COMMUNICATION FROM THE COMMISSION - INTEGRATED PROGRAMME FOR SMALL AND MEDIUM-SIZED ENTERPRISES (SMEs) AND THE CRAFT SECTOR - THE MULTIANNUAL PROGRAMME, CONCERTED ACTIONS AND OTHER COMMUNITY ACTIONS IN SUPPORT OF SMEs
Date: 1996-07-10
Institutions: European Commission
Subjects: EU programme, competitiveness, employment policy, handicrafts, small and medium-sized enterprises

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

Brussels,  10.07.1996 
COM(96) 329 final 

COMMUNICATION  FROM THE COMMISSION 

INTEGRATED PROGRAMME 

FOR 

SMALL AND MEDIUM-SIZED ENTERPRISES (SMEs) 

AND THE CRAFT SECTOR 

THE MULTIANNUAL PROGRAMME, CONCERTED ACTIONS 

AND OTHER COMMUNITY ACTIONS IN SUPPORT OF SMEs 

TABLE OF CONTENTS 

A  GLOBAL  FRAMEWORK  FOR  COMMUNITY  ACTIONS  IN  FAVOUR  OF 

SMES 

I.  The strategic context: the contribution of SMEs to employment 

II.  Pulling together: a coherent framework  for  SME Policy 

III.  The relationship with the  1994 Integrated  Programme 

IV.  The particular role of the Third Multiannual Programme for  SMEs 

V.  Content of the Integrated Programme for SMEs 

PRIORITY MEASURES 

I.  Simplify and improve the administrative and regulatory business environment 

II.  Improve the financial  and fiscal  environment for  enterprises 

III.  Help  SMEs  to  Européanise  and  internationalise  their  strategies,  in  particular 

through better information  and cooperation  services 

IV.  Enhance  SME  competitiveness  and 

improve 
innovation, information  technologies and training 

their  access 

to  research, 

V.  Promote entrepreneurship and support special target groups 

CONCLUSION 

/U 

A GLOBAL  FRAMEWORK  FOR  COMMUNITY  ACTIONS 
IN FA VOUR  OF SMES 

There  is  now  widespread  recognition  that  small  and  medium-sized  enterprises  (SMEs)1 
can  make  a  vital  contribution  to job  creation,  competitiveness  and  growth  within  the 
European  Union. 

Member  States  and  the  Community  already  try  to  unlock  the potential  of  SMEs  through 
an  array  of  measures,  but  many  of  these  initiatives  are  narrowly  targeted  and  too 
disparate  to  be  easily  accessible  by  most  SMEs.  Maintaining  coherence  between  these 
initiatives  and,  in  a  rapidly  changing  economic  environment,  ensuring  that  the  different 
actions  are  directly  relevant  to SMEs  and  their problems  remains  a political  priority  for 
the  Commission. 

The  1994  Integrated  Programme2  was  a first  attempt  to  set  out  a global  framework 
for 
all  Community  actions  in favour  of  SMEs  under  the  various  Community  policies.  It  was 
based  on  the  White Paper  on  Growth,  Competitiveness  and  Employment  and  introduced 
a closer  coordination  and partnership  between  all parties  involved  in SME  development. 

the 
to  the  1995  Madrid  European  CounciP, 
In  its  SME  Policy  Paper  presented 
Commission  developed  a  more  ambitious  policy  in favour  of  SMEs,  highlighting 
that 
targeted  help  to  SMEs  is  a  cost-effective  way  to  support  job  creation.  The  conclusions 
of  that  Council  endorsed  this  approach,  inviting  the  Commission  to put  the  objectives  of 
the Policy  Paper  into practice  as swiftly  as  possible.4 

These  new priorities  and  initiatives  must  now  be set  in  the  context  of  the  existing  action 
programmes  in favour  of  SMEs  so  that  the different  contributions  can  be focused  on  the 
full  range  of strategic  objectives. 

thus  updates  and  develops 

This  Communication 
Programme 
specifically  to  encompass  the  n&v  Community  priorities  for  SME  Policy.  It  is  a  direct 
In  line 
to  the  Commission's  European  Confidence  Pact  for  Employment^ 
follow-up 
with  the  Florence  European  Council6  it  calls  for  an  integrated  approach  whereby 
national,  regional  and 
the  Community 
institutions  each  take practical  action  in favour  of growth  and  employment. 

the  social  partners  and 

the  1994  Integrated 

local  authorities, 

1 
2 
3 

4 
5 
6 

Commission Recommendation  concerning the definition  of SMEs, OJ n° L  107, 30.4.1996, p.4. 
Integrated Programme in favour of SMEs and the Craft  Sector, COM(94) 207 final of 3.6.1994. 
Commission  Communication  of 29.11.1995  on  "Small and Medium Sized Enterprises - A  dynamic 
source  of  employment,  growth  and  competitiveness  in  the  European  Union",  Document 
CSE(95)2087 (hereafter  referred  to as "the Madrid  SME Policy Paper"). 
Conclusions of the Madrid European Council, SI(95)  1000 of  16.12.1995, p. 14. 
CSE(96)  lof5.6.1996. 
Conclusions of the Florence European  Council, SI (96) 500 of 22.6.1996, p.2. 

Coordinating  Community  contributions  in  favour  of  SMEs  and  monitoring  progress  is 
the  Community's  Enterprise  Policy.7  The  Integrated  Programme 
the  essence  of 
demonstrates  its  coordinating  role  with regard  to Member  States'  actions  affecting  SMEs 
and  the  various  contributions  of  Community  policies  and  programmes.  Progress  on  the 
implementation  of 
in  a  regularly  published 
coordination  report.8 

integrated  approach 

is  set  out 

this 

I.  THE  STRATEGIC CONTEXT:  SMEs'  CONTRIBUTION  TO  EMPLOYMENT 

In  its  Madrid  SME  Policy  Paper  the  Commission  stated  that,  although  SME  policy  now 
ranks  higher  than  ever  on  the  political  agenda,  much  more  could  be  achieved  by  a  fresh 
approach  focusing  on  a  number  of  priority  issues.  It  confirmed  that  SMEs,  in  particular 
those  at  the  smaller  end,  now  play  a  key  role  in  terms  of  growth  and  of  generating  new 
jobs. 

SMEs  as job  creators 

SMEs  account  for  99.8% of  all  companies,  66%  of total  employment  and  65% 
of business turnover  in the European  Union. 

Net  job  creation  in  SMEs  has  more  than  compensated  for  job  losses  in  large 
enterprises  during  the  period  1988  to  1995.  During  that  period  enterprises  with 
fewer  than  100 employees have been  responsible for  almost  all job  creation. 

The Madrid  SME Policy Paper  stresses that European  SMEs' full  potential  for  growth  and 
employment  creation  has  not  been  properly  realised  and  that  growth  and  job  creation  in 
failings  which 
SMEs  has  been  inhibited  by  basic  market  and  policy  imperfections  and 
have  not  yet  been  adequately  addressed.  These  imperfections  were  analysed  and  the 
following  remedial  measures  proposed: 

Priority  Recommendations  from  Madrid  SME  Policy  Paper 

Reduce red tape which  hampers European  Entrepreneurship 

Ensure  better  involvement  of  SME  Organisations  in  the  decision-making 
process 

Help finance SMEs which  create new jobs 

Reduce  market  distortions and  inefficiencies 

Vigorous  action  to promote  research,  innovation  and training to  assist  SMEs 

Enhance competitiveness  and  internationalisation  of  SMEs 

See  also  Article  5,  paragraph  2,  of  the  Proposal  for  a  Council  Decision  on  a  Third  Multiannual 
Programme for  SMEs, OJ n° C 156, 31.5.1996, p.5. 
Report on the coordination  of activities  in favour  of SMEs, COM(96) 362 final of 8.9.1995  (Article 
5, second indent, of Council Decision 93/379/EEC of 14 June  1993, OJ N° L 161 of 2.7.1993, p.71). 

Ill 

II. 

PULLING TOGETHER: A COHERENT FRAMEWORK  FOR SME 
POLICY 

In its Resolution  of 22 April  1996 on the coordination  of Community  activities  in  favour 
of SMEs and the craft  sector,9  the Council  highlighted  the need  to  ensure that  the  stated 
priorities in favour  of SMEs be reflected  in real actions in their favour.  For achieving these 
objectives  the  Council  called  for  the  strengthening  of  coordination  of  all  Community 
instruments  and  programmes  and  for  better  coordinating,  as  appropriate,  of  Member 
States' actions in favour of SMEs. 

In line with  this Council  Resolution  and  the provisions  of Article  130 of the  Treaty,  the 
Integrated  Programme  provides  an  appropriate  framework  for  an  increased  coordination 
of policy  measures  for  SMEs. More  specifically,  the  Integrated  Programme  places  in an 
overall  framework  the  full  range  of  Community  measures  in  favour  of  SMEs,  thereby 
helping  to  achieve  greater  consistency,  effectiveness  and  transparency  of  the  individual 
actions. 

The Integrated  Programme  is not  a substitute for  various actions taken  at the national  or 
Community  level,  neither  does  it  involve  any  change  in  decision  making  processes.  Its 
objective  is  to  ensure  a  closer  partnership  between  all  parties  concerned  with  the 
development  of  SMEs  -  at  Community,  national  and  regional  levels  -  with  a  view  to 
enhancing  the  convergence  and  effectiveness  of  measures.  The  Integrated  Programme 
distinguishes between three types of measures: 

Concerted actions with Member States10 

Contributions from the European Union^ 

Integrated  Programme for  SMEs 

to 

1.  measures 
promote  mutual  2.  measures  for  SMEs  developed  under 
consultation  between  Member  States  and  other  relevant  Community  policies  (e.g. 
joint 
concerning actions in favour of SMEs. 

appropriate,  Structural Funds, R&TD, EIB and EIF); 
S M Es  d e v e,o p ed  w i t h in 

3  m e a s u r es  ^ 

co-ordination, 

as 

framework  of 
SME 

the 
specific 
Multiannual SME Programme). 

the  Community's 
the 
(i.e. 

Policy 

The  present  Communication  covers  the  three  elements  of  the  Integrated  Programme.  It 
supplies a frame of reference for the first two elements of the Community SME policy, i.e. 
concerted  actions  between  Member  States  and  the  Community's  contributions  for  the 
development  of  SMEs  through  its  other  policies  and  programmes,  and  sets  out  their 
relationship with the third  element,  i.e. the complementary  and  specific  SME Community 

9 

Council Resolution of 22 April  1996 on the coordination  of Community activities in favour  of SMEs 
and the Craft  Sector, OJ N° C 130, 3.5.1996, p. 1. 

10  See Article  130 §2  of the Treaty. 
11 

i.e.  contributions  through  policies  and  activities  the  Community  pursues  in  the  framework  of  the 
Treaty,  as  well  as  through  specific  measures  in  support  of  action  taken  in  Member  States 
(Article  130 § 3 of the Treaty). 

actions  contained  in  the  proposed  Third  Multiannual  Programme  for  SMRs  ( 1997-
2000).12 

IV 

Main  features  of the  Integrated  Programme  for  SMEs 

The  Integrated  Programme  facilitates  greater  coordination  of  Member  States' 
actions  affecting  SMEs.  It  envisages  "concerted  actions"  which  are  based  on  an 
exchange  of  best  practice  between  Member  States.  The  concerted  actions  aim  at 
increasing  the  efficacy  of Member  State  actions  in  the  field  of  the  improvement  of 
the  business  environment  and  the  stimulation  of  business  support  measures,  in 
particular  through  a better targeting  and  convergence  of policy measures. 

