the 'Report of the Business Environment 'Simplification Task Force (BEST)'', and the 'Commission Communication 'Promoting Entrepreneurship and Competitiveness' - The Commission's Response to the BEST Task Force Report'
Date: 1999-06-03
Institutions: European Committee of the Regions
Subjects: business activity, business management, business policy, competitiveness, computer system

C 293/48

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Official Journal of the European Communities

13.10.1999

Opinion of the Committee of the Regions on:

— the ‘Report of the Business Environment “Simplification Task Force (BEST)”’, and

— the ‘Commission Communication “Promoting Entrepreneurship and Competitiveness” —

The Commission’s Response to the BEST Task Force Report’

(1999/C 293/09)

THE COMMITTEE OF THE REGIONS,

having regard to the Report of the Business Environment Simplification Task Force from 30 April 1999
and the Commission’s communication ‘Promoting entrepreneurship and Competitiveness — The
Commission’s Response to the BEST Task Force Report and its Recommendations’ [COM(1998) 550
final];

having regard to the decision of its Bureau of 15 July 1998, under the fourth paragraph of Article 198c
of the Treaty establishing the European Community, to draw up an opinion on the subject and to direct
Commission 6 — Employment, Economic Policy, Single Market, Industry, SMEs, — to undertake the
preparatory work;

having regard to the draft opinion (CdR 387/98 rev. 1) adopted by Commission 6 on 30 November 1998
(rapporteur: Mr Unterrieder);

whereas various recommendations by the BEST Task Force can best be implemented at local or regional
level;

whereas the Committee of the Regions has several times drawn attention to the role played by the local
and regional authorities in promoting entrepreneurship and small businesses, for example in the following
opinions: the proposal for a Council Decision on a Third Multiannual Programme for small and
medium-sized enterprises (SMEs) in the European Union (1997-2000) (CdR 211/96 fin) (1); the Com-
mission Communication on Community structural assistance and employment (CdR 306/96 fin) (2); the
Green Paper on Innovation (CdR 112/96) (3); and the Communication from the European Commission
on the first action plan for innovation in Europe (CdR 68/97 fin) (4); the Proposal for a Council Decision
on measures of financial assistance for innovative and job-creating small and medium-sized enterprises
(SMEs) — the growth and employment initiative (CdR 46/98 fin) (5) and the role of local and regional
authorities in linking education and training establishments to enterprises (CdR 346/96 fin) (6),

unanimously adopted the following opinion at its 29th plenary session of 2 and 3 June 1999 (meeting of
3 June).

1. Preliminary comments on the BEST Task Force report

and the Commission Communication

1.1.
The Committee of the Regions (COR) welcomes the
action taken by the European Council to make the environ-
for small and medium-sized enterprises (SMEs) as
ment
conducive as possible to entrepreneurship. After all,
the
18.5 million SMEs in the EU, which account for 60 % of total
turnover and 66 % of employment, play a crucial role in
enhancing Europe’s competitiveness and economic growth.

1.2.
The COR would also point out that local and regional
authorities have an important role to play in the simplification
of the business environment, as SMEs operate primarily at
their level. However,
it is also very important to simplify
administrative procedures at European and national level.

1.3.
The report by the BEST Task Force, which was set up
by the Commission for this purpose, covered a broad range of
topics divided into four key areas:

(1) OJ C 34, 3.2.1997, p. 34.
(2) OJ C 42, 10.2.1997, p. 15.
(3) OJ C 182, 24.6.1996, p. 1.
(4) OJ C 244, 11.8.1997, p. 9.
(5) OJ C 251, 10.8.1998, p. 41.
(6) OJ C 116, 14.4.1997, p. 98.

1. Employment and taking on employees

2. Access to finance

3. Training, education and research, and

4. Business environment and administrative simplification.

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C 293/49

1.4.
The aim of the report is to present proposals to the
Commission and the Member States for concrete measures to
improve the quality of legislation and eliminate the unnecess-
ary burdens which restrain the development of corporate
Europe.

In response to the BEST Report, the European Com-
1.5.
mission adopted on 30 September 1998 a Communication
on Promoting Entrepreneurship and Competitiveness — the
Commission’s Response to the BEST Task Force Report and its
Recommendations (1). This Communication includes concrete
action plans for the following areas:

— New approaches in education, training and the workplace

environment

— Access to finance and helping innovation

— Better public administration.

1.6.
The COR welcomes the BEST Report and hopes that
the future blueprints for action will help to improve conditions
for business.

1.7.
In the face of increasing globalization, SMEs are forced
to operate in an ever wider economic area. The aim of a
business-friendly environment must therefore be to improve
the flow of information to SMEs which in very many cases do
not have the time or staff resources to acquire the information
they need to remain competitive. It is thus also important in
this respect to provide support at regional level for cross-
border trade, joint ventures and exports.

