Report from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions on the coordination of activities to assist small and medium-sized enterprises (SMEs) and the craft sector (1997)
Date: 1997-11-25
Institutions: European Commission
Subjects: EU activity, business policy, competitiveness, handicrafts, small and medium-sized enterprises

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  25.11.1997 
COM(97) 610 final 

REPORT  FROM THE COMMISSION  TO 
THE EUROPEAN PARLIAMENT,  THE  COUNCIL, 
THE ECONOMIC AND SOCIAL COMMITTEE AND 
THE COMMITTEE  OF THE  REGIONS 

ON THE COORDINATION 
OF ACTIVITIES TO ASSIST 
SMALL AND MEDIUM-SIZED ENTERPRISES (SMES) AND 
THE CRAFT SECTOR 
1997 

TABLE OF CONTENTS 

SUMMARY 
INTRODUCTION 
Aims and scope of coordination 
Structure of the report 
A common definition  of SMEs 
Improved knowledge of SMEs 

CHAPTER I.  IMPROVING  THE SME ENVIRONMENT 
1. Administrative simplification  and Improvement of the legal environment 

1.1 Concerted action with the Member States and organisations representing  enterprises 

with regard to legal and administrative simplification 

1.2 Assessment  of the impact of Community legislation on business 
1.2.1 Interdepartmental consultations on legislative proposals 
1.2.2  Community system for assessing the impact of legislative proposals 

on business, particularly SMEs 

1.3 Simplification  and improvement of legislation on the Internal Market 
1.4 Single Market Programme 
1.5 Transfer  of enterprises 
1.6 Competition policy 

1.6.1  Competition rules applicable to enterprises 
1.6.2  State aid 

2. Financial environment 
2.1 Late Payment in commercial transactions 
2.2 Preparing SMEs for the introduction of the euro 
2.3 Cross-border credit transfers 
2.4 Access to finance  for innovation 
3. Tax environment 
3.1 Taxation of enterprises 
3.2 Indirect taxation: VAT 
3.3 Customs 2000 
4. Social environment 
4.1 Action for Employment  in Europe: a Confidence  Pact 
4.2 Social dialogue 
4.3 Consultation of professional  circles 

4.3.1 Consultation meetings with the European SME Business Organisations 
4.3.2 Consultation of interested parties in the 'social economy' 
4.3.3 Consultation of bodies in commerce and distribution 

4.4 Local development and employment 
4.5 Hygiene, health and safety  at work 
5. Environmental  legislation 
5.1 Environment Fifth  Action Programme 
5.2 Environmental  Management  and Audit Scheme 
5.3 Volatile organic compounds 

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CHAPTER  II.  PROGRAMMES  AND  SUPPORT  MEASURES  FOR  SMES 

1.  Concerted  actions  with  the Member  States to  assist  SMEs 

2. Benchmarking 

3.  Access  to  finance  and  credit 

3.1  Measures  to promote  access to finance 

3.1.1  Bank-SME  partnership: the Round  Table of Leading  Representatives 

of the Banking  Sector 
3.1.2  European  capital markets 
3.1.3  Mutual  guarantee 

3.2  The  financial  instruments  of the Union 
3.2.1  The  European  Investment  Bank 

3.2.1.1 EIB  global  loans to  SMEs 
3.2.1.2 The  SME  facility:  subsidised  loans  for job-creating  SMEs 
3.2.1.3  The  Amsterdam  Special Action Programme 

3.2.2  The European  Investment  Fund 

3.2.2.1  Loan  guarantees  granted  to  SMEs 
3.2.2.2  Pilot project  "Growth  and  Environment": 
guarantees  on environmental  loans 

3.2.3  Venture  capital pilot  schemes 

3.2.3.1  "Seed  capital" pilot  scheme 
3.2.3.2  Eurotech  Capital  action 
3.2.3.3  Financing  Innovation 
4.  Support  for  the  development  of regional  SMEs 

4.1 Regionalised  operations 
4.2  Community  Initiatives 
4.3  Innovative  forms  of intervention 
5.  Operations  to  assist  SMEs  in specific  sectors  (agriculture  and  fisheries) 

6.  Support  for  SMEs  in the  europeanisation  and  internationalisation  of  their 

strategies,  in  particular  via  improved  information  and cooperation  services 

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6.1  Information  for  enterprises 

6.1.1  The network  of Euro  Info  Centres 
6.1.2 Other  information  actions 

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55 
6.2  Inter-enterprise  cooperation  and partnership  for  Europeanisation  and  internationalisation 55 
56 

6.2.1  Europeanisation  of enterprises 

6.2.1.1  A  legal  instrument  favourable  to transnational  cooperation:  the  European 

Economic  Interest  Grouping  (EEIG) 

6.2.1.2 Partnership  programmes:  EUROPARTENARIAT  and  INTERPRISE 
6.2.1.3 Encouragement  of inter-regional  cooperation:  RECITE  II 
6.2.1A Transnational  subcontracting 
6.2.1.5 Joint  ventures  in the Union: JEV  instrument 

6.2.2  Internationalisation  of enterprises: cooperation  with third  countries 

6.2.2.1  Commercial  policy 
6.2.2.2  Cooperation  with EFTA 
6.2.2.3  Cooperation  with the Northern  American  market 
6.2.2.4  Industrial  cooperation  with Japan 
6.2.2.5  Cooperation  with Mediterranean,  Latin  American  and  Asian  countries 
6.2.2.6  Cooperation  with  the Central  and Eastern  European  Countries  (CEEC) 

and  the Newly  Independent  States  (NIS) 

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6.2.2.7  Development  cooperation with the  associated  countries  in Africa  and  the 

Caribbean  and Pacific  Region  (ACP  countries) 

6.2.2.8  Cooperation  with  South Africa 

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72 

7.  Strengthening  SME  competitiveness  and  improving  access  to  research,  innovation  and 
72 

training. 

7.1  Enterprise  competitiveness 
7.1.1  Textiles  and  clothing 
7.1.2  The  chemical  industry 

7.2  Quality  and  standardisation 
7.2.1  Quality policy 
7.2.2  Standardisation  and  certification 

7.2.2.1  Standardisation  awareness  campaign 
7.2.2.2  NORMAPME 
7.3  Research  and technological  development 

7.3.1  SME  participation  in the 4th EU  RTD  Framework  Programme 
7.3.1.1  The Technology  Stimulation  Measures  for  SMEs 
7.3.1.2 Other measures  in FP4 relevant  to  SMEs 
7.3.1.3  Fifth  Framework  Programme  (1998-2002) 

7.4  Innovation 
7.5  The  information  society 

7.5.1  Information  Technology  (IT) Programme 
7.5.2  The Advanced  Communication  Technologies  and  Services Programme 
7.5.3  Multimedia  development  projects 
7.5.4  Telematics  Applications  Programme  (TAP) 

7.6  Electronic  commerce 
7.7  Vocational  training 

7.7.1  Objective  4  of the European  Social Fund 
7.7.2  The ADAPT  initiative 
7.7.3  The LEONARDO  DA  VINCI programme 
7.7.4  The MEDIA  II programme  - Training 

7.8  Environment 

7.8.1  Eco-Management  Audit  Scheme  (EMAS) 
7.8.2  Euromanagement-Environment  pilot  action 
7.8.3  Eco-Management  Guide 
7.8.4  LIFE 

7.9  Energy  and transport 
7.10  Audiovisual  industry 

7.10.1 MEDIA  II programme  - Development  and  distribution  of  European 

audiovisual  works  ( 1996-2000) 

7.10.2  Action  Plan  for  the introduction  of advanced  television  services  in  Europe 

(16:9 Action  Plan) 

8. Promoting  a spirit  of enterprise  and  support  for  target  groups 

8.1  Craft,  small  and  micro-enterprises 
8.2  Women  entrepreneurs  and  co-entrepreneurs,  businesses run by  entrepreneurs  from 

disadvantaged  groups 

8.3  Enterprises  in the  commerce  and  distribution  sector 
8.4  "Social  economy":  cooperatives,  mutual  societies,  foundations  and  associations 

CONCLUSIONS 

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SUMMARY 

This  report  on  the  coordination  of  activities  to  assist  SMEs  and  the  craft  sector  has  been 
drawn  up  pursuant  to  Council  Decision  of  9  December  1996  on  the  third  multiannual 
programme  for  SMEs,  and  is  part  of  the  follow-up  to  the  Council's  Resolutions  of  1996 
regarding  coordination  and  the  Integrated  Programme  and  the  corresponding  Parliament 
Resolutions  of  1997.  It provides  an  overview  of the  Community's  activities  to  assist  SMEs 
and  gives  practical  expression  to  the  objectives  of  the  Integrated  Programme,  which  is  the 
governing  framework  for  the  coordination  of  activities  in  this  field.  Its  aim  is  to  raise  the 
profile  of the Union's  action  to assist  enterprises  and  to help make  such  action  more  visible, 
coherent and  efficient. 

The  aim  of  the  coordination  is  to  ensure  that  the  SME  dimension  is  integrated  into  the 
definition  and  implementation  of  Community  policies  and  to  increase  the  participation  of 
SMEs in Community programmes. 

The report which  updates  the previous  report  of  1995 is  structured  on  two  priorities,  namely 
improving  the  SME  environment  and  presenting  the  programmes  and  support  measures  for 
SMEs. The conclusions demonstrate the progress made since the first report  in this series was 
drawn up in 1992. 

A political priority in favour  of SMEs has gradually developed within the Union as a result  of 
the  recognition  of  the job-creation  potential  of  SMEs,  which  has  been  reflected  in  positive 
indications from recent European Councils. 

To  improve  the  administrative,  legal,  fiscal  and  financial  environment  for  SMEs,  the 
Commission is keen to take greater account of the specific  features  of SMEs in drawing up all 
Community  policies  (such  as  the  programme  for  the  internal  market,  competition,  taxation, 
the Oenvironment  and  social policy) and has proposed  specific  actions. The new definition  of 
SMEs  adopted  in  1996  is  contributing  to  better  targeting  of  measures  to  assist  SMEs. 
Coordination  is  achieved  through  the  SME impact  assessment  sheet  for  legislative  proposals 
and via interdepartmental  cooperation.  In the case of  existing  legislation,  measures  are being 
taken  to  simplify  legislation  relating  to the internal  market.  Following  the  European  Council 
in  Amsterdam  in  June  1997,  the  Commission  set  up  a  "BEST"  Task  Force  to  improve  and 
simplify  the  business  environment.  A  recommendation  on  improving  and  simplifying  the 
business  environment  during  the  start-up  phase  was  adopted  in  1997.  Work  on  payment 
periods and the transfer  of businesses is under way. Improvement of the  financial  environment 
of  SMEs  was  the  central  topic  of  the Round  Table  of  leading  representatives  of  the  banking 
sector  and  was  the  subject  also  of  a  Communication  on  the  European  capital  markets. 
Practical  questions  relating  to  the  change-over  to  the  euro  are  being  examined  in  working 
parties,  one  of  which  is  dealing  specifically  with  SMEs.  Furthermore,  following 
the 
Amsterdam  Council,  the  Commission  proposed  guidelines  for  Member  States  Employment 
Policies  as  a  framework  for  discussion  at  the  special  Job  Summit  in  Luxembourg  (20/21 
November).  These  guidelines  cover  several topics, including  the promotion  of  a new  culture 
for entrepreneurship  in Europe. 

The programmes  and business  support measures  are aimed primarily  at  access  to  finance  and 
credit,  support  for  the  development  of  SMEs  in  disadvantaged  regions,  the  Europeanisation 
and  internationalisation  of  SMEs,  strengthening  competitiveness,  improving  access  to 
research,  innovation  and  training, promoting  the spirit  of enterprise  and  greater  consideration 
of the environmental  dimension. 

The support measures  taken under enterprise policy  concern mainly  information  via the  Euro 
Info  Centres  -  recognised  as  "first-stop  shops"  for  access  to  Community  information  for 
enterprises  -  the  Europeanisation  and  internationalisation  of  enterprises  through  inter-
enterprise  cooperation  networks  (BC-NET  and  BRE)  and  the  EUROPARTENARIAT  and 
INTERPRISE  programmes,  as  well  as  transnational  subcontracting  schemes  such  as  the 
organisation of international buyers'  exhibitions  (IBEX). Measures have also been directed  at 
the  craft  sector,  at  commerce  - which  was  the  subject  of  a Green  Paper  -  and  at  the  "social 
economy".  The holding  of the Third  European  Conference  on the  Craft  Industry  in Milan  on 
20  and  21  November  1997,  whose  theme  is  "Innovating  for  employment",  reflects  the 
importance attached to this sector of the economy. Moreover, with a view to helping craft  and 
small  enterprises,  a  series  of measures  has been  taken,  in particular  to  develop  a culture  and 
spirit  of  enterprise  and  to provide  support  for  women  entrepreneurs.  In  order  to promote  the 
creation  of joint  ventures  within  the  European  Union,  the  Commission  has  adopted  the  new 
programme  entitled  "JEV  -  European  Joint  Venture".  A  Euromanagement-Environment 
scheme  is  also  being  set  up  in  order  to  help  SMEs  participate  in  the  Community  system  of 
environmental management and auditing. 

The other programmes  and measures of Community  support  for SMEs are mainly through the 
structural  funds,  the  programmes  of  research  and  technological  development,  the  vocational 
training programmes  and the programmes  of international  cooperation.  Other  actions  concern 
SMEs  in  the  fields  of  quality  and  standardisation,  innovation,  the  environment  (ECO-
AUDIT), transport, energy and the audiovisual  industry. 

SME participation  in the programmes  has gradually  increased.  To start with,  in the  structural 
funds  -  the  principal  financial  instruments  of  the  Union  -  SMEs  are  a  target  group  for  aid. 
Between  the  periods  1989-1993  and  1994-1999  the  Community  appropriations  for  SMEs 
almost  doubled,  to  an average of  10% for  all objectives  and notably more  for  the Objective  2 
regions, where  16% on average is devoted to them  for  1997-1999. In the new Member  States 
the share reaches  30 to 40%. The Commission has also proposed  that the margin  available in 
the existing programmes  be used  for  SMEs. The  Community  SME initiative, currently  under 
way,  is  specifically  devoted  to  the  adaptation  of  SMEs  to the  internal  market.  Overall,  there 
has been  a noticeable  increase  in the  allocations  for  SMEs. The Commission  launched  at  the 
end of  1997 a thematic evaluation on the impact of structural funds  on SMEs. 

The  European  Investment  Bank  doubled  the  volume  of  its  global  loans  to  promote  the 
competitiveness  of  SMEs  between  1993  and  1996, and  the number  of  SMEs  benefiting  also 
double^to  stand at  11 034 in  1996. The SME facility  has helped 4 435 SMEs to create more 
than 45 000 jobs. The European  Investment Fund now devotes  34% of its activities to SMEs, 
with  guarantees  amounting to 613 million  ecus, of which  397 million  ecus is for  the  "growth 
and the environment" pilot scheme. 

In  the  Research  and  Technological  Development  (RTD)  programmes,  the  introduction  of 
specific  measures  for  SMEs  has  increased  their  participation  in  the  Fourth  Framework 
Programme,  nearly  doubling  their  participation  compared  with  the  Third  Programme. 
2  500  SMEs  benefited  from  the  technology  stimulation  measures  between  1994  and  1996, 
most  of them being  enterprises with  fewer  than  50 employees. Besides, within the  Innovation 
programme, the Commission launched in July  1997 the I-TEC pilot project  to encourage start 
up capital investment in technologically innovative SMEs. 

To  promote  the  internationalisation  of  SMEs,  the  existing  Community  methodologies  and 
tools for information and partnership have been extended to a number of third countries under 
Community  programmes:  in  the  Mediterranean  Basin  (MEDA),  in  Latin  America  (AL-
INVEST) and most recently in Asia (ASIA-INVEST), as well as in the countries of Central 
and  Eastern  Europe  (PHARE,  COOPME)  and  the  beneficiary  countries  of  the  TACIS 
programme.  Partnership  meetings  are  held  in  third  countries  along  the  same  lines  as  the 
EUROPARTENARIAT and INTERPRISE programmes. 

In the field of vocational training, SMEs are the priority target in programmes under Objective 
4  of  the  European  Social  Fund  and  the  ADAPT  scheme,  the  allocations  for  which  vary 
between  50  and  80%  depending  on  the  Member  State.  In  the  enterprises  strand  of  the 
LEONARDO DA VINCI programme, SMEs account for  16% of partners in the pilot projects 
and 26% of the mobility projects. These percentages should rise in the next calls for proposals 
because of the improved mobilisation  of networks of intermediaries  and the greater priority 
given to SMEs, the craft sector and micro-enterprises. 

Finally, the report demonstrates the progress made and recognises that the coordination  effort 
can  be  further  strengthened  in  order  to  rationalise  and  make more  effective  the  actions  to 
assist SMEs. To increase the participation of SMEs in Community programmes, the barriers 
to  their  fully  exploiting  the  measures  available  will  be'identified  and  possible  solutions 
examined.  Although  SME  policy  remains  essentially  a  matter  for  the  Member  States,  the 
Commission  can  play  a  significant  role.  In  application  of  Article  130  of  the  Treaty  on 
European Union, concerted  action stimulates closer cooperation amongst the Member States 
by  organising  the  exchange  and transfer  of  good practice in improving  and  simplifying  the 
business  environment  and measures  in support  of SMEs. Moreover, the  structured  dialogue 
between the Commission and the professional  organisations ensures that adequate account is 
taken  of the situation  of  SMEs and that policy measures  are explained.  Coordination  of all 
those  involved  is  essential  for  translating  the  political  priorities  into  tangible  measures, 
thereby maximising the potential for jobs, growth and the competitiveness of SMEs. 

FINANCIAL INSTRUMENTS, COMMUNITY  PROGRAMMES AND SMEs 

Number of 
SMEs 

SME participation across 
all projects 

SME share in  overall 
budget 

Community  operations 

Financial  instruments 
EIB - Financing via global  loans 

since 1990 

in  1995 
in  1996 

SME  facility  - Global  loans  with 
interest  subsidy  in  1994 

Amount 
allocated to 
SMEs in ecus 

11 MM 
2,9 MM 
2,6 MM 

1 MM 

42.000 
11.736 
11034 

4 435 
(45.000 new 
jobs) 

EIF (guarantees)  1994-1997, of which 
"Growth  and  the  environment" 

613,5 M 
397 M 

Seed  capital  action 

35 M 
(investments) 

207 
(3000 jobs) 

100% 

100% 
100% 

100% 

45%  of financing  allocated 
to industry  and  services 
58,4% 

100% 

34%  of EIF  activities as a 
whole 

100% 

10%  on  average for  Ôbj. 1 
16%  for  Objective  2 
30-40%  for  the  new  MS 

Structural  funds  (94-99)* 
CCA/DOCUP 

Community  initiatives  (94-99) 
SME 
LEADER  II 
EMPLOYMENT-N OW 

Research  and  development 
III  Framework  Programme  for  RDT 
(91-94) 
IV Framework  Programme  for  RDT 
(94-98) 

TSME  (in  10 programmes)  (94-98) 
Results  94-96 
Innovation  Programme 

Vocational  training 
ESF Objective  4 
ADAPT 
LEONARDO  DA VINCI  (95-99) 

International  cooperation 
JOP  (91-97) 

PHARE  -SME  (95-96)  national 
programmes 
COOPME  (95-97) 
TACIS -SME  (95-96) 
MED-INVEST/MEDA  (95-96) 

AL-INVEST  (95-99) 
ECIP  (95-99) 

ASIA-INVEST  (97-2002) 

1MM 

100% 

700 M 
(indicative) 

6.276 (4 yrs) 
5.439 (2 yrs) 

2500 

18% 
24% 

100% 

47% 

100% 
20% 
50% 

100% 

majority 
16% (enterprise strand) 
26% (mobility strand) 

124 joint 
enterprises 

majority (69% 
SMEs<100 employees) 
100% 

100% 
100% 

4000 
partnership 
contacts 

50 to 80% 
majority 

majority  for  SMEs 

100% 

100% 
100% 

825 (95-96) 

SME- oriented 

Facility  1 : 100% 
Facility  2 : 80% 

117,5 M 

33 M 

13 M 
31 M 

41 M 
250 M 

42  M 

Environment 
Financial  instrument  LIFE  (93-97) 

250 projects 

MEDIA  II  Programme 
of which  Loans  for  SME  development 
Action  plan  16:9 

3 M 

220 
220 

85% 

40% 

45% 

MM =  1000  million 
N.B.: The Community operations set out in this table are of differing  types (subsidies, loans, guarantees) and cover  different 
periods. The amounts given cannot therefore  be added. 
* An estimate is given of anticipated  SME  participation. 

INTRODUCTION 

This report has been drawn up in accordance with Article 5(2) of the Council Decision of 
9  December  1996  on  a  third  multiannual  programme  for  small  and  medium-sized 
enterprises  (SMEs)  in the European  Union (1997 to 2000)1, which  stipulates that  "the 
Commission  shall  submit  to  the  European  Parliament,  the  Council,  the  Economic  and 
Social  Committee and the Committee of the Regions a biennial report assessing  progress 
in  the  inclusion  of  the  SME  dimension  in  all  Community  policies  and  programmes, 
following  its  coordination  activities".  This  report  on  the  coordination  of  Community 
activities  to assist  SMEs  and the craft  sector is the fourth,  following  on  from  the  reports 
for  19952  (published  in  1996  and  distributed  in  over  20 000  copies  among  interested 
circles),  19943 and  19924.  It covers  1995, 1996 and part of 1997. 

It  is  also  a response  to  requests  by  the  Council,  which  showed  its  interest  in  the  1995 
report by adopting the Resolution  of 22 April 1996 on the coordination  of activities  in 
favour  of SMEs  and the craft  sector5,  in which it  asked the Commission  to  analyse  in 
greater  detail  the  impact  of Community policies  on SMEs. By adopting  in July  1996 the 
updated  version  of  the  Integrated  Programme  for  SMEs  and  the  craft  sector6,  the 
Commission  confirmed  the  usefulness  of  a  global  framework  for  all  actions  to  assist 
SMEs  in  order  to  enhance  their  profile  and  increase  their  effectiveness.  The  Integrated 
Programme  is thus  a coordination  instrument  operating  both  externally,  by  encouraging 
concerted  actions  between  Member  States,  and  internally,  by  laying  emphasis  on 
coordination  between  enterprise  policy  and  other  Community  policies  or  programmes. 
This report  reflects  the objectives  of the Integrated  Programme  for  SMEs  and  should  be 
considered  in  the  context  of  the  Council's  request,  expressed  in  its  Resolution  of  9 
December  19967  on  the  Integrated  Programme,  for  a  Recommendation  on  how  to 
increase  the  participation  of  SMEs  in  Community  policies  and  programmes.  The 
European  Parliament  also  expressed  its  interest  in  the  coordination  of  actions  to  assist 
SMEs by adopting on 24 April  1997 an own-initiative Resolution  on the  1995 report8 and 
an  own-initiative  Resolution  on  the  1996  Integrated  Programme9  requesting  the 
Commission to step up and sharpen its coordination  efforts. 

The attention paid by the Commission to coordinating  its actions to  assist  SMEs led it in 
April  1996, following  the restructuring  of the departments  in charge of  enterprise  policy, 
to  set  up  a  new  Directorate  to  be  responsible  for  concerted  actions  in  the  field  of 
enterprise  and  tourism  policy,  in  which  a  new  unit  has  special  responsibility  for 
the  Member  States,  coordination  with-  the 
SME-related  concerted  actions  with 

1 
2 
3 
4 
5 

6 
7 

8 
9 

Council Decision  97/15/CE of 9.12.1996, OJ L 6 of  10.1.1997, p.25 

COM(95) 362 of 8.9.1995, mention of the  1995 report refers to this  communication 

COM(94) 221 of 7.9.1994, mention  of the  1994 report refers  to this communication 

SEC(92) 704 of 26.5.1992 

Council  Resolution  96/C  130/01 of 22.4.1996 on the coordination  of Community  activities  in favour  of  SMEs 
and the craft  sector, OJ C  130 of 3.5.1996, p.l 

COM(96) 329 of  10.7.1996 

Council  Resolution  97/C  18/01  of  9.12.1996  on  realising  the  full  potential  of  SMEs,  including  micro-
enterprises  and  the  craft  sector,  through  an  integrated  approach  to  improving  the  business  environment  and 
stimulating business  support measures, OJ C  18 of  17.1.1997, p. 1 

Rapporteur  Mr Garosci, A4-0100/97, OJ C  150 of  19.5.1997, p. 50 

Rapporteur  Mrs Pcijs, A4-0034/97, OJ C  150 of  19.5.1997, p. 47 

Community  policies  concerned,  and  improvement  of  access  by  SMEs  to  Community 
support  programmes.  In this  way,  the  Commission  demonstrated  its will  to  improve  the 
coordination  of  actions  to  assist  SMEs  in  view  of  the  importance  of  SMEs  for  growth, 
competitiveness and  employment. 

This report  deals with  SMEs  in general,  irrespective  of their  sector  and  legal  status.  As 
regards tourism, which cuts across a number of fields, the Commission adopted in  1997 a 
specific report on Community measures affecting  tourism10 setting out the contribution  of 
Community policies to this sector, of growing importance for the European  economy  and 
employment 

AIMS AND SCOPE OF  COORDINATION 

Coordination  has  two  aspects:  external  via  the  concerted  actions  conducted  with  the 
Member  States  for  the purpose  of promoting  cooperation  among the Member  States  and 
between  the  Member  States  and  the  Commission,  in  particular  by  exchanges  of 
experience  and  best  practice,  and  internal  via  the  interdepartmental  work  carried  out 
within  the  Commission.  Internal  coordination  applies  to  all  Community  programmes, 
policies  and  actions  which  may  concern  SMEs both  from  the  regulatory  point  of  view 
(social,  environmental  or  competition  legislation)  and  from  the  financial  point  of  view 
(financial  instruments  and  programmes  such  as  the  structural  funds,  research  and 
technological development or vocational training). 

Coordination  has  the  twofold  objective  of  (a)  ensuring  that  the  SME  dimension  is 
incorporated  into  the  planning  and  implementation  of  Community  policies  so  that 
greater  allowance  is  made  for  the  special  features  of  SMEs  and  (b)  increasing  SME 
participation  in Community  programmes.  Account  is taken of the SME  dimension  in 
other  policies  mainly  at  the  stage  of  interdepartmental  consultation  on  legislative 
proposals  (see  the  SME  impact  assessment  form  system)  and  on  proposals  for 
Community  programmes.  For  support  programmes,  in  addition  to  the  planning  and 
programming  phase,  coordination  also  applies  to  the  implementation,  follow-up  and 
evaluation phases. 

STRUCTURE  OF THE REPORT 

This  report  comprises  two  chapters  organised  around  the  Commission's  priorities 
regarding  enterprise  policy,  in  accordance  with  the  lines  of  action  defined  in  the  third 
multiannual  programme  for  SMEs  of  9 December  1996.  The  first  chapter  deals  with 
improvement  of  the  SME  environment,  which  is  looked  at  from  the  administrative, 
legal,  financial,  fiscal  and  social points  of  view,  while  the  second  concerns  the  support 
programmes  and  measures  for  SMEs,  comprising  mainly  concerted  actions,  access  to 
financing  and  credit,  support  for  Europeanisation  and  internationalisation,  improvement 
of  SME  competitiveness,  improvement  of  SME  access  to  research,  innovation  and 
vocational  training, promotion  of  the  entrepreneurial  spirit  and  support  for  categories  of 
enterprises  such  as those  in  the  craft  sector,  distributive  trade  and  the  'social  economy'. 
The conclusions describe progress on coordination  since the adoption of the first report in 
1992. 

10 

COM(97) 332 of  2.7.1997 

10 

A COMMON DEFINITION OF SMEs 

The Commission  defined  for the first time a single reference  framework  for  all measures 
to  assist  SMEs  by  adopting,  on  3 April  1996,  a  Recommendation  on  the  definition  of 
SMEs11  addressed  to  the  Member  States,  the  European  Investment  Bank  (EIB)  and  the 
European Investment Fund (EIF).  This recommendation promotes the use of a  definition 
of SMEs, small  enterprises  and micro-enterprises  at both national  and Community  level, 
in  order  to  increase  the  coherence,  effectiveness  and  profile  of  all  actions  to  assist  such 
enterprises.  Thus,  an  SME  is  defined  as  an  enterprise  which  has  fewer  than  250 
employees  and  an  annual  turnover  not  exceeding  ECU 40  million  or  an  annual 
balance-sheet  total  not  exceeding  ECU 27  million  and  in  which  no  enterprise  or 
enterprises  which  are  not  themselves  SMEs  own  25% or  more  of  the  capital  or  of  the 
voting  rights.  Furthermore,  other  thresholds  define  small  enterprises  (fewer  than  50 
employees,  turnover  not  exceeding  ECU 7 million  or  balance-sheet  total  not  exceeding 
ECU 5  million,  together  with  the  independence  criterion)  and  micro-enterprises  (fewer 
than  10 employees). 

Since  Commission  departments  are  obliged  to  comply  with  this  Recommendation,  the 
application of the same definition  to all Community programmes  for  SMEs  should  make 
it  possible  to  improve  the  coherence  between  these  programmes  and  to  improve 
coordination both among them and between national aid measures for SMEs. 

IMPROVED KNOWLEDGE  OF SMEs 

More  than  99.8% of the  17.9  million  enterprises  in the European  Union  are  SMEs, 
employing  66%  of  the  private-sector  workforce  and  generating  56.2%  of  total 
turnover. 

In order to improve  its knowledge  of  SMEs, the Commission  adopted  two main  lines of 
action. First, it continued the statistical work which was started in  1987 with the national 
statistical institutes and led to the creation of the European System of Statistics on SMEs, 
a  database  containing  information  on  enterprises  broken  down  by  size  class.  Second,  it 
renewed  its  collaboration,  begun  in  1992, with  the  European  SME  Observatory,  one  of 
the  most  important  analytical  sources  of  information  on  the  economic  performance  and 
the environment  of SMEs, and which produces an independent annual report. 

The European System of Statistics on SMEs 

During  the  past  two  years,  the  Commission  has  considerably  enhanced  the  European 
System  of  Statistics  on SMEs, while  ensuring that the burden  on enterprises  is kept  to  a 
minimum. Use was made of the content of the System in drawing up the fourth  edition of 
the publication  "Enterprises  in Europe" and the third  and  fourth  reports  of  the  European 
SME  Observatory. 

11 

OJL  107 of 30.4.1996, p. 4 

11 

The fourth  edition  of the publication "Enterprises in Europe", published  at the end of 
1996,  provides  a  descriptive  analysis  of  the  data,  illustrated  by  graphs  and  tables  of 
figures.  It  gives  a  picture  of  European  enterprises  (on  the  basis  of  their  number, 
workforce  and  turnover), plus  a comparison  with  the  United  States  and  Japan,  thematic 
analyses  (the  demography  of  enterprises,  innovation  in  SMEs,  labour  costs  and 
productivity  in  SMEs,  SMEs  and  subcontracting,  SMEs  and  the  recession  in  Europe), 
regional  analyses,  sectoral  analyses  (27  sectors  of  activity  are  examined)  and  national 
analyses  (covering  the countries of the European  Economic Area).  A new  update  of  the 
European  System  of Statistics on SMEs has just been started, with the aim of  publishing 
the fifth edition of "Enterprises in Europe" by the beginning of 1998. 

Besides,  the  BACH  Database  contains  business  account  data  with  a  breakdown  of 
different  size  groups  based  on  a harmonised  definition.  The  information  is  provided  by 
Central Banks and  Statistical Agencies. The database is well-suited  for  financial  analysis 
and  a first study  "European  Economy (Supplement  A)  : Financial  situation  of  European 
enterprises" was published on  14 July  199712. 

The European  SME  Observatory 

During the period  1995-1996, the European  SME Observatory produced  two reports: the 
third  and  fourth.  They  contain  both  quantitative  and  qualitative  information  and  a 
number  of  detailed  thematic  studies.  The  third  covers  the  15  Member  States  of  the 
European  Union  plus  Norway,  while  the  fourth  covers  the  countries  of  the  European 
Economic  Area  plus  Switzerland.  The  latter  deals  particularly  with  the  effects  of  the 
internationalisation  of markets  on  SMEs  and  their  performance  in  the  Single  Market.  It 
arrives  at  the  conclusion  that  the  completion  of  the  Single  Market  has  so  far  had  a 
positive  impact  on  economic  growth  in  Europe,  particularly  on  exports  and  the 
productivity  of  enterprises,  and  that  SMEs  have  greatly  benefited  from  it.  It  is  SMEs 
which  now  have  the  highest  growth  potential,  implying  the  creation  of  many  new 
jobs.  The  detailed  thematic  studies presented  in the  fourth  report  deal  with  (a)  women 
and  SMEs  and  (b)  cooperatives,  mutual  societies,  associations  and  foundations.  1997 
saw  the  start  of preparatory  work  for  the fifth report,  which will  comprise  two  thematic 
studies on tourism  and the environment  and new chapters on cooperation between  SMEs, 
the use of external advisory services, and failures  and bankruptcies. 

12 

1SSN-0379-2056 

12 

CHAPTER I.  IMPROVING  THE SME ENVIRONMENT 

Community  measures  to  improve  the  SME  environment  are  mainly  directed  at 
administrative  simplification,  taking  the needs  and constraints  of SMEs  into  account  in 
the  drafting  of  legislative  proposals  and  in  policies  likely  to  affect  them  (notably 
competition,  the  internal  market,  taxation,  and  social  and  environmental  policies),  the 
simplification  of  existing  legislation,  specific  initiatives  such  as  those  on  payment 
periods  and the transfer  of SMEs, and lastly  the consultation  of SME  organisations  and 
the representation of SMEs in the social dialogue. 

1. 

ADMINISTRATIVE  SIMPLIFICATION  AND 

IMPROVEMENT  OF  THE  LEGAL 

ENVIRONMENT 

1.1 

Concerted  action  with  the  Member  States  and  organisations  representing 
enterprises with regard to legal and administrative  simplification 

The administrative  burdens  imposed  on enterprises  are due mainly to Member  State and 
not  European Union regulations13. This is why the Commission  has decided,  in  addition 
to  the procedures  to  improve  Community  legislation  described  in  point  1.2.  above,  to 
exchange  information  and  best  practice  in  the  field  of  legal  and  administrative 
simplification  with the Member  States and the representatives of enterprises14. The aim is 
to  disseminate  this  exchange  of  best  practice  in  order  to  enable  the  Member  States  to 
assess  their  performance,  for  example by benchmarking,  and thus to  encourage  them  to 
devise, where necessary, new simplifying  measures. This work has been carried  out with 
the assistance of the group of experts for improving  and simplifying  the environment  for 
enterprises, made up of representatives of the Member States and of enterprises15. 

In order to structure this work, it was considered  appropriate to concentrate first of all on 
the initial phase of the life-cycle  of an enterprise, i.e. its start-up and its first few years of 
development.  Despite  the importance  for  employment,  in  some Member  States  it  takes 
too  long  to  set  up  an  enterprise,  owing  to  the  lack  of  coordination  between  the 
administrative  authorities,  which  is  reflected  in  a  maze  of  formalities  and  procedures. 
This has been confirmed  by a comparative  analysis of the situation in Europe, the United 
States  and Japan  conducted  under  the  Innovation  Programme  -  EIMS-96/142.  A  first 
concerted  action with  the Member  States  and organisations  representing  enterprises was 
therefore  launched  at  a  Forum  held  in  June  1995 in  Paris,  which  was  followed  up by 
three specialised  workshops. The exchange of information  and best practice resulted in a 
Commission  Recommendation  on improving  and simplifying  the business  environment 
for  business  start-ups16.  The  Commission  recommends  that,  for  all  the  formalities 
involved  in starting up an enterprise, Member  States  should  set up single  contact points, 
use  a  single  registration  form  and  a  single  identification  number,  and  speed  up 
authorisation procedures. It also urges the Member  States to stimulate enterprises in their 
first  years  of  existence  by  easing  the  fiscal,  social,  environmental  and  statistical 
constraints to which they are subject. 

13 

14 
15 
16 

Report  of the  group of independent  experts on legislative and administrative  simplification  (Molitor Group), 
COM(95)  288  of  21.6.1996  and  1995  UNICE  report  on  regulation  entitled  "Releasing  Europe's  Potential 
through Targeted Regulatory Reform" 

See the Integrated Programme for SMEs and the craft  sector, COM(96) 329 final of  10.7.1997 

Council Resolution of 10 October  1994, OJ C 294 of 22.10.1994, p. 6 
Recommendation of 22 April  1997, OJ L 145 of 5.6.1997, p. 29 

13 

1.2 

Assessment of the impact of Community  legislation  on business 

1.2.1 

Interdepartmental  consultations on legislative proposals 

The  role  of  enterprise  policy  in  interdepartmental  consultations,  including  legislative 
proposals,  is to  ensure  that  the  Commission  is taking  appropriate  account  of  the  impact 
on business, and in particular on SMEs. Legislation  is often  necessary  in order to protect 
the environment, or to ensure the health and safety of employees, or to introduce  essential 
social  security provisions. However,  such legislation  often  affects  businesses  by creating 
compliance  costs  and  administrative  burdens,  which  can  put  at  risk  their  competitive 
position,  their  growth  and  their potential  for  creating  sustainable jobs.  This  burden  falls 
disproportionately  on  smaller  businesses,  which  in  comparison  to  large  enterprises,  do 
not  have  sufficient  human  or  financial  resources.  SMEs  are  often  not  aware  of  or 
experience difficulty  in understanding  complex regulations. They do not have the time or 
the  expertise  to  get  involved  in  consultation  procedures  prior  to  the  preparation  of 
legislation. 

In view  of the importance  of the SME sector within the European Union's  economy  it is 
the responsibility  of enterprise policy  services to ensure that when  a legislative  proposal 
is  likely  to  affect  SMEs,  proper  account  is  taken  not  only  of  the  compliance  costs  and 
other  burdens  of  the  regulation  itself,  but  also  of  the  administrative  procedures  or 
requirements which stem from the regulations. 

As  part  of  the  consultation  process,  enterprise  policy  services  are  introducing  a  "Think 
Small  First"  concept  which  should  be  applied  by  the  Commission  when  legislation  is 
being  drafted.  This  on  the  basis  that,  while  large  firms  can  adapt  to  legislative 
requirements  which  have  been  developed  with  SMEs  in  mind,  the  reverse  is  not  true. 
This  means  looking  at  a proposal  for  legislation  from  a  small  firm's  point  of  view  and 
ensuring that the appropriate SME business organisations have been properly  consulted. 

Policy  areas  where  enterprise  policy  services  have  been  active  and  directly  involved  in 
the interdepartmental  consultations, because of the potential implications  for the business 
environment  and  SMEs,  include  : the  social  dialogue,  the  Single  Market  Programme 
(new common VAT system, public procurement, revised Intrastat Regulation  (Eurostat)), 
Revised  Eco-label  Regulation,  euro  ,  Environmental  Liability,  Food  Law  Green  Paper, 
and  Commercial  Communications.  On  all these  issues where  the implications  for  SMEs 
are significant,  the Commission services responsible for enterprise policy endeavoured  to 
see that  SMEs'  concerns were understood  and properly taken into account, and that  SME 
business organisations were consulted and involved. 

1.2.2  Community system for assessing the impact of legislative proposals  on business, 

particularly  SMEs 

Where  a  specific  legislative  proposal  is  likely  to  have  a  significant  impact  on  business, 
particularly  on  SMEs,  enterprise  policy  services  require  the  appropriate  Directorate-
General  to  complete  a  business  impact  assessment  designed  to  provide  a  concise  and 
comprehensive picture of the implications  for  SMEs so that decision-makers  can see that 
the particular concerns of SMEs have been properly taken into account. 

In  the  yearly  Commission  Legislative  Programme,  legislative  proposals  which  will 
require  the  completion  of  a  business  impact  assessment  are  indicated  so  that  interests 
concerned  have advance notice that business is going to be affected.  This  gives them  the 

14 

opportunity  to  get  involved  in the consultation  process. The business  impact  assessment 
will  be  based  on  the  appropriate  regulatory  impact  analysis  undertaken  by  the 
Directorate-General  responsible  for  the  legislative  proposal.  The  objective  is  to  ensure 
that the appropriate balance has been struck between new requirements,  for  example,  the 
environmental  or  health  and  safety  controls,  and  compliance  costs  and  other 
administrative burdens for business. 

In  1995,  14  business  impact  assessments  were  completed  including  four  legislative 
proposals  concerning  structural business  statistics17; the protection  of workers  from  risks 
related 
for 
telecommunications  equipment19;  and  emissions  from  internal  combustion  engines  in 
non-road mobile machinery20. 

interconnection  provisions 

at  work18; 

carcinogens 

exposure 

to 

Out  of  the  19 new  legislative proposals  contained  in the  Commission's  1996  legislative 
programme,  10  were  considered  likely  to  have  a  significant  impact  on  business, 
particularly  on  SMEs,  and  the  appropriate  Directorates-General  were  required  to 
complete  a  specific  business  impact  assessment.  Out  of  these  10,  7  business  impact 
assessments were completed while the other 3 were deferred  into 1997. 

These  included  proposals  on  : the use of  organic  solvents  in certain  industrial  activities 
including  dry  cleaning,  printing  and  vehicle  repair,  involving  many  SMEs21,  the 
implementation  of  the  framework  agreement  on  parental  leave,  where  a  number  of 
European  SME  business  organisations  were  concerned  about  the  need  to  address  the 
specific  position  of  SMEs22,  the  charging  of  heavy  goods  vehicles  for  the  use  of  road 
infrastructure23,  and  the  provision  of  labour  costs  statistics24.  All  these  business  impact 
assessments  can  be  examined  by  obtaining  the  appropriate  COM  document  from  the 
Office  for Official  Publications of the European Communities. 

Lastly,  in  the  framework  of  the  first  Action  Plan  for  Innovation  in  Europe,  the 
Commission  has  undertaken  to set up  an ex-ante mechanism  for  assessing  the impact  of 
regulations on innovation within the general guidelines for legislative policy. 

1.3 
Simplification  and improvement of legislation on the Internal  Market 
The  SLIM  initiative25  (Simpler  Legislation  on  the  Internal  Market),  launched  by  the 
Commission  in  May  1996,  aims  to  find  ways  to  reduce  the  constraints  which  Single 
Market  rules  impose  on  enterprises,  particularly  the  smallest  among  them,  and  to  make 
the  operation  of  the  Union  more  transparent  and  more  efficient.  The  SLIM  method  is 
novefm  that it leaves the task of drawing up recommendations  on simplifying  legislation 

17 
18 

19 
20 
21 
22 
23 
24 
25 

COM(95) 99 final of 31.3.1995 

COM(95) 425  final  of  13.9.1995 

COM(95) 379 final of  19.7.1995 

COM(95) 350 final of 06.9.1995 

COM(96) 538 final of 6.11.1996 

COM(96) 26 final of 31.1.1996. Council Directive 96/34/EC of  3.6.1996, OJ L  145 of  19.6.1996, p. 4 

COM(96) 331  final  of  10.7.1996 

COM(96)475  final  of  16.10.1996 

COM(96) 204 final  of 8.5.1996 

15 

to small teams made up of experts from the national administrations  and representatives 
of users, e.g. enterprises (manufacturing and distributive trade, including SMEs). 

The  first  phase  of  the  SLIM  exercise  concentrated  on  the  following  four  sectors: 
INTRASTAT  (system  for  collecting  statistics  on  intra-Community trade),  construction 
products, recognition of qualifications,  and ornamental plants. For each of these sectors, 
solutions  for  simplifying  or  improving  the  legislation  were  defined  by  the  teams  of 
experts26.  Following  their  recommendations,  the  Commission  has  already  drawn  up 
proposals for improving the INTRASTAT system27 and will soon draw up proposals in 
other areas. 

The  second  phase  of  the  SLIM  project,  which  is  currently  under  way,  deals  with  the 
following sectors: obligations regarding value-added tax, banking services, the Combined 
Nomenclature  for  external 
in 
trade,  and  fertilisers. 
recommendations  to  be  included  in  a  Commission  Communication  to  the  Council  in 
November 1997. 

The  work  will  result 

The  SLIM exercise  is only one component  of a wider programme  for  simplifying  and 
improving Single Market legislation with a view to making it more effective.  It is one of 
the  strategic  measures  of  the  Action  Plan  for  the  Single  Market.  This  incremental 
simplification  programme  will  combine  the  SLIM  method  and  other  rationalisation 
measures in order to simplify, by 1999, a number of areas of legislation such as insurance 
and real  estate, consumer  services, telecommunications,  customs rules  and procedures, 
and company law. 

1.4 

Single Market Programme 

The Commission aims to ensure that SME demands and concerns are taken into account 
by  the  Commission  services  in  the  implementation  of  the  Single  Market  Programme 
Info  Centres  provide  useful  feedback  information  from  SMEs 
(SMP).  The  Euro 
operating in the Single Market. With regard to Public Procurement, a Green Paper28 was 
published  which  enables  interested  parties  to  present  their  views.  In  addition,  the 
potential impact of Single market legislation on different  policy areas is examined by the 
Commission interdepartmental groups. 

Fully exploiting the potential of the Single Market, which is one of the main thrusts of 
the Confidence Pact for Employment29, is one of the priorities of the European Union. 
In this context, enterprises should be helped to take advantage of the internal market. In 
its  report  on  the  impact  and  effectiveness  of  the  Single  Market30,  the  Commission 
confirmed the scale of the positive economic impact of the internal market (almost  1.5% 
additional  growth  and nearly  900 000 new jobs), while pointing  out that  the delays  in 
national application of the Single Market rules continued to limit its positive contribution 
to growth, competitiveness and employment. 