The  Integrated  Programme  also  ensures  better  coordination  of  the  various 
contributions  the  Community  is  making  in  favour  of  SMEs  through  its  various 
poHoies  and  programmes.  The  objectives  of  this  coordination  consist  in  ensuring 
better  recognition  of  the  SME  dimension  in  the  various  Community  policies  and 
programmes,  facilitating  increased  participation  of  SMEs  in  Community  supported 
actions,  and  more effective  consultation  with  organisations  representing  SMEs. 

The  results of the  Commission's  coordination  activities  will  be  evident  from  the  reports  on 
the  inclusion  of the  SME  dimension  in all Community  policies  and  programmes.13 

Hi.  THE RELATIONSHIP  WITH  THE  1994 INTEGRATED  PROGRAMME 

This  Communication  updates  and  develops  the  1994  Integrated  Programme.  It  sets  out  a 
global  framework  for  SME  Policy  which  is based  on  the  same  methodology  while  aiming 
at new objectives  and  presenting  an array of new measures. 

• 

the  same  methodology 

The approach  proposed  in the  1994 Integrated  Programme  remains  unchanged.  It  is based 
on the three types of instruments  described  above  (the  Multiannual  Programme,  concerted 
actions with Member  States  and  other  Community  actions  in support  of SMEs). 

•  enlarged  objectives 

The  1994  Integrated  Programme  was  a  direct  consequence  of  the  Commission's  White 
Paper  on  Growth,  Competitiveness  and  Employment.  It  spelled  out  the  priorities 
formulated  in  the  White  Paper  concerning  the  contribution  of  SME  policies  to  the 
attainment  of  its  objectives.  The  1994  Integrated  Programme  made  a  distinction  between 
measures  aiming  at  improving  the  business  environment  and  those  aiming  at  stimulating 
business  support  services,  while  focusing  on  the  various  stages  of  the  life  cycle  of 
enterprises. 

This  updated  Integrated-  Programme  builds  on 
in  particular  by 
concentrating  the  various  measures  on  the  new  strategic  objectives  identified  in  the 

this  distinction, 

12  OJn°C  156, 31.5.1996, p.5. 
13  Article  5, paragraph  2, of the  Proposal  for  a  Council  Decision  on a Third  Multiannual  Programme 

for SMEs, OJ n° C  156, 31.5.1996, p.5. 

Madrid  SME  Policy  Paper  and  reemphasized  in  the  European  Confidence  Pact  for 
Employment. 

1994 Integrated  Programme 

1996  Integrated  Programme 

1. Improve the business 

environment 

1. Improve the administrative  and 
regulatory  business  environment 
2.  Improve the financial  and  fiscal 

environment 

2.  Stimulate business support 

3. Help  SMEs Européanise and 

measures 

internationalise 

4.  Enhance  SME  competitiveness 
5.  Promote  entrepreneurship  and special 

;.'. 

.. 

••  „.,-,.• 

: 

target  groups 

• 

neyv  actions 

The  formulation  of  an  updated  Integrated  Programme  does  not  imply  that  all  actions  set 
out  in  the  1994  Integrated  Programme  are  completed  or  are  less  relevant.  Actions 
designed  to  meet  the objectives  of the  1994 Programme  will continue to be  implemented. 

Compared  to  the  1994  Integrated  Programme,  this  Communication  sets  out  a  number  of 
additional  initiatives  in favour  of  SMEs  as well  as  identifying  actions  in  the  framework  of 
other  Community  policies  which  will  take  account  of  the  new  priorities  in  their 
implementation.  Some of these  actions  still  have  to  be  adopted  by  the  Council,  or  even  to 
be proposed  by the  Commission. 

Value  added:  new  key  actions 

Concerted  actions 

Actions under  other 
Community policies 

Specific  SME Policy actions 

access of SMEs to the  Information  Society 
forum  on  entrepreneurship 
forum  on  craft  and  small  enterprises 
forum  on commerce 
simplifying  internal  market  legislation  (SLIM) 
loan guarantees  for  employment  (ELISE) 

• 
• 
• 
• 
• 
• 
•  EIF equity  support  for  SMEs 
introduction  of the  Euro 
• 
instrument  for  transnational  investment  within  the 
• 
EU 
support  for  international  cooperation 
innovation  in  SMEs 

• 
• 
•  marketoriented  technological  development 
•  Third  Multiannual  Programme  for  SMEs  (1997-
1 

2000) 

VI 

IV.  THE  PLACE  OF  THE  THIRD  MULTIANNUAL  PROGRAMME  FOR  SMEs 

The  Multiannual  SME  Programme  is an  essential  part  of the  framework  of the  Integrated 
Programme.  It  provides the  legal  and  budgetary  basis for  the  Community's  specific  actions 
in  favour  of  SMEs  which  are  not  covered  by  other  Community  policies.  The  current 
Multiannual  Programme  expires  on  31  December  1996.  The  proposal  for  a  Third 
Multiannual  SME  Programme14  - now  before  the  Council  of Ministers  for  final  adoption  -
aims  at  "maximising  European  SMEs'  full  potential  for  employment,  growth  and 
competitiveness".  It  has  received  the  unanimous  endorsement  of  the  European  business 
organisations  representing  SMEs15  and  will  cover  the  period  1997  -  2000.  The  Florence 
European  Council  has urged  the Council  to  adopt  this Programme  by the end  of  1996. 

V.  CONTENT  OF THE  INTEGRATED  PROGRAMME  FOR  SMEs 

The  synoptic  table  on  the  following  pages  sets  out  the  main  features  and  specific  policy 
actions  of the updated  Integrated  Programme  for  SMEs. 

14  Commission  Proposal  for  a Council  Decision  on  a Third  Multiannual  Programme  for  SMEs  in  the 

European Union (1997-2000). OJ n° C  156, 31.5.1996, p.5. 

15  CCACC, CECOP, CEDI, EMSU, EUROCHAMBRES, EUROCOMMERCE,  EUROPMI, UEAPME, 

UNICE and YES for Europe. 

Vil 

INTEGRATED  PROGRAMME  FOR  SMEs 

Concerted Actions 

Actions  initier other ( oinmnnity policies 

Multiannual  SME  I'rogramme' 

I.  SIMPLIFY  AND  IMPROVE  THE  ADMINISTRATIVE  AND  REGULATORY  BUSINESS 

ENVIRONMENT 

•  Committee on Improving 
and Simplifying  the 
Business Environment 

•  Guidelines  for  regulatory  policy  (including 

_ 

Ti 

, » ,, 

better consultation) 
„., 
,..  . 
Pilot  action  for  simplifying  Internal  Market 
legislation (SLIM) 
^  „ 
,,  ,. 
Follow-up to Mohtor report 
„. 
,r A„ 
Simplify  new common VA 1  system 

• 

• 

• 

•  New approach  to Business  Impact 
(including 

Assessment  System 

methods 

for 

cost/benefit 

, 

.. 

. 
evaluation) 
Transfer  of businesses 

• 

•  Dispute settlement procedures 

•  Appropriate legal instruments 

n. 

IMPROVE  THE  FINANCIAL  AND  FISCAL  ENVIRONMENT  FOR  SMEs 

•  Better access to 

finance and capital 

. 
, 
markets 

, 

•  Better  targeting  of  Community  support  for 
SMEs,  including  EIF  loan  guarantees  for 
,,,,  ,,M.,i  ..... 
employment  at  reduced  rales  (LLISh),-  Ell* 
equity  support  for  SMEs, and  reorientation  of 
Structural  Funds'support,3  EIB  loans 
Fiscal environment  of businesses 
Introduction of the Euro 

• 
• 

• 

• 

• 

Late payment 
„ 

, .„  , ,  _ 

,„»,,-, 
Round  I able Bankers and SMEs 

, 

SME capital markets, including 
EASDAQ 

•  Mutual Guarantee  Schemes 
• 

Factoring and credit  insurance 

l it  H E LP  SMES  TO  EUROPEANISE  AND  INTERNATIONALISE  THEIR  STRATEGIES, 

IN  PARTICULAR  THROUGH  BETTER  INFORMATION  AND  COOPERATION  SERVICES 

•  Administrative 

•  Access to the Single Market 

•  Partner search  networks 

cooperation- 
Single Market 

- More competition and encourage reduction 

State aid 

- Cross-border public procurement 
- Standards and certification 
- Transnational  investment  within the EU4 

•  Access to third countries 

- Reduce trade barriers 
- Improve multilateral  rules on FD1 
- Facilitate international  cooperation  with 
enterprises  in Third Countries5 

*  Direct partnerships 
. 

Promotion  of  European  Economic 
Interest Groupings (REGIE) 

• 

' 

EICs as first stop shops 

"«[working of providers  of market 
information 

IV.  ENHANCE  SME  COMPETITIVENESS  AND  IMPROVE  THEIR  ACCESS  TO  RESEARCH, 

INNOVATION,  INFORMATION  TECHNOLOGIES  AND  TRAINING 

•  Business services 
(including  in  the 
V 
\ 
? 
ot innovation) 
. 

• 

SME actions in the 
field of research 
(CREST) 

r CA/TC 
T 
. 
. 
Information  Society 
,-™,r. 
, 
, 
the needs of SMEs 

field 

•  Competitiveness and modernisation  of SMEs 
- Structural  Funds6 (incl. SME Initiative7) 
,••• 
i  i  • • i 

• 

Promotion of subcontracting 
„r.  x 1% ,,„,,,„., „,.„„ 
•  COMMERCE 2000 

- Industrial  competitiveness 
- Local development  initiatives8 

. 

Innovation  by  SMEs  (e.g.  New 

J 

v  h 

^ 

' 

.  Management  training for SMEs 

•  Action Plan for  Innovation9 
.  Access to R&TD10 

# 
• 

" access to Community R&TD Programmes 
- market-oriented  technological  development 
A c c e sg  of  S M Es  tQ  t he  M o r m a t i on  S o c i e t yi, 
Environmental  requirements12 
i -i 
energy saving'-1 
•  Access to training1'4 

including in the area of new technologies's 

V.  P R O M O TE  ENTREPRENEURSHIP  AND  SUPPORT  SPECIAL  TARGET  GROUPS 

• 
• 

Entrepreneurship 
Forum on Craft  and 
small enterprises 

• 

Forum on Commerce 

Follow-up White Paper on Education 

• 
•  Access of craft  enterprises to Single Market 

• 
Promote entrepreneurship 
•  Craft  and small  enterprises 

„, 

,, 
•  Women entrepreneurs11' 

,, 

,  ,. 

., 

•  Commerce and distribution 

•  Women and young entrepreneurs 

vin 

Principal  Sources of Finance 

Financial instrument for transnational  investments by SMEs within the EU; 

European loan insurance scheme for employment  (ELISE): ECU 25 million (in  1996); 

1  Multiannual  Programme for  SMEs  1997-2000  : budget proposed: ECU  180 million; 
2 
3  New orientation of Objective 2 Support (ECU 8.15 billion for  1997-1999); 
4 
5  MED-INVEST  1997-2000:  ECU  million;  AL-INVEST  1995-2000:  ECU  41  million;  AS-INVEST 
1996-2000: ECU  32  million; ECIP  1995-1999: ECU  250  million;  JOP PHARE/TACIS  1996-2000: 
ECU 70 million; 
Structural  Funds  1994-1999:  Community  Support  Frameworks,  Community  Initiatives  and  pilot 
projects; 
Community Initiative for SMEs  1994-1999: ECU  1  billion; 
LEADER  Community  Initiative  1994-1999:  ECU  1.4  billion  and  URBAN  Community  Initiative 
1994-1999: ECU 0.6  million; 
Follow-up of the conclusions of the Florence European Council; 

9 
10  4th  Framework  Programme  R&TD  1994-1999:  various  projects  accessible  to  SMEs  within  [ 12.3] 

7 
8 

6 

billion allocation; 
ISAC: ECU 44 million; 

11 
12  Growth and Environment Pilot Project: ECU  14 million  in  1996 (+ 5 MECU in  1997); 
13  THERMIE II: ECU 500 million; SAVE II: ECU 45 million; 
14  ADAPT  Community  Initiative  1995-1999:  ECU  2.9  billion  (of  which  1.4  billion  ECU  from  the 
Structural  Funds);  LEONARDO  1995-1999:  ECU  620  million;  Training  and  Mobility  of 
Researchers Programme (1995-1998): ECU 744 million; 

15  ADAPT-BIS reinforcement  of the ADAPT Initiative  1997-1999:  ECU  162 million; 
16  EMPLOYMENT  NOW:  ECU  100  million;  European  Social  Fund  (local  employment  initiative  for 

women) and European Regional Development  Fund. 

