Opinion of the Economic and Social Committee on the 'Proposal for a Council Decision on a third multiannual programme for small and medium-sized enterprises (SMEs) in the European Union (1997-2000)` () (96/C 295/02)

On 10 April 1996 the Council decided to consult the Economic and Social Committee, under Article 130 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 19 June 1996. The Rapporteur was Mr Lustenhouwer; the Co-Rapporteur was Mr Malosse.

At its 337th Plenary Session (meeting of 10 July 1996), the Economic and Social Committee adopted the following Opinion by 90 votes to none, with one abstention.

1. Introduction

1.1. The importance of SMEs for employment, growth, innovation and competitive conditions on the European market has gained broad recognition in recent years. Awareness of the intrinsic value of SMEs is also growing as it becomes ever clearer that independent entrepreneurship enriches our societies and can bridge the traditional opposition between labour and capital. This has been made clear in numerous studies, and fortunately the special position of SMEs is also taken into account in many policy areas. Since its first Opinion on SMEs (), the Committee has been advocating the incorporation of an SME dimension into Community policy. This has now to a great extent been achieved. The Commission proposal for specific actions in favour of SMEs is in line with this thinking and is the outcome of numerous policy statements by the Council () and the European Parliament on the need for a complementary SME policy.

1.2. The programme for 1997-2000 comprises measures aimed at: encouraging an environment conducive to the development of SMEs throughout the EU; improving the competitiveness of European SMEs and encouraging their Europeanization and internationalization. The programme concerns all SMEs regardless of their sector or legal form. The Committee stresses that the programme ought therefore also to be open to firms in the form of cooperative associations, etc.

The Commission proposal is limited in the sense that it provides the legal and budgetary basis for specific flanking measures which are not part of other Community policies. The integration of SME policy into other policy areas is part of the Integrated Programme () in favour of SMEs and the craft sector which is shortly to be updated. As the Committee expects to issue a separate Opinion on this subject, this Opinion will confine itself to the proposals as set out in Multiannual Programme.

1.3. In its Opinion of 28 April 1993 the ESC expressed its views on the previous Multiannual Programme which expires at the end of 1996. At the time, the ESC virtually unanimously endorsed the Commission proposals, but expressed concern about the limited scope of the proposals for the craft, commercial and distribution sectors.

In its Opinion of 21/22 October 1992 () the Committee looked in more detail at the specific position of the craft sector. The ESC recently decided to bring this work up to date in the form of an own-initiative Opinion on the craft sector. In order to avoid repetition, the aspects of craft policy peculiar to that sector will be dealt with only in passing is this Opinion.

1.4. Article 3 of the draft Council Decision contains a definition of the subsidiarity principle in the sense that it provides that the Commission shall take measures only in so far as they cannot be better achieved by the Member States. The Committee fully endorses this thinking. However it is particularly important in relation to the measures under discussion, which complement other Community policies, that action be taken at Community level only when it offers added value and complementarity. SMEs, which at present transcend borders only to a limited extent, should be helped to overcome their structural weaknesses in the first instance by local actions. Community actions should be complementary in nature or else fulfil a pilot function from which non-participating firms can benefit. In this connection the Committee reiterates its call for proper dissemination of the results of pilot actions among SMEs.

1.5. At the Cannes Summit in July 1995, the European Council adopted a resolution on the important role of SMEs and craft industries in creating employment.

1.5.1. On 31 January 1996 Commission President, Jacques Santer, announced a European confidence pact for employment to the European Parliament. The pact would have three priorities: SMEs, Trans-European Networks and R& D.

The Multiannual Programme now under consideration is not therefore the only EU policy instrument to promote the establishment and development of SMEs. This policy must be at the heart of the EU's operational and legislative programmes, and in particular the internal market, the structural instruments, the Leonardo and Socrates education and training programmes, R& D and innovation, the financing instruments, particularly the EIB and the development of the information society.

1.6. It is regrettable however that despite good intentions SMEs are not yet accorded the necessary priority in all areas of EU policy. Thus in its decisions and proposals, the Commission has earmarked no additional funds for the Community initiatives (the SME initiative is the only one not to receive additional funding) or for the R& D programmes.

It is therefore important that, in addition to the third multiannual programme, other EU policies take greater account of this priority. The Committee therefore proposes machinery for making this effective: the establishment of a task force for SMEs/innovation in research activities, the implementation of an SME and craft industries programme within Leonardo, the strengthening of the role of DG XXIII in promoting structural activities and the implementation of information society projects.

2. The measures proposed

2.1. Simplification and improvement of the administrative and regulatory business environment This area of the Multiannual Programme falls into four parts.

We are concerned here with questions such as the simplification and improvement of Community legislation and the exchange of best practices. The Committee stresses the importance of these activities and expects to see concrete results in terms of an improved business climate for SMEs in the short term. Measures to simplify laws and regulations at European level should also be stepped up. The Committee in particular emphasizes the importance of an efficient system of cost-benefit analyses. Cost-benefit analyses should be part of the impact reports which it is planned to improve. If the outcome of a cost-benefit analysis is objectively negative, the Committee feels that the necessary political conclusions must be drawn.