26 
27 
28 
29 
30 

Commission  report on the SLIM pilot project - COM(96) 559 final of 6.11.1996 

COM(97) 252 final  of 30.5.1997 and COM(97) 275 final of 4.6.1997 

COM(96) 583 of 27.11.1996 

CSE (96)1  final  of 5.6.1996 

COM (96) 520 final of 30.10.1996 

16 

improving 

its  priorities  for 

the 
Following  this  report,  the  Commission  defined 
performance  of  the  Single  Market  in  the  coming  years  and  presented  them  in  its  Single 
Market  Action  Plan31,  which  is  based  on  four  strategic  objectives:  improving  the 
effectiveness  of  the  rules;  eliminating  the  main  market  distortions;  eliminating  sectoral 
obstacles  to  the  integration  of markets,  and  placing  the  Single Market  at  the  service  of 
everyone.  Some of the specific  actions  are designed  to improve more specifically  access 
of  SMEs  to  the  Single  Market,  for  example  -  those  relating  to  the  improvement  of 
enterprises'  access to the information  they need, by setting up an info-line  on the Internet 
as a coordinated  addition to the activity of the Euro Info  Centres; and those related to the 
simplification  of national and Community provisions and to the improvement  of payment 
periods  in  commercial  transactions.  The  Amsterdam  European  Council  (16-17  June 
1997) gave the go-ahead to the Action Plan and endorsed  its objectives, thus  reaffirming 
the  need  to  give  a  new  political  impetus  to  eliminating  the  remaining  barriers  and  to 
ensure that full  advantage is taken of the potential benefits  of the Single Market. 

Surveys  and  studies  suggest  that  larger  companies  have benefited  most  from  the  Single 
Market  Programme.  SMEs  operate  at  regional  and  local  level,  while  larger  companies 
have  a  wider  knowledge  and  are  more  familiar  with  the  Single  Market  legislation. 
However,  the  same  sources  reveal  that  SMEs  operating  at  EU  level  prior  to  the  Single 
Market Programme  or SMEs operating in cross-border regions thought that the SMP had 
a  positive  impact  on  their  business.  They  admitted  that  an  increase  of  competitive 
pressure  in  the  business  environment  had  resulted  in  improved  quality  standards  and 
productivity. 

For most SMEs, whether they operate at international  level or not, a major problem is the 
cost  of  complying  with  new  technical,  administrative  and  fiscal  regulations.  Large 
companies  report  that  they  have  been  able  to  reallocate  a  member  of  staff  to  deal 
exclusively  with  the  paperwork  needed  in  order  to  comply  with  the  new  legislation. 
Smaller  companies  state, however,  that this poses  a serious cost  to their business.  These 
represent  once-off  fixed  costs  that  tend  to  be  a  higher  proportion  of  an  SME's  total 
turnover  than  that  of  a larger  company.  Also,  small  manufacturers  in  some  sectors,  e.g. 
machinery,  tend  to  produce  custom  equipment  so  the  costs  of  conformity  for  each  new 
model are high. For example, smaller machinery manufacturers  view the CE marking as a 
necessary  marketing  tool.  However,  the  cost  of  complying  is  a  fixed-cost,  which 
inevitably  raises  the  break-even  point  :  this  is  negligible  for  bigger  manufacturers 
producing  in  large  numbers, but  can be  important  for  manufacturers  of  specialised  one-
off machinery or machines produced in smaller numbers. 

Nevertheless, SMEs from various sectors have expressed positive views about the impact 
of  the  Single  Market  on  their  activities.  For  example,  in  the  detergent  and  cosmetics 
sector,  SMEs  have  benefited  from  improved  access  to  European  markets.  In  the 
construction  site equipment  sector32, 29% of SMEs as opposed to 7% of large companies 
feel  that  Single  Market  legislation  has  encouraged  them  to  sell  in  other  markets.  Small 
companies  already  operating  at  international  level,  in  sectors  such  as  machinery, 
considered that the system of self-certification  for CE marking greatly supports SMEs, by 
helping  them  to  raise  the  technical  standard  of  their  products,  and, compete  more 

31 
32 

CSE(97)1  final  of 4.6.1997 
Ws/Atkins.  "Impact  and  effectiveness  of  the Internal  Market Programme  in  the  Construction  Site  Equipment 
sector",  May  1996 

17 

larger  companies.  Other  surveys33  confirm 

effectively  against 
the 
implementation  of  the  Single  Market,  37%  of  SMEs  surveyed  claimed  to  have 
significantly  improved their European distribution  and marketing activities, 27% claimed 
to  have  developed  improved  products  or  production  processes  and  a  further  12%  had 
taken on staff with new skills to adjust  to the European market's needs. Also,  concerning 
VAT  procedures  for  intra-EU  sales,  32% of  SMEs  considered  that  the  new  system  has 
had a positive impact in their activities as opposed to only 30% of large companies. 

that  since 

Company law 

The  European  Commission  has just  launched  a  broad  exercise  to  consult  the  Member 
States, professional  organisations  and  the  academic  community  on  the  subject  of  "The 
Single Market and company law"34. By this consultation, the Commission  is seeking to 
establish whether the legal  structures within which  enterprises  operate are appropriate  or 
need  to  be  changed  in  the  context  of  the  Single  Market  and  Economic  and  Monetary 
Union,  and  to  ascertain  inter alia what  the requirements  are in terms  of  simplifying  the 
present rules, particularly in relation to SMEs. 

intends  to  adopt  a  new  proposal  for  the  Tenth  Directive  on 
The  Commission 
cross-border  mergers  of  corporate  enterprises.  The  field  of  application  of  this  new 
proposal  will  not  be  confined  to  public  limited  companies  but  will  cover  all  corporate 
enterprises.  This  widening  of  scope  will  mainly  benefit  SMEs,  which  are  often  limited 
liability  companies.  The possibility  of cross-border  mergers  will help  to  internationalise 
the  activity  of  these  enterprises,  as  advocated  by  the  Commission  in  its  multiannual 
programme for SMEs. 

In addition,  the Commission  is planning to adopt  a proposal  for  a Fourteenth  Directive 
on the transfer  of head  offices  of companies  from  one Member  State to  another.  This 
Directive,  the  field  of  application  of  which  is  similar  to  that  of  the  new  proposal  on 
cross-border  mergers,  is  also  likely  to  become  an  effective 
the 
internationalisation  of SMEs. 

instrument  for 

Recognition  of  qualifications 

On  8 February  1996, the  Commission  adopted  a proposal  for  a Directive  establishing  a 
mechanism  for  the  recognition  of  qualifications  in  respect  of  the  professional 
activities  covered  by  the  Directives  on  liberalisation  and  transitional  measures  and 
supplementing the general system for the recognition of qualifications35. 

This  proposal  aims  to  recast  the  main  provisions  of  the  "transitional  measures"  and 
"liberalisation"  Directives  relating  in  particular  to  commerce,  industry  and  small  craft 
industries, so as to clarify  and simplify  Community  legislation  in this area.  The  proposal 
also  aims  to  establish  a  mechanism  for  the  recognition  of  qualifications  in  respect  of 
professional  activities  not  covered  by  the  general  system.  This  mechanism  will  enable 

33 
34 

35 

"EU initiatives for  SMEs - are the policies  appropriate ?", Deloitte Touche Tohmatsu International,  1995 

Based  on  a Commission  report  entitled  "The  Simplification  of  the Operating  Regulations  for  Public  Limited 
Companies in the European  Union",  1995 

COM(96) 22 final of 8.2.1996 

18 

migrants  to  request  the  recognition  of  their  qualifications  if  they  do  not  have  the 
professional  experience required  to apply for recognition  under a "transitional  measures" 
Directive. 

Accounting  rules 

Directive  78/660/CEE36  on  the  annual  accounts  of  certain  types  of  companies  and 
Directive  83/349/CEE37  on  consolidated  accounts  allow  the  Member  States  to  exempt 
from  some  of  their  obligations  small  and  medium-sized  companies  or  small  groups  of 
companies  which  do  not  exceed  certain  threshold  levels.  Article  53(2)  of  Directive 
78/660/EEC  stipulates  that  these  levels  may  be  revised  every  five  years  in  the  light  of 
economic and monetary trends in the Union. 

The  latest  revision  was  in March  1994, and  the next  one  is  due  in  1999.  Changing  the 
threshold  levels  will  form  part  of  a  project  to  adapt  the  directives  to  economic 
development,  particularly  with  regard  to  small  and  medium-sized  companies.  Some  of 
the changes planned  are linked  to the introduction  of the euro, but  the  Commission  will 
also  re-examine  the  accounting  procedures  applicable  to  small  and  medium-sized 
companies  with  a  view  to  a  possible  relaxation  of  these  procedures,  while  at  the  same 
time taking account of the requirements imposed by the Single Market.  The Commission 
has  launched  a  questionnaire  on  accounting  in  SMEs,  and  the  comments  made  will  be 
used as a basis for drafting  amendments to the Directives.  The new definition  of SMEs38 
is another element  which  the Commission  will  take into  account  when  drawing  up  these 
proposals. 

Protection  of intellectual and industrial property 

Following the consultation  set in motion by the presentation, in  1995, of a Green  Paper 
on  the  protection  of  utility  models  in  the  Single  Market39,  the  Commission  is  due 
shortly to propose a measure to harmonise national legislation in this field, in view of the 
impact  of  the present  differences  on  the  free  circulation  of  goods  and  on  the  conditions 
for  non-distorted  competition.  Utility  models  are  a  flexible,  inexpensive  form  of 
protection well  suited to  SMEs active in certain  sectors of innovation.  The  Commission 
is  also  continuing  its  efforts  for  the  rapid  adoption  of  proposals  on  the  protection  of 
designs and models, potentially of great interest for SMEs. 

Public  procurement 

On  27  November  1996  the  Commission  adopted  a  Green  Paper  entitled  "Public 
procurement  in  the  European  Union:  exploring  the  way  forward"40,  the  aim  of 
which was to increase the effectiveness  of its policy of opening up public procurement by 
means  of  broad  consultation  with  all  interested  parties.  The  Green  Paper  sets  out  the 
Commission's  ideas on the specific  difficulties  encountered by SMEs in taking  advantage 
of the new potential  sales opportunities  created  by  Community  Directives.  It  also  seeks 

36 
37 
38 
39 
40 

O J L 2 2 2 of  14.08.1978, p. 11 

OJ L 193 of  18.7.1983, p. 1 

OJL  107 of 30.4.1996, p. 4 

COM (95) 370 of  19.7.1995 
COM(96) 583 of 27.11.1996 

19 

to  promote  a  discussion  whose  ultimate  objective  is  to  propose  a  series  of  concrete 
measures  likely  to  encourage  greater  SME  participation  in  public  procurement.  These 
measures  are  to  be  based  mainly  on  supporting  enterprises  in  the  fields  of  training, 
information,  technical assistance and cooperation between enterprises. 

A  number  of  Euro  Info  Centres  have  developed  specialised  software  for  electronic 
tendering  aimed  at  improving  access  to  information  on  tender  notices  for  their  clients, 
notably  in  the  Netherlands,  the  United  Kingdom  and  France.  In  addition,  Euro  Info 
Centres  were  involved  in different  applications  and  a related  study on  SIMAP  (Système 
d'Information  pour les JVfarchés Publics). 

1«5 

Transfer of enterprises 

Since  the  Commission  sent  the  Member  States  the  Recommendation  of  7  December 
1994 on the transfer of SMEs41, a number of them have adopted, or are at least planning 
to adopt, measures to improve the legislative and fiscal  environment  of enterprises  in this 
area.  The  Commission  set  a time  limit  of  two  years,  expiring  on  31 December  1996,  in 
which  the  Member  States  were  to  communicate  to  it  the  text  of  any  legislation, 
regulations  or  administrative  provisions  adopted  regarding  the transfer  of  enterprises.  In 
order  to  make  an  initial  assessment  of  the  measures  taken  since  1994  and  to  define 
existing  best  practice,  the  Commission  organised  a  European  forum  on  this  subject  in 
Lille  on  3-4 February  199742.  The  work  of  this  forum  showed  that  progress  has  been 
achieved mostly with regard to simplified  public limited companies, one-man businesses, 
the right to transform  one legal structure into another, the continuity of partnerships,  and 
taxation  of  donations,  inheritances  and  sales  of  enterprises.  The  efforts  to  facilitate  the 
transfer  of enterprises will be continued in the coming years. 

1-6 

Competition  policy 

European  enterprises  generally  benefit  from  effective  competition  policy.  This  is 
particularly  true  for  SMEs. Competition  policy benefits  SMEs directly  in markets  where 
large  enterprises'  market power  threatens them  or indirectly by keeping prices  and  costs 
low.  Simultaneously,  competition  policy  favours  new  entries,  which  are  frequently 
SMEs.  Furthermore,  unjustified  state  aid  distorts  market  forces  and  therefore  creates 
disadvantages for SMEs. 

1.6.1  Competition  rules applicable to enterprises 
SMEs  are  the  main  beneficiaries  of  the  recent  Commission  Communication43  on  the 
revision  of its  Communication  of  3 September  1986 on agreements  of minor  importance 
(in application of Article 85 of the EC Treaty on agreements between enterprises). 

The  Commission  notes  that  agreements  between  SMEs,  as  defined  by  the  Commission 
Recommendation  of  3 April  199644,  are  rarely  likely  to  have  any  appreciable  effect  on 
trade between Member States or on competition. Therefore,  as a general rule, they are not 
subject  to  the  prohibition  provided  for  in  Article  85(1).  Where  such  agreements 

41 
42 
43 
44 

OJL  385 of 31.12.1994,p.  14 and C400 of 31.12.1994, p. 1 

OJ C 284 of 27.9.1996, page 3 of the cover 

COM(96) 722 final concerning agreements of minor importance, OJ C 29 of 30.1.1997, p. 3 

Commission  Recommendation  of  3.4.1996  to  the  Member  States,  the  EIB  and  the  EIF  concerning  the 
definition  of SMEs, OJ L  107 of 30.4.1996, p. 4 

20 

exceptionally  fulfil  the  conditions  of  application  of this provision,  they  would  not  be  of 
sufficient  Community  interest  to justify  intervention.  This  is  why  the  above-mentioned 
text  states  that  the  Commission  will  not  institute  any  procedure,  either  on  request  or 
automatically, to apply the provisions of Article 85(1) to such agreements. 

However, the Commission reserves the right to intervene with regard to such  agreements 
if  they  relate  to  a  substantial  share  of  the  market  in  question  and  if  competition  is 
restricted by the cumulative effect  of distribution networks. 

With regard  to vertical restraints, i.e. agreements between  operators at different  stages  of 
commerce,  the  Commission  has just  published  a  Green  Paper45  opening  the  way  to  a 
broad consideration of future policy with regard to the application of competition rules. 

In  this  context  and  in  the  light  of  the  Council  Resolution  of  10 October  199446,  which 
called  on  the  Commission  to  examine  the  possibilities  for  SME  cooperation,  the 
Commission  intends to refine  its analysis in the field of cooperation in joint purchasing. 

As  regards  the  application  of  competition  rules  in  specific  sectors  of  activity,  such  as 
motor vehicle distribution and servicing, the adoption of Regulation  1475/9547 introduced 
several  provisions  securing  for  dealers,  most  of  whom  are  SMEs,  greater  commercial 
independence  vis-à-vis  manufacturers.  This  has  also  made  it  possible  to  rebalance  the 
position  of  manufacturers  and  distributors  of  spare  parts  in  relation  to  that  of  motor 
manufacturers. 

On  31 January  1996  the  Commission  adopted  a  new  Regulation  on  the  application  of 
Article 85(3) to categories  of technology transfer  agreements48 with a view to  facilitating 
certain technology transfers, which should be favourable to SMEs. 

1.6.2  State aid 

As  regards  State  aid,  the  Commission's  general  policy  has  always  taken  account  of  the 
position of SMEs. This attitude was reflected,  in  1992, in the first specific  guidelines  for 
aid to SMEs49, which stipulate that, as long as it is within certain limits, aid to SMEs may 
be  eligible  for  the  exemption  provided  for  in Article  92(3)(c)  of the Treaty  and  are  thus 
deemed to be compatible with the common market. In addition, the guidelines  introduced 
a  de  minimis  rule  dispensing  the  Member  States  from  the  obligation  to  notify  the 
Commission  in  the  case  of very  small  amounts  of  aid, which  are  assumed  not  to  affect 
trade  between  Member  States.  Although  the  de minimis  rule  does  not  set  a  limit  on  the 
size of-recipient  enterprises, it is obvious that it concerns mainly SMEs. 

The  guidelines  on  aid  to  SMEs, which  provided  for  a review  of  their  application  after 
three  years,  were  revised50  in  1996.  Although  the  main  guidelines  defined  in  1992 

45 
4^ 

47 
48 
4 9. 
50 

COM(96) 721 final of 22.1.1997 

Council  Resolution  94/C 294/04  of  10.10.1994  on giving  full  scope the dynamism  and  innovatory  potential  of 
SMEs, including  the craft  sector and  micro-enterprises,  in a competitive  economy, OJ C 294 of  22.10.1994, p. 
7, par. Ill, 4th  indent 

OJL  145 of 29.6.1995, p. 25 

OJL  31 of 9.2.1996, p. 2 

Community  guidelines on aid to SMEs, 92/C 213/02 of 20 May  1992, OJ C 213 of  19.8.1992, p.2 

Community  guidelines on State aid for  SMEs 96/C213/04, OJ C 213 of 23.7.1996, p.4 

21 

(general assessment  criteria, acceptable intensity) did not change, some clarifications and 
amendments  were  introduced.  First,  the guidelines  extend  the range of eligible  purposes 
of aid by stipulating  that the favourable  attitude to aid for tangible  investment  will  also 
apply  to  aid  for  intangible  investment  in  the  form  of  technology  transfer.  Such  aid  is 
intended  to  encourage  SMEs  to use advanced  technologies  which  they  would  not  have 
been able to develop themselves. As for other types of aid, the new guidelines retain most 
of  the  criteria  of  the  previous  guidelines  (aid  for  consultancy  services,  training  and 
dissemination of knowledge) or refer to guidelines  specific  to these types of aid51,  which 
often  contain  more  favourable  rules  for  assessing  aid  for  SMEs.  For  example,  the 
threshold  applied  to environmental  aid or aid for research  and development  intended  for 
SMEs  is  10% higher  than  that  normally  applied  to  large  enterprises.  Second,  the  de 
minimis  rule was amended  and is now the subject  of a separate notice52. Compared  with 
the  original  de  minimis  rule,  the  new  rule  has  considerably  simplified  application 
procedures.  It also  extends  its field of application  to all types of aid (except  export aid, 
which remains excluded) and replaces the rules on the cumulation of different  categories 
of expenditure by a single threshold. The threshold below which aid need not be  notified 
to the Commission  is set at ECU 100 000 over a period of three years, irrespective of the 
type of aid. Lastly, the definition  of SMEs used in the guidelines has been adapted to the 
harmonised definition  adopted by the Commission53 (see Introduction). 

It  is  important  to  add  that,  as  a  result  of  three  notifications  it  received  in  1996, the 
Commission  decided  that  the  SME  guidelines  also  apply  to  aid  granted  to  SMEs  for 
direct  investments  in  third  countries.  This  decision  reflects  the  attitude  of  the 
Commission,  which  wishes  to  encourage  SMEs  to  internationalise  their  activities,  also 
via investments in extra-Community countries. 

Apart  from  the  new  guidelines  on  aid  to  SMEs,  the  Commission  recently  adopted 
guidelines  on  aid  to  enterprises  in  deprived  urban  areas.  This  instrument  permits  the 
granting of aid to enterprises setting up or already located in such areas, on condition that 
the criteria  laid  down in the guidelines are met. Since the potential beneficiaries  of such 
aid are mainly  SMEs, the Commission's  favourable  approach in this field is of particular 
interest to them. 

It  should  be  added  that  the  Commission's  attitude  to  SMEs,  as  reflected  in  the 
above-mentioned  texts, is the expression of a general policy. In the supervision of aid, as 
in  its  other  fields  of  activity,  the  Commission  seeks  to  take  account  of  the  special 
situation  of  SMEs  and  to  help  to  stimulate  their  development,  while  complying  with 
competition rules. 

2. 

FINANCIAL  ENVIRONMENT 

2.1 

Late Payment in commercial  transactions 

Late  payment  is  an  increasingly  serious  obstacle  to  the  development  of  European 
enterprises,  in  particular  SMEs  whose  cash-flow,  profitability  and  competitiveness  are 

->1 

52 
53 

Community  guidelines  applicable  to  State  aid  for the protection  of the environment  OJ  C  72 of  10.3.1994, 
p. 3; Community guidelines applicable to State aid for research and development, OJ C 45 of  17.2.1996, p. 5; 
Guidelines applicable to aid for employment, OJ C 334 of  12.12.1995, p.4 

Commission notice on the de minimis rule for State aid, OJ C 68 of 6.3.1996, p. 9 

Commission Recommendation of 3.4.1996, OJ L 107 of 30.4.1996, p.4 

22 

undermined.  In  its  Recommendation  of  12  May  1995  on  payment  periods  in 
commercial  transactions54,  the  Commission  set  out  a  range  of  practical  and  legal 
measures  to  tackle  late  payment  in  Europe.  This  Recommendation  requested  Member 
States to take the most appropriate measures to improve payment periods and to  forward 
a  report  to  the  Commission  on  action  taken  in  respect  of  this  Recommendation  before 
31 December  1997.  The  Commission  undertook  an  evaluation  of  the  effect  of  the 
Recommendation  in  1997 and has published  a Communication55  which  shows  that  little 
action has been taken by Member  States to reduce the problem  of late payment,  and  that 
the payment  situation  is not getting better. In the absence of sufficient  action by  Member 
States  before  the  end  of  1997, the  Commission  will  propose  a  directive  to  combat  late 
payment,  containing  minimum  requirements  to be  incorporated  into  national  legislation. 
These requirements  should include a statutory right to interest on late payments,  efficient 
and  inexpensive  redress  procedures  for  obtaining  payment,  and  a  maximum  payment 
period for public procurement contracts. 

2.2 

Preparing SMEs for the introduction  of the euro 

The  enterprise  policy  departments  have  played  an  active  part  in  all  the  Commission's 
work  concerning  the  euro,  participating  in  the  corresponding  working  parties  on 
"enterprises",  "consumers",  "payment  systems",  "means  of  payment",  "accounting  and 
taxation",  and  were  involved  in  preparing  the  Round  Table  on  practical  aspects  of  the 
transition to the euro, which was attended on  15 May  1997 by all the economic  operators 
concerned. They have regularly put the euro on the agenda of the meetings they hold with 
trade  organisations,  the  Euro  Info  Centres  (EICs)  and  the  members  of  the  Bank-SME 
Round  Table.  They  have  set  up  an  ad  hoc  group  on  SMEs  and  the  euro,  in  which  the 
intermediaries  of  enterprises  meet  in  order to promote  mutual  exchanges  of  information 
and between  themselves  and  the Commission.  They have  encouraged  private  and  public 
initiatives  on  euro-related  information  for  SMEs  and have  forwarded  to the EICs  all  the 
documents  on  the  euro  likely  to  be  of  use  to  them.  In  addition,  a  campaign  to  raise 
awareness  of  the  introduction  of  the  euro  was  launched  by  the  EICs  in  1996,  to  be 
carried  over into  1997 and beyond.  This campaign will  involve  a number  of  information 
events  and  the  production  of  a  number  of  information  documents  answering  the  main 
questions  on the effects  of the introduction of the euro on the various business  functions. 
These awareness-raising  actions are also directed at the craft  and micro-enterprise  sector. 

2.3 

Cross-border credit transfers 

In order to simplify  transnational  operations  of SMEs and hence to reduce their costs the 
Comifrission  has  proposed  concrete  measures  such  as  the  Directive  on  cross-border 
money  transfers56  which  will  ensure  that  businesses  will  be  able  to  transfer  money 
quickly  and  more  reliably.  In  addition,  under the Directive,  Member  States  must  ensure 
that there are settlement procedures  for transnational  disputes relating to matters  covered 
by the Directive. 

54 
55 
56 

OJL  127 of  10.6.1995, p. 19 

C(97) 2121 of 9.7.97, OJ C 216 of  17.7.97 

Directive 97/5/EC, OJ L 43 of  14.2.1997, p.25 

23 

2.4  Access to finance for innovation 

The Action Plan for  Innovation in Europe, adopted on 20 November  1996, provides  for 
measures to encourage the financing of innovation, in particular by venture capital.  The 
European  Council  Resolution  on  growth  and  employment,  adopted  at  the  Amsterdam 
Summit,  reaffirmed  the  importance  of  access  to  financing  for  advanced-technology 
projects and for SMEs. 

3. 

TAX ENVIRONMENT 

Commission activities in the fields of customs and taxation policy aim to support the full 
implementation of the Single Market by adapting the administrative sets of rules in these 
policy areas to the Market. At the same time, a simplification  of legislation  is intended. 
The latter is expected  to  substantially  reduce the administrative  burdens  on businesses, 
especially SMEs.  Under the Action Plan for Innovation in Europe a Communication on 
taxation and innovation is being considered. 

3.1 

Taxation of enterprises 

Following  the  Commission's  discussion  paper  "Taxation  in  the  European  Union"  of 
20 March 199657, a High Level Group on taxation was set up. On the basis of discussions 
in that Group, the Commission presented a Communication "Taxation in the European 
Union, Report on the development of tax systems"58. This report recommended setting 
up  a  new,  permanent  group  to  provide  a  strategic  overview  of  taxation  policy,  and 
identified  the simplification  of the tax environment of SMEs and other businesses as an 
issue which that group could examine. This new Taxation Policy Group has now been set 
up, and started work on 11  March 1997. 

Following the work  carried  out by this Taxation Policy  Group, which has  already met 
four  times, and by the informal  Ecofin  Council  in Mondorf-les-Bains,  the  Commission 
adopted  on  1  October 1997  a  Communication59  to  the  Council  proposing  a  set  of 
measures to combat  damaging tax competition  in the Union.  These measures include, 
inter alia, a Code of Good Conduct involving a political commitment on the part of the 
Member  States  to  combat  damaging  tax  competition  in the field of  business  taxation, 
measures to eliminate serious distortions in indirect taxation, and measures to eliminate 
deductions  at  source  in  respect  of  payments  of  interest  and  royalties  between  related 
enterprises based in different  Member States, an area in which the Commission could put 
forward a new proposal. 

3.2  ~~Indirect taxation: VAT 

In  the  field  of  indirect  taxation,  the  Commission  proposed  in  July 1996  a  work 
programme for introducing a common system of value-added tax (VAT)60. This will  find 
practical  expression  in  a  number  of  Commission  proposals  with  the  following  main 
objectives: 

57 
58 
59 
60 

SEC (96) 487 final of 20.3.1996 

COM(96) 546 final of 22.10.1996 

COM(97) 495 final of  1.10.1997 

COM(96) 328 final of 22.7.1996 

24 

- 

- 

- 

to achieve equal treatment of national trade and intra-Community  trade in  goods 
and services, thereby enabling SMEs to operate throughout the Community from their 
place  of  establishment  without  having  to  face  increased  administrative  charges  (by 
applying the principle of a single place of taxation); 

to reduce the uncertainty  and complexities  associated with the application  of VAT  by 
setting  up  a uniformly  applicable  harmonised  VAT  system  in  accordance  with  the 
demands of a proper internal market, while maintaining the level of tax revenue; 

to  reduce  the  uncertainty  caused  by  differing  interpretations  of  the  Directives,  by 
altering the legal  status of the VAT Committee. As in the case of customs and  excise, 
the  Council  could  call  on  the  Committee  to  assist  the  Commission  when  it  adopts 
implementing measures. 

This  strategy  involves  a preparatory  phase  during  which the  Commission  has  submitted 
two proposals, one on a change in the legal status of the VAT Committee61  and the other 
on  reinforcing  administrative  cooperation  (FISCALIS  Programme)62.  A  proposal  on 
mutual assistance in tax collection is also due this year. 

The Commission then intends to produce three series of formal proposals: 
- 

the  first  is  intended  to  define  taxable  transactions,  taxable  persons  and  the  taxation 
basis and to settle the question of exemptions and deductions prior to proposing  a new 
alignment of rates; 
the  second  concerns  the territorial  field  of application  of VAT,  the place  of  taxation, 
the  organisation  of  transactions,  the  rights  and  obligations  of  taxable  persons,  and 
inspection methods; 
the third  covers  mechanisms  for  redistributing  tax  revenue,  special  arrangements  and 
transitional measures, and a final alignment of rates. 

- 

- 

The  conference  held  in  Limelette  (B)  in  November  1996  on  "the  common  system  of 
VAT"  provided  an  opportunity  to  consult  the  various  interested  parties,  including 
organisations representing  SMEs. 

Furthermore,  the  Commission  has  chosen  VAT  obligations  as  the  subject  of  the 
second  SLIM  (Simplified  Legislation  on  the  Internal  Market)  exercise  planned  for 
1997. The aim is to look  at two  areas (obligations  on taxpayers, the person  liable to pay) 
with  a  view  to  improving  the  current  system.  The  SLIM  team  responsible  for  this 
question  has  concentrated  on  a  number  of  basic  national  and  Community  VAT 
obligations which impose a burden on enterprises, with a view to pinpointing the areas in 
which simplifications  should be introduced. 

3.3 

Customs  2000 

The Customs 2000 action programme, adopted in the form  of a Decision of the European 
Parliament  and  the  Council  on  19 December  199663,  aims  to  modernise  the  national 
customs  administrations  and  to  promote  cooperation  among  them  and  with  the 
Commission. Its objective is to ensure that Community  legislation is applied uniformly  at 

61 
62 
63 

COM(97) 325 final of 25.6.1997 

COM(97)  175 final of 23.4.1997 

OJL  33, of 4.2.1997, p. 24 

25 

the  external  borders  and that the internal  market  can function  as it  should.  Article 6(2) 
and Article 9 of this programme provide for simplification  measures  intended  to provide 
the  Commission  with  a  coherent  framework  for  taking  steps  to  simplify  customs  rules 
and procedures in order to make it easier for enterprises to engage in external trade. 

The main actions being conducted in this area relate to the following: 

-  Avith regard  to  Community  transit,  adapting  and simplifying  customs  transit  systems 
by  amending  the Customs  Code  and its implementing  provisions;  negotiating  a new 
convention on common transit; and computerising the management  of the procedures. 
The  planned  measures  should  reinforce  the  security  and  effectiveness  of  these 
procedures, which fulfil  a major need of economic operators; 

-  simplifying  economic  customs  procedures  by  amending  the  Community  Customs 
Code  and  its 
implementing  provisions  and  by  developing  systems  for  the 
computerised  management  of these procedures in order to enable enterprises  to export 
Community products in economically favourable  conditions; 

-  amending  the  Community  Customs  Code  in  order  to  permit  the  centralised 
management  of  the  simplified  procedures  and  the  relaxation  of  the  obligation  to 
submit  certain  accompanying  documents  with the declaration,  thereby  facilitating  the 
computerisation of customs clearance procedures; 

-  standardising  and simplifying  the rules on preferential  origin.  During  the first half of 
1997 this  led to the adoption  of a single text  of the  "origin" .protocol  annexed  to the 
free trade  agreements  concluded  by the Community  with  it's European  partners.  The 
same text  is to be proposed  this  autumn to the Mediterranean  countries  and probably 
to Mexico  and South Africa.  A similar text will be proposed to the countries  covered 
by  the  System  of  Generalised  Preferences  with  a  view  to  its  entering  into  force  on 
1 January 1998. 

Furthermore,  a  SLIM  exercise  to  simplify  the  Combined  Nomenclature  for  External 
Trade  is  currently  under  way  with  the  aim  of  proposing  a  modernisation  of  the 
Nomenclature,  some  subdivisions  of  which  seem  outdated  from  an  economic  point  of 
view. 

4. 

SOCIAL  ENVIRONMENT 

4.1 

Action  for Employment  in Europe: a Confidence  Pact 

Unemployment  has increased  steadily  in Europe  since the  1970s. It means  a  precarious 
situation  for millions  of men  and women  and undermines  European  society.  In order to 
define  the  general  framework  for  the  creation  of  jobs,  the  Commission  adopted  a 
Communication64 in June  1996 proposing a European Pact for Confidence. 

The  European  Pact  for  Confidence  builds  on  the  strategy  proposed  in  the  1993 
Commission's  White Paper on growth, competitiveness  and employment.  By restoring a 
climate  of  confidence  it  aims  to  mobilise  all  actors,  public  authorities  and  social 
partners  alike, 
in  a  coordinated 
comprehensive  strategy  for  employment.  Its  approach  combines  an  employment-
oriented  macroeconomic  policy  with  resolute  action  to  complete  the  Single  Market, 
accelerated  reform  of  unemployment  systems  and  better  use  of  European  structural 

respective  commitments 

to  define 

their 

64 

Action for employment in Europe: A confidence pact, CSE(96)  1 final of 5.6.1996 

26 

policies. SMEs are particularly addressed with regard to the full  exploitation of the Single 
Market.  The  Commission  lays  down  the  priorities  for  its  SME  policy  and  its  attitude 
towards  State aids for  SMEs. The Commission  also advocates to use additional  financial 
resources  available from the structural  funds  for the development of SMEs, adaptation  to 
industrial  change,  local  initiatives  for  development  and  employment  and  territorial  pacts 
for  stronger  partnership  towards  employment  creation.  Furthermore,  a  much  closer 
partnership  with  the  European  Investment  Bank  (EIB)  should  make  support  the  creation 
of  SMEs  by  the  structural  funds.  The  confidence  pact  received  broad  support  from 
Member States, social partners, European Parliament and Committee of the Regions. 

At  its meeting  in  Amsterdam  on  16-17  June  1997, the  European  Council  confirmed  its 
commitment  to  reduce  the  administrative  burden  on  SMEs.  It  urged  also  the  EIB  to 
examine  the  establishment  of  a  facility  for  the  financing  of high-technology  projects  of 
SMEs. The European  Council  in Amsterdam was  also  a watershed  for  employment 
policies in the Union. With the adoption of the employment  title, the Heads of State and 
Government  agreed  that  employment  was  to  be  considered  as  a  matter  of  common 
concern.  The  new  Treaty  reinforces  the  coordination  of  National  employment  policies 
and  foresees  the  establishment  of  common  guidelines  which  can  in  due  course  lead  to 
recommendations  to  Member  States.  Following  the  Amsterdam  agreement  to  anticipate 
the  application  of  the  new  employment  Title,  the  Commission  has  adopted  on  1st 
October  1997  a  Communication  on  Guidelines  for  Member  States  Employment 
Policies65 as a framework  for discussion  at the extraordinary  European  Council  on 20/21 
November  in  Luxembourg.  The  Commission  will,  on  the  basis  of  the  Presidency's 
Conclusions from the Jobs Summit, present a final proposal  for  adoption by the  Council. 
The  guidelines  proposed  focus  on  four  main  lines  of  action  for  Member  States' 
employment  policies,  the  first  one being  entrepreneurship,  followed  by  employability, 
adaptability  and equal opportunities. To promote  a new culture of entrepreneurship  in 
Europe,  further  efforts  are required  for  example  to  make  it  easier  to  start-up  and  run  a 
business  (in particular  through  administrative  simplification),  to  develop  venture  capital 
markets and make taxation more employment friendly. 

4.2 

Social  dialogue 

Social dialogue at a European level is, as in many Member States, organised on a sectoral 
and interprofessional  basis. SMEs are represented in both forms of dialogue. There are no 
social dialogue arrangements at Community or National level specific to SMEs. 

European Social Dialogue at Interprofessional  Level 

the 

three  European  organisations  who 

The  Val  Duchesse  social  dialogue  was  organised  for  the  first  time  in  1985  bringing 
together 
the  main  national 
interprofessional  employer  and  trade  union  confederations.  In  addition,  all  European 
confederations,  including  UEAPME,  are  consulted  on  the  topics  under  discussion.  The 
informal  (until  the  Single  Act  and  the  Agreement  on  Social  Policy)  and  voluntary 
dialogue  has  made  a  positive  contribution  towards  European  social  policy  in  terms  of 
joint opinions or declarations. 

represent 

In  1995,  the  interprofessional  dialogue  received  a  significant  boost  by  the  Directive  on 
Parental Leave66, adopted by the Council on 3 June  1996 arising out of the Agreement  on 

65 
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Directive 96/34/CE of 3.6.1996, OJ L  145 of  19.6.1996, p. 4 

27 

Parental Leave concluded between UNICE, the CEEP and ETUC on  14 December  1995. 
This is the first European Agreement based on Article 4 of the Social Protocol attached to 
the  Treaty  on  the  European  Union  (TEU).  Article 4  empowers  the  social  partners  to 
"dialogue  between  them  at  Community  level  which  may  lead  to  contractual  relations, 
including  agreements".  The  framework  Agreement  on  Parental  Leave  includes  specific 
arrangements  to  take  into  account  the  particular  functioning  and  organisation  needs  of 
SMEs.  However,  certain  SME  organisations  have  expressed  serious  concerns  about  the 
validity  of  this  aspect  of  the  social  dialogue  on  the  grounds  that  because  they  are 
excluded  from  negotiation  of social  policy  agreements  under  it,  such  agreements  do  not 
take proper account of SMEs. 

European  Social Dialogue at Sectoral Level 

Not  all  sectors  have  developed  a social  dialogue  at a European  level. This  depends  on  a 
number of factors, first the joint willing of social partners and the existence of a common 
sectoral policy  at a European  level (e.g. agriculture,  fisheries  or road transport), the need 
for  large  restructuring  at  a  European  level  (e.g.  textiles,  telecommunications  or  civil 
aviation)  or  the  recognition  of  the  sector,  having  very  specific  requirements  (e.g. 
industrial cleaning or security). 

Sectors differ  considerably with regard to company size. In general, in the primary  sector, 
dominated  by  SMEs,  social  dialogue  is well-established.  Social  partners  have  used  this 
forum  to discuss issues such as employment, vocational training, health and safety  issues. 
Apart  from  discussion,  activities  also  lead  to participation  in  Ey. training  projects  or  to 
real negotiations. For instance, the European level social partners in the agriculture  sector 
signed 
the 
includes 
improvement  of  paid  employment 
recommendations  on  the  adaptation  of  working  time  and  supplementary  provisions 
relating to working conditions. 

the  first  sectoral  recommendation  framework  agreement  concerning 

in  this  sector  on  24  July  1997.  It 

The services sectors can be broadly divided into sectors under restructuring  and sectors in 
expansion.  Most  restructuring  service  sectors,  such  as  banking  and 
insurance, 
telecommunications,  postal  services,  aviation,  railways  are  dominated  by  large  (public) 
companies.  Many  of  these  sectors  are  challenged  by  a  fast  changing  economic 
environment  :  globalisation,  ever  faster  introduction  of  information  technology  and 
privatisation. This evolution may lead to the emergence of new, smaller companies. 

Most of the expanding service sectors are characterised by a high concentration  of SMEs. 
Social  dialogue  is  well  established  in  traditional  sectors  such  as  road  (as  from  1965) 
HORECA  (as  from  1983)  or  commerce  (1985).  Discussions  here  concentrate  on 
employment,  working  conditions  and  political  issues,  which  result  in joint  opinions  or 
joint actions. 

Furthermore,  the  expansion  of  new  services,  such  as  security  or  cleaning,  has  led  to  a 
multiplication  of  sectors  actively  involved  in  European  social  dialogue.  Indeed,  as 
recognition  of the sector is one of the incentives for developing activities  in the field, the 
social  partners  have  a  common  interest  to  obtain  concrete  results.  In  general,  sectors 
dominated  by  large  companies  have  a  tendency  to  concentrate  activities  more  on 
industrial  policy  issues,  while  sectors  dominated  by  SMEs,  especially  the  sectors  in 
expansion,  stick  more  to  social  issues  (employment,  safety  or  equal  opportunities). 

28 

European Social Dialogue at a Cross-roads 

Parallel  to  the  construction  of  a true European  Union,  awareness  of the  need  for  further 
development  of  a  European  social  policy  is  growing,  in  particular  as  regards  an 
Employment  policy,  as indicated by the European  Councils at Florence  and  Amsterdam. 
Social  dialogue  is  an  important  tool  in the creation  and  implementation  of  social  policy 
and  is  expected  to  grow  in  importance  in  the  coming  years,  in particular  in  view  of  the 
incorporation of the Agreement of Social Policy in the TEU as a result of the Amsterdam 
Council in June  1997. 

The  Commission  has  already met with  European  social partners  to discuss  the  European 
Pact of Confidence  for Employment. As a direct consequence interprofessional  as well  as 
sectoral social dialogue will increasingly focus on employment  and directly related  social 
aspects. As  the motor  of  future  employment  creation,  SMEs  are  expected  to  play  a  key 
role in this process. 

With  a  view  to  reinforcing  social  dialogue,  the  Commission  issued  on  18 September 
1996  a  Communication  concerning  the  Development  of  the  Social  Dialogue  at 
Community  Level67.  The  Communication  included  an  appeal  to  all  social  partners  to 
give  their  views  on  the  future  shape  and  framework  of  social  dialogue.  A  forum  was 
organised  in  The  Hague  on  28-29  April  1997  to  bring  together  the  social  partners  to 
discuss  the  responses  to  the  consultation.  SME  organisations  which  responded  to  the 
Communication  were  invited  to  participate.  On  the  basis  of  these  opinions  and 
assessment  of  current  structures  in terms  of  efficiency  and  impact,  the  principles  of  the 
future  social  dialogue  will  be  laid  down  in  a  second  Communication,  to  be  adopted 
before the end of 1997. 

As proposed  in the  Communication  concerning the Development  of the  Social  Dialogue 
at a Community  Level, the Commission has also launched  a study to examine the  degree 
of representation of existing European  social partners involved in the social dialogue. 

4.3 

Consultation  of professional  circles 

4.3.1  Consultation  meetings with the European SME Business  Organisations 

Recognising  the  importance  of  consulting  the  representatives  of  the  European  SME 
business  sector,  the  Commission  services  responsible  for  enterprise  policy,  play  a 
coordinating  role  to  ensure  that  the  European  SME  business  organisations  are  properly 
consulted on issues of interest being developed by various Commission  services. Regular 
consultation  meetings  are  arranged  where  representatives  from  other  Commission 
services  make  presentations  about  their  policy  objectives  e.g.  preliminary  ideas  before 
issuing- a Green  consultation  paper  or  ideas  and  objectives  in  advance  of  reaching  final 
decisions  on  a  proposed  directive  or  regulation.  The  consultation  meetings  in  1996 
covered  such issues  as environmental  liability, the social dialogue,  a Green  Paper  on  the 
protection  of  utility  models  in  the  Single  Market,  the  use  of  industrial  solvents 
(Commission proposal  for  a directive), sectors and activities  excluded  from  the  Working 
Time  Directive,  and  a  proposed  directive  on  end  of  life  vehicles.  In  addition  to  these 
consultation meetings the European SME business organisations were kept up to date and 
informed  about  other  areas of  interest  to them,  including  on  such  issues  as  late  payment 
in  commercial  transactions,  the transfer  of ownership  of businesses,  the Banking  Round 
Table,  and  the  Commission's  Recommendation  on  the  simplification  of  administrative 
procedures in Member States for business start-ups. 

67 

COM(96) 448 final of  18.9.1996 

29 

4.3.2  Consultation  of interested parties  in the  'social economy1 

A special  dialogue was conducted  with the Advisory Committee on cooperatives,  mutual 
societies,  associations  and  foundations  (CMAF),  which  was  set  up  by  the  sector  itself 
and,  since  its plenary  session  of  11 December  1995, has no  longer been  "temporary".  It 
does not replace bodies representing  the various  sectors or formal  consultative bodies  of 
the  European  institutions.  Its  main  task,  thanks  to  its  organisation  in  subject-specific 
working  parties,  is  to  draw  the  Commission's  attention,  on  its  own  initiative  or  at  the 
Commission's request, to the opinions of cooperatives, mutual  societies, associations  and 
foundations  on all matters concerning the construction  of Europe and its impact on them. 
The Committee has, for  example, issued a statement on the Commission  Communication 
on  worker  information  and  consultation68,  delivered  opinions  on  the  revision  of  the 
European  Treaties  and,  in  particular,  on  the  application  to  the  CMAF  sector  of  the 
concept  of  general  interest,  and  has  adopted  a declaration  on the  legal basis  of the work 
programme  to  assist  CMAF.  It  is  also  drawing  up  opinions  on  the  White  Paper  on 
education  and  training,  on  the  Green  Paper  on  the  information  society  and  on  the 
introduction of the euro. 

4.3.3  Consultation  of bodies in commerce and distribution 

In  order  to  launch  a  broad  consultation  on  European  internal  trade,  a  Green  Paper  on 
Commerce  was  adopted  by  the  Commission  on  20 November  199669.  This  text  was 
discussed  with  the  Directors-General  for  Internal  Trade,  who  launched  the  debate  at 
national level by organising seminars with the help the Commission. 

The Committee on Commerce  and Distribution (CCD)70 held several meetings to discuss 
various subjects  directly concerning  distributive trade and to draw up opinions. Since the 
end  of  1996,  a number  of  subjects  have  attracted  special  attention,  particularly  the  euro 
and  the  introduction  of  the  single  currency,  vertical  restraints,  electronic  commerce  and 
the  Green  Paper  on  Commerce.  After  its  renewal  in  1997  and  the  restructuring  of  its 
operating  procedures  in  order  to  increase  its  effectiveness,  the new  CCD  will  be  able  to 
provide  the  Commission  very  rapidly  with  opinions  which  reflect  the  point  of  view  of 
operators in the commerce and distribution  sector. 

