Special Report No 7/99 concerning the development of industrial sites, together with the Commission's replies
Date: 1999-12-09
Institutions: European Court of Auditors
Subjects: EU aid, EU control, European Regional Development Fund, industrial development

C 68/24

EN

Official Journal of the European Communities

9.3.2000

SPECIAL REPORT No 7/99

concerning the development of industrial sites, together with the Commission(cid:146)s replies

(submitted pursuant to Article 248(4), second subparagraph, EC)

(2000/C 68/02)

CONTENTS

Paragraph

Page

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Budgetary and physical data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 4

5 to 9

Legality and regularity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 to 12

Mode of development of industrial sites co-financed by the ERDF . . . . . . . . . . . . . . . . . . . . . . .

13 to 41

Organisational background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15 to 18

Determination of requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19 to 28

Industrial and small business areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20 to 26

Business (cid:145)nurseries(cid:146) and bridging buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27 to 28

Objectives and indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29 to 33

Selection criteria for projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34 to 39

Evaluation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40 to 41

Interim and ex post evaluation within the context of Community measures . . . . . . . . . .

Specific evaluations outside the framework of the Community measures . . . . . . . . . . . .

40

41

The impact of industrial sites and the co-financing of them . . . . . . . . . . . . . . . . . . . . . . . . . . . .

42 to 65

Undertakings and jobs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

42 to 47

Selling prices for infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48 to 62

Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49 to 56

The role of ERDF aid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

57 to 62

Value added by the Community programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63 to 65

Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66 to 77

Financial data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66

Development and restructuring of the regions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67 to 73

Impact of the ERDF aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

74 to 77

The Commission(cid:146)s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25

27

27

28

28

31

31

31

33

33

33

34

34

34

35

35

36

36

37

37

37

37

38

38

40

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Official Journal of the European Communities

C 68/25

SUMMARY

Within the context of its audit of the development of industrial sites (see paragraph 1), in addition to examin-
ing the legality and regularity of the co-financed projects the Court also wished to investigate the degree of
integration of the development of industrial sites into that of the regions and the impact of the sites. In order
to do so, it conducted on-the-spot audits in six regions receiving European Regional Development Fund (ERDF)
aid and sent questionnaires to seven others. Investigations were also carried out at Commission departments
(see paragraphs 2 to 4).

Although industrial sites are not mentioned in the texts of the regulations governing the Structural Funds, they
are nevertheless often co-financed by the ERDF and it is difficult to quantify the total amount of its contribu-
tions. An improvement in the quality of the data sent in by the Member States would be necessary in order to
obtain more accurate information on the use of ERDF resources (see paragraphs 5 to 7).

As regards legality and regularity, some observations have been sent to several Member States concerning the
eligibility of expenditure declared by them and irregularities or legal disputes not notified to the Commission
(see paragraphs 10 to 12).

As regards regional development and conversion, it was found that there are often a large number of opera-
tors with responsibility for the creation of industrial sites, but no coordination between them (see paragraphs
15 to 18), that there are no land development priorities for industrial sites and that the objectives and selec-
tion criteria for the projects are weak (see paragraphs 29 to 39). The initiatives that are occasionally taken to
draw up inventories of sites are not always adequately targeted (see paragraphs 19 to 28).

The Commission ought therefore to encourage the Member States to create analytical and monitoring tools
(inventory and sales statistics) to enable active management of the creation or conversion of industrial sites
within the framework of a genuine regional development plan (see paragraph 70).

In the specific case of (cid:145)business nurseries(cid:146), a maximum length of stay should be imposed on companies so that
the nurseries can remain focused on their aim of helping in the creation of new operations (see paragraph 28);
they should compile statistics on the undertakings(cid:146) success rates and the jobs created (see paragraphs 33 and
46).

The evaluators of ERDF measures should also investigate whether there is a consistent site development
approach and an analysis of needs (see paragraphs 40 and 41).

With regard to the impact of the ERDF aid, it was found that where inventories of the sites exist they enable
the number of undertakings and jobs within them to be monitored in a more appropriate way than is possible
using occupancy rates alone; little information is available on the jobs created by undertakings which have
benefited from the (cid:145)nurseries(cid:146) (see paragraphs 43 to 46).

There are few regions where it is possible to verify the application of the rules on competition in connection
with the fixing of rent levels and sales prices for developed infrastructure. The market price, which should
where necessary be taken as a reference point in order to measure distortion of competition, is not in fact help-
ful since it is too closely connected to the initiatives of State property-developers alone (see paragraphs 49 to
55). The Commission should for this reason examine the lack of transparency in the fixing of prices for devel-
oped plots. In addition, in view of the competition between developers in a region to attract undertakings
which are moving onto sites, ERDF aid should a fortiori only be granted within an overall regional develop-
ment framework laying down the selection criteria for subsidised projects (see paragraph 56).

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9.3.2000

When ERDF aid enables the developer to make a profit, there is no counterpart to the Community financing
and the non-refundable ERDF aid has no observable impact. In some cases, replacing the subsidy with a loan
should be considered. Subsidies are justified when there is a desire to create an incentive for localisation and
in the redevelopment of derelict or abandoned former sites. Subsidies should anyway always be granted within
the framework of a structured regional development plan, in order not to outstrip actual needs (see paragraphs
57 to 62).

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INTRODUCTION

1. Two of the objectives ascribed to the Structural Funds (SFs)
are to further the development and structural adjustment of
regions whose development is lagging (Objective 1) and to restruc-
ture regions seriously affected by industrial decline (Objective 2).
In this connection the ERDF co-finances projects to set up or
modernise infrastructures, including industrial or small business
areas whose developed plots are generally sold vacant to under-
takings. In some cases these areas are equipped with buildings,
whether they be (cid:145)nurseries(cid:146) intended to house very recently estab-
lished undertakings on a temporary basis by providing assistance,
management support and shared office services, or (cid:145)bridging
buildings(cid:146) to house undertakings that are not yet in a position, or
do not wish to bear installation-investment costs. Such areas and,
where appropriate, the buildings within them are termed (cid:145)indus-
trial sites(cid:146).

2. Neither the concept of industrial sites nor the types of infra-
structure it covers are specifically mentioned in the regulatory
texts governing the SFs. The financial resources devoted to them
may, however, account for a significant proportion of the total
ERDF aid in regions whose development is lagging or which are
being restructured (see paragraphs 8 and 9), and they are there-
fore covered indirectly by the Community regional policy. The
Court therefore wished to examine, in addition to the legality and
regularity of the operations co-financed by the ERDF (see para-
graphs 10 to 12), firstly, how the procedure for developing indus-
trial sites fits into that of the regions receiving ERDF subsidies (see
paragraphs 13 to 41) and, secondly, the impact of these opera-
tions (see paragraphs 42 to 65).

3. The ERDF contributes to the development of industrial sites
primarily through operational programmes made up of (cid:145)sub-
programmes(cid:146) which are in turn subdivided into (cid:145)measures(cid:146), under
which the projects are co-financed in the eligible regions. The
Commission intervenes chiefly at the level of the main priorities
for these programmes. For the measures, its role is primarily to
ensure that the Member States and regions submit files describ-
ing the planned actions. At the Commission, the investigation
was conducted at the Directorates-General for Regional Policy
and Cohesion (DG XVI) and Competition (DG IV).

sample is not intended to ensure statistical representativeness, but
rather to demonstrate the range of differing practices, some of
which should be encouraged. Questionnaires were also sent to
seven other regions, of which six replied (Hainaut (B, Objective 1),
Saarland (D, Objective 2), the Autonomous Community of
Extremadura (E, Objective 1), the Loire region (F, Objective 2),
Basilicata (I, Objective 1) and Limburg (NL, Objective 2)), and one
did not (Ireland (Objective 1)).

BUDGETARY AND PHYSICAL DATA

5. The Commission departments have various systems for record-
ing accounting and financial data concerning ERDF support mea-
sures:

(a) Sincom is the general system that records the Commission(cid:146)s
commitments and payments, including those relating to ERDF
support measures; this system is designed for accounting pur-
poses and contains no information concerning the content of
the measures;

(b) Garfield is a local system, specific to DG XVI, which details
the appropriations (1) under ERDF support measures down to
measure level; however, it does not record the expenditure
declared by Member States, even though this is broken down
in exactly the same manner; it contains a database that is used
by DG XVI to list, using a predetermined thematic classifica-
tion, measures under ERDF assistance programmes dating
from the 1994 to 1999 generation; some items of informa-
tion are not included in this database;

(c) details of expenditure actually incurred and broken down in
accordance with the measures provided for in the programmes
are only available in the form of hundreds of paper and com-
puter files concerning these programmes; no overview of the
situation is drawn up.

6. The Court has already noted on several occasions the diffi-
culty of quantifying the financial resources earmarked by the
ERDF for actions in favour of specific fields or target groups (2).
Any attempt to identify the appropriations allocated for develop-
ing industrial sites also comes up against several difficulties, of
which the main ones are:

4. Audits in the Member States were carried out in six regions
receiving ERDF subsidies, three with Objective 1 status (the Land
of Thuringia (D), the Autonomous Community of Valencia (E)
and Sicily (I)) and three with Objective 2 status (the eligible regions
of Limburg (B), the Nord-Pas-de-Calais region (F) and Wales (UK)).
These regions are economically and geographically different, which
has an effect on their development or restructuring. They were
selected because of their interest value as regards the development
of industrial sites and the volume of appropriations they allocate
to finance them in the context of ERDF support measures. This

(a) projects to develop new industrial sites may be charged to
measures that include projects of a different nature. Examples
from the programmes audited are conference centres (Nord-
Pas-de-Calais, 1989 to 1991/A operational programme), water-
supply and tourism infrastructures (Thuringia, 1989 to 1993
operational programme) and other local development, tour-
ism or industrial projects (Valencia, 1990 to 1993 operational
programme); nurseries and bridging buildings can actually be
covered by measures to support SMEs;

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Official Journal of the European Communities

9.3.2000

(b) In Objective 2 regions new industrial sites were created by
redeveloping abandoned former sites and are charged to mea-
sures that can also include urban regeneration; furthermore,
it is often the case that redeveloping industrial sites does not
result in new sites being developed, but rather residential
developments or greenfield sites.