The Committee looks forward with interest to the proposals for simplification of the company statute and calls on the Commission to include in these its old proposals on simplification of the 4th and 7th Directives on the submission of annual reports for small EEIGs.

The Committee also hopes that the necessary decisions will soon be taken on statutes for European cooperatives, mutual societies, and other associations in order to provide firms of this type with a suitable legal form for transnational activities.

2.2. Improvement of the financial environment for enterprises In its Opinion of 6 July 1994 (), the ESC looked in detail at the European Commission's Communication on the financing of SMEs. Many of the problems identified at that time still exist and need to be solved more and more urgently. The Committee at the time also pointed to the direct relationship between the fiscal climate and the financing problems facing SMEs. The Committee has also noted with approval the Commission Communication on the development of capital markets for fast-growing small and medium-sized enterprises (EASDAQ) (). As new Commission publications can be expected dealing with the legal and other obstacles to the establishment of EASDAQ, this subject will not be further developed here. The Committee would merely stress the great importance it attaches to the Commission's activities in this area and endorses the proposal to establish a new guarantee instrument (ELISE) () to help employment - creating SMEs to obtain loans.

2.3. Helping SMEs to Europeanize and internationalize their strategies, in particular through better information services 2.3.1. The actions under this chapter absorb a major part of the available budget. Thus a good ECU 50 million have been earmarked for the Euro Info Centres (EICs) and a good ECU 34 million for partnership programmes.

The Committee endorses the principle of concentrating the third programme's resources on a limited number of priorities and on actions which have already proved their worth.

2.3.2. The Commission proposes to emphasize the role of the EICs as first stop shops in order to channel SMEs more effectively towards specialist advice. The Committee endorses this initiative insofar as it will make some EICs more proactive in their approach to SMEs, encouraging local SMEs to take on a European dimension. This presupposes that the number of EICs is not curtailed, enabling them to remain close to their customers.

Networks should be generally established around EICs, offering specialized advice and local sub-centres.

2.3.3. The Committee is aware of the need to make the EIC network more professional and to improve the quality of services. It does not however at this stage see any need for a new selection. The Committee feels that it would be better to carry out a case-by-case evaluation in partnership with national and regional authorities, and particularly the EICs' host organizations which at present shoulder almost all the EICs' operating costs.

2.3.4. The growing success of the various partnership actions testifies to the correctness of the method introduced with Europartenariat. These actions (e.g. the Interprise programme) have given a new impetus to economic cooperation initiatives within and outside the EU. The Committee stresses the value of developing such arrangements with Eastern Europe and the Mediterranean countries via a partnership with EU business organizations, rather than through external consultants.

2.3.5. As the BC-NET and BRE systems have not yet yielded the expected results, the Committee asks the Commission to consider incorporating these networks into a wider framework of initiatives, led by business organizations, in connection with new information society products (electronic trade, business networks, inter-firm partnership networks, exchange of business files).

In view of the importance of partnership between SMEs as a development instrument, the Committee asks the Commission to consider establishing a financial instrument for intervention after the initial contact, supported by current programmes, based on the model of the ECIP and JOPP instruments which exist for non-EU countries.

2.4. Enhancing SME competitiveness and improving their access to research, innovation and training 2.4.1. As Community policies for the promotion of R& D already include specific actions for SMEs, the present proposals are restricted to pilot actions in areas not yet covered by other Community programmes. The content of the actions is not sufficiently clear however, nor whether they meet a need which cannot be met by other means. Thus the Committee thinks that it would be better to develop actions to support entrepreneurs involved in innovative processes than to aim these actions at intermediaries (advisors), but at the same time it attaches great importance to training for SMEs and craft industries in standardization and certification. The funds available under this programme could probably be substantially increased if they were reorganized and integrated with the planned expenditure under NORMAPME which provides support for SMEs in implementing European standards. In its 1993 Opinion on the Multiannual Programme then in force the Committee urged involvement of SMEs in the development of European standards. The Committee is pleased that the Commission and the Council have heeded this call () and that they now support European SMEs in this work. Pursuit of these activities in the years to come is therefore fully justified.

2.4.2. The Committee once again stresses that the trade and distribution sectors should be involved in drawing up innovation actions, under both the Green Paper and the multiannual programme. Where innovation is concerned, the focus is too often exclusively on production, with developments in processes and logistics being left aside for simplicity's sake.

2.5. Promoting entrepreneurship and supporting special target groups 2.5.1. The Committee agrees with the Commission that entrepreneurship must be stimulated at all levels and a culture promoted in which people are more willing to take on entrepreneurial risks. It is therefore a good thing that activities have been undertaken with great success in a number of Member States to encourage (often young) people to start up and develop their own businesses. A good example of this is Italian Law No 44, which could serve as a model (best practice) for other Member States. This is undoubtedly a job for the Community, as well as for the Member States. This subject could be tackled in the framework of European SME Week, thus providing a stimulus to entrepreneurship in the broadest sense. Special attention could also be paid to management buy-outs (MBOs).