4.4 

Local development and  employment 

As a result of the European employment  strategy outlined at the Essen European  Council 
(December  1994)  and  then  fleshed  out  at subsequent  European  Councils, the problem  of 
Local  Development  and  Employment  Initiatives  (LDEIs)  was  regarded  as  one  of  the 
priority themes of Community  action. 
It  is  m  this  context  that  the  Commission  presented  in  June  199571  its  Communication 
entitled  "A  European  Strategy  for  Encouraging  LDEIs",  which  highlighted  both  the 
job-creating  potential  of  the  local  level  and  the  structural  obstacles  which  have  to  be 
removed to enable such initiatives to develop. 

LDEIs offer  three benefits:  they provide new sources of employment  arising from unmet 
needs;  they  are  a means  of  enabling  new  entrepreneurs  to  engage  in  projects  which,  in 

68 
69 
70 
71 

COM(95) 547 final of 14.11.1995 
COM(96)530of20.11.96 
Commission Decision 81/428/CEE of 20.5.81, OJ L165 of 23.6.1981, p.24 
COM(95) 273 final of 13.6.1995 

30 

creating jobs, help to reinforce  local cohesion; lastly, they often  play an active part  in the 
regeneration of the weakened fabric of urban or rural areas. 

However,  LDEIs  are still too often  faced  with financial, legal, technical  and  institutional 
obstacles. 

The question of local development  and employment has therefore become a major  theme 
of  Community  action  and  has  been  the  subject  of  a  number  of  initiatives  both  at 
policy-making level and as part of the action of the Community Structural Funds 72. 
Following  President  Santer's  initiative  to  establish  a  European  Confidence  Pact73,  the 
Florence Summit of Heads of State or Government  (June  1996) reacted  favourably  to the 
Commission's  suggestion  to  launch  on  a  trial  basis  about  sixty  territorial  employment 
pacts  to  be  financed  under  the  Community  Structural  Funds,  in particular  by  using  the 
flexibility margins available. 

The  features  of the territorial  employment  pacts  - particularly  their bottom-up  approach, 
their  emphasis  on  innovation,  and  the  setting-up  of  local  partnerships  -  mean  that  the 
actions  will  be  geared  to  the  idea  of  local  development  promoted  by  the  Commission 
following 
the  publication  of  the  White  Paper  on  Growth,  Competitiveness  and 
Employment. 

4.5 

Hygiene, health and safety at work 

In  1995,  20  000  copies  of  the  Self-audit  Handbook  for  SMEs  were  published  and 
distributed  by  the  Community  networks, notably  the  Euro  Info  Centres  and  the  specific 
"health  and  safety  at  work"  networks.  Intended  to  identify  and  assess  anomalies  and 
accident  hazards,  this  Self-audit  Handbook  is one  of  the  keys  to  improving  the  safety 
and  health  of  workers  and  thereby  the  quality  of  products  and  performance  in  SMEs. 
Although  such  assessment  is  common  practice  in  large  enterprises,  it  is,  for  obvious 
reasons  of  cost,  less  frequent  in  SMEs.  In  publishing  this  handbook,  the  European 
Commission  has  offered  heads  of  SMEs  an  assessment  and  decision-making  tool  in  the 
field of safety  and health at work. Its purpose is to help entrepreneurs to analyse and deal 
with  their  in-house  safety  and  health  problems  themselves.  The  Commission  deals 
regularly with requests for publications, mainly from SMEs or organisations  representing 
them.  Besides  the  handbook,  two  other  publications  in  the  series  "Health  and  safety  at 
work"  - "Guidance  on  risk  assessment  at work"  and  "A  Guide  for  SMEs" -  are  also  in 
great demand. 

The  Commission  departments,  in  coordination  with  the  National  Institute  for  Research 
and  Safety  and  the  French  Ministry  of  Social  Affairs  and  with  the  participation  of  the 
other  Member  States, organised  in  1995 the  Second  European  Festival  of  Health  and 
Safety  Films,  the  aim  of  which  was  to  extend  the  use  and  quality  of  audiovisual 
productions  on the subject.  Numerous representatives  of SMEs attended the event,  and it 
was  apparent  that  many  products  produced  by manufacturers  are intended  for  SMEs.  In 
addition,  the  Commission  departments  organised  in  1996,  in  partnership  with  the 
International  Social  Security  Association,  a  competition  to  reward  products  for 
education  and training  in prevention. Here again, the SME dimension  figures  large, in 
terms  of  both  participation  in  the  competition  and  the  dissemination  and  use  of 
award-winning products intended for SMEs. 

72 
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COM(96)  109 of 20.3.1996  "Community Structural  Assistance and  Employment" 

CSE (96)  1 final of 5.6.1996 

31 

In  October  1996,  the  First  European  Week  for  Health  and  Safety  at  Work  saw  a 
considerable  and rapid mobilisation  of resources  in organising  a large number  of  events 
or basic  actions. A  large proportion  of the projects  involved practical  activities  to  assist 
SMEs. In almost half of the 36 projects  subsidised  by the European  Commission,  SMEs 
were the targeted public, e.g. the visits to SMEs in the metal sector organised in Belgium. 
At  the same time,  a number  of information  meetings  for  SMEs were  a great  success. In 
Ireland  the  "good  neighbourhood"  pilot  project  attracted  more  than  50  large  enterprises 
and  visitors  from  both  sides  of  industry,  also  supporting  the  least  active  SMEs.  In 
general,  keen  media  interest  was  reflected  in  the  press.  Given  the  success  of  the  first 
European  Week,  a  second  week  will  be  organised  in  1997  on  the  subject  of 
"promoting  a method of risk assessment", whereby special attention  is to be paid to 
SMEs 

At  the  same  time,  in  1995  and  1996  several  projects  on  SMEs  were  supported.  One  of 
them, launched in  1995 as a pilot project, is the "Safety check", the purpose of which was 
to develop a practical  instrument  for risk assessment  in micro-enterprises. The success  of 
the  pilot  project,  initially  conducted  for  Germany,  was  borne  out  by  on-the-ground 
assessments  in  France,  Belgium  and  Luxembourg.  The  safety  institutes  of  other  EU 
countries  are  currently  using  the method  for  other  craft  trades. An  exchange  is  planned 
after the results have been obtained. 

At  sectoral  level, a project  was subsidised which resulted  in the preparation  of  a guide 
for  risk  assessment  and  the  monitoring  of  chemical  hazards  in  SMEs.  A  similar 
project  involves  drawing up a guide for workers who have to handle waste. This  project, 
launched in  1996, deals with the problems which workers may encounter in SMEs, where 
there is often  a lack of sophisticated equipment and appropriate expertise. 

In  1996, various projects  were started  as part of the SAFE programme  (Safety  Actions 
for  Europe),  the  overall  objective  of which  is to  improve  safety,  hygiene  and  health  at 
work and prevent or reduce occupational risks, particularly in SMEs. For  1997, two types 
of  action  will  be  conducted:  basic  projects  and  awareness-raising  events.  A  call  for 
proposals will be published in the Official  Journal for the first type of action. The second 
type (awareness-raising) will be conducted in close cooperation with the network of Euro 
Info  Centres. 

In  addition  to  the  SME  information  campaigns,  a number  of  projects  were  launched  to 
collect  data  on  SMEs  and  health  and  safety  at  work.  The  first  concerns  the 
incorporation  of a chapter on working  conditions  and the quality  of work  in  SMEs 
into the Fifth  Annual Report  of the European  SME  Observatory.  Another project  is 
the  publication  of  a report  on health  and  safety  at work  in  the European  Union.  In 
this  report,  which  is  due  to  be  published  in  1998,  a  number  of  data  will  relate  to 
SMEs.The  European  Agency  for  Health  and  Safety  at  Work,  based  in  Bilbao,  was 
officially  set up in  1996, and its structures are being established, notably the  development 
of the information  network, which could be operational in 1997. 

5. 

ENVIRONMENTAL  LEGISLATION 

Environment Fifth Action  Programme 

5.1 
The  Commission  adopted  in  1996  an  interim  report74  on  the  implenlentation  of  the 
Environment  Fifth  Action  Programme75  which  evaluates  progress  made  between  1992 

74 

COM(95) 624 of  10.1.1996 

32 

and  1995. Although, the Commission  stresses that other policies  generally  take greater 
account of environmental concerns, it concludes that progress is being made at varying 
speeds. 

The  Commission  also  adopted  a  proposal  for  a  European  Parliament  and  Council 
Decision on the Review of the Fifth  Action Programme  "Towards sustainability"76 
which identifies five priority  areas where action needs to be stepped  up. The proposal 
stresses that particular  emphasis  should be put  on the development  of programmes  for 
the  further  promotion  of  environmental  awareness  in  industrial  SMEs.  SMEs 
wishing  to  use  clean  technologies  should  be  helped  to  overcome  the  technical  and 
financial obstacles encountered. On 9 December 1996, a political consensus on the text of 
a common position was reached in the Council. 

5.2 

Environmental Management and Audit Scheme 

In  order  to  promote  constant  improvements  in  the  environmental  performance  of 
industrial activities, the Council adopted on 29 June 1993 a Regulation allowing for the 
voluntary participation by industrial companies in the Community Eco-Management and 
Audit Scheme (EMAS)77. This scheme requires the establishment and implementation, by 
companies,  of  environmental  policies,  programmes  and  management  systems  at 
production  site  level. This is  accompanied  by  systematic  and regular  evaluation  of the 
environmental  performance  of  sites  by  independent  verifiers,  and  the  publication  of 
annual  environmental  statements  by  each  company  participating  in  the  scheme. 
Participation  in  the  scheme  could  represent  an  important  competitive  advantage  and 
could  be  required  by  prime  contractors  of  their  sub-contractors.  However,  EMAS 
registration  is  a  challenge  for  SMEs which  often  lack  tjie  necessary  management  and 
financial  capacities.  The Commission  has therefore  developed  instruments  to promote 
their participation (see Chapter II). 

5.3  Volatile organic compounds 

The impact of environmental policy on SMEs was also taken into account and evaluated 
when preparing  the proposal  for  a Council  Directive  on the limitation  of  emissions  of 
volatile  organic  compounds  due  to  the  use  of  organic  solvents  in  certain  industrial 
activities78.  The  Commission  undertook  considerable  regulatory  impact  analysis  and 
completed  a business  impact  assessment.  This proposal  allows  the  achievement  of the 
environmental  targets set by the use of abatement technology  and/or the substitution of 
high  solvent  products  with  low  solvent  or  solvent free products.  This flexibility was 
specifically  introduced  to  respond  to  the  concerns  of  the  many  SME  operators  of  the 
plants covered by the proposal. 

75 
76 
77 
78 

Environment Fifth Action Programme, COM(92) 23 of 18.3.1992 

COM(95) 647 of 24.1.1995 
EEC Regulation  1836/93, OJ L168 of 10.7.1993, p.l 
COM(96)538finalof6.11.1996 

33 

CHAPTER II. PROGRAMMES  AND STJPPORT MEASURES  FOR  SMES 

1. 

CONCERTED ACTIONS WITH THE  MEMBER STATES TO ASSIST  S M ES 

The concerted  actions provide the framework for consultation  among the Member  States 
and between the Member States and the Commission in order to promote the exchange of 
best  practices  for  improving  the  SME  environment  (see  Chapter  I,  point  1.1.  on 
Concerted Action n°l)  and policies and measures to assist SMEs.  This  should  lead to a 
gradual improvement in the coherence between national and Community schemes. 

« 

The  framework  for  the  Concerted  Actions  is set  out  in the Integrated  Programme79,  as a 
concrete  outcome of Article  130 of the Treaty on European Union,  and proposes  a series 
of  fora  on  central  issues,  involving  political  leaders,  national  and  regional  officials, 
business organisations and practitioners, along with various follow-up  activities.  Several 
fora  have  now  taken  place  with  a  focus  on  issues  arising  at  different  stages  in  the  life 
cycle of an enterprise. 

Under  Concerted  Action  n°2  on  Support  Measures  for  Enterprises,  the  Madrid 
Forum  of  16 and  17 November  1995 debated  measures  designed  to  assist  SMEs  in  their 
start-up  and  in  the  early  stages  of  their  development.  The  Forum  examined  financial 
support  and 
training  and  advisory  measures  and  support 
infrastructure. 
Participants  were  helped  in  their  deliberations  by  "The  European 
Directory  of  Measures  in  Favour  of  Business  Start-ups  and  Assistance  for  New 
Enterprises"80,  which  highlighted  interesting  experience  and  good  practice  in  each 
Member State. 

taxation,  assistance, 

Follow-up  work  through  a  Steering  Group  has  sought  to  develop  an  appropriate 
methodology  for  identifying  and promoting best practice.  This work  is to be assisted  by 
a  database  of  support  measures  and  various  Internet  tools  promoting  an  exchange  of 
information  between  support  agencies  and  between  entrepreneurs.  Both  of  these 
developments  were  subject  to  the  launch  of  a  call  for  tender  in  199781.  In  addition, 
discussions  with  the  Member  States  are  expected  to  lead  to  their  organising  a  series  of 
seminars  on the different  forms  of support measure identified  in Madrid  to carry  forward 
the concerted  action process at a more detailed level. 

Under  Concerted  Action  n°3, a forum  on the stimulation  of demand  for  services  among 
SMEs  was  held  in  Dublin  in November  1996 with  the  theme  of  increasing  the  profile 
and  effectiveness  of  services  to  assist  SMEs.  Over  two  hundred  participants  -
enterprises,  public  authorities  (national, regional  and  local)  and  intermediaries  -  debated 
the  present  situation  of the market  in  SME  support  services, the  current  difficulties  and 
the  gaps  encountered,  in  order  to  identify  actions  likely  to  improve  any  dysfunctions  in 
this  market.  Three  working  parties  dealt  respectively  with:  recent  trends  in  public 
measures  and  programmes  at regional  and  national  level,  recent  trends  in  measures  and 
programmes  offered  by  intermediaries,  and  marketing  experience  in  support  services. 
They  deliberated  on  three  fundamental  questions:  what  the  requirements  of  SMEs  are; 
what  the role  (1)  of intermediaries  and  (2) of government  is; and how  to  assess  whether 

79 

80 
81 

COM(94)207of3.6.1994 

This document is available as an OPOCE publication. 

OJ S  189 of 30.9.1997, p.33 

34 

the services provided meet the needs of SMEs and whether they are effective  and of high 
quality. 

The  conclusions  highlighted  the  following:  the  role  of  "first-stop  shops"  in  assisting 
SMEs to obtain relevant  information,  the need to decentralise information  so  as to  reach 
local SMEs, and the need to strengthen the role of intermediaries  and increase the use  of 
information  systems.  Emphasis was also placed on administrative  simplification  and  the 
crucial  need  for  coordination  both  between  local,  regional  and  national  authorities  and 
between  administrations  and  SME  intermediaries.  The  Commission  will  continue  its 
work by organising various specific working parties. 

A  further  Forum  on the Transfer  of Enterprises  took place in Lille in February  1997, 
which examined both simplifying  and supporting measures at the transfer  stage (see point 
1.1.5.) 

2. 

BENCHMARKING 

all  challenge  European 

The Internal  Market,  the prospect  of Economic  and Monetary  Union  and  the process  of 
globalisation 
its 
competitiveness.  In order to meet this challenge, Europe needs to address  systematically 
and  with  determination  all  the  factors  which  limit  its  growth  potential.  In  response  to 
requests  from 
its 
Communication  of April  199782 that benchmarking in the economy and society should be 
used  to  compare  performance  in  various  key  areas  and  to  identify  factors  crucial  to 
economic success. 

industry  and  the  Council,  the  Commission  has  proposed 

to  continuously 

improve 

industry 

in 

Benchmarking  will  be  promoted  at  different  levels:  that  of  enterprises,  at  the  sectoral 
level and in relation to the framework conditions for the economy and society. 

At  the  enterprise  level,  benchmarking  is  primarily  the  responsibility  of  industry 
itself.  Public  authorities  can  mainly  contribute  via  its  promotion  to  a  wide  audience, 
particularly  to  SMEs,  which  do  not  have  the  resources  or  the  necessary  experience  to 
undertake  benchmarking  alone.  The  Commission  has proposed  to  examine  with  all  the 
parties  concerned  the  possibility  of  creating  a  European  network  for  enterprise 
benchmarking.  Such a network  should ensure that coherent, trustworthy  and  equivalent 
services are available, in particular for SMEs, throughout the Union.  These initiatives  are 
being sponsored by the Commission: 

•  a  pilot  project  from  Forbairt  (Ireland)  aiming  to  identify  experience,  services  and 
méthodologies  already  developed  in  Europe,  and  to  prepare  an  action  plan  for  the 
creation of a European Network for enterprise benchmarking; 

•  a project  from  Eurochambres  to  use  the  existing  network  of  European  Chambers  of 
Commerce  and Industry to promote awareness programmes about quality  in  SMEs, to 
encourage  them  to  apply  benchmarking  through  pilot  projects  and  to  improve  the 
conditions for  SME access to the European Network for enterprise benchmarking. 

At  sectoral  level,  benchmarking  focuses  on  the  evaluation  of  specific  framework 
conditions  required  for  sustaining  competitiveness  in  a  particular  sector.  Various 
initiatives  on sectoral  benchmarking  have been  undertaken  by the Commission  and  by 
industry: 

82 

COM(97)  153 of  16.4.1997 

35 

Consumer  çleçtronjçs  :  a  five  year  EU-Japan  programme  for  electronics  suppliers 
completed  in  1996  was  sponsored  by  the  Commission  and  the  Japanese  Ministry  for 
International Trade and Industry (MITI).  This aimed to improve the quality of European-
based suppliers through a process of benchmarking against Japanese best practice; 

Automotive  :  a  project  to  benchmark  the  competitiveness  of  European  manufacturing 
locations for the automotive industry is being undertaken by the Commission; 

Chemicals  :  a  project,  implemented  in  close  collaboration  with  industry  and  worker 
representatives, 
three  phases:  planning,  analysis  and 
in 
implementation. It is now entering the analysis phase; 

is  being  undertaken 

Biotechnology.  Pharmaceuticals  and  Agri-food  : a study  will  pay particular  attention  to 
those  areas  which  can  be  benchmarked  and  are  susceptible  to  action  e.g.  the  regulatory 
It  will  also  study  the  significance  of  corporate  culture,  venture  capital, 
framework. 
the  mobility  and 
innovation  and  factors  affecting 
optimum  size  for  successful 
productivity  of scientists; 

Mechanical  Engineering  :  an  inventory  of  actions  for  this  sector  is  being  prepared  to 
provide a basis for  sectoral benchmarking concentrated on a few key aspects; 

Construction  :  a  case  study  approach  is  being  used  to  define  best  practice  and 
benchmarks for this  sector. 

Benchmarking  of  framework  conditions,  in  particular  factor  costs,  infrastructures, 
skills, innovation  and the  environment,  is a means  of evaluating  the efficiency  of  public 
policies  affecting  competitiveness  and  identifying  the  steps  required  to  improve  them. 
The  Member  States  in  conjunction  with  the  Commission  will  implement  four  pilot 
projects,  with  a working  procedure  which  ensures  transparency,  dialogue  and  expertise. 
The  themes  for  these  projects  are  :  a  new  technological  and  organisational  paradigm 
and 
(benchmarking  covering  mainly  diffusion 
communication  technologies  by  enterprises)  ; financing  of  innovation  (this  project  will 
build on experience gained through the Innovation Programme); logistics and skills. 

and  use  of  new 

information 

In  its  Communication,  the  Commission  also  suggests  further  fields  for  benchmarking, 
such  as  the  weight  of 
regulation  on  SMEs,  protection  of  intellectual  property  and 
innovation.  For  instance,  the  Integrated  Programme  in  favour  of  SMEs  and  the  Craft 
Sector envisages the use of benchmarking  in relation to the legislative and  administrative 
environment  in  which  enterprises  operate  and  benchmarking  of  business  support 
measures  forms  part  of  the  work  undertaken  in  the  follow-up  to  Concerted  Action  n°2. 
Results  will  be  communicated  to  all  Member  States,  Community  institutions  and  other 
interested  parties.  Finally,  the  Action  Plan  for  Innovation  provides  for  the  development 
with the profession  of a benchmarking, system for European venture capital firms. 

3. 

ACCESS TO FINANCE AND CREDIT 

3.1  Measures  to promote  access to  finance 

3.1.1  Bank-SME  partnership:  the  Round  Table  of  Leading  Representatives  of  the 

Banking  Sector 

The  Round  Table,  launched  in  September  1995  by  Commissioner  Christos  Papoutsis, 
continued  its work  throughout  1996.  Its primary  objective  was to identify  best  practices 
in  improving  bank/SME  relations  by  bringing  together  experts  from  the  banking  sector 
and  European  SME  organisations  in  a  series  of  workshops.  22  members  took  part:  7 

from  European  SME  organisations  and  15 bankers  (one  from  each  EU  Member  State), 
covering  cooperative,  savings  and  commercial  banks.  The  role  of  the  European 
Commission was  essentially that of a facilitator,  providing  a secretariat  for the initiative, 
acting as a catalyst and helping to bridge differences  in opinion where they arose. 

The  Final  Report  of  the Members  of  the Round  Table, published  on  27 February  1997, 
contains  a wide range of Best Practices and Recommendations.  Not  only does it  outline 
what banks have been doing to develop and improve the services and products they  offer 
to  SMEs,  it  also  looks  at  efforts  to  improve  communication,  initiatives  to  support 
entrepreneurship  and the ways in which banks have reshaped their organisations  in order 
to  respond  better  and  more  rapidly  to  the  needs  of  their  SME  customers.  The 
Recommendations  are addressed  to a variety of target  groups: banks  and other  financial 
institutions,  SMEs,  their  organisations  and  other  enterprises,  regional  and  national 
authorities  and European  institutions.  An Executive  Summary of the Final Report,  Best 
Practices and Recommendations  is available in all  11 Community languages. 

In  the  context  of  the  Commission's  Innovation  Programme,  the  I-TEC  INFO  project 
(Intensive  Transeuropean  Exchange  and  Communication  on  Innovation  Financing)  will 
continue studying the support mechanisms created by EU banks to facilitate the  financing 
of  innovative  projects.  A  series  of  policy  exchange  workshops  will  subsequently  be 
organised  by  the  Commission,  involving  relevant  policy  makers  and  actors  in  the  field. 
Specifically  in this area, the First Action Plan for  Innovation called on the  reinforcement 
of  the  interfaces  between  the  spheres  of  innovation  and  technology  and  the  sphere  of 
finance. 

3.1.2  European  capital markets 

The  Commission  actions  for  improving  access  for  SMEs  to  capital  markets  and  for  the 
stimulation  of the  creation  of new markets  for  SMEs  have been  carried  out  by  different 
Commission  services,  with  enterprise  policy  services  in  the  lead.  For  example,  the 
Commission  provided  financial  help  for  the  start-up  of  the  European  Association  of 
Securities Dealers, which subsequently led to the creation of the European Association  of 
Security  Dealers  Automated  Quotation  stock  market  (EASDAQ).  The  Commission 
adopted  in  1995  a Communication  on Reporting  on the feasibility  of the creation  of a 
European  Capital  Market  for  smaller  entrepreneurially  managed  growing 
companies83,  on  which  the  Parliament  adopted  a  resolution  on  4Julyl99684.  As  a 
follow-up,  the  Commission  adopted  a  Communication  entitled  "European  Capital 
Markets for SMEs: Prospects and Potential Obstacles to Progress"85, which involved 
close-cooperation  between  the  Commission  departments  concerned,  namely  enterprise 
policy, telecommunications, financial affairs  and internal market. Also, in its First Action 
Plan  for  Innovation,  the  Commission  has  stressed  the  importance  of  creating  favourable 
conditions  for  the  functioning  of  the  new  stock  markets  for  innovative,  high  growth 
SMEs, and has called on the Member States to explore actions in this field. 

Since  1995 a number of stock exchanges have been set up to cater for the needs of SMEs, 
especially  for  high-growth  SMEs.  These  new  exchanges  are  "regulated"  markets 
(ISD)  adopted  on 
according 

to  Directive  93/22/EEC  on  Investment  Services 

83 
84 
85 

COM(95) 498 final  of 25.10.1995 

A4-0168/96, OJ C 211 of 22.7.1996, p.40 

COM(97)  187 final  of  5.5.1997 

37 

10 May 1993, and therefore if they so wish (e.g. EASDAQ) they have the right to operate 
cross-border.  In  the  absence  of the IDS  any cross-border  operation  would  have been 
much more difficult  or simply impossible.  The Alternative Investment  Market (AIM), 
launched in London on  19 June  1995, listed 270 companies at the end of March 1997. 
The "Nouveau  Marché"  in  Paris  began  trading  on  20 March 1996  and  listed  26 
companies  at the end of May  1997, while other markets started operating  in  Frankfurt, 
Amsterdam  and  Brussels  in  1997;  these  four  markets  form  the  Euro.NM  network 
(established as an EEIG), in which admission rules as well as quotation procedures and 
ways  of  disseminating  information  have  been  harmonised,  and  by  the  end  of  1998 it 
should  be possible  to  trade  securities from one market  to  another  within  the  network. 
The pan-European  market  EASDAQ was  launched  in Brussels  on  30 September 1996. 
The  Commission  is  following  closely  the  developments  in  these  new  markets  and  is 
available to help their promoters with information  on the possibilities  provided  by EU 
directives. 

3.1.3  Mutual guarantee 

The  European  Mutual  Guarantee Association  (EMGA) continued  its  activities  in  1996 
with the help of the Commission.  Backing was given to creating support for the mutual 
guarantee  system  in  Portugal  and  Greece.  A  seminar  was  held  in  Budapest  to  make 
Eastern  European  countries  aware  of  the possibilities  offered  by  the  mutual  guarantee 
system.  Lastly, the feasibility  study for the setting-up of a mutual guarantee scheme was 
conducted in Finland, which has become a member of the EMGA, although the scheme is 
not yet operational. 

3.2 

The financial instruments of the Union 

3.2.1  The European Investment Bank 

The general presentation of the activities of the EIB has not changed since the previous 
report.  It should be noted that, under its cooperation policies towards third countries, the 
EIB has extended its activities to the Republic of South Africa. 

3.2.1.1  EIB global loans to SMEs 

The EIB finances  SME investments indirectly via its global loans.  The updated  figures 
in the table below show the importance of the EIB's role in supporting SME investments. 

Since  1990, the EIB has provided considerable support for the financing  of SMEs, 
nearly, 42 000  of  which  have  benefited  from  loans  totalling  more  than  ECU 11 
billion,  or  nearly  45%  of  the  financing  granted  to  industry  and  services.  Over 
four-fifths  of them  employ  fewer  than 50 people  and 97% fewer  than  250.  More 
than 23 000 operations (ECU 6.4 billion in loans) involve investments in aided areas, 
and there are some 13 000 projects outside these areas. 

38 

THE EUROPEAN INVESTMENT BANK AND SMEs 

In  1996, the EIB  concluded global  loans  totalling ECU 5 580 million  compared  with 
ECU 5 175 million in  1995.  During the year,  13 033 loans amounting to  ECU 4 444 
million were granted under current global loans (13 801 loans and ECU 4 354 million 
in  1995). 

58.4% of this  amount was devoted  to supporting  some  11 034  SMEs,  eight-tenths 
of which employed  fewer  than 50 people.  70% of these SMEs are located in regional 
development zones. 

About  42%  of  the  loans  are  for  small  or  medium-scale  investments  in  the 
infrastructure  sector  (environment,  communications,  energy),  mostly  made  by  local 
authorities. 

EIB  financing  granted  in  the  Community  to  support  the  competitiveness  of 
enterprises  amounted: 

in  1995: 

to ECU 3.5 billion, of which 2.9 billion for 11 736 SMEs; 

in  1996: 

to ECU 3.8 billion, of which ECU 2.6 billion for  11 034 SMEs.  Italy (882 
million),  France  (409  million),  Germany  (295  million),  Spain  (279 
million),  the  United  Kingdom  (253  million)  and  Belgium  (247  million) 
In  addition,  the  EIB 
benefited  most  from  financing  via  global  loans. 
supports SME investment relating to the environment or the rational use of 
energy. 

3.2.1.2  The SME facility:  subsidised loans for job-creating  SMEs 

4 435 Beneficiary  SMEs create over 45 000 jobs 

A  facility  for  interest  subsidies  on  European  Union  budgetary  resources  relating  to 
ECU  1 billion  in  EIB  global  loans  in  favour  of  SMEs was  approved  in  April  1994  by 
the Council of Ministers86.  An agreement was signed between the European  Commission 
and the EIB on  14 June  1994 on the implementation  by the  latter of the  interest  subsidy 
facility.  The Commission adopted the third report on the implementation of this Decision 
on 25 October  199687. 

This  facility  is open to  SMEs with net fixed assets not  exceeding  ECU 75 million  and  a 
maximum  of 500 employees, but it is also stipulated that at least 60% of the  beneficiaries 
are  to  be  SMEs  with  fewer  than  250  employees  and  an  annual  turnover  not  exceeding 
ECU 20 million  or  a balance-sheet  total under ECU  10 million.  The interest  subsidy  of 
2% per year is applied for five years to a maximum  loan of ECU 30 000 per job  created, 
which amounts to a subsidy of ECU 3 000 over five years per job created.  The subsidy is 
granted to beneficiaries  on the basis of a written declaration to the effect  that the new jobs 

86 
87 

Council Decision  EC/94/217 of  19 April  1994, OJ L  107 of 28.04.1994, p. 57. 
COM(96)  522  final  of  25.10.1996,  Commission  report  on  the  implementation  of  the  Decision  regarding  the 
provision  of  Community  interest  subsidies  on  loans  for  SMEs  extended  by  the  EIB  under  its  temporary 
lending facility  (the SME Facility). 

39 

have  been  in  existence  for  at  least  six  months.  The  subsidy  is  paid  when  the  loan  has 
actually been disbursed to the beneficiary  and the first interest payment is due.  Following 
a  Council  Decision,  this  facility  was  implemented  in  September  1994.  At  the  end  of 
December  1995,  the  full  amount  of  the  SME  facility,  ECU  1  billion,  had  been  lent  to 
4 435  SMEs  and  8% disbursed to 444 beneficiary  enterprises.  By mid-June  1997, 63% 
of  the  facility  had  been  disbursed  to  3 086  enterprises,  representing  loans  worth 
ECU 626 million, and 36 000 jobs were actually created.  95% of the volume of loans 
was  granted  to  SMEs  with  fewer  than  250 employees  and 80% to SMEs  with  fewer 
than  50  employees.  By  the  end  of  1997,  the  EIB  will  have  completed  all  subsidy 
payments  to  SMEs.  Thus  4 435  SMEs  will  have  benefited  from  the  SME  facility, 
representing  over 45 000 new jobs.  The sectoral breakdown  shows that the majority  of 
the  loans  were  granted  to  the  secondary  (71%)  and  tertiary  (28%)  sectors.  The  metal 
industry  and  mechanical  engineering  account  for  20%,  followed  by  private-  and 
public-sector  services  (19%),  other  important  sectors  being  food,  distributive  trade, 
woodworking, the rubber industry, the paper/pulp industry and printing (5-7% each). 

3.2.1.3  The Amsterdam  Special Action Programme 

Following  the  Resolutions  adopted  by  the  Amsterdam  European  Council,  the  EIB 
adopted  during  the  summer  of  1997 guidelines  concerning  a three-year  programme,  the 
"Amsterdam  Special  Action  Programme"  (ASAP),  which  includes  a  section  devoted  to 
SMEs  active  in  the  new  technology  field  and  to  which  an  amount  up  to  ECU  1 billion 
will be allocated from the Bank's surpluses. 

3.2.2 

The European  Investment  Fund 

3.2.2.1  Loan guarantees  granted  to SMEs 

The  purpose  of  the  European  Investment  Fund  (EIF),  created  under  the  growth 
initiative  following  the  Edinburgh  Council,  is  to  provide  loan  guarantees  for  projects 
relating  to  trans-European  networks  and  for  SMEs.  Of  the  ECU 2  billion  authorised 
capital  of  the  EIF,  at  the  end  of  1996  ECU  1 786  million  was  subscribed  by  the  EIB 
(40%),  the  Community  (30%)  and  76  financial  institutions  in  all  the  Member  States 
(19.3%).  The EIF can grant guarantees  for a total amount which can ultimately be up to 
eight times its subscribed capital, i.e.  ECU  16 billion. 

In  June  1997,  the  sum  of  the  guarantee  operations  signed  in  favour  of  SMEs 
amounted to ECU 613.5 million (not including the operations signed for  trans-European 
networks,  which  amounted  to  ECU  1 195 million),  of  which  ECU 397  million  was  for 
the  pilot  project  "Growth  and  Environment"  and  ECU  14.5  million  for  equity 
participations.  The SME operations  accounted for 34% of the total operations  of the 
EIF. 

Since mid-1996, the EIF has also been  able to participate in the equity of enterprises 
specialised  in  the  financing  of  SME  capital.  By  mid-February  1997,  the  EIF  had 
received  and  analysed  over  25  proposals  for  SME  equity  participations,  three  of  which 
have  already  been  signed.  For  these  equity  participations,  the  EIF  will  concentrate  its 
resources  (ECU 70  to  80  million  until  the  end  of  1998)  on  those  parts  of  the  equity 
participation  market  in which  it can  add value to the operations of the private  sector  and 
the  capital  market,  i.e.  venture  capital  investments  in  enterprises  with  high  growth 
potential, in particular those developing and exploiting new technologies or products. 

Other  guarantee  and  equity  participation  operations  are  being  examined,  and  for  1997 
EIF  equity  participations  are  expected  to  reach  about  4%, and  newly  signed  SME 

40 

guarantee  operations  will reach 30 to 35% of the total  operations  in  1997.  Thus  the 
balance  between  EIF operations  involving  trans-European  networks  and  those  involving 
SMEs, as far  as new operations  are concerned,  is already  fairly  reasonable.  The  strategy 
of the EIF  is gradually  to diversify  its activities  in the SME sector to include  operations 
with high value added for the European SMEs  financed. 

In  1996,  besides  the  project  "Growth  and  Environment",  the  Fund  signed  five 
transactions to assist SMEs, demonstrating its ability to help mobilise private funds  for 
investment by EuropeanSMEs. 

Examples  of EIF  operations signed in 1996 to assist SMEs: 

Scottish  Equity  Partnership,  a  financial  instrument  aimed  at  improving  the  access  of 
SMEs  to own  capital,  whereby the EIF guarantees  loans  by private  financial  operators 
the  allocation  of  a 
(banks  or  institutional  investors),  to  top  up  public  funds  for 
venture-capital-type fund  which will take equity  participations  in Scottish SMEs; 

First  Irish  Mezzanine  Fund II,  in  which  the  EIF guarantees private-sector  loans  in  a 
financial  instrument  set  up  by Allied  Irish  Bank,  an EIF  shareholder,  which  will  invest 
own funds  in Irish  SMEs; 

The securitising  transaction  of the  Caisse National  du  Crédit Professionnel  (CNCP)  in 
the  financing  necessary for  the  sale  to  third 
Belgium,  whereby  the  EIF  guarantees 
parties  of SME  loans  held by the  CNCP, making  it possible for  the CNCP to grant  new 
SME loans; 

Merseyside Special  Investment  Fund  in the  United Kingdom,  where the EIF  guarantees 
part  of the  loan granted  by Barclays to sub-funds promoting  new investments, via  loans 
in British  SMEs; 

The aim of the Efibanca  transaction is to top up the credit from  a global  loan granted  by 
the  EIB  to  Efibanca,  an  institution  established  in  the  SME  sector 
in Italy,  making  it 
possible  to increase the EIB credit lines to Efibanca. 

3.2.2.2  Pilot project  "Growth and Environment": guarantees on environmental  loans 

In December  1995, following  an initiative by the European Parliament in favour  of SMEs 
and  the  environment,  the  Commission  and  the  European  Investment  Fund  (EIF)  signed 
an  agreement  on  the  implementation  of  the  pilot  project  "Growth  and  Environment", 
undefwhich  the  EIF  provides  a partial  guarantee  on  loans  to  small  and  medium-sized 
enterprises with  fewer  than  100 employees (with a preference  for  SMEs with fewer  than 
50 employees)  for  investments  resulting  in significant  environmental  benefits.  "Growth 
and  Environment"  is  one  of  the  measures  taken  in  the  context  of  the  White Paper  on 
Growth,  Competitiveness  and  Employment  and  of  the  of  Commissioners'  group  on 
competitiveness. 
Its  aim  is  to  encourage  environmental  investments  by  SMEs  in  the 
Union.  The  Community  finances  the  premiums  for  the  loan  guarantees  granted  by  the 
EIF on borrowings  to finance  investments, issued by intermediary banks, in the  Member 
States.  The EIF is thus indirectly involved via a network of banks in the various Member 
States, selected  on the basis of a call  for  expressions  of interest88.  The responsibility  for 

Published  in  OJ  C  177  of  12.07.95, pp.  10-13. 

41 

approving  and  administering  the  loans  is  delegated  to  these  intermediary  financial 
institutions.  It  is  estimated  that  the  volume  of  loans  guaranteed  will  reach  ECU  1 800 
million. 

This  loan  guarantee  instrument  will  enable  SMEs  to  obtain  more  favourable  terms  for 
financing  loans  for  environmentally  beneficial  investments.  The EIF guarantees make  it 
possible not only to facilitate  access to the sources of loans but  also to lower the  interest 
rate. 

The system operates as follows: 

-  the  guarantees  cover  loans  for  investments  which  have  a  minimum  maturity  of  three 

years (no working capital) and are for less than ECU  1 million; 

-  only  investments  generating  directly  or  indirectly  significant  environmental  benefits 
(e.g.  prevention/reduction  of  all  forms  of  pollution,  energy  savings,  environmental 
improvement  of production  processes, and  improved products  and  services resulting  in 
enhanced environmental protection) are eligible under the programme; 

- the guarantees offered  by the EIF cover up to 50% of the cost of the entire project; 

- only new loans are eligible for guarantees under the system. 

To  date,  the  EIF  has  signed  twelve  contracts  with  financial  intermediaries  in  nine 
Member  States  and is continuing  its discussions to set up a complete  network  in each  of 
the fifteen  Member States.  The first commitments of bank guarantees began at the end of 
1996, and the Commission  is awaiting with interest the full  achievement  of its  objective, 
which  is  to  make  it  easier  for  SMEs  in  the  European  Union  to  obtain  financing  for 
environmental  investments.  Since this is a pilot programme, it will be  evaluated  mainly 
in  terms  of  the  type  and  overall  volume  of  environmental  investments  made  by  SMEs. 
This  evaluation  will  provide  the  basis  for  deciding  whether  this  programme  should  be 
made permanent  and, if so, how. 

3.2.3 

Venture capital pilot  schemes 

3.2.3.1  "Seed capital"pilot  scheme 

«SEED CAPITAL» PILOT SCHEME 

At the end of 1988,  the European Commission launched a pilot scheme to stimulate seed capital 
(regional policy  and enterprise policy).  The pilot scheme comprises  23  investment funds  in 
operation,  created between  1990 and 1993 following a call for  expressions  of interest.  The 23 
funds  in the  pilot scheme received, for five years, repayable  advances  covering 50% of their 
operating  costs.  In  addition, 15 of these  23 funds,  located in assisted regions of  the  Union, 
received  a  capital  contribution  from  the  Commission via  the  European  Enterprise and 
Innovation Centres (EEIC) established  in  these regions.  Tliese funds,  established in eight 
European Union  countries  - Germany,  Belgium,  Spain,  France,  Ireland,  Italy, the Netherlands 
and the United Kingdom - are independent private-law entities responsible for  their investment 
decisions.  Tliree funds  are transnational in scope.  They cover respectively: Benelux,  France-
Spain and Sarre-Lorraine-Luxembourg. 

The  pilot  scheme  was  the  subject  of  an  external  evaluation  carried  out  between 
November  1996 and May  1997.  The resulting report will be available  in the  second  half 
of 1997. 

42 

The 23 funds  have  so far raised ECU  49.7  million  and invested 35  million  in the 
start-up  of  207  enterprises,  which  are  still  active.  They  have  directly  generated 
3 000 jobs. 

The interim  evaluation report notes that,  since the pilot  action was launched,  there has 
been a natural breakdown of the 23 funds into two poles and two types of performance: 

1. private funds with a purely commercial approach, and 

2.  public or private local development funds. 

In the case of the first, the notion of seed capital involves a rigorous selection of a very 
small  number  of  relatively  large  investments.  Only  three  out  of  the  23  funds  were 
managed  as  purely  commercial  seed  capital  funds.  The  input  of  the  pilot  scheme 
contributing to the operating costs was essential in two out of three cases.  In the second 
type,  seed  capital  involves  small  shareholdings  in  local  SMEs  with  limited  growth 
potential and an essentially regional market.  As for the Regional Funds, the input of the 
pilot scheme was fundamental to their creation. 

The report  emphasises that Europe, and particularly  its southern regions, is  lagging  far 
behind the United States in terms of the level of seed capital activity.  However, the best 
European  funds  achieve profitability  rates  only  slightly  lower  than  those  of  American 
Funds.  Germany leads in seed capital investments, with 41% of the total investments in 
this sector in Europe. 

Some achievements of the seed capital pilot scheme 

Technostart (Stuttgart): 12% holding in Jet and Lasersystem, a company which 
created a prototype of a laser painting system.  Applications in the aeronautical sector. 
Nine new jobs. 

F.A.I.R.  (Liege): 33% holding in ICM, a company specialising in the design and 
manufacture of portable "constant potential" X-ray generators for the on-site quality 
control of welding. Five new jobs. 

Business Innovation Fund (Dublin): 20% holding in EDI Factory, a company 
specialising in devising computer solutions to promote exchanges between industries 
with electronics know-how. Six new jobs. 

Innovi-Euroventures (Benelux): 20% holding in Fondatech, a company which 
develops equipment for reinforcing the structures of building foundations by means of 
gas pressure. Fifteen new jobs. 

RTVL (Lille): 37.5% holding in ACTN, a company working to help a metalworking 
enterprise to diversify into surface treatment, painting, and powder and liquid 
lacquering, with the installation of an automatic painting line.  Twenty-five new jobs. 

Korda Associates  (London): 26.5% holding  in  Cambridge  Animation,  a  company 
specialising in the audio-visual production of animated films. Fifteen new jobs. 

43 

3.2.3.2  Eurotech  Capital action 

The  purpose  of  the  Eurotech  Capital  action  is  to  encourage  the  financing  by  private 
capital  of  transnational  advanced  technology  projects.  The  Commission  has  thus 
authorised  European  venture  capital  funds  specialising  in  investment  in  advanced 
technology.  These  financial  entities, each of which has a minimum  investment  capacity 
of  ECU 50  million,  agree  to  earmark  at  least  20%  for  shareholdings  in  SMEs  which 
develop transnational  advanced technology projects. 

In  1996,  the  Eurotech  Capital  network  had  14  members  covering  the  majority  of  the 
Member  States.  This  network  has  undertaken  to  invest  a  total  amount  of  ECU 232 
million in transnational advanced technology projects.  Since the total commitment of the 
Community budget is ECU 9.2 million, the resulting leverage effect  is  1  to 25. 

3.2.3.3  Finance for  Innovation 

A  number of actions to support the finance for innovation have been launched  since  1995 
under the Programme for Innovation in Europe. 

Investment  forums  held  in  the  Member  States  (five  in  1995  and  two  in  1996) 
attracted,  on  the  one  hand,  entrepreneurs  from  over  500  innovating  SMEs  in  full 
expansion  seeking  sources  of  funding  and,  on the  other,  financial  institutions  seeking 
investment opportunities (mostly venture capital companies from all over the Union). 

Officially  launched  on  1  July  1997  as  part  of  the  Innovation  Programme,  the  I-TEC 
(Innovation  and  Technology Equity  Capital) pilot project  is an initiative for  encouraging 
start-up  capital  investment  in technologically  innovative  SMEs.  I-TEC  aims  to  develop 
the  ability  of  venture  capitalists  to  evaluate  and  manage  start-up  investments  in  such 
SMEs,  which  -  despite  their  economic  viability  and  inherent  quality  -  would  not 
otherwise  be  taken  into  consideration.  Nine  venture  capitalists  will  be  selected  by  the 
end of  1997 to participate  in the I-TEC pilot project,  with a total investment  capacity  of 
ECU 380 million. 

Lastly, in  1997, there will be a trial of an interface  service between SMEs participating  in 
the 4th Framework Programme  for RTD and sources of  financing.  This pilot project  will 
involve  setting  up  an  "Innovation-financing  Help  Desk"  to  inform  potential  investors 
about  the  projects  under  way  and  their  potential,  and  to  help  the  SMEs  or  researchers 
concerned  to  obtain  easier  access  to  private  capital,  in  particular  at  transnational  level 
(e.g.  information  on  sources  and  access  conditions  for  venture  capital,  and  the 
expectations of investors).  Through the studies and the seminars for the exchange of best 
practiees  which  it  has  organised,  the  Innovation  Programme  has  gained  experience  in 
innovation  financing,  which  it  intends  to  develop  by  means  of  instruments  such  as  the 
European Innovation Monitoring System (EIMS) and I-TEC INFO. 

4. 

SUPPORT  FOR THE  DEVELOPMENT  OF REGIONAL  S M ES 

The  previous  reports  for  1992,  1994  and  1995  gave  detailed  accounts  of  the  principles 
governing the Structural Funds.  The major multiannual guidelines  for  Objectives  1, 2, 3, 
4  and  5b  (for  the period  1994-1999) presented  in the  1995 report  still  apply.  However, 
for  Objective  2 the new  programmes  for  the period  1997-1999  have been  the  subject  of 
negotiations  in  1996  and  1997.  In  addition,  following  the  accession  of  the  three  new 
Member States in  1995, programmes were adopted to assist these countries. 

44 

It  should  be  remembered  that  in  the  Community  Support  Frameworks  (CSF)  and  the 
Single Programming  Documents  (SPDs)  a total  of about  10% of the total  resources  of 
the  Funds  are  specifically  devoted  to  measures  to  promote  and  improve  the 
production  facilities  and the economic environment of SMEs, and this percentage  is 
even higher in the zones covered by Objective 2. 

