Opinion of the Economic and Social Committee on the "Ninth annual report of the Structural Funds (1997)"

(1999/C 368/10)

On 29 April 1999 the Economic and Social Committee, acting under Rule 23(3) of its Rules of Procedure, decided to draw up an opinion on the "Ninth annual report of the Structural Funds (1997)".

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 29 September 1999. The rapporteur was Mr Vasco Cal.

At its 367th plenary session of 20 and 21 October 1999 (meeting of 20 October), the Economic and Social Committee adopted the following opinion by 80 votes to one, with one abstention.

1. Introduction

1.1. The annual report is issued pursuant to Council Regulation (EEC) No 2052/88 as amended by Council Regulation (EEC) No 2081/93 concerning the reform of the Structural Funds. Article 16 of the regulation requires the Commission, before 1 November of each year, to submit a detailed report indicating the progress made in achieving the objectives of the Funds and the use made of the aid granted during the preceding year. Article 31 of the coordinating Regulation (EEC) 2082/93 lists the items to be included in the annual report and adds that "each year, the Commission shall consult the social partners organised at European level on the structural policy of the Community".

1.2. Under the abovementioned Article 16, the report has to be submitted to the Council, the European Parliament and the Economic and Social Committee. On receiving the report each year, the Committee draws up an opinion setting out the comments which it deems appropriate. Although the Committee cannot influence the measures described in the report as these refer to the past, its opinions have nevertheless led to a dynamic exchange of views with the Commission on specific aspects of the use of the Structural Funds. The final part of the report contains a chapter on relations with the other institutions, in which the Commission mentions and comments on the opinions of the ESC, the European Parliament and, more recently, the Committee of the Regions.

1.3. A significant example of the influence of this dynamic consultation process is the involvement of the socio-economic partners in the Structural Funds, enshrined in Article 4 of the Framework Regulation as revised in 1993. During the first years of the application of the 1988 Structural Fund reform, the Committee - notably in its opinions on the annual reports - repeatedly stressed the need to provide for involvement of the socio-economic partners at all levels and in all stages of the process. Although Article 4 does not fully embrace this position, it has meant that since 1994 the social partners can be involved both in the Member States and at Community level, albeit in differing forms.

1.4. For all these reasons, the Committee cannot understand why this year, for the first time since 1989, it appears from the ESC secretariat that the Commission is not to consult it on the annual report, obliging it to draw up its opinion using the own-initiative procedure. This has seriously delayed the start of the work, owing to the procedural, budgetary and operational problems which the launch of own-initiative work entails(1).

1.5. The situation is all the more surprising in view of the fact that the ninth report focuses on assistance to small and medium-sized firms. This sector is widely represented within the Committee, and the Committee has undertaken extremely useful steps to ensure that the various Commission departments take greater account of specific SME interests.

2. The annual report of the Structural Funds (1997)(2)

2.1. 1997 marked the start of the second stage of the programming period and the third year since the 1993 revision of the regulations. Virtually all the programmes had been approved by then, including the Community initiatives. At the end of 1997 a total of 1026 programmes were under way (580 for the various objectives and 446 for the Community initiatives).

2.2. As programmes reached "cruising speed", it was possible to make up some of the financial backlog of the previous years. Implementation is thus in keeping with the financial perspectives laid down in Edinburgh. Only in the case of the Community initiatives did commitments and payments remain insufficient.

2.3. The new Objective 2 programmes were designed to give priority to employment, and 89 territorial employment pacts were also launched.

2.4. On the management side, 22 datasheets were drawn up setting out the categories of expenditure eligible for Community part-financing from the Funds.

2.5. The thematic priorities included the information society, urban development, and interaction between regional policy and competition policy.

2.6. 1997 was also the first year of preparations for the new regional policy, as part of the package which came to form Agenda 2000.

2.7. Each annual report focuses on a particular horizontal topic. The previous two annual reports focused on the environmental aspect of assistance (1995) and the technological development of the regions (1996). The topic for 1997 is assistance to small firms.

2.8. The report states that SMEs employ around two thirds of the private labour force and account for 60 % of total turnover in the EU. According to reports cited by the Commission, SMEs have the greatest potential for job-creating growth.

2.9. In the 1994-1999 programming period as a whole, between 15 % and 20 % of total Fund resources will be specifically earmarked for measures to stimulate small firms and improve their productive facilities and economic environment. The percentage will vary between Member States, reaching 40 % in some of them.

