 final of 24.6.1997.