4.1 

Regionalised operations 

Objectives  1, 2 and 6 

With  regard  to  Objective  1  (regions  whose  development  is  lagging  behind),  the 
Operational  Programmes  (OP)  or  Single  Programming  Document  (SPD)  are  currently 
being  drawn  up.  The  interim  assessment  is  not  yet  available.  The  programmes  for 
Objective  1  regions  dealing  more  particularly  with  SMEs,  such  as  the  "industry" 
operational  programmes  for  Ireland,  Italy,  Portugal  and  Greece,  are being  monitored  by 
the departments  in charge of enterprise policy  in order to take more account  of the  SME 
dimension in the implementation of these programmes and, where appropriate, to  transfer 
best practices and tried and tested schemes. 

Following  the  accession  in  1995  of  the  three  new  Member  States  (Austria,  Finland 
and  Sweden),  SPDs  were  negotiated  in  which  a  large  proportion  was  earmarked  for 
assisting  SMEs.  The  funds  made  available  to  assist  SMEs  in  these  countries  (30  to 
40%  of  Community  aid)  are  almost  double  those  granted  for  the  other  objectives 
(15 to 20%).  In its Communication  of July  199689, the Commission presented  the  SPDs 
of  the  three  new  Member  States  (in  particular,  content  and  financial  allocation),  which 
give considerably  more  place to the  SME  dimension  than  the previously  negotiated 
programmes.  Objective  6 was  created  for  the  most thinly  populated  regions  of  the 
Union (< 8 inhabitants/km2) in Sweden and Finland. 

Actions to assist the revival, creation and development  of SMEs figure  very  prominently 
in the national initiative programmes which the regions and the Member States present  as 
part of the multiannual operations under regionalised  structural policy.  It should be noted 
that  regional  policy  and  the  policy  of  cohesion  are  based  on  shared  responsibility. 
Community  action  is  designed  as  a  complement  or  a  contribution  to  corresponding 
national  or  regional  actions  (Article  4 of  Council  Regulation  2081/93  of  20.07.199390). 
Operations  are defined  as part of an overall regional  development  or conversion  strategy 
adopted on a multiannual basis. 

In  the central  regions  of  the Union,  often  characterised  by  the proximity  of  large  urban 
centres, the emphasis is placed on the quality of the economic environment  of SMEs and 
their  adaptation  to  changes  in external markets.  In less developed  areas, including  rural 
In 
areas,  SMEs  are  more  fragile  and  regional  policy  requires  different  instruments. 
particular, by setting up SME networks it is possible not only to attain a "critical size" for 
the sale of certain products on the local and extra-regional market, but also to share skills. 

For  the  Arctic  regions,  the  concern  is  to  develop  in  small  localities  a  decentralised 
network  of  activities  using  new  information  technologies  and  advanced  communication 
services  intended  for  the  global  market,  since  local  demand  is  very  limited.  The  active 
population seeking skilled jobs is usually already well  qualified. 

89 

90 

COM(96)  316  final  of  3.7.1996  on  the  implementation  of  EU  regional  policies  in  Austria,  Finland  and 
Sweden. 
"Coordination" Regulation, OJ L 193 of 31.7.1993, pp.5-19. 

45 

On  30  May. 1997,  the  Commission  presented  a  set  of  guidelines  for  adapting  the 
programmes of the Structural Funds until 1999 for Objectives  1 and 6, in particular 
to  take  account  of  the political  priorities  defined  at the  informal  Council  of  Ministers 
responsible  for  regional  policy  and., town  and  country  planning  policy  held  in 
Ballyconnell  (IRL)  in November  1996 and  of  the Florence  European  Council  in  June 
1996.  It  was  proposed  in  Florence  to  use  the  resources  available  in  the  existing 
programmes  to support SMEs and local  development  and employment  initiatives. 
Thus  the  priorities  defined  are  centred  mainly  on  job  creation,  particularly  by 
SMEs.  Member States and regional  authorities should therefore  be encouraged  to take 
advantage of resources to exploit the job-creating potential of SMEs. 

With  regard  to  Objective  2  (regions  in  industrial  decline),  1996  was  a  crucial  year 
devoted  to the negotiation  of the new programmes  for  the period  1997-1999,  which 
were adopted in  1997.  The development of SMEs is one of the priorities  defined  by 
the  Commission  in  its  guidelines  for  Objective  291,  which  is  reflected  in  the  SPDs 
presented  by  the  Member  States.  A reference  to  the  new  definition  of  SMEs92  was 
included in them with a view to harmonising both Community and national procedures. 

Thus there is the gradual emergence of a priority to assist SMEs, which is reflected 
in practice in the most recent SPDs by a greater financial  effort  to assist measures 
directly aimed at enterprises, in particular by co-financing  national measures.  It is 
therefore  the  task  of  the  partners  in  charge  of  implementing  this  programme 
(Commission,  Member  States,  Regions  and  socio-economic  partners)  to  make  every 
effort  to ensure that these programmes achieve their objectives  and that the measures to 
assist SMEs are used and are effective  in boosting their competitiveness  and increasing 
job creation. 

included 

Coordination  between  entreprise  policy  and  regional  policy  is  ensured,  in  particular 
through interdepartmental  consultations not only on the numerous regional  programmes 
but  als©  on  thematic  actions.  Such  consultation  took  place  during  the  adoption  of  a 
number  of  communications.  These 
"Structural  assistance  and 
employment"93,  which  recommends  making  use  of  the  margin  of  flexibility  in  the 
programmes and reorientating them towards assisting job creation (investment  in human 
capital, reinforcement  of business services, technological innovation and new sources of 
jobs,  and  the  introduction  of  regional  employment  pacts  between  public  and  private 
operators);  "Cohesion  policy  and  culture"94  and  "Cohesion  policy  and  the 
environment"95, which acknowledge the importance of SMEs as a new source of jobs in 
the  ecological  sector  and  the  need  to  promote  environmentally friendly products  and 
technologies, in particular in SMEs; and "Towards an urban agenda in the European 
Union"96 and "Cohesion and the information society"97. 

91 

92 

93 
94 
95 
96 
97 

Note  for  guidance  concerning  operations  in the declining  industrial  areas  for  the  second  programming  period 
1997-1999, Document C(96) 952 final  of 29.4.1996. 

Commission  Recommendation  to  the  Member  States,  the  EIB  and  the  EIF  of  3  April  1996  concerning  the 
definition  of SMEs, OJ L  107 of 30.4.1996, p.4 

COM (96)  109 of 20.3.1996 

COM (96) 512 of 20.11.1996 

COM(95) 509 of 22.11.1995 

COM (97)  197 of 06.05.1997 

COM (97) 7 of 21.1.1997 

46 

The  Commission  also  adopted,  in  accordance  with  Article  130b  of  the  Treaty  on 
European  Union,  the  first  report  on  economic  and  social  cohesion  in  199698,  which 
analyses  the  effects  of  national,  Community  and  structural  policies  on  cohesion.  An 
analysis of the impact of enterprise policy on cohesion shows that, although the measures 
to  assist  SMEs  should  contribute  to  reinforcing  cohesion,  there  has  been  little  or  no 
response from enterprises in some of the areas lagging behind. 

The  annual  reports  on  the  Structural  Funds  have,  since  the  1994  report99,  included  a 
chapter  on  the  complementarity  between  the  Structural  Funds  and  SME  and  tourism 
policy, which will be continually improved. 

In order to  ensure  the sound  and  efficient  management  of the operations  co-financed  by 
the  Structural  Funds  as  part  of  the  SEM  2000  exercise  (Sound  and  Efficient 
Management),  the  Commission  is  drawing  up  a  Regulation  on  the  detailed  methods  of 
the Member  States'  financial  control  of operations  co-financed  by  the  Structural  Funds. 
In preparing this legislation, it has framed rules distinguishing those types of  expenditure 
which  are  and  those  which  are not  eligible  for  Community  co-financing  and  fact  sheets 
have  been  drawn  up  on  financial  engineering  measures  such  as  venture  capital  and 
guarantee funds  (available on the Internet http//dg 1608.intro.html). 

Various  studies have been conducted,  one of which,  in  1996, was  on the  impact  of  the 
structural  policies  on  the  economic  and  social  cohesion  of  the  Union  1989-1999100. 
In order to find out more  about the nature of the co-financed  actions  and their  economic 
impact  on  SMEs,  the  Commission  launched  a  thematic  evaluation  of  "the  impact  of 
Structural  Funds  on  SMEs"101  during  1997, which  will  deal  with  the  whole  range  of 
current  programming,  including  the  Community  initiatives. 
It  will  supplement  and 
update  the  1993  assessment,  the  results  of  which  were  commented  on  in  the  1994 
report102. 

With regard  to the  network  of 250 Euro  Info  Centres, mention  should  be made  of  the 
work  of the  sub-group  specialising  in  the  Structural  Funds,  which  is  made  up  of  49 
EICs  from  the  15  Member  States. 
In  1996,  besides  the  information  meetings  and 
exchanges  of  views  on  the  Community  SME  Initiative  and  inter-regional  cooperation 
under  Article  10  of  the  ERDF,  this  sub-group  compiled  records  of  "success  stories" 
involving  projects  which  had  made  a  positive  contribution  to  local  development  in 
Germany  and  Italy,  for  example.  In  this  way,  about  a hundred  projects  were  analysed 
and presented to the Commission.  The specialised EICs are also a very valuable relay  for 
passing  on  grass-roots  information  to  the  Commission,  and  also  provide  local,  regional 
and national  authorities with technical advice for the planning and implementation  of the 
programmes  supported by the Structural Funds.  Quite a few EICs play an important  role 
in informing  SMEs of the opportunities which the regional programmes  offer  them.  The 
EICs  are  often  involved  in  the  planning  and  promotion  of  regional  development 
programmes  such as INTERREG and OUVERTURE.  Lastly, the EICs were involved  in 
promoting the DIRECTORIA  event on inter-regional cooperation held in Brussels on 4-6 

98 
99 
1 00 
1 01 
1 02 

COM (96) 542 of 6.11.1996, published  by the Publications Office,  ISBN  92-827-8878-4 

COM(95) 583 of  14.12.1995  and COM(96) 502 of  30.10.1996. 

Published  by the OPOCE, ISBN 92-827-9168-8 

OJ S 133 of  12.7.97, p.39 

COM(94) 221 of 7.9.1994 

47 

December  1995 and in Strasbourg on 24-26 February  1997, and about  ten members of 
the network were present on the European Union stand. 

Objective 5b (fragile rural areas) 

If SMEs are "the backbone of the EU economy", as Eurostat  stated  in its fourth  report 
"Enterprises in Europe", the description is even more apt for the rural areas of the Union. 
SMEs are a fundamental  component of the economic fabric of rural areas, all the more so 
as  this  fabric  evolves  away from a  structure  once  dependent  mainly  on  agriculture,  a 
sector  which  has  undergone  profound  changes,  towards  multisectoral  socio-economic 
development.  This  is  why,  under  the  various  rural  development  programmes  and 
measures  co-financed  under  the  Structural  Funds,  SMEs receive  special  aid  which  is 
intended not only to facilitate the creation and ensure the permanence of SMEs but also 
to  improve  their  environment,  for  example by  contributing  to  the  development  of the 
services they need, and to improve their competitiveness.  For the second period of the 
reform of the Structural Funds 1994-1999, over 25% of the appropriations granted to 
Objective  5b  programmes  are intended  for  investments  in production,  SMEs, the 
craft  sector and services, i.e. a Community contribution  of approximately  ECU 1.7 
billion. 

4.2  Community Initiatives 

The Community Initiative programmes are drawn up on the basis of guidelines laid down 
by the Commission.  They generally relate to topics of Community interest or permit the 
implementation  of  more  appropriate  or  innovative  procedures,  and  the  European 
dimension  offers  opportunities  for dealing with the problems to be solved  and deciding 
on the content of the actions to be undertaken. 

The following  13 Community Initiatives, which may also contribute to the development 
of SMEs, were adopted in 1994 (scheduled for  1994-1999): SMEs (ECU 1  065 million), 
ADAPT (1 600 million, adaptation of workers to industrial changes), LEADER II (1 755 
million, development of rural areas), INTERREGII (3 472 million, border areas), REGIS 
II  (600  million,  the most  remote  regions), EMPLOI (1 810 million,  human resources), 
RECHAR  II  (453  million,  conversion  of  areas  affected  by  the  decline  of  the  coal 
industry), RESIDER II (568 million, conversion of steelmaking  areas), KONVER (725 
million,  conversion  of  areas  seriously  affected  by  industrial  decline,  and  military 
installations), RETEXII (596 million, conversion of textile areas), URBAN (869 million, 
urban  areas),  PESCA  (296  million,  conversion  of  areas  dependent  on  fishing)  and 
PEACE (295 million, special aid programme for reconciliation in Northern Ireland).  A 
presentation of the REGIS, URBAN and RETEX initiatives can be found in the previous 
report103. 

The SME Community Initiative 

The Community Initiative on SMEs, with a budget of ECU 1 billion (regions covered by 
Objectives  1,  2,  5b  and  6),  of  which  ECU 800  million  for  Objective  1  regions, 
supplements the actions under the Integrated Programme in favour of SMEs and the craft 
sector, according to the methods and procedures applicable to the Structural Funds.  This 
initiative  aims  to  make  SMEs  in  the  Union  more  competitive  by  improving  their 
environment and know-how.  The operational programmes under the SME Initiative were 

1 03 

COM(95)362 final of 8.9.1995. 

48 

adopted in  1995 and  1996 (except the programme for England).  They include measures 
in the field of cooperation between SMEs which vary from one Member State to another, 
and concentrate on their internationalisation, improved access to the internal market and 
public procurement contracts, actions relating to subcontracting, the adoption of a "total 
quality"  strategy,  cooperation  with  research  centres,  access  to  new  technologies, 
marketing,  financing,  improving  the  organisation  and  management  of  enterprises  or 
improving  environmental  management  (environmental  audits).  The  departments 
responsible  for  enterprise  policy  are generally  members  of the monitoring  committees 
and regularly  attend  the meetings  in the Member  States.  The state of progress  of  the 
programmes  varies  considerably  from  one  Member  State  to  another.  In  Ireland,  for 
example, the programme focusing on a financial engineering measure (interest subsidies) 
for small enterprises (<50 employees) is almost entirely under way.  In France, two calls 
for projects  aimed  at inter-enterprise  cooperation for modernisation  and innovation and 
transnational partnership are at the project-selection  stage.  In Italy, calls for projects are 
also being  launched.  In Spain and Portugal, on the other hand, there are difficulties  in 
starting  up  the programmes.  In  Greece,  as  a result  of  the political  will  to  coordinate 
measures to assist  SMEs between the various ministries, seven SME support  structures 
were  selected  to  help  enterprises  to  take  better  advantage  of  the  whole  range  of 
Community programmes which might concern them.  The measure to assist "clusters" is 
at the project-selection  stage.  The programmes  of the new Member  States  adopted  in 
1996 include, in particular, measures in Austria to assist environmental audits, advice and 
training in telematics, and environmental technology; in Sweden, access to markets via 
networks, the  improvement  of training  and  management,  access  to  the  Single  Market, 
new information  technologies and the environment as a factor of competitiveness; and in 
Finland,  measures  to  help  strengthen  the  links  between  research  and  training,  the 
application of the technical regulations of the Single Market, and clusters. 

In  addition,  the  Commission  proposed  to  the  Community  Initiatives  Management 
Committee on  17 November 1996 three types of action to promote transnational  actions 
to be financed by the Community SME initiative reserve of ECU 25 million: 

1) exchanges of experience and best practices between the Member States in previously 
identified  fields,  2)  support  for  International  Buyers'  Exhibitions  (IBEX)104  and  3) 
teletourism105 (to promote the inclusion of tourism enterprises on the Internet). 
The Commission  selected,  following  an invitation to tender106,  an intermediary  support 
structure  for  planning  and  organising  transnational  actions,  in particular  exchanges  of 
experience  in the context  of the  SME Initiatives  and industrial  change.  The  enterprise 
policy~departments cooperate closely in all these actions by transferring their practices in 
relation to  SME policy  to the regional policies  and providing technical  support  for  the 
selection of projects (in particular for IBEX and tourism). 

1 04 
1 05 

1 06 

Brochure presenting the Vademecum ISBN 92-827-7852-5  and publication  in OJ S 38 of 22.2.1997, p. 46 

Call  for  proposals  to  establish  a  European  coordination  and  transfer  structure  aimed  at  promoting  the  use  of 
electronic publicity and commerce through  the Internet network  amongst  SMEs operating in the tourism  sector 
and  located in the less favoured  regions of the Union, OJ C  162 of 6.6.1996, p.21 

Open procedure, OJ S  142 of 25.7.1996, p.33 

49 

The LEADER II Community  Initiative 

Support  for  SMEs  and  the craft  sector  is an important  dimension  of LEADER  II, which 
so  far  comprises  100  programmes/global  subsidies.  The  Community  contributes 
ECU  1 755 million  (at  1995 prices, including  the reserve)  to help finance  investments  of 
ECU 4 billion in 800 LEADER territories.  It is estimated that on average over 20% of 
the funds  are intended  for  aid to small  and  medium-sized  enterprises  and  the  craft 
sector.  This percentage  varies from one territory to another  and  only reflects  part  of the 
support  provided  by  LEADER  to  SMEs  and  the  craft  sector,  since,  while  the  actions 
financed  under  LEADER  II  include  measures  to  assist  SMEs  directly  (access  by  SMEs 
and  the  craft  sector  to  business  services,  creation  of  local  services  such  as  one-stop 
innovative  investment,  aid  for  setting  up  enterprises  or  facilitating 
shops,  aid  for 
teleworking),  other  actions  are of indirect  benefit  to  SMEs  in  the territories  in  question. 
This applies to the various technical assistance measures for rural development,  measures 
for  exploiting  and  marketing  the products  of  local  agriculture,  forestry  and  fisheries,  or 
training measures.  But it is incontestably the approach underlying the implementation  of 
LEADER,  namely  an  integrated  development  strategy  covering  a  territory  with  the 
participation  of  the  players  concerned,  which  enables  SMEs  to  expand  their  activities 
under a more global  development  project.  In addition,  since innovation  is a condition  of 
eligibility  for the LEADER programme, the projects  implemented make it possible to test 
new methods  of  organisation  and marketing  and new products, thus  offering  SMEs  new 
opportunities. 

Lastly,  in  LEADER  II,  a  new  section  was  introduced  concerning  transnational 
cooperation, with  a budget of ECU 137 million.  Thus the beneficiaries  of LEADER  II 
have the possibility of jointly planning, producing and marketing products and services in 
all fields  of rural development.  This section will enable SMEs in LEADER areas to work 
together and expand their activities. 

4.3 

Innovative forms  of intervention 

The purpose  of the  European  Business  and  Innovation  Centres  (BICs),  supported  by 
the Commission  under Article  7 of the ERDF Regulation,  is to contribute to the creation 
of  innovating  enterprises  and  the  modernisation  and  development  of  existing  SMEs. 
There  are currently  140 BICs  in the Union, mostly  in the  Objective  1 and  2 regions  but 
also  in Objective  6 and  5b regions.  These centres belong  to the European  Business  and 
launched  an 
Innovation  Centre  Network  (EBN).  In  May  1997  the  Commission 
assessment  study on its action to support BICs, which it has been conducting  since  1984 
underots regional  policy.  By this  study, the results  of which  will be  available  in  March 
1998, the Commission  intends to: make an initial  assessment  of its action;  establish  how 
far  it  is  consistent  with  other  similar  regional  development  measures  financed  by 
Community  or national credits; and propose the adjustments  necessary  for  implementing 
this action. 

Article 10 of the ERDF Regulation107 permits the financing  of studies and pilot  projects 
concerning regional development  at Community level, in particular in the frontier regions 
of the Member  States.  The Article  10 budget is limited to  1% of the annual  allocation  of 
the  ERDF.  A  budget  of  almost  ECU 400  million  is  earmarked  for  actions  grouped 
around  four  themes:  internal  and  external  inter-regional  cooperation  (RECITE  II  and 

1 07 

Regulation  2083/93 of 20.7.1993, OJ L  193 of 31.7.1993, p.38 

50 

ECOS/OUVERTURE  II - ECU  180 million), innovation  for regional  and  local  economic 
development  (90 million), town  and country planning  (45 million)  and  urban  policy  (80 
million).  These  actions  were  the  subject  of  calls  for  proposals  published  in  the  OJ.  In 
this  way,  support  will  be  provided  for  pilot  projects  in  the  following  areas:  urban 
environment, the information  society, innovation and technology transfer,  new sources of 
employment,  cultural  cooperation,  internal  and  external  inter-regional  cooperation,  and 
town and country planning.  RECITE II more specifically  concerns SMEs. 

The  Commission  is  also  currently  examining  the  possibility  of  launching  a  new 
instrument  called  "Eurofin",  intended  to  improve  the  financing  of  innovating  SMEs  in 
the assisted regions through equity holdings 

The Commission  also supports territorial development strategies for innovation  and 
the  information  society.  Thus  the  pilot  projects  under  Article  10  of  the  ERDF,  RIS 
(Regional  Innovation  Strategies)  and  RISI  (Regional  Strategies  on  the  Information 
Society),  are  conducted  by  about  60  regional  authorities  and  will  mobilise  more  than 
1 000  key  regional  players,  both  public  and  private,  in  particular  heads  of  SMEs,  in 
structured  strategic  deliberations  aimed  at devising  a regional  strategy  and  converting  it 
into  a  concrete  action  plan  on  the  basis  of  the  identification  of  priority  projects.  The 
purpose of the RIS is to promote innovation, including technological  and research  aspects 
and  other  equally  important  purely  economic  and  institutional  aspects,  within  the 
traditional  fabric  of  production.  The  purpose  of  the  RISI  is  to  identify  the  economic 
opportunities  and  risks  which  the  information  society  will  create  in  the  regions  so  that 
they  can  anticipate  the  effects  of  this  new  revolution  and  thereby  maximise  the 
opportunities and minimise their negative impact.  These two actions are being  conducted 
in  conjunction  with  activities  to  promote  (a)  innovation  (RITTS  under  the  Innovation 
Programme) and (b) the information  society. 

The  elaboration  of these territorial  strategies, including their action plan, is based  on  the 
reinforcement  of  cooperation  between  the  public  and  private  sectors  and  between 
regional enterprises, in particular SMEs, and the supply infrastructure,  for technology  and 
services,  associated  with  technological  innovation  and  the  information  society  in  the 
region.  All  strategic  planning  exercises  begin  by  analysing  demand,  in  particular  the 
needs  of  SMEs,  and  involve  a  multidisciplinary  and  integrated  approach  based  on  the 
implementation of genuine subsidiarity at the level of regional responsibilities. 

Article 8 of the EAGGF-Guidance  Regulation also permits the support of studies, pilot 
and  demonstration  projects,  and  projects  to  disseminate  Community  results  concerning 
rural -and agricultural  development  (for  example,  see  chapter  on  women  entrepreneurs). 
Article 6 of the ESF Regulation permits the financing  of innovative technical  assistance 
actions  and  pilot  and  demonstration  projects  in  the  field  of  vocational  training  and  job 
creation, and actions to monitor and assess the measures co-financed  by the ESF. 

5. 

OPERATIONS  TO  ASSIST  S M ES 

IN  SPECIFIC  SECTORS  (AGRICULTURE  AND 

FISHERIES) 

Objective 5a (adaptation  of agricultural  structures and  modernisation/restructuring 
of  fisheries) 

The  measures  under  the  former  EC  Regulation  N° 866/90,  now  replaced  by  Council 
Regulation  N° 951/97  of  20  May  1997  and  EC  Regulation  N° 867/90  on 
the 
improvement  of  processing  and  marketing  conditions  for  agricultural  and  forestry 
products,  concern  primarily  SMEs.  Practical  experience  and  statistical  information  on 

51 

the structure  of the  food  sector reveal that more than  90% of the approximately  253 000 
firms in the EU food  sector employ fewer than 20 people and that 6% employ between 20 
and 99 people.  However, these measures do not consider SMEs as a target group  and do 
not contain any particular actions or rules applying to them.  Furthermore, no quantitative 
information  concerning  the  participation  of  SMEs  in  the  programmes  and  the  related 
financial  efforts  at Community level can be provided. 

The Common  Fisheries  Policy 

for  example,  employed  some  90 000  people 

The  fisheries  sector  includes  a  very  large  number  of  SMEs:  according  to  a  European 
Commission  study  108,  the  branch  of  European  industry  which  processes  fisheries  and 
in  2 240 
aquaculture  products, 
establishments, with a Community average of 40 workers per enterprise (ranging from 16 
in Italy  to  91 in  Germany).  In  addition,  95% of the vessels  in the  Community  fleet  are 
less  than  24  metres  long.  In  this  context,  SMEs  represent  a considerable  proportion  of 
the beneficiaries  of the  structural  operations  to  assist  the  fishing  and  aquaculture  sector, 
since it is towards  SMEs that most of the structural  and socio-economic  measures  in  the 
sector  are  directed,  in  particular  via  the  Financial  Instrument  for  Fisheries  Guidance 
(FIFG) and the PESCA Community initiative. 

The  FIFG,  which  since  1994  has  accounted  for  a  quarter  of  the  EU  Structural  Funds 
(Objective  5a)  and  to  which  ECU 2 800  million  has  been  allocated  for  1994-99,  can 
co-finance  operations in the following areas: 

-  adapting fishing  capacity (withdrawal of vessels, setting up joint ventures); 
-  modernisation and renewal of the fleet; 
-  development of aquaculture; 
-  protection of inshore areas; 
- 
infrastructure  works in fishing ports; 
-  processing and marketing of products; 
-  product promotion; 
-  socio-economic measures for  fishermen; 
-  other measures (technical assistance). 

6. 

SUPPORT  FOR SMEs IN THE  EUROPEANISATION  AND INTERNATIONALISATION  OF 
INFORMATION  AND 
THEIR  STRATEGIES, 

IN  PARTICULAR  VIA 

IMPROVED 

COOPERATION SERVICES 

6.1  ^.Information  for  enterprises 

6.1.1  The network  of Euro Info Centres 

In January  1995, the enlargement  of the European Union to  15 Member  States led to the 
opening  of  seven  EICs  in  Finland,  nine  in  Sweden  and  seven  in  Austria.  At  the  same 
time, the policy of setting up Correspondence Centres (EICCs) in the countries of Central 
and  Eastern  Europe  was  continued  and  was  extended  to  the  countries  of  the 
Mediterranean  Basin. 

1 08 

Statistical  study  on the processing  of  fisheries  and aquaculture  products  in the  European  Community,  April 
1993, European Commission 

There are 227 EICs, to which 21 EICCs have been added, so that they constitute a unique 
network  present  in  public,  private  or  mixed  structures  in  direct  contact  with  SMEs 
(Chambers  of  Commerce,  local  development  agencies  or  banks).  Entirely  dedicated  to 
enterprises,  EICs  are  multi-purpose  and  provide  SMEs  with  all-round  expertise  in 
Community matters. 

As  the  most  valuable  link  between  Europe  and  SMEs;  EICs  inform  enterprises, 
initiate  them,  advise  them  and  assists  them  in  all  areas  relating  to  Community 
programmes and policies. 

A new function  for the Euro Info Centres 

The  1996  Council  Decision  on  the  third  multiannual  programme  for  SMEs  made  the 
EICs  first-stop  shops  for  Community  information  for  SMEs.  This  new  function  is 
intended  to  give  SMEs  simpler,  clearer  and  thus  more  efficient  access  to  the  European 
Union  than  in  the  past:  to  its  legislation,  programmes  and  opportunities.  It  found  its 
practical  expression  in a strategy to adapt the network which was favourably  received  by 
the  Member  States  on  19 September  1997.  This  strategy  spells  out  the  practical 
implications of the first-stop shop function,  the range of services offered  by EICs and the 
feedback  procedures  for information from SMEs. 

The first-stop  shop  dimension 

In accordance with the concept of the first-stop shop, the EICs are centres for routing and 
processing  requests  for  information.  In this way,  SMEs  find  a local  interlocutor  who  is 
likely to provide straightforward,  pragmatic answers to all their queries: either directly, or 
indirectly  by  directing  them  to  specialised  structures  and/or  service  providers  who  can 
deal with the request more thoroughly. 

On the operational  level,  fulfilling  the first-stop shop objective  implies  developing  close 
cooperation  with  other  SME  intermediaries,  including  other  Community  networks  such 
as  the  Innovation  Relay  Centres,  the  CRAFT  network  of  National  Focal  Points  or  the 
European Enterprise  and Innovation  Centres, to which the EICs refer  entrepreneurs  who 
require services which such intermediaries provide.  The status of first-stop shop does not 
mean  that  the  EICs  becomes  the  sole  interlocutors  of  SMEs.  EICs  develop  in  an 
organised  fashion  their  partnerships  with  other  SME  intermediaries  (host  structures, 
partners  in  the  same  locality,  region,  country,  trade,  category,  etc.)  by  encouraging 
synergies  and  avoiding  duplication  of  functions  and  responsibilities  in  line  with  the 
principle of subsidiarity.  It is important that each interlocutor of SMEs fully  assumes his 
information  and  advisory  role  at  a  clearly  defined  and  complementary  level  (general 
the 
Community 
Commission's  other  networks;  local  and  national  information  for  local  and  national 
partners). 

for  EICs;  specialised  Community 

information 

information 

for 

In order to guarantee the quality of their services, the EICs are permanently  subject  to an 
independent  audit.  This  evaluation  exercise will lead to a partial renewal  of the EICs  at 
the end of  1997.  In addition, on the basis of a call for tenders, organisations  representing 
SMEs, whether  sectoral  or horizontal,  European  or national, will be  able to join  the EIC 
network as associate members. 

53 

The range of EIC services: 

The  Info-service 

such 

and  guides 

information  bulletins, 

In  1995,  the  EICs  answered  310 000  questions  from  enterprises  in  the  European  Union 
In  1996  this  figure  rose  to  more  than  350 000.  As 
on  all  EU-related  subjects. 
disseminators of information,  the EICs make available to enterprises a very large range of 
documentation:  brochures, 
the 
ECO-Management  Guide, which is a tool for self-assessment  and awareness-raising  with 
regard  to the  application  of  European  environmental  standards  in  SMEs.  As  organisers 
of seminars and conferences,  they are actively involved in high-profile  events such as the 
European  information  society  weeks,  organised  with  the  ISPO  (Information  Society 
Project  Office)  in the countries of the European Union, the CEECs and the Mediterranean 
Basin.  As  part  of  the  1996  and  1997  promotion  campaigns  on,  respectively, 
standardisation  and the euro, the EICs organised  information  days, conducted  surveys  of 
enterprises  and  widely  disseminated  self-assessment  brochures  and  software  which  they 
had  themselves  produced.  At  the  end  of  the  first  half  of  1997,  it  is  estimated  that 
these  campaigns  gave  rise to over 6 million  contacts.  Lastly, during  1997, about  100 
EICs organised  over  150 events  as part  of an awareness-raising  campaign  on health  and 
safety  at work in SMEs. 

as 

Initial advisory and assistance  services 

The  EICs  provide  initial  assistance  at  the  various  stages  in  the  development  of  an 
enterprise.  They are involved mainly as advisers on European financing  schemes open to 
enterprises, such as the Community research and technical development programmes  and 
the  structural  funds,  on  quality,  standardisation  and  certification  policy,  and  on 
environment policy. 

The  EICs  also  provide  support  for  maintaining  and  consolidating  new  markets.  This 
theme  covers  the  activity  of  the  EICs  in  areas  relating  to  the  Europeanisation  and 
internationalisation  of enterprises, by providing them with better information  on all third 
country markets,  and to the relevant  EU programmes,  and the promotion  of  cooperation 
between  both  intra-EU  and  third  country  enterprises,  by  using  other  Community 
networks and instruments. 

In these various  areas, the collective  expertise of the network  is based  on the  specialised 
groups of EICs which develop the products and services which meet the needs of SMEs. 
The main areas covered by these groups are the environment, the euro, external relations, 
the information  society, public procurement contracts, and  standardisation. 

Feedback of information  from  SMEs 

The Commission  departments  are aware of the privileged place occupied  by the  EICs  in 
informing  them of the particular problems  faced by SMEs in implementing  legislation  or 
participating  in certain Community programmes.  This feedback  takes the  form  of  direct 
consultation  of  EICs  or  surveys  of  SMEs  conducted  in  their  region.  The  EICs  are 
continuing the work on the Single Market begun in  1994 thanks to a now well  established 
feedback  procedure  and  by  the  compilation  of  success  stories.  The  EICs  have  also 
participated  in  consultation  panels  such  as the VAT pilot  group  and  passed  on  opinions 
and  comments,  on  their  own  behalf  or  on behalf  of  their  SME  clients,  on  a number  of 
Green Papers: the single currency, innovation and public contracts.  Lastly, the EICs play 

54 

a  practical  role  in  the  operation  of  the  Single  Market  by  informing  SMEs  of  the 
complaints procedures and by following  up the complaints lodged. 

6.1.2  Other information  actions 

In  order  to  meet  the  large number  of  direct  requests  to  the  Commission  for  information 
from widely differing  groups (enterprises, professional  bodies, consultants, students), the 
enterprise policy departments restructured  their general information  service to  businesses 
in  1995  by  setting  up  an  information  centre  open  to  visitors.  As  a  result  of  close 
collaboration  with  the  information  centres  of  the  other  Commission  departments,  it  is 
possible to provide information  efficiently,  focusing  on individual needs, and to  organise 
study  visits  and  group  visits.  60 000  copies  of  the  monthly  EURO-INFO,  a  concise 
information  bulletin  aimed  at  SMEs,  are  distributed  free  of  charge  to  organisations, 
associations,  professional  groups,  members  of  the  BRE  and  BC-NÈT  networks,  EICs, 
enterprises  and  information  offices  of  the  European  Institutions,  and  to  Commission 
offices  and  EU  delegations  which  expressly  request  it.  The  presence  of  the  enterprise 
policy  stand  with  its  targeted  documentation  is  one  of  the  most  sought-after  and 
appreciated instruments, particularly in the less favoured  regions of the Union, where it is 
sometimes  the only  direct  instrument  of Community  information.  The  stand  is  reserved 
for  events  which  target  SMEs  (in  particular,  ENTERPRISE,  EUROPARTENARIAT, 
Buyers'  Exhibitions, conferences  on the craft  sector) and which are expected to attract  an 
average of 300 visitors. In order to raise the profile  of Community actions to assist SMEs, 
the  enterprise policy  department  has  for  a number  of years participated  in certain  events 
jointly with other Commission departments.  Lastly, the Commission has supported  SME 
information  seminars in the Member States. 

6.2 

Inter-enterprise  cooperation  and  partnership  for  Europeanisation  and 
internationalisation 

One of the priority  areas  of enterprise policy  is cooperation between  enterprises,  mainly 
in  the  European  Union  but  also  with  third  countries.  To  stimulate  inter-enterprise 
partnerships  in  the  Union,  the  Commission  has  set  up  partner-search  networks  and 
specific  programmes  of  meetings  between  enterprises  (EUROPARTENARIAT  and 
To  promote  the  internationalisation  of  enterprises,  in  particular 
INTERPRISE). 
partnerships  between  EU  enterprises  and  enterprises  in third  countries,  the  Commission 
has set up specific  programmes and actions. 

Partner-search  networks 

In  1996,  the  500  correspondents  in  the  73  countries  which  form  the  BRE  network 
produced 8 200 offers  of,  or requests for, cooperation.  At the same time, the 300 advisers 
in the 40  countries  currently  covered  by BC-NET  submitted  7 300 offers  of,  or  requests 
for,  cooperation.  These requests come from SMEs wishing to conclude  lasting technical, 
financial  or commercial cooperation  agreements. 

to  partnership  possibilities, 

The  third  multiannual  programme  for  SMEs  (1997-2000)  provides  for  the  creation  of  a 
database  allowing  global  access 
incorporating 
opportunities  for  cooperation  offered  by  BRE,  BC-NET  and  INTERPRISE  and 
EUROPARTENARIAT  events.  In  accordance  with  these  guidelines  and  following  a 
broad consultation  of the members of the cooperation networks, the BC-NET/BRE sector 
began  work  to  introduce  a new  computer  tool  linking  the members  with  one  other  and 
with the Commission.  Certain  aspects were decisive  in its design, in particular  the need 
tool  which  is  simple  to  use  and  based  on  modern 
to  construct  a  user-friendly 

i.e. 

55 

technologies,  and  the  need  to  maintain  the  specific  nature  of  each  of  the  networks  in 
terms  of  mode  of  operation  and  access  by  the  members  to  the  database.  One  of  the 
priorities  of the new computer tool is therefore  to enable members  of BC-NET  and  BRE 
to play an active role, since they will in future  be able to carry out real-time  consultation 
of  the  data  stored  in  the  common  base  and  extract  the  profiles  which  interest  them  by 
combining different  pre-defined  search parameters. 

6.2.1  Europeanisation  of enterprises 

6.2.1.1  A  legal  instrument  favourable  to  transnational  cooperation:  the  European 

Economic Interest  Grouping (EEIG) 

The  European  Economic  Interest  Grouping  (EEIG)109  is  a  legal  framework  which  is 
particularly  suited  for  promoting  transnational  cooperation  between  SMEs.  This  is  why 
the Commission departments responsible for enterprise policy took the initiative to create 
an  EEIG  network,  called  REGIE,  the purpose  of which  is  to  provide  the  information 
and  technical  assistance  necessary  for  promoting  EEIGs  among  these  economic 
operators110. 

As part  of this  action,  a conference  was held  in March  1996, in close  collaboration  with 
the  departments  responsible  for  company  law,  in  order  to  assess  the  first  six  years  of 
experience  of  the  EEIGs  and  to  promote  this  legal  instrument  among  SMEs.  This 
conference  was  a unique  opportunity  for  the  Commission  departments  and  existing  and 
potential  EEIGs  to  meet,  and  provided  the  necessary  impetus  for  new  actions  to  assist 
EEIGs,  notably 
the  Commission  on  9 September  1997  of  a 
Communication  aiming  to  promote  the  participation  of  EEIGs  in  public  contracts  and 
programmes  financed  by  public  funds111.  These  will  involve  the  design  of  practical 
working tools such as a brochure for SMEs wishing to use this cooperation  instrument. 

the  adoption  by 

6.2.1.2  Partnership programmes:  EUROPARTENARIAT and  INTERPRISE 

EUROPARTENARIAT 

EUROPARTENARIAT  is  directed  towards  the  economic  development  of  regions 
eligible  for the  Structural Funds (Objectives  1, 2,  5b and 6) by  stimulating  transnational 
cooperation  between  SMEs.  Managed  jointly  by  the  enterprise  policy  and  regional 
policy  and  cohesion  departments,  this  programme  offers  enterprises  the  opportunity  to 
meet  potential  partners  to  discuss  and  negotiate  possible  cooperation  agreements.  Two 
events  a year  are held  in the European Union.  The organisation  follows  a  methodology 
which  has proved  to be  effective:  a host country  is chosen,  SMEs  located  in the  chosen 
area and wishing to enter into a partnership  are selected (about 400), a catalogue with the 
profiles  of the selected enterprises is produced, the catalogue is distributed throughout the 
15 Member  States  and  third  countries, personalised  business  meetings  are  arranged,  and 
the results of the contacts are evaluated and followed up. 

The  success  of  the  formula  has  led  EUROPARTENARIAT  to  cover  more  than  70 
countries.  In  collaboration  with  the  Directorates-General  responsible,  the  promotion  of 

1 09 

110 

Council Regulation 2137/85/EEC of 25 July  1985, on the European Economic Interest  Grouping (EEIG), OJ L 
199 of 31.7.1985, p. 1 

See the notice to readers on the setting-up of the European Network  of European  Economic  Interest  Groupings 
(REGIE), OJ C  146 of  13 June  1995. The current legal basis of the REGIE project  is contained  in the  Council 
Decision on a third multiannual programme for SMEs, OJ L 6 of  10.01.1997, p.25 

1 ! * 

Communication  of  9.9.1997,  OJ  C  285  of  20.9.1997,  p.  17 

56 

each  event  now  extends  to  the  Mediterranean  partners,  the  countries  of  Central  and 
Eastern  Europe,  the  Commonwealth  of  Independent  States,  and  the  countries  of  Latin 
America and South-East Asia.  Furthermore, the methodology has been incorporated into 
the respective Community economic development programmes for these countries. 

EUROPARTENARIAT  in  figures: 

In  1995, Germany and  Portugal. 

EUROPARTENARIAT  North  Rhine-Westphalia  (Dortmund,  20-21  March  1995)  attracted 
about  5 000  visitors from  54  countries.  The 357  German  enterprises  were  able  to  hold  about 
10 000 business meetings  with the 2 000 visiting SMEs, 200 of which came from  countries  in the 
Commonwealth  of  Independent  States.  The  evaluation  report  shows  that  188  cooperation 
agreements  were  concluded  between  German enterprises  and  visitors  and  124 between  visiting 
enterprises. Aware  of the importance  of the economic spin-off for  enterprises,  the  German  local 
authorities  wanted  to follow  up  this  event  by  organising,  in  February  1998,  a  second  event 
under the INTERPRISE  programme. 

EUROPARTENARIAT  Portugal  (Lisbon,  24-25 November  1995).  406 Portuguese  enterprises 
met about 2 000 SMEs  (250 of which  came from  Sweden, Norway  and Finland)  in the course  of 
almost  11 000 interviews.  This event  was a milestone  in the EUROPARTENARIAT  programme 
in that it introduced  a software  system for  managing  "spontaneous"  meetings  between  visitors. 
EUROPARTENARIAT  is thus  becoming  a platform for  European  and  international  meetings  of 
SMEs. 

In 1996, Sweden and  Italy. 

than  1500 

(Luleâ,  13-14  June  1996), 

EUROPARTENARIAT  Northern  Scandinavia 
first 
EUROPARTENARIAT  organised  in one of the  three new Member  States  of the  Union,  attracted 
occasion, 
more 
EUROPARTENARIAT  was directed  not at a single  country but at Finland, Norway  and  Sweden 
alike.  386  enterprises  were  able  to  hold  7 500  business  meetings  with  the  1 200  visiting 
enterprises,  225  of  which  came from  PHARE  countries  and  160 from  TACIS countries.  At  the 
same time, a number of seminars  were held, in particular  a conference  on women  entrepreneurs. 

50  countries. 

Exceptionally 

SMEs 

from 

the 

the 

for 

EUROPARTENARIAT  Italy  (Genoa,  27-29  November  1996),  besides  a  large  delegation  of 
enterprises  from  the  PHARE,  TACIS  and  Mediterranean  countries,  saw  for 
the  first  time 
considerable  participation  by  enterprises from  Asia,  latin  America  and  the  United  States,  so 
that  in  all  more  than  70  countries  were  represented.  The  406  northern  and  central  Italian 
enterprises selected  met almost 2 350 SMEs in some  12 000 bilateral  interviews. 

In  1997, Hellas and France Massif  Central 

EUROPARTENARIAT  Hellas  (Piraeus,  23-24 June  1997). 400  Greek SMEs  met  1733  visiting 
companies from  more  than  60  countries.  Out  of  the  1733  registered  visiting  companies',  758 
came from  the  EU,  37 from  EFT A  countries,  299 from  the  Mediterranean,  360 from  PHARE 
countries,  200 from  TACIS  countries,  64 from  Asia  and  12 from  the  USA.  In  total,  11  336 
meetings were organised. 
EUROPARTENARIAT  France  Massif  Central (Clermont-Ferrand,  16-17  October  1997).  418 
French  SMEs  met  1750  visiting  companies  from  more  than  60  countries.  Out  of  the  1750 
registered  visiting  companies,  974  came from  the EU  (333 from  France)  ,  48 from  the  EFTA 
countries,  213 from  the Mediterranean,  201 from  PHARE  countries,  138 from  TACIS  countries, 
104 from  Asia,  34 from  Latin  America,  25 from  the  US and  13  from  Canada.  In  total,  10  300 
meetings were organised. 
Forthcoming  events  :  EUROPARTENARIAT  The Netherlands  1998  (Apeldoom,  11-12  June) 
and EUROPARTENARIAT  Spain  1998 (Valencia, 12-13 November). 

57 

INTERPRISE 

The purpose of INTERPRISE, which  is implemented  under  enterprise policy,  is to boost 
local, regional or national initiatives to stimulate SME transnational cooperation  through 
interviews between heads of enterprises. 

This  programme  is  based  on  the  EUROPARTENARIAT  methodology.  There  are, 
however,  major  differences  between  these  two  programmes. 
INTERPRISE  supports 
small-scale  events  (about  100  SMEs)  focused  on  one  or  two  sectors  of  activity  and 
directed  at  all  the  regions  of  Europe,  whether  or not  they  are  eligible  for  the  Structural 
Funds. 

As a result of these features,  local operators can use INTERPRISE  to provide  a practical 
illustration  of  an  economic  development  policy  in  a  chosen  sector  of  activity.  The 
formula  is  proving  a  great  success.  There  have  been  over  200  projects  since  the 
programme was launched in  1990. 

It was possible to involve third countries in some of these projects  - initially  Central  and 
Eastern European countries and Mediterranean partners.  The Commission  then  extended 
this  methodology  to  the  PHARE  countries,  the  TACIS  countries,  the  countries  of  Latin 
America,  the  Mediterranean  partners  and  the  countries  of  South-East  Asia.  The  event 
held  in  Riyadh  on  20-22  May  1997  as part  of  cooperation  between  the  Union  and  the 
Gulf  States  is  an  example  of  the  extension  of  the  INTERPRISE  method.  On  that 
occasion,  170 enterprises  took  part,  75 from the  Gulf  and  95 from the  European  Union, 
and there were 800 meetings between participants. 