PRIORITY  MEASURES 

I.  SIMPLIFY  AND  IMPROVE  THE  ADMINISTRATIVE  AND  REGULATORY 

BUSINESS  ENVIRONMENT 

European  enterprises  face  an  increasingly  complex 
legal,  fiscal  and  administrative 
environment.  While  the  cost  of  non-regulation  has  never  been  measured,  the  total  annual 
cost  of administrative  burdens  on  all  enterprises  in Europe  has been  estimated  at  between 
180  and  230  billion  ECU16.  Although  part  of  this  burden  is  unavoidable,  what  matters 
most  is  the  relatively  much  higher  impact  on  SMEs  than  on  large  companies  (see 
following  box).  SMEs  do  not  have  the  resources  to  cope  with  this  burden  and  often 
cannot  afford  outside help. 

Administrative  burdens  on  SMEs 

According  to  a  German  study17, 
the  average  time  spent  by  businesses  on 
administrative  work  amounts  to  over  700  hours  a  year.  A  business  with  up  to  9 
employees devotes  62  hours  per  employee  to  administrative  formalities.  For  a  larger 
company,  however,  this figure  is much  lower  at  5  1/2  hours.  The  same  study  stated 
that  the  relative  cost  of  administrative  burdens  per  employee  is  up  to  more  than  20 
times  higher  in  smaller  enterprises  than  in  larger  ones.  Administrative  complexity  is 
particularly important  in the areas of labour,  environmental  and  tax  legislation. 

Such  compliance  costs  discourage  new  business  creation  and  recruitment.  Reducing  the 
structural  bias  against  SME  creation  and  development 
resulting  from  excessive 
bureaucracy  is therefore  of primary  importance  particularly  at  national  level.18 

Early  consultations  of  SME  organisations  are  a prerequisite  for  a  successful  policy  in  this 
context.  Member  States  and  the  Commission  should  improve  consultation  of  SME 
organisations  when  preparing  policies  of  relevance  to  them,  and  should  encourage  their 
in 
involvement.  The  participation  and 
full 
Community  structures  needs further  consideration. 

representation  of  SME  organisations 

The issue  of representation  of SMEs  in the  autonomous  social  dialogue  at  European  level 
is  a  sensitive  and  controversial  matter.  The  Commission  expressed  its  position  on  this 
matter  in  its  1993  Communication  on  the  application  of  the  Social  Protocol.  The 
Commission  will  review  the  state  of  play  on  this  issue  in  its  forthcoming  Communication 
on the  Social Dialogue  to be adopted  in the second  half of  1996. 

16 
17 

18 

European Observatory  for  SMEs, Third  Annual  Report,  1995. 
1995  study  by  the  Institut  fur  Mittclstandsforschung.  Similar  figures  are  contained  in  the  1996 
Report  submitted  by  the  Committee  m  Enterprise  Creation  established  by  the  Danish  Ministry  of 
Economic  Affairs. 
Commission  SME Report for  the Madrid European  Council,  CSE(95)  2087, p. 10 and  Single Report 
from  the Council and the Commission on Employment,  SI(95)  1000, Part B, Annex 2, p. 15. 

A±> 

A.  CONCERTED  ACTIONS 

An important  step  in this direction  has been taken  in the  framework  of the  1994  Integrated 
Programme  by  creating  the  Committee  on  Improving  and  Simplifying  the  Business 
Environment.  This  Committee  is  the  expression  of  the  joint  commitment  of  Member 
States  and  the  Community  to  a  policy  of  administrative  and  regulatory  simplification.  It 
constitutes  the framework  for  an  exchange  of best  practice  in this field.  In  order  to  ensure 
a practical follow  up, the  results  of the Committee's  work  will be  set  out  in a report  to  the 
Council  and  where  appropriate  in recommendations  to the Member  States. 

The first  indications  from  the workings  of this  Committee  have  shown  that  some  Member 
States  have  developed  a  bold  strategy  for  administrative  simplification.  The  experience 
gained  from  the  relevant  work  programmes  should  lead  other  Member  States  to  adopt 
similar  programmes  as  suggested  by  the  Molitor  Report19,  with  specific  dates  and  targets 
in  terms  of  reductions  of  costs  for  SMEs.  The  Committee  will  also  develop  common 
criteria  for  bench  marking  in  the  area  of  administrative  simplification.20  A  beginning  will 
be  made  during  the  discussions  of  the  working  groups  which  have  been  created  by  the 
Committee  in the wake  of the Paris Forum  of June  1995  and  which  will  examine  inter  alia 
simplified  start-up  procedures  for  new  SMEs  as well  as the  automatic  granting  of  licences 
or  authorisations  failing  reaction  from  the  administrative  authorities  in a given  time  period 
following  receipt  of an  application. 

The  work  programme  of the  Committee  will  continue  to  build  on  the  approach  based  on 
the  life-cycle  of  enterprises  (creation,  development  and  transfer  of  businesses)  and  in 
addition  focus  on  the  priority  areas  identified  in  the  Madrid  SME  Policy  Paper,  in 
particular the simplification  of environmental  and tax  legislation. 

As  regards  the  simplification  of  labour  legislation21  and  the  introduction  of  more  flexible 
working  time,  the joint  report  of  the  Council  and  the  Commission  on  employment22  has 
led  the  Madrid  European  Council  to  confirm  these  priorities  for  a joint  action.  This  is 
another  important  area  in  which  the  exchange  of  best  practice  can  lead  to  co-ordinated 
action between Member  States. 

19  Report  of  the  Group  of  Independent  Experts  on  Legislative  and  Administrative  Simplification, 

COM(95) 288 final  of 21.06.1995, p.83. 

20  The  benchmarking  approach  will  be  followed  also  in  Concerted  Actions  concerning  support 

measures. 

21  For  instance,  measures  to  adapt  provisions  on  recruitment,  maintenance,  lay-off  of  workers  and 
maternity  leave  to  be  more  flexible  and  operational.  In  addition,  measures  could  be  introduced  to 
adopt  more  consistent  thresholds  for  SMEs  in  order  to  compensate  for  the  cost  disadvantage  of 
SMEs vis-à-vis large competitors. 

22  Single Report from  the Council and the Commission  on Employment,  SI(95)  1000 of  16.12.95, part 

B, Annex 2, p. 16. 

B. 

C O M M U N I TY  C O N T R I B U T I O NS 

A  number  of  measures  concerning  simplification  of  Community  legislation  have  been 
taken  already  such  as  the  implementation  of  the  business  impact  assessment  system  and 
the follow-up  given by the Commission  to the recommendations  of the Molitor  group.23 

New  measures  will  include  the  implementation  of  the  recently  adopted  guidelines  for 
regulatory  policy  which  will  improve  the  quality  of  Community  legislation  and  lead  to 
better  consultation  of interested  parties,  including  SME  organisations.  An  improved,  more 
pragmatic  method  for  the  implementation  of cost/benefit  evaluation  is foreseen  among  the 
measures to be taken  in the framework  of the Third  Multiannual  Programme  for  SMEs. 

legislation 

In  the  specific  area  of  Internal  Market 
the  Commission  has  recently 
strengthened  its ongoing  efforts  of legislative  simplification  by launching  a Pilot  Project  to 
assess  how  best  to  reduce  the  burden  on  business  of  Single  Market  rules  in  particular 
sectors.  The exercise  will  provide  a test  bed  for  more  wide  ranging  actions.  The work  will 
be  carried  out  by  small  teams  each  devoted  to  the  examination  of a particular  area.  These 
"SLIM"  teams  will  bring  together  the  Commission,  representatives  from  Member  States 
and those  concerned  by legislation  such  as business,  including  SMEs.  They  will  also try  to 
identify  any  aspects  of  national  legislation  affecting  the  Single  Market  that  might  result  in 
unnecessary  burdens.  The  Florence  European  Council  calls  on  the  Commission  to  submit 
to  the  Council  before  the  end  of  1996  the  initial  results  of  its  initiative  on  practical 
simplification  measures. 

In  the field of  social  legislation,  the  Social  Policy  Action  Programme24  includes  proposals 
for  revising,  clarifying  and  consolidating  Community  Directives,  in  particular  in  the  areas 
of  transfers  of  undertakings25  and  collective  dismissals26,  and  the  codification  and 
simplification  of  the  Community  Regulations  coordinating  social  security  schemes27. 
SMEs  should  remain  involved  in this  process. 

to  ensure 

As  regards  the  Community's  environmental  legislation  the  Commission  will  continue  to 
propose  means 
integrate  environmental 
that  companies  are  able 
considerations  in  their  policies  in  a  more  flexible  and  simple  way.  This  involves  the 
simplification  of  existing  legislation,  including  repealing  outdated  legislation  and,  where 
appropriate,  the  adapting  of  this  legislation  to  make  it  more  receptive  to  market-based 
instruments,  including  negotiated  or  voluntary  agreements.  This  approach  would  then 
support  traditional  regulatory  action,  thereby  reducing  the  need  for  further  command  and 
control  type  regulations. 

to 

23  Commission  Comments  on  the  Report  of  the  Group  of  Independent  Experts  on  Legislative  and 

Administrative  Simplification,  COM(95) 596 final. 

24  COM(95)  134 final of  12.04.1995. 
25  Council  Directive 77/187/EEC of  14.02.1977 on transfers  of undertakings. OJ L 61 of 5.3.1977. 
26  Council Directives 75/129/EEC and 92/56/EEC on collective redundancies, OJ L 245 of 26.8.1992. 
27  Council Regulations  1408/71/EEC and 574/72/EEC, OJ L 335 of 30.12.1995. 

Of  primary  importance  also  will  he  the  proposal  for  a  simple  Common  VAT  system  for 
the  Single  Market  which  I he Commission  intends  to  submit  as  icqucslcd  by  the  Council  1H 
In  this  context  the  Commission  is  proposing  a  working  programme  for  a  Common  VAT 
system.29  After  consultation  with  Member  States  proposals  will  be  made  aiming  primarily 
at the following  objectives : 

•  Ensure  equal  treatment  of  domestic  and  intracommunity  trade  in goods  and  services, 
in  order  to  allow  SMEs  to  operate  from  their  place  of  establishment  throughout  the 
Community  without  facing  additional  administrative  burdens; 

•  Reduce  uncertainty  and  complexity 

in  the  application  of  VAT,  by  providing 
businesses  with  a  Common  VAT  system  which  is  uniformly  applicable  and  which 
meets the requirements  of a true  Single Market; 

•  Reduce  the  uncertainty  caused  by  different  interpretation  of  the  rules,  by  considering 
a  new  role for  the VAT  Committee.  As is already  the case  in the field of customs  and 
excise  duties,  the  Council  could  confer  upon  this  Committee  the  task  of  assisting  the 
Commission  in adopting  implementing  measures. 