7. The appropriations earmarked for developing industrial sites
in the financing schedules are therefore only indicative and approxi-
mate. The only way of obtaining more accurate information
would be to improve the quality of the data sent in by the Mem-
ber States, and one principal means of achieving this would be for
assistance programmes to be more homogeneous and detailed in
structure. The information concerning the 1994 to 1999 period
extracted from the Commission database (see paragraph 5) shows
that the appropriations set aside for developing completely new
areas amount to ECU 2 493 million and those for redeveloping
run-down former sites to ECU 1 338 million. Furthermore, appro-
priations totalling ECU 4 363 million were earmarked for struc-
tures to support economic activities that may include industrial
sites, but the nature of the infrastructures was not further speci-
fied beforehand.

8. With regard to the six regions visited, Table 1 shows the initial
financial appropriations under ERDF assistance for the 1989 to
1993 and 1994 to 1999 periods for, firstly, these regions(cid:146) main
co-financed programmes, with all measures taken together, and,
secondly, measures in these programmes likely to include
industrial-site development projects. The corresponding expendi-
ture for the 1989 to 1993 period is also shown. Depending on
whether the regions visited have Objective 1 or Objective 2 status,
it was observed that the amount of ERDF aid devoted to the
industrial sites may account for up to 23 % or 48 % of the total.

9. Physical data relating to these same regions and their indus-
trial sites are set out in Table 2. They mainly indicate that, in com-
parison with their surface area and population, Objective 2 regions
have more extensive infrastructures than those with Objective 1
status. Owing to lack of availability, some data concerning the
Objective 2 regions (population and surface areas) are shown only
at NUTS II level (3), whereas areas eligible for ERDF Objective 2
support measures are set at NUTS III level.

LEGALITY AND REGULARITY

11. The issue of ineligibility arose in three of the six projects
audited in the Community of Valencia (E), for which VAT and liti-
gation provisions and various sums unconnected with the projects
audited had been declared (ineligible expenditure of ECU 1,2 mil-
lion out of a total of ECU 9,1 million; ERDF aid of 58,3 %). More-
over, one amount of ECU 2,5 million corresponded to excess
expenditure declarations compared with what should have been
declared under the principle according to which a maximum of
10 % of the total eligible cost is accepted for purchasing land (4).
For one of the six projects audited in Nord-Pas-de-Calais (F) the
declared expenditure could not be justified (ECU 0,2 million out
of a total of ECU 1,7 million; ERDF aid of 19 %).

12. Failure to declare irregularities to the Commission in accord-
ance with Regulation (EC) No 1681/94 (5) applied, firstly, to two
projects in Thuringia (D), the value of which was deducted from
the expenditure declared following an audit conducted by the
Land Audit Institution (expenditure of ECU 4,3 million and ECU
2,9 million) and, secondly, to Sicily (I), where two of the four
projects audited included in the expenditure declaration were sub-
ject to legal disputes before the courts (expenditure of ECU 3,6
million and ECU 1,9 million; ERDF aid of 50 %). In one of the lat-
ter cases the building co-financed by the ERDF had collapsed.

MODE OF DEVELOPMENT OF INDUSTRIAL SITES
CO-FINANCED BY THE ERDF

13. Assistance in the form of programmes presupposes action
being taken within an institutional organisation specific to each
Member State or even to each region (see paragraphs 15 to 18).
This action should include:

(a) a determination of requirements (see paragraphs 19 to 28);

(b) the setting of objectives appropriate to a regional develop-
ment project and indicators for measuring the degree to which
the projects are implemented and their impact (see paragraphs
29 to 33);

(c) the setting of criteria for selecting projects (see paragraphs 34

to 39);

(d) an ex post evaluation of the projects implemented and their
impact, which should be taken into account when subsequent
analyses are carried out (see paragraphs 40 and 41).

10. The audit of projects in the regions visited gave rise to obser-
vations concerning the eligibility of certain items of expenditure
declared, and revealed irregularities or legal disputes not notified
to the Commission.

14. Where such action is not taken at global level within the
region concerned, there is a risk that too many or too few indus-
trial sites will be developed, either in relation to demand on the
part of undertakings (output mismatch) or in ignorance of the lat-
ter(cid:146)s requirements. Undertaking demand is not, however, the only

Table 1

Financial data on ERDF aid in the regions visited

Objective 1 regions

Objective 2 regions

(million ECU)

Thuringia (D)

Valencia (E)

Sicily (I)

Limburg (B)

Nord-Pas-de-Calais (F)

Wales (UK)

1989 to
1993

1994 to
1999

1989 to
1993

1994 to
1999

1989 to
1993

1994 to
1999

1989 to
1993

1994 to
1999

1989 to
1993

1994 to
1999

1989 to
1993

1994 to
1999

244,4

955,7

351,8

1 207,9

374,8

558,0

81,9

96,8

229,4

592,0

179,4

358,2

(1)

u.

(1)

u.

u.

7,0

-

2,0

8,8

-

15,6

86,8

30,0

25,4

46,6

75,9

113,0

78,8

109,9

-

1,3

u.

u.

-

23,2

133,2

-

-

5,4

u.

u.

17,3

10,5

35,9

39,7

u.

u.

31,0

23,6

13,2

48,0

u.

u.

33,1

73,4

35,8

19,1

u.

u.

43,9

64,8

u.

30,7

u.

u.

Initial financial package for the main
ERDF measures

Initial package for ERDF aid for
industrial sites

Including, under the heading of
redevelopment (2)

Proportion of ERDF aid allocated
under industrial sites (%)

(1)

u.

(1)

Final ERDF aid for industrial sites

91,9

Including, under the heading of
redevelopment (2)

u.

u.: Unavailable.
(1) These data cannot be supplied because the measures to which industrial sites are charged are too general.
(2) Considerable sums are allocated to the redevelopment of sites in disrepair, but it is not possible to specify the proportion used to create new sites.

.

.

9
3
2
0
0
0

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

C
6
8
/
2
9

Physical data on the regions visited and their industrial areas

Table 2

Objective 1 regions

Objective 2 regions

Thuringia (D) (3)

Valencia (E) (4)

Sicily (I) (5)

Limburg (B)

Nord-Pas-de-Calais (F)

Wales (UK)

1 617 400

2 330 500

2 570 690

242 220

1 241 410

2 076 600

2 503,8
1 279,5

3 919
1 266
5 185

75,6

0,3
2,1
4,1

u.

u.

78 958

20,1

3 908,4
1 645,0

1 281
1 917
3 198
n.s.

n.s.
n.s.
n.s.

u.

u.

u.

u.

5 094,7
1 672,0

4 113
u.
4 113
u.

0,2
0,8
2,5

u.

u.

775,3
319,6

7 411
571
7 982

92,8

3,3
10,3
25,0

115,0

5,0

4 001,7
1 534,0

10 391
2 358
12 749

81,5

1,0
3,2
8,33

1 008,0

2,3

30 898

85 209

264 468

7,5

11,5

25,5

2 918,9
1 301,8

u.
u.
u.
u.

u.
u.
u.

u.

u.

u.

u.

C
6
8
/
3
0

E
N

O

f
f
i
c
i
a
l

J
o
u
r
n
a
l

o
f

t
h
e

E
u
r
o
p
e
a
n
C
o
m
m
u
n
i
t
i
e
s

Surface area of the region (ha) (1)

Population in 1996 (x1 000) (1) :
(cid:151) total
(cid:151) active

Surface area of the sites (ha) (2) :
(cid:151) occupied developed surface area
(cid:151) unoccupied developed surface area
(cid:151) total developed surface area
(cid:151) occupancy rates for the developed surface areas (%)

Total developed surface area:
(cid:151) as a percentage of the surface area of the region
(cid:151) in hectares per 1 000 individuals
(cid:151) in hectares per 1 000 active individuals

Average surface area sold per year (ha) (2)

Number of years needed to sell the unoccupied developed surface
area

Jobs (2) :
(cid:151) total number of jobs in the areas (individuals)
(cid:151) average number of jobs per occupied hectare in the area

(individuals/ha)

u.: unavailable
n.s.: not significant.
(1) Source: Eurostat (NewCronos).
(2) Source: the relevant regions.
(3) Areas developed and redeveloped after unification.
(4) Not including areas with an occupancy rate greater than 80 %.
(5) Not including small business areas.

a

b
c

d
e
d+e=f
d/f

f/a
f/b
f/c

g

e/g

h

h/d

.

.

9
3
2
0
0
0

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criterion that should guide the development of industrial sites. It
is the responsibility of the authorities concerned to ensure that
economic activity is stimulated in areas eligible for ERDF assis-
tance, in accordance with the specific requirements of these areas,
and to prevent industrial sites being spread too widely, as this may
have a detrimental impact on the environment and land-use plan-
ning.

In Sicily (I) 33 industrial areas have been developed by 11
18.
consortia set up by law under the supervision of a section of the
regional administration. Small business areas, on the other hand,
are developed by municipalities under the supervision of a differ-
ent section. There is no coordination between these operators,
even though industrial undertakings can set up in small business
areas and vice versa.

