Opinion of the Economic and Social Committee on the 'Ninth annual report of the Structural Funds (1997)'
Date: 1999-10-20
Institutions: European Economic and Social Committee
Subjects: Structural Funds, activity report, job creation, small and medium-sized enterprises, use of aid

C 368/26

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Official Journal of the European Communities

20.12.1999

Opinion of the Economic and Social Committee on the ‘Ninth annual report of the Structural
Funds (1997)’

(1999/C 368/10)

On 29 April 1999 the Economic and Social Committee, acting under Rule 23(3) of its Rules of Procedure,
decided to draw up an opinion on the ‘Ninth annual report of the Structural Funds (1997)’.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was
responsible for preparing the Committee’s work on the subject, adopted its opinion on 29 September
1999. The rapporteur was Mr Vasco Cal.

At its 367th plenary session of 20 and 21 October 1999 (meeting of 20 October), the Economic and
Social Committee adopted the following opinion by 80 votes to one, with one abstention.

1.

Introduction

is issued pursuant

The annual report

1.1.
to Council
Regulation (EEC) No 2052/88 as amended by Council Regu-
lation (EEC) No 2081/93 concerning the reform of
the
Structural Funds. Article 16 of the regulation requires the
Commission, before 1 November of each year, to submit a
detailed report indicating the progress made in achieving the
objectives of the Funds and the use made of the aid granted
during the preceding year. Article 31 of the coordinating
Regulation (EEC) 2082/93 lists the items to be included in the
annual report and adds that ‘each year, the Commission shall
consult the social partners organised at European level on the
structural policy of the Community’.

1.2.
Under the abovementioned Article 16, the report has
to be submitted to the Council, the European Parliament and
the Economic and Social Committee. On receiving the report
each year, the Committee draws up an opinion setting out
the comments which it deems appropriate. Although the
Committee cannot influence the measures described in the
report as these refer to the past, its opinions have nevertheless
led to a dynamic exchange of views with the Commission on
specific aspects of the use of the Structural Funds. The final
part of the report contains a chapter on relations with the
other institutions, in which the Commission mentions and
comments on the opinions of the ESC, the European Parlia-
ment and, more recently, the Committee of the Regions.

A significant example of the influence of this dynamic
1.3.
consultation process is the involvement of the socio-economic
partners in the Structural Funds, enshrined in Article 4 of the
Framework Regulation as revised in 1993. During the first
years of the application of the 1988 Structural Fund reform,
the Committee — notably in its opinions on the annual reports
— repeatedly stressed the need to provide for involvement of
the socio-economic partners at all levels and in all stages of
the process. Although Article 4 does not fully embrace this
position, it has meant that since 1994 the social partners can
be involved both in the Member States and at Community
level, albeit in differing forms.

For all these reasons, the Committee cannot understand
1.4.
why this year, for the first time since 1989, it appears from
the ESC secretariat that the Commission is not to consult it on
the annual report, obliging it to draw up its opinion using the
own-initiative procedure. This has seriously delayed the start of
the work, owing to the procedural, budgetary and operational
problems which the launch of own-initiative work entails (1).

The situation is all the more surprising in view of the
1.5.
fact that the ninth report focuses on assistance to small and
medium-sized firms. This sector is widely represented within
the Committee, and the Committee has undertaken extremely
useful steps to ensure that the various Commission depart-
ments take greater account of specific SME interests.

2. The annual report of the Structural Funds (1997) (2)

1997 marked the start of the second stage of the
2.1.
programming period and the third year since the 1993 revision
of the regulations. Virtually all the programmes had been
approved by then, including the Community initiatives. At the
end of 1997 a total of 1 026 programmes were under way
(580 for the various objectives and 446 for the Community
initiatives).

2.2.
As programmes reached ‘cruising speed’, it was pos-
sible to make up some of the financial backlog of the previous
years. Implementation is thus in keeping with the financial
perspectives laid down in Edinburgh. Only in the case of the
Community initiatives did commitments and payments remain
insufficient.

(1) In order to prevent the recurrence of such problems of interpre-
it is necessary to make it clear that when a Council
tation,
Regulation requires that the Committee be sent annual reports on
Community policies on which it is consulted by right,
the
Committee can begin work on an opinion without this being
considered an ‘own-initiative’ opinion, as the European Parliament
and the Committee of the Regions do.

(2) Drawn up on the basis of the general summary which precedes

the report.

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2.3.
The new Objective 2 programmes were designed to
give priority to employment, and 89 territorial employment
pacts were also launched.

On the management side, 22 datasheets were drawn
the categories of expenditure eligible for

2.4.
up setting out
Community part-financing from the Funds.

The thematic priorities

2.5.
included the information
society, urban development, and interaction between regional
policy and competition policy.

2.6.
1997 was also the first year of preparations for the
new regional policy, as part of the package which came to
form Agenda 2000.

