No C 358/16 Official Journal of the European Communities 31. 12.83 
5.3. The Committee proposes that the two-year-
period covered by its own proposals be used: 
— to make a vigorous start on implementing the 
proposed investment policy with a view to 
increasing the competitiveness of the best mines 
and coking plants and to carry out intensive 
research work directed towards achieving this 
goal, 
— to make a more thorough study of the possible 
consequences which a subsequent reduction in 
aid would have on individual mines, the situa­
tion of mining and iron and steel-making com­
plexes in the regions and, in particular, on 
employment. 
Done at Brussels, 26 October 1983. 
The full text of the opinion is as follows: 
THE ECONOMIC AND SOCIAL COMMITTEE, 
Having regard to the Treaty establishing the Euro­
pean Economic Community, and in particular 
Article 198 thereof, 
Having regard to the request made by the Council 
of the European Communities on 24 June 1983 for 5.4. The Committee takes note of the Com­
mission's recent proposals for a balanced solid fuels 
policy. These proposals could take effect on 1 Janu­
ary 1984 and are the subject of a separate opinion. 
The proposals to be put forward must take account 
of the economic and social consequences which a 
sharp and rapid reduction in the production of cok­
ing coal would have upon the Community regions 
concerned. 
5.5. More specifically, the Committee recognizes 
the difficulties arising in connection with the current 
system of financing and approves the Commission's 
proposal that the costs be met by the Community's 
general budget rather than solely from the funds 
available to the ECSC. 
The Chairman 
of the Economic and Social Committee 
Francis CEYRAC 
an opinion on the proposal for a Council Decision 
empowering the Commission to help finance inno­
vation within the Community, 
Having regard to the decision taken by its Bureau 
on 5 July 1983 instructing the Section for Industry, Opinion on the proposal for a Council Decision empowering the Commission to help 
finance innovation within the Community 
The text referred to the Committee has been published in Official Journal of the Euro­
pean Communities No C 178 of 5 July 1983, page 4. 
A. LEGAL BASIS FOR THE OPINION 
On 24 June 1983 the Council referred the abovementioned proposal to the Economic 
and Social Committee in accordance with Article 198 of the Treaty establishing the 
European Economic Community. 
B. OPINION OF THE ECONOMIC AND SOCIAL COMMITTEE 
The Economic and Social Committee prepared its opinion on the above matter at its 
21 lth plenary session held in Brussels on 26 and 27 October 1983. 
31. 12.83 Official Journal of the European Communities No C 358/17 
Commerce, Crafts and Services to draw up an 
opinion on the matter, 
Having regard to the opinion drawn up by the afore­
mentioned Section at its meeting held on 5 October 
1983, 
Having regard to the oral report made by the rap­
porteur, Mr Poeton, 
Having regard to the discussions at its 211th plenary 
session held on 26 and 27 October 1983 (meeting on 
26 October), 
HAS ADOPTED THE FOLLOWING OPINION 
unanimously: 
1. General comments 
1.1. In its opinion of 27 May 1982, the Economic 
and Social Committee emphasized the financial 
needs of small and medium-sized enterprises, in 
particular those concerned in the development and 
exploitation of technical innovations. It therefore 
welcomes this Commission proposal, in particular 
in view of its relevance to long-term job creation. 
1.2. It is a fact that small and medium enterprises 
from whom the Community and its member coun­
tries expect an essential contribution to technologi­
cal progress, job creation and competitivity, encoun­
ter particular difficulties when facing up to 'innova­
tion', not least concerning its finance. In most if not 
all EC member countries special financial mea­
sures are taken to try and reduce these difficulties: 
but these measures vary greatly, are much more 
comprehensive and effective in some countries (e.g. 
the Federal Republic) than in others, and are in gen­
eral insufficient to provide conditions equivalent to 
those prevailing amongst the Community's main 
competitors, Japan and the USA in particular. 
1.3. The Committee therefore reaffirms that much 
more needes to be done to promote innovation, 
especially amongst SMEs. At the same time it recog­
nizes that this is not an easy task. It agrees with the 
analysis of the problems made by the Commission 
in the explanatory memorandum — e.g. the imbal­
ance in fund-raising terms between under-valued intangible assets ('human capital', etc.) and over­
valued tangible assets — which inhibit and even 
prevent borrowing by SMEs wishing to pursue inno­
vation. It draws attention to a further major inhibit­
ing factor, namely that credit institutions do not, in 
its view, normally offer medium-term loans for 
innovation without attaching conditions which can 
be unattractive to potential borrowers while the 
alternative of short-term funds are subject to a 
cash-flow cost which too often increases the level of 
debt-servicing to an extent which effectively prohi­
bits their use to finance innovation. The Committee 
therefore considers that the Commission's analysis 
of the major obstacles to the finance of innovation 
needs to be enlarged to cover cash-flow problems 
and the terms and conditions attached to funds 
which are made available. 