Organisational background

Determination of requirements

15. The initiative to develop sites co-financed by the ERDF may
be taken at various levels. The main approaches can thus be
grouped into three categories: (1) the sites are developed exclu-
sively by the municipalities in accordance with their specific
objectives; (2) local authorities whose responsibilities cover a
group of municipalities, if not the actual region, also take the ini-
tiative in this direction; (3) sites are also developed by bodies set
up for this purpose. The feature generally common to these dif-
ferent categories is a lack of coordination between the operators
and, where this occurs, failure to examine the expediency of the
projects. In the rest of this report, the authorities or bodies which
receive ERDF assistance are referred to as (cid:145)final beneficiaries(cid:146) and
sometimes as (cid:145)developers(cid:146) (6). The final beneficiary is thus not the
undertaking which moves onto the industrial site.

16. Thuringia (D) and Limburg (B) belong to the first of the
above categories. In the latter region, however, cooperation
between the communes and the private sector is achieved through
a regional development company that is at the centre of various
initiatives in favour of undertakings, manages a detailed database
on sites and draws up related long-term analyses.

17. The Autonomous Community of Valencia (E), Nord-Pas-de-
Calais (F) and Wales (UK) may be placed in the category where
industrial sites are also developed by authorities which are not
municipalities. In the Autonomous Community of Valencia (E),
the industrial and small business areas are created by a State-
owned company under private law, which accounts for some 70 %
of site supply, by a regional State-owned company under private
law and by the provinces, municipalities and the private sector. A
lack of coordination between these operators was observed. In
Nord-Pas-de-Calais (F) there is fierce competition between the
municipalities to attract undertakings, due largely to the volume
of budgetary revenue that can be generated by means of (cid:145)business
tax(cid:146) (7). This competition has led to a sharp increase in the num-
ber of relatively small industrial and small business areas (see
paragraph 41). Attempts are, however, being made to encourage
the municipalities to cooperate with each other. In some cases the
private sector is involved in developing industrial sites through
State and private sector partnerships. In Wales sites are developed
on an individual basis by the regional, county and municipal
administrations and a development agency.

19. Carrying out an analysis of the number of developed indus-
trial sites required presupposes the appointment of a body to be
responsible for developing them or for coordinating the initiatives
launched by the various parties, particularly in view of the lack of
coordination between State property-developers. If global knowl-
edge of a region(cid:146)s requirements is to be acquired, then there is a
need for information concerning existing infrastructures and a
method and data that will enable long-term demand to be assessed.

Industrial and small business areas

20.
In addition to the fact that the occupancy rate of industrial
and small business areas (8) may conceal subregional imbalances,
as an indicator it fails to ensure that sufficient developed surface
areas are available, given that this can only be achieved by taking
account of sales. For example, in Limburg (B), whose average site-
occupancy rate is 92,8 % (see Table 2), availability is relatively
greater than in Nord-Pas-de-Calais (F), whose average rate is 81,5 %,
as annual sales in the former in fact amount to 115 hectares and
in the latter to 1 000 hectares. Limburg therefore has vacant
developed sites that will enable it to meet sales for five years,
whereas availability in the other region is limited to just over two
years.

21. Some regions visited that have a body responsible for such
matters, information on existing infrastructures and a method
and data for assessing long-term demand took the initiative of
drawing up analyses of requirements for industrial and small busi-
ness areas. In Limburg (B) analyses were made on the basis of his-
toric sales of plots of land over a 10-year period and an optimum
stock-level was defined as being one sufficient to enable demand
to be met over the average period required to develop a new area,
i.e. three years, plus a safety margin. A similar analysis, with a
15-year horizon, is carried out by the Flemish community with
the provinces(cid:146) assistance when the land-planning scheme is defined.
In Nord-Pas-de-Calais (F) an initial survey of industrial areas,
which detailed, inter alia, the surface areas developed and avail-
able to undertakings, was conducted in 1996 and co-financed by
the ERDF. On the basis of the average figure for the surface area

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sold annually, it can be seen that there is a very uneven locational
spread of developed-plot reserves and that there are shortfalls in
certain districts. This survey remains to be checked by the depart-
ments responsible for it, but the fact that they only have to update
it every three years reduces its usefulness. It is not used to evalu-
ate plot-development requirements.

22. Other regions visited have information concerning their
industrial and small business areas, but do not use it to determine
requirements, in particular because no information concerning
site sales exists. In Thuringia (D) the inventory, which was drawn
up in 1997 and covers areas for which some municipalities have
received public subsidies, still contains no information on unre-
developed areas opened up in the former German Democratic
Republic. A need for 1 500 to 1 600 hectares of developed sites
is quoted under the 1994 to 1999 SPD for this region, but these
figures were not based on an analysis of the existing supply and
sales. In the Autonomous Community of Valencia (E) there is an
inventory detailing the areas, created at different times, which still
have vacant equipped plots. They account for 1 917 hectares out
of a total of 3 198, giving an average occupancy rate of 40 %; 120
hectares were quoted as being required under the 1989 to 1993
operational programme, but no global analysis had been made. In
Sicily (I) an inventory of industrial areas was compiled in 1989,
with ERDF assistance, and was updated in 1996. However, it does
not indicate the developed surface areas that are unoccupied and
available to undertakings. There is also a list of small business
areas developed by the municipalities, several of which have
received ERDF assistance, but there is no information as to their
surface area or occupancy rate. In Wales (UK) a partial database
has been developed by the development agency, but the informa-
tion it contains is not used as a forward-planning tool.

23. The information in the abovementioned inventories is for-
warded by the site-owners to the authorities responsible for
keeping such inventories. Discrepancies between the information
in these inventories and that obtained from final beneficiaries
were detected in Limburg (B) and Nord-Pas-de-Calais (F), or when
situations established on different dates were compared in Thur-
ingia (D) and Sicily (I). They are due to, inter alia, incorrect data
being forwarded or the protracted intervals at which these data-
bases are updated.

to exhaust the stock of equipped plots available may be consid-
ered excessive. The redevelopment of fallow land will further
increase the available surface area. The Court has already detected
overcapacity in this region on past occasions (9). The Loire Region
(F) has neither inventories of sites nor sales information. In
Extremadura (E) there is a list of completed industrial sites which
indicates total surface areas and the surface areas of plots, which
makes it impossible to estimate actual needs; the local authorities
have, however, said that a detailed inventory is being prepared
now. In Basilicata (I) a small amount of basic information has yet
to be supplemented. Limburg (NL) has a database of industrial
sites and some information on the annual sales of developed plots.
A requirements analysis, broken down according to the various
types of site, is carried out every five years on the basis of job-
creation scenarios and sectoral statistics regarding the number of
people employed per hectare. In addition, an analysis of plot
availability and sales is also carried out annually. It is considered
necessary to maintain a permanent level of stock equal to the
average quantities that can be sold over a five-year period.

25. Feasibility studies have been carried out for some large
industrial sites and in some cases have been co-financed by the
ERDF. This was the case with a logistical and transport area and a
services zone in Limburg (B) and a mixed transport (road/rail) site
in Nord-Pas-de-Calais (F). In the latter region feasibility studies
were also carried out for smaller projects. One of these studies,
carried out at a municipality(cid:146)s request, described the highly
unfavourable environmental situation with regard to two sites it
had planned and the extensive site availability in surrounding
municipalities. This was not reported, however, in the document
presenting the project to the regional authority which was to
decide whether ERDF assistance would be granted. These projects(cid:146)
development was finally suspended, owing to a lack of interest on
the part of local undertakings. Cases can also arise where, despite
a feasibility study having been carried out, the site developed does
not accurately meet demand. In Wales (UK) the plots on offer
comprise, inter alia, redeveloped former mining- and steel-industry
sites that are very small in size. Undertakings are aware of the lack
of large-scale sites and have been forced to set up outside the
region. Nevertheless, when an area of several dozen hectares was
redeveloped, with ERDF assistance, it was decided that it would
be geared towards SMEs operating in high-technology sectors and
turned into a showcase area. Some time after it was opened, part
of the development co-financed by the ERDF had to be demol-
ished to allow a large undertaking to be installed. Furthermore,
some landscaping equipment there was no longer being main-
tained.

24. Of the regions that replied to the questionnaire (see para-
graph 4), Hainaut (B) has both an inventory of the industrial areas
under the five local authority associations that are responsible for
their development and statistics on sales of developed sites.
Although examination of sales is cited in the questionnaire as
being a guiding principle when a decision is taken to develop new
areas, the occupancy rate of the developed plots is only 59,5 %.
At the average sales rate observed in recent years the time needed

26.
In Limburg (B) and Nord-Pas-de-Calais (F) surveys were car-
ried out before measures to redevelop abandoned industrial sites
were taken. The scope for assigning these sites to other uses is
frequently limited for legal, technical, environmental or, simply,

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access reasons. The delays that may result are not particularly
consistent with the desire to be in a position where new commer-
cial surface areas are promptly available, and the sites are gener-
ally reallocated in a piecemeal fashion. In Limburg (B), although
additional financial resources were allocated for developing new
areas, those initially set aside for the redevelopment of former
sites were underutilised. In Thuringia (D), as of 1994, site creation
and redevelopment were linked by the requirement that redevel-
opment of former sites should absorb 30 % of all financial resources
allocated to industrial sites, despite the lack of an inventory of
former sites.

Business (cid:145)nurseries(cid:146) and bridging buildings

27. Public authorities are usually prompted to start developing
business (cid:145)nurseries(cid:146) or bridging buildings by the results of similar
projects (see paragraph 1). In this way a network of centres is
gradually established that is more or less coordinated (10).

areas, or merely paraphrased the title of the measures. Implemen-
tation indicators existed in certain cases, whilst impact indicators
were very rare and could not always be calculated. In Sicily (I) the
main objectives were to increase industries(cid:146) added value, stimulate
entrepreneurial initiative and encourage the relocation of activi-
ties to areas outside urban centres; physical and impact indicators
were proposed.