28  Conclusions of the Council of 24.10.1994. 
29  A Common  VAT system for the Single Market, COM(96) 328. 

IL  IMPROVE THE  FINANCIAL  AND  FISCAL  ENVIRONMENT  FOR  SMEs 

Compared  to  larger  firms,  SMEs  are  much  more  dependent  on  internal  sources  of  funds 
(i.e.  owners' own  capital  and  retained  profits)  than  external  sources  of finance.  They  often 
have problems  accessing  bank  loans  at  reasonable  rates,  or  raising  equity  on  the  markets, 
and  frequently  rely  on  informal  sources  (family,  friends)  for  external  funding.  The  Madrid 
SME Policy Paper  identified  a number  of failures  in the financial and  fiscal  environment  of 
SMEs which  hamper their  development. 

Key  problems  in SMEs'  financial  and  fiscal  environment 

Under-capitalisation  of European  SMEs 

Difficulties  in obtaining  loans 

Absence of a European  capital  market  for  SMEs 

Problems of late  payment 

Preparation  for  the introduction  of the  Euro 

A.  CONCERTED  ACTIONS 

While  the  issue  of  a  better  access  to  finance  and  capital  markets  for  SMEs  has  been 
addressed  in  part-10  this  topic  warrants  more  specific  attention.  Therefore  the  Commission 
will organise a special  forum  for  the exchange  of best  practice  in this field. 

As regards the reduction  of non-wage  labour  costs  resulting  from  national  regulations,  the 
Commission  has pointed  out  that  relatively  high  taxes  and  social  security  contributions  on 
labour  hit  SMEs  hardest.  The  need  to  shift  taxes  away  from  labour  was  again  emphasised 
in the  Commission's  recent  Discussion  Paper  on  "Taxation  in  the  European  Union".31.  In 
this  context  the  Florence  European  Council  requested  the  Council  to  submit  a  report  on 
the  development  of  tax  systems  within  the  Union,  taking  account  of  the  need  to  create  a 
tax environment  that  stimulates  enterprise  and  the creation  of jobs.32 

B.  COMMUNITY  CONTRIBUTIONS 

The  Third  Multiannual  SME  Programme  includes  a  number  of  initiatives  to  improve  the 
financial  environment  of  SMEs  (e.g.  late  payment,  Round  Table  of  Bankers  and  SMEs, 
mutual  guarantee  schemes,  factoring  and  credit 
insurance,  pilot  scheme  for  New 
Technology  Based  Firms,  capital  markets  for  fastgrovving  SMEs).  These  measures 
complement  those  taken  under  other  Community  policies  to  improve  the  financial 
environment  of SMEs. 

30 

In the framework  of the  1994  Integrated  Programme, a Concerted  Action  (n° 2) has been  organised 
to exchange best  practice  in  the field of business  support  measures  including  financial  instruments 
for business start-ups. 
31  SEC(96) 487 of 20.03.1996 
32  Conclusions of the Florence European  Council, SI (96) 500 of 22.6.1996, p.3. 

1. Better  targeting  of  Structural  Policies  towards  SME  development 

6 

The  Commission's  European  Confidence  Pact  for  Employment-"  highlights  the  need  for  a 
better  orientation  of  Community  financial  instruments  (including  European  Investment 
Bank  (EIB),  European  Investment  Fund  (EIF)  and  budgetary  support 
instruments) 
towards  SME  development. 

In  this  context  the  Commission  has  proposed  a  European  Loan  Insurance  Scheme  for 
Employment  (ELISE).34 Under  this scheme  the Community  will bear the cost  of  premiums 
for  guarantees  extended  by  the  EIF.  Particular  priority  will  be  given  to  small  enterprises 
(fewer  than  50  employees).  This  Programme  builds  on  the  experience  gained  through  the 
"Growth  and Environment"  pilot  project. 

The  SME  Report  for  the  Madrid  European  Council  highlighted  the  need  to  increase  the 
supply  of  equity  capital  for  SMEs  through  the  EIF.  Following  the  favourable  decision  by 
the EIF's General  Meeting  on  18 June  1996,  sufficient  amounts  will be invested  by the  EIF 
in  order  to  provide  a  leverage  to  the  capital  of  financial  intermediaries  such  as  venture 
capital  funds.  This will  have a beneficial  effect  on  the access of SMEs  to venture  capital. 

In  the  area  of  the  Community  structural  funds  the  Commission  recently  proposed 
guidelines35  in  the  perspective  of  the  negotiations  of  the  second  programming  period 
1997-1999  for  the  declining  industrial  areas  (Objective  2  areas)  where  the  first  priority  is 
recognised  as  competitiveness  and  the  development  of  SMEs.  In  addition,  the  Florence 
European  Council  subscribed  to  the  Commission's  recommendation  to  focus  structural 
policies  more  on  job  creation,  in  particular  by  concentrating  available  margins  of  the 
structural  funds  for  the  support  of SMEs in partnership  with  the EIB.36 

More  generally,  SMEs  are  still  not  benefiting  sufficiently  from  many  Community  actions 
and  programmes  compared  to  their  share  of  economic  activity  and  their  employment 
growth  potential.37  The  Commission  will  therefore  identify  ways  to  enable  SMEs  to  fully 
participate  in  all  Community  programmes.  Concrete  action  under  the  SME  Multiannual 
Programme  will  include  a  Recommendation  to  Member  States  on  ways  to  increase  the 
share  of SMEs  in Community  policies  and  programmes.38 

33  CSE(96)  1 final of 5.6.1996. 
34  Proposal  for  a  Council  Decision  on  the provision  of  loan  guarantees  for  investments  carried  out by 

SMEs creating employment, OJ N° C 146, 21.5.1996, p.6. 

35  Note for guidance concerning operations in the declining industrial  areas (objective 2) for the second 

programming period  1997-1999, C(96) 952, April  1996. 

36  Conclusions of the Florence European  Council, SI (96) 500 of 22.6.1996, p.4. 
37  For instance, in the area of the Structural  Funds (See Annual  Report of the Court of Auditors (1994), 

OJN°C  303 of  14.11.1995, p. 140), R&TD and  international  co-operation  programmes. 
38  Third Multiannual  SME Programme,  Section  II. A. 1  of the Explanatory  Memorandum. 

7 
2. Improve the  fiscal  environment  of  SMEs 

-  Tax treatment  of  transnational  operations  of  SMEs 

The  recent  Commission  Discussion  Paper  on  "Taxation  in  the  European  Union"39 
highlighted  the  complaints  of  businesses  involved  in  transnational  trade.  The  list  of 
problems is long and  includes the treatment  of permanent  establishments  of  SMEs  in  other 
Member  States  compared  to  domestic  companies,  cross  border  interest  and  royalty 
payments and  losses of permanent  establishments  and  subsidiaries  in other  Member  States. 
As a follow-up  to  this Discussion  Paper  the  Commission  will  present  a communication  on 
direct  taxation  which  will  focus  on  the  needs  and  challenges  of  a  properly  functioning 
single  market.  The  Commission  identified  relevant  areas  in  which  the  Single  Market  does 
not  appear  to  be  working  effectively  as  cross-border  interest  payments,  taxation  of 
permanent  establishments40  and  the  adequacy  of  bilateral  tax  conventions  for  a  fully 
developed  Single Market.41 

- Adjust  the fiscal  environment  to SMEs'  needs 

The  Single  Report  from  the  Council  and  the  Commission  on  Employment  emphasised  the 
need  to  adjust  the  fiscal  environment  of  SMEs42.  In  this  context  the  Commission  will  in 
particular  ensure  a  further  response  to  the  Communication  of  25  May  1994  on  the 
improvement  of  the  tax  environment  of  SMEs.43  This  Communication  covered  four 
priority  areas:  self-financing,  fiscal  treatment  of venture  capital,  administrative  complexity 
and  transfer  of  businesses.  On  the  issue  of  self-financing,  the  Commission  has  adopted  a 
Recommendation  to the Member  States.44  A Recommendation  has also  been  addressed  to 
Member  States in the area  of transfer  of businesses.45 

An important  issue  is the  under-capitalisation  of  European  enterprises  in  comparison  with 
their  counterparts  elsewhere.  This  is  partly  because  national  tax  systems  in  the  European 
Union  discriminate  in  favour  of  debt  financing  and  against  equity  financing.  SME^s  are 
particularly  affected,  since they  have  fewer  financing  options  than  large  enterprises.  In  line 
with  the  Madrid  SME  Policy  Paper,  the  Commission  will  identify  best  practices,  where 
appropriate  by recommendation,  with  a view  to  ensure  more  even  handed  tax  treatment  of 
equity and  debt  financing. 

39  SEC(96) 487 of 20.03.1996. 
40  This  issue was dealt  with  in  the  Commission  Communication  of  25.5.1994  on  the  improvement  of 
the  tax  environment  of  SMEs  (COM(94)  206  final  of  25.5.1994).  This  would  imply  to  tax  the 
foreign  activities  of  SMEs,  under  certain  conditions,  only  in  the  Member  State  of  residence  of  the 
enterprise.  The  result  would  be a  major  simplification  for  the  enterprises  concerned  as  they  would 
only have to deal with one tax system which would lead to less compliance costs. 

41  SEC(96) 487 of 20.03.1996 
42  SI(95)  1000 of  16.12.1995, part  B, Annex 2, p. 15. 
43  COM(94) 206 final of 25.5.1994. 
44  OJN°L177of9.7.1994,  p.l. 
45  Commission  Recommendation  on  the  transfer  of  small  and  medium-si/.cd  enterprises,  COM 

(94)3312 of 07.12.94 

3.  Preparation  of SMEs  to  the  introduction  of the  Euro 

Economic  and  Monetary  Union  will  have  positive  effects  on  business,  both  from  the 
macroeconomic  and  microeconomic  point  of  view.  Transition  to  a  single  currency  will 
require  careful  preparation.  Thus,  special  attention  should  be  paid  to  the  most  vulnerable 
groups  of  users,  among  them  SMEs  and  especially  SMEs  in  the  commerce  sector.  The 
Commission  has  already  widely  consulted  interested  parties,  including  SMEs,  and  intends 
to  continue to  consult  them. 

the  interests  of  SMEs  such  as  the  professional  organisations 
Those  who  defend 
representing  SMEs,  commerce,  tourism,  accountants,  banks  and  chambers  of  commerce, 
at  European  and  national  level,  must  take  up  their  cause  and  guarantee  them  the  support 
they  need.  Among  the  aforementioned  groups,  the  Commission,  given  its  privileged 
position,  has  a  special  role  to  play.  The  Commission  will,  on  the  one  hand,  make  sure 
SMEs  are  given  full  consideration  throughout  the  process  of  developing  Euro  related 
regulations,  and  on the  other  include  an  SME  focus  in  its information  and  communication 
strategy  on  the  Euro.  This  latter  means,  encouraging  SME  groups  to  launch  information 
campaigns  and,  providing  them  with  the  necessary  support  through  the  Euro-Info-Centre 
Network  (EICs).  The  latter  will  have a key  role to  play,  particularly  as regards  identifying 
problems  SMEs  will  have  to  confront  and  in  disseminating  proposed  solutions.  The 
Commission  has recently  launched  an  information  programme  called  "Euro:  one  currency 
for  Europe".  In this programme  special  attention  will be given  to  providing  information  to 
SMEs concerning  the implications of the single currency  on  them. 

III. 