1.3.1. The Committee is also very conscious that 
many specific reliefs given by national tax 
authorities to other forms of investment direct funds 
away from industry in general and innovation in 
particular. 
1.3.2. The above considerations underline yet 
again the overriding need to give greater encourage­
ment to medium and long-term lending in produc­
tive investments. The Commission proposal must be 
seen as an experimental scheme, initially of rather 
modest dimension, to do this in one key area. The 
Committee hopes it will be implemented quickly 
and the opportunity thus be given to build on the 
experience gained. 
1.4. The Committee notes that the criteria nor­
mally used by the Commission and the European 
Investment Bank to define SMEs fix the upper lim­
its at (a) not exceeding 500 employees, (b) net fixed 
assets not exceeding 75 million ECU. In addition 
there is a limit of 33 % on the maximum holding in 
the total capital by an enterprise which is not an 
SME. The Committee approves the first two criteria 
and considers they should be applied strictly in rela­
tion to this scheme. In some countries a figure 
below 33 % still confers certain powerful rights equi­
valent to a controlling interest. The Committee is 
therefore of the opinion that the criteria used should 
take account of these differences. 
1.5. As regards the definition of innovation the 
Committee can accept the broad lines set out in the 
proposal, respectively in the third recital and in 
No C 358/18 Official Journal of the European Communities 31. 12.83 
Article 2. It considers, however, that those activities 
which should clearly not be allowed to benefit from 
the scheme could with advantage be specifically 
excluded. 
1.6. The Committee strongly recommends that in 
such a sensitive area as this the time taken by finan­
cial intermediaries to complete negotiations with 
SME innovators on loan finance should be kept as 
short as possible (e.g. six weeks) and that procedures 
should be adopted which permit that, e.g. individual 
requests by SMEs should not be subject to approval 
by the Community authorities. 
1.7. The Committee is convinced that the scheme's 
success or failure will very largely depend on the 
extent to which 'innovators' and SMEs are informed 
of its existence. Proper publicity for the scheme 
amongst the public at large and SMEs in particular 
is of the utmost importance and should be kept in 
the forefront at all stages of implementation. The 
Committee suggests that one simple name — Euro­
pean Innovation Loans (EILs) — should be used 
and acknowledged at all times. 
1.8. The seventh recital of the draft Decision refers 
to the encouragement, as a priority, of 'cross-border 
cooperation within the Community' for innovation. 
The Committee strongly supports this priority. those innovators in member countries where rates of 
interest are high will receive a much shorter interest 
moratorium period than those within member coun­
tries where rates of interest are low. The Committee 
recommends that member governments should be 
encouraged to offer an exchange risk guarantee to 
the borrowers to enable funds to be borrowed for 
EILs at lower rates of interest on the European 
money market. 
2.3. Articles 3 and 4 
Under the proposed financial aid model the financ­
ing institutions (financial intermediaries) would — 
depending on the case — bear half or all the default 
risk. This could result in a situation in which the 
financing institutions continue to hold back on par­
ticularly risky innovatory projects which really 
ought to be encouraged, while EEC funds are chan­
nelled into such projects as could be financed by the 
banks without additional incentives. This possibility 
should be excluded by appropriate provisions. 
2.4. Article 6 
2. Specific comments 
2.1. Article 2 This Article covers a number of significant elements 
including the agreement between the Commission 
and the Bank, the eligibility of 'financing requests' 
(viz. of the intermediaries introducing them) and the 
contracts with intermediaries. 
2.1.1. The Committee recommends the deletion of 
the two words 'in sectors' in the first sentence since 
this may be unnecessarily restrictive. 
2.1.2. The Committee recommends (see point 1.5 
above) that, in particular, the following fields 
should be specifically excluded from the scope of 
the scheme: real estate, mass media, finance and 
financial services. 
2.2. Article 3, third indent 2.4.1. As regards the agreement between the Com­
mission and the Bank, the Committee would expect 
it to take account of the comments in this opinion to 
the extent that these are not already reproduced in 
the Council Decision. 
2.4.2. The decisions concerning the 'eligibility of 
the financing requests' will form a vital role in the 
success of the scheme. The Committee agrees that 
these decisions should be taken by the Commission, 
in line with existing practice and also because some 
such requests could, and indeed in a European per­
spective should, emanate from intermediaries oper­
ating at European level. 
The Committee welcomes the concept of an interest 
holiday, payable out of the Community budget, 
attaching to an EIL and extending over the first few 
years, corresponding to the period of no return on 
the investment. If, in order to avoid any exchange 
risk, the Commission resorts to local borrowing, 2.4.3. The Committee thinks it necessary, nonethe­
less, to emphasize the difficulty of the task facing 
the Commission in taking these decisions. The long 
experience of the Community, dating back to the 
earliest days of the ECSC, in loan finance will stand 
it in good stead for this task. But the Commission 
31. 12.83 Official Journal of the European Communities No C 358/19 
will need to obtain the best advice available, includ­
ing from qualified representatives of the social part­
ners. 
2.4.4. The decisions on financing requests are dif­
ficult because the choice of financial intermediary 
has to take account of the intermediary's ability to 
meet a number of criteria, sometimes difficult to 
reconcile. These intermediaries must of course in the 
first place be reputable companies known for their 
probity, rectitude and credit worthiness. They must 
be able to give evidence of their ability to provide 
technically qualified assessment of innovation pro­
jects, whether in-house or through outside advisers, 
or both. It must also be shown that they have dealt 
swiftly and efficiently with applications, and in 
particular have not unduly prolonged provision of 
credit in the past. The intermediaries should also be 
in a position to publicize and market the EILs 
amongst 'innovators' and SMEs. But they also need 
to be judged on their readiness to take risks, to lose 
money on some projects, to take the long view, to 
learn from the experience of others. In short, the cre­
dentials of an intermediary reed to be assessed less 
in financial than in economic terms, e.g. the extent 
to which its operations have contributed to job crea­
tion and to added value in the companies con­
cerned. A further yardstick, in order to safeguard 
equal chances for the smallest companies, would be 
the proportion of operations in favour of these in 
relation to the total number of operations. The 
Commission should give due weight to all these 
considerations taking local practices in the Member 
States into account and the need to keep adminis­
trative formalities to a minimum before authorizing 
a financing request. . 2.4.5. The contracts with the intermediaries are the 
vehicle for ensuring respect of the condition laid 
down in Article 3, indent 4, namely 'finance with 
characteristics close to those of the European Inno­
vation Loan'. This condition is an essential counter­
part to the provision of public funds at privileged 
rates and a necessary incitement for a financial 
intermediary specialized in promoting innovation to 
take its share of risk. The Committee approves this 
procedure on the understanding that the contracts 
between the Community authorities and the inter­
mediaries will lay down detailed conditions for its 
implementation in practice: the matching condi­
tions which the intermediary would offer should be 
spelt out for example in regard to the interest rate to 
be charged after the moratorium or the conditions 
which would entitle the intermediary to equity con­
version rights. 
2.4.6. One condition which should figure in all 
contracts is the requirement for the intermediary and 
beneficiaries of the EILs to make due acknowledge­
ment of the support received from the Community 
and to publicize this support in appropriate ways. 
2.5. Article 7 
The Committee expects that it, as well as the Coun­
cil, be sent the Commission's report, not least in 
view of its privileged position for assessing the 
impact of the EILs in practice and its ability to help 
provide information about the scheme to those most 
concerned by it. 
Done at Brussels, 26 October 1983. 
The Chairman 
of the Economic and Social Committee 
Francois CEYRAC 
APPENDIX 
to the opinion of the Economic and Social Committee 
JAPAN 
Japanese SMEs are supported by a basic small business act and 15 other major acts for small 
business designed to eliminate the handicaps associated with smallness. In addition it has a 
No C 358/20 Official Journal of the European Communities 31. 12.83 
government-supported financial system which includes a long-term credit insurance agency and 
certain banks which lend only to SMEs. 
Loan guarantees 
To facilitate the financing of SMEs by private financial institutions, government credit guaran­
tees are provided on loans up to 8 million yen per firm for a fee of 1 % per annum. Surety and 
collateral are normally required, but up to 2,5 million yen may be guaranteed without collateral 
or surety. 
If the borrower defaults, the loan is repaid by the Small Business Credit Insurance Corporation, a 
public corporation funded by the Government. 
Loans 
Most preferential loans are made through four government-affiliated institutions. One, Small 
Business Finance, offers loans to firms in government-designated trades up to 220 million yen at 
6,55 % to 7,7 % per annum for a maximum term of 18 years. 
A modernization fund is used to make interest-free or low-interest loans to firms having 100 or 
fewer employees in designated industries to aid them in modernizing their equipment. Loans are 
for up to 12 million yen for a term of five years and finance half the cost. 