30.
In Wales (UK) the intention was to measure the sites(cid:146) impact
on jobs. Although there are no statistics on this topic, estimated
figures were put forward when the projects were submitted for
ERDF funding. The ex post evaluation of programmes for the 1989
to 1993 period revealed a considerable difference between the
estimates and what was actually achieved, which may be attrib-
uted in part to over-optimistic forecasts: 3 793 and 633 gross
jobs (11) were created respectively under measures relating to
industrial sites under the 1989 to 1991 operational programme
and the 1989 to 1993 RECHAR Community Initiative (conver-
sion of coal-mining areas), whereas the projects adopted had fore-
cast that 12 658 and 1 095 gross jobs would be created respec-
tively.

28. Since these buildings(cid:146) operating costs have to be covered by
rents paid by the undertakings using them, their occupancy rate
is of primary importance. It is therefore essential to determine
potential demand as accurately as possible, so as to avoid low
occupancy rates and the attendant need to increase the rents
charged to cover operating costs. This would be particularly det-
rimental in the case of (cid:145)nurseries(cid:146), since their objective is to
encourage new undertakings to (cid:145)hatch out(cid:146) and to reduce their
mortality rate. If there is insufficient information on the level of
demand, some (cid:145)nurseries(cid:146) may be created and then prove not to
have been needed. They may end up being converted into build-
ings that are simply leased to undertakings, as was the case with
two co-financed projects in Limburg (B). Although three of the
remaining five centres have been operational since the end of the
1980s, their average occupancy rate is still only approximately
70 %, whereas when they were set up, the rents had been calcu-
lated so that their profit and loss accounts would balance on the
basis of a 90 % occupancy rate. The centre with the highest aver-
age occupancy rate is the one that had the highest number of
undertakings staying for more than five years. In Nord-Pas-de-
Calais (F), the occupancy rate of one (cid:145)nursery(cid:146) set up in 1992 was
below 50 %. Following difficulties at the beginning of the 1990s,
one group of seven (cid:145)nurseries(cid:146) set up at the end of the 1980s and
managed by a French dØpartement authority had an occupancy rate
of over 80 %. As these structures are very sensitive to the eco-
nomic climate, the occupancy rate increased overall in 1998. In
Wales (UK) the failure to impose a maximum length of stay on
undertakings resulted in one (cid:145)nursery(cid:146) co-financed by the ERDF
gradually turning into a building leased under normal conditions.

31. As of 1994 the programmes almost systematically included
more detailed objectives and some physical and impact indicators
(surface area developed and numbers of undertakings set up and
jobs), with the exception of those of Thuringia (D). Very few indi-
cators exist that show concern for regional development and,
more particularly, no distinction is ever drawn between gross and
net employment.

32. The information concerning the undertakings set up and
jobs available is not very relevant, since it is drawn up when the
project is merely at the start-up stage. In this regard, ex post evalu-
ation is nevertheless carried out too early. However, in some cases
the inventories compiled by some regions (Thuringia (D), Sicily
(I), Limburg (B) and Nord-Pas-de-Calais (F)) sometimes include
information on the undertakings located at the various sites or on
employment, which allows the impact of these items of infra-
structure to be assessed more accurately (see paragraph 43).

33. From the outset the stated objective of some (cid:145)nursery(cid:146)-
creation measures has been to reduce the failure rate of new
undertakings by lowering their fixed costs and obtaining manage-
ment subsidies for them. However, little information is available
concerning job creation by undertakings that have benefited from
this support infrastructure (see paragraph 46).

Objectives and indicators

Selection criteria for projects

29. Up until 1994 several programmes made no reference to the
specific objectives of developing industrial and small business

34. An active industrial sites development policy would need to
use selection criteria suitable for development projects with, for

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example, priorities as to the siting of projects, their design quality
or the type of undertaking they could house. This principle is all
the more necessary where State property-developers compete on
selling prices or rent levels (see paragraphs 48 to 62). The pro-
grammes do not usually contain selection criteria for projects.

In Sicily, there were no criteria during the 1989 to 1993
39.
period and the administration was left to select the projects. In
the subsequent programme, five industrial areas were chosen,
with the aim of reinforcing the effects of assistance, of which four
were selected on the basis that they were already well developed.
However, because the projects in these five areas advanced too
slowly, all the areas are to be given the possibility of receiving
Community appropriations.

In Limburg (B), ERDF assistance was supposed to be granted
35.
according to urgency and need, and the quality of the land. In fact,
the supply of developed sites decreased at the end of the 1980s
and all the projects were co-financed as and when applications
were submitted. For business (cid:145)nurseries(cid:146), location criteria had been
set and the success of previous projects was supposed to deter-
mine whether or not new ones were set up. In fact, three projects
out of six had already been completed before implementation of
the programme began, implying that in this case the related ERDF
co-financing had no direct effect on regional development. A
fourth project was set up a few kilometres from a centre which
already had occupancy problems; in the end both these centres
had to be converted into bridging buildings, bringing the projects
into the sphere of property rather than support for new undertak-
ings.

36.
In Thuringia (D), local authorities wishing to receive public
assistance to create a zone had to demonstrate interest on the part
of undertakings, at least 50 % of which were supposed to fulfil
specific conditions on sector of activity and turnover outside a
zone defined around the administrative area concerned (this con-
dition was abolished for projects receiving assistance from the
Land as of 1995). The concept of eligible undertakings laid down
for this purpose resulted, for instance, in the exclusion of the
development cost of plots occupied by commercial undertakings
with a large surface area. About half of the projects for industrial
sites accepted in this way were charged to the ERDF appropria-
tions, without any specific criteria.

37. The Autonomous Community of Valencia (E) programmes
do not include any selection criteria for projects.

Evaluation

Interim and ex post evaluation within the context of
Community measures

40. Evaluations of ERDF assistance all too often say nothing
about the measures for industrial sites or do not discuss whether
it would be advisable to create any (existence of a development
plan based on an analysis of supply and demand or on priorities).
For Limburg (B), it was not until the interim evaluation of the
1994 to 1996 SPD that the evaluator examined the comparative
levels of supply and demand for developed land and pointed out
the relatively high level of availability at that time. For Thuringia
(D), the interim evaluation of the 1994 to 1999 operational pro-
gramme highlighted the lack of data on the need to develop new
sites and the absence of planning which could be taken into con-
sideration when approving aid. For the Autonomous Community
of Valencia (E), the interim evaluation of the 1994 to 1999 opera-
tional programme is the only one available, and it does not deal
with the question of industrial site development needs. In Nord-
Pas-de-Calais (F), the ex post evaluations of the 1989 to 1993
period did not draw attention to the lack of information on the
stock of developed plots. In Sicily (I), ex post evaluation was only
carried out for the (cid:145)Aree Attrezzate(cid:146) multiregional programme,
and it was mainly concerned with the problems of putting Com-
munity appropriations to use and the aim of decongesting urban
areas, which was pursued by relocating undertakings in industrial
zones. In the absence of data on where undertakings were located,
the evaluator took as a basis the figure for the percentage of wage
earners in the areas, which had dropped from 35,1 % to 29,9 %,
from which he concluded that the objective had not been achieved.

38.
In Nord-Pas-de-Calais (F), although general criteria had been
set for redevelopment measures, of which the main one was the
size of the site, if one looks at the measures during the 1989 to
1993 period it can be seen that the choice of projects was more
often determined by urgency or the less complex nature of the
sites and was not based on a regional redevelopment plan. For
new industrial and small business areas, contrary to the provi-
sions of the 1997 to 1999 SPD, the 1996 register was not used as
a basis for selecting projects, since the data were supposed to be
updated and verified in 1999. In addition, in order to regulate
competition between municipalities (see paragraph 17), a higher
rate of assistance was set for projects with an intermunicipality
structure.

Specific evaluations outside the framework of the
Community measures

41.
In the two Limburg provinces (B and NL), sales of developed
plots were monitored and a (cid:145)stock management(cid:146) approach was
introduced (see paragraphs 21 and 24). In Nord-Pas-de-Calais (F),
the most important points revealed by the survey (see paragraph
21) were the role of business tax in the fragmentation of the sup-
ply of developed land and the lack of selection of undertakings in
the developed zones. This report pointed out the risk of costly

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competitive bidding between local authorities in certain districts
where there seemed to be an oversupply. It recommended setting
priorities, increasing efforts aimed at coordination, image, devel-
opment quality, service and harmonisation of the business tax. In
Thuringia (D), since mid-1997 questionnaires have been sent to
the communes with co-financed projects to obtain data on their
state of progress and on the occupancy of the completed zones
and the corresponding level of employment. This ex post monitor-
ing does not, however, negate the benefits of a long-term analysis.

43. Table 2 shows, where figures are available, the number of
undertakings and jobs in the industrial and small business areas
surveyed. Employment varies from eight individuals per occupied
hectare in Sicily (I) to 26 individuals in Nord-Pas-de-Calais (F), and
average surface area used varies from one hectare per undertak-
ing in Nord-Pas-de-Calais (F) to five hectares in Sicily (I).

