State Aid Scoreboard - Autumn 2002 update : Special edition on the candidate countries
Date: 2002-11-27
Institutions: European Commission
Subjects: Central and Eastern European countries, State aid, accession criteria, competition law, control of State aid, economic analysis, enlargement of the Union, single market, statistics

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 27.11.2002
COM(2002) 638 final

State Aid Scoreboard

autumn 2002 update

Special edition on the candidate countries

(presented by the Commission)

State Aid Scoreboard

autumn 2002 update

Special edition on the candidate countries

Contents

Executive Summary ................................................................................................................... 4

Introduction ................................................................................................................................ 6

Part One: The enlargement process............................................................................................ 8

1.1

1.2

Introduction .................................................................................................................. 8

The competition dimension of the enlargement process.............................................. 8

1.2.1

Pre-accession Strategy leading to the Europe Agreements.......................................... 8

1.2.2

Accession negotiations................................................................................................. 9

1.2.3

The requirements for closure of the competition chapter ............................................ 9

1.2.4

The results of the assessment ..................................................................................... 10

1.2.5

Post-Accession ........................................................................................................... 10

Part Two: Comparison of the State aid situation in the Candidate countries........................... 12

2.1

2.2

2.3

2.4

2.5

2.6

2.7

Conceptual remarks.................................................................................................... 12

Overview .................................................................................................................... 13

Sectoral distribution of aid ......................................................................................... 14

Aid to the manufacturing sector................................................................................. 15

Horizontal and sectoral objectives ............................................................................. 16

State aid supporting regional development and cohesion .......................................... 17

State aid instruments in the manufacturing sector ..................................................... 17

Part Three: Country profiles of the state aid situation.............................................................. 19

Bulgaria .................................................................................................................................... 19

Cyprus .................................................................................................................................... 21

Czech Republic......................................................................................................................... 24

Estonia .................................................................................................................................... 26

2

Hungary.................................................................................................................................... 28

Lithuania................................................................................................................................... 31

Latvia

.................................................................................................................................... 33

Poland .................................................................................................................................... 35

Romania.................................................................................................................................... 37

Slovenia .................................................................................................................................... 39

Slovak Republic ....................................................................................................................... 41

Methodological notes ............................................................................................................... 43

Tables

Table 1: Summary table - State aid in the EU and the candidate countries ............................. 14

Table 2: Sectoral distribution of aid, 2000 ............................................................................... 15

Table 3: State aid to the manufacturing sector, 2000 ............................................................... 16

Table 4: State aid for horizontal objectives, 2000.................................................................... 17

Table 5: State aid to the manufacturing sector by type of aid instrument, 2000...................... 18

3

EXECUTIVE SUMMARY

Ten Candidate countries set to join the EU in 2004

The conclusions of the Brussels European Council in October 2002 confirm the European
Union’s  determination to conclude  accession  negotiations  with ten  Candidate  countries  at
the European Council in Copenhagen on 12-13 December 2002 and to sign the Accession
Treaty in Athens in April 2003. In its recent Strategy Paper and Report1, the Commission
sets out the progress towards accession by each of the candidate countries.

EU  competition  policy,  including  State  aid  control,  is  a  key  component  of  the
enlargement process

Before  accession,  Candidate  countries  must  demonstrate  the  existence  of  a  functioning
market  economy  as  well  as  the  capacity  to  cope  with  competitive  pressure  and  market
forces within the Union. In assessing whether the Candidate countries can comply with the
competition acquis and withstand the competitive pressures of the internal market resulting
from  the  full  application  of  this  acquis,  the  Commission  has  examined  whether
undertakings  operating  in  the  Candidate  countries  are  accustomed  to  operating  in  an
environment such as that of the Community. More specifically in the area of State aid, all
twelve  Candidate  countries  have  in  recent  years  established  State  aid  monitoring
authorities. These authorities have screened awards of State resources to determine whether
or not they constitute State aid as defined under Article 87 of the Treaty and whether they
are compatible with the common market. Where identified State aid measures are deemed
to  be  incompatible  with  the  EU  acquis,  Candidate  countries  must  either  abolish  these
measures or gradually phase them out.

Just under €5 billion of State aid aw arded by Candidate countries in 2000

In  the  year  2000,  the  twelve  Candidate  countries  awarded  State  aid2  worth  an  estimated
€4.8 billion. This compares with €70 billion awar ded in the fifteen EU Member States. In
absolute terms, Poland (€1.87  billion), Hungary, Czech Republic and Romania awarded the
most  aid.  Together,  they  accounted  for  more  than  85%  of  total  aid  in  the  Candidate
countries.

Compared with the EU average, the Candidate countries tended to grant more aid as
a percentage of their GDP but less in per capita terms

State  aid  granted  by  the  Candidate  countries  represented  on  average  1.3%  of  Gross
Domestic  Product  compared  with  the  EU  average  of  0.8%.  However,  this  average  masks
considerable differences between the countries ranging from around 0.5% or less in Estonia
and the Slovak Republic up to 1.7% in Hungary and 1.9% in Romania.

When aid is expressed in per capita terms, however, the picture changes considerably. Even
if  purchasing  power  standards  (PPS)  are  used  -  thereby  taking  account  of  differences  in
price levels between countries - the Candidate countries tended to  spend less  aid  than the
EU  Member  States  in  the  year  2000:  105  PPS  per  person  against  the  EU  average  of  185

1 ‘Towards the Enlarged Union’. COM(2002) 700 final of 9 October 2002
2 Total aid less agriculture and fisheries

4

                                                
PPS  per  person.  The  ranking  of  the  Candidate  countries  also  changes:  for  example,
Romania which  reported the  highest  level  of  aid  as  a  percentage  of  GDP  is  ranked  6th  in
terms of aid per capita (PPS).

Sectoral distribution of aid varies considerably among Candidate countries

In the year 2000, an estimated 46% of State aid in the Candidate countries was granted to
the  manufacturing  sector,  compared  with  an  EU  average  of  35%.  The  share  of  total  aid
directed towards the transport sector, mostly to the railway network, was 22% as against a
Community average of  46%. The  coal  sector  received  12%,  around  10%  was  non-sector-
specific  aid  for  employment  objectives  while  the  rest  was  split  between  the  non-
manufacturing  sector  and  services  other  than  transport.  There  are  significant  differences
between the Candidate countries in the sectors to which they directed aid. The share of aid
to the manufacturing sector ranged from 10% or less in Estonia and Lithuania to more than
50%  in  Cyprus,  Hungary,  Romania  and  the  Slovak  Republic.  Aid  to  the  transport  sector
accounted  for  around  10%  of  overall  aid  in  Cyprus  and  Poland  while  in  Estonia,  it
represented more than 80%.

In  contrast  to  the  EU  average,  several  Candidate  countries  tended  to  award  aid
through tax exemptions rather than grants

For the Candidate countries as a whole, tax exemptions accounted for a larger share of total
aid than grants: around 50 % of total aid to the manufacturing sector was awarded through
tax exemptions compared with an EU average of 29% while aid in the form of grants made
up 25% of the total, against an EU average of 62%.

5

INTRODUCTION

The European Council in Copenhagen in June 1993 decided that accession to the European
Union  would  take  place  as  soon  as  a  country  was  able  to  assume  the  obligations  of
membership  by  satisfying  the  economic  and  political  conditions.  The  existence  of  a
functioning market economy, as well as the capacity to cope with competitive pressure and
market  forces  within  the  Union  constitute  requirements  for  membership.  As  EU
competition  policy,  including  State  aid  control,  plays  a  key  role  in  creating  a  well-
functioning economy, effective application and enforcement of such a policy is therefore a
crucial component of the enlargement process.

The  accession  negotiations,  which  began  in  1998,  determine  the  conditions  under  which
each  applicant  country  will  join  the  European  Union.  The  Union  is  currently  engaged  in
negotiations with twelve Candidate countries. The negotiations on competition policy have
seen significant progress in legislative approximation and in the setting up of a competition
discipline in all Candidate countries. As of October 2002, the competition chapter had been
provisionally closed in the negotiations with eight countries.

Accession negotiations have clearly contributed towards creating more transparency in the
field of State aid in the Candidate countries. In recent years, all twelve Candidate countries
have established State  aid monitoring  authorities.  These  authorities  have  screened  awards
of  State  resources  to  determine  whether  or  not  they  constitute  State  aid  as  defined  under
Article 87 of the Treaty and whether they are compatible with the common market. Where
identified State aid measures are deemed to be incompatible with the EU acquis, Candidate
countries must either abolish these measures or gradually phase them out.

This update of the State Aid Scoreboard is a first attempt to present the state aid situation in
the  twelve  Candidate  countries  for  the  year  2000.  It  draws  on  material  provided  by  each
candidate country early in 2002 in the context of an inventory and data gathering exercise
as  well  as  the  annual  reports  on  State  aid  transmitted  by  the  candidate  countries  in
accordance with their transparency obligations laid down in the Europe Agreements.

While every effort has been made to allow comparability of the data between the Candidate
countries,  there  are  a  number  of  reasons  why  caution  should  be  exercised,  including  the
relatively short period during which the Commission has been monitoring the situation in
the Candidate countries, the existence of language difficulties which make it more difficult
to  monitor  the  press,  and  the  lack  of  awareness  among  citizens  and  companies  in  these
countries  of  the  concept  of  State  aid  control.  Moreover,  as  this  is  the  first  exercise  of  its
kind,  there  are  inevitably  problems  of  interpretation  regarding  the  precise  concept  of  aid
and the classification of aid schemes. As a result, information on State aid in the Candidate
countries may not be as complete as it is in the present Member States.

Disparities between countries may also be explained by the degree to which each Candidate
country has adapted to a competition discipline by adopting national legislation, based on
the  Community  acquis,  and  setting  up  State  aid  monitoring  authorities  charged  with
enforcing the rules. The timing of these and other developments is also important to bear in
mind,  particularly  given  that  the  data  in  this  Scoreboard  refer  to  the  year  2000.  For
example,  significant  changes  in  the  State  aid  field  have  taken  place  in  many  of  the
Candidate  countries  since  this  time.  Furthermore,  State  aid  levels  have  also  tended  to
fluctuate  considerably  around  this  time,  e.g.,  a  number  of  countries  awarded  much  larger

6

volumes  of  aid in 1998 and 1999, often  in  the  context  of  restructuring  or  privatisation  of
national industries.