, • 

38 INTERPRISE  events  held  in the Member  States  in  1995 mobilised  6 000  enterprises 
and  resulted  in  15 000  business  meetings.  Nearly  500  cooperation  agreements  were 
recorded  in  the  project  assessment  reports.  35  events  were  supported  in  1996,  and  32 
events are planned  for  1997. 

6.2.1.3  Encouragement  of inter-regional cooperation: RECITE II 

As  part  of  internal  inter-regional  cooperation,  a  call  for  proposals  was  published  in 
October  1996112 to support projects  in five fields of action, two of which directly  concern 
SMEs,  namely  improving  the  access  of  SMEs  to  the  European  market,  in  particular  by 
appropriate techniques of cooperation between enterprises, and improving the services on 
offer  to SMEs to encourage them to innovate. 

6.2.1.4  Transnational  subcontracting 

The  Commission  has  progressively  developed  a  policy  in  the  field  of  subcontracting 
whicrrinitially  aimed  to promote  the creation  of  a truly  European  subcontracting  market 
and  more  recently  fosters  the  internationalisation  of  European  subcontracting  and  the 
strengthening  of  its  competitiveness  in  the  global  economy.  Initiatives  are  carried  out 
under  enterprise  policy  as  part  of  its  third  multiannual  programme  for  SMEs  in  the 
European Union.  Joint initiatives  are carried out with other Commission  departments, in 
particular  Industry,  Regional  Policy  and Eurostat.  The Commission  has  also  established 
a  good  working  relationship  with  a  number  of  trade  associations  and  subcontracting 
intermediary  organisations  such  as  Chambers  of  Commerce  and  Industry  and 
Development  Agencies at European, national and local levels. 

Initiatives developed pursue three main objectives, which are to: 

1 12 

OJC326of31.10.96,  p. 9 

58 

Improve  the  transparency- of  the  subcontracting  market  through  the  production  of  a 
Practical  Guide on legal aspects of industrial  subcontracting  and a Directory  of  subcontracting 
intermediary  organisations  (third  edition  being  prepared),  statistical  studies  on  the  economic 
importance  of  subcontracting  and  the  organisation  and  support  of  seminars  and  fora  on 
subcontracting (consumer electronics, textiles/clothing and construction); 
Reinforce  inter-industrial  partnerships,  through  the  establishment  of  a  subcontracting 
assistance network called  SCAN (results  of the pilot phase were presented  in Brussels  in Feb. 
1995)  for  the  interconnection  of  existing  subcontracting  databases  and  exchanges  across 
Europe  based  on  a  common  approach  in  compiling  data  on  suppliers  in key  industry  sectors; 
the  preparation  of  sectoral  subcontracting  nomenclatures;  the  promotion  and  support  of 
International  Buyers'  Exhibitions  (IBEX programme,  see box  below)  and  the production  of  a 
industrial 
"European  Guide  on  Cooperation"  and  "Guidelines 
subcontracting"  in  cooperation  with  UNICE,  subcontracting  development  poles  and  sectoral 
projects notably in consumer electronics and scooter sectors ; 

for  partnership 

in 

Promote  the  internationalisation  of European  Subcontracting  via  scholarships  for  training 
programmes  in  Japan  (Human  Resource  Training  Programme  -  HRTP  now  called  Japan 
Industry  Insight)  in  cooperation  with  the  EU-Japan  Centre  for  Industrial  Cooperation  and  the 
European Automotive  Suppliers' Mission to Michigan held in February  1997. 

IBEX: INTERNATIONAL  BUYERS' EXHIBITIONS 

The IBEX  concept  was launched  and tested under enterprise policy following  the  request  by  the 
Council^'3  to  test  the formula  of  inter-enterprise  meetings  organised  to  meet  the  demands  of 
large  enterprises for  the  development  of  new  inter-industry partnerships  (buyers'  exhibitions). 
This concept  was taken  over in the context of regional policy  and the Community SME  Initiative 
(CSMEI). 
In  this  way,  the  Commission  encourages  and  supports  the  organisation  of 
International  Buyers'  Exhibitions  in the regions  eligible for  the Structural Funds,  in  particular 
those eligible  under  Objective 1. 

The IBEX programme  organises planned  meetings  between  large  enterprises  and  SMEs  on  an 
international  scale, focusing  on the needs clearly identified  by large enterprises and the  specific 
capacities  of SMEs  to meet them.  These inter-enterprise  contacts, directed towards a  particular 
strategic  sector  (motor  industry,  agri-food,  textile,  wood, etc.)  are  intended  (a)  to  assist  large 
enterprises  in their  international search for partner  SMEs for  specific cooperation  requirements 
and  (b)  to  promote  relations  between  large  enterprises  and  SMEs  by  offering  SMEs 
opportunities for  direct  contacts with  large enterprises interested  in their products  and  services 
or their know-how.  The IBEX  optimise  the quality and  benefits  of bringing together  SMEs  and 
large enterprises  and  offer the participants  savings  in time and financial commitment  compared 
with traditional sub contracting  fairs. 

Under its  enterprise policy,  the Commission supported seven IBEX: 
VETISin  Turin in November  1996 (motor industry), where 67 customers met 316  subcontractors 
in  the  course  of  4 550  meetings, following  on  from  the  1994  VETIS, where  54  buyers  met  530 
suppliers  in the course  of 7 314 meetings; 
MET  in Strasbourg  in  October  1996 (advanced technology),  20  buyers,  156 suppliers  in  1 485 
meetings; 
AEROMART  in  Toulouse  in  December  1996  (aeronautical  sector),  where  31  buyers  met  182 
suppliers  in  the  course  of 2 500  meetings;  Elmia  Food  in Jônkoping,  Sweden,  in March  1997 
(agri-food),  where  25  buyers  met  68 suppliers  in  the  course  of  280  meetings;  Eurocontract  in 
Brussels  in  October  1995  (multisectoral),  where 54  buyers  met  145'suppliers  in  the  course  of 
1 340 meetings;  Telematics  is due to be held in Milan in November 1997. 

1 13 

Council Resolution  of 22 November  1993, OJ C 326 of 3.12.1993, p.l 

59 

6.2.1.5  Joint  ventures in the Union: JEV instrument 

The  purpose  of  this  new  JEV  (Joint  European  Venture)  programme  is  to  support  the 
creation  of  transnational  joint  ventures  between  SMEs  in  the  European  Union.  It  falls 
within  the  conclusions  of the  Commission  Communication  of  10 July  1996  concerning 
the Integrated  Programme  in  favour  of  SMEs  and the  Council  Decision  of  9  December 
1996  on  the  multiannual  programme  for  SMEs,  which  calls  on  the  Commission  to 
encourage SMEs to create or expand an activity in another Member State. 

It is a mechanism providing  for  a Community  contribution  to cover part  of the  expenses 
involved  in  setting  up  a joint  venture.  The  amount  of  this  contribution  and  the  rules 
governing it are as follows: 

-  a  repayable  advance  covering  up  to  50%  of  the  eligible  costs  up  to  a  maximum  of 
ECU 50 000; 

- when  a joint  venture  is set up, this contribution may be increased  up to  a maximum  of 
ECU  100 000 covering, besides  50% of the eligible costs, an additional  payment  limited 
to  10% of the total amount of the investment. 

This  programme  will  operate  via  a  network  of  financial  intermediaries,  including 
institutions specialised in investment  financing. 

6.2.2  Internationalisation  of enterprises: cooperation with third  countries 

Much of the prosperity of the European Union depends on foreign  trade and investments. 
There  is  a  positive  correlation  between  free  world  trade  arid  business  expansion, 
economic  growth  and  employment.  Therefore,  despite  the  increased  competitive 
pressures, the globalisation of the world economy has made it possible for  SMEs to  enjoy 
unprecedented  growth and competitiveness potential which must be enhanced. 

EU  enterprises  need  both  to  fully  exploit  the  advantages  of  the  Single  Market  and  to 
ensure their presence  in third  country markets. Benefits  to  foreign  competitors  from  the 
liberalisation  of  the  internal  market  should  be  matched  by  efforts  to  ensure  EU 
companies,  including  SMEs,  business  and  investment  opportunities  on  third  markets. 
Besides  providing  for  free  access  to  third  country  markets  through  its  trade  policy,  the 
Commission  has  therefore  developed  special  tools  to  support  SME  activities  outside 
Community borders. 

6.2.2.1  Commercial policy 
On  14 February  1996 the  Commission  adopted  a Market  Access  Strategy114  in which  it 
outlined  a strategy  to open up other markets. The Commission  recommends  a twin-track 
approach comprising bilateral measures coupled with multilateral  action in the WTO and 
elsewhere.  In the context  of this Market  Access  Strategy  an important  step  has been  the 
establishment  of the interactive Market Access Database (available on the Internet). This 
allows  SMEs  to  inform  the  Commission  of  barriers  they  encounter  whilst  operating 
abroad  thus  enabling  the  Commission  to  act  on their  behalf  either  in  the  context  of  the 
WTO or bilaterally. 

1 14 

"The global  challenge of international  trade: a market access strategy for the European  Union", 

COM(96) 53, adopted  on  14 February  1996 

60 

Within the Trade Barriers Regulation  (TBR)115, entering  into  force  on  1 January  1996, a 
so-called  third  track  was  created.  It  envisages  complaints  of  individual  companies 
including  SMEs  (next to Member  States and EU-Industry sectors) alleging  adverse  trade 
effects  caused  by  trade  obstacles  in  third  countries.  With  the  aim  of  offering  SMEs 
relevant  and  easily  accessible  information  on  the possibilities  for  operating  and  trading 
abroad,  the  EU  currently  develops  a  system  for  providing  information  about  conditions 
and requirements of third country markets. 

Mutual recognition with its reciprocal nature may be more attractive (and therefore  more 
effective)  than  unilateral  pressure  to  liberalise  third  country  markets  by  reducing 
regulatory  obstacles  faced  by  European • traders  and  exporters.  Up  to  date,  Mutual 
Recognition  Agreements  (MRAs)  of  conformity  assessment  of  regulated  products  have 
been initialled with Australia, New Zealand, Canada and the United States. Their positive 
benefits  will be mostly  felt  by  SMEs which  are usually  unable to  cope with the  burdens 
of multiple domestic jurisdictions. 

At  the  same  time,  on  the  multilateral  level  the  EU  pursues  a  firm  market  opening 
strategy.  It  consists  in  a) consolidating  the Uruguay Round  acquis  and making  sure that 
all  of  the  undertakings  are  scrupulously  implemented,  b)  identifying  ways  of  pushing 
market  opening  still  further  and  exposing new  areas  such as competition  and  investment 
to  multilateral  or  plurilateral  disciplines,  and  c)  responding  to  the  new  challenges  and 
new  obstacles  raised  by  the  globalisation  of  the  world  economy.  The  impact  on  SMEs 
businesses development is expected to be positive. 

Within the WTO  context, the EU has played  a key role in the successful  negotiations  on 
basic telecommunications  services and on information  technology products, and provided 
the  decisive  push  for  the  agreement  on  financial  services,  where  negotiations  are  now 
reopened.  In particular,  and at the end of the WTO Ministerial  Conference  in  Singapore 
in  December  1996,  Ministers  adopted  the  WTO  Declaration  on  Trade  in  Information 
Technology  Products  (ITA),  providing  for  participants  to  eliminate  customs  duties  and 
other charges on information  technology products by the year 2000. The  final  agreement 
ensured  participation  of  41  WTO  members,  accounting  for  92%  of  world  trade  in  IT 
products. With  extra EU imports of some US$  105 billion  in  1995, the EU is the  second 
largest  importer  of  IT  products.  The  elimination  by  the  EU  of  tariffs  on  about  400 
Information  Technology Products represents a significant  market access improvement  for 
foreign  suppliers.  This  will  enable  EU  enterprises  including  particularly  SMEs  to 
purchase  Information  Technology  Products  at  lower  costs  and  thereby  stimulate  an 
indisputable competitive boost to them. 

6.2.2.7  Cooperation  with EFTA 

The  EEA  Agreement  (European  Economic  Area)  between  the  EU  and  the  EFTA-EEA 
States  (Norway,  Iceland  and  Liechtenstein)  entered  into  force  on  1  January  1994.  It 
provided the  framework  for the participation of the EFTA-EEA  States in the Multiannual 
Programme  of  Community  measures  to  intensify  the  priority  areas  and  to  ensure  the 
continuity  and  consolidation  of  policy  for  enterprise,  in  particular  SMEs,  as  of 
1 January  1994. Cooperation  has been  extended  to the third  Multiannual  Programme  for 
SMEs with effect  from  1 January 1997. 

1 15 

EC Regulation  n° 3286/94, adopted  by the Council on 22.12.1994, published  in OJ L 349 of 31.12.1994, p. 71 

61 

6.2.2.3  Cooperation with the Northern American market 

UNITED STATES 
In  November  1995,  the  European  Commissioners  for  Trade  and  Industry  and  the  US 
Secretary  of  Commerce  opened  the  Trans-Atlantic  Business  Dialogue  (TABD),  a 
unique  business-driven  process  by  which  European  and  American  CEOs  (Chief 
Executive  Officers)  can  make  joint  recommendations 
levels  of 
governments  from  the  EU  and  the  US  and  thus  facilitate  transatlantic  trade  and 
investment. 
In November  1996, the Transatlantic  Small Business Initiative (TASBI) was  launched 
at the TABD Conference  in Chicago to cater for the specific  needs  of small  businesses. 
It  is  an  integral  and  horizontal  part  of  TABD  and  aims  to  facilitate  mutually  beneficial 
business  relations  between  European  and  American  SMEs.  Presently  it  consists  of  two 
major  components: 
- partnering  events that  focus  on stimulating  sector-specific  SMEs from both  sides of the 

to  the  highest 

Atlantic to form business alliances and partnerships; 

- the development  of an interlinked  EU and US information  and cooperation  system  that 
acts  as  a  one-stop-shop  providing  enterprises  with  complete  information  on  topics 
relating to doing business in the EU and the US. 

Furthermore,  the  particular  concerns  of  SMEs  are  taken  into  consideration  in  treating 
important issues such as standards and certification  and in implementing the EU/US joint 
study. 
In Novembre  1997, during the TABD conference  in Rome, further  progress was made on 
TASBI  development.  Additional  key  issues  for  SMEs were identified  such  as  electronic 
commerce.  The  TASBI  committee  (composed  of  representatives  from  the  European 
Commission,  the  US  Government  and  the  private  sector)  will  be  expanded  and  meet 
twice  a  year.  New  proposals  were  launched  to  be  further  examined  (in  the  field  of 
analysis, training,  diffusion  of  success  stories  and  general  information).  New  actions  on 
partnering  events  and  the  development  of  information  and  cooperation  systems  were 
decided. 

Partnering Events 

• 
Two partnering events were organised in 1997: 

a.  in  the  United  States:  the  "European  Automotive  Suppliers'  Mission  to  Michigan" 
(EASMM97)  took  place  in  February  in  Detroit  during  the  world's  largest  event 
dedicated  to  automotive  engineering  (the  Society  of  Automotive  Engineers-SAE 
Expo).  This  was  the  first  action  coordinated  and  supported  by  the  European 
Commission.  140 European enterprises and organisations participated  in the event,  in 
over  200  meetings  with  52  US  automotive  firms  and/or  exhibiting  in  the  European 
Village. 

b.  in  Europe:  the  "Eurobenefit  Matchmaker"  mission,  organised  by  the  US  Department 
It 
of  Commerce  (DoC)  and  supported  by  the  Commission,  took  place  in  April. 
attracted  15 US  companies  from  the medical,  automotive,  sporting  goods,  computer, 
franchising  and  other  sectors  who  visited  Amsterdam,  Brussels  and  Rome  and 
participated in the "Eurobenefit  Business  Conference". 

American  companies  participated  at  the  1997 EUROPARTENARIAT  events  in  Greece 
(Piraeus, 23-24 June) and France-Massif Central (Clermont-Ferrand,  16-17 October). 

Other partnering events are scheduled for  1998-1999 : 
a.  EASM98, third European Automotive Suppliers Mission to Michigan; 

62 

b.  "Healthcare  matchmaker"  event  organised  by  the  US  Department  of  Commerce  in 

February  1998; 

c.  American  companies  will  participate  at 

the  1998  EUROPARTENARIAT 

in 

Apeldoom; 

d.  Partnership  event  involving  European  and  American  high-tech  SMEs  in  Texas  in 

1999; 

e.  The  Commission  and  the  US  Department  of  Commerce  are  examining  other 
partnering  events  that  could  be  organised  both  in  Europe  and  the  US  (such  as  an 
INTERPRISE  event and a US "matchmaker mission" on the franchising sector). 

•  Information  and cooperation system. 

The  EU  and  the  US  are  developing  an  SME  user-friendly  information  and  cooperation 
database.  The  DoC  has  already  developed  a  TABD/SME  home  page  providing 
information  about  services,  and  upcoming  SME  events.  The  Commission  is  examining 
how  it  could  link  up  the  information  system  with  its  existing  cooperation  networks, 
notably  the  BC-NET  and  the  BRE.  The  Department  of  Commerce,  is  examining  the 
possibility of extending the BC-NET network in US. 

CANADA 

The  signature,  in  December  1996  of  the  EU-Canada  Political  Declaration  and  Action 
Plan marked  a new departure in EU/Canada relations.  Business-to-business  contacts  are 
considered as a priority, and the focus will be on: 
- 

identifying  and  supporting  the  establishment  of  transnational  strategic  business 
alliances, technology transfers  and other forms of industrial cooperation; 

-  exploring  the  scope  for  supporting  business-to-business  contacts,  including  round-
tables, seminars and conferences  on issues of mutual interest and, if appropriate, using 
the existing mechanisms established by the  1976 Framework  Agreement. 

The  Sub-Committee  on  Industrial  Cooperation  will  be  reactivated  and  given  a  leading 
role  in promoting  business  contacts  and particular  importance  will  be  given  to  contacts 
between SMEs. 
For 
first 
the 
EUROPARTENARIAT  France-Massif Central in 1997. 

time  a  delegation  of  Canadian  enterprises  participated 

the 

in 

6.2.2.4  Industrial  cooperation with Japan 

Industrial  cooperation  is  one  of the  four  pillars  of the competitiveness  policy  defined  in 
1994 in  the  Commission's  Communication  "An  industrial  competitiveness  policy  for 
the  European  Union"116.  The  purpose  is  to  reinforce  EU  industry's  presence  on  fast 
growing markets and to improve the competitiveness of companies through  the exchange 
of  experience  and  know-how.  The  Commission's  industrial  cooperation  activities  with 
Japan have therefore been established along three main mutually complementary lines: 

-  Long-term  intangible  investment  with  training  and  exchange  programmes  which 
should "produce" European industry  leaders, scientists, and government  officials  with a 
substantial  understanding  of  Japan.  The  EU-Japan  Centre  for  Industrial  Cooperation 
was  established  in  1987  as  a  joint-venture  between  the  Commission  and  MITI. 
It 
provides  an  efficient  business  information  service  as well  as  training  programmes.  In 
June  1996, a Brussels  office  was  opened.  Topical  missions  consisting  of  a  two-week 

1 16 

COM(94) 319 of  14.9.1994 

63 

seminar on specific  industry-related  topics, as well as the Senior Management  Training 
Programme  consisting  of  11  to  16  week  seminars  of  course  work  and  individual 
company  visits,  provided  European  managers  of  SMEs  with  the  opportunity  to  study 
the  Japanese  language  and  culture  as  well  as  management  practices,  to  analyse  the 
market  and to  learn  about  industrial  structures, distribution  channels  and  legal matters, 
and,  last but not  least, to establish valuable contacts to Japanese  industry.  Taking  into 
account  their  limited  financial  resources,  participating  SMEs  have  been  supported  by 
scholarships provided by the Commission under enterprise policy. 

-  Support  to  industrial  sectoral  initiatives,  including  industrialists'  missions  to 
Japan,  Business  Conferences  and  Seminars.  The  first  JAMA-CLEPA  Business 
Conference  on "European  car-parts for the Japanese automotive industry", held in Paris 
in  March  1995,  included  80  face-to-face  meetings  between  EU  and  Japanese 
industrialists.  The  second  conference  took  place  in  Berlin  in  May  1996.  Furthermore, 
the  Commission  continued  its  support  to the  Consumer  electronics  programme,  which 
has run since  1991 and has generated  a significant  improvement  in the  competitiveness 
of  products  of  participating  component  producers  and  buyers.  This  industry-led 
programme  has been  extended  to Eastern European partners  and to  additional  fields  of 
consumer electronics. 

-  Encouragement  of  high  level  contacts  between  industry  leaders  through  the  EU-
Japan Industrialists Round Table (which has taken place three times since  1995), the 
UNICE-KEIDANREN meetings as well as the EU-Japan Business Forum. 

To  implement  this  policy,  the  permanent  Dialogue  between  MITI  and  the  European 
Commission,  established  in  1993, was  pursued.  Various  high  level  meetings  between 
representatives of MITI and the Commission took place in  1995 and  1996, aiming at: 

- launching, supervising and supporting joint programmes promoting EU-Japan  industrial 
cooperation  (training  and  exchange  programmes,  industrial  initiatives  in  specific 
sectors, EU-Japan Industrialists Round Table); 

-  promoting  the  convergence  of  industrial  policies  through joint  working  groups  on  the 

information  society, on biotechnology and standards and quality. 

6.2.2.5  Cooperation  with Mediterranean, Latin American  and Asian  countries 

Cooperation  between  the  EU  and  the  Mediterranean,  Latin  American  and  Asiatic 
developing  countries  aims  primarily  at  supporting  economic  development  in  third 
countries, notably through  SMEs.  However,  European  SMEs also benefit  from  business 
cooperation,  e.g.  through  the  establishment  of joint  ventures  (ECIP)  or  the  provision  of 
equipment and services in these countries. 

In  addition  to  the promotion  of  investments  under  the programmes  of  aid  to  these  third 
countries,  the  inter-enterprise  partnership  programmes  and  networks  set  up  as  part  of 
enterprise  policy  have  been  gradually  extended  to  cover  these  countries.  Thus  the 
methodologies  developed  for  European  enterprises  have  been  transferred  in  order  to 
establish cooperation arrangements with enterprises in third countries. 

64 

•  The  ECIP  programme:  Promotion  of  Direct  Investment  and  Joint  Ventures  in 

the Mediterranean  Region, Asia, Latin America and South Africa 

The Commission  has developed  a specific  instrument: European  Community  Investment 
Partners117  -  ECIP  (ECU 250  million  for  1995-1999)  intended  to  facilitate  direct 
investments  in  Mediterranean,  Asian  and  Latin  American  countries.  Since  1996  it  has 
been extended to cover South  Africa. 

ECIP  supports  the  creation  of  Joint  Ventures  between  EU  and  local  companies  or 
licensing  agreements.  ECIP  targets  SMEs  but  operations  from  larger  companies  are 
also eligible.  Large multinationals may not benefit from the scheme.  825 proposals were 
approved  during  1995  and  1996,  (compared  to  624  in  1993  and  1994)  for  a volume  of 
funding  of ECU 99 million.  This reflects the increasing volume of actions  supported. 

four  different  programme 

facilities  provide  grants  or 

The 
to  support 
actions  concerning  the  search  for  investment  partners  and  identification  of  projects 
(facility  1), feasibility  studies and'or pilot projects  (facility  2), joint ventures with  capital 
(facility  3)  and  training,  management  and  technical  assistance  by  covering  the  costs 
(facility  4).  All  Facility  1 actions  are  oriented  towards  SMEs  and  over  80%  of  all 
Facility 2 actions. 

ioans 

The  Commission  seeks  to  target  this  scheme  on  SMps,  expressly  excluding  large 
multinational  undertakings.  The  new  Regulation  introduced  specific  improvements 
for SMEs  as regards the conditions  of finance  available, in particular under Facility 2 
and  4.  The EU  is now  offering  financial  assistance  to pre-feasibility  missions.  If  an 
action  co-financed  under  Facility  2  is  successful,  the  Community  contribution  may 
exceed  50% and be up to  100% of the cost  for  SMEs.  Under Facility  4, for  SMEs  only, 
the costs of training, technical assistance and management  expertise provided by  external 
sources or by the European partner to the joint venture are eligible for grant  finance. 

•  MEDA: Cooperation with the Mediterranean  region 

The economic and financial basket of the Euro -Mediterranean Partnership  established by 
the  Barcelona  Conference  of  November  1995  envisages  the  creation  of  an  "area  of 
shared prosperity".  This will be achieved through the progressive establishment  of a free 
trade  area  by  the  year  2010,  and  appropriate  economic  cooperation  measures.  The 
Barcelona  Declaration118  emphasises  the  importance  of  the  private  sector  development 
and the role of SMEs in the process of economic transition. 

In  1996, the  Commission  services  in  charge  of  enterprise  policy  have  also  been  closely 
involved  in the preparation  and follow-up  of the first Euro-Mediterranean  Conference 
of  Ministers  of  Industry  (20-21  May  1996), which  adopted  the  Brussels  Declaration 
on  Industrial  Cooperation.  This  Declaration  outlines  priorities  for  encouraging 
industrial modernisation and investment flows to the region.  The SME topic ranks high 
among  these  priorities, which  include: the development  of  specialised  services  centres, 
SME  start-ups  and  development,  strengthening  of  the  Euro  -Mediterranean  partnership 
and  information  and  communication  networks  to  foster  cooperation  among  companies. 
A  Work  Programme  is  part  of  the  Brussels  Declaration,  and  focuses  on  cooperation 
measures.  The  Commission  services  in  charge  of  enterprise  policy  will  actively 

1J 7 
1 18 

ECIP Regulation  213/96 of 29.1.1996, OJ L 28 of 6.2.1996, p. 2 

EU Bulletin  11.1995,2-3-1 

65 

contribute  to  its  follow-up,  especially  in  the  Working  Group  'Development  of  the 
industrial fabric  and entrepreneurship', which deals with SME policy. 

Since  1992, under the former Med-Invest Programme, the Commission  has  contributed 
in  a  significant  way  to  promoting  transnational  cooperation  among  SMEs  in  the 
European Union  and the Mediterranean.  These actions were reinforced  throughout 
the year 1996 under MED A financing. 

Participation  of Mediterranean  SMEs in the partnership instruments: 

-  The  participation  o£  Mediterranean  SMEs 

in  EUROPARTENARIAT  and 
INTERPRISE  events has been promoted.  2000 SMEs from the Mediterranean  have 
taken  part  in  nine  Europartenariats  since  1992, and  200  Mediterranean  companies  are 
expected  in  the  forthcoming  Europartenariats  taking  place  in  Greece  and  France  in 
1997. 

-  The  partnership  methodology  (Med-partenariat  and  Med-Interprise)  has  been 
extended  to  the  Mediterranean.  Med-partenariats  took  place  in  May  1995 
(Morocco)  and,  with  a  particularly  high  participation,  in  October  1995  (Israel). 
Med-Interprise  events  are  also  attracting  a  growing  interest  (10  Med-Interprise 
organised  up to now  in the various  countries). Three Med-Interprise  events took  place 
in  1996:  in  Bethlehem  (Palestine),  in  Cairo  (Egypt)  focusing  on  the  electronics  and 
information  technology  sectors),  and  Med-Interprise  Algeria  in  Montpellier  (France), 
which enabled Algerian entrepreneurs to meet with their European counterparts. 

On the whole, EUROPARTENARIAT,  Med-Partenariat  and Med-Interprise  events 
have enabled close to 4 000 companies from the Mediterranean  Partners to establish 
targeted contacts with SMEs from the European Union over the past four years. 

Extension  of  the  BC-Net,  BRE,  and  Euro  Info  Correspondence  Centres  (EICCs) 
networks to the Mediterranean  countries 

BRE now covers  all Mediterranean  Partnership  countries except  Syria.  BC-Net  is  active 
in  8 of  the  12 Mediterranean  Partners,  including  Egypt,  Israel  and  Jordan.  In  line  with 
the  objectives  of  the  Euro  -Mediterranean  Partnership,  these  networks  assist  SMEs  and 
their  support  institutions  in  the  search  for  lasting  economic  partnerships.  Euro-Info-
Correspondence  Centres  have  also been  set up  in  10 of the  12 Mediterranean  countries, 
the most  recent  ones being the EICCs in Gaza, Lebanon  and  Syria.  Like their  European 
counterparts,  these  EICCs  provide  SMEs  with  all  the  necessary  information  on  EU 
In  June  1996,  the  first  Euro  -Mediterranean  Forum  on 
activities  and  programmes. 
information  and  cooperation  networks  for  small  businesses  and  craft  firms  was  held  in 
Rome,  and  adopted  an  operational  action  plan  with  a  view  to  creating  an  integrated 
permanent  Euro-Mediterranean  Network  and  exchanging  information,  experience  and 
best practices. 

For  1997,  four  Med-Interprise  (Lebanon,  Morocco,  Gulf  and  Malta)  are  already 
scheduled,  together with two Med-Partenariat  events  (Jordan, Tunisia).  An  extension  of 
BRE to Syria is envisaged,  and emphasis will be put on the synergy  and links  between 
these  networks  and  the  Business  Centres  recently  created 
in  some  of  the 
Mediterranean  Partner countries. 

All  these  activities  are  now  financed  under  the  MEDA  programme,  since  the 
Commission has decided not to renew the MED-INVEST programme.  The  Commission 
is  also  providing  support  to  set  up  Euro-Mediterranean  Networks  of business  operators, 

66 

such  as  Chambers  of  Commerce  and  Industry,  Industrial  Federations,  banks,  export 
promotion institutes and trade fairs. 

A  programme  for  1998-1999  on  partnership  actions  in  the  Mediterranean  was 
agreed in  1997 by the competent Commission services, which provides for  a high rhythm 
of  events  (one  Med-Partenariat  and  five  Med-Interprise  per  year)  and  defines  target 
countries.  The  political  dimension,  as well  as  the  regional  approach  will  be  a  main 
component  of  all  the  foreseen  events,  especially  in  the  Middle-East  in  support  of  the 
Peace process. 

•  AL-INVEST: Cooperation with Latin-American countries 

After  the initial  period  (1992  to  1994), the  Commission  decided  in  1995  to  launch  AL-
INVEST  II  (ECU 41  million  for  1995-1999).  AL-INVEST  is  intended  to  increase 
European  investments  in  Latin  America,  as well  as  enhancing  commerce  between  both 
regions. 
It  targets  both  EU  and  Latin  American  SMEs  and  has  concentrated  on 
encouraging  business-to-business  meetings  between  European  and  Latin  American 
entrepreneurs, mainly through INTERPRISE-type events. 

The first Partenariat  EU/MERCOSUR event will take place in Montevideo, Uruguay,  on 
3-5 December  1997.  Three  hundred  companies  from  the  Mercosur  area  (Argentina, 
Brazil,  Paraguay  and  Uruguay)  and  Chile  will  meet  with  200  companies  from  the 
European Union to establish contacts and explore cooperation  in the following  industrial 
sectors:  agro-industries  and  food,  chemical  products,  plastics  and  components,  textiles 
and garments, metallurgy and machinery. 

Besides 
these  sectoral  meetings,  a  network  of  South-American  organisations 
("Eurocentros  de  cooperaciôn  empresarial")  was  created  and  linked  with  the  European 
cooperation  and  information  networks  (notably  BC-NET  and  BRE)  that  are  fully 
operational in most of the Latin American countries 

•  ASIA-INVEST: Cooperation with Asian countries 

ASIA-INVEST  (ECU 32  million  1997-2002)  aims  at  facilitating  business  cooperation 
between  economic  operators  from  Europe  and  Asia.  It  contains  several  instruments  to 
stimulate  growth  in  trade  and  investment  flows  and  to  create  a  greater  awareness 
amongst European  businesses, especially SMEs, of business opportunities  in Asia. In 
1996, Asia-Invest  was  extended  to  China with  an  additional  budget  of  ECU  10 million. 
ASIA-INVEST  will  be  administered  by  a  Secretariat  to  be  established  in  Brussels  in 
autumn 1997. 

ASIÀTNVEST has three instruments for providing support to cooperation  initiatives: 

-  the Business  Priming  Fund, aimed at preparing groups of companies  for new  markets 

and partnerships; 

-  Asia-Interprise  and  Asia-Partenariat.  The  ASEAN-EU  Partenariat  takes  place  in 

Singapore in November  1997; 

-  the Asia Investment  Facility, through which research is carried  out by country  and by 

sector into investment trends and conditions in Asia. 

ASIA-INVEST  links  EC-supported  European  Business  Information  Centres  (EBICs)  in 
Asia with Euro Info  Centres, chambers of commerce and trade and industrial  associations 
in Europe, helping  companies to get in touch.  EBICs are operational  in Bangkok,  Kuala 
Lumpur,  Manila  and  Mumbai,  and  are planned  for  Colombo,  Jakarta  and  Hanoi/Ho  Chi 
Minh City.  ASIA-INVEST  provides  for  the extension  of BC-NET  and  BRE  tliroughout 

67 

South  and  South-East  Asia  and  China.  ECIP  is  also  applicable  as  well  as  EIB  loans 
(loans worth ECU 340 million in Asia). 

As  a  result  of  the  first  Euro-Asia  summit  (ASEM),  held  in  Bangkok  in  March  1996, 
much  attention  is  being  given  to strengthening  the  role of SMEs  in  their  process  of 
internationalisation,  especially  in  Asia.  The  ASEM  Business  Forum,  whose  first 
session was held  in Paris  in  1996, is an example of excellent  cooperation  among  the  EU 
and Asia business communities in this field. 

6.2.2.6  Cooperation  with  the  Central  and Eastern  European  Countries  (CEEC)  and 

the Newly Independent  States (NIS) 

The  EU  assists  Central  and  Eastern  European  Countries  (CEEC)  in  their  political  and 
economic transition,  with a particular  eye to future  accessions to the Union.  With  regard 
to  SMEs,  the  EU  promotes  the  establishment  of  Joint  Ventures  and  direct  investment 
(JOP  programme  under  the  PHARE  programme)  as  well  as  the  development  of  SME 
support  institutions  and  networks  (PHARE  programme).  EU  assistance  to  the  Newly 
Independent  States  (NIS)  and  Mongolia  through  the  TACIS  programme  (Technical  Aid 
to  the  Commonwealth  of  Independent  States)  includes  SME  support  for  building-up 
intermediary agencies, a senior expert service and partnership events. 

•  JOP: Promotion  of Joint Ventures and direct investments in Central  and Eastern 

European Countries, the Newly Independent States and Mongolia 

Set up in  1991, JOP  (Joint Venture Programme, ECU  117.5 million  allocated  so  far)  is a 
specific  programme  within  the PHARE  programme  which  aims  to  assist  the  creation  of 
joint  ventures  in the  CEECs between  Community  SMEs  and partners  in those  countries. 
Since  1995, JOP has been extended  to include the Russian  Federation.  Moves  are  under 
way  to  include  in  JOP  other  countries  covered  by  the  TACIS  programme  (Newly 
Independent  States  and  Mongolia).  Like  ECIP,  JOP  uses  a  network  of  financial 
intermediaries  to  support  feasibility  studies,  participation  in  the  equity  of  the  joint 
venture,  the  training  of  its  staff  and  the  information  necessary  for  setting  it  up.  The 
measures  implemented  have  mostly  enabled  Community  SMEs  to  carry  out  the 
preparatory  phases  of  their  joint  venture  projects,  thus  reducing  the  administrative, 
financial  and  legal  constraints.  By  encouraging  the  creation  or  extension  of  joint 
ventures  in  the  CEECs,  this  programme  promotes  foreign  investment  by  Community 
SMEs.  The  programme  mainly  assists  SMEs:  69%  of  the  approved  applications 
In  1996,  aid  was 
were  submitted  by  enterprises  with  fewer  than  100  employees. 
granted  for  400 projects.  By the end of 1996,124 joint ventures  had been  set up  and 
had  generated  investments  of  about  ECU 90  million,  representing  a leverage  effect 
of 1:9. 
•  PHARE  Programme 
Within  PHARE119,  the  Commission  has  set-up  SME  National  Programmes  by 
providing  technical  assistance  to  the  following  countries:  Poland,  Hungary,  Czech 
Republic, Slovakia, Slovenia, Bulgaria, Romania, Albania, Lithuania, Latvia, Estonia and 
the  Former  Yugoslav  Republic  of  Macedonia.  For  these  SME  programmes,  the  EU 
provided ECU 33 million in 1995 and 1996 of which 23 million (69%) were devoted to 
technical  assistance  and  transfer  of  know-how  and  ECU  10 million  (30%)  to  financial 

1 19 

EEC  Regulation  3906/89,  OJ  L  375  of  23.12.1989,  p.l  ;  amended  by  EC  Regulation  753/96  OJ  L  103  of 
26.4.1996, p.5 

68 

instruments.  Most  programmes  are  managed  in  a  decentralised  way  by  a  management 
unit established  in each country. 

PHARE  has  supported  the  development  of  SME  support  institutions  (providing 
information,  advice  and  training  services),  of  National  SME  agencies  (established  in 
Albania, Czech Republic, Hungary, Lithuania, Poland, Romania,  Slovakia, and  Slovenia) 
and  of  local  delivery  mechanisms  for  technical  assistance,  either  public  or  private  or  a 
combination  of  both.  There  are now  PHARE-supported  local  institutions  in  all  partner 
States, and networks of regional development agencies in some of them. 

PHARE  has  also  supported  a  number  of  financial  schemes  through  different  delivery 
mechanisms  to  cover  an  urgent  need  which  the  existing  financial  system  cannot  easily 
address,  while  using  the  financial  instrument  as  a  lever  to  promote  institutional 
development of the banking system. 

PHARE  has  also  supported  a  number  of  transnational  actions,  to  promote  contacts 
between  businesses  in  the  EU  and  in  the  CEEC  (participation  of  CEEC  companies  in 
EUROPARTENARIAT  and INTERPRISE), promote the establishment  of EU-sponsored 
networks  in  Central  and  Eastern  Europe  (EICs, BC-Net),  and promote best practice  and 
experience from EU institutions and associations.  So far, one Euro  Info  Correspondence 
Centre  (EICCs)  has been  set  up in each associated  country.  They have been  working  in 
close  cooperation  with  the  Euro  Info  Centres  in  the  EU,  as  they  are  members  of  this 
network. 

In  addition  to  JOP,  the  COOPME  is  a multi-country  programme  (ECU  13 million  for 
1995-1997)  developed  to:  improve  the  ability  of  SME  associations  from  Central  and 
Eastern  Europe  to  serve  their  members;  expand  relations  and  twinning  arrangements 
between  EU  SMEs  and  trade  associations  and  their  counterparts  in  Central  and  Eastern 
Europe;  expand  cooperation  and  partnership  between  SMEs  in  the  two  regions. 
COOPME  notably  supports  the  extension  of  EU  networks  (BC-NET,  Euro-Info-
Correspondence-Centres,  Business  and  Innovation  Centres)  to  Central  and  Eastern 
Europe, 
in  EUROPARTENARIAT  and 
INTERPRISE  events,  and  the  organisation  of  such  events  in  PHARE  countries 
(EUROPARTENARIAT  Poland was organised  in Gdansk  and an INTERPRISE  event  in 
Hungary),  the  operation  of  two  manager-mobility  schemes. 
It  also  finances  actions 
managed  by  European  organisations  (e.g.  Eurochambres,  the European  Venture  Capital 
Association and EURADA). 

the  participation  of  PHARE  countries 

The  Baltic  Sea  Partenariat,  held  in  Gdynia,  Poland  in  September  1996  and  financed 
under_COOPME,  brought  together  700  SMEs  from  around  the  Baltic  Sea  area  and  the 
European  Union  for business  meetings  (200 SMEs from the maritime industries  of these 
countries  and  500  visiting  companies  from  the  EU  and  other  Central  and  Eastern 
European countries).  The objective was to enable SMEs to explore business  partnerships 
with their counterparts from other countries and thus to facilitate  the further  development 
of  international  business  activities  in  the  Baltic  Sea  area.  Baltic  Sea  Partenariat  was  a 
highly  successful  event which will  contribute  to  strengthening  economic development  in 
this region and between this region and the EU. 

PHARE's  operations  in  the  next  five  years  will  focus  on:  the  completion  of  an  SME-
friendly  environment  (legal,  regulatory  and  fiscal)  as  a  pre-condition  to  further 
assistance;  a  systematic  SME  impact  assessment  of  PHARE  programmes;  further 
integration  of  SME  support  into  private-sector  development  programmes  as  well  as 
environmental  considerations  and  women's  entrepreneurship  into  SME  programmes; 

69 

SME  development  in integrated  regional/rural development  programmes  complemented, 
at  National  level,  by  further  emphasis  on  banking  and  financial  sector  reform 
programmes,  the  development  of  financial 
instruments  (mainly  equity,  debt  and 
guarantees) through professionally  run delivery institutions (investment  funds,  or banks), 
increased  cooperation  between  EU-based  and 
independent 
CEEC-based  SMEs  to  facilitate  transfer  of  know-how  on  internal  market  uses  and 
practices, as well as management and vocational training programmes for SMEs. 

from  Government; 

The  new  PHARE  orientations  confirm  the  creation  of  a  multi-country  SME  facility  to 
boost investments  in the CEECs.  The facility  is currently under preparation  through  the 
joint  involvement  of  the  Commission  departments  in  charge  of  external  and  financial 
affairs  and  enterprise  policy,  EBRD  and  EIB.  Also,  the  new  orientations  call  for 
concentration  of  activities  in  a  few  accession-related  core  areas.  In  that  light,  a  new 
programme  to  support  economic  operations  (and  particularly  SMEs)  to  facilitate  their 
integration  into  the  internal  market  is  currently  being  prepared  by  an  interdepartmental 
working  group  involving  the  departments  responsible  for  external  and  financial  affairs, 
industry and enterprise policy.  The new programme could integrate and re-focus  some of 
the existing actions mentioned, e.g. JOP and COOPME. 

The  enterprise  policy  departments  are  closely  associated  with  the  establishment  of 
measures  in  favour  of  SMEs  in  PHARE.  This  coordination  is  carried  out  at  several 
levels,  notably  through  technical  assistance  for  the  development  of  SMEs  in  these 
countries, contributing to the definition,  monitoring, and evaluation of calls for tender, as 
well  as joint  organisation  of seminars.  They contribute  to the progressive  integration  of 
new  partners  from  the  CEEC  into  the  EU  SME  information  and  cooperation  networks 
and to the development of joint ventures through JOP. 

Finally,  in  line  with  the  Additional  Protocols  to  the  European  Agreements  and  the  pre-
accession strategy, a certain number of Community programmes will be opened up to the 
associated countries  in Central Europe.  Preparations  for the  opening  up  of the  Third 
Multiannual Programme for SMEs to the CEECs from  1 January  1998 onwards  are 
currently under way. 

•  TACIS  Programme 
TACIS120  (Technical  Aid  to  the  Commonwealth  of  Independent  States)  is  a  European 
Union  Initiative  for  the  development  of  harmonious  and  prosperous  economic  and 
political  links  between  the  European  Union  and  the New  Independent  States  (NIS)  and 
Mongolia.  Within  TACIS,  ECU 51  million  has  been  allocated  to  SME  support  for 
1992-1994 and ECU 31 million for 1995-1996. 

The  TACIS  SME  Programme,  has  been  based  on  the  need  to  build  up  intermediary 
agencies,  which  can  provide  assistance  to  existing  entrepreneurs  and  start-ups.  Since 
1992, over 40 centres have been established in the New Independent States. 

Programmes  have  been  developed  to  assist  individual  entrepreneurs  such  as  the 
European  Senior  Service  Network  Programme,  which  provides  through  senior 
executives practical managerial experience, know-how and skills directly to enterprises in 
the  NIS.  Projects  have  also  been  developed  with  Eurochambres  to  assist  the  NIS 
Chambers of Commerce and Industry. 

1 20 

EEC-Euratom  Regulation  2053/93, OJ  L  187  of  29.7.1993, p.l  and  EC-Euratom  Regulation  1279/96,  OJ  L 
165 of 4.7.1996, p.l 

70 

Furthermore,  the  Commission  will  progressively  include  the  TACIS  Support  centres  in 
the  BC-Net,  starting  with  the  Russian  Federation  and  Ukraine. 
In  June  1994,  CIS 
entrepreneurs  participated  in  the  EUROPARTENARIAT  in  Gdansk  (Poland).  Since 
then,  TACIS  has  formalised  the  CIS participation  to  EUROPARTENARIAT  and  trains 
National  counsellors.  While  the  Commission  services  directly  responsible  for  TACIS 
provide  the  funding  for  National  counsellors,  the  enterprise  policy  departments  have 
included them in all activities with regard to EUROPARTENARIAT. 

Finally, six panels are to be established in Hungary, Russia, Ukraine, Estonia, Latvia and 
Lithuania  by  the  Committee  on  Commerce  and  Distribution  with  Commission  support. 
The objective is to raise awareness in these countries of the problems that EU  enterprises 
wishing to do business there are facing, and to provide technical advice and assistance  for 
the  development  of  independent  professional  federations  and  efficient  distribution 
networks in these countries. 

In  conclusion,  there  is  a  steady  and  constructive  cooperation  between  the  Commission 
services  in  implementing  the  TACIS  SME  programme  which  enables  the  Commission 
services  in  charge  of  TACIS  to benefit  from  the  experience  gained  in  the  field  of  SME 
policy by the Commission  services directly in charge of enterprise policy. 