THE IMPACT OF INDUSTRIAL SITES AND THE
CO-FINANCING OF THEM

Undertakings and jobs

It is difficult to evaluate the impact of ERDF co-financing of

42.
industrial sites for the following reasons:

(a) an industrial or small business area does not in itself create
employment; jobs are created, rather, by making optimum use
of endogenous potential (research and development assist-
ance, management support, particularly through business
(cid:145)nurseries(cid:146), etc.) while taking into account exogenous factors
which may influence job creation (road infrastructure, attract-
ing outside undertakings, etc.);

(b) co-financed projects often relate to only part of an existing or
new site, such as installing a sewage system, wiring, a section
of access road or internal road, a lighting system, a water
treatment plant, adding plants to improve the visual aspect of
a group of zones, etc.; for this reason one cannot attribute the
impact made by the sites solely to the projects co-financed by
the ERDF;

(c) an industrial or small business area can only be satisfactorily
occupied several years after the project has been completed,
and the length of time involved depends on the project(cid:146)s qual-
ity (12) and also on the phase in the economic cycle;

(d) the contribution made by a new site to regional development
will depend in particular on its occupancy rate, and also on
relocations by undertakings in the region to the new site,
which reduce its impact (diversion effect (13)); this impact can
also include beneficial effects which are rather diffuse and are
usually not evaluated: increasing the effectiveness of undertak-
ings located in a better environment and reducing congestion
in urban centres, which can in turn make redevelopment
measures necessary.

44. Employment per hectare is gradually decreasing, mainly
because of the increasing concentration of capital in production.
It varies significantly according to the location, the features of the
site and the activities carried on on the site. In Limburg (B), it fell
from 25 individuals per hectare at the beginning of the 1980s to
17 at the end of the decade, and to 11 at present. In Sicily (I), there
were 10 jobs per hectare in 1989, in comparison with eight now.
Moreover, in this region, which is the only one of those visited
where data of this kind are collected, areas which had been
equipped and sold but were (cid:145)inactive(cid:146) (14) represented, in 1997,
10 % of the surface area equipped and sold. In one area which was
examined, the (cid:145)inactivity(cid:146) rate was as high as 16 %. Although the
rate of job creation that may be expected is not as high as in the
case of the setting-up of new businesses, company relocations
may help to improve the urban environment and boost produc-
tivity.

45. Relocations of companies do not create as many jobs as
when new companies are set up but they may, in certain cases,
help to improve the urban environment and increase productiv-
ity. The regions visited do not collect data on relocations, except
for Limburg (B) where, on the basis of the relatively incomplete
data concerning the sites visited by the Court, the relocation rate
is estimated at between 50 % and 90 % of the undertakings which
have moved in. In Sicily (I), where the decongestion of urban cen-
tres was one objective, the undertakings located in the industrial
zones appeared to result primarily from the relocation of former
operations.

46.
In Limburg (B), during the 1986 to 1997 period, 122 under-
takings out of 152 emerged successfully from the five (cid:145)nurseries(cid:146),
which is equivalent to a rate of 80 %. However, there is no infor-
mation available on the jobs created by these undertakings at the
end of their period of stay. In Nord-Pas-de-Calais (F), at one (cid:145)nurs-
ery(cid:146) which was examined only seven undertakings out of 15 were
able to leave and open for business on the outside during the
1992 to 1998 period. Finally, between 1993 and 1998, 148
undertakings out of 192 were able to graduate successfully from
seven other (cid:145)nurseries(cid:146) (rates varied between 54 % and 89 %), cre-
ating 627 jobs.

It was not possible to find many synergies within the areas.
47.
Such synergies are only likely to come about in a limited number
of cases, such as technological zones where undertakings have set
up either through internally-generated development or precisely
because of potential relationships with universities, research cen-
tres or neighbouring undertakings. Another case, which is often

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seen in the automobile sector, is where subcontractors collect
around large undertakings which had arranged for neighbouring
sites to be reserved for them at the time they moved in.

Selling prices for infrastructure

48. ERDF aid is not granted directly to the companies that set up
on co-financed industrial sites (see paragraph 15). It is therefore
necessary to find out whether this assistance is passed on to ben-
efit the undertakings, in the form of a reduction in the normal
selling price, or if it benefits the developer, who may possibly
make a profit on the project which might be reinvested in other
operations. In the first case competition aspects must be consid-
ered, first concerning the combination of subsidies (see para-
graphs 49 to 55) and secondly, within the relevant region, con-
cerning competition between developers who are receiving ERDF
assistance and those who are not (see paragraph 56). In the sec-
ond case, the issue of the purpose of the aid must be borne in
mind (see paragraphs 57 to 62).

Competition

49. Regional State aid is designed to compensate for the disad-
vantages which certain regions may have, and is subject to an aid
intensity ceiling, above which it might cause distortions of com-
petition. In order to make the various forms of aid comparable
with one another and aid intensities comparable from one Mem-
ber State to another, aid notified must be converted into (cid:145)net grant
equivalent (NGE)(cid:146) (15). Any State aid included in the sale of devel-
oped sites must be included in this calculation. This State aid
should as a rule be evaluated on the basis of the market value.

In the Autonomous Community of Valencia (E) and in Nord-
52.
Pas-de-Calais (F), the price is set by the site developer in accord-
ance with its own aims. More broadly speaking, in France there
are no restrictions on the selling price or the levels of rent for
developed land and free transfers or sales for the token price of
FRF 1 are permitted. In Sicily (I), the regional government sets the
selling price for plots each year. It has not been possible to recon-
struct either the method used to fix these prices or their relation-
ship with the project(cid:146)s development costs.

In Thuringia (D), although the regulations provide that the
53.
developed plots should be sold, after being advertised, for the best
price offered, in reality the municipalities fix the selling price in a
discretionary manner. However, in contrast to the other regions
visited, a system has been put in place which is designed to pre-
vent both developers keeping the subsidies they have received as
a profit and the plots being sold at excessively low prices. If the
selling price exceeds the net cost price (after deduction of the vari-
ous subsidies), adjusted so that the municipality bears 10 % of the
development costs, the latter will have to repay the surplus to the
partners involved in financing the project, namely the Federal
Government, the Land and the European Union; however, if the
plots are sold at a price which is too low to cover the cost price,
the difference will be regarded as a subsidy and will be added to
any other assistance the undertaking has received. This balance
sheet must be drawn up no later than 10 years after the benefi-
ciary(cid:146)s final declaration of expenditure has been submitted. To
date, this system has not been put into practice in this Land.

54.
It is clear from the procedures observed for establishing sell-
ing prices for subsidised infrastructure that in most of the regions
neither of the systems which preclude State aid are applied.
According to the Commission communication, the sales should
therefore be notified, but this is not done (see paragraphs 49 and
50).

50.
In the Commission communication on the sale of land and
buildings by public authorities, two systems are described for
establishing sale prices in a way that automatically precludes the
existence of State aid (16). The first is sale through an uncondi-
tional bidding procedure, comparable to a public auction. The
second system is based on establishing a market value and pro-
vides for one or more independent experts to carry out, prior to
the sale, an evaluation on the basis of generally accepted market
indicators and valuation standards.

55. Moreover, in the majority of cases State property-developing
bodies are in an extremely dominant position in supplying this
infrastructure, and as a result set the prices, frequently below cost
price. Thus, the market price cannot be considered as a true mar-
ket price, and using it to establish whether there is a distortion of
competition is only of limited help.

51. Among the regions visited, sales of plots of land could only
be categorised within one of the two systems laid down in the
Commission communication in Limburg (B) and in Wales (UK).
The selling prices realised correspond to the valuations of State
officials in the former or of experts from the Royal Institute of
Chartered Surveyors in the latter.

56. ERDF aid is not neutral in its impact on competition between
developers from an eligible region to attract undertakings, in par-
ticular through setting selling prices. For this reason, it is all the
more necessary to observe the principle that such aid should only
be granted within an overall framework of regional development
which sets out clear selection criteria for subsidised projects.

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The role of ERDF aid

57. ERDF aid for the development of industrial sites is designed
to encourage the setting-up of enterprises and the creation of jobs
in such places. Although the project(cid:146)s socioeconomic objectives
may have been achieved, where the ERDF contribution is not
passed on in its entirety to the undertakings it will enable the
developer to reduce its loss, to break even or to make a profit. In
these latter two cases, where there is no financial contribution by
another partner, the ERDF will, ultimately, be the sole financial
contributor to the project. Any profit realised by the developer
after it has received the subsidies and the sales proceeds, which
the ERDF does not receive, will accrue to its own resources.

58. The fact is that developing industrial sites may generate prof-
its. After the first stage, when the developer incurs the expendi-
ture needed to acquire the undeveloped land and to develop it, for
which the ERDF grants assistance, there is a second phase during
which it alone receives the sales proceeds of developed plots;
these receipts do not go towards covering the operating costs. If
the developed plots are sold at the net cost price (after deduction
of the subsidies), the developer will recover its contribution to the
project(cid:146)s financing, and all the non-returnable aid paid, and spe-
cifically the ERDF assistance, will be profit which may in some
cases contribute to the financing of other operations which may
be far removed from the ERDF(cid:146)s objectives.

59. For example, in Limburg (B), the developer(cid:146)s final profit for
two industrial or small business area projects where all the land
had not yet been sold, out of five projects audited, is estimated at
26 % of the total cost for one of them and 16 % for the other
(average ERDF assistance: 10 % of the total cost). In Thuringia (D),
three projects were audited where not all the land had yet been
sold. Of these, one was expected to show a profit in the region of
21 % (ERDF assistance: 18 % of the total cost). In the Autonomous
Community of Valencia (E), the developer of one site, a State-
owned company with activities other than developing industrial
sites, made a profit corresponding to 30 % of the project(cid:146)s devel-
opment costs (ERDF assistance: 65 % of the total cost).

60.
It is difficult to discern the impact of non-returnable ERDF
aid in the field of industrial site development, either with regard
to its effect on the price at which developed plots are sold to
undertakings or the use to which sales proceeds are put.

