Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Decision 2000/819/EC on a multiannual programme for enterprise and entrepreneurship, and in particular for small and medium-sized enterprises (SMEs) (2001-2005)

EXPLANATORY MEMORANDUM

1. Introduction

The evaluation report on the Growth and Employment Initiative (1998-2000) has been prepared in accordance with Article 7(2) of the Council Decision 98/347/EC adopted on 19 May 1998. This Decision requires the Commission to provide an evaluation of the programme, notably as regards its overall utilisation, its immediate effects on the creation of employment and the prospects for the creation of employment in the long term by SMEs.

On 20 December 2000, by Decision 2000/819/EC, the Council decided to extend the financial instruments of the Growth and Employment Initiative (the SME Guarantee Facility, the ETF Start-up Facility and the Joint European Venture (JEV) programme) under this new legal basis. A new instrument, the Seed Capital Action, was also added. However, no additional budget was foreseen for JEV.

Annex II, point IV of this Decision notes that JEV needs to be simplified, in order better to respond to the needs of SMEs, including those in applicant States, and that the Commission was examining the possibility of such simplification. However, after careful analysis, the Commission has determined that it is not possible to simplify JEV significantly under Decision 2000/819/EC because:

- this Decision does not contain any rules to allow the Commission to adopt measures to change the structure of the programme as described in Annex II of Council Decision 98/347/EC;

- this Decision does not contain any rules to allow the Commission to adapt the eligibility criteria of the programme contained in Council Decision 98/347/EC;

- the budget for JEV was committed on the basis of the Framework Agreement signed between the Commission and the financial intermediaries in the JEV network. Any change to the substance of these agreements, which is considered necessary both in order to simplify the programme and to adequately protect the Community financial interest, would therefore not be consistent with Article 6(5) of the old Financial Regulation (in force at the time of the commitment);

- the budget for JEV was committed under the Growth and Employment Initiative (1998-2000) and is therefore reserved exclusively for those states that were members of the European Union and the European Economic Area at the time that Council Decision 98/347/EC entered into force. It is not therefore possible to use it for projects involving the accession and candidate countries;

- Decision 2000/819/EC does not allow the Commission to expand the definition of 'transnational joint venture' (the only eligible form of transnational cooperation foreseen under Decision 98/347/EC) to the broader 'transnational partnership' (referred to in Decision 2000/819/EC), which is considered necessary as part of any adaptation of the programme.

The evaluation of the Growth and Employment Initiative indicates that two of the three financial instruments, the SME Guarantee Facility and the ETF Start-up Facility, can be considered a success. However, the JEV programme, whose aim was to assist SMEs in creating new transnational joint ventures within the European Union (and later the European Economic Area), was not a success. This was due to low demand from the market (very little of the available budget was committed to projects), low employment creation, poor cost-effectiveness for both the Commission and SMEs, and generally low satisfaction with the instrument among SMEs.

2. Objectives of the Commission's proposal

The main objective of the Commission's proposal is to phase out the JEV programme as soon as possible and return the unspent funds (+/- EUR 43m) to the general budget.

At the same time, the Commission proposes to make several minor amendments to Annex I of Council Decision 2000/819/EC relating to the entry into force of the new RTD framework programme, the eligibility of RTD activities under ETF Start-up and the length of the start-up period for specific high tech sectors.

3. Content of the Commission's proposal

The following two documents are submitted to the Council and Parliament:

1. evaluation report on the Growth and Employment Initiative;

2. proposal to amend the Council Decision 2000/819/EC on a multiannual programme for enterprise and entrepreneurship, and in particular for small and medium-sized enterprises (SMEs) (2001-2005).

The Council together with Parliament in accordance with the procedure laid down in Article 251 of the Treaty is asked to adopt the proposed amendment of Council Decision 2000/819/EC, which comprises:

1. Authorisation of the phasing-out of the JEV programme;

2. Modification of Annex 1 of Council Decision 2000/819/EC to make a more explicit reference to the eligibility of RTD activities under the ETF Start-up Facility; to update the reference to the fifth framework programme for RTD (in order to take account of the launch of the sixth framework programme); and to extend the definition of the start-up period for specific high technology sectors, in particular life sciences, to 10 years (to reflect the extended pre-commercialisation product development and testing phases that are characteristic of these particular sectors).

2003/292 (COD)

Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Decision 2000/819/EC on a multiannual programme for enterprise and entrepreneurship, and in particular for small and medium-sized enterprises (SMEs) (2001-2005)

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 157(3) thereof,

Having regard to the proposal from the Commission [1],

[1] OJ C , , p. .

Having regard to the opinion of the European Economic and Social Committee [2],

[2] OJ C , , p. .

Having regard to the opinion of the Committee of the Regions [3],

[3] OJ C , , p. .

Acting in accordance with the procedure laid down in Article 251 of the Treaty,

Whereas:

(1) On 5 November 1997, the Commission adopted Decision 97/761/EC approving a support mechanism for the creation of transnational joint ventures for SMEs in the Community [4].

[4] OJ L 310, 13.11.1997, p. 28.

(2) The ETF Start-up Facility, the Joint European Venture (JEV) programme and the SME Guarantee Facility were measures provided for in Council Decision 98/347/EC of 19 May 1998 on measures of financial assistance for innovative and job-creating small and medium-sized enterprises (SMEs) - the growth and employment initiative [5].

[5] OJ L 155, 29.5.1998, p. 43.

(3) The multiannual programme set up by Council Decision 2000/819/EC [6], which was adopted on 20 December 2000, aims at improving the financial environment for business, in particular by improving the functioning of the ETF Start-up Facility, amending the SME Guarantee Facility and, with regard to JEV, by using for the benefit of undertakings planning to enter into a transnational partnership the commitments effected up until 31 December 2000 under Decision 98/347/EC.