Employment

2.2.
Given that 66 % of jobs are created by SMEs, it would
seem to be a good idea to give their European associations the
opportunity to have a direct input into the social dialogue.
Their practical and regional expertise would help to prevent
implementation problems at regional level. At the same time,
modern, participation-based management methods can be
applied to a greater extent in the SME sector. A study by the
European Foundation for the Improvement of Living and
Working Conditions has shown that direct communication
between employers and workers produces the best results in
social and business terms when combined with collective
representation of interests in individual establishments. In this
way EU-level social dialogue is supplemented and implemented
at establishment level in a meaningful way.

2.3.
Any SME-friendly policy must be founded on the
maintenance and improvement of the high European quality
standard with high productivity, with due regard for the
principles of human rights which have evolved over time. This
means that there can be no move towards lowering minimum
quality standards in the working environment (environment,
consumers, employers) set at European level, or towards trying
to compete with low-wage countries. The COR believes that
the administrative and legislative conditions needed to create
a favourable environment for entrepreneurs and workers are
best shaped at the local level. Local authorities and institutions
should make it easier for entrepreneurs to maintain and
improve on the minimum standards already achieved.

1.8.
The flexibility of business people and their staff, which
is demonstrated in acceptance of the principle of life-long
learning, is nevertheless insufficient to make SMEs competitive.
The European institutions and the Member States, particularly
the regions and localities, must also consider new forms of
cooperation between public institutions and the private sector
(Public Private Partnership). They must be receptive to business
at all levels of administration and take account of its interests.

2.4.
Against this background, the COR welcomes the fact
that the Commission recommends extending the collective
representation of workers within business establishments for
the design, development and introduction of improvements of
all types affecting this level, but without diluting existing
mechanisms for consultation and bargaining between the
representatives of employers and workers, i.e. not allowing
any undermining of collective agreements.

1.9.
The COR believes that one of the most important and
beneficial ways of helping SMEs is to remove red tape and
reduce external costs on them (taxes, duties, bureaucratic
charges etc.). This should be kept in mind when considering
this opinion.

In many cases,

the Commission’s proposals

2.5.
for
improving the lot of SMEs pay too little attention to the
repercussions for workers, consumers and the environment.
Most existing protection provisions, which prima facie incur
costs, bring savings for businesses and the economy as a whole
in the longer term through indirect returns.

2. Specific comments on the BEST Task Force Report

and the Commission Communication

The two papers contain many good proposals for
2.1.
improving the business environment for SMEs. The COR will
be following these with great interest as SMEs come into
contact primarily with local and regional authorities.

(1) COM(1998) 550 final.

2.6.
For example, high standards of worker protection
result in improved working conditions, which translate into
fewer accidents at work, less work-related sickness and an
improvement in the de facto pensionable age. These business
and economic advantages also benefit SMEs. The COR feels
that this aspect is not taken into account enough by the
Commission. As an example, health and safety inspectors
should be as ‘user-friendly’ as their remit allows. Effective
checks are only possible if contraventions of worker protection
regulations can be penalized.

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2.7.
Contented workers make a major contribution to
increased productivity. A common minimum standard should
therefore be maintained in Europe in such areas as working
hours (1), workers’ health and safety (2), posting of workers (3).
The appropriate framework for this would be the collective
agreements. When it is necessary to make collective agree-
ments more flexible to take account of regional circumstances
with a view to creating more jobs, divergences at company
level must not fall below the common minimum standard.
Account should also be taken of the cost implications for
SMEs when collective agreements are concluded.

step up the provision of risk capital to SMEs. In this connection,
the European Commission is called upon to submit proposals
on how to facilitate access to these stock markets for SMEs
from all European regions.

2.12.
The COR would point out in particular that SMEs are
is therefore
in most cases labour-intensive operations.
important when examining this question to look into options
to ease labour costs and provide further forms of relief.

It

2.8. With regard to the question of basic provision
(‘people’s pension’), the COR is in favour of such provision;
private insurance should be supplementary. However, in the
interests of stability and security, pension funds should only
be allowed to invest in venture capital where appropriate
guidelines are in place.

2.13.
The BEST Report does not mention how the plethora
of proposed tax cuts and increased support are to be
implemented in financial terms, with the coming of monetary
union and the need to meet the Maastricht criteria. This
question is particularly relevant given the ever decreasing
proportion of tax revenue from businesses. Since 1990 tax on
capital has fallen from 37 % to around 33 %, while tax on
labour has increased from 37 % to around 40 %.

Access to finance

Training, education and research

2.9.
The transition from wage-earner to self-employment
can be facilitated by changing the way state grants are
deployed. For example, allowing people to continue to claim
unemployment benefit for a certain period while they are
starting self-employment would increase willingness to take
the risk of becoming self-employed. Particular attention should
be paid to promoting entrepreneurship among women.