6.2.2.7  Development  cooperation  with  the  associated  countries  in  Africa  and  the 

Caribbean and Pacific Region  (A CP countries) 

Since  1990,  the  Fourth  Lomé  Convention  between  the  EU  and  the  70  associated 
countries  in  Africa,  the  Caribbean  Sea  and  the  Pacific  Region  (ACP-countries),  is  the 
legal  basis  for  development  cooperation  and  economic  ties.  On  4 November  1995, the 
agreement  amending  the Fourth  Lomé Convention  was  signed  in Mauritius  at  the ACP-
EU  Council.  The  Convention  will  expire  in 2000.  The  Commission  opened  the  debate 
about  the  future  of  EU-ACP-relations  with  the  publication  of  a  Green  Paper  in 
November  1996121, in which  it  evaluates  the  achievements  of  development  cooperation 
up  to  now.  In  its  presentation  of  options  to  revitalise  the  EU-ACP  partnership,  the 
Commission  underlines  the  importance  of  supporting  the  private  sector.  Particular 
importance  should  be  attached  to  cooperation  between  the  European  regions  bordering 
certain  ACP  countries  (e.g. the  ultra-peripheral  regions)  and  the ACP  countries  in  order 
to support inter-regional cooperation actions relating to SMEs. 

Technical  assistance measures  designed  to promote  SMEs include  support  to  specialised 
bodies  (Chambers  of  Commerce),  the dispatch  of experts to  banks  financing  SMEs,  but 
also  and  above  all  the promotion  of Investment  Fora.  These  fora  have brought  together 
hundreds  of  European  investors  with  local  entrepreneurs. 
In  recent  years,  the 
Commission has started to organise sectoral fora which assist local enterprises to improve 
their competitiveness. 

For  about  fifteen  years,  the  Centre  for  Industrial  Development  (CID)  has  supported 
cooperation  between  European  industrial  SMEs  and  those  in  ACP  countries  by  using 
instruments  such  as joint  ventures,  management  contracts,  licensing  and  subcontracting, 
while  at the  same  time  relying  on  a network  of  local  and  European  antennae  and  close 
cooperation with promotion bodies in the Member States. 

The  CED receives  approximately  600 requests  for  assistance  a year  and uses  a budget  of 
ECU 72 million to launch about 300 direct operations to assist ACP and European SMEs. 

1 21 

COM(96) 570 of 20.11.1996 

71 

Given the complementarity  of their respective roles, the  Commission,  the  EIB  and  the 
CID work  in  close operational  cooperation.  For example, the CID selects  "bankable" 
projects  which  will  benefit  from  easier  access  to  the  resources  of  the  EIB,  and  certain 
EIB  global  loans  to  local  SMEs  are  provided  with  technical  assistance  by  the 
Commission  and  the  CID.  A  Technical  Assistance  Fund  (TAF),  set  up  by  the 
Commission,  co-finances  CID  support  measures  to  assist  heads  of enterprises  who  have 
signed cooperation protocols as part of the EU-ACP Industrial Fora.  European  SMEs are 
generally  involved  in  the  implementation  of  Community  development  aid  via  contracts 
for  works,  supplies  and  services.  Although  works  contracts  are  dominated  by  major 
European  enterprises,  it is now  SMEs  - especially  via trading  companies  - which  are by 
far the most active in contracts for supplies and services (technical assistance). 

To  help  SMEs  to  be  more  widely  involved  in  such  contracts,  the  Commission  has 
improved  the  availability  of  information,  particularly  on  the  Community  rules  on 
competition  and  on  existing  opportunities.  As a result, there  are over  800 inquiries  a 
day  for  the  information  on  programmes  and  projects  which  is  available  on  the  Internet 
and in the "Blue Pages" of the Courier. 

6.2.2.8  Cooperation with South Africa 
In  1997,  two  important  private  sector  development  programmes  of  the  European 
Programme  for  Reconstruction  and  Development  (EPRD)  for  South  Africa  will  be 
implemented  : the  Small  and  Micro-enterprise  Development  Programme  and  the  Trade 
and Investment Development Programme. 

The first programme consists basically of the Small and Micro-enterprise  lending  facility 
and a Micro and Small Credit Scheme. 
The  second  one  aims  at  creating  a  dynamic  and  successful  Small,  Medium  and  Micro-
Enterprise  sector  by  improving  its  international  competitiveness,  specifically 
for 
emerging  entrepreneurs.  The  expected  beneficiaries  are  previously  disadvantages  small 
and  micro-enterprises  who  will  receive  training  in  the  basic  principles  of  international 
competitiveness  for  export.  This  Trade  and  Investment  Development  Programme  will 
include  training  in  international  competitiveness,  product  and  market  development  for 
export  and  international  partnership.  Measures  under  the  "International  partnership 
programme",  will  target  SMEs  within  specific  product  sectors,  who  would  receive 
opportunities  for  upgrading  technology.  A  series  of  events  are  foreseen  :  INTERPRISE 
type  events;  linking  with  the  BRE;  an  Industrial  Forum  with  a regional  dimension  and 
other  ad hoc initiatives  in line with the programme,  such as research  studies, mentoring, 
missions,  participation 
in 
external  partnership 
EUROPARTENARIAT  events. 
In  1997,  the  republic  of  South  Africa  and  the  European  Community  agreed  on  a 
Multiannual  Indicative  Programme  up  to  end  of  1999  which  focuses  on  private  sector 
development  support. 

events  or  participation 

in 

7. 

STRENGTHENING  SME 

COMPETITIVENESS  AND 

IMPROVING  ACCESS  TO 

RESEARCH,  INNOVATION  AND  TRAINING. 

Strengthening  the  competitiveness  of  SMEs  is  absolutely  necessary  if  they  are  to  meet 
the  challenge  of  greater  competition  in  an  increasingly  global  economy  which  is 
undergoing  far-reaching  changes  due to the emergence  of the information  society  and to 
environmental  and  quality  requirements  in  particular.  Better  SME  access  to  RTD 
activities  and  to  innovation  can help  to  achieve  this  goal.  SMEs must  therefore  become 
more  innovative  and  must  be  better  able  to  assimilate  the  new  communication 

72 

technologies,  so  that  even  those  in  the  most  peripheral  regions  can  have  fast,  low-cost 
access  to  the  most  distant  markets.  They  must  also  improve  the  management  of  their 
enterprises  through  increased  investment  in vocational  training. Furthermore,  in  order  to 
respond to market requirements, SMEs must be better able to integrate the  environmental 
dimension into their manufacturing  processes and products. 

7.1 

Enterprise  competitiveness 

Promoting the competitiveness of European  industry 

The  Council  Decision  of  25  June  1996  on  the  implementation  of  a  Community  action 
programme to strengthen the competitiveness  of European industry122  sets out a series  of 
guidelines  concerning,  inter  alia,  implementation  of  the  1994  communication  on 
competitiveness123  in  the  areas  of  intangible 
investments,  industrial  cooperation, 
competition  and  modernisation  of  public  authorities,  the  emergence  of  the  learning 
society  (promoting  continuing  training),  the  development  of  industrial  cooperation  with 
all third countries and the strengthening of the relationship with the United States through 
the  Trans-Atlantic  dialogue  and  standardisation.  Two  sectoral  Communications  were 
adopted in  1996, one on textiles and clothing and the other on the chemical  industry. 

7.1.1  Textiles and clothing 

In May  1996, the  Commission  adopted  a communication  on the competitiveness  of  sub 
contracting  in  the  textile  and  clothing  industry124.  In  June  1996,  a Round  Table  on  the 
European  textile  and  clothing  industry,  a sector  dominated  by  SMEs, was  organised  by 
the  Commission.  It  provided  the  opportunity  for  representatives  of  the  European 
federation  representing  this  sector  (EURATEX),  the  leaders  of the National  federations, 
the  social  partners  and  representatives  of the Member  States  to  discuss  the  problems  of 
the sector with the Commission.  Following this Round  Table, three joint  working  groups 
were created  in June  1996 on the Commission's  initiative, covering the promotion  of the 
sector's  competitiveness  (innovation,  RTD,  information  technologies,  employment  and 
training,  structural  adjustment,  industrial  cooperation),  as well  as the internal  framework 
(partnerships  between  enterprises  in the  EU,  State  aid policy,  internal  market  and  trade) 
and external relations (industrial cooperation with third countries, market access, customs 
and  anti-fraud,  external  trade).  The  objective  is  to  improve  the  flow  of  information 
between the industry and the Commission, to identify  existing programmes  and measures 
relevant  for  enterprises  in  the  textile  and  clothing  sector,  to  consider  further  potential 
initiatives  to  assist  the  sector  and  to match  any  such  action  more  closely  to  enterprises' 
needs.  This  working  group  met  three times  in  1996  and  1997,  and  a Communication  is 
currently being prepared by the Commission. 

7.1.2  The chemical  industry 

In  April  1996,  the  Commission  published  a  Communication  on  an 
industrial 
competitiveness  policy  for  the  European  chemical  industry125,  which  was  drawn  up  in 
consultation with representatives  from  the European chemical industry. It defines  a set of 
actions to  enhance  its competitiveness.  The actions to be developed  by the  Commission, 
industry and/or Member States are grouped around the four priority areas of the industrial 

1 22 
1 23 
1 24 
1 25 

Council  Decision  96/413/EC of 25 June  1996, OJ L 167 of 6.7.1996, p. 55 

COM (94) 319 of  14.9.1994 

COM (96) 210 of  15.5.1996 

COM  (96)  187 of 30.4.1996 

73 

competitiveness  Communication  : actions to improve the regulatory  framework,  focusing 
on the consolidation,  updating  and/or  simplification  of the current  regulatory  framework 
for  chemical  substances  and preparations, as well as the application  of a sound  approach 
for  all  new  possible  regulatory  initiatives.  An  example  of  such  activities  that  is  of 
particular importance for SMEs is the simplification  of procedures  for the notification 
of new chemicals. 

7.2 

Quality and standardisation 

7.2.7  Quality  policy 

The  Euromanagement  project  (1993-1994)  showed  that,  particularly  when  faced  with 
market  pressures  relative  to  the  certification  of  quality  systems,  SMEs  have  serious 
difficulties  in  developing  and  applying  a  quality  component  adapted  to  their  needs 
(existence on the market, improving their organisation and competitiveness). 

The Commission  has therefore  endeavoured to integrate the SME dimension into its 
European  quality  policy.  The main  aim of this  policy  is to  shift  the  emphasis  of the 
debate on quality  (over and above the certification  of quality systems) towards making it 
an element of the  global  strategy  of enterprises  seeking to improve their  competitiveness 
on an ongoing basis. 

Two  specific  initiatives  in  the  context  of  European  quality  policy  are  now  receiving 
Commission  support: the European Quality Award for SMEs and a Eurochambres  project 
on quality. 

4. 

The European  Quality Award  for SMEs  (first  awarded  in  1997) was developed  by the 
EFQM  (European  Foundation  for  Quality  Management)  and  the  EOQ  (European 
Organisation  for Quality), based  on the European  Quality Award  which was launched in 
1992.  It  suggests  a  model  of  excellence  for  quality  management  as  well  as  a  self-
evaluation  methodology  based  on this  model, to make  it easier  for  SMEs  to  understand 
and  apply  the concepts  of total  quality.  The aim of the award  is to  encourage  and give 
recognition to the achievement of excellence by SMEs in quality management  as the best 
strategy to improve their competitiveness. 

The  Eurochambres  quality  project  aims  to  promote  quality  awareness  programmes 
among  SMEs  by  using  benchmarking  techniques,  with  the  support  of  the  existing 
network  of European  Chambers  of Commerce  and Industry.  In more  general  terms,  this 
initiative is part  of the effort  to establish  a European benchmarking  network  at enterprise 
level, and it aims to create favourable  conditions for SME access to this network. 

7.2.2 "Standardisation  and certification 

7.2.2.1  Standardisation  awareness campaign 

A  promotional  campaign  held  by  the network  of Euro  Info  Centres  in  1995 and 1996 
focused  exclusively  on the topic  of European  standardisation  policy.  1 400 events  were 
held and 3 600 articles appeared  in the press of all the Member  States, allowing  SMEs to 
familiarise  themselves with basic  safety  requirements  and with the harmonised  European 
standards  on  technical  matters.  Direct  contact  was  made  with  more  than  300 000 
SMEs. Explanations were given of the Directives covering such highly teclinical areas of 
expertise  as  machinery,  personal  protective  equipment,  electro-magnetic  compatibility 
and low voltage. The action taken involved  preliminary  enterprise  surveys earned out by 
the EICs, information  meetings on the technical  standards and regulations that  enterprises 
must  adhere  to  in  order  to  acquire  the "EC  mark",  the production  and  distribution  of 

74 

brochures, practical  factsheets  and software  to guide entrepreneurs  in procedural matters, 
and  the promotion  of  a consultant/interface  service provided  by  the  EICs  between  local 
entrepreneurs, 
in 
implementing Community directives. 

institutions  and  the  national  bodies 

the  Community 

involved 

7.2.2.2  NORMAPME 

for  Electrotechnical  Standardisation), 

To  enable  SMEs  to  participate  more  fully  in  the  European  standardisation  process,  and 
especially  in  the  work  of  the  CEN  (the  European  Committee  for  Standardisation)  and 
CENELEC  (the  European  Committee 
the 
Commission  gave  its  support  to  the  setting  up  of  NORMAPME,  the  Technical 
Standardisation  Bureau  for  Craft,  Small  and  Medium-Sized  Enterprises.  SME 
integration  in this  area  is of crucial  importance,  since  some  700 European  standards  are 
adopted  annually  by  the  European  standardisation  bodies.  As  a  rule,  the  standards  are 
applied  on  a  voluntary  basis,  and  are  relevant  to  all  Community  enterprises,  whether 
export-oriented  or not,  since national  standards  which  are no  longer  relevant  need  to  be 
withdrawn.  However,  for  the  most  part,  SMEs  are  not  consulted  in  the  process  of 
developing  standards, hence the need  for  a body  such as NORMAPME.  1995 and  1996 
were start-up years for NORMAPME's  activities; it was set up as a non-profit  association 
under  Belgian  law.  The  action  taken  has  concentrated  on  the  following  areas  in 
particular: a campaign in cooperation with the CEN and the industrial policy  departments 
to  increase  standardisation  awareness,  the production  of  documentation  and  a  database, 
and the establishment  of a network  of experts. In addition, NORMAPME  has become an 
associate member of the CEN. 

In  the  light  of  the  Eurobarometer  survey,  the  European  standardisation  bodies  and  the 
Commission agreed a Memorandum  of Understanding to increase awareness of European 
standardisation.  Several  measures  have  been  implemented  on  this  basis,  in  close 
cooperation with SMEs (NORMAPME) and the Euro Info Centres.  One of the measures, 
which  should  be  of  particular  benefit  to  SMEs,  is  the  establishment  of  a  site  on  the 
Internet  to  provide  information  on  and  encourage  participation  in  the  standardisation 
process (INES project). 

7.3 

Research  and technological  development 

Technology  is  a  major  factor  enabling  enterprises  of  all  types  and  sizes  to  gain 
competitive  advantage.  But  enterprises  can  find  it  hard  to  carry  out  Research  and 
Technological  Development  (RTD)  on  their  own.  Cooperation  among  different 
enterprises  and research  organisations  is one solution,  allowing  the pooling  of  resources 
and of complementary skills. 

EU  programmes  for  RTD  help  partners  from  different  countries  to  work  together, 
creating  links  between  different  National  business  and  research  communities.  The  4th 
Community  RTD  Framework  Programme  (FP  IV)126  covers  all  the  EU-funded  RTD 
activities  (ECU  13  billion  between  1994  and  1998)  and  has  three  main  objectives:  to 
enhance the competitiveness  of European  industry, improve the quality  of life  in  Europe 
and support other EU policies. 

1 26 

OJL  126 of  18.5.1994, p.l 

75 

7.3.1  SME participation  in the 4th EU RTD Framework  Programme^ 

Besides being  a major  contributor to Europe's rapidly  evolving  economy,  SMEs  support 
the  competitiveness  of  larger  industry  as  sub-contractors.  High-tech  SMEs  power 
sectors  such  as  multimedia  and  software  development, 
rapidly  evolving 
biotechnology  and  biomedical  or  environmental  technologies.  In  the  US,  they  are 
known to produce  twice  as many innovations per employee  and to generate  three-and-a-
half more new products per dollar invested in research than larger enterprises. 

As  a result  of  the  Internal  Market  many  EU  SMEs  face  the  increasing  globalisation  of 
their markets as well  as the arrival of foreign  competitors  on their National  markets. The 
technological  content  of  products  and  processes  is  also  increasing  and,  to  remain 
competitive, many  SMEs have to develop or have access to new technologies.  Through 
their  participation 
in  shared-cost  Community  RTD  programmes,  SMEs  can 
internationalise  their  network  of business  and  research  partners, while  at the  same 
time  improving  their  technological  base, through  a shared  RTD  effort  or  access  to 
RTD results. 

A  study  performed  in  1994  assessed  the  RTD  needs  and  capabilities  of  a 
representative sample of some two million European industrial SMEs. 

These were divided into three main groups : 

1.  Technology  developers  (1-3%).  These  SMEs  are  active  in  both  research  and 
development  and  have  well-established  RTD  capabilities.  Thoy participate  largely  in 
EU-funded  research  projects.  However,  the£ may  need  support  for  competing  on  an 
equal footing with larger enterprises when preparing proposals. 

2.  Leading  technology  users  (10%).  SMEs  which  are  more  technologically  advanced 
than the average company in their sector. They can identify  RTD needs, but often  have 
limited  or  no  RTD  capabilities  and,  therefore,  usually  subcontract  research  to  third 
technological 
parties.  They  play  a  crucial  role  in  disseminating  and  adapting 
innovation to medium and low-tech companies. 

3.  Technology  users  -  followers  (90%).  The  vast  majority  of  EU  SMEs  are  only 
interested  in the final products of RTD. They have  little or no need  to carry out  RTD 
activities  and  do  not  invest  hard  earned  cash  in  risky  and  long  term  return  RTD 
projects. 

7.3.1.1  The Technology Stimulation Measures for  SMEs 

One oTthe priorities of FP IV, common to all specific  RTD programmes, is to foster  and 
facilitate  the  participation  of  SMEs.  A  special  set  of  measures,  the  Technology 
Stimulation  Measures  for  SMEs  (TSME),  has  been  implemented  in  10  specific 

1 27 

For all programmes  implementing  specific  measures  for  SMEs  in FP4, SMEs are defined  as companies  which 
satisfy  the  following  3 criteria  : <  500  employees,  annual  turnover  <  ECU 38  million  and  no  more  than  1/3 
owned  by  an  organisation  larger  than  an  SME  (based  on  turnover  and  number  of  employees),  unless  it  is  a 
financial  investor  such  as  a  bank  or  venture  capitalist.  Only  the  specific  programme  on  Information 
Technologies,  given  the high-added  value of companies  active  in this area, accepts companies  with  a turnover 
of up to  ECU  50  million.  However,  the definition  used  is a provisional  one which  is applied  for  a transitional 
period  in the field  of research  and which  is, in principle, due to be replaced  by 31.12.1997 with  a reference  to 
the Commission  Recommendation  of 3 April  1997 concerning the SME definition  (JO L  107 of 30.04.1997, p. 
4).This  paragraph  does  not  include  SME  participation  in  the  EU  Innovation  Programme  (see  7.4.),  which 
corresponds  to Activity  III of FPIV 

76 

programmes. Other programmes have developed  additional project  types and tasks aimed 
at solving specific  SME related problems. 

CONTENT AND  IMPLEMENTATION 

The Technology  Stimulation  Measures  for  SMEs  (TSME), implemented  in the 4th  RTD 
Framework  Programme,  build  on  the  successful  experience  of  the  Brite-EuRam 
programme  and  extend  the  CRAFT  scheme  to  9  other  research  programmes  covering 
RTD  activities  on  Life  Sciences,  Energy,  Transport  and  the  Environment.  The  TSME 
were  designed  to  overcome  problems  encountered  by  SMEs  when  preparing  proposals: 
accessing  information  on  EU programmes,  finding  adequate  research  partners,  defining 
RTD  needs,  proving  the  feasibility  of  projects  before  committing  funds.  They  aim  at 
further  encouraging  and  facilitating  participation  by  SMEs  in  EU  RTD  Programmes  by 
targeting mainly Technology Developer SMEs and Leading Technology User SMEs. 

The TSME comprise two main measures: 

1. Exploratory  Awards.  SMEs  from  different  Member  States  identifying  a  common 
RTD  project  can,  on  the  basis  of  a  short  outline  proposal,  receive  funding  (75%  of 
total  costs, up  to  ECU 45 000) to prepare  a  full  proposal  and/or perform  a  feasibility 
study. This first phase is optional and should last less than  12 months. 

2.  Cooperative  Research  (CRAFT) projects  are  targeted  at  Leading  Technology  User 
SMEs  and  enable  them  to  engage  third  parties  (called  RTD  Performers)  to  carry  out 
research  on  their  behalf.  Results  will  be  fully  owned  by  SMËs.  The  Commission 
shares  research  costs  with  SMEs by  funding  up  to  ECU 500 000  or  50% of  the  total 
costs. CRAFT projects  should  last  from  1 to 2 years. All EU-funded  projects  must  be 
innovative  and pre-competitive,  thus requiring that  further  development  is  undertaken 
between 
the 
the  project  and 
product/services  resulting  from  the  research.  A  novelty  with  respect  to  the  original 
CRAFT  pilot  scheme  is  that  larger  companies  or  public  bodies  can  participate  in 
projects  by  funding  up  to  a  sixth  of  the  costs,  allowing  for  vertical  cooperation 
between SMEs and private or public end-users. 

the  commercialisation  of 

the  completion  of 

This  two-stage  application  procedure  is  not  only  beneficial  for  the  CRAFT-type 
SMEs, but  also  particularly  interesting  for  SMEs with  research  capacities,  typically 
Technology  Developers, which  can benefit  from  an Exploratory  Award  to  increase  their 
chance  of  success  when  submitting  Collaborative  research  projects,  the  traditional 
project  format  in  EU  RTD  programmes,  where  they  will  often  team  up  with  large 
enterprises, universities and research centres to compete with other similar projects. 

An additional  feature  of the TSME is the setting up of a small SME Coordination  Unit, 
whose  responsibility  is  to  coordinate  the  implementation  of  the  TSME  across  all  10 
research programmes, to manage the CRAFT network  of National  Focal  Points  and  to 
liaise  with  other  EU  SME  related  measures.  This  Unit  is  a  first-stop  shop  where  all 
proposals  are  received  and  processed.  A  single  information  package  on  the  10 
programmes  was  produced  and  standard  submission  forms  are  provided  for  all 
programmes, thus  simplifying  the  submission  procedure.  The TSME  are  implemented 
via  open  calls  for  proposals  which  were  launched  in December  1994  and  will  run  until 
April  1998.  Proposals  can  be  submitted  on  a  continuous  basis  and  are  evaluated  three 
times a year.  Streamlining  of internal management  procedures by the SME  Coordination 

77 

Unit  ensured  that  all proposers  under  the  TSME were  informed  of the  outcome  in the  3 
months following  their submission. 

INFORMATION AND ASSISTANCE ACTIONS 

The  Commission  Communication  on  the  Integrated  Programme  in  favour  of  SMEs 
highlighted  the  need  for  information  and  awareness  actions  and  for  the  coordination  of 
support  networks  to  facilitate  and  foster  SME participation  in  the  EU  RTD  Framework 
Programme. 

To participate  in  EU RTD programmes,  it is necessary  that  at least  two  foreign  partners 
team  up  to  submit  a  proposal.  To  help  SMEs  in  this  critical  step  and  give  them 
information,  a  CRAFT  Network  of  local  Focal  Points  has  been  established.  All 
Member  and  Associated  States  were  asked  to  propose  organisations  with  adequate 
resources  and  skills  to  form  a network  ensuring  an  adequate  thematic  and  geographical 
coverage  of  each  State. These  organisations  inform  and  assist  SMEs  in partner  searches 
or  in  preparing  proposals.  SMEs  interested  in  submitting  a  project  can  also  look  for 
partners  using  the  "Expressions  of  Interest"  available  on the  ARCADE  telematic  server 
or consult the CORDIS "RTD Partners" database. 

In addition, Euro Info  Centres (EICs) in their capacity as "first  stop shops" have provided 
information  on  TSME,  in  particular  some  were  actively  encouraged  to  work  together 
with  members  of  the  CRAFT  network.  A joint  training  course  for  EICs,  CRAFT  and 
Innovation  Relay  Centres  (IRCs)  was  organised  under  Enterprise  Policy  in  December 
1997. Among  other issues, they examined  the best ways of making  information  days  for 
R&D programmes more attractive to SMEs. 

Experience  under  FP  III  has  shown  that  systematic  Multinational  Information  and 
Assistance  Actions  targeted  at  SMEs  in  one  or  several  research  areas/industrial  sectors 
facilitate  the  establishment  of  transnational  partnerships  and  are  an  effective  way  to 
promote participation by SMEs in TSME. Such actions include four basic steps  (inspired 
by  the  methodology  developed  under  the  Euromanagement  scheme):  dissemination  of 
information  on TSME, auditing of SMEs on EU funded  projects, brokerage of the results 
of the "Expressions  of Interest" to form  transnational consortia and assistance  for writing 
project  proposals. 

To launch the Technology  Stimulation Measures for SMEs in  1995, three  Multinational 
Information  and  Assistance  Actions  (totalling  ECU 5  million  in  EU  funding)  were 
undertaken  by  the  different  Commission  services  and  coordinated  by  the  services  in 
charge of research. They involved respectively  some 50 private consultants specialised in 
auditing  SME  technology  needs  (Euromanagement  II), the  20  members  of  the  CRAFT 
(CECIMO, 
network  of  Focal  Points  and  17  European 
ORGALIME,  FEFAC,  etc.).  As  a  result,  50.000  SMEs  were  informed  and  2 000 
audited,  which  had  never  until  then  participated  in  EU  RTD  programmes. 
Approximately 40% of all proposals submitted in the first year of FP IV under the TSME 
resulted  from  these  actions.  Additional  Information  and  Assistance  Actions  (ECU 4.5 
million  in  EU  funding)  were  launched  in  1996  by  the  programmes  implementing  the 
Technology  Stimulation  Measures  for  SMEs. These  actions  involve  mainly  the  CRAFT 
network  of National  Focal  Points, but  also Innovation  Relay  Centres, Euro  Info  Centres 
and other intermediaries. 

Industrial  Federations 

Information  and  awareness  actions  also  include  events.  The  "First  SME  Technology 
Days"  held  in  Brussels  in  October  1996,  gathered  850  participants  from  21  European 
countries  and  Israel,  mainly  SMEs  (35%)  and  intermediaries  (30%).  Participants  in  the 

78 

SME  Technology  Days  were  given  the  opportunity  to  meet  with  Commission  officials 
from the specific  RTD programmes and explore opportunities available in their field. 

As  a result  of all  these  actions, the number  of proposals  submitted  under  the  TSME 
rose sharply  by the end of  1996 with  some 75% of participating  SMEs  involved  for 
the first time. 

THE  MID-TERM  RESULTS 

The  analysis  of  SME  participation  in  the  previous  EU  RTD  Framework  Programmes 
(FP III)  shows  that  SMEs join  industrial  programmes  like Brite-EuRam  (Industrial  and 
Materials  technologies)  or  ESPRIT  (Information  technologies),  rather  than  more  basic 
research-oriented  ones. The table below shows the number of contracts signed with SMEs in 
FP III and FP IV (up to 31.12.1996). 

SME participation by project type in FP IV from 1994 until 1996 and FP III 
(Number of SMEs having signed a contract with the Commission between  1.1.1995 and 31.12.1996) 

Programme 

Industrial  technologies 
Life  sciences 
Environment 
Non-nuclear  energy* 
Transport 
Telematics 
ACTS 
ESPRIT 
TOTAL  FP IV 
(1994  until  1996) 

TOTAL  FP  III 
(1991-1994) 

SME  participation** 

Exploratory 
Awards 
704 
169 
33 
2 
70 
N/A 

N/A 

105 
1083 

1572 

Cooperative 
Research 
Projects 
498 
26 
/ 

/ 
N/A 

N/A 

N/A 

6 
530 

Collaborative 
Research 
Projects 
836 
261 
114 
304 
547 
459 
437 
868 
3826 

1203 

3501 

TOTAL 

2038 
456 
147 
306 
617 
459 
437 
979 
5439 

6276 

* RTD component only (JOULE).  ** Enterprises with less than 250 employees. N/A = Not  applicable 

6000  SMEs  participated  to  the  3rd  Framework  Programme  (FP  III),  covering  the 
1991  to  1994 period.  Over  50% were  Technology  Developers  involved  in  collaborative 
research  projects,  but  the pilot  CRAFT  (Cooperative  Research  Action  For  Technology) 
action  of the Brite-EuRam  programme  was  specifically  directed  to  Leading  Technology 
Users.  CRAFT  projects  totalled  some  ECU 70  million  of  EU  funding  and  allowed 
some  1200  SMEs  to  take  part  in  this  programme,  thus  bringing  the  share  of  SMEs 
participation  from 25% to 55%. 

In  FP  IV,  a  first  major  result  is  the  increase  in  SME  participation  in  collaborative 
research projects with some 3 800 SMEs participating in research projects launched in 
the  first  two  years  (1995-96).  This  equals  the  participation  in  all  four  years  of  the 
previous Framework  Programme  and is mainly the result of better and targeted  supply of 
information  and  facilitated  access  under  TSME. The  figure  below  shows  that  SMEs  are 
responsible  for  the  increase  between  FP  III  and  FP  IV  in  the  total  share  of  enterprises 
(from  35% to 40%) 

79 

Participation  in FP III and IV by type of organisation 

Overall  participations  by  partner  type  in  FP  III 

Overall  p a r t i c i p a t i o ns  by  partner  type  in  FP  IV 
from  1994  until  1996 

Research 
organisations 
30% 

University 
higher 
education 
32% 

Industry 35% 
-of  which 
51%  SMES 

Industry 40% 
-of  which 
58%  S M Es 

University 
higher 
education 
27% 

SMEs are responsible for the increase between FP III and FP IV in the total share of 
enterprises (from 35 to 40 %). 
Three  programmes  (Industrial  and  Material  Technologies,  ESPRIT  -  Information 
Technologies  -  and  Transport)  account  for  66%  of  all  SME  funding  and  67%  of  all 
SME  participation.  However,  SME  participation  in  FP  IV  is  more  evenly  spread 
across all programmes  than in FP III. It is also interesting to note that  SMEs  represent 
a majority  (53%) of all industrial project coordinators. 

Share of SME funding between programmes in FP III and IV 

EC  funding  TO  S M Es  by  programme  in  FP 

Telematics  Environment 

EC  funding  to  SMEs  by  p r o g r a m me  In  FP  IV 
f r om  1994  until  1996 

Life sciences 
5% 

Transport 
90/,° 

Environment 
2% 

In FP IV, EC funding for SMEs is more evenly spread across the programmes than it was 
in FP III 

The TSME are starting to deliver, even though it took some time to establish the CRAFT 
Network  and  spread  information  on  the  new  SME  support  measures.  The  668 
Exploratory Awards supported to date by the TSME are allowing  1 500 SMEs to prepare 
a  proposal  together  with  a  foreign  partner,  while  some  1 000  SMEs,  mostly  Leading 
Technology  Users,  are now  involved  in  143 CRAFT  type research projects.  Once  again, 
this  matches  the  numbers  observed  for  all  4  years  of  the  previous  Framework 
Programme.  The  programme  on  Industrial  and  Materials  Technologies  is  the  one 
that  attracted  most  proposals,  but  other  research  programmes  (Agriculture  and 
Fisheries,  Biomedicine  and  Health,  Transport)  are  increasingly  attracting  SME 
proposers. 

80 

The Technology Stimulation Measures for SMEs: 
Project submission and selection in FP IV from 1994 to 1996 

Type of  project 

Exploratory  Awards 

Cooperative  Research 
(CRAFT) 

Programme 

Submitted 
Projects 

Contracts(l) 

BRITE-EURAM  III 
SMT 
BIOMED II 
BIOTECHNOLOGIES 
FAIR 
ENVIRONMENT 
MAST III 
JOULE 
TRANSPORT 
ESPRIT 
TOTAL  FP  IV 
(1994-1996) 
TOTAL  FP  III 
(1991-1994) 

873 
81 
77 
42 
247 
55 
37 
38 
59 
95 
1604 

885 

422 
30 
33 
17 
87 
17 
13 
17 
32 
45 
713 

391 

Contracts(l) 

Submitted 
projects 
.  263 

9 
-

25 
9 
-
1 

Not applicable 

Not applicable 

6 
313 

331 

119 
4 
-

14 
5 
-
1 

1 
144 

172 

The success  rate for SMEs under the Technology  Stimulation  Measures is  relatively 
high despite the fact that 75 % of these are newcomers. 

The analysis of SME participation in TSME projects  shows that: 

•  approximately  5 200  SMEs  have  participated  in  the  calls  for  proposals  under  the 
TSME and 2 500 of these were funded. When submitting an interesting proposal (on 
the  basis  of  the  Evaluation  Report)  non-selected  SMEs  are  encouraged  to  resubmit 
improved proposals; 

•  onaverage, participation  in an ECU 700 000 CRAFT project  (involving  7 partners  on 

average) only represents ECU 50 000 in own investment per SME; 

•  small  enterprises  (less  than  50  employees)  represent  a  majority  of  participants 
(70%  for  selected  Exploratory  Awards  and  46%  for  CRAFT  projects,  totalling  60% 
for  all  TSME).  Enterprises  from  more  traditional  sectors  such  as  food  production, 
construction,  mining,  textiles  or  wood  represent  40%  of  participants  and  make  up 
most of the 6% belonging to the 250-500 employees category. 

•  approximately  18%  of  SMEs  come  from  the  4  "Cohesion  countries"  (Spain, 
Portugal,  Greece  and  Ireland)  which  is  more  than  their  average  participation  in  EU 
projects.  Their  participation  shows  an industrial  structure based  on  smaller  units  and 
less  advanced  sectors.  However,  three  of  the  larger  EU  industrialised  countries 
(Germany, France and Great Britain) represent some 50% of all SME participants. 

81 

•  Newcomer  SMEs  represent  some  75% of participants  in Exploratory  Awards or 
CRAFT  projects.  The TSME,  therefore,  allowed  some  1 900 SMEs  to take  part 
for the first time in EU RTD programmes. 

The Technology Stimulation Measures for SMEs : 
distribution of project participation  by size in FP IV from 1994 until 1996 

Type of project 

Exploratory  Awards 

Cooperative  Research 

Size of SMEs 

Submitted 

Contracts (1) 

Submitted 

Contracts (1) 

(excluding RTD  performers) 
(CRAFT) 

(in number of  employees) 

_ 

_ 

_ 

_ 

50 to 100 

100 to 250 

250 to 500 

>500 

TOTAL 

ÏÏ4 

377 

343 

2 

3Î89 

( 1 ) Including contracts under negotiation  up to February  1997 

206 

Î9Ï 

52 

2 

327 

356 

Î44 

Ï38 

1492 

2022 

ÎÔÔ3 

_ 

Ï7Ï 

206 

87 

75 

The  first  projects  selected  and funded  by the original  pilot  CRAFT  scheme  in  1993 are 
now  coming  to  an  end. Successful  projects  can be  found  in  many  industrial  sectors, 
ranging from the very traditional to more advanced ones. A publication available from all 
CRAFT 
SME  Web-page 
the 
(http://www.cordis.lu/sme/home.html) lists ten of these projects. 

National 

Points 

Focal 

and 

on 

Most  participants  (70%) in the first  CRAFT  projects  launched  in  1993 mentioned the 
the 
simultaneous 
internationalisation  of their contacts as their main motivation. Other benefits  arising  from 
participating in CRAFT projects are: 

technological  base, 

improvement  of 

together  with 

their 

improved competitiveness  linked to increased technology in their processes/products; 
• 
•  better  knowledge  of their  competitors  and/or  suppliers/end-users  and development of 

RTD networks; 

•  access  to processes  and products  that  satisfy  ISO and European  (CEN/CENELEC) 

norms; 

•  obtaining  the label  of a company  performing  RTD at the level  of excellence  of EU 

projects. 

82 

The TSME  and,  in particular,  the CRAFT scheme play a leading role in EU RTD. More 
than  ever,  European  SMEs  will  find  easier  access  to  support  for  RTD  and  innovation-
linked activities. 

7.3.1.2  Other measures in FP4 relevant to SMEs 

Besides 
programmes, many programmes have a special interest for SMEs. 

the  TSME,  which  are  common 

to  and  coordinated  between  different 

Demonstration  projects in the Life Sciences 

The  three  specific  programmes  in  the  Life  Science  area  (Agriculture  and  Fisheries  -
FAIR, Biotechnology  - BIOTECH,  and Biomedicine and Health  - BIOMED)  all  support 
Demonstration Projects  aimed at the exploitation and dissemination  of new technologies. 
Up to 6% of the programmes' budgets is earmarked for projects which prove the viability 
of  a new technology,  overcome barriers to its commercialisation  and promote  awareness 
of  its  economic,  social  or  medical  benefits.  Based  on  the  principle  that  "seeing  is 
believing",  Demonstration  Projects  mark  a  significant  break  with  the  culture  of 
traditional RTD projects  since they aim at using available knowledge to show how a new 
technology  or  device  can  be  applied  concretely.  EU  funding  is  provided  on  the  same 
basis  as  shared-cost  research  projects,  for  a  period  of  two  to  four  years.  While  the 
demonstration  projects  are  not  directly  targeted  at  SMEs,  these  represent  on 
average 25% of all selected proposers. 

SMEs in the first call for proposals for Demonstration  Projects in Life  Sciences 

PROGRAMME 
BIOMED 
FAIR 
BIOTECH 
Selected projects 

Total number 
of proposals 
46 
25 
13 
20 

Total number 
of proposers 
332 
130 
79 
100 

% of SME proposers 

16% 
39% 
25% 
25% 

RTD programme for transport 

In  December  1994  the  Council  adopted  a  specific  research,  technological  development 
and  demonstration  programme  in  the  field  of  transport  for  the period  1994  to  1998  128 
undeflhe  fourth  RTD framework programme. With  a view  to promoting  the  sustainable 
mobility  of  persons  and  goods,  the  programme  aims  to  contribute  towards  the 
development,  integration  and management  of a transport  system which  is more  efficient, 
safer,  and  compatible  with  the  environment  and  quality  of  life.  Its  budget  frame  is 
ECU 256  million.  Between  December  1994  and  March  1997,  three  Calls  for  Proposals 
were  launched.  In  the  First  and  Second  Calls  for  Proposals  SMEs  represented  35% 
of all proposers. The total number of contractors is  1  294 of which 392 (30%) are SMEs. 

1 28 

OJL  361 of 31.12.1994, p. 56 

83 

Demonstration  component of the Non-Nuclear Energy Programme - THERMIE 

One  of  the  pillars  of  European  energy  policy  is  the  THERMIE  programme  (ECU 566 
million  for  1995-1998)  which  is  a part  of the Fourth  EU RTD  Framework  Programme. 
THERMIE  provides  financial  support  for  projects  implementing  innovative  energy 
technologies  (Type  A)  and  for  complementary  activities  (Type  B).  THERMIE  also 
includes Technology Stimulation Measures for SMEs. 

With  regard  to  type-A-actions,  precise  figures  on  the  participation  of  SMEs  are  not 
available, but  a qualitative assessment  gives  an overall  participation  of  about  65% of 
SMEs  as  coordinators  of  proposed  projects,  but  only  about  20%  of  selected 
projects. 
A  major  effort  is  still  necessary  to  help  SMEs  to  present  high  quality  proposals 
which  is the main  goal  of activities  undertaken under Technology  Stimulation  Measures 
for SMEs. 

The  table  shows  the  number  of  actions  and  budget  concerning  the  field  of  Technology 
Stimulation of SMEs (Type B actions) for the years  1995 and 1996. 

THERMIE Actions for Technology  Stimulation of SMEs fType  B) 

Year 

1995 
1996 

I 

Number of selected 
Actions 
40 
22 

I 

THERMIE  Support 
(MECU) 
4X10 
2.05 

In  order  to  raise  awareness  of  those  instruments  specifically  targeted  at  SMEs,  in  the 
open call  for proposals  for  1997 a leaflet  has been prepared  to be circulated  as widely  as 
possible  through  the  following  networks  :  Organisations  for  the  Promotion  of  Energy 
Technologies  (OPETs),  Craft  Focal  Points, Euro  Info  Centres.  The  objective  is  to  draw 
the  attention  of  SMEs  to  the  possibility  of  receiving  EU  support  to  perform  feasibility 
studies as a preparatory phase for the presentation  of a Type A proposal. A pre-screening 
service  is  offered  by  the  Commission  services  to  help  the  SMEs  to  better  target  their 
proposal. 

The  FP  IV  programmes  for  innovation  and  information  technology  are  discussed  in  the 
following  sections. 

Best Practices and First Users actions in ESPRIT 
See point  7.5.1. on the Information  Technology Programme. 

7.3.1.3 Fifth Framework Programme (1998-2002) 

On 30 April  1997, the Commission  adopted  a "proposal concerning the Fifth  Framework 
Programme  of  the  European  Community  for  research,  technological  development  and 
demonstration  activities  (1998-2002)129"  which  advocates  a  new,  approach 
to 
Community  research  based  on  the  simplifîcation  of  its  decision-making  and  delivery 
mechanisms  as well  as on the greater  focusing  of measures  and themes.  The  proposal 

1 29 

COM(97)  142 final of 30.04.1997 

84 

includes three thematic and three horizontal programmes. Given that SMEs are important 
vectors  and actors in innovation,  the key factor  in industrial  competitiveness,  a  specific 
horizontal programme "Innovating and involving SMEs", based on the experience of 
the Fourth Framework Programme, has been introduced. It aims to facilitate  SME access 
to  advanced  technologies  and  to  the  possibilities  offered  by  the  Union's  research 
programmes,  and in particular  to make it easier to exploit the results  of research  and to 
stimulate the establishment  of innovative companies. SMEs will not only be able to take 
advantage  of  the  specific  programme  "Innovating  and  involving  SMEs"  (in  particular 
through  a one-stop-shop  for SMEs  for all research  programmes  within  the  European 
Commission,  for  the  submission  of  SME-specific  projects),  but  will  also  be  able  to 
benefit  from  measures  reserved  for  them  within  other  programmes  (exploratory  awards 
and cooperative research (CRAFT) projects). 

7.4 

Innovation 

THE INNOVATION  PROGRAMME  AND TECHNOLOGY  TRANSFER 

The  Innovation  Programme130  (ECU 312 million  between  1995 and  1998) relates  to the 
third  activity  under  the  Fourth  Framework  Programme  for  RTD  and  focuses  on  the 
dissemination and exploitation of the results of research activity. It aims to help European 
industry  to  increase  its  competitiveness  by  making  the  best  possible  use  of  available 
technology and techniques. 

The  programme  adopts  a new global  approach  to the promotion  of innovation,  and has 
three interdependent  objectives: to promote an environment  conducive to innovation and 
the take-up of new  technologies by enterprises; to stimulate the development  of an open 
European  area  for  the  dissemination  of  technology  and  know-how;  and  to  provide 
suitable technology for this area. 

The  activities  promoted  under  the  programme  relevant  to  SMEs  are  set  out  in  the 
following  lines of action: 

a) European Innovation Monitoring System (EIMS)131 

The  European  Innovation  Monitoring  System  aims  to  strengthen  the knowledge  base 
available  on enterprise  performance  (particularly  SME performance),  public  policy 
and  the  infrastructure  of  innovation  support  services.  The  most  important  projects 
include: 

-  the Community  Innovation  Survey,  a project  which  was implemented  jointly  with 
Eurostat,  involved  a  survey  of 44 000 enterprises  in thirteen  countries,  for  the  most 
part  SMEs, based  on a harmonised  questionnaire  which  enabled  Eurostat  to  set up a 
unique  database.  The  results  were  presented  at  an  international  conference  in 
Luxembourg in May  1996; 

-  a survey on the significance  of Europe's new high technology enterprises  and on the 

main characteristics of rapid-growth enterprises; 

1 30 

1 31 

Specific  programme  for the dissemination  and optimisation  of the results of activities in the field of research 
and  technological  development,  including  demonstration  (1994 to  1998),  Council  Decision  94/917/EC  of 
15.12.1994, OJL  361 of 31.12.1994, p. 101 

Sometimes referred  to as the European Innovation Observatory 

85 

-  a  study to identify  methodologies  for  categorising  SMEs  according  to  criteria  based 

on their capacity for innovation. 

b) Promotion of innovation management techniques 

The  aim  of  this  line  of  action  is  to  support  the  efforts  of  national  and  regional 
organisations  in  both  the  public  and  private  sectors  to  increase  SME  usage  of  modern 
management  methods.  The  thirty  projects  currently  under  way  provide  for  action  to 
increase  awareness,  at  national  and  regional  level,  of  the  effective  use  of  innovation 
management  techniques  for  SMEs.  They  involve  an  exchange  of  experience  and  the 
dissemination  of  good  practice  among  SMEs,  as well  as  innovation  advice  missions  to 
more than  1 000 SMEs in Europe. At the end of these missions, the enterprises  concerned 
will develop an action plan to integrate suitable management  techniques  into their  global 
innovation  strategy. 

c) The European Design Prize 

This prize aims to demonstrate the crucial role played by design in the innovation process 
for SMEs, as well as its profitability  and the important contribution it makes to  industrial 
success.  Some  400  SMEs  applied  for  the  1997 prize.  The  prizes  were  presented  on  31 
January  1997, at an international  conference  which brought together  all of the players  in 
this domain, in addition to the shortlisted SMEs. 

d) European innovation networks and services 

This  experimental  line  of  action,  launched  at  the  end  of  1995,  has  the  following 
objectives: 

- 

- 

- 

to  provide  more  effective  (integrated)  services  for  SMEs  by  encouraging  active 
cooperation  between  professions  which  hitherto  have  rarely  worked  together  (for 
example,  between  technologists  and  bankers  or  between  instigators  of  social 
innovation and technologists); 
to  make  it  easier  to  harmonise  public  support  measures  (for  example,  cooperation 
between  national  programmes  aimed  at  stimulating 
the  placement  of  young 
researchers  in  SMEs to  facilitate  technology transfer,  with  a particular  view to  testing 
the feasibility  of transnational placements); 
to  interconnect  national  networks  of  SME service providers  (for  example  university-
industry 
thereby  reinforcing  Europe's  enterprise  support 
infrastructure. 

interface  services), 

Twentythree  networks  involving  approximately  150  organisations  have  thus  far  been 
selected, of which approximately ten represent SMEs. 

e) Validation  and technology transfer projects 

"Validation  and technology  transfer  projects"  are primarily but  not  exclusively  aimed  at 
SMEs,  although  not  exclusively  so.  Its  objective  is  to  provide  Community  support  for 
projects  that  seek  to  validate  research  results  or  transfer  technology  to  new  application 
areas, depending on market needs and social requirements. 