HELP SMES TO EUROPEANISE AND  INTERNATIONALISE 
THEIR STRATEGIES,  IN PARTICULAR THROUGH  BETTER 
INFORMATION  AND COOPERATION  SERVICES 

Despite  clear  evidence  that  the Internal  Market  legislative  programme  has already  begun 
to  reap  benefits  for  business,  SMEs  in  particular  are  still  having  difficulties  in  gaining 
access to parts of the market.  Similar and arguably greater barriers exist in accessing third 
markets. The major problems include: 

Barriers to Europeanisation and internationalisation of SMEs 

distortions of competition; 

delays in national transposition and differences  in compliance and  enforcement; 

difficulties  in accessing standards and  certification; 

barriers to participation in public procurement; 

lack of comprehensive market intelligence; 

difficulties  in identifying  suitable partners. 

A.  CONCERTED ACTIONS 

in  compliance,  interpretation  and 
Delays  in  national  transposition  and  differences 
enforcement  cancels out  the harmonisation  effect  of Community-wide  legislation,  thereby 
creating  barriers  for  the  Europeanisation  of  SMEs.  The  Florence  European  Council 
emphasised  once  again  the  essential  contribution  made  by  the  internal  market  to 
promoting  growth  and  employment.  It  called  on  Member  States  to  speed  up  the  full 
implementation  of the Directives concerning the internal  market, in particular in the public 
procurement, investment services and insurance  fields.46 

legislation  recommending 

In line with  a Council  Resolution  of  10 October  1994 on  support  measures  for  SMEs47, 
the  Commission  recently  issued  a  progress  report  on  the  enforcement  of  the  internal 
market 
in  national 
administrations  to  help  enterprises,  in  particular  SMEs,  to  deal  with  possible  intra-
Community  trade  barriers.  Such  contact  points  for  enterprises,  which  already  exist  in 
some  Member  States,  should  be  linked  to  the  inter-administration  network,  to  which 
SMEs do not  have direct  access.  In  this way  solutions  to  their  problems  could  be  found 
more rapidly. This will complement  the Commission's efforts  to  step up actions to  ensure 
an efficient  treatment of complaints against intra-Community trade barriers. 

the  setting  up  of  contact  points 

The  move towards  Economic  and  Monetary  Union  will  also  favour  the  Europeanisation 
and internationalisation  of SMEs, in particular by reducing costs in trading  internationally. 
Compared to large enterprises these costs are higher for SMEs. 

46  Conclusions of the Florence European Council, SI (96) 500 of 22.6.1996, p.2. 
47  Council  Resolution  of  10.10.1994  on  giving  full  scope  to the  dynamism  and  innovatory  potential  of 
SMEs,  including  the  craft  sector  and  micro-enterprises,  in  a  competitive  economy,  OJ  n°  C  294  of 
22.10.94, p.6. 

B. 

C O M M U N I TY  C O N T R I B U T I O NS 

1. Euronennisation  of SMEs:  exploiting  the  full  potential  of  the  Single  Market 

a. Improve  information  and  cooperation  services  for  SMEs 

European  SMEs  often  lack  access  to  essential  information  on  markets  in  other  Member 
States  and  on  Community  SME  programmes.  They  also  have  difficulties  in  identifying 
suitable  partners.  The  Third  Multiannual  Programme  for  SMEs  therefore  proposes  new 
measures  in the  field  of  information  services  (e.g.  the  strengthening  of  the  role  of  Euro-
Info-Centers  as  "first-stop-shops"  and  the  networking  of  providers  of  global  or  regional 
market  intelligence).  In  addition,  the  new  Multiannual  Programme  will  give  further 
impetus  to  Community  instruments  which  facilitate  business  cooperation  and  partnerships 
between  SMEs and  large enterprises  and  also between  small  enterprises  themselves. 

b. Strengthen  competition  and  reduce  distortions  from  State  Aid 

The  Madrid  SME  Policy  Paper  and  the  Single  Report  from 
the  Council  and  the 
Commission  on  Employment48  emphasised  that  the  completion  of the  Single  Market  must 
be  supported  by  a vigorous  competition  policy  in order  to  eliminate  excessive  rigidities  in 
the  product  and  services  markets  (for  example,  in  the  telecommunications  and  energy 
markets).  In  particular,  a number  of structural  constraints  must  be  removed  in  order  to  let 
the  potential  for  enterprise  and  employment  creation,  in particular  in the  service  sector,  be 
exploited  to the full.  The Commission  will therefore  pursue its efforts  to: 

• 

• 

• 

Promote  competition  in  those  fields  where  there  are  still  monopolistic  practices,  for 
instance in the energy  markets49 

Encourage  the  reduction  of  the  level  of  State  aid,  taking  account  of  regional 
differences  and  other  Community  objectives,  by  subjecting  it  to  tighter  control  (as 
recommended  by the  Council).50 

Examine  the  need  for  clarifying  the  Community  competition  rules  applicable  to  co 
operation  between  SMEs,  for  example,  co-operation  in  networks  for joint  purchases 
and  sales.51 
In  addition,  the  Commission's  forthcoming  Green  Paper  on  Vertical 
Restrictions  will  in  particular  deal  with  relations  between  producers,  wholesalers  and 
retailers.  During  the  last  twenty  years,  growing  concentration  among  commercial 
enterprises  and  the  development  of  new  forms  of  co-operation  has  made  it  vital  to 
ensure  that  the  conditions  for  fair  competition  between  economic  actors  exist,  whilst 
guaranteeing  the same market  opportunities. 

48  SI(95)  1000, part  B, annex  2, p. 15. 
49  See  the  political  agreement  reached  within  the  Council  on  20  June  1996  concerning  a  common 

position on the liberalisation  of the electricity  market. 

50  Council  Conclusions of 6-7 November  1995 on competition  policy and  industrial  competitiveness. 
51  Council Resolution of  10 October  1994, OJ N° C 294 of 22.10.94, p.6. 

11 

c. Facilitate  access  to cross  border  public  procurement 

Public  procurement  markets  represent  approximately  15  %  of  combined  GDP  in  the 
European  Union.  However,  the  share  of  SMEs  in these  markets  is  not  proportionate  to  their 
importance  in  the  economy.  In  order  to  facilitate  access  by  SMEs  to  transnational  public 
procurement  markets  the  Commission  will  adopt  a  report  to  the  Council  on  measures  to 
assist  SME  participation  in  public  procurement.  This  report  will  list  a  number  of  actions  in 
this field including the following  measures: 

• 

• 

• 

• 

• 

• 

the  review  of  the  effectiveness  of  existing  services  which  provide  facilities  not  readily 
available  to  SMEs  because  of their  si/.e,  but  which  are  an  essential  ingredient  of  success 
in public procurement  markets; 

action  to  ensure  that  the  European  Economic  Interest  Grouping  (EEIG)  can  participate 
on  an equal footing  when bidding for  public  contracts,  so that  they  may be better  utilised 
as  a  vehicle  whereby  SMEs  may  combine  resources.  The  Commission  will  produce  a 
Commission  Communication  on this issue by the end  of  1996; 

examine methods  of improving the prospects  of smaller  subcontractors; 

the promotion  of open  and  simpler procurement  practices  among contracting  entities; 

enlarging  and  improving  information  on  sub-threshold  contracts,  contracting  authorities, 
national  rules and  European  standards  and  technical  requirements  readily  accessible  in an 
easily comprehensible  format; 

speeding  up  the  introduction  of  information  technology,  such  as  SIMAP,  in  order  to 
provide  SMEs  and  networks  serving  them,  especially  in  frontier  areas,  with  more 
detailed  information,  for  example,  on products  and  smaller  contracts. 

a\ Standards  and  certification 

The  Europeanisation  and  internationalisation  of  SMEs  is  still  hampered  by  persisting 
technical  barriers  to  trade.  Within  the  EEA  these  barriers  result  from  the  lack  of 
acceptance  of  the  mutual  recognition  principle, 
the  slow  pace  of  the  European 
standardisation  process  and  the  lack  of  SME  involvement.  Additional  costs  appear  for 
SMEs  when  European  standards  are  adopted  and  outdated  national  standards  have  to  be 
withdrawn.  Though  voluntary  in principle, these European  standards  have to be applied  by 
all  SMEs,  irrespective  whether  they  produce  for  the  national  or  European  market,  if they 
want  to  stay in the  market. 

12 
With  a view  to  alleviate  these  problems the  Commission  will take the following  measures: 

• 

• 

• 

increase  its  effort 
European  technical  standard  setting  process; 

to  encourage  the  participation  of  SME-intermediaries 

in  the 

inform  SMEs  of  their  rights  in  the  case  of  denial  of  the  benefit  of  the  principle  of 
mutual  recognition  of  national  standards  by  public  or  private  purchasers  and 
encourage  them  to  lodge  complaints; 

strengthen  actions  to  better 
European  standardisation  and  certification; 

inform  SMEs  of  the  opportunities  resulting  from 

H  encourage  the  European  standardisation  Committees  to  give  priority  to  performance 

standards  instead  of product  standards. 

e. Facilitate  transnational 

investment  by SMEs  within  the  EU 

Less  than  3%  of  Community  enterprises  (about  460.000)  engage  in  transnational 
activities.  In view  of the  employment  and  growth  potential  of  SMEs  a considerably  higher 
number  of  European  enterprises  should  be  encouraged  to  participate  in  transnational 
trade.  One  of  the  major  factors  which  discourages  SMEs  to  make 
transnational 
investments  relates to the financing of such  operations. 

Currently,  the  banking  system  is  not  sufficiently  meeting  requirements  and,  with  the 
exception  of  the  specific  provisions  on  transnational  investment  contained  in  the  ELISE 
scheme,  no  financial  instrument  exists  for  supporting  SMEs  willing  to  make  transnational 
investments  or  considering joint  venture  agreements  with  businesses  from  other  Member 
States.  The  experience  with  financial  instruments  for  stimulating  co-operation  between 
Community  SMEs  and  enterprises  from  third  countries  (e.g.  JOP  and  ECIP)  suggests  that 
similar  initiatives  within  the  Community  would  yield  significant  results,  in  particular  in 
view  of  the  need  to  stimulate  investments  with  growth  and  employment  potential.  The 
transnational  nature  of these  instruments justify  a Community  initiative in this field. 

Therefore  the Commission  will  consider  the  possibility  of launching  of a pilot  project  for  a 
Community  financial  instrument  with  a view  to  encouraging  cross-border  investment  and 
joint  ventures  within  the  Union.  Such  an  instrument  would  be  designed  to  support, 
through  a  network  of  banks  and  venture  capital  funds,  the  efforts  of  SMEs  who  are 
creating  or  developing  an activity  in another  Member  State. 

The  pilot  project  would  cover  all  the  necessary  steps  involved 
in  a  cross-border 
investment,  such  as  a  company's  general  activity  with  respect  to  accessing  new  markets 
(supply  of  specific  information,  selection  of  partners,  identification  of  new  market 
opportunities),  preparation  of  operations  abroad  (market  studies, 
legal  assistance), 
financing  of  the  investment  through  long  term  capital  resources,  and  finally,  technical 
assistance  (transfer  of know  how). 

With  a view  to  maximising  the  potential  of  such  an  instrument,  its  operation  should  have 
two  main  features:  on  the  one  hand,  sharing  of  the  risk  by  the  Community,  the  SMEs  and 
the  financial  intermediaries,  and  on  the  other  hand,  an  ad-hoc  reimbursement  mechanism 
based  mainly  on  the  success  of the  projects. 