In spite of these limitations, the Scoreboard does give an important insight into the overall
level  of  State  aid  in  the  candidate  countries  and  the  areas  to  which  aid  is  directed.  The
Scoreboard  is  divided  into  three  main  sections.  The  first  part  provides  some  general
background  information  on  enlargement  and  in  particular  negotiations  on  the  competition
chapter.  The  second  part  attempts,  with  all  the  necessary  caveats,  to  compare  the  candidate
countries with one other and also vis-à-vis the EU average. It looks at the overall level of aid,
the sectors to which aid is directed and the use of various aid instruments in the manufacturing
sector. Finally, part three includes a two-page profile outlining the state aid situation for each
candidate country.

For the future, the Commission intends to work closely with the Candidate countries to raise
awareness of the need to control State aid and to improve the quality and comparability of the
data. This will allow the Candidate countries to be fully integrated into future updates of the
Scoreboard.

Candidate  countries  were  not  required  to  report  aid  expenditure  for  the  agricultural  and
fisheries sectors, which are covered by other chapters in the Europe Agreements.

7

PART ONE: THE ENLARGEMENT PROCESS

1.1

Introduction

The European Union is currently engaged in accession negotiations with twelve Candidate
countries.  Following  the  Luxembourg  European  Council  of  December  1997,  accession
negotiations were opened with Cyprus, the Czech Republic, Estonia, Hungary, Poland and
Slovenia.  Following  the  Helsinki  European  Council  of  December  1999,  accession
negotiations  were  also  opened  with  Bulgaria,  Latvia,  Lithuania,  Malta,  Romania  and
Slovak Republic. While the Helsinki European Council recognised Turkey as a Candidate
country, the conditions for starting accession negotiations have not yet been achieved.

The European Union reconfirmed its commitment at the Laeken European Council in 2001
to  bring  the  accession  negotiations  with  the  candidate  countries  that  are  ready  to  a
successful  conclusion  by  the  end  of  2002,  so  that  those  countries  can  take  part  in  the
European  Parliament  elections  in  2004  as  members.  The  conclusions  of  the  Brussels
European Council on 24-25 October 2002  confirmed the European Union’s determination
to  conclude  accession  negotiations  at  the  European  Council  in  Copenhagen  on  12-13
December  2002  and  to  sign  the  Accession  Treaty  in  Athens  in  April  2003.  In  the
Commission’s Progress Report1 published on 9 October 2002, a recommendation was made
to  conclude  the  negotiations  with  ten  countries:  Cyprus,  the  Czech  Republic,  Estonia,
Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia.

1.2

The competition dimension of the enlargement process

1.2.1

Pre-accession Strategy leading to the Europe Agreements

The  introduction  of  market  economies  in  Central  and  Eastern  Europe  led  the  European
Union to review during the nineties its trading relations with the CEECs, and to conclude
free  trade  agreements  with  them.  The  principal  instrument  was  the  Europe  Agreement,
which provided a new framework for trade and related matters between the Union and each
CEEC.  Association  Agreements  are  also  in  force  with  the  two  other  candidate  countries,
Cyprus  and  Malta.  Under  the  Agreements,  the  partner  countries  commit  themselves  to
approximating  their  legislation  to  that  of  the  European  Union,  particularly  in  the  areas
relevant  to  the  internal  market.  The  Agreements3  therefore  contain  the  main  substantive
competition  rules  which  apply  in  areas  where  trade  between  the  EU  and  a  CEEC  is
affected. The Agreements stipulate that any public aid which distorts or threatens to distort
competition by favouring certain undertakings or the production of certain goods is deemed
to be incompatible with the proper functioning of the Agreement, in so far as it may affect
trade between the EU and a CEEC. The Europe Agreement makes it clear that these rules
are to be interpreted in accordance with the criteria arising from the application of Article
87 of the Treaty.

3  The  Agreement  with  Malta  does  not  contain  provisions  on  competition  similar  to  those  in  the  other
agreements.

8

                                                
1.2.2

Accession negotiations

The  accession  negotiations,  which  began  in  1998,  determine  the  conditions  under  which
each applicant country will join the European Union. On joining the Union, applicants are
expected to accept the "acquis", i.e. the detailed laws and rules adopted on the basis of the
EU  Treaty.  The  negotiations  focus  on  the  terms  under  which  the  applicants  will  adopt,
implement  and  enforce  the  acquis,  and,  as  the  case  may  be,  the  granting  of  possible
transitional  arrangements  which  must  be  limited  in  scope  and  duration.  In  practice,  the
negotiations  have  been  sub-divided  into  31  chapters.  Chapter  6  concerns  competition
policy. The negotiations on the competition chapter started in 1998 with Cyprus, the Czech
Republic,  Estonia,  Hungary,  Poland  and  Slovenia  and  in  2000  with  Latvia,  Lithuania,
Malta,  Romania  and  Slovak  Republic.  The  competition  negotiations  with  Bulgaria  were
opened in March 2001.

1.2.3

The requirements for closure of the competition chapter

The  requirements  for  the  provisional  closure  of  the  competition  chapter  are  derived  from
the  conclusions  of  the  Copenhagen  European  Council  in  1993.  At  Copenhagen,  the
European Council defined the criteria which  applicants have  to  meet before  they  can join
the EU. In the economic sphere, these criteria require the existence of a functioning market
economy  as  well  as  the  capacity  to  cope  with  competitive  pressures  and  market  forces
within  the  European  Union.  Competition  negotiations  have  taken  place  in  the  context  of
this ‘economic criterion’. In this framework, the EU has consistently taken the view that the
Candidate countries can be  regarded as being  ready  for  accession only  if  their companies
and public authorities have become accustomed to a competition discipline similar to that
of  the  Community  well  before  the  date  of  accession.  This  is  necessary  to  ensure  that  the
economic actors in the Candidate countries are able to withstand the competitive pressures
of the internal market.

Consequently, the requirement of adapting to a competition discipline well before accession
stems both from the need to preserve the internal market discipline after enlargement, and
from  the  difficulties  that  would  arise  in  Candidate  countries  if  they  were  faced  with  the
application  of  the  acquis  from  one  day  to  the  next.  In  order  to  avoid  such  difficulties,  a
thorough pre-accession preparation is essential. Companies (including public undertakings)
need to adjust to operating in accordance with antitrust rules and without distortive forms of
State  aid,  the  authorities  and  the  judiciary  need  to  grow  accustomed  to  applying  and
enforcing these rules, and public bodies involved in the granting of aid have to get used to
State  aid  discipline,  including  ex  ante  notification  procedures.  In  this  respect,  the  Lisbon
strategy  of  ‘less  and  better  aid’4  in  order  to  increase  competitiveness  is  an  important
instrument for the Candidate countries.

In  translating  these  principles  into  concrete  requirements,  the  EU  put  forward  three
elements that must be in place in a Candidate country before the competition negotiations
can be provisionally closed:

4  The  Lisbon  European  Council  Conclusions  of  March  2000  called  on  Member  States  to  “…reduce  the
general  level  of  State  aids,  shifting  the  emphasis  from  supporting  individual  companies  or  sectors  towards
tackling  horizontal  objectives  of  Community  interest,  such  as  employment,  regional  development,
environment and training or research.”

9

                                                
(1) the necessary legislative framework with respect to antitrust and State aid;

(2)  an  adequate  administrative  capacity  (in  particular,  a  well-functioning  competition
authority); and

(3) a credible enforcement record of the acquis in all areas of competition policy.

To  evaluate  whether  these  requirements  are  met,  the  Commission  has  carried  out  an  in-
depth  assessment,  including  the  examination  of  cases  that  the  competition  offices  of  the
Candidate countries have handled, both in the state aid and antitrust area. This has enabled
the Commission and the Council to assess the degree to which the competition discipline is
already being enforced in the Candidate countries.

1.2.4

The results of the assessment

Progress in the area of State aid has tended to be much slower than in the antitrust field, and
it is only more recently that a real State aid discipline has begun to emerge. All Candidate
countries have now adopted national State aid legislation, based on the Community acquis,
and have also set up State aid monitoring authorities charged with applying and enforcing
the rules. However, the  degree  to  which  a  full  and  proper  State aid  discipline is  enforced
still varies somewhat from country to country.

The  decision  to  provisionally  close  the  competition  negotiations  with  Estonia,  Latvia,
Lithuania and Slovenia in December 2001,  with Cyprus in June 2002 and with the Czech
Republic,  Malta  and  Slovakia  in  October  2002,  reflects  the  important  progress  that  had
been  made  in  these  eight  applicant  countries.  State  aid  rules  are  being  enforced  and
incompatible aid  measures have been duly  amended.  Progress has been  achieved  in  other
countries  as  well  and  the  Commission  has  been  able  to  present  proposals  to  the  Council
which  could  pave  the  way  for  the  conclusion  of  the  negotiations  on  competition  with
Hungary  and  Poland  by  the  end  of  2002.  Progress  has  also  been  made  in  Bulgaria  and
Romania.  State  aid  legislation  in  these  two  countries  has  been  introduced  only  recently
though, and it will still take some time for a sufficiently developed enforcement record to
emerge.

1.2.5

Post-Accession

Upon  Accession,  Candidate  countries  will  be  required  to  notify  new  aid  measures  to  the
Commission. As with the current Member States, the Commission will control the granting
of aid by means of a formal and transparent procedure.5

A  specific  approach  has  been  devised  for  aid  measures  that  already  entered  into  effect
before the date of accession and that Candidate countries would like to continue to operate
beyond  that  date.  The  approach  was  already  announced  in  the  Common  Positions  on  the
Competition  Chapter,  adopted  by  the  EU  in  November  2001  and  has  been  further
developed  since  then.  It  is  envisaged  that  the  following  measures  will  be  regarded  as
existing aid in the new Member States from the date of accession:

– 

Aid measures that entered into effect before 10 December 1994;

5 Council Regulation No. 659/1999 of 22 March 1999

10

                                                
– 

– 

Aid measures that are included in a list attached to the Accession Treaty;

Aid measures that were approved by the State aid monitoring authority of the
Candidate countries and submitted to the Commission between 1 November
2002  and  the  date  of  accession  and  to  which  the  Commission  does  not
object.

Different  arrangements,  which  are  currently  being  finalised,  will  apply  to  aid  in  the
transport sector.

11

PART TWO: COMPARISON OF THE STATE AID SITUATION IN THE CANDIDATE COUNTRIES

2.1

Conceptual remarks

The data used in this Scoreboard were provided by each candidate country early in 2002 in
the  context  of  an  inventory  and  data  gathering  exercise  as  well  as  the  annual  reports  on
State  aid  transmitted  by  the  candidate  countries  in  accordance  with  their  transparency
obligations laid down in the Europe Agreements. No data were available for Malta for the
year 20006.