[6] OJ L 333, 29.12.2000, p. 84.

(4) According to point IV of Annex II to Decision 2000/819/EC, experience has shown that the JEV programme needs to be simplified in order to enable SMEs' requests for financial contributions to be dealt with quickly by the financial intermediaries and Commission departments and to ensure that Community resources are used correctly. It was also stated that the Commission was examining the possibility of adapting the eligibility criteria in order to respond more effectively to the needs of SMEs with regard to cross-border investments, including those in applicant States.

(5) On 10 September 2002 the European Parliament adopted a resolution [7] on the Commission report [8] on the Growth and Employment Initiative, where it notes that the JEV programme in its current form is no longer appropriate.

[7] Resolution on the Report from the Parliament on Growth and Employment Initiative - measures on financial assistance for innovative and job-creating small and medium-sized enterprises (SMEs), PE 316.350 of 24.7.2002.

[8] Report from the Commission to the European Parliament and the Council on Growth and Employment Initiative - measures on financial assistance for innovative and job-creating small and medium-sized enterprises (SMEs), COM(2002)345 of 1.7.2002.

(6) The evaluation of the Growth and Employment Initiative as at 29 May 2002 [9] concludes that the take-up of the JEV programme by the market is low, the job creation effect limited and the administrative cost very high and that JEV should be phased out as soon as possible.

[9] [COM(2003) 8.12.2003]

(7) For reasons of cost-efficiency, the Community should withdraw progressively from programmes that involve micro-management of small amounts of money, as is the case with the projects financed under the JEV programme.

(8) After careful analysis, it has to be concluded that a substantial simplification of the JEV programme is not possible, since any substantial change to the structure or eligibility criteria of the programme would change its nature and therefore be outside the scope of the legal basis (Council Decision 98/347/EC). Therefore it would not be possible to use the remaining committed budget nor would it be possible to use the budget for projects involving the accession and candidate countries.

(9) The budget for the JEV programme was committed on the basis of framework agreements signed with the financial intermediaries in the JEV network, thus creating a direct legal relationship between the Commission and these intermediaries. Therefore a replacement of these existing framework agreements with direct legal agreements between the Commission and SMEs, which, in this particular programme, would have resulted in simplification and improved protection of the financial interests of the Community, is not possible.

(10) Only relatively minor procedural changes would be possible without losing the remaining budget, which are deemed to be insufficient to ensure that the programme performs significantly better.

(11) It is not possible to use the remaining committed budget for projects involving the accession and candidate countries, since this budget was committed under the Growth and Employment Initiative (1998-2000) and is therefore reserved exclusively for those states that were members of the European Union and European Economic Area at the time that Council Decision 98/347/EC entered into force.

(12) Since the phasing-out of the other two European transnational joint venture programmes - European Community Investment Partners (ECIP) for the developing countries in Asia, Latin America, the Mediterranean region and South Africa (ALAMEDSA countries) in 1999 and the Programme to promote SME joint ventures and other joint agreements (JOP) in the Central and Eastern European Countries (CEECs) and New Independent States (NIS) in 2000 - many financial intermediaries in the JEV network have scaled down or ceased this activity because of the low volume of JEV applications from SMEs with the result that in the majority of Member States, in reality, it is no longer possible to apply for the programme.

(13) In view of the clear conclusion of the evaluation, it is not considered appropriate to propose to replace the JEV programme with a similar one.

(14) The phasing-out of the JEV programme should not affect the rights and obligations of the Community, the financial intermediaries and the beneficiaries (SMEs) that relate to approved projects.

(15) In order to respect their legitimate expectations, the financial intermediaries should be able to present applications for financial contributions for SMEs for a certain period after this Decision has been adopted.

(16) For the purpose of promoting innovation, research and development and entrepreneurship by SMEs, as requested by the Barcelona Council, an environment favourable to private sector investment in research and development, in particular through venture capital, should be encouraged.

(17) The Competitiveness Council of 26 November 2002 stated that Member States, the Commission and financial institutions should consider how to improve the financial framework for biotechnologies.

(18) The European Parliament requested, in the report on life sciences and biotechnologies of 21 November 2002, that the Commission should identify how to overcome the issue of insufficient funding regarding biotech start-ups and asked the European Investment Bank to give favourable consideration to follow-up actions.

(19) Decision 2000/819/EC should be amended accordingly,

HAVE ADOPTED THIS DECISION:

Article 1

Decision 2000/819/EC is amended as follows:

(1) Annex I is amended as follows:

(a) In the first indent of point 4(a)(i), the first sentence is replaced by the following:

"by investing in relevant specialised venture capital funds, particularly in seed funds, smaller funds, funds operating regionally or funds focused on specific sectors or technologies, or venture capital funds financing R&D, e.g. funds linked to research centres and science parks which in turn provide risk capital for SMEs."

(b) In point 4(a)(i) the following indent is added:

"- the start-up phase is normally defined as up to 5 years. However, for companies in specific high technology sectors, in particular life sciences, the start-up phase can be up to 10 years, due to the extended pre-commercialisation product development and testing phases that are characteristic of these particular sectors."

(c) In point 4(a)(iv), the following subparagraphs are added:

"The Joint European Venture programme shall be phased out.

The financial intermediaries may present applications for financial contributions from SMEs to the Commission until [date of entry into force + 115 days - to be entered at the moment of publication].

Applications and projects shall be dealt with according to Article 4 and Annex II of Council Decision 98/347/EC."

(d) In the first indent of point 5, the word "fifth" is deleted.

(2) In Annex II, point IV is deleted.

Article 2

This Decision shall enter into force on the 20th day following its publication in the Official Journal of the European Union.

Done at Brussels,

For the European Parliament For the Council

The PresidentThe President

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