62. However, developing new sites in parts of a region which
have few facilities or where there is a particular need for develop-
ment (location effect) and redeveloping former sites which are
now abandoned and derelict, and sometimes polluted, are special
cases in that they may require expenditure, rendering it impos-
sible to put them on the market at a price which is competitive
with other sites not burdened with similar costs. In these cases
ERDF aid is justified in order to compensate for the handicap of
these costs and, as a result, to make the selling price of the plots
competitive in comparison with the other sites. Here, ERDF assis-
tance has an incentive effect which is of general public benefit as
regards the location of infrastructure in certain parts of the region
and the development of derelict sites (see paragraph 64).

Value added by the Community programmes

63. ERDF measures provide considerable financial resources to
the final beneficiaries and are chiefly viewed in this light. How-
ever, the nature of industrial sites facilities suggests that they
would still have been completed without assistance, although
probably in smaller numbers. For this reason in particular, it is
important that infrastructure is developed within the framework
of a structured regional development plan.

64. With regard to the redevelopment of former sites, ERDF aid
seems to be more of a deciding factor. Renovating disused indus-
trial land seems less urgent and is often only considered after sev-
eral other priorities have been attended to. In this case, the aid
makes it possible to lessen significantly the project(cid:146)s financial bur-
den on the final beneficiary. In the same way, some qualitative
projects would not have been carried out without ERDF aid: these
are environmental or architectural projects which do not fulfil any
of the regions(cid:146) essential needs, but are additional factors in attract-
ing undertakings. In some regions, the ERDF has also supported
the setting up of databases on industrial sites.

65. Finally, very few synergies were found between the measures
in favour of industrial sites and other Community measures or
actions. Although most operators connected with developing
industrial sites in the regions involved are at the centre of eco-
nomic life, they are not aware, with the exception of those respon-
sible for creating business (cid:145)nurseries(cid:146), of the possibilities offered,
for example, by the European Social Fund or the European Invest-
ment Bank (EIB).

CONCLUSION

Financial data

61.
In addition, since in theory the development of sites gener-
ates receipts which constitute a recouping of the investment, this
should be considered when granting ERDF subsidies, as loans
might in some cases replace subsidies.

66. On several occasions, the Court has found it difficult to
quantify the sums allocated by the ERDF to specific fields and

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target groups. The same difficulty has been encountered with
respect to the development of industrial sites. An improvement in
the quality of the data sent in by the Member States would be nec-
essary in order to gain a better awareness of the use of ERDF
resources, and one way of achieving this would be for assistance
programmes to be more homogeneous and detailed in structure
(see paragraphs 5 to 7).

(b) identifying those parts of an area where, although the supply
of facilities may satisfy existing needs, it is none the less insuf-
ficient with respect to their surface area or population and
where it is necessary, for this reason, to carry out actions
designed to increase economic activity, since these are also
part of the area eligible for ERDF measures;

Development and restructuring of the regions

67.
Initiatives for developing industrial sites are often the pre-
rogative of the municipalities and occasionally of bodies that
group together several municipalities and State-owned companies
or consortia, but there is no coordination between these opera-
tors (see paragraphs 15 to 18). However, ERDF co-financing of
projects should be dependent on a Community regional develop-
ment or restructuring policy which supports action programmes
conceived at a regional level and financed by State funds. The
ERDF should therefore avoid initiatives which emerge at the most
decentralised level and should instead encourage the region(cid:146)s
development or restructuring on the basis of an overall regional
plan (see paragraphs 13 and 14).

68. The regions visited by the Court do not have land manage-
ment priorities for industrial sites, except for a few large infra-
structure items. Measures for developing such sites are weak, both
with regard to their objectives (see paragraphs 29 to 33) and the
selection criteria for projects. It is vital that an overall regional
development framework be put in place, including selection cri-
teria for projects, and this is all the more necessary in view of the
competition which can arise between State property developers
(see paragraphs 34 to 39).

69. Because of the increasing numbers of these facilities, an
increase partly encouraged by the ERDF (see paragraph 63), on
some occasions a desire has arisen to ascertain the region(cid:146)s stock
(see paragraphs 40 and 41) and some survey initiatives have been
taken. However, they have not always been sufficiently well-
targeted to be used for forecasting purposes or to provide an over-
all picture of needs. Sometimes, the programmes still set out needs
even where they have not actually been evaluated (see paragraphs
19 to 28).

70.
In order to increase the effectiveness of ERDF assistance in
this field, the Commission should encourage the Member States
to create analytical and monitoring tools, including a regularly
updated inventory of industrial sites and statistics on site sales.
These tools ought to enable site development to be actively man-
aged, in the following ways:

(a) drawing a distinction between areas with too much availabil-
ity and those with not enough, in order to redirect State aid
co-financed by the ERDF, according either to priorities, or to
demand;

(c) monitoring the satisfactory use of these facilities, in a way that
is more relevant than that permitted by current impact indica-
tors, and possibly redirecting supply in quantitative and quali-
tative terms as a result;

(d) channelling some development efforts towards avoiding a
deterioration in the supply, which can have detrimental effects
on the environment and on land use planning.

71. These data will only be useful if the regions set and observe
selection criteria for projects, drawn up in accordance with a
regional development plan.

72.
In the specific case of the business (cid:145)nurseries(cid:146), there should
be a maximum length of stay for undertakings so that these facili-
ties can remain focused on their aim of helping to create busi-
nesses (see paragraph 28) and statistics should be kept on the suc-
cess rates of undertakings which have benefited from nurseries
and on jobs created, in order to measure their contribution to
regional development (see paragraphs 33 and 46).

73. The evaluators of the ERDF measures should also investigate
whether there is a consistent site development approach and an
analysis of needs (see paragraphs 40 and 41).

Impact of the ERDF aid

74. Since ERDF aid is not granted to the undertakings which
move onto subsidised sites, the setting of the selling prices for this
infrastructure is a key element in analysing the impact of the aid
(see paragraph 48).

75. As far as competition is concerned, this audit has revealed a
lack of transparency in the setting of selling prices for developed
plots which the Commission ought to look into, and a lack of a
genuine market, even though the market value is supposed to be
used as a reference point when setting the selling prices (see para-
graphs 49 to 56).

76. No link can be shown between ERDF assistance and selling
prices. For this reason, the Commission should clarify the objec-
tive of this subsidy. It is possible for a project to end up breaking
even or even showing a profit, which may imply the lack of a
counterpart to the ERDF co-financing and the use of this profit
for other purposes which may diverge from the ERDF(cid:146)s objectives.

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Since in theory the development of sites generates revenue which
constitutes a recouping of the investment, this should be consid-
ered when granting ERDF subsidies, since loans might in some
cases replace subsidies (see paragraphs 57 to 62).

77. However, ERDF aid in the form of subsidies is of particular
additional value where a location effect is sought or in the rede-

velopment of abandoned former sites, since these projects may
initially be perceived as less urgent. In such cases, the costs of
development or treatment may prevent sites being put on the
market at a competitive price and the subsidy, which in these
cases acts as compensation for this handicap, should have an
incentive effect as regards location or the development of derelict
sites (see paragraphs 62 and 64).

This report was adopted by the Court of Auditors in Luxembourg at the Court meeting of 9
December 1999.

For the Court of Auditors

Jan O. KARLSSON

President

NOTES

(1) These are maximum amounts up to which expenditure may be
incurred and are laid down in the programmes(cid:146) financing schedules.
(2) See paragraph 13 of Special Report No 3/96 on tourist policy and the
promotion of tourism (OJ C 17, 16.1.1997) and paragraphs 6.49 to
6.52 of the Annual Report concerning the financial year 1996 (OJ
C 348, 18.11.1997; implementation of measures in favour of under-
takings, SMEs in particular, in the context of the ERDF).

(3) The territory of the European Community is subdivided according to
a nomenclature of territorial units for statistical which comprises 71
regions at NUTS I level, 183 at NUTS II level and 1 044 at NUTS III
level.

(4) See in this connection the observations already published by the Court
in its Annual Reports on the financial years 1994 (paragraph 4.18b)
and 1992 (paragraph 6.43) as well as in its Special Report No 1/95
on the financial cohesion instrument (paragraph 4.18).

(5) Commission Regulation (EC) No 1681/94 of 11 July 1994 concern-
ing irregularities and the recovery of sums wrongly paid in connec-
tion with the financing of the structural policies and the organisation
of an information system in this field (OJ L 178, 12.7.1994, p. 43).
In the regulations the final beneficiaries are the bodies or public or
private companies responsible for commissioning the work (the prin-
cipal); in the case of aid schemes and in the event of the granting of
aid by bodies appointed by the Member States, the final beneficiaries
are the bodies that distribute the aid.

(6)

(7) The rate is set by the local authorities and relates to the rental value
of the tangible fixed assets and a proportion of salaries paid. Competi-
tion between municipalities to attract undertakings can also have the
effect of lowering the level of this tax rate.

(8) The occupancy rate can be calculated by comparing the surface areas
occupied by the undertakings with either the total zone surface area
(whether equipped or not) or the total equipped surface area (occu-
pied or vacant). The first ratio is useful as regards determining surface

areas set aside for undertakings in land-planning schemes and the sec-
ond, which was used for this report, for deciding on the surface areas
that need to be developed.

(9) See paragraph 7.34 of the Annual Report concerning the financial
year 1979 (OJ C 342, 31.12.1980) and paragraph 7.26 of the Annual
Report concerning the financial year 1980 (OJ C 344, 31.12.1981).
(10) Coordination by a central body enables (cid:145)nurseries(cid:146) to be guided
towards specialising (e.g. technological or small business (cid:145)nurseries(cid:146),
etc.), links to be established at group level with the banking and
finance sectors, universities and laboratories, increased exchanges of
experiences, etc.