86 

Two  calls  for proposals  were published,  with  a budget  of ECU 70 million,  on  15 March 
1995  and  15  September  1996.  Two  hundred  proposals  were  accepted  for  the  definition 
phase,  and  more  than  two-thirds  of these will  proceed  to  the  demonstration  phase,  with 
Community support of between ECU 500 000 and ECU  1.5 million.  SME  participation 
in  both  calls  was  very  high  and  the  following  three  points,  which  apply  both  to 
participation and to the proposals selected, are worthy of emphasis: 

-  920 organisations are participating in the projects, 47% of these are SMEs; 
-  approximately  60 % of the projects are coordinated by SMEs; and 
- 

there is at least one SME in 90 % of the project consortia. 

The  breakdown  of  the  projects  into  two  phases  (definition/feasibility  followed  by 
implementation  after  a  successful  definition  phase)  simplified  the  initial  proposal  and 
reduced the effort  required of the proposer. In addition to the support services provided  to 
the consortia,  this proved  to be particularly  useful  for  projects  involving  a large  number 
of SMEs. 

f) Innovation Relay Centre Network 

Innovation Relay Centres (52 centres) advise organisations - especially small businesses -
on technology  and  innovation.  They  also help  SMEs  to  identify  suitable technologies  to 
match  their  needs  and  give  assistance  on  exploitation  as  well  as  advice  on  EU  RTD 
programmes.  Each  Relay  Centre  is  independent  and  backed  by  EU  funding  (ECU 23 
million  out  of  an  ECU 43.5  million  total  budget)  under  the Innovation  Programme.  The 
primary  goal  of  all Innovation  Relay  Centres  is to be a regional  "pole" that  will  provide 
access  to  the  required  expertise  to  support  the  exploitation,  technology  transfer  and 
innovation  activities of SMEs in that region. This gives SMEs a direct link to  partners 
and potential buyers of the technologies they have developed. 

The staff of Innovation Relay Centres are experienced in business and technology  and are 
selected according to their in-depth knowledge of the technology needs of local industry -
especially  SMEs,  their  capacity  to  advise  organisations  on  technology 
transfer, 
innovation  and  related  business  questions, their  ability to develop  services  that  meet  the 
specific  needs of the regional  industrial  fabric  and to help  local organisations  to  compete 
more  effectively  in  export  markets,  and  finally  their  in-depth  knowledge  of  EU  RTD 
programmes. 

Relay  Centres  can  distribute  details  of  SMEs'  innovative  products,  processes  and 
technologies  through  the  network  and  have  a  "partner  search"  service.  Other  services 
include  training  and  consulting  services  tailored  to  the  specific  region,  networking  and 
exchange  of  ideas  (for  example:  seminars  on  Total  Quality  Management,  Value 
Management, Patent and Intellectual Property Rights, and environmental responsibility). 

In  1995 and  1996, the Innovation  Relay  Centre Network  produced  the following  results: 
assistance for technology transfer  agreements (381 negotiated,  108 signed); assistance  for 
organisations  in  preparing  proposals  for  EU  RTD  programmes  (1 406  submitted,  309 
approved). The  number  of  contacts  with  clients,  mainly  SMEs, was  39 337,  and  the 
number of assistance sessions for clients, mainly SMEs, was 7 052. 

87 

g) OPET (Organisation  for the Promotion of Energy Technologies)  Network 

OPET  is  a  specialised  network  (40  OPET,  ECU 4  million  for  2  years)  under  the 
Innovation  programme  for  promotion  of  new  and  innovative  energy  technologies, 
replacing  the  former  OPET-THERMÏE  Network.  Its  objective  is  to  foster  market 
penetration  by  successful  new  and  innovative  energy  technologies,  in  particular  those 
related  to  technologies  demonstrated  through  the  non-nuclear  energy  programme 
(JOULE  -  THERMIE).  SMEs  are  one  of  OPET's  main  client  target  groups.  OPET 
concentrates  on the rational use of energy in buildings, transport  and industry,  renewable 
energy sources and fossil  fuels. 

FIRST ACTION PLAN  FOR INNOVATION IN EUROPE 

The  First  Action  Plan  for  Innovation  in  Europe  was  adopted  by  the  Commission  on 
20 November  1996  and  follows  on  from  the wide-ranging  public  debate  that  took  place 
after  the publication  of the  Green Paper on Innovation  at the end  of  1995, during  which 
the Commission's  diagnosis of the innovation deficit  in Europe was amply confirmed.  It 
is  also  in response  to a request  from  the Florence  European  Council  (June  1996), which 
invited the Commission to draw up an action plan on measures to be taken in the area of 
innovation. 

The  Action  Plan  sets  out  measures,  mainly  at  Community  level,  based  on  three  main 
objectives: 

• 

fostering  a genuine innovation culture, 

•  establishing  a favourable  legal, regulatory and financial  environment  for  innovation, 
• 

improving the linkage between research and innovation. 

The  Action  Plan  was  welcomed  both  by  the  European  institutions  and  by  the  socio 
economic  players. 
In  the  first  phase  of  its  implementation,  the  Commission  tackled 
problems  relating,  inter  alia,  to  intellectual  property  protection  (e.g.  publication  of  the 
Green Paper on Patents), the financing  of innovation, problems relating to education  and 
training  (the  Erasmus  apprenticeship  scheme,  the  initiative  on  Learning  in  the 
information  society),  and  problems  with  regard  to  enterprise  innovation  management 
(benchmarking  systems).  A first report on the implementation  of the Action Plan will be 
drawn up at the end of 1997. 

7.5  —The information  society 

7.5.1  Information  Technology (IT) Programme 

The  Information  Technology  Programme  (replacing  the  former  ESPRIT  programme) 
(ECU 2 065  million  for  1994-1998),  covers  a  large  variety  of  activities  from  basic  to 
technologies,  technologies  for 
applied  research  in  the  following  areas:  software 
components  and  subsystems,  electronic  commerce, 
research,  open 
microprocessor  systems,  high  performance  computing  and  networking,  teclmologies  for 
business  processes,  multimedia  systems  and  integration  in  manufacturing.  It  plays  an 
essential  role  vis-à-vis  SMEs  wishing  to  carry  out  RTD  in  information  technologies  or 
have access to results at the cutting edge of technology. 

term 

long 

88 

During  the  first  two  years  (1995  and  1996),  836 projects  were  launched  with  ECU 900 
million.  Approximately  1000  separate  SMEs  have  participated  in  a  shared-cost 
research  project  and carried out about 30% of the relevant work of the programme.  Six 
hundred more SMEs were involved  in the various Accompanying  Measures  launched  by 
the  IT  Programme.  This  places  the  IT  programme  amongst  the  top  rank  of  the 
Community R&D programmes and confirms  that the efforts  made to increase the rate 
of SME participation have been  successful. 

Further  to  the  specific  SME  stimulation  measures  (TSME) 
in  FP4 
(exploratory  awards  and  CRAFT),  additional  measures  both  on  the  content  and 
procedures  (introduction  of  specific  subjects  and  two  stage  application  procedure) 
have been put in place within the IT programme to meet the specific  needs of SMEs. 
These provisions have proved to greatly facilitate SME participation  in the activities 
of the IT programme. 

introduced 

As  regards  content,  they  include,  in  particular,  the  European  Systems  and  Software 
Initiative (ESSI), i.e. promotion/dissemination of best practice in software  development; 
microelectronic components and IT-based manufacturing  methods; experience with  First 
Users actions in micro-electronics  in products (FUSE); the creation of information  and 
assistance  centres  for  technology  transfer  (in particular,  in the field of high  performance 
computing,  electronic  commerce  and  process  automation).  Furthermore,  cooperation 
between  users  and  suppliers  of  specific  technologies  in  the  field  of  RTD  has  been 
strongly  encouraged  and  has  led  to  considerable  cooperation  between  large  enterprises 
and SMEs. 

In particular,  the  First  User  action  (FUSE)  is targeted  at  all  industrial  enterprises  which 
can benefit from new applications of existing microelectronic technologies. SMEs are the 
main  beneficiary  of  this  initiative.  Since  knowledge  transfer  is  an  essential  aspect  of 
FUSE,  a network  of  26  Technology  Transfer  Nodes  (TTNs)  was  set  up  to  promote  the 
advantages  of  microelectronics  for  businesses  and  to  provide  them  with  information, 
support and assistance. 

EUROPRACTICE,  closely related to FUSE, was launched in October  1995, to offer  low-
cost basic services to assist users in the take-up of microelectronics. The services  offered 
include  consultancy,  training,  software  tools,  design  support,  prototyping  and  low-
volume production. 

At  procedural  level,  a  two-stage  application  procedure  was  introduced  for  many 
sectors of the programme which is particularly beneficial  for SMEs: in the first stage, 
the  evaluation  of  the  proposal  is  based  on  its  expected  impact  on  businesses.  This  first 
evaluation  takes  little  time  and  only  successful  enterprises  are  invited  to  submit,  within 
two months, a complete proposal which provides a detailed outline of the RTD  approach 
and a work programme. SMEs benefit from this two-stage approach, since the substantial 
effort  to  present  a  complete  proposal  has  only  to  be  undertaken  after  passing  the  first 
"filter".  Furthermore,  there  are  frequent  calls  for  tender  (2 to 4 per year), which  are 
published  at fixed dates. This provides enterprises with the possibility  of planning  their 
participation and to have several months for preparation. 

The  Euro  Info  Centre  specialised  groups  on  Information  Society  and  R&D  have  been 
active in increasing awareness of these programmes amongst  SMEs and in helping  SMEs 
to gain access to them. 

89 

Two  Information  Society  Awareness  Weeks  were  organised  in  1996, in  collaboration 
with  ISPO (Information  Society Project  Office),  to inform  SMEs  of the opportunities  of 
the  Information  Society  and  demonstrate  applications  and  services  likely  to  be  of 
relevance  for  their  day  to  day  activities.  During  the  second  of  these  European  Weeks, 
EICCs  and other organisations  organised  events in 6 non-European  countries  (CEECs  & 
Tunisia). 

EIC members of the specialised  group on R&D continued  to organise  events to  promote 
R&D  programmes.  They  were  also  actively  involved  in  promoting  the  ITEA  awards. 
There' was  considerable  emphasis  on promoting  newer  schemes  such  as FUSE  and  Best 
Practice  in  ESPRIT.  With  regard  to  the  latter,  Swedish  members  of  the  group  gave 
greater  coverage  to  this  initiative  in  Sweden  where  the  scheme  was  considered  to  be 
undersubscribed.  In  response  to  a joint  request  from  the  Commission,  members  of  the 
network gave feedback  on how to improve the impact of information  days for SMEs. 

7.5.2  The Advanced  Communication Technologies and Services  Programme 

Three  specific  measures  are  taken  in  favour  of  SMEs  in  the  EU  RTD  programme  on 
Advanced  Communications  Technologies  and  Services  (ACTS): measures  to  encourage 
and  facilitate  SME  participation  in  the  RTD  programme;  measures  to  disseminate 
information  to SMEs and to support the take-up of new services by  SMEs; and  measures 
to  facilitate  consensus  development  on  access  to  interoperable  electronic  commerce 
systems by SMEs. 

Over 25% of participants in this RTD programme are SMEs. Specific measures were 
taken  to  encourage  SME  participation  in  the  second  Call  for  proposals  in  1995,  and  * 
further  encouragement will be given for the third Call for proposals in 1997. 

A  specific  project  (SMARTS)  is  now  responsible  for  broadening  the  participation  of 
SMEs  in  information  dissemination  and  technology  transfer  activities.  This  project  will 
ensure  that  at  least  5000  European  SMEs  have  access  to  information  and  results,  by 
late 1998. 

Development  of  electronic  commerce  technologies,  systems  and  services  is  a  major 
feature  of the ACTS research. A "consensus development  chain" brings together  over 20 
projects  on  "small  business  networking  and  commercial  transactions".  This  RTD  chain 
provides  the technology  input  to the Memorandum  of Understanding  signed  by  over  70 
major  companies  on  "Open  Access  to  Electronic  Commerce  for  Europe's  SMEs". 
This  "Memorandum  of  Understanding  provides  an  open  framework  for  industrial 
agreements  on  interoperability  of  transaction,  directory  and  authentication  systems,  and 
on rights and responsibilities in electronic commerce. 

7.5.3  Multimedia  development projects 

Two calls for proposals for multimedia development projects were published.  One, under 
the  IMPACT  2  programme  did  not  expressly  favour  SMEs  in  development  teams, 
although  SMEs  were  encouraged  to  participate,  and  the  results  were  as  follows:  103 
proposals  from  565  organisations,  of  which  356  were  SMEs  (under  250  employees) 
(63%),  and  17  projects  supported  including  105  organisations,  including  68  SMEs 
(64%). 

90 

The  second,  under  the  INFO  2000  programme,  incorporated  a  specific  advantage  to 
small enterprises (under 50 employees) and the Objective  1  region by increasing the level 
of support available from 40% to 50%. The results were as follows: 477 proposals from 
2 428 organisations, of which  1  486 (61%) were small and 1 653 (68%) were SMEs, 
and 80 projects  supported with 405 organisations, of which 253 (62%) were small and 
318 (78%) were SMEs. 

7.5.4  Telematics Applications Programme (TAP) 
The Council Decision on the TAP Programme132 set an objective that 5% of the TAP 
budget  for  1994-1998  should  go  to  small  and  medium-sized  businesses  or 
organisations  (SMEs/SMOs  with  less  then  500  employees).  Therefore,  the  TAP 
Programme is by its very nature open to SMEs/SMOs. Projects  responding  to the need 
for greater awareness and introduction of telematics in SMEs received ECU 44.1 million 
in  funding.  In  other  projects,  more  than  50%  of  the  participating  organisations  are 
SMEs/SMOs which received funding  of ECU 32.4 million. SMEs/SMOs are involved in 
more  than  95%  of  all  the  Telematics  projects.  The  total  of  ECU 76.5  million 
corresponds  to  13  % of EU funding  for  existing  projects  and 8.5% of the  overall 
foreseen  TAP budget. The Telematics Programme currently satisfies  the objectives 
defined for SME/SMO involvement. 

7.6 

Electronic commerce 

Driven by the dramatic progress in the field of information  technology, in particular the 
fast  expansion  of  the  Internet,  electronic  commerce  presents  enormous  potential 
opportunities  for  consumers  and businesses  in Europe, and  in particular  for  SMEs. Its 
propagation will also have a considerable impact on Europe's competitiveness  in global 
markets. It will, however, also lead to profound structural changes in business and labour 
markets. 

Electronic  commerce  covers  many  diverse  activities  in  both  goods  and  services, 
including  electronic  trading  of  goods  and  services,  on-line  delivery  of  digital  content, 
electronic fund  transfers,  electronic share trading, electronic bills of lading, commercial 
auctions,  collaborative  design  and  engineering,  on-line  sourcing,  electronic  public 
procurement, direct consumer marketing and after-sales service. 

In  April  1997, the  Commission  adopted  a communication  on  a European  Initiative  in 
Electronic Commerce133 to encourage the growth of electronic commerce both within the 
EU and in the global marketplace. 

The key issues are as follows: 

•  The need to reinforce trust and confidence in transnational electronic commerce. This 
is  crucial  in  the  context  of  further  removal  of  trade  barriers  and  the  increasing 
multilateral commitments in the WTO framework, as well as the emergence of cyber 
crime  (e.g.  electronic  money 
laundering,  malicious  hacking  and  copyright 
infringement).  SMEs, in particular, need to be encouraged to adopt new business 
methods, techniques and innovations. 

1 32 
1 33 

OJ L 334 of 22.12.1994, p. 1 

COM (97)  157 of  15.04.1997 

91 

Provision  of  the  necessary  infrastructure,  tackling  the  problems  of  capacity,  cost, 
interoperability  and  user-friendliness.  The  Commission  will  work  with  EU  Member 
States as well  as with its trading partners towards the full  and timely  implementation 
of the WTO Agreement  on Basic Telecommunications, which will enter into force by 
1  January  1998  and  will  greatly  contribute  to  liberalisation  of  telecommunications. 
The  same  applies  to  the  recent  Information  Technology  Agreement  (ITA),  which 
provides  for  the  gradual  elimination  of tariffs  and  non-tariff  barriers  on  IT  products 
and  the  Mutual  Recognition  Agreements  (MRA)  of  conformity  assessment.  As 
outlined  in  its  Communication  on  "Cohesion  and  the  Information  Society"134,  the 
Commission  aims  at  diminishing  the  remaining  regional  disparities  in  cost,  quality 
and  accessibility  of  electronic  commerce  infrastructure  and  services,  so  as  to 
contribute  to  the  revitalisation  of  regions  and  to  renewing  and  sustaining  local 
services. The widespread availability of electronic commerce infrastructure  at an 
attractive price is required if SMEs are to fully  exploit the opportunities. 

through  RTD  programmes 

The  Commission  will  pursue  a  coordinated  European  approach  to  tackle  capacity 
bottlenecks 
information  and  communication 
technologies,  including  actions in the Fifth  Framework  Programme  and in the Trans-
European Networks. It will also facilitate the active involvement  of Europe's  industry 
and public bodies in global decision-making on Internet evolution. 

in 

The  Commission  has  been  encouraging  consensus  on  standardisation  in  electronic 
commerce  through  the  Memorandum  of  Understanding  on  Open  Access  to 
Electronic  Commerce  for  European  SMEs,  which  aims  at  involving  European 
industry  and  users  in  standardisation  and specification  work.  Steps  will  be  taken  to 
better address user needs, in particular SMEs, in standardisation. 

• 

Improvement  of  user-friendliness.  The  aim  is  to  offer  simple,  user-friendly 
solutions  to handling each stage in the transaction  chain  electronically.  This will 
facilitate  the  widespread  take-up  of  electronic  commerce,  especially  by  SMEs, 
and  allow  them  to  get  started,  using  and  staying  up-to  date  with  electronic 
commerce  technologies.  To  this  end,  special  importance  is  given  to  electronic 
commerce  in EU RTD programmes  (a first electronic commerce call  for proposals  in 
the  ESPRIT  programme  has  already  been  launched).  Electronic  commerce  is  also  a 
key action in the programme "Creating a User-Friendly Information  Society". 

Promotion  of  international  industrial  and technological  cooperation.  Projects  will  be 
launched during  1997 as part of the Prague Action Plan involving Central and Eastern 
European  countries,  and  in  cooperation  with  non-Union  Mediterranean  countries. 
The  Commission  will  also  strengthen  its  ongoing  international  cooperation  in 
the  field  of  electronic  commerce  by  promoting  global  pilot  projects  in  the  G7 
Global Marketplace for SME collaboration. 

1 34 

COM (97) 7 of 22.1.1997 

v 

92 

Creation  of  a  favourable  regulatory framework in  relation  to  issues  ranging from 
security, privacy  and the protection  of property rights (in particular  copyrights  and 
trademarks)  to  consumer protection,  accounting  and  audit  rules  and  tax  neutrality. 
Measures  already  taken  include  the  EC  Directive  on  the  protection  of  personal 
data135, the proposal of a Transparency Mechanism Directive, aimed at reducing the 
risk that  different  National  measures  restrict  the free movement  of  IT  services;  a 
Directive  on contracts negotiated  at a distance which covers  electronic  transactions 
and  a  certain  number  of  horizontal  and  sectoral  directives.  As  a  follow-up  to  the 
Green Paper on Commercial Communications, the Commission will forward detailed 
proposals. It will also present a proposal for a directive on financial services contracts 
negotiated  at a distance and a proposal for a Directive on the issuance of electronic 
money. The Commission will work towards early ratification  and implementation of 
the  recently  adopted  World  Intellectual  Property  Organisation  (WIPO)  Copyright 
treaty and WIPO Performers and Phonograms Treaty. 

•  Education  and training initiatives will be developed for SMEs, schools and local 
authorities within the framework of the SOCRATES and LEONARDO programmes, 
the  Action  Plan  "Learning  in  the  Information  Society"136  and  the  ADAPT-BIS 
programme, (new strand on Building the Information Society). 

In order to  create  awareness  and encourage best practice  amongst businesses,  and 
SMEs  in  particular,  the  Commission  will  launch  a work  programme by  the  end  of 
1997, based on the experience of the Commerce 2000 pilot programme as well as on the 
consultation  on the Green Paper on Commerce and Distribution.  Awareness promotion 
will  be  pursued  through  the  G7  project  Global  Marketplace  for  SMEs  and  through 
specific  activities  to  be  carried  out  by  the  Euro  Info  Centre  network  under  the  Third 
Multiannual Programme for  SMEs. The Commission will also present a strategy paper, 
together  with  an  action  plan  to  stimulate  the  development  of  electronic  public 
procurement, which should work as a catalyst on the global market. 

7.7  Vocational training 

Vocational  training,  and  especially  training  in  better  management,  is  an  essential 
component of SME competitiveness. However, SMEs are often  reluctant to see training 
as a necessary investment to improve performance and adapt to the rapid changes in their 
environment  (such  as  changes  in  production  processes  or  the  introduction  of  new 
technologies).  Objective  4  of  the  European  Social  Fund,  the  Community  ADAPT 
initiative  and  the  LEONARDO  DA  VINCI  programme  are  aimed  in  particular  at 
supporting  and  providing  backing  for  enterprises  adapting  to  industrial  change  and  at 
improving the vocational training systems in the Union. The Media-Training programme 
is  aimed  at  meeting  the  specific  requirements  of  the  audiovisual  sector  in  the  area  of 
training. 

1 35 

1 36 

Directive  95/46/EC  of  the  European  Parliament  and  of the Council  of  24  October,  1995 on  the  protection  of 
Individuals with regard to the processing of personal data and on the free  movement  of such data, OJ L 281  of 
23.11.95, p. 31 

COM(96)471  final  of 2.10.1996 

93 

7.7.1  Objective 4 of the European Social Fund 

A priority of Objective 4 is to focus on the specific  needs of SMEs in terms of human 
resources  development  (to  facilitate  the adaptation  of workers  to  industrial  change  and 
to changes in the systems of production). This involves: 

-  assistance for  SMEs in anticipating their workers'  skill requirements  and in putting  in 

place forward management of human resources; 

-  support for their efforts  in terms of employee training; 
-  promotion of services for SMEs and inter-SME cooperation to achieve the above 

goals. 

This priority  is clearly  set out both in the ESF Regulation137  and  in the Member  States' 
programming  documents,  and  is  given  special  attention  in  terms  of  follow-up  and 
evaluation. 

In  Finland  and  Sweden,  all  Objective  4  measures  focus  on  SMEs.  Sweden's  SPD 
stipulates  that  only  enterprises  with  fewer  than  250  workers  are  eligible  and  that 
priority will be given to enterprises with less than 50 workers. 

In  some  Member  States,  particularly  France,  intermediary  bodies  are  very  active  in 
mobilising  SMEs  and  in  helping  to  set  up  Objective  4  projects  (these  bodies  include 
Chambers  of  Commerce  and  Industry,  local  Chambers  of  Commerce  and  the  bodies 
involved in fund-raising  for vocational training). 

At  this  stage  of  implementation,  the  Commission  only  has  incomplete  and  provisional 
data  for the rest  of the Member  States. Assistance  for  SMEs  varies  considerably  from 
country  to country  and would  appear to account  for  between  50% and  80% of  the 
sums  allocated.  The  interim  assessment,  which  is  expected  at  the  end  of  1997,  should 
give the actual distribution of funding by enterprise size. 

The approach taken under Objective 4 is illustrated by the two projects described below: 

One project  offers  the possibility of basic training for the 50 000 least  skilled workers  in 
France's agri-food  industry. The position of these workers has become very precarious as 
a result of changes in the systems of production. On the one hand, a large number of jobs 
are  disappearing,  particularly  the  least  skilled  ones.  On  the  other  hand,  the  demand  for 
more  skilled  jobs  is  rising.  A  training  scheme  has  been  put  in  place  to  make  these 
workers more employable  and to fight against their exclusion from the jobs  market.  It  is 
aimed at the acquisition of basic general knowledge (reading, writing and arithmetic)  and 
the  development  of  analytical  skills,  logical  reasoning  and  problem  solving  abilities. 
These  skills  are  a prerequisite  to  commencing  skills-oriented  training  and  to  vocational 
development. 

A  project  in Finland  involves networking  all the pre-emptive  measures  supported  under 
the  ESF.  It  covers  labour  market  trends  as  well  as  defining  qualification  needs  at 
regional, sectoral  and enterprise  level. The project  has a dual  aim: to collect  and  analyse 
all  available  data  in  the  area  of  pre-emptive  measures  and  to  stimulate  cooperation 
between  the  participants.  Data  collection  is  handled  via  a  database  which  is  accessible 

1 37 

Council Regulation  2084/93 of 20.07.1993, OJ L 193 of 31.7.1993, p. 39 

94 

through the Internet.  Provision has been made for  exchanges of information  between  the 
promoters of pre-emptive measures and for a wide distribution of the results to  interested 
parties, particularly SMEs. 

7.7.2  The ADAPT  initiative 

The  total  budget  for  ADAPT  is  almost  ECU 3.3  billion,  with  an  EU  contribution  of 
ECU  1.6  billion.  This  Initiative  focuses  on  Human  Resources.  With  its  bottom-up 
approach,  emphasis  on  innovation,  experimentation,  and  transnationality,  it  is  an  ideal 
cradle for ideas in the field of work organisation,  and specifically  areas such  as  enhancing 
the  knowledge-creating  capacity  of  the  workforce,  and  linking  the  introduction  of 
Information  Communication  Technologies  (ICTs) with  the  education  and  training  of  the 
workforce  and  with  organisation  renewal  within  this  framework.  SMEs  are  a  clear 
priority  target  group  within  the  ADAPT  initiative.  Furthermore,  ADAPT  proposes 
measures  aimed  directly  at  SMEs  and  most  of these have been  carried  over  into  national 
Operational Programmes: 

a) 

b) 

c) 

d) 

e) 

the  development  of  guidance  and  counselling  systems  for  workers  affected  by 
industrial  change in different  economic  sectors, which is of particular  importance  to 
those threatened by unemployment in SMEs; 

training  actions  aimed  at  improving  the  capacity  of  entrepreneurs  and  managers  to 
adapt to change and to design relevant business plans. Again, particular attention will 
be paid to improving management quality in SMEs; 

assistance  for  SMEs to set up and implement internal and external on-going training 
programmes; 

the  development  of  networks  and  cooperation  between  producers,  suppliers  and 
customers,  one  aspect  of which  is  to  stimulate  the  transfer  of  know-how  and  good 
practice and to improve the ability of enterprises to train their workforce  especially to 
meet the specific needs of SMEs; 

the  development  of  competitive  cluster  activities  and  participation  of  SMEs  in 
enterprise  networks. An important  activity here will be the creation  of  structures  for 
shared services for groups of SMEs. 

Beyond the field of training, ADAPT is also about stimulating the creation  of new jobs. 
It is essential, particularly  for  SMEs, to take  full  advantage  of the possibilities  offered  by 
the emergence of new markets, the development of new activities and increased job  growth 
potential.  ADAPT  can  also  contribute  to  improving  local  and  national  infrastructure  to 
support entrepreneurship  and the expansion of SMEs, and to ensure that  good practice and 
ideas are transmitted and shared across national boundaries. 

The  first  call  for  projects  allowed  the  selection  of  1  400  projects  in  300  transnational 
partnerships.  During  1997,  the  second  and  final  phase  of  projects  will  be  selected.  By 
1999 over 3 000 projects will have participated in this Initiative. 

In order to facilitate  access to this Initiative, National Support Structures have been put in 
place in each Member  State.  Their main tasks are to support project  promoters'  activities 
and  to  disseminate  good  practices.  Moreover,  most  of  them  have  their  own  websites 
through which easy access to information  concerning the Initiative is provided. 

95 

A  first  analysis  of  ADAPT projects  shows  that  the  vast  majority  are  promoted  by 
SMEs themselves, involve SMEs as part of a broader consortium, or include SMEs 
as major beneficiaries of their activities. 

In order to take stock of the impact of ADAPT, each Operational Programme funds  an 
independent evaluation. Most of the Member States have selected independent evaluators 
which have already submitted a first mid-term report. Moreover, it is the Commission's 
intention to launch in the next few months an EU-wide evaluation on the transnational 
feature of the Initiative to assess its impact. 

7.7.3  The LEONARDO  DA  VINCI  programme 

The LEONARDO DA VINCI programme138 (ECU 620 million between  1995 and 1999) 
was set up as a result of the changes introduced in the Maastricht Treaty which states that 
the  Community  shall  implement  a policy  aimed  at  facilitating  adaptation  to  industrial 
changes,  improving  initial  and  continuing  vocational  training,  facilitating  access  to 
vocational  training  and  encouraging  mobility  and  cooperation  on  training  through 
incentive measures, while maintaining the principle of subsidiarity.139 

A prominent  feature  of its  first  two years  of operation  has been the ongoing  attention 
given  to  SME  access  to  vocational  training.  This  has  resulted  in  better  SME 
representation. UEAPME (the European Association of Craft, Small and Medium-sized 
Enterprises),  for  example,  is  a  full  member  of  the programme  Monitoring  Committee 
within the employers'  organisation.  Similarly,  local Chambers of Commerce are on the 
National  Coordinating  Bodies  responsible  for  implementation  in  the  participating 
countries. 

The programme endorses the need to establish links between vocational training and the 
world  of  work,  and  promotes  cooperation  between  all  those  involved.  The 
implementation  of  measures  to  benefit  SMEs  and  the  craft  sector  is  strongly 
encouraged at several levels: 

- within the common framework of objectives which supports the measures to be taken 
by  establishing  a  link between  the  qualification  and  skill  needs  of  enterprises  and  the 
measures proposed to satisfy those needs; 

- through very specific measures 

In Strand I, there is a great need for enterprises (including SMEs and craft enterprises) to 
participate  as promoters  or partners in those areas where their  action is  likely to be of 
most  help  in  improving  vocational  training  systems  and  schemes  in  the  participating 
countries, i.e. in pilot projects  to improve the quality  of continuing vocational  training 
schemes, and in transnational placement programmes and transnational programmes  for 
the exchange of young people and trainers. 

Enterprises  are  obviously  best  represented  in  Strand  II,  which  aims  to  improve 
through 
vocational 

training  measures  for  enterprises  and  workers, 

including 

1 38 
1 39 

Council Decision  94/819/EC of 06.12.1994, OJ L 340 of 29.12.1994, p. 8 

Article  127 of  the  Treaty  sets out  the measures  to be  taken  by  the  European  Union  in  the  area  of  vocational 
training 

96 

university/industry  cooperation.  They  are  particularly  involved  in  transnational  pilot 
projects  for  innovation  in  vocational  training  (through  the  integration  of  technological 
change), in investment in continuing vocational training for workers, and in the transfer 
of technological  innovation through cooperation between enterprises  and universities in 
the  field  of  continuing  vocational  training.  They  are  also  involved  in  transnational 
programmes  of  undergraduate  and  graduate  placements  in  enterprises,  transnational 
programmes  of  exchanges  between  enterprises  and universities  or training  bodies, and 
transnational programmes of exchanges of those in charge of training. 

In  Strand  III,  which  focuses  on  the  development  of  language  skills  in  particular, 
Community  support  is provided  for  the design  of transnational  pilot  projects  aimed  at 
drawing  up  linguistic  audits  for  enterprises,  especially  small  and  medium-sized 
enterprises  and socio-economic operators. Support is also provided  for  transnational 
exchange  programmes  between  enterprises  and  specialist  language  training 
institutions  or  training  bodies.  Similarly,  there  is  a  measure  to  provide  support  for 
surveys and analyses to examine new types of apprenticeships and new training methods 
for small and medium-sized enterprises. 

-  through the priorities established for  the measures  in the first  two Strands  of the 
programme 

Among  the  priorities  of  Strand  I  is  the  theme  of  the  acquisition  of  skills  to  enable 
service providers, small and medium-sized enterprises, and industry to respond to 
the requ.irements of the internal market. The Strand II priorities include the theme of 
acquisition  of  the  qualifications  and  skills  required  for  adaptation  to  industrial 
changes,  changes  in  systems  of  production  and  the  dissemination  of  new 
technologies, particularly  in small and medium-sized  enterprises  and the traditional 
industrial  sectors.  Another  Strand  II  priority  is  the  development  of  enterprise 
management  training for the transfer  of technological  innovation  and the training 
of managers and directors of small and medium-sized enterprises. 

It  is  important  to  emphasise  that  when  transnational  partnerships  are  being  set  up, 
promoters  are  requested  to  establish  "multi-player" partnerships,  that  is,  partnerships 
which  include  both  trainers  and  elements  from  the  business  community,  social 
partners or chambers of commerce and industry. Such partnerships are better able to 
demonstrate a common or shared interest in the implementation of a proposed project and 
to validate the end results of the project. 

a) The design of vocational training projects for SMEs and the craft sector 

Submissions  made  in response to  calls  for  proposals  must  not  only  meet  a number  of 
established  criteria  such  as  transnationality  and  criteria  relating  to  the  nature  of  the 
partnerships, but must also respond to annual priorities.  A distinction is made between 
Community  priorities  (common  priorities)  and  national  priorities  (additional  specific 
priorities). 

The  Community  priority  in  the  1995m  call  for  proposals  was  to  support  the 
improvement  of  vocational  training  measures  for  enterprises  and  workers,  including 

1 40 

OJC  128 of 24.05.1995, p. 14 

97 

through  university/industry  cooperation.  Among  its  aims  was  the  acquisition  of  the 
qualifications  and  skills  needed  to  adapt  to  industrial  change,  and  to  make  these 
qualifications  and  skills  more  transparent.  These  aims  were  pursued  by  improving 
cooperation between training organisations, universities and enterprises in the context of 
new forms of apprenticeship and on-and-off-the-job  training. They were also pursued 
through  the  development  of  training  actions  and  plans  for  the  introduction  of  new 
systems  of  production  and  work  organisation  in  the  context  of  industrial  change 
and  the transfer  of  technological  innovations,  particularly  to  SMEs  and  industries 
facing tough global competition. 

The  1996141 call  for  proposals  contained  five  Community  priorities  based  on  the 
Commission's  White  Paper  "Teaching  and  Learning:  Towards  the  Learning  Society". 
One of these priorities was targeted at investment in human resources. Another objective 
was "the development of new methodologies to remove disincentives to training for 
SMEs". A third priority was to widen access to skills using the tools of the  information 
society in the context of lifelong  learning. The proposals were intended  in particular to 
cover the training of trainers, management training for the transfer  of new technologies 
and the training of SME managers and directors. 

The  1997142  call  for  proposals  maintained  the  1996 priorities  while  also  requiring  that 
each  proposal  demonstrate  how  the  transnational  partnership  would  contribute,  for 
example, to the skill needs of enterprises, particularly those of SMEs. The existance of a 
strong  and  structured  partnership  with  active  involvement  by  enterprises,  especially 
SMEs (or groups of SMEs) involved in production, and small and craft  enterprises, was 
considered an advantage in the selection of projects. 

b) Vocational training projects under way for SMEs and craft enterprises 

The final report on the results of the FORCE programme 143 identifies  SMEs as a priority 
for LEONARDO DA VINCI and specifies  that access to the programme is particularly 
important  for them. SMEs are now being targeted directly and are accorded the highest 
priority. Their participation is essential to support innovation in vocational training. 

The LEONARDO DA VINCI programme has tackled the following questions: 

1.  How can the programme support the development of training within SMEs faced with 
very rapid industrial changes, and the development of a highly qualified workforce in 
theJertiary sector and in the emerging occupations? 

2.  How  do  SMEs  make  their  training  needs  known  and  how  do  they  benefit  from 

innovative training methods developed within large enterprises? 

3.  Since access by industry to the results of research and to technological innovation is a 
crucial  factor  in SME competitiveness, how can university/enterprise  cooperation in 
the  area  of  vocational  training  contribute  to  producing  a workforce  with  technical 
qualifications relevant to the new requirements? 

1 41 
1 42 
1 43 

OJC  60 of 29.02.96, p. 16 

JO C 381 of  17.12.96, p. 44 
The  1995 report covers the FORCE programme, p. 78 

These are crucial questions since it would appear that the success of LEONARDO DA 
VINCI cannot be disassociated from its ability to make SMEs participate as key players. 
The call for proposals for 1997 and future years should lead to a further increase in 
SMEs. 

In  quantitative  terms,  it  is  immediately  obvious  that  the  other  partners  involved  in 
training account for a far higher proportion than SMEs as is illustrated by the responses 
to calls to proposals under the programme. This statement must, however, be tempered 
by the fact that enterprises in general, and SMEs in particular, have a strong  preference 
for participating in Strand II of the programme. Actions under this Strand (pilot projects 
and mobility projects) are aimed at supporting improved vocational training measures for 
enterprises and workers. 

Of the projects selected following the 1995 call for proposals, SMEs accounted for 16% 
of partners (all types included)  for the first three Strand II pilot project  measures as a 
whole (i.e. innovation in vocational training to allow for technological changes and their 
impact  on work,  qualifications  and skills; investment  in continuing  vocational  training 
for  workers;  and  the transfer  of technological  innovation  through  cooperation  between 
enterprises and universities in the field of continuing vocational training). The proportion 
was 20% under the  1996 call  for  proposals, whereby  SMEs  represented  the greatest 
proportion of partner organisation for these three measures, which had not been the 
case under the previous call. 

SMEs  accounted  for  26%  of  partners  (all  types  included)  in  the  projects  selected 
following  the  1995 call  for proposals under the three Strand II mobility measures  as a 
whole  (i.e.  undergraduate  and  young  graduate  placements  in  enterprises;  exchanges 
between enterprises and universities or training bodies; and exchanges of those in charge 
of  training).  This  figure  dropped  to  24%  under  the  1996  call  for  proposals. 
Nevertheless,  for  these  two  calls  for  proposals  and  in  the  context  of  the  mobility 
measures  in  Strand  II,  SMEs  were  the  best  represented  type  of  organisation  among 
partners overall. 

The noticeable  increase  in the rate  of participation  by  SMEs in the three pilot  project 
measures  referred  to  above  and  the  consolidation  of  their  lead  over  other  partners  in 
terms of representation by organisation type in the Strand II mobility measures, show that 
SMEs  are maintaining  and  even  increasing  their  participation  in  the  programme 
for certain measures. 

In  qualitative  terms,  although  SMEs  are  participating  in  transnational  projects, 
they still seem to be taking a passive role compared to the other partners, often limiting 
themselves to the role of observer, and at best, to validating results. 

Of the considerable number of submitted proposals targeted at SMEs, few show that an 
analysis  of  SME needs was undertaken  in advance. Few projects  take  account  of pre 
existing measures or analyses already carried out. 

Finally, too many of the proposals are content with taking a general approach to SMEs, 
viewing them as a homogeneous entity and arguing at a "macro level", which is hardly a 
suitable level of intervention for targeted measures. 

99 

However, an analysis of the proposals selected in 1995 and 1996 reveals some broad 
trends in terms of the objectives of projects focused on enterprise development, and 
SME  development  in  particular.  These  trends  can  be  grouped  under  the  following 
themes: 

i) Promotion of an innovation culture within the enterprise 

These projects  aim to increase the innovation capacity of SMEs, either by promoting an 
innovation  culture  within  them,  or by  facilitating  the transfer  of  innovation  -  often  in 
advanced technology areas - to SMEs through university/enterprise  cooperation and the 
networking of research centres and SMEs/groups of SMEs. Other projects  are aimed at 
improving the capacity of SMEs to exploit and manage strategic information. They 
evaluate  the  concrete  needs  of  enterprises  and  develop  and  transfer  strategic  SME 
surveillance  systems,  by  putting  suppliers  and  consumers  of  strategic  information  in 
contact with each other. 

ii)  Consideration  of  the  impact  of  new  technologies  and  of  the  resultant  skill 

requirements 

Numerous projects use the new communication and information technologies to improve 
the  quality  and  relevance  of  training  in  order  to better  adapt  it  to  SME needs  and  to 
develop flexible forms  of work  organisation  (supported  by  flexible  training  methods 
and/or integration  of training  into the workplace).  Some projects  take into  account  the 
new internal and external relations at work (outworking and outsourcing,  for example), 
often by means of telematic networks. These projects seek to make telematic technology 
more  accessible  to  SMEs  (e.g.  transnational  electronic  learning  networks).  Other 
projects  promote  the  transfer  of  teleworking/telelearning  (where  the  qualification 
process is integrated into the work, as in "just in time" training). 

Projects  on  the  integration  of  technologies  into  the  sphere  of  continuing  training, 
involve,  for  example,  open  and  distance  learning  by  means  of  telematic  networks  or 
telelearning  (using  multimedia  tools  or  tools  for  distance  training  and  evaluation), 
training  in electronic  commerce, and training in language  skills by means  of telematic 
networks.  Some projects  support  new  learning  strategies  by basing  themselves  on the 
concept  of  the  enterprise  as  tutorial-based  trainer,  while  others  use  the  new 
technologies to put in place a network to analyse tutorial practices at European level. 

iii)  Support  for  sectors  undergoing  considerable  technological  change  in  a 

technology transfer perspective 

By way  of  example,  one project  envisages  increasing  investment  by  SMEs within  the 
biotechnology sector in the countries of southern Europe, by developing training and 
evaluation  systems  in  pilot  enterprises;  while  another  project  is  facilitating  the 
implementation of new technologies in SMEs in the software industry. 

iv)  Promotion  of  investment  by  enterprises  in  continuing  training  and  improved 

access to training 

A very large number of projects are aimed at greater SME openness to training,  often 
through more flexible  forms of training and through anticipating new needs arising  from 
changes  in  the  world  of  work,  sometimes  of  a  technological  nature.  These  projects 

100 

include the development of training plans for craft  enterprises using tutorials; a measure 
for training "coaches" in SME commercial development using telematic networks; and 
the  anticipation  of new needs  for  key  skills  and  for  training  in  SMEs  or  in  managing 
training  time, by  optimising  the replacement  of  employees  during  their  absence  or by 
developing flexible training in the enterprise. 

v) Setting  up enterprises  and responding to the development  needs  of new SMEs, 

often in a context of fighting against exclusion 

Numerous projects are targeted at developing the kind of entrepreneurial spirit needed 
to set up a small business of one's own.  Such projects are designed either to help specific 
disadvantaged  groups or to  assist  regional  and/or rural  development  in  a more  general 
sense. 

Programmes for the integration  of excluded young people include theoretical  training 
programmes  alternating  with  practical  periods  in  existing  regional  SMEs,  training  of 
trainers  in  setting  up  businesses,  open  and  distance  training  for  groups  at  risk  of 
exclusion  in  rural  coastal  regions,  and  a  French  project  in  a  sector  undergoing  huge 
industrial  change  which  is  aimed  at  setting  up  micro-enterprises  offering  innovative 
products (glass sector). 

Some  projects  support  economic  development  in  disadvantaged  rural  regions  by 
providing rural SMEs with expertise - through alternating training - using placements and 
new work-relocation technologies (teleworking) to develop the distance selling sector in 
rural areas. Another project targets the development of new skills for business handovers 
(this involves facilitating business transfers and ensuring the durability of SMEs). 

c) Future perspectives 

It is too early yet to establish a clear course of action to improve SME participation in the 
LEONARDO DA VINCI programme. The analyses given above provide qualitative and 
quantitative information on the nature of their participation, and it is the responsibility of 
the  project  promoters  to  inform  the  Commission  of  their  experiences  and  to  propose 
concrete  solutions, in  line with  the programme's  bottom-up  approach  and  organisation 
policy. 

In  this  regard,  the  role  of  networks  operating  at  various  levels  (especially  regional 
networks with support from Chambers of Commerce and Industry, sectoral networks, and 
networks set up in the context of cooperation between universities and enterprises) would 
appear  to be  vital  for  relaying  information  and  serving  as  a point  of  contact  between 
enterprises and the European Commission. 

The  European  Commission  itself  has  taken  or  given  its  support  to  various  initiatives 
directly  relevant  to  SMEs:  an  explanatory  information  brochure  for  SMEs  on  the 
LEONARDO  DA  VINCI  programme  has been  produced,  and  a  special  workshop  for 
SMEs was held on the occasion of the information  and contact days organised from 3 to 
6  February  1997  in  Brussels  for  potential  promoters.  On  13 and  14 March  1997, the 
National  Coordination Bodies of the Benelux countries held a seminar for  the National 
Coordination Bodies of all the Member States of the European Union on the subject  of 
SME participation in the programme. Finally, mention should be made of the work done 

101 

to  prepare  the  Recommendation  on  access  to  vocational  training,  part  of  which  is  of 
direct relevance to SMEs. 

These initiatives are likely to provide input for the current discussion on the revision of 
the LEONARDO DA VINCI programme, which is in its third year of operation. A mid 
term progress report will be presented to the programme's Monitoring Committee in June 
1997. 

7.7.4  The MEDIA II programme - Training 

The rapid growth of the European market  for  audiovisual programmes  (13% in  1994-
95), as well  as the potential  for job creation in the audiovisual  sector, require a highly 
qualified body of professionals and entrepreneurs. 

