COMMISSION STAFF WORKING PAPER Member State Competitiveness Performance and Policies(2011 report)
Date: 2011-10-14
Institutions: European Commission
Subjects: administrative formalities, competitiveness, energy grid, industrial cooperation, industrial development, industrial infrastructure, industrial restructuring, innovation, single market, small and medium-sized enterprises, sustainable development, trans-European network, transport infrastructure

EUROPEAN COMMISSION 

Brussels, 14.10.2011 
SEC(2011) 1187 final 

COMMISSION STAFF WORKING PAPER 

Member State Competitiveness Performance and Policies 
(2011 report) 

Accompanying the document 

Communication from the Commission to the European Parliament, the Council, the 
European Economic and Social Committee and the Committee of the Regions 

Industrial Policy: Reinforcing Competitiveness 

{COM(2011) 642 final} 
{SEC(2011) 1188 final} 

 
 
 
 
  
 
TABLE OF CONTENT 

1 

2 

2.1 

2.2 

2.3 

3 

3.1 

3.2 

3.3 

3.4 

4 

4.1 

4.2 

4.3 

4.4 

4.5 

4.6 

4.7 

4.8 

4.9 

Introduction.................................................................................................................. 4 

Structural Change and the Competitiveness of EU Member States............................. 7 

Introduction.................................................................................................................. 7 

Structural change in the European Union .................................................................... 8 

Summary of findings.................................................................................................. 13 

Overview of progress by broad policy area ............................................................... 15 

Towards an innovative industry ................................................................................. 15 

Towards a sustainable industry .................................................................................. 21 

The business environment.......................................................................................... 29 

Entrepreneurship and SME policy ............................................................................. 34 

Country chapters ........................................................................................................ 43 

Belgium ...................................................................................................................... 43 

Bulgaria ...................................................................................................................... 49 

Czech Republic .......................................................................................................... 55 

Denmark..................................................................................................................... 62 

Germany..................................................................................................................... 68 

Estonia........................................................................................................................ 74 

Ireland ........................................................................................................................ 80 

Greece ........................................................................................................................ 86 

Spain........................................................................................................................... 93 

4.10 

France......................................................................................................................... 99 

4.11 

Italy .......................................................................................................................... 105 

4.12 

Cyprus ...................................................................................................................... 112 

4.13 

Latvia ....................................................................................................................... 117 

4.14 

Lithuania .................................................................................................................. 125 

4.15 

Luxembourg ............................................................................................................. 131 

4.16 

Hungary.................................................................................................................... 136 

4.17  Malta ........................................................................................................................ 141 

2 

 
 
 
4.18 

The Netherlands ....................................................................................................... 147 

4.19 

Austria ...................................................................................................................... 153 

4.20 

Poland....................................................................................................................... 161 

4.21 

Portugal .................................................................................................................... 168 

4.22 

Romania ................................................................................................................... 174 

4.23 

Slovenia.................................................................................................................... 181 

4.24 

Slovakia.................................................................................................................... 188 

4.25 

Finland ..................................................................................................................... 195 

4.26 

Sweden ..................................................................................................................... 203 

4.27 

United Kingdom....................................................................................................... 209 

5 

5.1 

5.2 

5.3 

Annex: Methodology and indicators used ............................................................... 216 

Industry classifications and indicators used in section 2 and introductions of country 
chapters .................................................................................................................... 216 

Indicators used in section 3 and the introductory graph of country chapters .......... 226 

Data sets ................................................................................................................... 233 

This report has been written by the staff of the Directorate-General for Enterprise and 
Industry, European Commission. Any comments are welcome to the following e-mail 
address: ENTR-MS-COMPETITIVENESS@ec.europa.eu 

3 

 
 
 
 
 
 
 
 
 
 
 
 
 
1 

INTRODUCTION 

The  recovery  of  the  EU  industry  from  the  crisis  remains  fragile.  At  the  same  time,  many 
structural  challenges  need  still  to  be  addressed  in  order  to  safeguard  its  international 
competitiveness.  These  include  weaknesses  in  the  creation  and  exploitation  of  knowledge, 
improvement  in  the  business  environment,  and  raising  the  ability  of  industry  to  adjust  to 
challenges such as demographic change, globalisation and climate change. A large part of the 
policy instruments which can improve industrial competitiveness are national, and the success 
of EU industry critically depends on national action. At the same time, important initiatives at 
the EU level are also necessary to complement national actions.  