Insofar  as  it  was  possible,  the  data  have  been  harmonised  by  applying  the  same
methodology as that used for the EU Member States in the spring 2002 update of the State
aid Scoreboard7. In principle, the data included in this Scoreboard should refer to measures
that  have  been  assessed  by  the  national  State  aid  monitoring  authorities  to  determine
whether or not they constitute State aid as defined under Article 87 of the Treaty. For some
countries,  the  data  include  some  measures  that  are  incompatible,  while  in  others,  some
existing measures had not yet been assessed at the time the data were compiled. In addition,
some  categories  of  aid  may  not  have  been  reported  to  the  same  extent  by  all  candidate
countries.  For  example,  certain  types  of  rescue  aid  which  consist  of  postponing  and,  in
some  cases,  the  waiving  of  liabilities  such  as  tax  arrears,  are  particularly  difficult  to
measure. It is also worth noting that while some countries include State aid granted by local
government,  others  may  include  aid  granted  only  by  central  government.  As  a  result,  the
scope and quality of the data in this Scoreboard may vary from one country to another.

State aid data collected for the Scoreboard are grouped according to primary objectives. It
has to be noted that primary objectives cannot always give a completely accurate picture of
the final beneficiaries: e.g., a part of regional aid is in fact paid to small and medium size
enterprises,  aid  for  research  and  development  goes  to  particular  sectors,  and  so  on.
Similarly, aid classified under ‘rescue and restructuring’ is, in the vast majority of cases, ad
hoc aid to a company in a particular sector.

Candidate  countries  were  not  required  to  report  aid  expenditure  for  the  agricultural  and
fisheries  sectors,  which  are  covered  by  other  chapters  in  the  Europe  Agreements.  These
sectors are therefore not included in the Scoreboard. Also excluded is Community funding
for the candidate countries. The EU's financial planning for 2000 to 2006, adopted by the
Berlin  European  Council  in  March  1999,  includes  €22  billion  devoted  to  'pre-accession
assistance'  for  infrastructure  and  institution-building  (PHARE),  environmental  and
transport  infrastructure  (ISPA)  and  rural  development  (SAPARD)  in  the  applicant
countries.

As  a  general  rule,  de  minimis  aid  is  excluded  from  the  totals  provided  for  each  country
although the situation may vary from one country to another. Where available, information
on de minimis aid  is  included  separately.  Under  the  de  minimis  rule,  aid  to  an  enterprise
that  does  not  exceed  the  threshold  of  €100  000  over  any  period  of  three  years  is  not
considered State aid within the meaning of Article 87(1) of the Treaty and is therefore not
subject to the notification obligation as regards the EU Member States.

6 The Agreement with Malta does not contain any specific reporting obligations for State aid
7 COM(2002) 242 final of 22.05.2002

12

                                                
See also Methodological notes.

2.2

Overview

The  population  of  the  twelve  Candidate  countries  stood  at  106  million  in  the  year  2000
compared with the EU total of 376 million. The largest countries were Poland (39 million)
and Romania (22 million), the smallest Malta (0.4 million) and Cyprus (0.8 million).

State  aid8  granted  by  the  twelve  candidate  countries9  was  estimated  at  €4.8  billion.  The
comparable figure for the EU was €70 billi on. In absolute terms, Poland (€1 869 million),
Hungary  (€840  million),  Czech  Republic 
awarded the most aid. Together they accounted for more than 85% of total aid in the twelve
candidate countries.

(€770  million)  and  Romania  (€650  million)

In  relative terms, State  aid  may  be  expressed  as  a  percentage  of  Gross  Domestic  Product
(GDP) or as  a per  capita measure.  For  the Candidate countries as a whole  (CC-12), State
aid represented 1.3% of GDP10 which is significantly higher than the EU average of 0.8%.
However,  this  average  masks  significant  differences  between  the  countries:  Romania
(1.9%), Hungary (1.7%) and Czech Republic (1.5%) all reported aid levels well above the
CC-12 average. In contrast, for the three Baltic States (Estonia, Lithuania and Latvia) and
the Slovak Republic, aid as a percentage of GDP was at or below the EU average of 0.8%.

When  aid  is  expressed  in  per  capita  terms,  however,  a  different  picture  emerges.  Even  if
purchasing  power  standards  (PPS)11  are  used  -  thereby  taking  account  of  differences  in
price levels between countries – in 2000, the Candidate countries tended to spend less aid
than the EU Member States: 105 PPS per person on average against the EU average of 185
PPS  per  person.  Only  Hungary  (190  PPS)  exceeded  the  EU  average  although  Czech
Republic, Slovenia and Cyprus all reported aid levels well above the CC-12 average. The
ranking of the Candidate countries also changes: for example, Romania which reported the
highest level of aid as a percentage of GDP is ranked 6th in terms of aid per capita (PPS)
(Table 1).

8 Total aid less agriculture and fisheries
9 No data available for Malta. Furthermore, the figures do not include the aid granted by Cyprus through the
International Business Enterprises scheme since the measure is to be abolished by 1 January 2003 as it is not
compatible with the Treaty (cf. the country profile of Cyprus).
10 GDP less value added for agriculture and fisheries
11 State aid per capita are expressed in terms of Purchasing Power Standards (PPS) and therefore take account
of differences in price levels between countries. In general, when PPS are used instead of exchange rates, the
gap between high-income and low-income countries narrows as price levels in low-income countries tend to
be low compared to richer countries.

13

                                                
Table 1: Summary table - State aid in the EU and the candidate countries

Year 2000
Population (mio)
State aid (mio. €)
State aid/GDP (%)
Aid/capita (PPS/cap)

EU 15 CC 12 BG CY CZ EE HU LT LV MT PL
376,5 105,6 8,2 0,8 10,3 1,4 10,0 3,7 2,4 0,4

RO SI SK
38,7 22,5 2,0 5,4

69.460 4.839 151

95 770 26 843 70 53 n.a. 1.869 650 221 91

0,8
185

1,3 1,3 1,0
105

1,7 0,6 0,7 n.a.
66 156 174 43 190 44 47 n.a.

1,5 0,5

1,1
98

1,9 1,2 0,4
88 173 45

Note: Total State aid less agriculture and fisheries. EU funding is also excluded. No State aid data available
for Malta. Source: DG Competition and Eurostat

2.3

Sectoral distribution of aid

As previously stated, the available data on State aid are grouped according to the primary
objective  only  and  cannot  therefore  give  a  completely  accurate  picture  of  the  final
beneficiaries  of  the  aid.  Notwithstanding  the  measurement  difficulties,  the  data  do  give
some  indication  as  to  which  sectors  are  favoured  by  each  Candidate  country.  In  the  year
2000,  an  estimated  46%  of  State  aid  in  the  Candidate  countries  was  granted  to  the
manufacturing  sector,  compared  with  the  EU  average  of  35%.  The  share  of  total  aid
directed towards the transport sector, largely to the railway network, was around 22%. The
coal  sector  received  12%,  around  11%  was  non-sector-specific  aid  for  employment
objectives12  with  the  remainder  split  between  the  non-manufacturing  sector  and  services
other than transport (Table 2).

The  CC-12  averages13  conceal  significant  differences  between  Candidate  countries  in  the
sectors to which they directed aid. The share of aid to the manufacturing sector ranged from
10% or less in Estonia and Lithuania to more than 50% in Cyprus, Hungary, Romania and
the Slovak Republic. Manufacturing aid is dealt with in more detail in section 2.4. Aid to
the transport sector accounted for around 10% of overall aid in Cyprus and Poland, while,
in Estonia it represented more than 80%. Aid for employment and training made up around
25% of aid in Poland and 30% in Slovenia compared with a CC-12 average of 11%. Aid to
the  coal  industry  accounted  for  more  than  25%  of  aid  in  Bulgaria,  almost  20%  of  aid  in
Poland and around 10% in Czech Republic and Romania. No other  country granted more
than 5% of its aid to this sector in the year 2000.

12 It was not possible to classify employment and training under a particular sector.
13 These averages are clearly  influenced  by  the  large  share  of  aid  in  Poland,  Romania,  Hungary  and  Czech
Republic

14

                                                
Table 2: Sectoral distribution of aid, 2000

% of total

Manufacturing

Non
manufacturing

Coal Services Transport

EU 15
CC 12
BG
CY
CZ
EE
HU
LT
LV
PL
RO
SI
SK

35
46
38
52
42
10
62
5
45
42
52
37
55

0
4
11
-
-
-
-
57
-
2
17
-
10

11
12
27
-
11
-
2
-
-
19
10
5
4

3
4
2
33
19
6
0
-
7
-
2
2
2

46
22
22
8
26
84
36
38
48
13
19
25
29

million €

Total aid

Not 
elsewhere
classified*

5
11
1
6
2
-
0
-
-
24
1
30
-

69.460
4.839
151
95
770
26
843
70
53
1.869
650
221
91

* This column includes aid to employment and training that can not be classified under a particular sector.

Source: DG Competition

2.4

Aid to the manufacturing sector

Aid  to  the  manufacturing  sector14  encompasses  aid  for  horizontal  objectives  such  as
research  and  development  and  small  and  medium-sized  enterprises  as  well  as  aid  for
specific sectors such as steel and shipbuilding, aid for rescue and restructuring and regional
aid.

Aid granted to the manufacturing  sector in the Candidate countries was  estimated at  €2.2
billion  for  the  year  2000.  Poland  accounted  for  more  than  one  third  of  this  amount.  In
relative  terms,  the  CC-12  figure  represented  2.0%  of  value  added  in  total  industry15.  In
terms of value added, Cyprus, Hungary and Romania directed relatively high levels of aid
to this sector in the year 2000 (see Table 3). The high level in Cyprus can be explained by
the  relatively  large  share  of  aid  for  horizontal  objectives,  primarily  aid  for  small  and
medium-sized  enterprises.  In  Hungary,  it  was  due  mainly  to  the  large  amount  of  aid
awarded to undertakings through a series of fiscal aid schemes. In Romania, it was largely
the result of large amounts of aid for rescue and restructuring.

14 See more precise definition in Methodological notes.
15  At  the  time  the  statistics  were  compiled,  data  on  value  added  for  the  manufacturing  sector  were  not
available.  Value  added  in  total  industry  was  therefore  used  as  a  proxy.  The  equivalent  figure  for  the  EU
Member States was 1.4% in 2000.