Investment assistance 
Three small business investment companies, established by the government in 1963, purchase 
stock and convertible bonds issued by small corporations capitalized at 100 million yen or less 
belonging to government-designated trades. Funds for this purpose are obtained partly from 
government loans to the three companies which totalled 1 900 million yen in fiscal year 1978. 
Management and technical assistance 
Included are management consulting and guidance and technological guidance and experimen­
tation. These services are made available free of charge to firms with 20 or fewer employees. 
In Japan's fiscal year 1978, the government budgeted 25,5 million yen to subsidize the manage­
ment consulting services of local commerce and industry associations. 
Procurement assistance 
Government entities allot an annually determined proportion of their total procurement contracts 
to small and medium-sized enterprises. In Japan's fiscal year 1978, such contracts were equiva­
lent to about 36 % of total government procurement expenditure. 
Fiscal assistance 
Several types of tax deductions are available. The most important are: income tax deductions for 
owners of unincorporated enterprises and reduced corporate tax rates for cooperatives and incor­
porated SMEs. 
Other assistance 
Firms with 20 or fewer employees in designated trades which are unable to afford modernization 
loans may apply to agencies established by local governments to lease equipment worth up to 
15 million yen for two to five years (six to 12 years for pollution control equipment) at a 5 % per 
annum leasing charge. 
Aid for technological improvement is extended through subsidies for the application of techno­
logical innovations; free testing and consultation services are provided by public testing and 
research organizations and technical data is provided. (Quoted from Report of the US House of 
Representatives — October 1979.) 
31. 12. 83 Official Journal of the European Communities No C 358/21 
UNITED STATES 
In the United States there is a small business act, now 30 years old, which places an obligation on 
the federal government to aid, counsel, assist and protect small business. There is also a long 
tradition in the United States of individual, outside risk investment in young innovative SMEs as 
well as small business investment companies which are specifically structured with government 
loan guarantee support to assist these young enterprises. 
The main agent of government is the Small Business Administration with 4 400 employees, 80 % 
in local offices. Net operating expenses of SBA revolving funds were £ 660 million in 1979. Total 
SBA loans £ 3 400 million. 
The SBA provides loan guarantees either direct or through intermediaries, regular SBA loans etc. 
'Leverage Loans' are available to Small Business Investment Corporation (SBICs) from federal 
sources at one-eighth of 1 % above the cost to the US Treasury. 
Corporation tax at lower level (17 to 40%) on first $ 100 000 revenues. SMEs may carry back 
product liability losses for 10 years. SBICs are tax exempt provided they pay out 90 % of income. 
In the field of public procurement, US policy aimed at maximizing purchasing from small firms 
is highly developed. The most significant provisions are 'set-asides' which require federal agen­
cies to restrict portions of certain types of purchases to small firms; subcontracting clauses nego­
tiated by the SBA with prime contractors to government; contract counselling and technological 
assistance; and a databank of small business sources of supply. US federal procurement in 1978 
was 24,4 %-of the total sum of $ 78 800 million federal purchases. 
In research and development only 3 % of the value of contracts was awarded to small firms in 
1979. A new law introduced 'set-asides' for R & D in 1978 and in 1982 the Small Business Inno­
vation Research (SBIR) programme was set up. This allocates $ 1 400 million to small high-tech­
nology firms over the next five years. 
(Main source: 'The promotion of small business: a seven-country study' Economists Advisory 
Group Ltd, London, 1980).' 
EMPLOYMENT IN SMEs 
The percentage importance of SMEs as regards employment, added value, turnover and investment in 
certain countries 
Employment 
Added value 
Turnover 
Investment France 
40,3 
— 
30,9 
21,1 Federal 
Republic 
of 
Germany 
43,4 
31,4 
31,9 
32,9 Italy 
43,7 
49,2 
50,5 
43,5 Nether­
lands 
56,0 
— 
60,7 
— United 
Kingdom 
44,3 
40,7 
41,1 
— USA 
58,2 
51,4 
52,6 
— Japan 
54,4 
44,1 
33,9 
33,9 
The figures for the USA and the United Kingdom relate to 1972, for France, Italy and the Netherlands to 1975 
and for Germany to 1976. 
Source: OECD. 