(11) Jobs in an undertaking in a certain region which has relocated to a
new area in the same region will be counted under the heading of
gross employment connected with the creation of the new area, even
if the undertaking concerned does not increase its staff. It would not
be counted as net employment, however.

(12) On this topic, see (cid:145)New location factors for mobile investment in
Europe(cid:146), Netherlands Economic Institute in cooperation with Ernst &
Young, 1993, a study launched by the European Commission(cid:146)s
Directorate-General for Regional Policy and Cohesion. This report
speaks of a combination of subjective factors which are not costly
(market, labour, transport infrastructure, etc.), and financial factors
(labour, land and buildings, assistance).

(13) See paragraphs 6.1 to 6.75 of the Court(cid:146)s Annual Report concerning

the financial year 1987 (OJ C 316, 31.12.1988).

(14) That is, areas equipped with buildings which are empty or belong to

undertakings which have ceased operating.

(15) See (cid:145)Guidelines on national regional aid(cid:146) (OJ C 74, 10.3.1998, p. 9).
(16) Commission communication on State aid elements in sales of land
and buildings by public authorities (OJ C 209, 10.7.1997, p. 3).

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THE COMMISSION(cid:146)S REPLIES

SUMMARY

The Commission does not regard the development of industrial sites as an objective of structural policy in
itself. Structural Fund programmes do not always contain specific measures for the development of industrial
sites but use such sites as a means of achieving other goals. Consequently, spending in this field may vary
considerably from one programme to another (paragraphs 1 and 2).

Implementation of the Structural Funds is based on the principles of programming and partnership; accord-
ingly, the Commission collects data at the level of the measure and Member States are free to design measures
according to their needs and choices. In the new programming period, measures will probably be designed in
a more detailed way, which will improve monitoring and reporting on activities financed by the Structural
Funds (paragraphs 5 to 7).

The Commission will examine the irregularities detected by the Court (paragraphs 11 and 12) and take the
necessary action.

One of the main principles of structural policy is systematic planning together with close monitoring of imple-
mentation (paragraphs 13 and 14). In accordance with partnership, the regions should decide which action is
the most efficient and suitable for them (paragraph 19).

Despite some progress, the Commission is aware that there are shortcomings as regards goals and indicators
(paragraph 31). Project selection is the responsibility of the Member State and this selection must always com-
ply with guidelines and priorities agreed with the Commission (paragraph 37).

As regards evaluation, it is difficult to measure and compare the impact of measures concerning industrial sites.
This point received particular attention in some interim evaluations (see paragraphs 40 and 41 (e.g. Thurin-
gia)). The new Structural Funds General Regulation explicitly requires mid-term evaluations.

As regards competition (paragraphs 49 and 50), the transfer of Community public resources to a public body
does not constitute a State aid within the meaning of Article 87(1) of the Treaty. It is a matter for the Member
State alone to decide subsequently whether sales by the beneficiary public authority will take place under
market conditions or on favourable terms.

ERDF money must not be used to make profits (cid:151) where such profits occur, they should be reinvested (para-
graphs 57 and 58). The new regulations favour the use of repayable forms of financing.

The development of industrial sites must always form part of a structured regional development project based
on a sound definition of priority guidelines in the SPDs and programming complements.

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INTRODUCTION

1 and 2. The Court of Auditors is right to say that the Structural
Funds Regulations make no explicit reference to the development
of industrial sites. (In more general terms Article 1(b) of Regula-
tion (EEC) No 4254/88 as amended defines as one field of assis-
tance for the ERDF (cid:145)[infrastructure] investment relating to the
regeneration of areas suffering from industrial decline, including
inner cities(cid:146)). The Commission does not regard the development
of industrial sites as an objective of structural policy in itself.
However, developing such sites has played and, to a lesser degree,
may continue to play a role of some significance within a wider
policy to support and develop business activities in assisted
regions, particularly those of SMEs. For this reason, Structural
Funds programmes do not always contain specific measures for
the development of industrial sites but use industrial site develop-
ment as a means of implementing other measures designed to
assist business development. Spending in this field may vary con-
siderably from one programme to another.

BUDGETARY AND PHYSICAL DATA

5 to 7. The Commission collects data from the Member States
about the implementation of Structural Funds programmes using
a list of categories of assistance. However, one consequence of the
principle of programming and partnership (introduced in 1989),
as opposed to the management of individual projects by the Com-
mission, is that the most detailed level at which data may nor-
mally be collected is that of the measure. Gathering data about
activities below measure level (such as the development of indus-
trial sites) has proved very difficult.

Title II (Programming) of the new Structural Funds General Regu-
lation confirms this approach which gives the Member States (cid:151)
within their overall strategy for implementing Structural Funds
programmes (cid:151) the freedom to design measures according to
their needs and choices rather than following a standard model
and nomenclature. Over a seven-year programming period, the
Member States need a degree of flexibility in programme imple-
mentation in order to be able to respond to developments. Other-
wise there would be the risk of returning to project approval at
Commission level.

The experience gained since the introduction of programming
has led the Commission to draw up a revised and more detailed
categorisation of areas of assistance for the new programming
period. It is likely that measures will in future be designed in a
more detailed way as the need to get Commission approval even
for minor changes disappears under the new Regulation. Member
States will have to demonstrate the link between categories of
assistance and the proposed measure. In conjunction with the

new information system replacing Garfield, this should improve
monitoring and reporting on the activities of the Structural Funds,
facilitate follow-up and provide a sound basis for evaluations. In
this context rehabilitation of old sites will be a category distinct
from other activities to support SMEs.

8. The share of total ERDF aid actually going into the develop-
ment of industrial sites may in practice be lower than indicated
by the Court.

LEGALITY AND CORRECTNESS

11. The Commission will look in detail at the cases raised by the
Court so that it can take appropriate steps.

12. After checking the notifications of irregularities sent by the
Member States under Regulation (EC) No 1681/94, the Commis-
sion can confirm that no irregularities were notified under that
Regulation for projects either in Thuringia (D) or Sicily (I). It will
approach the relevant departments in those two Member States
to obtain details of the situation before deciding what, if any,
action to take.

Since 1994, it has noted a considerable increase in the number of
cases notified by the Member States under Regulation (EC) No
1681/94, although the situation is still not ideal. The Commission
is taking steps to improve the situation.

PROCESS OF DEVELOPING INDUSTRIAL SITES
PART-FINANCED BY THE ERDF

13 and 14. The Court rightly calls for a systematic approach in
programme establishment and implementation, including criteria
for project selection as stipulated by the regulations. For measures
where Community aid consists essentially of the part-financing of
an existing aid scheme (previously approved by the Commission),
the criteria for project selection form part of such an aid scheme
(see paragraph 34).

Systematic planning for future needs and developments is one of
the main principles of structural policy. Economic reality will,
however, often move faster than public administrative planning
(of which the developments in the new German L(cid:228)nder over the
past 10 years are a significant example). Close monitoring during

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the whole cycle of programme implementation helps to ensure
that strategies developed at the start of programmes keep up with
developments. None the less there will always remain a possibil-
ity of error, easily criticised in hindsight, especially when eco-
nomic framework conditions change rapidly or adversely.

Ex post evaluations will yield useful results only if they are done
sufficiently long after the end of a programme lifespan to take
account of longer-term effects. (In paragraph 32 the Court itself
states that ex post evaluations come too early). The programming
cycle, where in effect new programmes are designed while the
current ones are still being implemented, implies that the find-
ings of ex post evaluations may often be taken into consideration
only in the next or even later programming phase. Nevertheless,
Articles 14(2) and 42 of the new Structural Funds General Regu-
lation explicitly require mid-term evaluations. These will be use-
ful not only for adjusting ongoing programmes but also for
designing programmes for the following programming period.

Organisational context

It is correct that, under Structural Funds rules, businesses
15.
moving into developed sites are not regarded as final beneficiaries.
Under these rules, except in the case of aid schemes, these are
considered to be the promoters (project developers).

Analysis of needs

19.
In order to improve analysis of regional needs for industrial
sites, the Court of Auditors proposes designating a body to under-
take this work. The regions should have the right to implement
the approach which is the most efficient and suitable for them.

It is essentially the role of the partnership (monitoring commit-
tees and in the future managing authorities) to determine the
needs of an assisted area, to ensure the coordination of public
project promoters and, if necessary, adjust planning to unexpected
developments during the lifetime of a programme. In certain
cases, a degree of competition between public promoters can
even have positive effects on the quality of industrial sites offered
to businesses. Articles 35(3), 36 and 42 of the new General Regu-
lation reinforce the role of partnership whilst facilitating its imple-
mentation.

Industrial and craft areas

24. Figures on the availability of industrial sites and the average
annual rate of sales are important indicators when determining
further needs for site development. A purely statistical interpreta-
tion of such figures, however, would neglect the quality aspects of
sites, such as the geographical location within the assisted region,
access to transport, availability of other resources (raw materials,
suppliers) and infrastructure, possible synergies with related busi-
nesses, training or research institutions present. In some countries
even local business taxation may be a factor. Not all sites will
therefore be equally suitable or attractive for all kinds of business
activity.

Incubators and advance factories

28. Even now many incubator centres gradually increase the
rent to the market level over the time that an enterprise stays in
them. This creates an incentive for viable businesses to leave. It
also provides essential income to complement the public subsi-
dies to the incubator centres and help them finance the services
they offer to new businesses.

The difficulties of identifying economic needs by means of the
administrative procedures described above are greater in the case
of incubator centres, which are normally for the exclusive use of
new businesses, often specialising in high-tech and/or services. By
contrast, normal industrial sites will regularly accommodate a
large share of existing businesses, whose needs are more easily
established. In this context, the fact that demand may also be
created by attractive supply should not be neglected.