2. Internationalisation  of SMEs:  access  to third  country  markets 

13 

g. Reduce  trade  barriers  to third  countries 

Helping  European  SMEs  internationalise  is  equivalent  to  boosting  their  competitiveness. 
Following  the  Uruguay  Round  Agreements,  renewed  emphasis  should  be  placed  on 
pursuing  market  access  strategies  vis-à-vis  third  countries.  A  more  open  world  market 
offers  the  best  possibilities  for  European  firms  and  particularly  SMEs  to  compete 
internationally.  In  this  general  context,  the  Trade  Barriers  Regulation  is  a  crucial  tool  to 
ensure that  the  obligations  assumed  under  international  trade  rules,  be  they  multilateral  or 
bilateral,  are  adhered  to.  Under  the  Trade  Barriers  Regulation  an  obstacle  to  trade  can  be 
tackled  both  through  resort  to  international  dispute  settlement  and/or  through  a  negotiated 
settlement  with  a  third  country.  European  business,  and  especially  SMEs  should, 
therefore,  be  encouraged  to  take  greater  advantage  of  the  Trade  Barriers  Regulation 
which  allows the European  Union  to  tackle individual  barriers  in cases in which  companies 
feel  most  aggrieved  by  them.  Resort  to  the  Trade  Barriers  Regulation  is  particularly 
relevant  for  SMEs,  since  available  evidence  suggest  that  trade  barriers  although  affecting 
both  large enterprises  and  SMEs,  create  particular  difficulties  for  the  latter. 

b. Improve  multilateral  rules  on  Foreign  Direct  Investment 

An  increasing  role  of  SMEs  in  international  investment  activities  will  be  of  particular 
importance  for  the  Union  Europe  should  be able to  profit  fully  from  the  world-wide  trend 
of  liberalising  Foreign  Direct  Investment  (FDI).  European  firms,  including  SMEs,  have 
experience  of  investing  away  from  home  as  a  result  of  intra-Community  trade  where  few 
restrictions  on  FDI  remain.  European  firms  are  in  a good  starting  position  when  it  comes 
to  making use  of investment  opportunities.  To  build  on  this  position  European  companies 
would  greatly  profit  from  an  effective  world-wide  regulatory  framework  for  FDI  in  which 
the  right  to  invest  and  fair  treatment  by the  host  country  are firmly established.  This  does 
not  exist  at  present. 

In  this  general  context  there  is  a  need  for  transparent,  coherent  and  liberal  multilateral 
rules  on  Foreign  Direct  Investment.  The  work  currently  done  within  the  OECD  in  the 
direction  of elaborating  a multilateral  investment  agreement,  and  which  may  be  continued 
in  the  WTO,  is  a  valuable  contribution  to  strengthening  the  multilateral  system  and 
assisting European  SMEs. 

c.  Facilitate  international  co-operation  with  enterprises  in  third  countries 

With  a view  to  developing  a  more  coherent  policy  and  access  to  a  more  coherent  service 
for  companies  in  the  area  of  business  co-operation,  the  existing  Enterprise  Policy 
networks  and  partnerships  programmes  (EICs,  BC-Net  and  BRE,  EUROPARTENARIAT 
and  INTERPRISE)  will  be  improved,  including  in  particular  the  search  for  synergies  with 
other  Community  policies.  A limited  number  of  pilot  activities  will  be  conducted  aimed  at 
improving  the  awareness  of  European  SMEs  about  strategic  advances  of  SMEs  in  third 
countries as well  as at  strengthening  the access of European  SMEs to third  countries.52 

52  Third Multiannual  SME Programme, COM(96) 98 final of 20.03.1996, Section U.C. 

14 
The  internationalisation  programmes  will  be  continued  to  ensure  a  presence  in  all  CEEC 
countries,  the  Mediterranean,  Latin  America,  Asia  and  in  South  Africa.  The  appropriate 
location  of  the  national  contact  points  of  the  co-operation  networks  will  be  decided  as  a 
function  of mutual  needs. 

Direct  contacts  between  entrepreneurs  will  be  strengthened  through  Partenariat  and 
Interprise  methodologies  in priority  areas,  with  the  financial  support  of  External  Relations 
Programmes  aimed  at  promoting  the development  of enterprises  in third  countries. 

In addition,  special  attention  will  be attached  to  SMEs  in the framework  of the  strategy  of 
pre-accession  with  candidate  Central  and  East  European  Countries  (CEECs),  as  well  as 
Malta and  Cyprus. 

Finally  and  within  the  framework  of  the  Joint  EU-US  Action  Plan,  several  of  the 
objectives  mentioned  therein  are  of  particular  significance  for  SMEs.  Joint  initiatives  and 
suggested  measures  with 
to  market  access,  standards  and  certifications, 
information  technologies  and  telecommunications  as  well  as  other  regulatory  areas  are 
expected  to  have  a  positive  impact  on  European  SMEs.  These  initiatives  could  include 
focused  partnership  actions with the United  States, in particular  for  co-operation  aiming  at 
strategic  sectors and  connected  to  subcontracting. 

regard 

IV,  ENHANCE  SME  COMPETITIVENESS  AND IMPROVE THEIR  ACCESS 
TO RESEARCH,  INNOVATION,  INFORMATION  TECHNOLOGIES 
AND  TRAINING 

15 

The  Madrid  SME  Policy  Paper  identified  a  number  of  elements  which  hamper  the 
competitiveness  of European  SMEs. 

Barriers  to  competitiveness of European  SMEs 

The  business  environment  in  Europe  (in  particular,  the  lack  of  sufficient  risk 
capital,  the  existence  of significant  regulatory  barriers  and  a lower  propensity  to 
take  risks)  are  not  as conducive  to  the  development  of  New-Technology-Based 
Firms (NTBF)  as in the US. 

Technology-intensive  SMEs  need  much  better  access  to  Community-funded 
R&TD  programmes.  They  also  need  to network  better  with  each  other  and  with 
large companies in order to tap  complementary  resources. 

The vast  majority  of SMEs, who are not technology-intensive,  need  to  make  use 
of readily  available  research  results  in  order  to  remain  competitive,  but  lack  the 
expertise  and  resources  to  do  so.  The  development  of  the  Information  Society 
and  the  take-up  of these  new  opportunities  by  SMEs  must  become  a key  factor 
in addressing this  problem. 

Labour  market  rigidities (See  Section  I above) 

Insufficient  focus  on training in  SMEs 

A.  CONCERTED  ACTIONS 

There  is a need  for  exchanging  best  practice  in the field of innovation53,  in particular  in the 
field of encouraging  the  creation  of new  enterprises  by  researchers  and  engineers  working 
in  research  centres  or  universities.  Incentives  through  social  security  systems  are  among 
the  measures  to  be  examined.54 
In  co-ordination  with  the  Innovation  Policy  Fora 
organised  under  the  Innovation  Programme,  a  working  party  will  be  set  up  in  the 
framework  of the Concerted  Action  on  support  measures  for  enterprises. 

Of particular  importance  is the  access  of  SMEs  to  the  information  society.  The  forum  on 
the  information  society  constitutes  a  framework  for  an  exchange  of  best  practices  with  a 
possible  feed-back  from  the  Gl  pilot  projects  which  are  of  particular  relevance  to  SMEs. 
In  this  context  Electronic  Commerce  is  of  strategic  importance  given  the  world-wide 
opportunities  it  offers  to  SMEs  and  the  rapid  growth  of  this  type  of  commercial  activity 
(20%  in  five  years  time).  Key  issues  are,  in  particular,  user-friendly,  cheap,  secure  and 

53  Commission  Green Paper on Innovation,  COM(95) 688 final of 20.12.95. 
54  Another  idea  suggested  in  a  1996  Report  submitted  by  the  Committee  on  Enterprise  Creation 
established  by the  Danish  Ministry  of Economic  Affairs  is  the  putting  into  place  of  special  fellow 
ships  for  PhD  students  who  want  to  carry  out  their  research  work  through  the  setting  up  of  an 
enterprise  (p.231 of the Report). The  same  Committee  also suggests  to create a core of  "innovation 
scouts" tracking  research  results with a potential  of being transformed  into marketable products and 
services (p.226 of the Report). 

16 
multilingual  information  services  (content  industries)  and  EDI  facilities;  the  involvement 
of  intermediaries  for  disseminating  best  practices  and  providing  training  and  advice;  legal 
and financial issues. 

The  importance  of  adapting  training  programmes  to  the  needs  of  SMEs  and  to  introduce 
incentives  for  SMEs  to  invest  in  training  has  been  underlined  in  the  joint  Council  and 
Commission  report  on  employment  and  will  be  part  of  the  follow-up  procedure 
concerning  the  five  priorities  defined  at  the  Essen  European  Council.  SME  organisations 
will be involved  in this process. 

B.  COMMUNITY  CONTRIBUTIONS 

taken 

improving 

their  access 

in  particular  by 

to  enhance  SME's 
A  number  of  Community  measures  have  already  been 
innovation, 
competitiveness, 
information  technologies  and  training.  Among  these  measures  the  Euro-Info-Centre 
network  (EICs),  the  European  Business  and  Innovation  Centres  (EBICs),  the  European 
Regional  Development  Fund  (ERDF),  the  European  Social  Fund  (ESF),  the  EAGGF-
Guidance  section,  the  LEONARDO  programme  and  the  Fourth  Framework  Programme 
on R&TD  have to  be mentioned  in the first place.  New  measures  will  in  particular  include 
a  Commission  Recommendation  addressed  to  Member  States  on  ways  to  increase  the 
share of SMEs in Community  policies and  programmes.55 

to  research, 

1. Industrial  competitiveness 

In  March  1995  a  Commission  Communication  to  the  Council  and  European  Parliament 
proposed  an Action  Programme  and  time  table  to  implement  measures  under  an  industrial 
competitiveness  policy  for  the  European  Union.  This  was  accompanied  by  a Proposal  for 
a Council  Decision.56 

The  Action  Programme  takes  account  of  the  subsidiarity  principle  and  includes  measures 
by the  Commission  to  be  carried  out  in  close  coordination  or  collaboration  with  Member 
States and/or business organisations.  These  measures  concern: 

• 

• 

• 

• 

the need  to  modernise  the  role  of  public  authorities  and  to  continue  work  in  respect 
of streamlining  and  making  procedures  more  transparent; 

to  promote  intangible  investment  (vocational  training,  organisation  of  work,  new 
technologies,  and  quality.); 

to develop  industrial  cooperation; 

to ensure  fair  competition  both  in internal  and  external  markets. 

The  Commission  has  sent  recently  a  communication  to  the  Council  and  to  the  European 
Parliament  on  "An Industrial  Competitiveness  Policy for  the European  Chemical  Industry: 
a Model",  which  seeks to  identify  the industry's  main  challenges  and  needs,  and  to  define  a 

55  See  the  Commission  Proposal  for  a  Council  Decision  on  a  Third  Multiannual  SME  Programme, 

Section II. A. 1  of the Explanatory  Memorandum. 

56  COM(95) 87 final of 30 March  1995. 

17 
set  of  activities  to  enhance  its  competitiveness.  Within  the  actions  to  be  developed  by  the 
Commission,  industry  and/or  the  Member  States,  and  which  stem  from  the  four  priority 
areas  of  the  overall  Industrial  Competitiveness  Communication,  are  measures  to  improve 
and  simplify 
the 
consolidation,  the  updating  and/or  the  simplification  of  the  regulatory  framework  for 
chemical  substances  and  preparations.  This  will  include  the  codification  of  the  Directives 
on  fertilisers,  on  limitations  for  placing  on  the  market,  and  on  detergents;  the  reshaping  of 
the  Directive  on  preparations;  and  the  simplification  of  procedures  for  the  notification  of 
new  chemicals,  especially for  SMEs. 

framework.  These  actions  will  concentrate  on 

legislative 

the 

2. Innovation  and  R&TD 

In  addition  to  specific  pilot  actions  based  on  the  Third  Multiannual  SME  Programme  and 
without  amending  the  master  plan  provided  by  the  Fourth  R&TD  framework  programme, 
the following  actions will be developed  to  help  SMEs  innovate,  in particular  by  facilitating 
their  access  to  Community  R&TD  Programmes  and  encouraging  market  oriented 
transnational  technological  development. 