The Media II programme - Training (ECU 45 million between  1996 and 2000) aims 
to  meet  the  evolving  needs  of  the  audiovisual  programme  industry  and  to  bolster  its 
competitiveness by improving initial and particularly continuing vocational training for 
professionals  in the sector. Since the industrial fabric of the European audiovisual sector 
consists to a large extent of SMEs, legal provision was made in the Council decision144 
setting up the programme for special attention to be given to SMEs. 

The three key  areas  of training  developed under the programme  (management  of the 
audiovisual  industry  at  European  level,  use  of  new  production  technologies  and 
screenplay  techniques)  are dealt with  in  a European perspective" to make  professionals 
and  enterprises  aware  of the  European  and  international  dimension  of  the  audiovisual 
market. 

The  action  to  be  taken  aims  at  strengthening  cooperation  between  training 
institutions,  the  professional  sector  and  enterprises.  The  programme  takes  into 
account  structural  objectives  such  as the development  of the  independent  production 
sector, and SMEs in particular,  and seeks to ensure consistency with other  Community 
measures  in  the  field  of  training  (particularly  the  LEONARDO  programme  and  the 
objectives  of  the  European  Social  Fund).  Approximately  250  training  initiatives  are 
provided  for  during  the lifetime  of the programme, with  1 700 professionals  and 650 
institutions and enterprises involved. 

7.8 

Environment 

Environmental  legislation might impose additional burdens on SMEs, which often  lack 
the financial and staff resources to meet the requirements. Even voluntary initiatives such 
as the Eco-Management Audit Scheme (EMAS) can in practice become compulsory due 
to market pressure. The Commission  is aware of that risk and therefore  has developed, 
where  necessary,  tailored  measures  to  support  SMEs  in  implementing  Community 
legislation. 

1 44 

Council  Decision  95/564/EC  of  22  December  1995  on  the  implementation  of  a  training  programme  for 
professionals  in the European  audiovisual  programme  industry (Media  II - Training). OJ  L 321 of 30.12.1995, 
p. 33 

102 

7.8.1  EcO'Manaeement Audit Scheme (EMAS) 
To take  into  account  the  SME dimension,  the EMAS Regulation145  states  a  specific 
concern  of  Member  States  and  the  Commission  for  the  participation  of  SMEs 
(Article 13). 

In March  1996 a call for tenders146 was launched by the Commission  for  identification 
and development  of effective  means for the provision  of technical  support to  SMEs to 
participate in EMAS. Five projects started in January 1997. 

For the 38 EU-financed projects, involving 358 industrial sites, which were implemented 
after  an earlier tender, published in  1993, the participation of SMEs in EMAS has been 
analysed. The results showed that despite the variable size of the sites involved (from 7-8 
employees  to  more  than  350),  the  average  size  is  definitely  small  and  medium 
enterprise: more than 65% of the sites have fewer than 150 employees (35% with fewer 
than 50 and 32% with 50 to  150). Most of the 57 sites, with more than 250 employees 
exceed  this  limit by  some units, while there are few  sites with  around  300 employees. 
Size has been identified  as a key variable in determining difficulties  and drawbacks 
in  implementing  EMAS,  as  the  smaller  the  size,  the  greater  the  lack  of  human, 
technical and financial resources. 

Size breakdown of sites participating in the EMAS scheme, by number of employees 

SIZE 

I  NUMBER OF sTfËS 

< 50 employees 
50-150 
150-250 
> 250 

J 

123 
115 
63 
57 

7.8.2  Euromanagement-Environment pilot action 

In  1995,  the  Commission  launched  the  EUROMANAGEMENT-Environment  pilot 
action  with  the  aim  of  assisting  those  SMEs  wishing  to  participate  in  EMAS,  the 
Community Eco-Management and Audit Scheme. It involves: 

-  developing  a  methodology  applicable  Europe-wide  to  assist  those  SMEs  -of  a 
preferably  small  size  in  the  industrial  sector,  seeking  to  establish  environmental 
management systems and to be registered under the EMAS Regulation; 

-  applying this methodology to a pilot sample of more than 500 SMEs (with a smaller 
number  to  be  assisted  in registering  under  the  EMAS  scheme)  and  identifying  and 
analysing the problems, opportunities  and adjustment  needs of SMEs resulting from 
implementation of the EMAS Regulation; 

-  presenting  a  report  to  the  Commission  on  structural  and  other  measures  needed  at 
regional,  national  and  European  level  to  facilitate  SME participation  in  the  EMAS 
scheme, including an assessment of the need for revision of the Regulation. 

1 45 
1 46 

EEC-Regulation  1836/93, OJ L  168 of  10.7.1993, p. 1 

O J C 7 5 of  15.3.1996, p. 27 

103 

The  European  coordinator147,  who  developed  the  methodology,  is  responsible  for 
organising the action, supervising the consultants' work and producing an overall report 
on the action. A network of 51 consultants was selected from the  1  323 expressions of 
interest  and  the  323  valid  proposals  that  were  submitted148.  In  the  first  phase,  each 
consultant selected at least 10 SMEs, where possible from the same industrial sector, held 
a  seminar  for  the  SME managers,  carried  out  an  environmental  analysis,  designed  an 
individual  environmental  management  system  with  the  SMEs,  and  analysed  the 
adjustment  needs  and difficulties  of  SMEs in fulfilling  the requirements  of the EMAS 
Regulation. In the second phase, each consultant is helping at least one of these SMEs to 
implement  the  environmental  management  system  and  to  register  under  the  EMAS 
scheme. 

The national coordinators, chosen by the Member States, act as national relays and their 
primary task is to help the consultants to provide the participating SMEs with registers of 
relevant national environmental regulations, to submit reports and to organise  follow-up 
meetings with the consultants and the SMEs in their country. 

At the seminar to launch the pilot action which took place in Brussels on 3 and 4 October 
1996  under  the  auspices  of  the  Commission,  the  European  coordinator  instructed  the 
consultants  and national coordinators  in the methodology to be used  during the action. 
The pilot  action,  which  is being  carried  out  by the  enterprise  policy  departments  in 
cooperation with the industrial policy and environment departments, as well as the 
Member States, received a favourable reception, and a request for the method to be taken 
over has already been made at national level. The results of the pilot action are expected 
at the end of 1997. 

7.8.3  Eco-Management Guide 

During  1995/96, several EIC members of the Environment Specialised Group developed 
with  Commission  support  an Eco-Management  Guide  (EMG)  for  SMEs.  This  is  an 
interactive  tool,  consisting  of  software  and  a guidebook,  designed  to  help  companies, 
SMEs in particular,  to take the first necessary  steps towards registering  on the EMAS 
scheme.  EMG  can  also  be  useful  when  implementing  environmental  management 
systems  for  companies.  The  EMG,  available  in  all  EU  languages,  covers  industrial 
sectors such as engineering, coating, plastic packaging, textile finishing and printing, and 
will be extended in 1997 to the timber and food sectors. 

7.8.4 JLIFE 

Since  1992,  SMEs  can  be  supported  by  the  financial  instrument  for  the  environment 
LIFE149. From  1993 to 1995 (the first phase of LIFE), 394 demonstration projects  in the 
Member  States  were  co-financed  via  EU  funding  of  ECU 145.9 million.  In  1996  and 
1997, 215 projects were supported. 

1 47 
1 48 
1 49 

Selected following  call for tender No 95/C 231/10, OJ C 231 of 5. 9. 95, p. 13 

Call for proposals No 96/C 49/10, OJ C 49 of 20.2.96, p. 21 

Created  by  EC  Regulation  1973/92  of  21.5.92,  OJ  L  206  of  22.7.1992,  p.  1;  modified  by  EC  Regulation 
1404/96 of  15.7.1996, OJL  181 of 20.07.1996, p. 1 

104 

Amongst  these  projects  it  is  estimated  that  more  than  250  projects  concern  SMEs, 
which benefited from some 40% funding under LIFE. The sectors involved are mainly: 
clean technologies (surface treatments, ceramics, tannery, paper, agri-food,  textiles); the 
waste treatment sector, notably by recycling; rehabilitation of contaminated  sites; the air 
and  water  sectors  and  urban  projects,  notably  for  traffic  management  and  land  use 
planning. 

The impact on employment is difficult  to estimate because pilot demonstration  projects 
generally involve temporary or existing jobs. However, each project involves some 4 to 6 
jobs, which results to  approximately  1 000 to  1 500 jobs  in SMEs supported  under 
LIFE. 

7.9 

Energy and transport 

ENERGY 

The  Commission  opened  a  broad  discussion  on  energy  policy  which  led  to  the 
publication  of the  White  Paper  on "An energy  policy  for  the  European  Union"150 
The White Paper  states that  the key role  of the  energy  sector  is to  improve  industrial 
competitiveness,  security  of supply, economic and social development  on a sustainable 
basis and the quality of life of its citizens. The Commission then introduced a  five-year 
indicative  action  programme  based  on jointly-defined  strategic  objectives  towards 
which  Community  and  national  energy  policies  should  converge.  The  most  direct 
impact energy policy will have on SMEs, stems from the improvement of conditions 
for competition. In fact,  the availability of energy  at competitive prices  and on the 
best conditions will be crucial for the strengthening of SMEs' competitive strength. 

In  addition,  the  renewable  energy  industry  consists  predominantly  of  SMEs.  The 
activities  which  will  arise  out  of  the  Green  Paper  for  a  Community  Strategy  entitled 
"Energy for the future  : renewable sources of energy"151 will therefore  affect  positively 
SMEs  active  in  or  with  renewable  sources  of  energy.  Conversely,  accelerating  and 
strengthening the use of renewable sources of energy and renewable energy technologies 
should be an important element in overall Community strategy for supporting SMEs. 

Two programmes have been developed: SAVE II to promote the rational use of energy 
and ALTENER to promote renewable energy sources. 

SA VEII; rational me of energy 

SAVE II152 (ECU 45 million  for  1997-2000)  is  a non-technological  EU programme to 
promote  the rational  use  of  energy.  SAVE  aims  at  creating  an  environment  in  which 
investments  in  energy  efficiency  will  be  accelerated  and  energy  efficiency  will  be 
recognised as a market opportunity. The programme is not specifically  targeted towards 
SMEs, but  several  SMEs benefit from it.  SAVE II  supports  the  following  measures  : 
studies,  sectoral  targeted  pilot  actions,  information  dissemination,  evaluation  and 
monitoring of energy efficiency  progress in the Community and energy management at 
regional and urban level. 

1 50 
1 51 
1 52 

COM(95) 682 of  13.12.1995 

COM(96) 576 of 20.11.1996 

Council Decision  96/737/EC of  16.12.1996, OJ L 335 of 24.12.1996, p. 50 

105 

SMEs  are specifically  mentioned  in the priorities  for  1997 in relation  to  education and 
training  activities  :  "promotion  through  the  use  of  education/training  schemes  of 
energy efficiency  in SMEs". 

ALTENER: promotion  of renewable energy sources 

The  ALTENER  programme  (ECU 40 million  between  1993 and  1997) focuses  on the 
promotion  of  renewable  energy  sources.  The  Commission  is  now  preparing  an 
ALTENER II-programme for 1998 to 2002. 

ALTENER provides support for pilot actions proposed by Member States. It also aims at 
increasing the uptake of renewables in the Community and increasing trade in renewable 
products,  equipment  and  services  within  and  beyond  it,  which  should  reduce  CO2 
emissions. 

The  programme  is  not  specifically  targeted  towards  SMEs,  although  several  SMEs 
benefit from the programme. The proposed ALTENER II will calculate the support  given 
to SMEs separately, which is not the case for the current ALTENER programme. 

TRANSPORT 

interconnectivity  and 
The  Trans-European  Transport  Networks  aim  to  provide 
transportation 
interoperability  between  the  infrastructure  of  the  different  national 
networks.  Council  Regulation  2236/95  on  all  Trans-European  Networks153  (both 
transport  and energy  networks)  allocates  for  1995-1999, a budget  of ECU 2.345  billion, 
of  which  ECU  1.8  billion  is  earmarked  for  transport.  Although  the  Trans-European 
Transport Networks do not include specific  support measures for SMEs, they will  benefit 
the economy as a whole and will have an indirect impact on SMEs, in particular  those in 
more remote areas, which will gain from improved links to central European markets. 

The Commission  is about to launch a study to identify  the financial  problems  SMEs are 
facing  when  participating  as  subcontractors  in  the  implementation  of  Trans-European 
Networks,  and  will  examine  ways  in  which  such  problems  could  be  solved,  notably 
through European  financial  guarantees. 

7.10  Audiovisual  industry 

7.10.1 MEDIA  II  programme 

-  Development  and  distribution  of  European 

^audiovisual  works (1996-2000) 

The  Council  Decision  on  the  implementation  of  the  Media  II  -  Development  and 
distribution  programme154  has the  structural  objective  of  developing  an  independent 
production  and distribution  sector, especially of SMEs, as one of the basic aims of the 
programme.  SMEs  account  for more than  85% of the enterprises  participating  in the 
programme, which has a total budget of ECU 265 million for the period  1996-2000. 

1 53 
1 54 

Adopted by the Council on 18.9.1995, OJ L 228 of 23.9.1995, p.  1 

Council Decision 95/563/EC of 10 July  1995 on the implementation of a training programme encouraging the 
development  and  distribution  of  European  audiovisual  works  (Media  II  -  Development  and  distribution) 
(1996-2000), OJ L 321 of 30.12.95, p. 25 

106 

With  a  specific  budgetary  allocation  of  ECU 65  million  for  the  development  sector 
(pre-production),  the  programme  aims  to  improve  development  opportunities  for 
projects  in the areas  of drama,  documentaries,  animation  and new technologies.  It  also 
targets  the  development  of the enterprises  themselves  through  loans  to  strengthen  and 
structure  them.  During  1996,  the  first  year  of  implementation  of  the  Media  II-
Development  programme,  loans  for  SME development  amounted  to  ECU 3  million, 
more  than  a third  of the year's  budgetary  allocation.  220 SMEs  benefited  from  the 
programme during 1996. 

Funding for the distribution  and circulation of audiovisual programmes is intended to 
strengthen  the  sector  by  promoting  transnational  dissemination  and the networking  of 
operators, as well as the linguistic diversity of works and independent production. 

7.10.2 Action  Plan  for  the  introduction  of  advanced  television  services  in  Europe 

(16:9 Action  Plan) 

The  changeover  from  the traditional  4:3  screen  format  (cinematographic  format  of the 
1930s)  to the modern  wide-screen  16:9 format,  along  with  the introduction  of  digital 
television  which  goes  hand-in-hand  with  it,  is  a  transition  that  will  have  far-reaching 
consequences for the future  of the broadcasting  sector. The 16:9 Action Plan155 provides 
for ECU 228 million in Community financing  between  1993 and 1997 to launch the first 
phase of this fundamental  change. 

The  role  of  the  Action  Plan  is  to  provide  broadcasters  and  programme  makers  with 
financial 
incentives  to  cover  the  additional  cost  of  broadcasting  and  producing 
programmes  in  the  16:9 format,  so  that  wide-screen  televisions  can be  marketed  with 
confidence,  and to  ensure  the  durability  of  European  audiovisual  catalogues.  The two 
major  categories  benefiting  from  the  Action  Plan  are  independent  producers  and 
broadcasters. On average, 45% of funding  has been given to independent  producers 
who  are  mainly  SMEs,  reflecting  the diversity  of  Europe's  audiovisual  industry.  220 
independent  producers  on average  have  received  support  under  the Action  Plan  each 
year. 

8. 

PROMOTING A SPIRIT OF ENTERPRISE AND SUPPORT FOR TARGET GROUPS 

A call for proposals156 was published on 15 April  1997 to promote assistance for craft and 
It  includes  measures  in  favour  of 
small  enterprises  and  an  entrepreneurial  spirit. 
businesswomen,  women  setting  up  enterprises  and  wives  working  in  the  enterprise, 
young- entrepreneurs  and  enterprises  made  up  of  disadvantaged  groups.  The  call  for 
proposals has seven objectives: transnational cooperation, joint participation of small and 
craft  enterprises  in  fairs  and  shows  in  the  countries  of  the  EEA,  promotion  of  the 
European  culture  and  spirit  of  enterprise,  financing  and  access  to  credit,  vocational 
training  for  craftsmen  and those  setting  up small  enterprises,  access  to  information  and 
services  through  computer  applications,  and  the  training  of  Euro-advisers.  The 
Commission received 402 proposals, which are currently being examined. 

1 55 

1 56 

Council  Decision  93/424/EEC of 22 July  1993 on an action  plan  for the introduction  of advanced  television 
services in Europe, OJ L 196 of 05.8.93, p. 48 
Assistance for craft  enterprises and small enterprises: Call for proposals 97/ C 117/17, OJ C  117 of  15.4.1997, 
p. 43 

107 

8.1  Craft small and micro-enterprises 

On 10 April 1996, in the context of a reorganisation of its departments, the Commission 
decided to set up a unit for "Crafts and small business" within the Directorate General 
responsible  for  enterprise  policy.  The new  unit  was  given  responsibility  for  craft  and 
small enterprises, women, young entrepreneurs, target groups and local development. 

Based on the Communication: "The craft  industry and small enterprises, keys to growth 
and  employment  in  Europe"157 and  on the  Report  to  the Madrid  European  Council,  a 
number  of  specific  actions  directly  inspired  by  the  ten  priority  actions  set  out  in  the 
Communication  have  been  implemented.  These  Commission  priorities  have  the 
following  specific  aims: to strengthen the integration of craft  and small enterprises  into 
the  single market;  to  develop  transnational  cooperation;  to provide  specific  aid  in  the 
areas  of  standardisation,  certification,  and  environmental  and  quality  management;  to 
provide  better  access  to  vocational  training  and  training  in  management  techniques, 
particularly  for  spouses  as  co-entrepreneurs;  to  guarantee  better  access  to  sources  of 
funding;  and to provide  support  for  an initiative by the European  associations  of  craft 
enterprises to increase the visibility of the sector. 

In accordance with these commitments, the following measures have been implemented: 

a) Preparation for the Third European Conference on the Craft Industry and Small 

Enterprises 

The Third European Conference  on the Craft  Industry and Small Enterprises, to be held 
on  20  and  21 November  1997  in  Milan,  aims  to  take  stock  of  progress  made  and  to 
establish guidelines and priorities for the work of the Commission and the Member States 
in  this  sector.  Eleven  preparatory  conferences  were  held  in  1996  and  1997,  each  on 
themes  specific 
training,  employment,  artisan  trades, 
entrepreneurial  spirit,  local  development,  new  technologies,  etc.),  whereby  all 
Commission departments concerned were closely involved in them. 

the  sector  (funding, 

to 

b) Transnational cooperation 

A call  for  proposals  was published  on  18 August  1996, in cooperation  with  all  of the 
departments concerned, with a view to strengthening transnational  cooperation between 
craftsmen  supported by the craft  organisations involved in facilitating  business contacts. 
The evaluation of the 58 applications received and the process of selecting projects was 
completed  on 22 November  1996. Twelve projects  involving  ten  countries  were  given 
priority, and have been given a global subsidy of approximately ECU 1 million. 

c) Integration of small and craft enterprises into the internal market 

In accordance with the Commission's priority, the removal of the obstacles that craft and 
small enterprises have to face in their cross-border activities has continued, in addition to 
advice for enterprises in this area. 

1 57 

COM (95) 502 of 26.10.1995: "The craft  industry and small enterprises, keys to growth and employment  in 
Europe. Results of the Second European Conference on the Craft Industry and Small Enterprises in Berlin, 26 
and 27 September  1994, follow-up measures and recommendations to the Member States". 

108 

Pilot actions aimed at supporting craft  and small enterprises operating in border regions 
and  wishing  to  enter  cross-border  markets  have  been  carried  out  following  a  call  for 
tender158. 

The actions are being implemented through: 

• 
• 

support for the setting up of trans-border enterprise advice offices; 
the  conclusion  of  studies  to  identify  the  obstacles  faced  by  these  enterprises  in 
neighbouring countries. 

Financial support is being given to the managers of six offices  and for the production of 
eleven  studies.  At  the  end  of  their  implementation  in  April  1997, the  actions  will  be 
evaluated  by  an  independent  company  selected  on  the  basis  of  a  call  for  tenders.  A 
possible extension of the initiative is envisaged on the basis of the evaluation report. 

d) Dialogue with the representative organisations in the sector 

The  enterprise  policy  departments  have  involved  the  other  departments  of  the 
Commission in meetings with the main European and national representative bodies  for 
the  craft  sector  and  small  enterprises.  These  meetings  are  an  informal  forum  for 
discussion and exchanges of views on national and European policies to assist craft  and 
small enterprises. 

e) Actions in the area of training 

As part  of  the  European  Year  of  Lifelong  Learning, financial support  was  given  to  a 
project  to  set  up  a  European  network  for  young  craftsmen  wishing  to  move  between 
various European countries. 

f)  Improving  awareness  about  craft  and  small  enterprises  at  European  level  and 

increasing their visibility and representativeness 

- Support for the launch of the "Avignon Academy", the result of the plan for a European 
academy for craft  and small enterprises, a centre for information,  exchange and dialogue 
for the sector. Its aim is to affirm  the identity, role, characteristics and importance of the 
craft  sector in the European regions. 
-  Co-financing  of  European  competitions  for  young  craftsmen  from  various  trades  in 
order to enhance European identity (e.g. the European Bakers' Trophy). 
-  Setting up of a European prize for  arts and crafts,  these being the most representative 
elements of craft and small enterprise activity within the Community. 
- Raising awareness of the economic role of the sector through economic analyses geared 
specifically  towards  small  and  craft  enterprises.  An  analysis  of  the  textile  and 
construction  sectors  in  four  countries,  based  on  common  criteria,  yielded  very 
encouraging results. 

1 58 

OJ C 89 of 26.3.1994, p. 16 

109 

8.2  Women 

entrepreneurs  ami  co-entrepreneurs.  businesses 

run  by 

entrepreneurs from disadvantaged groups 

Women play an important role in the administration and management of SMEs, firstly as 
entrepreneurs: of the 18 million SMEs in the Union, 20-30% are managed by women and 
25-35% of new businesses are set up by women. Secondly, they play a role as assisting 
spouses  to  the  manager:  in  60-80%  of  SMEs,  the  manager's  spouse  carries  out 
administrative and management duties and he/she is, with or without official  status, the 
manager's closest associate and may even be described as a genuine co-entrepreneur. It is 
generally  acknowledged  that  the greater the assisting  wife's  role in  the running of the 
company,  the  greater  the  chances  of  the  company's  survival.  In  some  sectors  such  as 
fisheries,  the activities of each of the spouses are complementary; likewise in rural areas, 
where  10% of farm managers are women, farmers'  wives often  act as managers (of the 
accounts in particular), and are directly involved in the development of farm tourism and 
local services. 

The Fourth Framework Programme on equal opportunities  for women  and men (1996-
2000)159 includes female entrepreneurship as one of its priorities.  In its Communication 
of 21 June  1996 entitled "Incorporating equal opportunities for women and men into all 
Community  policies  and  activities"  160,  the  Commission  devotes  a  chapter  to  women 
entrepreneurs  and  assisting  spouses  in  SMEs.  Their  difficulties  and  constraints  are 
identified  and Community measures are set out to counteract these. The Communication 
is  aimed  at  integrating  the  equal  opportunities  dimension  into  all  Community 
programmes. 

In addition, the fourth report of the European Observatory for SMEs contains a thematic 
study on women and SMEs which brings to light the fact that more and more businesses 
are being set up by women. 

Since the first European Conference on the Craft Industry, organised in October  1990 in 
Avignon,  the  Commission  has focused  some of its  actions  on the problems  of women 
managers and assisting spouses, particularly in the areas of training, studies and support 
for  the establishment  of networks. Following on from these initial  actions, the issue of 
women entrepreneurs and assisting spouses was chosen as one of the main themes for the 
Second  European  Conference  on the Craft  Industry  and  Small  Enterprises  in Berlin in 
1994. Based on the conclusions of these conferences, the Commission specified  priority 
actions  in  favour  of women managers  and assisting  spouses in  small businesses  in the 
craft sector, which were included in the third multiannual programme in favour of SMEs 
and craft  enterprises. These priority actions are: support for women setting up businesses, 
support  for  the establishment  and strengthening  of European networks, and  support  for 
training measures. 

1 59 
1 60 

Council  Decision  95/593/EC, OJ L 335 of 30.12.1995 

COM(96)67of21.02.1996 

110 

Promoting participation by women in regional development 

Based on the discussion on women entrepreneurs and the need to assist women who are 
.setting up, taking over or developing an enterprise, RECITE II161, in the context of inter 
regional  cooperation  under regional policy, will  encourage the networking  of  resource 
centres  to  enhance  the  value  of  work  and  improve  the  integration  of  women  into 
economic life. The services provided by these centres must be varied, because women are 
not  a homogeneous  group.  They  must  also  enable the  identification  of  new  forms  of 
activity and employment, particularly at local level, which reconcile the needs of women 
and men and the development of local potential. 

Promoting  transnational  measures  to  encourage  the  transfer  of  know-how  and 
experience through the EmpIoyment-NOW initiative 

The NOW strand (promotion of equal opportunities for women as regards employment) 
of the Employment and development of human resources initiative (ECU 500 million for 
the period  1995-1999) prioritises the setting-up of small enterprises and cooperatives by 
women, particularly by providing: 

-  assistance  for  the  development  of networking  and  cooperation  on  local  employment 
initiatives aimed at mobilising the capacities of women to build on local resources such 
as tourism, culture, the environment and care services, and aid for job creation in rural 
areas; 

- aid for women setting up small enterprises and cooperatives, and recruitment aid; and 
- aid for putting in place financial support instruments for women setting up enterprises. 

Almost  50%  of  the  750  projects  in  the first phase  (1995-1997)  involved  women 
setting up and developing small enterprises, and the provision of support services and 
vocational training. 

Pilot projects for women in rural areas 

In the context  of the pilot projects  supported  under the EAGGF  Guidance  section,  the 
Commission  has,  for  example,  published  a  call  for  proposals  to  support  innovative 
projects  for  women  in  agriculture  and  in rural  areas162. This  is  aimed  in  particular  at 
exploiting  local  agricultural  produce, conversion  into complementary  activities  such as 
craft  enterprises,  tourism,  services  and  the  environment.  Approximately  400  projects 
have been submitted and they will be examined during the second half of 1997. 

8.3 

Enterprises in the commerce and distribution sector 

As regards commerce and the distributive trades, the significant  employment potential 
of local distributive trade in less favoured rural areas was highlighted during a seminar. A 
joint study was carried out (under enterprise policy and regional policy) on the best use 
of the structural funds  (in particular the ERDF) to maintain and extend local distributive 
trading in rural areas. A survey was also done on the financing, problems and expected 
development  of  local  distributive  trading  and  the  solutions  implemented  to  improve 
trading in isolated rural areas. Based on the results of the study, a European seminar is 

161  OJC 326 of 31.10.1996, p. 9 
1 62  OJC 284 of 27.9.1996, p. 21 

111 

expected  to be  held  in  1997 in  cooperation  with  the  Committee  of  the  Regions. Pilot 
projects  are  also  expected  to  be  set  up  on  this  theme.  A  similar  approach  is  being 
examined for local distributive trade in urban areas. These two approaches are the subject 
of very broad consultation following the adoption of the Green Paper on commerce163. 

8.4 

"Social  economy";  cooperatives,  mutual  societies.  foundations  and 
associations 

Work  has  been  carried  out  on  an  ongoing  basis,  in  particular  on  the  methods  for 
evaluating the measures implemented to date by the Commission in support of CMAFs, 
and  on  the  evaluations  themselves,  as  well  as  on  drafting 
the  Commission 
Communication  on  associations  and  foundations.  This  has  been  done  through  direct 
meetings and interdepartmental consultations with the various Commission departments. 
A continuation of this cooperation is planned after  the publication of the Commission's 
Communication, to enable joint actions to be implemented. 

The  department  responsible  for  this  sector  was  active  in  several  areas  of  Community 
policy. Specifically, it participated in the consultative groups of the Lien and Democracy 
programmes  under  PHARE  and  TACIS  which  are  responsible 
for  making 
recommendations  on the financing of projects, the aim being to ensure that the  specific 
contributions  of  projects  submitted  by  CMAFs  are  properly  taken  into  account.  A 
contribution was also made to a variety of work on local development  and employment 
initiatives from their outset. 

It should  also be noted that on the initiative of the European Parliament,  a new budget 
line entitled "the third sector and employment" with funding  of ECU 10 million was set 
up under  the Community  budget  for  1997. This budget  line is  for  the exploration  and 
promotion  of  the  employment  potential  of  cooperatives,  mutual  societies,  associations 
and foundations  and more generally of all local development and employment initiatives. 
The  implementation  of  this  initiative  requires  close  ongoing  cooperation  between  the 
Commission departments responsible for CMAFs and employment respectively. 

The fourth report from the European Observatory for SMEs includes a thematic study on 
the "social economy" sector, which underlines the social role and economic importance 
of cooperatives, mutual  societies, associations  and foundations.  Enterprises  account  for 
about 5% of private-sector employment in this sector and are equally active in the market 
services and non-market services sector. 

1 63 

COM(96) 530 of 20.11.1996 

112 

CONCLUSIONS 

This report  deals with the impact of Community policies and actions on  SMEs, which is 
the outcome of coordination between enterprise policy and the other Community policies. 

Since  the  adoption  of  the  first  report  on  coordination  in  1992,  the  Commission  has 
developed  its  approach  and has introduced  changes to both the structure  and the  content 
of the report.  The result  is an integrated presentation  of all the Union's  actions  to  assist 
SMEs,  thus  improving  the  coherence  and  profile  of  its  actions.  Furthermore,  the  report 
reflects  the  specific  objectives  set  out  in  the  1994  and  1996  versions  of  the  Integrated 
Programme  which  was  conceived  as  a  framework  for  coordination  of  activities  for  the 
benefit  of SMEs, thus reinforcing  the approach advocated in the 1995 report. 

Considerable progress has been made with the emergence of a political priority in  favour 
of  SMEs  in  the  Union,  greater  allowance  for  the  special  situation  of  SMEs  in  policies 
which have an impact on their environment, and the introduction of support measures  for 
SMEs  in  most  Community  programmes.  The  participation  of  SMEs  in  Community 
programmes has increased considerably, although there is still room for  improvement. 

1. Emergence  of a political priority  in the Union and the Member  States 

The  recognition  of  the job-creating  potential  of  SMEs  has  led  to  the  emergence  of  a 
political  priority  in  favour  of  SMEs  in  the  European  Council.  In  1992,  the  Edinburgh 
Council  adopted  a  decision  to  set  up  the  EIF.  One  of  its  priorities  includes  granting 
guarantees to SMEs. In Copenhagen, in June  1994, the European Council  asked the EIB, 
in  cooperation  with  the  Commission,  to  increase  the  temporary  SME  loan  facility 
adopted  at  Edinburgh  by  creating  the  "SME  facility".  In  Cannes,  in  June  1995,  the 
European Council asked the Commission to explore ways to improve the effectiveness  of 
policies to  assist  SMEs. In response, the Commission presented  the report  on the role of 
SMEs  as a dynamic  source of employment, growth and competitiveness  in the Union, to 
the Madrid  European  Council,  at the end of  1995. The report was well  received.  With  a 
view  to  the  extraordinary  Luxembourg  Council  on  employment  in November  1997, the 
Amsterdam  Council in June  1997, asked the Commission to examine initiatives to create 
jobs  in SMEs and to set up a task  force  on simplification  in order to improve the quality 
of  legislation  and  reduce the burden  on enterprises, particularly  SMEs.  It  also  asked  the 
EIB  to  examine,  in  cooperation  with  the  EIF,  the  creation  of  a  facility  for  financing 
SMEs'  advanced technology projects. Furthermore, the Commission proposed  guidelines 
for  Member  States  employment policies as a framework for discussion  at the special Job 
Summit  in  Luxembourg  (20/21  November).  These  guidelines  cover  several  topics, 
including the promotion of a new culture of entrepreneurship in Europe. 

At  the  Denver  Summit  in  1997,  the  G7  also  recognised  the  economic  and  social 
importance of SMEs and the benefits  of exchanging best practice, and  expressed  the will 
to continue its work on SMEs. 

A  tendency  towards  convergence  of national  policies  is gradually  emerging  through  the 
concerted  actions  with  the Member  States  on  SME policy, benchmarking  exercises  and 
the identification  of best practices. 

113 

2. Greater allowance in Community policies for  the special features  of SMEs 

The  SME  dimension  touches  on  all  Community  policies  and  as  a  result,  it  is  now 
generally taken  into  account  although  to varying degrees; this can be brought  about  as a 
result of SMEs being considered as a category of enterprise deserving special attention or 
by  allowing  specific  provisions  to  be  made  for  them,  such  as  in  the  Community 
guidelines on State aid for SMEs in competition policy. 

The  definition  of  SMEs  adopted  in  1996  is  a  basic  requirement  for  gearing  policies 
towards  SMEs. It permits better targeting of measures to assist  SMEs  and  enables  aid  to 
be  quantified  according  to  the  size  of  the  enterprises  for  which  it  is  intended.  The 
Commission  is  making  every  effort  to  ensure  that  this  definition  is  applied  in  the 
implementation  and  evaluation  of  Community  programmes  so  that  their  impact  can  be 
better  measured,  but  in  view  of  the  time  required  for  the  practical  application  of  this 
definition,  the effects  will only be felt in the longer term. 

In order to improve the environment of SMEs and make greater allowance for their needs 
in  Community  policies  and  legislative  proposals,  the  Commission  makes  use  of  the 
impact-assessment  form  and  pursues  its  interdepartmental  work,  as  a major  task  within 
enterprise  policy.  The  introduction  of  regular  dialogue  between  the  Commission  and 
professional  organisations  enables  greater  account  to  be  taken  of  the  needs  and 
circumstances  of  SMEs.  Initiatives  have  been  taken  to  simplify  Internal  Market 
legislation. In  1997, the Commission  adopted the Recommendation  for  the  improvement 
and  simplification  of the  environment  of enterprises  in the start-up phase. Following  the 
request by the Amsterdam European Council, the Commission set up a task force  entitled 
"BEST  (Business  Environment  Simplification  Task Force)", which will present  a report 
to the Cardiff European Council in  1998. The Commission is examining the results in the 
Member  States  of  the  actions  carried  out  in the wake of  its recommendations  regarding 
payment  periods  and  the  transfer  of  enterprises.  Pending  the  introduction  of  the  single 
currency, the practical questions involved in the transition to the euro are currently  being 
examined  by  a number  of working  parties,  one  of which  deals  specifically  with  SMEs. 
The improvement  of the financial  environment  for  SMEs - a priority area in SME policy 
- has been at the centre of the work  of the Round  Table of leading representatives  of the 
banking  sector which will be continued. It was also the subject  for  a Communication  on 
European capital markets for SMEs. 

3. SMEs  : apriority  in Community programmes and increased participation 

First  of  all,  because  of  their  contribution  to  economic  and  social  development,  SMEs 
have been targeted  for  aid in the allocation  of the  Structural Funds  - one  of the  primary 
financial  instruments  of the Union. The measures  to assist  SMEs in the programmes  for 
1989-1993 accounted overall for  10% of the Community allocation. The same percentage 
is estimated  for the  1994-1999 programmes, double that of the previous period (since the 
total amount  allocated  to the Funds has been doubled). This percentage  varies  according 
to  the  objectives  of  the  Funds.  It  is  higher  for  Objective  2  regions  (16%  of  the 
appropriations  for  1997-1999)  than  for  Objective  1  regions  (10%  on  average).  The 
guidelines  for  the  1997-1999  programmes  for  Objective  2  regions  include  an  SME 
priority,  and  the  clauses  common  to  these  programmes  contain  a  reference  to  the 
Recommendation  on  the  definition  of  SMEs.  The  Commission  has  proposed  that  the 
margin  for  manoeuvre  available  in the other programmes  (Objectives  1, 3, 4 and  5b)  up 

114 

to  1999  be  channelled  towards  SMEs.  The  recently  adopted  programmes  of  the  new 
Member  States earmark  large amounts, about 30% to 40% of their allocation,  for  SMEs. 
This demonstrates an increase in the allocations to assist SMEs. The programmes relating 
to  the  Community  SME  Initiative  have  been  adopted  and  are  under  way.  Despite  the 
increase in the  allocation  for  SMEs, it would  seem that  SMEs  do not  benefit  fully  from 
the measures  intended  for  them.  Funds  are sometimes under-used,  particularly  those  for 
business  services  compared  with  measures  promoting 
the 
in  measuring  quantitatively  and 
Commission,  aware  of  the  difficulty 
qualitatively the impact of the Structural Funds on SMEs, launched  a thematic  study, the 
results of which will be presented in the next report. 

investment.  In  1997 

involved 

In  view  of  the  shared  responsibility  between  the  Commission,  the  Member  States  and 
regional  and  local  authorities,  the  Member  States  responsible  for  implementing  the 
Structural Funds must also be persuaded of the need to give priority to supporting  SMEs 
and  to  make  it  even  easier  for  them  to  have  access  to  the  programmes.  As  regards 
evaluation,  the  Commission  continually  encourages  the  Member  States  to  improve  the 
evaluation  of  their  actions  to  assist  SMEs,  since  it  is  often  incomplete  in  the  ex-ante 
projections  and ex-post evaluations. 

With regard to the European Investment Bank, the volume of its global loans to assist the 
competitiveness  of enterprises virtually doubled between  1993 and  1996, and the number 
of beneficiary  SMEs doubled from 5 257 in  1993 to  11 034 in  1996. Since  1990, a total 
of 42 000 SMEs, 80% of which have fewer than 50 employees, have received  loans from 
the  EIB  for  a  total  amount  of  ECU  11 billion.  The  SME  facility  has  benefited  4  435 
SMEs, which have created over 45 000 jobs.  Since its creation, the European  Investment 
Fund has expanded  its activities to assist SMEs, which now account  for  34% of the total. 
They involve guarantees worth ECU 613 million, ECU 397 million of which is  allocated 
to the pilot scheme "growth and  environment". 

The  efforts  to  coordinate  the  Research  and  Technological  Development  programmes 
(RTD)  have  clearly  borne  fruit.  The  introduction  of  specific  measures  for  SMEs 
(technology  stimulation  for  SMEs - "TSME")  combined  with  increased  information  and 
awareness-raising  activities has led to a marked increase in the participation  of  SMEs in 
RTD  programmes  in  the  Fourth  Framework  Programme  compared  with  the  previous 
ones. During the first two years of the Fourth Framework Programme,  5 439 SMEs have 
participated,  almost  as  many  as  participated  over  the  entire  four  years  of  the  Third 
Framework  Programme  (6  276),  which justifies  the  prediction  that  SME  participation 
will  double  in  the  Fourth  Programme.  Almost  2  500  SMEs,  the  majority  of  which  had 
never participated  in research programmes, benefited  from  the TSME between  1994 and 
1996.  40%  of  the  proposals  submitted  for  the  TSME  result  from  information  and 
assistance  actions.  The  statistics  on  SME participation  in  TSME  according  to  size  class 
show  that  SMEs  with  fewer  than  50  employees  represent  60%  (i.e.  the  majority)  of 
participating SMEs. The Commission proposal for the Fifth RTD Framework  Programme 
provides  for better coordination between  all those involved,  including  SMEs. It  includes 
a  specific  horizontal  programme  "Innovating  and involving  SMEs" and  a one-stop  shop 
for  SMEs  in  the  Commission  common  to  all  research  programmes  for  the  specific 
measures  for  SMEs  such as CRAFT  and exploratory  awards. As a part  of the  Innovation 
programme,  the  Commission  launched  the  I-TEC  pilot  project,  in  July  1997,  to 
encourage start-up capital investment in technologically  innovative SMEs. 

115 

Another  example  of effective  coordination  is the encouragement of partnerships  and  the 
internationalisation  of enterprises. The methodologies  devised  for  enterprise policy  have 
been  extended  to  programmes  to  assist  third  countries,  in  the  mutual  interest  of  both 
parties. The information  networks (Euro Info Centres), partner search networks (BRE and 
BC NET) and the programmes of meetings between enterprises  (EUROPARTENARIAT 
and  INTERPRISE)  are  now  part  of  the  programmes  to  assist  third  countries  in  the 
Mediterranean region (MEDA), in Latin America (AL-INVEST) and, very recently, Asia 
(ASIA-INVEST),  in  the  Countries  of  Central  and  Eastern  Europe  (PHARE  and 
COOPME),  and  in  the Commonwealth  of Independent  States  (TACIS). Thus, the  added 
value  of  these  Community  programmes  has  been  recognised  with  benefits  not  only  for 
enterprises  in  third  countries  but  also  for  European  enterprises  by  facilitating  their 
internationalisation.  For example, as a result of the partnership  actions, 4 000  enterprises 
in  Mediterranean  third  countries  have  been  able  to  establish  targeted  contacts  with 
European  enterprises  over  the  past  four  years.  The  budgets  of  the  JOP  and  ECIP 
instruments  have  been  increased  to  meet  the  growing  demands  of  SMEs.  Sixty-nine 
percent  of the cases  approved under JOP concern  SMEs with fewer than  100 employees. 
On the basis of the experience gained in these programmes, the Commission has adopted 
a new programme  entitled "Joint European Venture (JEV)" to enable European  SMEs to 
set up joint ventures in the Union. 

As regards vocational training in SMEs, the programmes under ESF Objective  4 and the 
ADAPT  Initiative  provide  for  measures  to  assist  SMEs.  The  amounts  involved  cover 
between  50% and  80% of the  cost  of the programmes, depending  on the Member  State. 
Since the interim  assessments will not be available until the end of  1997, it is too soon to 
assess whether  SMEs have really benefited from the substantial  amounts provided  for.  In 
the  LEONARDO  DA  VINCI  programme,  in  1996,  within  the  strand  dedicated  to 
businesses, SMEs  accounted  for  16% of the partners in the pilot projects  and 26% in the 
mobility projects. In spite of its efforts  to inform  and a reinforced priority given to SMEs, 
micro-businesses  and  craft  enterprises  in  the  calls  for  proposals,  the  Commission 
considers  that  greater  mobilisation  of  the networks  of  SME  intermediaries  is needed  to 
increase the level  of  SME participation,  to gear training programmes  more  accurately  to 
the specific needs of SMEs and to relay its action to enterprises. 

Strengthening  coordination  between  all the  partners 

Although  the  Commission  can  be  pleased  with  the  results  obtained,  it  is  aware  of  the 
difficulties  of assessing the impact of programmes on SMEs. 

In  general,  there  is  insufficient  data  available  to  accurately  measure  the  effective 
participation  of  SMEs  (for  example,  in  the  number  of  beneficiary  SMEs  classified  by 
size)  and  the  impact  of  the  programmes  in  terms  of  the  improvement  of  SME 
performance  or  the  number  of jobs  created  or maintained.  To  cite  the  Structural  Funds, 
by  way  of  example,  the  Commission  relies  essentially  on  the  data  supplied  by  the 
Member  States  responsible  for  implementing  and  evaluating  the  programmes.  The 
statistics  are  gradually  being  compiled  on  the  basis  of  the  new  definition  for  SMEs. 
Trends in the participation  of SMEs in the programmes are difficult  to measure when the 
programmes  are of different  duration. The type of support  for  SMEs differs  according to 
whether  the  aid  is  direct  (in  the  form  of  subsidies  or  loans)  or  indirect  (in  the  form  of 
infrastructures  and services made available for advising, training or  financing). 

116 

The Commission is also aware of the limits of its powers, since SME policy is essentially 
the preserve of the Member States. The Commission's  direct action is targeted towards 
the programmes it manages, the stimulation of greater cooperation between the Member 
States with regard to policies on SMEs, and the implementation of innovative measures 
for SMEs. 

The Commission aims to reinforce  the coordination between its departments in order to 
improve SMEs' access to programmes, avoid the dissipation of efforts  and rationalise its 
activities  to  assist  SMEs.  By  restructuring  its  departments  responsible  for  enterprise 
policy, it has placed emphasis on the coordination of such activities and has, for example, 
revived an interdepartmental SME group. In order to increase the participation of SMEs 
in Commumty programmes, the Commission wishes to identify  the barriers preventing 
SMEs from taking  full  advantage of Community programmes  and to  examine ways of 
overcoming them. 

Dialogue with professional  organisations is essential in order to understand the practical 
running of an enterprise and so consolidate the operational relays that are indispensable 
for political action. The organisations representing  SMEs have a role to play in gearing 
the programmes more closely to the needs of enterprises and facilitating  SMEs' access to 
- and participation in - the programmes.  In this way, development of the European social 
dialogue is an important factor in achieving an accurate representation of SMEs. 

The Commission is also working to achieve closer cooperation and coordination with the 
Member  States  and organisations representing  SMEs by means of concerted  actions to 
promote  the  exchange  and  transfer  of  best  practices  in  relation  to  SME  policy.  The 
methodology of concerted actions can help to improve the effectiveness  and performance 
of public policies to support SMEs. 

the  potential  of  SMEs  for  job-creation,  growth  and 
The  only  way  to  fulfil 
competitiveness in the Union will be to combine efforts  and mobilise the various partners 
involved  in  the  development  of  SMEs: the  European  institutions,  the  Member  States, 
regional and local authorities, professional organisations and SMEs themselves. 

Coordination between all the partners must be stepped up with a view to disseminating 
best  practice  throughout  the  Union  and  achieving  effective 
implementation  by 
concentrating resources on the established priorities. 

117 

ISSN 0254-1475 

COM(97) 610 final 

DOCUMENTS 

EN 

10  04  08  13 

Catalogue  number  :  CB-CO-97-629-EN-C 

ISBN  92-78-27705-3 

Office  for Official  Publications of the European Communities 

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