No C 358/22 Official Journal of the European Communities 31. 12. 83 
United States 
Total and small business employment growth by major industry 
(1977 to 1979 and 1979 to 1981) 
Industry 
Agriculture, forestry, fisheries 
Mining 
Construction 
Manufacturing 
Transportation, communications, 
utilities 
Wholesale trade 
Retail trade 
Finance, insurance, real estate 
Services 
All industries Total change in employment 
1977-1979 
344 600 
81 900 
645 400 
1 624 300 
207 400 
514 300 
1 198 900 
392 600 
2111 200 
7 119 800 1979-1981 
69 621 
216 250 
- 134 534 
- 726 684 
457 024 
600 166 
178 620 
432 955 
1 652 357 
2 745 776 Change in small business em­
ployment 
1977-1979 
328 900 
61 300 
619 900 
754 700 
207 600 
473 800 
985 600 
283 700 
1 661 700 
5 377 900 1979-1981 
60 676 
155 233 
- 109 290 
- 223 071 
134 569 
456 802 
167 885 
281 484 
1 020 880 
1 894 681 
Source: US Department of Labour, Bureau of Labour Statistics, Unemployment Insurance, ES-202 data, un­
published. Quoted in 'The state of small business: a report of the President' transmitted to the Con­
gress — March 1983. 
Japan 
Employees in the manufacturing industries 
Year 
Number of employees 
1 to 9 persons 
10 to 19 persons 
20 to 99 persons 
100 to 299 persons 
300 to 999 persons 
1 000 persons or more 
1 to 299 persons 
300 persons or more 
Total 1974 
2 035 
1 255 
2 854 
1 808 
1679 
1 856 
7 952 
3 535 
11 487 1975 
2 153 
1 282 
2 848 
1 704 
1549 
1 761 
7 986 
3 310 
11 296 1976 
2 112 
1 159 
2 990 
1710 
1 533 
1671 
7 970 
3 204 
11 174 1977 
2 078 
1 120 
2 940 
1663 
1474 
1 599 
7 802 
3 073 
10 875 1978 
2 178 
1 152 
2 987 
1 651 
1412 
1 512 
7 967 
2 923 
10 890 1979 
2 159 
1 153 
3 013 
1659 
1426 
1450 
7 984 
2 876 
10 860 1980 
2 143 
1 145 
3 044 
1697 
1437 
1465 
8 029 
2 902 
10931 1981 
1 508 
1 209 
3 161 
1719 
1 465 
1 503 
7 597 
2 968 
10 565 
Source: Ministry of International Trade and Industry,.'Kogyo Tokei Hyo' (Industrial Statistics Table) 
Notes: 1. Based on places of business. 
2. Figures for 1981 are preliminary. 
31. 12. 83 Official Journal of the European Communities No C 358/23 
DEFINITIONS OF SMEs 
USA 
Definitions vary according to sector: thus in manufacturing the ceiling set for certain branches 
(e.g. aeroengines, shipbuilding) is as high as 2 500 employees, while for others (e.g. electroplating, 
bookbinding) it is as low as 100 employees. In the service sector the upper limit for employees is 
much lower and is complemented by a figure for maximum turnover which again varies accord­
ing to branch, from $ 2 million to $ 9,5 million. 
JAPAN 
In Japan the ceiling in manufacturing is 300 employees or total net assets of 100 million yen; in 
the wholesale sector 100 employees or 30 million yen; and in retailing 50 employees or 10 million 
yen. 
Opinion on the memorandum on the Community's development policy 
A. LEGAL BASIS FOR THE OPINION 
As a follow-up in particular to its opinion of 23 February 1983 on defining new guide­
lines for closer cooperation between the ACP countries and the EEC, the Economic 
and Social Committee has delivered an additional opinion on this subject under the 
third paragraph of Article 20 of its Rules of Procedure. 
B. OPINION OF THE ECONOMIC AND SOCIAL COMMITTEE 
The Economic and Social Committee drew up its additional opinion on the above 
matter at its 211th plenary session held in Brussels on 26 and 27 October 1983. 
The full text of the opinion is as follows: 
THE ECONOMIC AND SOCIAL COMMITTEE, 
Having regard to the Treaty establishing the Euro­
pean Economic Community, and in particular 
Article 198 thereof, 
Having regard to the Commission's memorandum 
of 29 September 1982 on the Community's develop­
ment policy, 
Having regard to its Rules of Procedure, and in 
particular Article 20, paragraph 3, thereof, 
Having regard to the decision taken by its Bureau 
on 14 December 1982 instructing the Section for 
External Relations to draw up an additional opi­
nion on the 'non-ACP' aspects of the Commission's 
memorandum, Having regard to its previous opinions on the 
Lome Convention and various aspects of develop­
ment cooperation, and in particular its opinion of 
23 February 1983 on defining new guidelines for 
closer cooperation between the ACP countries and 
the EEC ('), 
Having regard to the opinion issued by the Section 
for External Relations at its meeting held on 
11 October 1983, 
Having regard to the report submitted by the rappor­
teur, Mr van Rens, 
(') OJ No C 90, 5. 4. 1983.