Goals and indicators

31. The Commission is aware of shortcomings as regards the
quantification of goals and indicators, despite the considerable
progress made during the current programming period. For the
new period, in accordance with Article 36 of the new General
Regulation of the Structural Funds, the Commission has drawn
up a methodological document (Working Paper No 3) on the
design and utilisation of the monitoring indicators.

32. As stated above, the findings of ex post evaluations and reli-
able data on the long term effects of Structural Funds measures
are often available only several years after the end of a programme.
This leads to the general dilemma that they can be taken into con-
sideration only in the next or even later programming phase. The
results of mid-term evaluations, however, often provide good

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indications for the adaptation of ongoing programmes and the
preparation of the next series of programmes.

IMPACT OF INDUSTRIAL SITES AND THEIR
PART-FINANCING

Project selection criteria

Competition

34. The Commission shares the Court(cid:146)s view that project selec-
tion criteria should play a strategic role in the implementation of
Structural Funds measures. Programmes did not always reflect
this in the past. This does not, however, necessarily mean that
implementing authorities did not apply such criteria, as project
selection is the responsibility of the Member State. In the new
programming period, this division of responsibility will be fur-
ther strengthened by the fact that detailed information on the
implementation of measures will be contained only in the pro-
gramme complement to be established by the Member States after
the Commission decision on their programme (and not requiring
Commission approval).

37. The text of these operational programmes lists the projects
planned and the goals of the measures to be taken. In any event,
the choice of these projects must reflect the guidelines and priori-
ties agreed with the Commission.

Evaluations

Interim and ex post evaluations as part of Community
assistance

In general, the evaluations carried out, particularly of
40 and 41.
Objective 2 programmes, look at the relevance of the strategy
adopted and its economic impact on the areas concerned. The
question of industrial sites was looked at more specifically in
some interim evaluations (cid:151) such as the programme in Thuringia
which includes quantified indications in physical terms (hectares
prepared, jobs per hectare, etc.). However, their specific features
(size, type of activity, etc.) make it difficult to assess and compare
the impact of measures for industrial sites. Securing a better
understanding of how effective these measures really are would
require a series of in-depth thematic studies based on a sample of
projects.

49 and 50. Sales to businesses of lots developed by public
authorities on terms which do not reflect market conditions con-
stitute State aid and must be notified and approved under Article
88(3) of the Treaty, except for cases covered by the de minimis rule
(Commission communication on de minimis aids (OJ C 68,
6.3.1996)) which do not constitute State aids within the meaning
of Article 87(1) of the EC Treaty. The Commission communica-
tion on sales of land and buildings by public authorities (OJ C 209,
10.7.1997) enables market conditions to be ascertained.

The possible existence of State aids for the purposes of this Report
may be considered at two levels. The first concerns the transfer of
funds from the Community to the regional or local authority
(ERDF assistance) while the second, at a subsequent stage, con-
cerns the sale of land developed by that regional or local author-
ity to purchasers, normally businesses.

At the first level, the transfer of Community public resources to a
public body, even on the condition that they are used to develop
land for subsequent sale to businesses, does not constitute State
aid within the meaning of Article 87(1) of the Treaty, since the
transfer of financial resources and the development does not con-
fer any advantage on the businesses.

It is up to the Member State alone to decide whether sales by a
public authority which has received Community aid are to be
made on market conditions (so that the assistance simply increases
local supply), or on more favourable terms (discount on the mar-
ket price). In the second case, the Member State must comply
with the above obligations stemming from Article 88(3) of the
Treaty.

As long as ERDF assistance does not explicitly provide for the sale
of land on favourable terms as an integral part of the measure, it
does not include an aid element; this appears to be the case for
most of the programmes concerned.

As regards the next programming period, the question of needs
for industrial sites should be raised when the development and
conversion plans for the areas concerned are being drawn up and
negotiated.

Nevertheless, irrespective of the question of whether the measure
itself includes a sale on favourable terms or not, the Commission
has in some cases insisted on the inclusion in the texts of opera-
tional programmes of certain clauses concerning the conditions
of sale, either to remind the Member State of its obligation to
notify, to cover cases where a sale on favourable terms forms part
of the assistance from the ERDF as an integral part of the

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measure, or to note the commitments given by the Member States
with regard to the conditions of sale. These clauses are:

(cid:151) (cid:145)sale on market conditions(cid:146); this fairly general clause occurs
without further detail in a large number of Objective 1 opera-
tional programmes for 1994 to 1999; the 1997 communica-
tion sets out what is meant by (cid:145)sale on market conditions(cid:146).
This clause is still binding on the Member States outside the
measure in question and so is binding even if the sale of the
land does not form part of the measure itself,

60 and 61. The Commission shares the view of the Court that
for this kind of investment alternative forms of financing should
take the place of non-repayable grants. This means that the impact
of the ERDF will be more clearly focused on assisting business
start-ups and would avoid the risk of undesirable repercussions
when the assets are resold. The new regulations favour the use of
repayable forms of financing. Furthermore, Article 28(3) now
stipulates clearly that (cid:145)assistance repaid ... shall be reallocated to
the same purpose(cid:146).

(cid:151) (cid:145)sale in accordance with the de minimis provisions(cid:146); the grant-
ing of aid under the de minimis rules is the responsibility of the
Member States alone (see the 1996 communication); failure to
comply with the de minimis provisions suggests that the aid
was granted illegally. This clause too commits the Member
States beyond the measure itself,

62. The Commission generally gives preference to the refurbish-
ment and reutilisation of derelict sites to the development of
greenfield sites, not least for environmental reasons. The high
costs involved in such operations often require public financial
assistance to make these projects competitive.

(cid:151) (cid:145)reference to an approved State-aid scheme(cid:146); this clause is
included where the measure in the operational programme
part-finances a State-aid scheme approved by the Commis-
sion which itself includes conditions for the sale of land, which
may themselves be favourable. This clause too commits the
Member States beyond the measure itself.

Value added by Community programmes

If aid is granted after the end of ERDF assistance, i.e. when the lots
are sold to businesses, on the basis of an (cid:145)aid(cid:146) approval by the
Commission, the aids in question must comply with the ceilings
on aid intensity and, if they are combined with other aids, the ceil-
ings on aggregation laid down by the Commission.

Role of ERDF aid

57 and 58. The Commission considers that ERDF resources (with
the exception of productive investment) must not be used to make
profits. Where such profits occur they should be reinvested for
similar eligible purposes in the same area, or if that is not pos-
sible, ultimately be repaid (1). At project level, only the Member
State can ensure this. When in the past the Commission has learnt
of such cases, it has insisted on proper reinvestment.

59. As the regional authorities informed the Court in the Valen-
cia case, revenue from the sale of this industrial site was re-
invested in other industrial sites meeting the same criteria which,
for that reason, were not part-financed by the ERDF.

63. The implementation of projects as part of a clear strategy of
which they form part is central to the concept of programming.
Measures within programmes should be designed so that this is
evident. The Commission is careful to ensure that the develop-
ment of industrial sites forms part of a structured regional devel-
opment project, based on a sound definition of the priority guide-
lines in the SDPs and programming complements.

65. Monitoring Committees, especially when representing a wide
partnership, are excellent forums where synergies between the
different actors can be developed. It is there that detailed informa-
tion about the possibilities offered by the ESF or the EIB can be
given by representatives of the Commission or the Bank.

CONCLUSION

Financial information

(1) Article 2 of the Financial Regulation; Article 17(3) of the Coordina-
tion Regulation (for the current period); Article 30(4) of the General
Regulation (for the period 2000 to 2006); Sheet 9 (bookkeeping
entries of other receipts) of the SEM 2000 rules on the eligibility of
expenditure under the Structural Funds.

66. As stated above the Commission has taken steps under the
new Regulations to develop more refined monitoring and report-
ing by Member States on individual categories of assistance. The
additional administrative tasks imposed on Member States by the
collection of such data should, however, remain proportional to
the value added in terms of better programme implementation.

9.3.2000

EN

Official Journal of the European Communities

C 68/45

Development and conversion of regions

67 to 71. The development of industrial sites is not an objective
of regional policy in itself. It may nevertheless constitute an
important tool for the development of business activities and
form part of the wider strategies in regional plans and pro-
grammes to achieve this objective. A systematic approach to
project implementation (including the development of industrial
sites) should be an important part of programming and the devel-
opment of measures. The implementation of Community struc-
tural policy in the regions must be based on the specific analysis
of regional needs and integrated into an overall strategy for the
development of the region concerned. It should include criteria
for project selection related to the needs analysed. The SPDs and
programming complements set out the goals and priorities of the
programmes. The projects financed by these programmes must
meet the criteria defined by these goals and priorities.

be demonstrated. For environmental reasons and to support urban
regeneration, the refurbishment of existing derelict sites is to be
favoured wherever possible.

72 and 73. The Commission remains convinced that industrial
site development should always be seen as one part of a wider
policy to assist business development, in particular of SMEs. As
regards the maximum duration for staying in business incubator
centres, the approach described in the Commission(cid:146)s reply to
paragraph 28 would be a more appropriate recommendation than
setting a cut-off point.

Impact of ERDF aid

The new Regulations underline the need for improved regional
analysis contained in programming documents and monitoring.
Development of new industrial sites will in future be included in
programmes only where a clear need for them and a strategy can

76. As reflected in the new Regulations, the Commission favours
the use of repayable forms of Structural Funds assistance for this
kind of activity. Such an approach would also prevent ERDF aid
flowing back to project promoters as a potential benefit once the
sites are resold.