2.10. This funding covers a wide range of measures: aid for investment through direct grants or financial engineering measures, funding for business start-up areas, training (including management training), advisory and information services, measures to promote R& D, measures relating to the information society, and aid for internationalisation.

2.11. The Commission's guidelines for the mid-term adjustment of the programmes for Objective 1 regions, presented on 30 May 1997, stated that the available resources should be used to support SMEs and local development and employment initiatives.

2.12. In response to some comments by the Court of Auditors, the Commission launched a series of actions to assess the Structural Funds' impact on SMEs. However, its findings were not expected to be available until the end of 1998.

3. General comments

3.1. The second chapter of the report presents the results for each objective. It details the support for SMEs, Community initiatives, innovative measures and pilot projects, and technical assistance measures. The second part of the chapter summarises the main achievements in each Member State, discussing the objectives and the Community initiatives separately and highlighting measures to assist SMEs. The picture is completed by the financial tables annexed to the report. The Commission should have explained the definitions of SME used in the various chapters, particularly as discussions on this subject at Community level have led to changes in the concepts and parameters used for defining SMEs. Several ESC opinions(3) have discussed the problems arising from the existence of differing definitions at both EU and national level, and the consequences for the allocation of financial support to the sector.

3.2. The third chapter assesses the impact of the Funds, setting out the results of the interim evaluations for each objective, the thematic and horizontal evaluations, and the employment impact. In the case of Objective 2, for instance, the Commission states that ex post estimates for 1989-1993 suggest that of the 850000 gross jobs created, some 450000 were net additional jobs. The average cost per net job created or maintained was almost ECU 42000 (22000 per gross job). The ex ante evaluation estimates that 650000 jobs were created or maintained in the period 1994-1996 and 880000 in 1997-1999. This would give a cost of around ECU 11000 per job. These figures are not comparable with those of the previous programming period.

3.3. The fourth chapter looks at budget implementation, financial checks and the verification of additionality.

3.4. The fifth chapter discusses coordination with the other financial instruments, namely the Cohesion Fund, European Investment Bank, European Investment Fund, ECSC, financial mechanism of the European Economic Area, education and training programmes, and Community funding of trans-European networks.

3.5. The sixth chapter considers compatibility and complementarity with other Community policies: employment and social policy, environment, promotion of equal opportunities for men and women, R& D, trans-European networks, tourism, culture, competition policy, transparency of public procurement, the common agricultural policy, and fisheries policy.

3.6. Article 31 of the coordinating Regulation states that the reports are to include "the list of major productive investment projects which benefited from assistance granted under Article 16(2)" and that "these projects should be the subject of a concise evaluation". The present report contains an annex listing the commitments and payments for these "major projects", but provides no further information. This problem can be resolved in future by the new wording of Article 26 of the general regulation. This article, which refers to major projects, requires the Member States to "inform the Commission in advance". This is not a requirement of the current regulation.

3.7. The final chapter of the report discusses inter-institutional dialogue with the socio-economic partners at European level. The section concerning the ESC appears to overlook some key aspects of the Committee's work in this area during the reference period, such as its active involvement in the Cohesion Forum and its opinions on the first cohesion report and on Agenda 2000 (adopted in October 1997). This oversight is surprising for several reasons. The Committee was the only institution to have issued an opinion on the first cohesion report, and its opinion was widely circulated at the Cohesion Forum. The Committee was also the first body to adopt an opinion on Agenda 2000.

4. Specific comments

4.1. Shortly after the ninth annual report on the Structural Funds was published, the Commission issued its mid-term review of structural interventions for Objectives 1 and 6. As this review gives further details regarding important aspects of the annual report, its findings will also be considered in the present opinion.

4.1.1. The Commission recognises that "the main aim of CSFs and SPDs is to reduce disparities between Member States in terms of their respective per capita income". At the same time, "the acknowledgement of employment as an overriding EU priority has also led to a number of programme adjustments such as the formal introduction of territorial employment pacts, [and to] the refocusing of some training actions". This confusion about the objectives against which the effectiveness of the use of the Funds is to be measured has unfortunately increased in the last few years, and is not conducive to a proper evaluation. Effectiveness is measured in terms of the objectives set and to what extent they have been achieved (while efficiency is measured in terms of the resources used), and it is not possible to evaluate correctly the results for objectives which did not exist.