A better  access  of  SMEs  to  Community  R&TD  Programmes  requires  better  information 
and  promotion  of  these  programmes.  To  achieve  this  objective  the  Commission  will 
ensure  a  better  targeting  of  the  promotion  of  Community  R&TD  programmes  towards 
specific  groups  of  SMEs.  This  will  involve  organising  strategic  technology  audits  for 
SMEs, decentralised  but  co-ordinated  at  Community  level,  in order  to  encourage  SMEs  to 
make  research  proposals.  The  expertise  gathered  by  the  EUROMANAGEMENT  pilot 
projects  under the Multiannual  SME  programme will be exploited  on  a permanent  basis by 
the  CRAFT  and  Innovation  Relay  Centres  networks  of  the  Community  R&TD  policy. 
These  pilots  could  also  serve  as  a  model  for  the  Member  States,  whereby  it  will  be 
possible  to  work  towards  better  co-ordination  of  national  and  Community  work  in  the 
field  of  information  and  advisory  services,  while  at  the  same  time  asking  the  Member 
States  to  add  "  a  transnational  dimension"  to  the  measures  they  adopt  at  national  or 
regional  level  to  assist  SMEs.  In  addition  to  encouraging  these  technology  audits,  the 
Commission  will  consolidate  the  existing  means  available  for  seeking  R&TD  partners  by 
co-ordinating  the  activities  of  the  various  networks  (INNOVATION,  CRAFT,  BC-NET 
and EICs as  first-stop-shops)  and  the use of on-line tools  such  as CORDIS  or  ARCADE. 

For  ensuring  a  better  access  of  SMEs  to  Community  R&TD  Programmes  it  is  also 
necessary  to  further  improve  the  selection  and  management  procedures  of  Community 
R&TD  programmes.  Key  measures  will  relate  to  the  transparency  of  the  selection 
process,57  ensuring  that  SME  experts  are  properly  represented  on  the  evaluation 
committees,58  informing  systematically  the  coordinators  of  the  projects  submitted  on  the 
results  of  evaluations,59  reducing  the  impact  of  long  delays  in  decisions,  reducing  late 
payment  problems,60  ensuring  a  proper 
the 
involvement  of SMEs as subcontractors  in the research/industry task  forces.62 

targeting  of  SMEs,61  and  promoting 

57  For  instance,  since  the  beginning  of  the  Fourth  Framework  Programme  the  information  packages 
indicate how the "innovative character"  is defined  and give the evaluation  criteria  used  to categorise 
proposals. 
in particular those from  technology centres working with SMEs. 
to allow unsuccessful  SMEs to understand  how to improve proposals in the  future. 
in particular  by introducing  a  specific  reference  in  the  standard  research  contract  on  the maximum 
payment  terms  for  subcontractors  of  Community  funded  R&TD  projects  in  order  to  avoid  lengthy 

58 
59 
60 

to  develop  new  applications  with  a  short 

Special  consideration  will  be  given  to  the  development  of  new  instruments  supporting 
market  oriented  transnational  technological  development.  This  should  address the fact  that 
the majority  of  European  SMEs  do  not  carry  out  long  term  research  and  tend  to  combine 
existing  technologies 
term 
perspective.  Progress  has  been  made  in  facilitating  access  by  SMEs  to  Community 
research  and  development  programmes  through  the  Technology  Stimulation  Measures  for 
SMEs.  However  the  R&TD  proposals  still  need  to  remain  pre-competitive,63  while  there 
is  a  need  for  fostering  short  term  development  work  by  SMEs  close  to  the  stage  of 
marketable  products  or  services.  Accordingly,  incentives  should  be  given  through  the 
Community  Innovation  Programme  or  through  national  or  regional  innovation  agencies 
aimed  at  supporting  transnational  projects  of  this  kind  including  the  non-national  part  of 
the  work.  In view  of the  very  competitive  nature  of this  kind  of  project,  grants  might  not 
always appear to be the best  way of financing. 

to  medium 

In order  to  test  the  feasibility  of a specific  technological  development  initiative  for  a wider 
population  of  SMEs  which  could  later  be  introduced  into  the  Community's  Fifth  R&TD 
Framework  Programme  (Innovation),  the Commission  proposes  to  launch  an  experimental 
pilot  action  into  ways  and  means to  provide  alternative  and  novel  forms  of finance  for  this 
kind  of R&TD  effort.  Given  the very  competitive  nature  of such  research,  the  Commission 
intends  to  test  the  feasibility  of  a  support  mechanism  for  initiatives jointly  undertaken  by 
SMEs  of  different  Member  States,  which  would  take  the  form  of  reimbursable  advances, 
or  risk-sharing  mechanisms  with  national  agencies  combining  financial  and  technological 
expertise.64  Actions  in  this  area  will  be  proposed  under  the  Community's  Fourth 
framework  programme  for  R&TD  and  will  have  to  comply  or  be  coherent  with  the 
principles  set out  in Articles 92 to  94 of the Treaty  and  all relevant  secondary  legislation. 

3.  Access  to the  Information  Society 

An  essential  factor  in competitiveness  will  be the  continued  use of  information  technology 
by  SMEs.  The  Information  Society  programme  of  the  Community  therefore  places  great 
emphasis  on  supporting  SMEs  in  accessing  and  using  these  new  applications.  Within  the 
framework  of  the  Information  Society  Action  Plan  the  Commission  will  develop  certain 
actions: 

delays  in  the  payment  by  project  leaders.  The  Commission  will  also  speed  up  its  own  payment 
delays. ( See the Commission's  1995 Recommendation  on  late payment,  OJ  N° L  127 of  10.6.1995, 
p.  19andOJN°C  144, 10.6.1995, p. 3). 

61  This  has  been  done  since  the  beginning  of  the  Fourth  Framework  Programme  by  ensuring  the 
consistent  application  of the criterion  of  independence  in  the  statistical  accounting  of  SMEs  in  the 
Community R&TD programmes. 
in  particular  during  the  "downstream"  phases  of  the  projects  (creation  of  prototypes,  field  tests, 
demonstration  etc.),  so  that  they  can  benefit  from  the  transfer  of  knowledge  and  increase  their 
technical  know-how. 
i.e. to require further  development  work after  the end of the project. 

62 

63 
64  Green Paper on Innovation, COM(95) 688 final. 

19 
Having  regard  to  the  difficulty  of  identifying  the  various  needs  of  SMEs  and  to  avoid 
developing  assistance 
the 
initiatives  based  on  technologies  rather 
Commission  proposes  to  launch  a pilot  action  to  ascertain  the  priorities  of  SMEs  and  on 
the  obstacles  hampering  the  use  by  SMEs  of  information 
technologies.  This  pilot 
programme  will  be  developed  in  close  co-ordination  with  Commission  efforts  to  mobilise 
the  different  groups  of  Information  and  Communication  Technology  (ICT)  users.  In 
addition,  the  Commission  will  initiate  studies  to  assess  the  technical,  economic  and  social 
issues for  SMEs raised  by the transition  to the Information  Society. 

than  on  needs, 

One  of  the  possible  benefits  of  information  and  communications  technology  lies  in  the 
possible  networking  or  clustering  of  initiatives  of  SMEs  independent  of  their  physical 
proximity.  A pilot  action  should  enable  the  Community  to  evaluate  the  economic  benefits 
which  could  be  derived  from  distance-networking  by  SMEs  (e.g.  through  exchange 
agreements,  common  specifications  for  products  and  services  and  sharing  of  resources). 
Enterprises  with  experience  in  information  and  communications  technology  (for  instance, 
in technology  parks)  could  set  the  example.  This  pilot  programme  will  be  set  up  in  close 
co-ordination  with  complementary  Commission  actions  in  this  field,  in  particular  by 
building upon  the experience  of various  on-going  G-7  Information  Society  projects. 

The  Commission  will  also  encourage  the  promotion  of  the  results  of  successful  pilot 
actions  and  the  dissemination  of  best practice  in  this  field,  in  particular  with  the  help  of 
intermediaries  (e.g.  EICs,  Chambers  of  Commerce,  SME  organisations, 
business 
Innovation  Relay  Centres)  and  through  the  organisation  and  follow-up  of  specific  fora. 
Closer  co-ordination  with  relevant  actions  outside  the  European  Union  will  also  be 
sought. 

In addition  to  the  implementation  of its action  programme  on  the  Information  Society,  the 
Commission  will  also  encourage  Member  Stales,  in  the  course  of  assessment  of  the 
activities  of  the  Structural  Funds  in  1997,  to  give  priority  in  the  different  operational 
programmes  to  helping  SMEs  to  have  a  better  access  to  the  Information  Society.  In  the 
framework  of the  new  Objective  2 (1997-1999)  Programme,  a particular  emphasis  will  be 
put  on  practical  Information  Technology  applications  and  services  proven  to  be  effective 
for  employment  and  business  creation  and  development.  Appropriate  measures  include 
awareness  and  training  actions  for  SMEs,  diffusion  of best  practices,  telematics-based  co 
operation  networks  between  enterprises  and 
services.  The 
Commission  has  also  decided  that  the  reserve  for  the  Community  Initiative  will  reinforce 
ADAPT65  with  162  MECU  through  a  complementary  set  of  actions  dealing  with  the 
information  society  (ADAPT-BIS). 

information 

improved 

The  Trans-European  Networks  for  telecommunication  will  also  provide  specific  support 
for  SMEs  particularly  by  stimulating  the  development  of  cross-border  generic  services66 

65  ADAPT  is  a  trans-national  Community  Initiative  specifically  designed  to  help  the  labour  force 

66 

respond to the changing needs of the labour market. 
i.e. interactive multimedia services networks which include the access to databases, e-mail  and file 
transfer and video-conferencing. 

20 
which  are  easily  accessible,  affordable  and  compatible.  Transnational  consortia  of  telecom 
operators  and 
the 
development  of  the  Information  Society  by  offering  support  and  electronic  services  to 
SMEs and  to the encouragement  of new forms  of work  such  as teleworking. 

intermediaries  (such  as  EICs  and  BC-NET)  will  contribute  to 

4.  Vocational,  management  and  research  training  for  SMEs 

The  contribution  of  SMEs to  employment  and  growth  must  be  maximised  by  encouraging 
them  to  invest  in training67.  In  this  area  European  SME  organisations  highlighted  that  the 
share  of  SMEs  (and  their  employees)  in  European  vocational  and  management  training 
programmes  tends to be relatively  low. 

The  Commission's  White  Paper  on  Education  and  Training  proposes  a  range  of  support 
measures  at  European  level,  in  particular  with  a  view  to  bringing  schools  and  businesses 
closer  together  and  in  order  to  achieve  equal  treatment  between  capital  investment  and 
investment  in training.68 

The  Commission  will  ensure  that  Community  support  in  the  area  of  vocational  and 
management  training  better  targets  SMEs  and  the  craft  sector,  in  particular  start-ups,  and 
provides  them  with  training  adapted  to  their  needs.  Community  support  for  SMEs  is 
currently  provided  through  the  European  Social  Fund  (ESF),  the  ADAPT  Community 
Initiative,  the  LEONARDO  Programme  and  the  Training  and  Mobility  of  Researchers 
Programme69.  The  Third  Multiannual  SME  Programme  proposes  complementary  pilot 
projects  helping to  identify  novel  approaches  in this field. 