2.7.
Each annual report focuses on a particular horizontal
topic. The previous two annual reports focused on the
environmental aspect of assistance (1995) and the technologi-
cal development of the regions (1996). The topic for 1997 is
assistance to small firms.

2.8.
The report states that SMEs employ around two thirds
of the private labour force and account for 60 % of total
turnover in the EU. According to reports cited by the
Commission, SMEs have the greatest potential for job-creating
growth.

2.9.
In the 1994-1999 programming period as a whole,
between 15 % and 20 % of total Fund resources will be
specifically earmarked for measures to stimulate small firms
and improve their productive facilities and economic environ-
ment. The percentage will vary between Member States,
reaching 40 % in some of them.

2.10.
This funding covers a wide range of measures: aid for
investment through direct grants or financial engineering
measures, funding for business start-up areas, training (includ-
ing management training), advisory and information services,
measures to promote R&D, measures relating to the infor-
mation society, and aid for internationalisation.

2.11.
The Commission’s guidelines for the mid-term adjust-
ment of the programmes for Objective 1 regions, presented on
30 May 1997, stated that the available resources should be
used to support SMEs and local development and employment
initiatives.

initiatives, innovative measures and pilot projects, and techni-
cal assistance measures. The second part of
the chapter
summarises the main achievements in each Member State,
discussing the objectives and the Community initiatives sepa-
rately and highlighting measures to assist SMEs. The picture is
completed by the financial tables annexed to the report. The
Commission should have explained the definitions of SME
used in the various chapters, particularly as discussions on this
subject at Community level have led to changes in the
concepts and parameters used for defining SMEs. Several ESC
opinions (1) have discussed the problems arising from the
existence of differing definitions at both EU and national level,
and the consequences for the allocation of financial support to
the sector.

3.2.
The third chapter assesses the impact of the Funds,
setting out the results of the interim evaluations for each
objective, the thematic and horizontal evaluations, and the
employment impact. In the case of Objective 2, for instance,
the Commission states that ex post estimates for 1989-1993
suggest that of the 850000 gross jobs created, some 450 000
were net additional jobs. The average cost per net job created
or maintained was almost ECU 42 000 (22 000 per gross job).
The ex ante evaluation estimates that 650 000 jobs were
created or maintained in the period 1994-1996 and 880 000
in 1997-1999. This would give a cost of around ECU 11 000
per job. These figures are not comparable with those of the
previous programming period.

The fourth chapter looks at budget implementation,

3.3.
financial checks and the verification of additionality.

3.4.
The fifth chapter discusses coordination with the other
financial instruments, namely the Cohesion Fund, European
Investment Bank, European Investment Fund, ECSC, financial
mechanism of the European Economic Area, education and
training programmes, and Community funding of
trans-
European networks.

2.12.
In response to some comments by the Court of
Auditors, the Commission launched a series of actions to
assess the Structural Funds’ impact on SMEs. However, its
findings were not expected to be available until the end of
1998.

3.5.
The sixth chapter considers compatibility and com-
plementarity with other Community policies: employment and
social policy, environment, promotion of equal opportunities
for men and women, R&D, trans-European networks, tourism,
culture, competition policy, transparency of public procure-
ment, the common agricultural policy, and fisheries policy.

3. General comments

3.1.
The second chapter of the report presents the results
for each objective. It details the support for SMEs, Community

(1) See for example the Opinion on the third annual report of the

European observatory for SMEs (OJ C 82, 19.3.1996, p. 5).

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3.6.
Article 31 of the coordinating Regulation states that
the reports are to include ‘the list of major productive
investment projects which benefited from assistance granted
under Article 16(2)’ and that ‘these projects should be the
subject of a concise evaluation’. The present report contains
an annex listing the commitments and payments for these
‘major projects’, but provides no further information. This
problem can be resolved in future by the new wording of
Article 26 of the general regulation. This article, which refers
to major projects, requires the Member States to ‘inform the
Commission in advance’. This is not a requirement of the
current regulation.

the report discusses

The final chapter of

3.7.
inter-
institutional dialogue with the socio-economic partners at
European level. The section concerning the ESC appears to
overlook some key aspects of the Committee’s work in this
area during the reference period, such as its active involvement
in the Cohesion Forum and its opinions on the first cohesion
report and on Agenda 2000 (adopted in October 1997). This
oversight is surprising for several reasons. The Committee was
the only institution to have issued an opinion on the first
cohesion report, and its opinion was widely circulated at the
Cohesion Forum. The Committee was also the first body to
adopt an opinion on Agenda 2000.

4. Specific comments

4.1.
Shortly after the ninth annual report on the Structural
Funds was published, the Commission issued its mid-term
review of structural interventions for Objectives 1 and 6. As
this review gives further details regarding important aspects of
the annual report, its findings will also be considered in the
present opinion.