4.1.2. The evaluation also made the managers and monitoring committees more familiar with the operational programmes, facilitating the mid-term review of them and improving their management. The review states that the social partners "were also associated with this process to the extent of their participation in Monitoring Committees". Since in many cases such participation still does not occur, they were not involved in the evaluation either. This is particularly regrettable because the social partners' practical knowledge of projects on the ground would have been extremely useful for the mid-term review.

4.1.3. Human resource development was one of the topics which was subject to particular changes in the context of the mid-term review, as can also be seen from the ninth annual report. The situation is changing rapidly, so adjustments are necessary. Also, many programmes are designed on a horizontal basis and take a "top-down" approach; they cover differing economic and geographical situations, and thus are not really tailored to local priorities. The territorial employment pacts were a positive step which sought to use a "bottom-up" approach, but their practical effects seem to have been very limited, partly because insufficient additional resources were allocated to them.

4.1.4. The report on the mid-term review does not devote sufficient attention to the fisheries sector. This is one of the sectors facing particular delays, inadequacies and difficulties, but the report is unable to offer a response.

4.1.5. Project selection criteria are a problem for many operational programmes and Community initiatives. The report addresses this question but simply notes that relatively sophisticated scoring systems are not a sufficient condition for ensuring that the best projects are selected; there is still the question of the credibility of the information and forecasts provided by the applicants. The Committee points out that in many cases, projects submitted by the social partners do not receive sufficient support, and are passed over for others which fizzle out when Community support ceases.

4.2. Turning to the annual report, the Committee stresses the importance of the topic chosen for this year, namely Structural Fund assistance for SMEs. The report highlights the many initiatives in this field. The role of SMEs in providing employment is widely recognised. However, the same cannot be said of the aid systems, which often grant aid on the pretext of safeguarding jobs. Indeed, some evaluations in the Member States conclude that the aid systems are intrinsically ineffective in creating jobs, and that the results are not on a par with the financial outlay.

4.3. The Committee proposes that the next annual report (1999) should take as its general topic the participation of the socio-economic partners. Article 4 of the current framework regulation mentions the importance of this participation, and the new regulations adopted on 21 June 1999 reinforce it. During the preparatory stage for the next programming period, information should be gathered and examples of involvement of the socio-economic partners should be noted; mention should also be made of projects run by the social partners at local, regional, national, cross-border and Community level.

4.4. As regards the lessons which the annual report provides for the next programming period, the Committee stresses the importance of the current Objective 4 (anticipation of industrial change), and the need to retain this perspective. The annual report says little about Objectives 3 and 4, and the experience gained by the social partners and the public authorities should be better publicised so that it can be used in the next programming period. In particular, measures to cushion the impact of the changes brought about by the information society and by the knowledge-based society in general are important not only for young people, but also for existing workers.

4.5. The next programming period should not mark a step backwards as regards coordination of Structural Funds activities with the other financial instruments. Efforts to pool the operation of the various funds and the other financial instruments should be stepped up. It may be easier for fund managers to draw up a small number of national programmes, to which the various projects should be adapted. However, simplification remains the most important goal for activities on the ground. There should be more of a "bottom-up" approach, and the funds should be coordinated when coordination is most necessary (i.e. in the field) rather than when it is easiest (i.e. in the documents).

4.6. All too often in the past, projects financed by another fund have not been accompanied by appropriate vocational training measures for men and women in the region concerned. This must not continue. Coordination of the European Social Fund with the other funds is particularly important because, at the end of the twentieth century, human skills are the key to the challenges of tomorrow's society. It is regrettable that the timid steps made towards coordination in the past in Objective 1 regions are not to be followed in the new Objective 2 regions, or by the EAGGF (guarantee section) or the ESF, in the next programming period.

Brussels, 20 October 1999.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI

(1) In order to prevent the recurrence of such problems of interpretation, it is necessary to make it clear that when a Council Regulation requires that the Committee be sent annual reports on Community policies on which it is consulted by right, the Committee can begin work on an opinion without this being considered an "own-initiative" opinion, as the European Parliament and the Committee of the Regions do.

(2) Drawn up on the basis of the general summary which precedes the report.

(3) See for example the Opinion on the third annual report of the European observatory for SMEs (OJ C 82, 19.3.1996, p. 5).