15

                                                
Table 3: State aid to the manufacturing sector, 2000

€ million
as % of total 
state aid
as % of
value added in 
total industry
per person
employed (€)

EU 15 CC 12
2.237
23.844

35

46

BG

CY

57

38

50

52

CZ

324

3

521

42

10

62

3

5

24

45

787

336

42

52

83

37

50

55

EE

HU

LT

LV

PL

RO

SI

SK

1,4

2,0

1,7

4,0

1,8

0,2

3,6

0,1

1,6

1,7

3,0

1,4

0,8

790

224

84

1.179

241

18

571

11

129

246

145

288

87

Source: DG Competition

2.5

Horizontal and sectoral objectives

State  aid  for  horizontal  objectives,  i.e.  aid  that  is  not  granted  to  specific  sectors  or
geographic  areas,  is  usually  considered  as  being  targeted  to  market  failures  and  as  being
less  distortive  than  sectoral  and  ad  hoc  aid.  Research  and  development,  safeguarding  the
environment,  energy  saving  and  support  to  small  and  medium-sized  enterprises  are  the
most prominent horizontal objectives pursued with State aid.

In 2000, aid granted for horizontal objectives accounted for just under 40% of total aid in
the  Candidate  countries.  There  were  large  disparities  between  countries  in  the  share  of
horizontal  objectives  ranging  from  around  10%  or  less  of  total  aid  in  Bulgaria,  Estonia,
Lithuania and Slovak Republic to 50% or more in Hungary, Poland and Slovenia (Table 4).
Again,  it  is  important  to  bear  in  mind  however  that  aid  schemes  classified  under  the
primary objective of, say, employment aid may also support secondary objectives such  as
small and medium-sized enterprises, etc. However, the data do give a broad indication as to
which horizontal objectives are favoured by each country. In 2000, around a quarter of all
aid  in  Poland  and  Slovenia  was  specifically  granted  for  employment  objectives.  Slovenia
directed  almost  10%  of  its  aid  to  research  and  development  compared  with  a  CC-12
average of only 2%. Finally, Cyprus granted just under 20% of its aid to small and medium-
sized enterprises.

Aid to support specific sectors is likely to distort competition more than aid for horizontal
objectives  and  also  tends  to  favour  other  objectives  than  identified  market  failures.
Moreover, a significant part of such aid is granted to rescue or restructure companies. This
can  be  explained  in  part  by  the  relatively  high  level  of  privatisation  and  the  need  for
candidate countries to demonstrate a functioning market economy capable of withstanding
the competitive pressure in the internal market.

The share of aid granted to specific manufacturing and service sectors varies significantly
from  one  candidate  country  to  another.  For  example,  taking  the  Candidate  countries  as  a
whole, aid to the steel sector  represented  5%  of  total  aid  in  the  year  2000  whereas  in  the
Czech  Republic  this  sector  received  almost  20%  and  in  the  Slovak  Republic  more  than
35%.

16

Table 4: State aid for horizontal objectives, 2000

EU 15 CC 12

BG

CY

CZ

EE

HU

LT

LV

PL

RO

SI

SK

as % of
total aid

24

39

1

30

17

10

50

3

15

55

18

51

12

Source: DG Competition

2.6

State aid supporting regional development and cohesion

The Europe Agreements lay down that public aid granted by the associated countries is to
be assessed taking into account that for a five-year period they are to be regarded as areas
identical to those areas of the Community qualifying for regional aid under Article 87(3)a
of  the  EC  Treaty,  i.e.  the  least  developed  regions.  In  2000,  the  Association  Councils  had
decided  to  extend  this  status  for  another  five  years  with  respect  to  Bulgaria,  Romania,
Lithuania  and  Estonia.  In  2001,  similar  decisions  were  adopted  by  the  respective
Association  Councils  with  the  Czech  Republic,  Latvia,  Poland,  Slovak  Republic  and
Slovenia. In some cases this was with a retroactive effect so that, for example in the Czech
Republic, the decision in fact expired by the end of 2001.

The Association Council decision extending Article 87(3)(a) status generally adds that the
associated country has to submit GDP per capita figures at the appropriate statistical level.
These figures are to be used by the State aid monitoring authority of the associated country
and the Commission to jointly draw up the regional aid map for the associated country, on
the  basis  of  the  Community  guidelines  on  national  regional  aid.  The  regional  aid  map
identifies the eligibility of regions for regional aid as well as the maximum aid intensities
allowed in each of these regions, taking account of regional disparities as reflected in per
capita income. On a proposal from the associated countries, the Commission has prepared
the submission of draft regional aid maps to the Council with a view to their adoption by
the respective Association Committees for most of the Candidate countries.

As almost all candidate countries in the year 2000 were regarded as areas identical to those
areas of the Community qualifying for regional aid under Article 87(3)a of the Treaty, some
countries could have classified much of their aid under ‘regional objectives’. However, in
order to provide  a clearer picture of where  the aid goes, aid has been classified, as far as
possible, under a more specific objective.

2.7

State aid instruments in the manufacturing sector

All State aid represents a cost or a loss of revenue to the public authorities and a benefit to
recipients.  However,  the  aid  element,  i.e.  the  ultimate  financial  benefit  contained  in  the
nominal  amount  transferred  depends  to  a  large  extent  on  the  form  in  which  the  aid  is
provided.

For  the  Candidate  countries  as  a  whole  (CC-12),  tax  exemptions  accounted  for  a  larger
share  of  total  aid  than  grants:  around  50  %  of  all  aid  to  the  manufacturing  sector  was
awarded  through  tax  exemptions  compared  with  an  EU  average  of  29%  while  aid  in  the
form of grants made up 25% of the total,  against an EU  average of 62%.  These averages
conceal considerable differences between the individual candidate countries: while Estonia,
Hungary,  Latvia,  Poland  and  Slovak  Republic  made  widespread  use  of  tax  exemptions

17

(60%  or  more  of  total  aid)  in  the  year  2000,  other  countries  tended  to  use  grants,  e.g.,
Bulgaria (just under 80% of all aid), Czech Republic and Hungary (more than 60%).

There are other forms of aid instrument which vary from one candidate country to another
(Table 5). One such category covers transfers in which the aid element is the interest saved
by the recipient during the  period  for  which the capital  transferred is at  his  disposal.  The
financial transfer takes the form of a soft loan or tax deferral. In the year 2000, soft loans
accounted  for a  significant share  of total manufacturing aid (between 10  and  16%)  in  the
Czech  Republic,  Poland  and  Slovenia.  A  similar  instrument  is  a  tax  deferral  which  was
used only in Latvia (3% of all aid), Poland (4%) and Romania (11%) in 2000.

Table 5: State aid to the manufacturing sector by type of aid instrument, 2000

in %
Equity 

Tax exemptions
29
51
14
51
8
70
79
28
58
60
38
12
69

participations Soft loans
5
0
8
5
1
-
-
-
10
14
-
-
2
-
1
-
37
-
16
3
5
-
16
10
-
-

Grants

62
25
77
49
63
29
17
63
-
11
15
50
29

EU 15
CC 12
BG
CY
CZ
EE
HU
LT
LV
PL
RO
SI
SK

Source: DG Competition

Tax 

deferrals Guarantees

1
3
-
-
-
-
-
-
3
4
11
-
-

3
8
7
-
5
1
1
8
2
5
30
11
2

million € 
Total
manufacturing
24.235
2.237
57
50
324
3
521
3
24
787
336
83
50

Aid may also be in the form of state equity participation which represented about 5% of all
CC-12 aid to the manufacturing sector. More than one-third of aid in Latvia was awarded
for the capitalisation of tax debts accrued before privatisation. Finally, aid may be provided
in the form of guarantees. The aid elements are much lower (on average around 10%) than
the nominal amounts guaranteed, since  they  correspond  to the benefit  which  the recipient
receives free of charge or at lower than market rate if a premium is paid to cover the risk.
Guarantees  were  awarded  in  2000  by  several  candidate  countries,  notably  in  Romania
where they accounted for 30% of all manufacturing aid.

18

PART THREE: COUNTRY PROFILES OF THE STATE AID SITUATION

BULGARIA

Year 2000

Population: 8.2 million

Total State aid (national currency): 295 million BGN

GDP: €11.7 billion

Total State aid (euro): €151 million

GDP per capita: €1433 or 5105 PPS

State aid as a percentage of GDP*: 1.3%

Exchange rate: 1€ = 1.9479 BGN

State aid per capita: €18 or 66 PPS

State aid legislative, administrative and enforcement framework

Ongoing negotiations  on the competition chapter which  was opened in  March  2001.  Law
on  the  Protection  of  Competition  of  1998  contains  basic  provisions  on  State  aid  control.
The new State aid law entered into force in June 2002. In July, rules on the application of
the  State  aid  law  were  adopted  and  the  Ministry  of  Finance  issued  an  Ordinance  on  the
procedure 
aid.
The  Commission  for  the  Protection  of  Competition  controls  State  aid.  The  Ministry  of
aid.
is 
Finance 
Website: www.stateaid-bg.org

for  monitoring 

transparency 

responsible 

monitoring 

ensuring 

State 

State 

and 

the 

for 

of 

of 

State aid situation in the year 2000

Bulgaria granted around €151 million of aid in  the year 2000. This represents 1.3% of GDP
or the equivalent of €18 per capita.

In 1999, the volume of aid was more than twice as high (almost €400 million), due largely
to the €170 million awarded  to  the  steel  industr y  in  the  context  of  privatisation.  In  2000,
there was no  reported aid to this industry. Similarly,  there  was no  aid  to  the  shipbuilding
sector in 2000 although €1 million in ad hoc aid was granted in 1999.

Aid for horizontal objectives made up only 1% of total aid while aid  granted for regional
objectives  represented  12%  of  aid.  All  other  aid  was  awarded  for  objectives  favouring
specific sectors. More than €40 million, representin g 27% of all aid went to the coal sector
with  a  further  11%  being  allocated  for  ore  mining.  Around  25%  of  aid  went  to  other
manufacturing  sectors  (central  heating  undertakings).  The  transport  sector  received  more
than 20% of total aid, all of it directed to the railway sector. There was no aid to the airline
industry in 2000 whereas in 1999, around €17 million was granted to Balkan Airlines.

Just  under  40%  of  all  aid  (€57  million)  in  2000  went  to  the  manufacturing  sector  (see
definition in methodological notes). This represents 1.7% of value added in total industry or
the equivalent of €84 per person employed.