2.10.
To make it easier for SMEs to raise money and to
have access to start-up capital, enterprise boards should be set
up at regional level to act as clearing points between public
funding agencies, banks and entrepreneurs with the capacity
to grant or refuse finance quickly. In addition, enterprise
boards should help individual entrepreneurs by bringing
them together with third persons who are interested in a
shareholding or stake in the business in return for financial
investment. An example of a pilot project of this kind is ‘The
Fund of North Sweden’ which sets up local stock markets to
help businesses in the region to make venture capital available
through public subscription and private placement.

2.11.
The COR shares the Commission’s view that a
significant contribution is being made to improving conditions
by expanding the network of European Business Angels,
promoting the provision of risk capital and dismantling
cultural, tax and regulatory obstacles. In particular, incentives
should be provided for so that existing European stock markets

(1) Directive 93/104/EC of 23.11.1993 — OJ L 307, 13.12.1993,

p. 18.

(2) Directive 96/71/EC of 16.12.1996 — OJ L 183, 29.6.1989, p. 1.
(3) Directive 89/391/EEC of 12.6.1989 — OJ L 18, 21.1.1997, p. 1.

2.14.
One of the most important aspects of the push to
improve the business environment is fostering an entrepreneu-
rial spirit, which means boosting the motivation and skills
required to make the move to self-employment.

The COR also supports improvements in the mutual
2.15.
recognition of vocational qualifications by schools and univer-
sities, and steps to promote the recognition of training credits
standardized at European level, thereby enhancing the mobility
of workers and promoting the upskilling of workers and
employers in the various Member States (lifelong learning).

2.16.
Training in business skills must be integrated into the
education system at an early stage. For example, secondary
schools in Denmark run projects whereby pupils and teachers
learn how to run a business over a certain period of time.
Experience shows that being brought round at an early age to
the view that anyone can run a business and promoting and
stimulating an entrepreneurial spirit within the teaching
community (teaching staff, auxiliary services ...) both in
technical colleges and university faculties (engineering, sci-
ences ...) and in secondary schools are very effective ways of
promoting the entrepreneurial spirit.

2.17.
There must be good cooperation between schools
and businesses to ensure that practical experience is passed on
more effectively within the education system. Local districts
and regions have a key role to play in promoting such
cooperation and creating new forms of collaboration. To
achieve this it is necessary to coordinate the initiatives launched
by different institutions involved in the training of potential
entrepreneurs (state, regions, universities,
local authorities,
employers’ associations ...).

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2.18.
In this context the COR would emphasize the import-
ance of promoting innovation. Its opinion on the First Action
Plan on Innovation (1) has already expressed the view that
regional measures should be put in place Europe-wide to keep
a record of technological developments so as to make it easier
for national authorities, businesses and research centres to
keep abreast of, and participate in, the tide of innovation in
Europe.

2.19.
Particularly welcome is the proposed introduction of
diplomas for life partners working in an enterprise. A number
of Member States have already included previous practical
experience in their vocational training certification and devel-
opments to recognize the importance of this experience within
broader training qualifications is to be welcomed.

SMEs make a considerable contribution to innovation
2.20.
in the European Community. Because of
the costly and
time-consuming procedure involved in obtaining a patent, this
important legal instrument is much underused by SMEs. The
evaluation must therefore address the question of how the
existing system, or the harmonized Community patent pro-
posed in the Commission Green Paper (2) can be set up on a
low-cost basis without this being achieved by passing costs on
to other enterprises. Consideration should be given to creating
a fund or insurance policy to cover part or all of the translation
costs incurred by SMEs.

2.21.
The fact is that the EU’s R&D programmes must be
geared much more towards the needs of SMEs. This means
that a proportion of expert posts in the consultation and
assessment processes and project audits should be reserved for
representatives of SME employers and workers.

SMEs are particularly disadvantaged by the fact that
2.22.
recognized European conformity assessments are often not
accepted in practice at national
level. This represents a
major obstacle to trade despite legal harmonization. Tighter
monitoring of laws applicable to SMEs is therefore essential.

Administrative simplification

2.23.
The COR welcomes the proposals for simplifying
administrative procedures. Dealings with public authorities are
seen as a considerable burden by many companies.

2.24.
The COR shares the Commission’s view that, faced
with the globalization of the economy and the competitive
pressure it brings, it is important to make public authorities as

transparent, service-oriented and cooperative as possible. For
example, Danish municipalities achieved successes in the field
of environmental monitoring by maintaining a dialogue with
businesses in order to nip problems in the bud.

2.25.
Another very welcome development is the setting up
as part of the European, national and regional legal process of
central bodies to assess the cost and impact on SMEs of
proposed laws. Nevertheless, the COR feels it is essential that
consultation should include not only representatives of SMEs,
but also other stakeholders, such as consumers and workers.