2.5.2. This chapter of the Multiannual Programme also covers actions for the craft sector, commerce, the distributive trades and specific target groups such as women and young entrepreneurs.

The Committee is pleased that the financial resources made available for these target groups are significantly larger than in previous years. The Committee is currently working on an Own-initiative Opinion on the craft sector. The Committee would like to point out here however that it welcomes the greater emphasis being laid on the craft sector. The conclusions of the European craft sector conference held in Berlin in 1995 need to be translated into concrete actions, where this has not already occurred. DG XXIII's new craft sector department will need to concern itself with this on an ongoing basis.

2.5.3. This Committee has also issued a number of Own-initiative Opinions on the retail trade and intends to return to the subject shortly, as the Commission is about to publish a Green Paper on commerce and distribution.

Community policy should pay greater attention to the distribution sector in view of its role in the relationship between firm and consumer. Thought should be given in this connection to the many questions raised by introduction of the euro.

2.6. SME policy development and knowledge of SMEs 2.6.1. This part of the Multiannual Programme accounts for a substantial part of the total budget, i.e. approximately ECU 23 million. The Committee acknowledges the great importance of these actions. The compilation of statistics on the development of the SMEs and their various sectors is essential for the development of policy. In past years the Committee has expressed its regard for the work of the European Observatory for SMEs () and expects its recommendations for qualitative improvement and dissemination of its work to be taken into account. Qualitative improvement could be achieved, inter alia, by making still greater use of studies of small firms carried out by other organizations. The Committee considers the incorporation of the main data and conclusions into a database accessible to all, albeit not via the Internet, to be an interesting idea which merits further development.

2.6.2. This part of the budget also covers other publications on enterprise policy. In the information society the Committee considers it desirable and essential that the results of SME policy be fully exploited. Only in this way can actions which are often limited in scope achieve a broader impact and perform their exemplary function. This could be one of the EICs' tasks.

3. Financial resources

3.1. The proposed budget for the implementation of the above actions totals ECU 180 million for the period 1997-2000. The budget of the current Multiannual Programme amounted to ECU 112 million. In its proposals the Commission calls for a budget of at least ECU 140 million for the coming four years and an additional ECU 40 million to be allocated later in connection with the 1997 review of the financial perspectives.

Given the need for the additional activities proposed by the Commission, the Committee considers the budget of ECU 180 million for the next four years to be the absolute minimum. This is all the more true as the programme is also open to the associated countries of Central and Eastern Europe, Cyprus and Malta. The Committee wonders whether it would not be better to finance the cost of this expansion of the programme from the funds earmarked for activities in favour of these countries. A smaller budget would severely undermine the credibility of politicians' assurances of the importance they claim to attach to a healthy small business sector and to its role in creating jobs and growth.

4. Conclusion

Action programmes of the kind currently proposed need to be revised from time to time in the light of recent developments. Taking account of market needs and effects on the labour market should receive high priority. The Committee feels that this will require intensive, regular contacts between the Commission and SME entrepreneurs' and workers' organizations. For this reason and in view of the impact on the labour market already referred to, the Committee, aware that this is strictly speaking outside the scope of the multiannual programme for SMEs, reiterates its call for expansion of the social dialogue to all social groups in order to give them an opportunity to conduct negotiations (). The Committee still believes that the representatives of the main economic and social sectors (among which the Committee would obviously include SMEs) should be involved in this within a suitable framework. Independently of this, the Committee points out that good consultation between the Commission and the organizations involved can ensure that actions actually reach entrepreneurs and generate feedback to enable activities to be adjusted. Such consultations can also ensure optimum allocation of the limited resources available. The Committee warns that the current proposals are liable to disperse funds over too many activities. The Committee endorses the internal reorganization of DGXXIII to reflect the future activities proposed.

The Committee has already stressed the importance it attaches to the integration of SME policy into all other aspects of Community policy and it therefore wholeheartedly welcomes the establishment of a special coordination unit for this purpose.

Done at Brussels, 10 July 1996.

The President of the Economic and Social Committee Carlos FERRER

() OJ No C 156, 31. 5. 1996, p. 5.

() Study on the situation of SMEs in the European Community, 26/27. 6. 1974, CES 714/74.

() Most recently: Madrid European Council, Conclusions of the Presidency, 16. 12. 1995, p. 14.

() COM(94) 207 final of 3. 6. 1994.

() ESC Opinion on SMEs and craft industries, 21/22. 10. 1992, OJ No C 332, 16. 12. 1992.

() ESC Opinion on the communication from the Commission on the financial problems experienced by SMEs, OJ No C 388, 31. 12. 1994.

() EASDAQ = European Association of Securities Dealers Automatic Quotation.

() ELISE = European Loan Insurance Scheme for Employment.

() Resolution of the Industry Council of 28. 3. 1996, point V(4).

() Most recently: Opinion on the third Annual Report of the European Observatory for SMEs, 20/21. 12. 1995, OJ No C 82, 19. 3. 1996.

() ESC Opinion on basic Community social rights, OJ No C 126, 23. 5. 1989.