Grants and tax exemptions, i.e. aid that is transferred in full to the recipient, accounted for
more  than  90%  of  all  aid  in  the  manufacturing  sector.  Grants  were  by  far  the  most
frequently used form of aid instrument making up almost 80% of the total (Table 5).

* (GDP less value added for agriculture and fisheries)

19

State aid in the year 2000 - Bulgaria

Total aid of which:

Horizontal Objectives, of which:
     Research and Developm ent
     Environm ent
     Sm all and m edium -sized enterprices
     Com m erce
     Energy
     Em ploym ent
     Training 
     Other Objectives

Aid for rescue and restructuring

Objectives favouring specific sectors, of which:
     Steel
     Shipbuilding
     Other Manufacturing Sectors
     Coal
     Other Non-m anufacturing Sectors
     Transport, of which:
            Railways
            Road/Com bined Transport
            Air Transport
     Tourism
     Financial Services
     Media and Cultural sector 
     Other Services

Regional O bjectives

€ m illion

151,4

1,9
-
0,8
-
-
-
1,2
-
-

1,6

129,5
-
n.a.
36,3
40,7
16,3
33,2
33,2
-
-
-
-
0,9
2,1

18,4

Total aid to the m anufacturing sector (€ m illion)
per person em ployed in this sector (€ - pps)
as %  of value added in total industry

57,0
83,8 - 298,6

1,7

M a in  s t a t e  a id  o b je c t iv e s  in  B u lg a r ia , 2 0 0 0

C o a l

O t h e r   m a n u f a c t u r i n g  
s e c t o r s

R a i l w a y s

R e g i o n a l   a i d

O t h e r   n o n - m a n u f a c t u r i n g  
s e c t o r s

0

5

1 0

1 5
%   o f   t o t a l   a i d

2 0

2 5

3 0

20

CYPRUS

Population: 755,000

Total State aid (national currency): 55 million CYP

GDP: €9.2 billion

Total State aid (euro): €95 million (plus €178 million 1)

GDP per capita: €12 137 or 14 938 PPS

State  aid  as  a  percentage  of  GDP*:  1.0%  (4%  if  the  extra
€178 million 1 is included)

Year 2000

Exchange rate: 1€ = 0.5739 CYP

State aid per capita: €126 or 156 PPS

State aid legislative, administrative and enforcement framework

Negotiations on the competition chapter provisionally closed in June 2002.
State aid law came into effect on 30 April 2001.
Office of the Commissioner for Public Aid established in May 2001.
Website: www.publicaid.gov.cy/paid/publicaid.nsf/

State aid situation in the year 2000

Cyprus granted around €95 million of aid in the year 2000. This represents 1.0% of GDP or
the equivalent of €126 per capita. Aid for  horizontal objectives accounted for around one-
third  of  the  total  (just  under  €30  million).  Of   this  figure,  €18  million  was  tax  relief  for
SMEs and €6 million grants for training objectives.

The financial services sector received €4.5  million in the form of tax exemptions. Almost
€23 million was directed at media and culture, w ith half being granted for public radio and
television.  Aid  for  transport  (air,  road  and  maritime)  totalled  €8  million  in  2000.  Finally,
there was €10 million of regional aid, the bulk of  which was for the rental of public land at
prices below market value.

Aid to the manufacturing sector accounted for just over half the total (€50 million) which
represents 4.0% of valued added in total industry. The total for manufacturing includes aid
for  the  technological  upgrading  of  enterprises  and  aid  granted  through  a  scheme  to  assist
exporters of industrial products, although the latter has since been abolished. Around half
the aid in the manufacturing sector took the form of a grant, while the other half was made
up of tax exemptions (Table 5).

Methodological notes

(1) In addition to the aid referred to above, €178 million (around 100 million CYP) was awarded
through the International Business Enterprises scheme in 2000. This aid was made up largely of tax
relief  (€148  million)  through  a  reduced  tax  rate  of  4.25%,  as  opposed  to  the  standard  rate  of  20-
25%. Tax exemptions accounted for a further €30 million. Such aid is not deemed to be compatible
with the Treaty and the measure is to be abolished on 1st January 2003. Enterprises already in the
scheme  will  be  allowed  to  keep  the  preferential  tax  rate  until  the  end  of  2005.  Given  the  clear
commitment to phase out this scheme, the aid has not been included in the total. However, if it were
included, the overall level of State aid in Cyprus would represent 4% of GDP.

21

Data on State aid refer to that part of the island that is under the control of the Cypriot government.
This covers an estimated 85% of the total population.
GDP per capita exceeds 80% of the EU average and thus Cyprus is not regarded as the equivalent of
an Article 87(3)(a) area.
In view of the fact that virtually all enterprises in Cyprus can be classified as SMEs, no aid scheme
existing prior to the enactment of the Public Aid Control Law in 2001 included the explicit
condition that beneficiaries should be SMEs.The total figure for transport includes €3.5 million
granted for maritime transport.

* (GDP less value added for agriculture and fisheries)

22

State aid in the year 2000 - Cyprus

Total aid of which:

Horizontal O bjectives, of which:
     Research and Developm ent
     Environm ent
     Sm all and m edium -sized enterprices
     Com m erce
     Energy
     Em ploym ent
     T raining 
     O ther O bjectives

Aid for rescue and restructuring

O bjectives favouring specific sectors, of which:
     Steel
     Shipbuilding
     O ther M anufacturing Sectors
     Coal
     O ther Non-m anufacturing Sectors
     T ransport, of which:
            Railways
            Road/Com bined T ransport
            Air T ransport
     T ourism
     Financial Services
     M edia and Cultural sector
     O ther Services

Regional O bjectives

€ m illion

95,4

28,9
0,9
1,7
18,1
2,2
0,1
-
6,0
-

-

56,5
-
-
16,9
-
-
8,1
-
1,9
2,7
1,4
4,5
22,6
3,0

10,0

T otal aid to the m anufacturing sector (€ m illion)
per person em ployed in this sector (€ - pps)
as %  of value added in total industry

49,8
1179,1 - 1451,3

4,0

M a in  s ta te  a id  o b je c tiv e s  in  C y p ru s , 2 0 0 0  

M e d i a   a n d  
c u l tu ra l  se c to r

S m a l l  a n d  
m e d i u m -siz e d   e n te rp ric e s

O th e r  m a n u fa c tu ri n g  
se c to rs

R e g i o n a l   a id

T ra in in g

0

5

1 0

1 5

2 0

2 5

%  o f to ta l  a id

23

CZECH REPUBLIC

Population: 10.3 million

Total State aid (national currency): 27 billion CZK

Year 2000

GDP: €52.9 billion

Total State aid (euro): €770 million

GDP per capita: €5 147 or 11 967 PPS

State aid as a percentage of GDP*: 1.5%

Exchange rate: 1€ = 35.5995 CZK

State aid per capita: €75 or 174 PPS

State aid legislative, administrative and enforcement framework

Negotiations on the competition chapter provisionally closed in October 2002.
Act on State aid of 24/2/2000 came into effect on 1/4/2000.
Office for the Protection of Competition established in 1991
Website: www.compet.cz

State aid situation in the year 2000

The Czech Republic granted around €770 million of  aid in the year 2000. This represents
1.5% of GDP or the equivalent of €75 per ca pita. In 1999, the level of State aid was more
than three times higher as the result  of  a  large  amount  of aid for rescue  and restructuring
and increased aid to the transport sector.

Aid for horizontal objectives accounted around 17% of total aid. Of the €133 million, aid
for  small  and  medium-sized  enterprises  (SMEs)  accounted  for  €67  million,  €28  million
went to research and development (R&D) while €17 million was awarded for employment
and training objectives. Aid to SMEs helped to create an estimated 1700 jobs.

Aid for the restructuring of the steel sector was estimated at €144 million, almost 20% of
all aid while €86 million of aid,  11% of total aid, was granted for scaled down production
of coal mines.

Financial services accounted for almost 20% of total aid in 2000. The bulk of this aid was a
State guarantee for restructuring plans in the banking sector. Transport aid amounted to one
quarter of all aid with more than 90% of the €200 million going to the railway sector.

In  2000,  around  €324  million  was  directed  to  the  manufacturing  sector.  This  represents
more than 40% of total aid or 1.8% of value added in total industry. The figure comprises
almost €50 million of aid for resc ue and restructuring, made up of a significant amount of
ad  hoc  aid  for  the  motor  vehicle  sector.  A  range  of  aid  instruments  were  used  in  the
manufacturing  sector.  Grants  accounted  for  more  than  60%  of  all  manufacturing  aid
followed by equity participation, soft loans, tax exemptions and guarantees (Table 5).

Methodological notes

Aid for rescue and restructuring has been estimated on the basis of the budget and duration of the
schemes. The figure for employment includes aid for training. The figure for coal includes aid for
ore mining.

* (GDP less value added for agriculture and fisheries)

24

S ta te  a id  in  th e  ye a r 2 0 0 0  - C ze c h  R e p u b lic

T o ta l a id  o f w h ich :

H o rizo n ta l O b je c tive s , of w hich:
     R esearch and D evelopm ent
     E nvironm ent
     S m all and m edium -sized enterprices
     C om m erce
     E nergy
     E m ploym ent
     T raining 
     O ther O bjectives

Aid  fo r re s c u e  a n d  re s tru c tu rin g

O b je c tive s  fa vo u rin g  s p e c ific  s e c to rs , of w hich:
     S teel
     S hipbuilding
     O ther M anufacturing S ectors
     C oal
     O ther N on-m anufacturing S ectors
     T ransport, of w hich:
            R ailw ays
            R oad/C om bined T ransport
            A ir T ransport
     T ourism
     F inancial S ervices
     M edia and C ultural
     O ther S ervices

R e g io n a l O b je c tive s

€ m illion

7 7 0 ,3

1 3 3 ,0
2 8 ,2
0 ,6
6 6 ,7
-
1 ,6
1 6 ,6
-
1 9 ,3

4 8 ,1

5 8 4 ,2
1 4 4 ,0
-
9 ,9
8 6 ,0
-
1 9 9 ,1
1 8 5 ,7
1 0 ,4
-
-
1 4 4 ,5
0 ,6
-

5 ,1

T otal aid to the m anufacturing sector (€ m illion)
per person em ployed in this sector (€ - pps)
as %  of value added in total industry

3 2 3 ,5
241,3 - 561,0

1,8

Main state aid objectives in the Czech Republic, 2000

Railw ays

Financial
 services

Steel

Coal

Small and medium
sized enterprises

0

5

10

15

% of total aid

20

25

25

ESTONIA

Year 2000

Population: 1.4 million

Total State aid (national currency): 407 million EEK

GDP: €5.5 billion

Total State aid (euro): €26 million

GDP per capita: €3 980 or 8 947 PPS

State aid as a percentage of GDP*: 0.5%

Exchange rate: 1€ = 15.6466 EEK

State aid per capita: €19 or 43 PPS

State aid legislative, administrative and enforcement framework

Negotiations on the competition chapter provisionally closed in November 2001.
The State Aid Monitoring Authority is the Ministry of Finance (Competition and State aid
Division). The new Competition Act of 5 June 2001 entered into force on 1 October 2001.
Websites: www.fin.ee/eng/

State aid situation in the year 2000

Estonia granted around €26 million of aid in the year 2000. This represents 0.5% of GDP or
the equivalent of €19 per capita.

Aid for horizontal objectives amounted to €2.5 million or 10% of total aid in 2000. Ad hoc
aid of €1.8 million  was  granted for  environmen tal purposes through the  Pollution  Charge
Act.  As  regards  other  horizontal  objectives,  relatively  small  amounts  of  aid  were  granted
for research and development (€0.3 million) and trade (€0.4 million).

In the year 2000, the transport sector received €22 million which represents almost 85% of
total aid. Aid for media and culture totalled €1.7 million and consisted la rgely of grants to
support the Estonian film industry.

In  2000,  only  €2.5  million  was  directed  to  the  ma nufacturing  sector  (10%  of  total  aid)
compared with almost €50 million in 1999. The  reduction can be explained by the expiry
on 1st January 2000 of two large regional programmes that provided tax relief to companies
to  acquire  or  upgrade  fixed  assets  and  equipment.  Indeed,  since  the  adoption  of  the  new
Income Act, which came into force on 1 January 2000, tax exemptions for companies with
foreign  capital  are  no  longer  permitted.  The  Act  also  precludes  the  granting  of  aid  to
specific regions.

Tax exemptions were the most frequently used form of aid instrument making up 70% of
total aid to the manufacturing sector while grants accounted for virtually all remaining aid
(Table 5).

Methodological notes

The total figure for transport includes €3.7 million granted for the provision of ferry services to the
Estonian islands. De minimis aid, which is not included in the figures below, was estimated at €0.4
million in 2000.

* (GDP less value added for agriculture and fisheries)

26

State aid in the year 2000 - Estonia

Total aid of which:

Horizontal Objectives, of which:
     Research and Developm ent
     Environm ent
     Sm all and m edium -sized enterprices
     Com m erce
     Energy
     Em ploym ent
     Training 
     Other Objectives

Aid for rescue and restructuring

Objectives favouring specific sectors, of which:
     Steel
     Shipbuilding
     Other Manufacturing Sectors
     Coal
     Other Non-m anufacturing Sectors
     Transport, of which:
            Railways
            Road/Com bined Transport
            Air Transport
     Tourism
     Financial Services
     Media and Cultural sector
     Other Services

Regional Objectives

€ m illion

26,0

2,5
0,3
1,8
0,0
0,4
-
-
-
-

-

23,5
-
-
-
-
-
21,8
9,1
8,7
0,3
-
-
1,7
-

-

Total aid to the m anufacturing sector (€ m illion)
per person em ployed in this sector (€ - pps)
as % of value added in total industry

2,5
18,0 - 40,5

0,2

M a in  s ta te  aid  o b je c tiv e s  in  E s to n ia , 2 0 0 0

Ra ilw a ys

Ro a d /Co m b in e d
tra n sp o rt

M a ritim e
 tra n sp o rt

T o ta l h o riz o n ta l
o b je ctive s

0

5

10

15

20

25

30

35

% o f to ta l a id

27

HUNGARY

Population: 10.0 million

Total State aid (national currency): 219 billion HUF

Year 2000

GDP: €50.6 billion

Total State aid (euro): €843 million

GDP per capita: €5 035 or 11 406 PPS

State aid as a percentage of GDP*: 1.7%

Exchange rate: 1€ = 260,045 HUF

State aid per capita: €84 or 190 PPS

State aid legislative, administrative and enforcement framework

Ongoing negotiations on the competition chapter.
On the basis of Government Decree No. 76/1999 and 163/2001, the State Aid Monitoring
Office began work in mid-1999 on the harmonisation of State aid regulations with the
Europe Agreement and the notification of State aid granted to undertakings.
Website: www.p-m.hu/Dokumentumok/English/tvi/honlapfo_20020208_en.htm

State aid situation in the year 2000

Hungary granted around €843 million of aid in the year 2000. This represents 1.7% of GDP
or the equivalent of €84 per capita.

Aid for horizontal objectives accounted for 50% of total aid: €370 million was made up of
tax benefits awarded to undertakings in the manufacturing sector through a series of fiscal
aid  schemes.  Several  of  the  schemes  have  been  found  to  be  incompatible  with  the  EU
acquis and are therefore being phased out. €22  million was earmarked specifically for small
and medium-sized enterprises while €18 million  was granted for environmental objectives.
The relatively small amount of aid to employment and training (under €2 million) reflects
the  increasing  tendency  to  promote  these  areas  through  general  measures  rather  than  by
granting State aid.

Aid  schemes  for  specific  manufacturing  sectors  no  longer  exist  due  to  the  fact  that
privatisation ended in the mid-nineties.

As regards aid to coal mining (€13 million in 2000), the Hungarian government decided in
1999 to terminate aid destined for current production to the coal sector by the end of 2000.
More  than  one-third  of  total  aid  was  directed  to  the  transport  sector  in  2000,  almost
exclusively  to  railways.  Of  the  €300  milli on,  around  60%  was  to  cover  public  service
obligations  and  the  remaining  40%  was  investment  for  infrastructure.  Aid  for  regional
objectives  totalled  €105  million.  A bout  60%  was  earmarked  for  regional  development
while  the  remaining  40%  were 
local  government  (see
methodological notes below).

tax  benefits  granted  by 

In  total,  around  €520  million  was  directed  to  the  manufacturing  sector  in  2000.  This
represents  more  than  60%  of  total  aid  or  3.6%  of  value  added  in  total  industry.  Tax
exemptions were the most frequently used form of aid instrument making up almost 80% of
total  aid  to  the  manufacturing  sector.  Grants  accounted  for  18%  while  the  remaining  aid
was split between soft loans and guarantees (Table 5).

28

Methodological notes

The concept of SMEs in Hungarian legislation is narrower than that used in the EU. This means that
the  figure  for  SMEs  is  underestimated  although  from  2001  a  more  comparable  figure  will  be
available.

Tax  benefits  granted  by  local  government  refer  only  to  undertakings  with  a  tax  base  higher  than
HUF  500  million  (€2  million).  Furthermore,  the  data  relate  to  aid  exceeding  €100  000.  As  from
2001, data will become available on the total amount of benefits granted by local government.

De minimis aid which is not included in the total amounted to almost €10 million.

* (GDP less value added for agriculture and fisheries)

29

State aid in the year 2000 - Hungary

Total aid of which:

Horizontal Objectives, of which:
     Research and Developm ent
     Environm ent
     Sm all and m edium -sized enterprices
     Com m erce
     Energy
     Em ploym ent
     Training 
     Other Objectives

Aid for rescue and restructuring

Objectives favouring specific sectors, of which:
     Steel
     Shipbuilding
     Other Manufacturing Sectors
     Coal
     Other Non-m anufacturing Sectors
     Transport, of which:
            Railways
            Road/Com bined Transport
            Air Transport
     Tourism
     Financial Services
     Media and Cultural sector
     Other Services

Regional Objectives

€ m illion

842,5

417,9
4,8
17,6
22,5
-
-
1,6
0,0
371,4

-

319,8
-
-
-
12,6
-
304,2
300,3
-
-
3,0
-
-
-

104,8

Total aid to the m anufacturing sector (€ m illion)
per person em ployed in this sector (€ - pps)
as %  of value added in total industry

521,1
571,3 - 1294,2

3,6

M a in  s ta te  a id  o b je c tiv e s  in  H u n g a ry , 2 0 0 0

O th e r h o ri z o n ta l
o b j e c ti v e s

R a il w a y s

R e g io n a l  a i d

0

5

1 0

1 5

2 0

2 5
% o f to ta l

3 0

3 5

4 0

4 5

5 0

30

LITHUANIA

Population: 3.7 million

Total State aid (national currency): 257 million LTL

Year 2000

GDP: € 12.2 billion

Total State aid (euro): €70 million

GDP per capita: € 3 303 or 7 658 PPS

State aid as a percentage of GDP*: 0.6%

Exchange rate: 1€ = 3.6952 LTL

State aid per capita: €19 or 44 PPS

State aid legislative, administrative and enforcement framework

Negotiations on the competition chapter provisionally closed in November 2001.
The Competition Council was set up in March 1999.
Law on Monitoring of State Aid to Undertakings was passed on 18 May 2000.
Website: www.konkuren.lt/english/index.htm

State aid situation in the year 2000

Lithuania granted around €70 million of aid in th e year 2000. This represents 0.6% of GDP
or the equivalent of €19 per capita.

Over  half  the  total  aid,  some  €40  million,  i nvolved  ad  hoc  aid  in  the  non-manufacturing
sector. The bulk of this aid was awarded to pay off part of a loan guarantee.

Aid  to  horizontal  objectives  totalled  €2  million  in  2000  with  around  half  this  figure
providing  forty  undertakings  with  export  credit  insurance  support  for  non-commercial
risk.The  figure  of  €1.2  million  under  regional  objectives  refers  to  aid  granted  for
investment at municipal and county level. No other ‘regional’ aid was  granted in the  year
2000 as the Law on Regional Development was passed only in July 2000. Aid for regional
development will be granted as from 2002.

State aid to the transport sector (€26 million)  made up almost 40% of total State aid. Road
transport received €19 million, the airlines  €6 million and the railways €1 million. Around
75%  of  total  transport  aid  was  granted  to  compensate  for  losses  incurred  in  relation  to
passenger transportation.

In  2000,  €3.4  million  was  directed  to  the  manufact uring  sector  (around  5%  of  total  aid)
which  represents  only  0.1%  of  value  added  in  total  industry.  The  overall  level  of
manufacturing  aid  fell  considerably  by  around  €15  million  between  1999  and  2000.  The
decrease was due largely to a reduction in aid for rescue and restructuring in the energy and
gas sectors as well as aid for regional purposes.

* (GDP less value added for agriculture and fisheries)

31

State aid in the year 2000 - Lithuania

Total aid of which:

Horizontal Objectives, of which:
     Research and Developm ent
     Environm ent
     Sm all and m edium -sized enterprices
     Com m erce
     Energy
     Em ploym ent
     Training 
     Other Objectives

Aid for rescue and restructuring

Objectives favouring specific sectors, of which:
     Steel
     Shipbuilding
     Other Manufacturing Sectors
     Coal
     Other Non-m anufacturing Sectors
     Transport, of which:
            Railways
            Road/Com bined Transport
            Air Transport
     Tourism
     Financial Services
     Media and Cultural sector
     Other Services

Regional Objectives

€ m illion

69,6

2,1
0,2
-
0,8
1,0
-
-
-
0,1

0,1

66,2
-
0,0
-
-
39,8
26,4
1,1
19,2
6,1
-
-
-
-

1,2

Total aid to the m anufacturing sector (€ m illion)
per person em ployed in this sector (€ - pps)
as % of value added in total industry

3,4
11,3 - 26,2

0,1

M a in  s ta te  a id  o b je c tiv e s  in  L ith u a n ia , 2 0 0 0

O t h e r
 n o n - m a n u f a c t u r in g
s e c t o r s

R o a d /C o m b in e d
t r a n s p o r t

A ir  t r a n s p o r t

0

1 0

2 0

3 0

4 0

5 0

6 0

%   o f  to ta l   a i d

32

LATVIA

Year 2000

Population: 2.4 million

Total State aid (national currency): 29 million LVL

GDP: €7.8 billion

Total State aid (euro): €53 million

GDP per capita: €3 258 or 6951 PPS

State aid as a percentage of GDP*: 0.7%

Exchange rate: 1€ = 0.5592 LVL

State aid per capita: €22 or 47 PPS

State aid legislative, administrative and enforcement framework

Negotiations on the competition chapter provisionally closed in November 2001.
The State Aid Surveillance Commission was set up in 1997. State aid law “On control of
the State and local government aid to entrepreneurial activity” was adopted in Feb. 1998.
Website: www.fm.gov.lv/finances/fr.vau.htm

State aid situation in the year 2000

Latvia granted around €53 million of aid in the  year 2000. This represents 0.7% of GDP or
the equivalent of €22 per capita.

Aid for rescue and restructuring accounted for almost 30% of total aid. The bulk of the €15
million was awarded for the capitalisation of tax debts accrued before privatisation as well
as  tax  deferrals  for  pre-privatisation  tax  debts  that  could  not  be  capitalised.  Aid  for
horizontal objectives amounted to €8 million, made  up almost exclusively of tax relief for
companies with foreign investment in the manufacturing and transport sectors.

Around 50% of total aid was awarded to the transport sector. Of the €26 million, half went
to compensate for losses incurred in the provision of bus transportation in rural areas while
Latvian  railways  received  €10  million  to  comp ensate  for  losses  incurred  in  passenger
transportation.

Aid to financial services fell sharply from €25 million in 1999 to just under €4 million in
2000.  In  1999,  the  Central  bank  and  government  incurred  substantial  costs  related  to  the
rescue and restructuring program of a Commercial Bank which became insolvent as a result
of the Russian crisis. In 2000 there were no new ad hoc cases in this sector.

Around 45% of  all aid  granted in 2000 went  to the manufacturing  sector. This represents
1.6% of value  added in total industry.  Almost 60% of aid to manufacturing  was  awarded
through tax exemptions while 37% was issued for the capitalisation of tax debts (Table 5).

Methodological notes

Aid granted under the following objectives was assessed and either fell under the de minimis ceiling
or  was  not  considered  to  be  State  aid:  research  and  development,  small  and  medium-sized
enterprises, environment, tourism, media and culture, and employment and training. De minimis aid
which is excluded from the total amounted to €5 million in 2000.

* (GDP less value added for agriculture and fisheries)

33

State aid in the year 2000 - Latvia

Total aid of which:

Horizontal O bjectives, of which:
     Research and Developm ent
     Environm ent
     Sm all and m edium -sized enterprices
     Com m erce
     Energy
     Em ploym ent
     Training 
     Other Objectives

Aid for rescue and restructuring

Objectives favouring specific sectors, of which:
     Steel
     Shipbuilding
     Other Manufacturing Sectors
     Coal
     Other Non-m anufacturing Sectors
     Transport, of which:
            Railways
            Road/Com bined Transport
            Air Transport
     Tourism
     Financial Services
     Media and Cultural sector
     Other Services

Regional O bjectives

€ m illion

52,6

8,1
-
-
-
0,4
-
-
-
7,7

15,0

29,2
0,1
-
-
-
-
25,2
9,7
13,4
-
-
3,9
-
-

0,2

Total aid to the m anufacturing sector (€ m illion)
per person em ployed in this sector (€ - pps)
as %  of value added in total industry

23,5
129,1 - 275,5

1,6

M a in  s ta te  a id  o b je c tiv e  in  L a tv ia , 2 0 0 0

R e sc u e   a n d
r e str u c tu r i n g

R o a d / C o m b i n e d
tr a n sp o r t

R a i l w a y s

T o ta l   h o r i z o n ta l
o b j e c ti v e s

0

5

1 0

1 5

2 0

2 5

3 0

%   o f  to ta l   a i d

34

POLAND

Year 2000

Population: 38.6 million

Total State aid (national currency): 7 493 million PLN

GDP: €164.4 billion

Total State aid (euro): €1 869 million

GDP per capita: €4 254 or 8612 PPS

State aid as a percentage of GDP*: 1.1%

Exchange rate: 1€ = 4.0082 PLN

State aid per capita: €48 or 98 PPS

State aid legislative, administrative and enforcement framework

Ongoing negotiations on the competition chapter which was opened in May 1999.
State aid law came into effect on 1 January 2001. Office for Competition and Consumer
Protection took over monitoring of State aid in 1998.
Website: www.uokik.gov.pl/

State aid situation in the year 2000

Poland granted around €1.87 billion of aid in th e year 2000. This represents 1.1% of GDP
or the equivalent of €48 per capita.

Aid  for  horizontal  objectives  accounted  for  more  than  half  of  total  aid.  The  figure  of  €1
billion was made up largely of aid for employment and investment aid (other objectives). A
significant proportion of employment aid, in the region of €180 million, was earmarked for
the  rehabilitation  of  working  persons  with  disabilities.  Aid  for  research  and  development
and small and medium-sized enterprises was marginal though it is worth noting that more
than €80 million was granted for environmental objectives.

Classified under regional aid are tax exemptions totalling €70 million which were awarded
to undertakings, almost exclusively under the law on special economic zones. Such regional
aid, which only accounted for 4% of total aid, is expected to increase in the coming years.

More than 30% of total aid was aimed at specific sectors. Aid for the restructuring of hard
coal and lignite mining totalled €350 million whic h represents almost 20% of total aid. In
addition to restructuring of  the  coal  sector,  a  further  €130  million  was  granted  for  rescue
and restructuring in 2000.

Transport aid amounted to €250 million in 2000 which corresponds to 13% of total aid. Just
over  half  the  amount  was  used  to  refund  the  cost  of  free  tickets  and  reduced  fares  for
passenger transport with the remainder being invested in railroad infrastructure.

Around 40% of  all aid  granted in 2000 went  to the manufacturing  sector. This represents
1.7%  of  value  added  in  total  industry.  A  range  of  aid  instruments  were  used  in  the
manufacturing  sector  with  tax  exemptions  making  up  60%  of  total  aid  followed  by  soft
loans  (16%),  grants  (11%)  with  the  remainder  split  between  equity  participation,  tax
deferrals and guarantees (Table 5).

* (GDP less value added for agriculture and fisheries)

35

State aid in the year 2000 - Poland

Total aid of which:

Horizontal Objectives, of which:
     Research and Developm ent
     Environm ent
     Sm all and m edium -sized enterprices
     Com m erce
     Energy
     Em ploym ent
     Training 
     Other Objectives

Aid for rescue and restructuring

Objectives favouring specific sectors, of which:
     Steel
     Shipbuilding
     Other Manufacturing Sectors
     Coal
     Other Non-m anufacturing Sectors
     Transport, of which:
            Railways
            Road/Com bined Transport
            Air Transport
     Tourism
     Financial Services
     Media and Cultural sector
     Other Services

Regional Objectives

€ m illion

1868,8

1028,0
23,5
83,2
1,5
-
-
452,2
-
467,5

127,7

642,2
12,4
-
-
351,1
29,3
249,3
249,3
-
-
-
-
-
-

71,0

Total aid to the m anufacturing sector (€ m illion)
per person em ployed in this sector (€ - pps)
as %  of value added in total industry

786,9
245,6 - 497,1 

1,7

M a in  s ta te  a id  o b je c tiv e s  in  P o la n d , 2 0 0 0

O th e r  h o ri z o n ta l
o b j e c ti v e s

E m p l o y m e n t

C o a l

R a i l w a y s

R e su e   a n d
re stru c tu r i n g  

0

5

1 0

1 5

2 0

2 5

36

ROMANIA

Population: 22.5 million

Total State aid (national currency): 12 958 billion ROL

Year 2000

GDP: €35.2 billion

Total State aid (euro): € 650 million

GDP per capita: €1 569 or 4 787 PPS

State aid as a percentage of GDP*: 1.9 %

Exchange rate: 1€ = 19921.8 ROL

State aid per capita: €29 or 88 PPS

State aid legislative, administrative and enforcement framework

Ongoing negotiations on the competition chapter.
State Aid Control is carried out by the Competition Council while monitoring of State aid is
carried out by the Competition Office. Both are operational since July 2000.
Website: www.oficiulconcurentei.ro/

State aid situation in the year 2000

Romania granted around €650 million of aid in the year 2000. This represents 1.9% of GDP
or the equivalent of €29 per capita.

Aid for horizontal objectives accounted for just under 20% of total aid. Half this amount,
around  €60  million  of  aid,  was  awarded  to  small  and  medium-sized  enterprises,  or  for
environmental objectives, research and development or training. The remainder  was made
up  almost  exclusively  of  tax  exemptions  to  undertakings  operating  in  the  manufacturing
sector for the purchase or modernisation of machinery and equipment.

In  the  year  2000,  €121  million  -  around  20%  of  a ll  aid  -  was  awarded  for  rescue  and
restructuring  to  the  manufacturing  sector.  More  than  half  this  aid  –  around  €70  million  -
went  to  manufacturers  of  machinery  and  equipment.  Undertakings  operating  in  the
chemical  industry  received  around  €25  million  wh ile  the  remainder  was  distributed  to
various other manufacturing sub-sectors.

The  coal  sector  received  10%  of  all  aid  in  the  year  2000  with  just  over  half  this  amount
covering production costs. In addition, 17% of aid, totalling more than €100 million, was
granted for mining other than coal. Other sectors such as steel (4%) and shipbuilding (1%)
were awarded relatively small shares of total aid.

Transport aid amounted to €123 million in 2000 which corresponds to around 20% of total
aid. The bulk of this aid consisted of grants and guarantees to the airline sector.

Around 50% of  all aid  granted in 2000 went  to the manufacturing  sector. This represents
3.0%  of  value  added  in  total  industry.  A  range  of  aid  instruments  were  used  in  the
manufacturing sector with tax exemptions making up almost 40% of total aid followed by
guarantees (30%), grants (15%) and tax deferrals (11%) (Table 5).

* (GDP less value added for agriculture and fisheries)

37

State aid in the year 2000 - Rom ania

Total aid of which:

Horizontal Objectives, of which:
     Research and Developm ent
     Environm ent
     Sm all and m edium -sized enterprices
     Com m erce
     Energy
     Em ploym ent
     Training 
     Other Objectives

Aid for rescue and restructuring

Objectives favouring specific sectors, of which:
     Steel
     Shipbuilding
     Other Manufacturing Sectors
     Coal
     Other Non-m anufacturing Sectors
     Transport, of which:
            Railways
            Road/Com bined Transport
            Air Transport
     Tourism
     Financial Services
     Media and Cultural sector 
     Other Services

Regional Objectives

€ m illion

650,4

119,1
7,1
18,1
27,9
-
n.a.
-
4,7
61,2

121,2

372,2
25,1
7,4
30,4
62,2
108,5
123,0
24,1
-
93,1
10,9
1,4
3,5
-

38,0

Total aid to the m anufacturing sector (€ m illion)
per person em ployed in this sector (€ - pps)
as %  of value added in total industry

336,4
145,4 - 443,5

3,0

M a in  s ta te  a id  o b je c tiv e s  in  R o m a n ia , 2 0 0 0

R e sc u e   a n d  
re str u c tu r i n g

O th e r   n o n -
m a n u fa c tu r i n g   se c to r s

A i r  tra n sp o r t

O th e r   h o r i z o n ta l
o b j e c ti v e s

0

5

1 0
i n   %   o f  to ta l

1 5

2 0

38

SLOVENIA

Population: 2.0 million

Total State aid (national currency): 46 billion SIT

GDP: €19.5 billion

Total State aid (euro): €221 million

GDP per capita: €9 826 or 15 276 PPS

State aid as a percentage of GDP*: 1.2%

Exchange rate: 1€ = 206.613 SIT

State aid per capita: €111 or 173 PPS

Year 2000

State aid legislative, administrative and enforcement framework

Negotiations on the competition chapter provisionally closed in November 2001.
State aid control Act came into force on 22 January 2000.
Commission for Monitoring of State Aid set up in 1998.
Commission for State Aid Control set up in 2000.
Website: www.gov.si/mf/angl/apredmf1.html

State aid situation in the year 2000

Slovenia granted around €221 million of aid in the year 2000. This represents 1.2% of GDP
or the equivalent of €111 per capita.

Aid for horizontal objectives accounted for 50% of total aid. More than €60 million (30%
of total aid) was allocated for employment objectives, largely in the form of tax exemptions
or  tax  relief.  €20  million  went  to  research   and  development  and  €13  million  each  to  the
environment and to small and medium-sized enterprises.

Aid for rescue and restructuring made up 12% of total aid in 2000. As regards  objectives
favouring specific sectors, 5%  of aid  was  granted to  the coal  sector,  exclusively  for mine
closures.  Just  under  €4  million,  around  2%  of  to tal  aid,  was  awarded  to  the  steel  sector
under the restructuring programme for this industry in Slovenia.

A quarter of all State aid (€56  million)  was allocated to the railway sector, largely  in  the
form  of  grants.  No  other  aid  was  awarded  to  the  transport  sector  in  2000,  in  contrast  to
1999 when, for example, the airline industry received some €25 million.

Regional aid, which was awarded in 2000 for investment schemes only, accounted for less
than 3% of total aid.

Just under 40% of all aid granted in 2000 went to the manufacturing sector. This represents
1.3%  of  value  added  in  total  industry.  A  range  of  aid  instruments  were  used  in  the
manufacturing sector with grants making up half the total and the other half split between
soft loans, tax exemptions, equity participation and guarantees (Table 5).

* (GDP less value added for agriculture and fisheries)

39

State aid in the year 2000 - Slovenia

Total aid of which:

Horizontal Objectives, of which:
     Research and Developm ent
     Environm ent
     Sm all and m edium -sized enterprices
     Com m erce
     Energy
     Em ploym ent
     Training 
     Other Objectives

Aid for rescue and restructuring

Objectives favouring specific sectors, of which:
     Steel
     Shipbuilding
     Other Manufacturing Sectors
     Coal
     Other Non-m anufacturing Sectors
     Transport, of which:
            Railways
            Road/Com bined Transport
            Air Transport
     Tourism
     Financial Services
     Media and Cultural sector
     Other Services

Regional Objectives

€ m illion

221,0

111,8
19,8
12,7
13,0
-
-
64,2
2,1
-

25,7

77,1
3,8
-
1,3
11,4
-
55,6
55,6
-
-
5,0
-
-
-

6,3

Total aid to the m anufacturing sector (€ m illion)
per person em ployed in this sector (€ - pps)
as %  of value added in total industry

82,6
287,9 - 447,7

1,4

Main state aid objectives in Slovenia, 2000

Employment

Railways

Rescue and
Restructuring

Research and
Development

Small and medium
sized enterprises

0

5

10

15

20

25

30

% of total aid

40

SLOVAK REPUBLIC

Population: 5.4 million

Total State aid (national currency): 3 863 million SKK

Year 2000

GDP: €20.4 billion

Total State aid (euro): €91 million

GDP per capita: €3 775 or 10 013 PPS

State aid as a percentage of GDP*: 0.4%

Exchange rate: 1€ = 42.6017 SKK

State aid per capita: €17 or 45 PPS

State aid legislative, administrative and enforcement framework

Negotiations on the competition chapter provisionally closed in October 2002. State aid law
came into effect on 1 January 2000. State aid Office established in March 2000.
Website: www.usp.sk

State aid situation in the year 2000

The Slovak Republic  granted  around €91 million  of  aid in the  year 2000.  This represents
0.4%  of  GDP  or  the  equivalent  of  €17  per  capita.  In  relation  to  1999,  total  aid  fell
considerably due partly to a reduction in the amount of aid awarded for transport.

Aid  for  horizontal  objectives  accounted  for  around  12%  of  all  aid  in  2000.  Of  the  €11
million,  €8  million  was  granted  to  around  sixty 
research  and  development  projects  in
various  industries.  A  further  €1.6  million  wa s  granted  to  small  and  medium-sized
enterprises.

Tax  relief  to  the  steel  industry,  totalling  €33  million,  represented  more  than  one-third  of
total  aid.  The  coal  sector  received  4%  with  around  half  the  amount  covering  production
costs. In addition, 7% of aid went for salt extraction and 3% for ore mining.

The transport sector received almost 30% of total aid, with virtually all of the €26 million
supporting  bus  transport.  Finally,  5%  of  aid  was  granted  to  support  regions  with  high
unemployment.

In total, €50 million went to the manufacturing  sector in 2000, made up largely of aid to the
steel  sector.  As  a  result,  tax  relief  schemes  accounted  for  70%  of  total  aid  to  the
manufacturing sector while the remaining aid was issued in the form of grants (Table 5).

Methodological notes

As with other countries, data for the Slovak Republic have been classified according to the primary
objective of the aid. This inevitably depends on how the primary objective is defined. The approach
used in the Slovak Republic may differ somewhat to that of some other countries in that aid, say, for
research and development in the steel sector would be allocated to steel as opposed to classifying it
under research and development. De minimis aid was estimated at around €12 million in 2000.

* (GDP less value added for agriculture and fisheries)

41

State aid in the year 2000 - Slovak Republic

Total aid of which:

Horizontal Objectives, of which:
     Research and Developm ent
     Environm ent
     Sm all and m edium -sized enterprices
     Com m erce
     Energy
     Em ploym ent
     Training 
     Other Objectives

Aid for rescue and restructuring

Objectives favouring specific sectors, of which:
     Steel
     Shipbuilding
     Other Manufacturing Sectors
     Coal
     Other Non-m anufacturing Sectors
     Transport, of which:
            Railways
            Road/Com bined Transport
            Air Transport
     Tourism
     Financial Services
     Media and Cultural sector
     Other Services

Regional O bjectives

€ m illion

90,7

10,7
8,0
0,3
1,6
-
-
-
-
0,9

0,8

74,1
33,2
-
-
3,8
8,7
26,4
1,2
25,2
-
-
-
1,9
-

5,0

Total aid to the m anufacturing sector (€ m illion)
per person em ployed in this sector (€ - pps)
as %  of value added in total industry

49,8
86,7 - 230,1

0,8

M a in  s ta te  a id  o b je ctiv e s  in  th e  S lo v a k R e p u b lic , 2 0 0 0

S te e l

Ro a d /Co m b in e d
T ra n sp o rt

O th e r n o n -m a n u fa ctu ring
se cto rs

Re se a rch  a n d
De ve lo p m e n t

Re g io n a l a id

0

5

10

15

20

25

30

35

40

% o f to ta l a id

42

METHODOLOGICAL NOTES

See also Conceptual remarks (Section 2.1)

The  data  used  in  this  Scoreboard  were  provided  by  the  national  administrations  of  each
candidate country. Additional data on population, GDP, value added in the manufacturing
sector and exchange rates were obtained from Eurostat.

For the purposes of the Scoreboard, aid to the manufacturing sector includes aid for steel,
shipbuilding, other manufacturing sectors, rescue and restructuring, regional aid and aid for
most  horizontal  objectives  including  research  and  development,  small  and  medium  size
enterprises, environment, commerce and energy saving.

Annual  average  exchange  rates  for  2000  were  provided  by  Eurostat  and  may  differ  from
those  used  by  the  national  authorities.  Furthermore,  exchange  rates  for  some  of  the
currencies in question have been subject to considerable fluctuations, which clearly have an
impact on the data.

The following symbols have been used in the Scoreboard:

n.a.

not available

-

0

real zero

less than half the unit used

43