2.26.
It is the task of regional and local authorities to create
a good administrative environment, for SMEs in particular,
with user-friendly structures at local level. Territorial auth-
orities are best placed to adjust so as to provide SMEs with
adequate services. In addition, through cooperation with other
authorities, especially as part of cross-border and inter-regional
partnerships, they can improve the range of services they offer.
Horizontal support at European level should be used to enable
the regions and localities to compare examples of best practice.
On this point, the COR would emphasize the importance
of support from the European institutions, especially the
Commission for initiatives to standardize and simplify the
procedures necessary for restructuring and setting up new
businesses.

‘One-stop-shops’ i.e. single locations for registration
2.27.
purposes with one person responsible and one procedure,
are to be welcomed and should be used at all
levels of
administration.

2.28.
In order to facilitate the passing on of businesses to
the next generation, the company should be seen as a living
organism and the transaction should not be taxed as if it were
a straight asset transfer. Consultancies should also be set up to
bring together those wishing to take on a business and those
who have no one to whom they can hand over their business.

The COR welcomes an extensive harmonization of
2.29.
administrative procedures at
the various levels so as to
minimize red tape. This is especially relevant in the case of
selection and clearing procedures
for Community pro-
grammes. Information technologies could prove to be highly
beneficial for simplifying red tape and seeking to ensure
that the information provided by the administration better
corresponds to requests made by businesses.

3. Conclusions

3.1.

The COR remains critical on the following points:

(1) CdR 68/97 fin — OJ C 244, 11.8.1997, p. 9.
(2) COM(97) 314 final of 24.6.1997.

The European institutions and the Member States
3.1.1.
should explore new forms of public/private cooperation,
especially at regional and local level.

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3.1.2.
Since most SMEs are labour intensive, it is essential
to examine the scope for cutting labour costs especially via tax
reliefs and incentives.

3.2.4.
The creation of central bodies — as part of the
European, national and regional legal process — to assess the
cost and impact on SMEs of proposed laws.

3.1.3.
In the light of monetary union and the Maastricht
criteria, the European Commission should submit proposals
on how the plethora of proposed tax cuts and increased
support are to be paid for.

3.1.4.
Not enough consideration has been given to the fact
that high standards of worker protection result in improved
working conditions, which translate into fewer accidents at
work, less work-related sickness and better health at retirement.
These business and economic advantages also benefit SMEs.

In the interests of stability and security, the COR
3.1.5.
proposes that pension funds should only be allowed to invest
in venture capital where appropriate guidelines are in place.

The COR supports the proposal

to set up an
3.1.6.
Enterprise Panel, but would like to see employers’ and workers’
associations involved. The COR would also propose that they
should be authorized to appoint a certain proportion of
experts for the consultation and assessment processes and
project audits.

3.2.

The COR welcomes the following proposals:

3.2.1.
through collaboration between schools and businesses.

Encouraging the passing on of practical experience

3.2.2.
The introduction of diplomas for life-partners work-
ing in an enterprise, thereby ensuring that practical experience
is recognized as a qualification.

The setting up of ‘one stop shops’,

3.2.3.
i.e. a single
location for registration purposes and a single registration
document for start-ups.

Brussels, 3 June 1999.

3.2.5.
at plant level.

Greater collective representation of workers’ interests

Lastly, the COR would make the following recommen-

3.3.
dations:

3.3.1.
Support measures for SMEs should at least be geared
to the number of jobs created, giving priority to measures to
promote local enterprise initiatives especially by young people.

3.3.2.
In order to encourage wage-earners to take the risk
of becoming self-employed, member governments and regions
should look into the possibility of allowing them to claim
unemployment benefit
for a certain period while setting
themselves up in self-employment.

3.3.3.
Support should be provided for SMEs that are
willing to take part in the sandwich training, i.e. in-company
inculcation of practical skills.

3.3.4.
The COR suggests introducing a ’Europass’ to enable
trainees to take part in cross-border training in different
countries. A harmonized recognition procedure would ensure
that the various different national training modules would be
recognized in all Member States. A standard form has already
been drawn up.

3.3.5.
The COR calls on the Commission to expand the
network of European regional advice centres for SMEs,
especially those giving advice on R&D programmes, and to
fund it more generously. An example of these centres are the
National Relais Centers. Action here would ensure a vigorous
information and advice strategy which would also address
those businesses that have not so far made use of such centres.

3.3.6.
Business start-up grants should foster adequate capi-
tal and skills for businesses. Notably, Member States should
encourage the establishment of new businesses by developing
fresh business ideas. To this end, seminars fostering entrepre-
neurship should be promoted.

The President

of the Committee of the Regions

Manfred DAMMEYER