The Commission recognises that ‘the main aim of
4.1.1.
CSFs and SPDs is to reduce disparities between Member States
in terms of their respective per capita income’. At the same
time, ‘the acknowledgement of employment as an overriding
EU priority has also led to a number of programme adjust-
ments such as the formal introduction of territorial employ-
ment pacts, [and to] the refocusing of some training actions’.
This confusion about the objectives against which the effective-
ness of the use of the Funds is to be measured has unfortunately
increased in the last few years, and is not conducive to a
proper evaluation. Effectiveness is measured in terms of the
objectives set and to what extent they have been achieved
(while efficiency is measured in terms of the resources used),
and it is not possible to evaluate correctly the results for
objectives which did not exist.

partners ‘were also associated with this process to the extent
of their participation in Monitoring Committees’. Since in
many cases such participation still does not occur, they were
not involved in the evaluation either. This is particularly
regrettable because the social partners’ practical knowledge of
projects on the ground would have been extremely useful for
the mid-term review.

4.1.3.
Human resource development was one of the topics
which was subject to particular changes in the context of the
mid-term review, as can also be seen from the ninth annual
report. The situation is changing rapidly, so adjustments
are necessary. Also, many programmes are designed on a
horizontal basis and take a ‘top-down’ approach; they cover
differing economic and geographical situations, and thus are
not really tailored to local priorities. The territorial employ-
ment pacts were a positive step which sought to use a
‘bottom-up’ approach, but
their practical effects seem to
have been very limited, partly because insufficient additional
resources were allocated to them.

4.1.4.
The report on the mid-term review does not devote
sufficient attention to the fisheries sector. This is one of the
sectors facing particular delays, inadequacies and difficulties,
but the report is unable to offer a response.

4.1.5.
Project selection criteria are a problem for many
operational programmes and Community initiatives. The
report addresses this question but simply notes that relatively
sophisticated scoring systems are not a sufficient condition for
ensuring that the best projects are selected; there is still the
question of the credibility of the information and forecasts
provided by the applicants. The Committee points out that in
many cases, projects submitted by the social partners do not
receive sufficient support, and are passed over for others which
fizzle out when Community support ceases.

4.2.
Turning to the annual report, the Committee stresses
the importance of the topic chosen for this year, namely
Structural Fund assistance for SMEs. The report highlights the
many initiatives in this field. The role of SMEs in providing
employment is widely recognised. However, the same cannot
be said of the aid systems, which often grant aid on the pretext
of safeguarding jobs. Indeed, some evaluations in the Member
States conclude that the aid systems are intrinsically ineffective
in creating jobs, and that the results are not on a par with the
financial outlay.

4.1.2.
The evaluation also made the managers and monitor-
ing committees more familiar with the operational pro-
grammes, facilitating the mid-term review of them and improv-
the social
ing their management. The review states that

4.3.
The Committee proposes that the next annual report
(1999) should take as its general topic the participation of the
socio-economic partners. Article 4 of the current framework
regulation mentions the importance of this participation, and

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the new regulations adopted on 21 June 1999 reinforce it.
During the preparatory stage for the next programming period,
information should be gathered and examples of involvement
of the socio-economic partners should be noted; mention
should also be made of projects run by the social partners at
local, regional, national, cross-border and Community level.

As regards the lessons which the annual report pro-
4.4.
vides for the next programming period, the Committee stresses
the importance of the current Objective 4 (anticipation of
industrial change), and the need to retain this perspective. The
annual report says little about Objectives 3 and 4, and the
experience gained by the social partners and the public
authorities should be better publicised so that it can be used in
the next programming period.
In particular, measures to
cushion the impact of the changes brought about by the
information society and by the knowledge-based society in
general are important not only for young people, but also for
existing workers.

4.5.
The next programming period should not mark a
step backwards as regards coordination of Structural Funds

activities with the other financial instruments. Efforts to pool
the operation of the various funds and the other financial
instruments should be stepped up. It may be easier for fund
managers to draw up a small number of national programmes,
to which the various projects should be adapted. However,
simplification remains the most important goal for activities
on the ground. There should be more of a ‘bottom-up’
approach, and the funds should be coordinated when coordi-
nation is most necessary (i.e. in the field) rather than when it
is easiest (i.e. in the documents).

4.6.
All too often in the past, projects financed by another
fund have not been accompanied by appropriate vocational
training measures for men and women in the region concerned.
This must not continue. Coordination of the European Social
Fund with the other funds is particularly important because, at
the end of the twentieth century, human skills are the key to
the challenges of tomorrow’s society. It is regrettable that
the timid steps made towards coordination in the past in
Objective 1 regions are not
to be followed in the new
Objective 2 regions, or by the EAGGF (guarantee section) or
the ESF, in the next programming period.

Brussels, 20 October 1999.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI