EN Official Journal of the European Union C 327/1

Opinion of the European Economic and Social Committee on ‘The unexplored economic potential of EU competitiveness — reform of state-owned enterprises’ (exploratory opinion)

2013/C 327/01

Rapporteur: Mr HENCKS

On 15 April 2013 Mr Leškevičius, the Lithuanian deputy minister for foreign affairs, asked the European Economic and Social Committee, on behalf of the forthcoming Lithuanian presidency of the Council, to draw up an exploratory opinion on

The unexplored economic potential of EU competitiveness: reform of state-owned enterprises.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 27 June 2013.

At its 491st plenary session, held on 10 and 11 July 2013 (meeting of 10 July), the European Economic and Social Committee adopted the following opinion by 170 votes to 10. with 2 abstentions.

1. Background

1.1 The purpose of this EESC exploratory opinion is to shed light on the specific contribution that public undertakings can make to the EU's competitiveness. It aims to pinpoint the specific challenges that exist in this area for EU policy and the European institutions.

1.2 This opinion should be seen against the background of the treaties, which give wide discretion to the Member States as regards the definition, organisation and funding of their services of general interest. Furthermore, the treaties leave it up to the Member States to decide on the undertakings responsible for carrying out their public service tasks and their status (private, public or public-private partnership) (1).

1.3 Public authorities decide on a case-by-case basis whether to use a public undertaking as one of its means of action; this hinges on their analysis of the sector concerned, the defined objectives and tasks and the long-term approach to be promoted.

1.4 According to Commission Directive 80/723/EEC of 25 June 1980 on the transparency of financial relations between Member States and public undertakings, a "public undertaking" means: "any undertaking over which the public authorities may exercise directly or indirectly a dominant influence by virtue of their ownership of it, their financial participation therein, or the rules which govern it. A dominant influence on the part of the public authorities shall be presumed when these authorities, directly or indirectly, in relation to an undertaking: a) hold the major part of the undertaking's subscribed capital; or b) control the majority of the votes attaching to shares issued by the undertaking; or c) can appoint more than half of the members of the undertaking's administrative, managerial or supervisory body."

1.5 All EU countries have set up public undertakings at some stage in their history, either directly, or by nationalising or "municipalising" private companies. They have done so for a wide variety of reasons: — to implement strategic objectives linked to external or internal security, or to the security of supply of certain essential goods and services; — to build infrastructure necessary for economic and social life; — to harness significant investment (particularly after each of the world wars); — to promote new activities that are not necessarily profitable in the short term; — to remedy failures of the market (natural monopolies, outsourcing) or of private initiative; — to address financial, economic, social or environmental crises; or — to carry out public service tasks.

1.6 Any measurement of the effectiveness, efficiency and, where necessary, the need for reform of public undertakings should not be limited to the usual indicators of economic-activity profitability, but should incorporate all of the objectives and tasks assigned to them by the public authorities.

1.7 According to the official EU definition, competitiveness is the ability of a state to sustainably raise the standard of living for its inhabitants and secure them a high level of employment and social cohesion.

1.8 Every year, the EU loses a bit of ground in terms of productivity. This slowdown is synonymous with deteriorating competitiveness. The telltale signs of this decline include insufficient innovation, and a lack of investment in infrastructure and technologies as well as in human capital.

1.9 The EU's competitiveness and attractiveness thus hinge on investment in infrastructure, education and training, research and development, health and social protection, environmental protection, and so on – all areas in which public authorities can make use of public undertakings as one means of intervention, amongst others.

1.10 However, the state and regional and local authorities are not inherently virtuous and public undertakings sometimes fail, due to: — administrative, bureaucratic or "political" control; — a lack of accountability on the part of the public authority, which can be solely focused on financial or economic objectives; — the use of a public undertaking for purposes other than its stated objective.

1.11 The public undertaking may form part of a defensive or offensive strategy on the part of the relevant public authority: — defensive, to curb the effects of the crisis, act as a fire-fighter where a company goes bankrupt or to save jobs, temporarily nationalise a company for the time that it takes to find a buyer, sanction a clear abuse of a private company, etc.; or — offensive, to promote an industrial policy or new technologies, implement public policy, develop new political objectives, promote new goals (biodiversity, renewable energy, the energy transition), generate a new development pattern (sustainable, inclusive).

1.12 This implies that the public authority assumes its responsibilities as regards setting the strategic direction, while giving the management a large degree of autonomy to run the undertaking. The public authority should, however, ensure that there is proper public scrutiny and regulation, which requires putting in place a system of governance for its public undertakings, underpinned by the participation of all stakeholders, as well as representatives of the staff of those undertakings.

1.13 The services of general economic interest that Member States deliver through public undertakings involve industrial or commercial activities, often in direct competition with those of other companies.

1.14 Among the public undertakings that are evolving in a deregulated, competitive environment, the most prominent example would be network industries (e.g. electricity, gas, electronic communications, transport, postal services); continuous access to and supply of these services – which must be of a high quality and affordable – is vital for not only the public, but also a large proportion of private companies. They thus play a fundamental role in the domestic economy and global competitiveness of a Member State. The same applies to other areas, such as the audiovisual sector, housing, health and social care, where market failures may prevent people from exercising their fundamental rights in one way or another.

2. Purpose of the exploratory opinion

2.1 In its referral letter, the forthcoming Lithuanian presidency specifically asked that the emphasis be placed on enhancing the efficiency of state-owned enterprises and on their importance for national competitiveness. The presidency has requested an analysis of the current situation and good (or bad) practices, which has been lacking at EU level, as has a structural reform as regards assessing the efficiency of such enterprises in the context of economic policy coordination and their impact on the internal market.

2.2 Although EU law applies only to a few specific areas concerning the activities of state-owned enterprises (state aid and services of general economic interest), the forthcoming Lithuanian presidency proposes that EU-level initiatives on the reform of state-owned enterprises be limited to non-legislative measures and that no targets be set for new legal regulation. The privatisation of state-owned enterprises should also remain exclusively a matter for the Member States.

2.3 Finally, the forthcoming Lithuanian presidency regrets that so far, there has been no comprehensive discussion in the existing and planned initiatives and documents of the European Commission of the reform of state-owned enterprises, their governance, boosting their efficiency, and their contribution to competitiveness and achieving the goals of the Europe 2020 strategy. Up to now, action by the Commission and the European Parliament has been limited to two areas: compliance with the rules on state aid and those on the provision of services of general economic interest.

3. The Committee's proposals

3.1 The Committee supports the request from the forthcoming Lithuanian presidency for an analysis of the current situation and good (or bad) practices, as well as a structural reform as regards assessing the efficiency of such undertakings in the context of economic policy coordination and their impact on the internal market.

3.2 The treaties now place a stronger obligation on the EU and the Member States to ensure that services of general economic interest operate effectively, notably by evaluating the performance of such services as part of an ongoing process. Until this is done, evaluations of their performance will not help to meet the needs of the public and of the economy at national and EU levels.

3.3 The purpose of such evaluation is to enhance the effectiveness and efficiency of services of general economic interest and their adaptation to the changing needs of the public and of business. It will also equip public authorities to make properly informed decisions. In addition, it will have a key role to play in achieving a balanced trade-off between markets and general interests, and between economic, social and environmental objectives.

3.4 In its opinion entitled An independent evaluation of services of general interest (2), the Committee put forward practical proposals for laying down at EU level the procedures for exchange, collation, comparison and coordination. It will therefore be up to the EU to stimulate this independent evaluation process, while respecting the subsidiarity principle and the principles set out in the protocol appended to the amended treaties, by defining a harmonised evaluation methodology at EU level. This should be based on common indicators backed by operational provisions, and should be arrived at through dialogue with the representatives of stakeholders.

3.5 As part of its consideration of the way in which public undertakings could contribute more to the EU's economic recovery and competitiveness, the Committee has addressed the issue of Europe's services of general economic interest in a number of opinions.

3.6 A Statute for a European company has been in existence since 8 October 2001. This statute, in use since 8 October 2004, enables companies operating in several Member States to form a single company under EU law and thus apply the same rules: a single system of management and publication of financial information. Companies that adopt this statute thus avoid having to comply with the national legislation of each Member State where they have a subsidiary, thereby reducing their administrative costs.

3.7 Against this backdrop, consideration should be given to introducing a "statute for an EU public enterprise", as proposed by the Commission in 2011 regarding Galileo (3) which is now a "de facto EU public enterprise".

3.8 Specifically, EU public enterprises could be envisaged within the major trans-European infrastructure networks, which are defined as a common policy in the treaties, in the areas of energy or transport. They would cooperate with national or local enterprises in these sectors, in order to implement the new provisions and powers laid down in the Lisbon Treaty, particularly in respect of the EU policy on energy (Article 194 TFEU).

3.9 In its opinion on the Green Paper entitled Towards a secure, sustainable and competitive European energy network (4), the Committee called for studies to be carried out into the timeliness and feasibility of a European energy service of general interest for the benefit of the public, with a common approach to prices, taxation, financial security rules, continuity, economic development and climate protection.

3.10 In the same Green Paper, the Commission argues for the establishment of a European Transmission System Operator by progressively building an independent company to manage a unified gas transport network throughout the EU.

3.11 Such services at EU level, whatever the status of the service provider (public, private, PPP), could bring added value to essential multinational or transnational areas such as security of energy supply, security of water resources, preservation of biodiversity, maintenance of air quality, internal and external security etc., insofar as these services can be delivered more effectively at EU level than at national or local levels.

3.12 The Committee therefore declares its support for public (EU and Member State) private partnerships to increase the security of energy supply and ensure that interconnected energy networks (gas, electricity, oil) are managed in an integrated way. The Committee also supports the development of wind energy networks at sea and the connection of these wind parks to the terrestrial network – which could significantly reduce operating and investment costs and provide greater incentives to invest in new network projects (5).

3.13 In terms of the powers of each Member State, as regards energy-mix for example, the social and societal questions posed by the management and use of natural resources, nuclear energy, climate change, sustainable management and security cut across traditional national borders and can be more satisfactorily addressed through a European concept of the general interest and appropriate services.

3.14 The issue could also be raised of the economic activities of the EU's executive agencies.

3.15 There are currently six of these agencies (6) which together implement programmes for the period 2007-2013 amounting to approximately EUR 28 billion. Most of these programmes fall within areas in which the EU has competence to support the Member States.

3.16 These executive agencies could be considered as a kind of outsourcing of certain Commission functions, and thus the question arises as to whether they are truly independent, while their tasks and responsibilities lead them to be directly involved in socio-economic activities. Is this so far from the broad definition established by the European Court of Justice of the concepts of economic activity and enterprise?

Brussels, 10 July 2013. The President of the European Economic and Social Committee Henri MALOSSE

(1) "The Treaties shall in no way prejudice the rules in Member States governing the system of property ownership." Article 345 TFEU specifies that the EU is to remain neutral on the public or private nature of an undertaking’s shareholders and does not affect Member States’ rules governing the system of property ownership.

(2) OJ C 162, 25.6.2008, p. 42.

(3) Impact assessment on the Proposal for a Regulation on further implementation of the European satellite navigation programme (2014-2020) (SEC(2011) 1446).

(4) OJ C 306, 16.12.2009, p. 51.

(5) OJ C 128, 18.5.2010, p. 65.

(6) The Trans-European Transport Network Executive Agency (TEN-TEA), the European Research Council Executive Agency (ERC), the Research Executive Agency (REA), the Executive Agency for Competitiveness and Innovation (EACI), the Executive Agency for Health and Consumers (EAHC), and the Education, Audiovisual and Culture Executive Agency (EACEA).