There  should  be a major  focus  on  training  measures  to  support  SMEs  aimed  at  supporting 
the pre-start-up  phase of new  SMEs,  which  requires  close counselling  in this critical  stage. 
The  development  of  women  entrepreneurs  needs  special  attention.  This  can  be  achieved 
both  within  the  existing  measures  in  the  programmes  already  adopted  and  through  new 
actions  under  the  reinforced  ADAPT  (ADAPT-BIS)  and  Employment-NOW  Initiatives. 
The  association  of  SMEs  or  SME  organisations  in  the  monitoring  committees  of  these 
programmes  will  help  to  take  into  account  these  priorities.  Beside  this,  SMEs  and  SME 
organisations  will  be  encouraged  to  present  projects  within  the  calls  for  proposals  under 
the  LEONARDO  programme  aimed  at  encouraging  training  during  the  start-up  phase  as 
well  as encouraging  women  entrepreneurship. 

5. Adapting  to environmental  and  energy  saving  requirements 

A  review  of  the  Fifth  Environmental  Action  Programme  points  to  the  need  for  the 
situation  of  SMEs  to  be  specifically  taken  into  account  in  relation  to  the  measures  that 
ensure  the  integration  of  the  environment  into  other  policy  areas,  and  in  the  process  of 
moving  towards  sustainable  development.  Studies  have  shown  that  SMEs  are  less  aware 
of  environmental  regulations  than  large  companies  and  have  less  access  to  information 
about 
technologies  and  services.  The 
Commission  will therefore  encourage  and  support  initiatives in the following  respects: 

the  availability  and  costs  of  environmental 

67  Single Report from  the Council  and the Commission  on Employment,  SI(95)  1000 of  16.12.95, part 

B, Annex 2, p. 15. 

68  White Paper on Education  and Training, COM(95) 590 final of 29.11.1995. 
69  Council  Decision  of  15  December  1994  on  a  specific  programme  for  R&TD, 

including 

demonstration,  in the field of training and mobility of researchers (1994-1998). 

• 

• 

• 

• 

• 

integration  of avoidance,  processing  and waste  management  in production  processes; 

21 

review  the  Environmental  Management  and  Audit  Schemes  (EMAS)  and  the  further 
development  of eco-management  systems  for  SMEs; 

introduction  of clean  technologies  taking  into  account  the  specific  problems  of  SMEs, 
particularly  in respect  of financial and  technical  obstacles;70 

facilitate  the development  of eco-businesses  and the  potential  of job  creation; 

better  information  for  SMEs  on  environmental  issues  and  environmental  awareness,  as 
well as for  training  and  technical  support.71 

support 

for  projects 

implementing 

innovative  energy 

The  new  THERMIE  Programme  (1995-1998)  with  a  budget  of  500  MECU  covers 
financial 
technologies  and 
complementary  activities,  including  the  dissemination  of  energy  technologies  on  the 
market  and  the  technological  stimulation  of  SMEs.  SMEs  will  be  specifically  facilitated 
and  encouraged  to  participate  in  this  Programme  with  assistance  to  identify  their  needs, 
including  to  find  cooperation  partners  and  in  the  training  of  staff  in  new  energy 
technologies.  The  THERMIE  Programme  will  be  complemented  by  a  new  SAVE  II 
Programme  (1996-2000)  concerning  the  promotion  of  energy  efficiency  in  the  European 
Union.72  The  latter  Programme  includes  financial  support  for  non-technological  pilot 
projects  aiming  at  stimulating  energy  efficiency  in  industry  and  commerce  which  will  in 
particular  benefit  SMEs. 

In  addition,  the  Community  "Growth  and  Environment"  pilot  project  is  geared  towards 
enterprises  investing  in  environmental  improvements  and  related  activities  such  as  energy 
savings.  Under  this  Programme,  the  EIF  will  provide  loan  guarantees  at  reduced  rates  to 
SMEs which  carry  out  eligible investments 

6.  Local  development  and  employment  initiatives 

the  Cannes  European  Council  highlighted 

the 
A  Commission  communication  for 
employment  effect  of  local  development  and  employment  initiatives  and  emphasised  the 
need  for  complementary  Community  activities.  SMEs  have  a  central  role  in  the 
implementation  of  such  initiatives.  As  a  follow-up  the  Commission  Communication  of 
October  1995  sets  out  the  strategic  guidelines  as  well  as  a  methodology  for  the 
implementation  of  Community  activities.  These  are  focused  on  the  specific  needs  of 
SMEs73 

In  addition,  the  Community  Iniatives  LEADER  and  URBAN,  which  aim  at  encouraging 
local  development  in  airal  and  urban  areas,  contribute  to  maintaining  or  setting  up  SMEs 
in  those  areas.  SMEs,  in  particular  commerce  and  the  craft  sector,  are  often  the  main 
beneficiaries  of these Community  initiatives. 

70  Commission  Communication  of  24.1.1996  on  the  Action  Plan  following  the  Review  of  the  Fifth 

Action Programme. 

71  Proposal for a Third Multiannual  Programme for  SMEs, COM(96) 98 of 20.3.96. 
72  COM(95) 225 final of 31.05.1995. 
73  OJN°C  265 of 12.10.1995. 

V.  PROMOTE  ENTREPRENEURSHIP  AND  SUPPORT  SPECIAL  TARGET 

GROUPS 

1-) 

The  Madrid  SME  Policy  Paper  called  for  a  full  recognition  of  the  importance  of 
encouraging  entrepreneurship  at  all  levels  by  policy  makers  throughout  the  Union.  The 
primary  goal  must  be  to  recreate  and  stimulate  a  truly  entrepreneurial  culture,  based  on 
values such  as self-reliance,  risk-taking  and  a sense  of personal  commitment.  This  requires 
action  to  change  attitudes,  starting from  the educational  and  training  systems  and  covering 
the relationship  between  the  entrepreneur  and  public  administrations,  financial  institutions 
and  large businesses.  In  addition,  actions  are  required  to  support  special  target  groups,  in 
particular  in view  of their job  creation  potential: 

A.  CONCERTED  ACTIONS 

The  Madrid  SME  Policy  Paper  emphasised  the  need  to  stimulate  business  culture  and 
entrepreneurship  at  all  levels.  Particular  attention  should  be  given  to  encouraging  an 
entrepreneurial  culture  in  the  framework  of  Member  States'  education  and  training 
to  stimulating  young  entrepreneurs.74  The  discussion 
systems  and 
the 
publication  by  the  Commission  of  its  White  paper  on  education  and  training75  will  form 
the basis for  an exchange  of best  practices  in this field. 

following 

A  special  target  group  covers  the  craft  and  small  enterprises  which  have  a  particular  role 
to  play  in the generation  and  maintaining  of employment,  and  this  over  the  whole  territory 
of the  Union.  They  are  directly  responsible  for  60 to  80 %  of the jobs  created  over  the  last 
five years.  Taking  into  account  the  specific  needs  of this  category  of  enterprises,  Member 
States  have  developed  specific  forms  of  support,  which  vary  considerably  from  one 
country  to  the  other.  In  line  with  the  conclusions  of  the  2nd  European  Conference  for 
Craft  and  Small  enterprises  in  Berlin  the  Commission  will  organise  a  specific  forum  in 
order  to  exchange  best  practices  with  regard  to  such  support  mechanisms,  including  their 
institutional  environment. 

Another  key  target  group  are  the  enterprises  in  the  field  oï  commerce  and  distribution. 
Following  the  outcome  of  the  discussion  of  the  Green  paper  on  Commerce  and 
Distribution,  which  the  Commission  plans  to  publish  during  1996,  the  Commission  will 
organize  an exchange of best  practices  on  topics  particularly  sensitive  for  the  development 
of commerce  and  distribution.  This will  cover  in particular  the  Information  Society  and  the 
individual  problems  of commerce  in rural  and  urban  areas  respectively. 

B.  COMMUNITY  CONTRIBUTIONS 

The  Commission  will  initiate  complementary  actions  under  the  Third  Multiannual  SME 
Programme  in  view  of  stimulating  entrepreneurship  and  encouraging  the  development  of 
craft  and  small  enterprises,  enterprises  in  commerce  and  distribution,  women  and  young 
entrepreneurs. 

74  See e.g. the Prince's Youth  Business Trust  in the UK. 
75  Commission  White Paper on Education  and Training, COM(95) 590 final of 29.1  1.95. 

23 
In  addition,  the  Commission  will  promote  entrepreneurship  through  actions  initiated  as  a 
follow-up  to the White  Paper  on  Education  and  Training. 

The  Commission  also  recently  sent  a  proposal  to  the  Council  and  to  the  European 
Parliament  on  the  mutual  recognition  of  qualifications.76  Its  purpose  is  to  establish  a 
mechanism  for  the  recognition  of  qualifications  relating  to  professional  activities  not 
covered  by existing  Directives.  This  should  in particular  benefit  craft  and  small  enterprises 
by facilitating  their  access to the  Single  Market. 

The  actions  for  women  entrepreneurs  under  the  Third  Multiannual  SME  Programme  will 
complement  the  Community  actions  in  the  framework  of  the  local  employment  initiative 
for  women  (LEI)  under  the  European  Social  Fund,  later  reinforced  by  the  Community 
initiative  EMPLOYMENT-NOW  which  supports  actions  in  the  field  of  training  for 
women  entrepreneurs  in  SMEs,  the  creation  of  local  services  to  support  start-ups,  co 
operation  and  networking  of  local  employment  initiatives  for  women  and  creation  of 
independent  activities. The Commission  will  encourage  the  integration  of the  same type  of 
projects  into the operational  programmes  of the  Structural  Funds. 

CONCLUSION 

This  Communication  on  a  Integrated  Programme  for  SMEs  provides  a  comprehensive 
framework  which  should  facilitate  coherence  and  greater  visibility  of  the  total  effort  in 
favour  of SMEs.  It  demonstrates  the wide range of measures  being taken  with  Community 
support,  which,  coupled  with  concerted  actions  taken  by  Member  States,  will  help  the 
mobilisation  and  further  development  of SMEs as a major  source  of job  creation. 

The  need  for  effective  coordination  is  essential.  The  task  of  bringing  greater  visibility  to 
the  strategy  and  of  achieving  greater  public  recognition  of  the  substantial  efforts  now 
being  made  in favour  of  SMEs  is closely  dependent  upon  the  degree  of  real  integration  of 
the  individual  actions.The exercise  of pulling together  the  different  strands  of  SME  Policy 
and  the  different  actions  undertaken  directly  by  the  Commission  services,  by  the  Member 
States  or  by  the  organisations  representing  SMEs  delivers  important  added  value  to  the 
sum  of individual  measures. 

This  Integrated  Programme  for  SMEs  is  a  direct  follow-up 
to  the  Commission's 
European  Confidence  Pact  for  Employment,  which  aims  at  full  mobilisation  of  all  the 
actors  in  a  comprehensive  strategy  in  the  fight  against  unemployment.77  In  line  with  the 
Florence European  Council78  it calls for  an integrated  approach  whereby  national,  regional 
and  local  authorities,  the  social  partners  and  the  Community  institutions  each  take 
practical  action  in favour  of growth  and  employment. 

76  COM(96) 22 final of 8.02.1996. 
77  CSE(96)  lof5.6.1996. 
78  Conclusions of the Florence European  Council, SI (96) 500 of 22.6.1996, p.2. 

ISSN 0254-1475 

COM(96) 329 final 

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