The  competitiveness  of  European  industry  in  international  product  and  services  markets  is 
revealed  by  its  rising  global  market  share  over  the  last  decade  and  by  some  favourable 
dynamics  regarding  its  trade  specialisation,  such  as  increasing  reliance  on  exports  by 
technology  driven  and  capital 
this  encouraging 
performance  masks  a  variety  of  developments  at  national  level,  many  of  which  are  not 
reassuring. Also, studies on the international competitiveness position of the Member States 
and  their  attractiveness  as  a  location  for  foreign  direct  investment  suggest  that  the 
international competitiveness of the EU may be eroding, a consequence of falling behind in 
the race for gaining market share through price and cost advantages, (see FIGURE 1 below), 
innovation and ultimately productivity growth. 

industries.  Nevertheless, 

intensive 

FIGURE 1: Competitiveness Index (based on unit labour costs) 

15,00%

10,00%

5,00%

0,00%

-5,00%

-10,00%

-15,00%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

-15,00%

-10,00%

-5,00%

0,00%

5,00%

10,00%

15,00%

Annual change in competitiveness index, % (left-hand scale)

Annual change in nominal effective exchange rate, % (right-hand scale) 

Source: DG Economic and Financial Affairs.

4 

 
  
 
 
Over the period 2000-2007, the cost competitiveness of the 27 EU Member States eroded by 
more  than  25%,  largely  due  to  the  movements  of  the  exchange  rate  of  the  euro  against  the 
currencies of the 36 partner countries under consideration. The drop in the exchange rate after 
2007 has brought about an improvement in the EU position in terms of cost competitiveness. 
From an aggregate point of view, unit labour costs in EU 27 only grew slightly faster than for 
the  36  trading  partners  (+3%  above  them  over  2000-2010).  However,  as  presented  in  the 
individual  country  chapters  of  this  report,  the  situation  varies  considerably  across  Member 
States,  a  few  countries  (including  Germany,  Austria,  Poland,  Sweden  and  the  UK)  having 
experienced a gain in external cost competitiveness1. 

Nations  characterised  by  strong  and  sustained  productivity  growth  are  able  to  gain 
international  market  share  and  improve  their  standards of living; those nations  experiencing 
comparatively  poor  productivity  growth  are  unable  to  gain  and  sustain  a  competitive 
advantage internationally.  

The present report focuses on the measures Member States have carried out to improve their 
competitiveness, and assesses their performance with respect to a number of key framework 
conditions. The main policy areas covered are industrial innovation, sustainability of industry, 
the business environment, entrepreneurship and SMEs. The report derives from Article 173 of 
the  Treaty  on  industry  and  forms  part  of  the  Europe  2020  framework2,  specifically  of  the 
flagship  initiative  “An  Industrial  Policy  for  the  Globalisation  Era”3.  Implementation  of  the 
flagship  initiative  is  on  track  and  the  Commission  has  already  adopted,  notably,  the 
commodities  and  raw  materials  strategy4,  the  Small  Business  Act  Review5  and  the 
Standardisation  package6.  The  policy  areas  which  are  covered  in  this  report  are  also 
ingredients  of  the  Broad  Economic  Policy  Guidelines7  which,  in  the  relevant  parts,  call  for 
improving the business and consumer environment, and for modernising and developing the 
industrial base in order to improve the functioning of the internal market. 

This  report  contains  a  horizontal  part  focusing  on  structural  change  (section  2)  and  an 
overview  of  progress  by  broad  policy  area  (section  3),  followed  by  country  chapters 
presenting  national  performance  and  policy  developments  in  the  same  policy  areas.  The 

1  

2 

3 
4  
5  
6  
7 

Cost competitiveness is  measured as the inverse ratio of annual unit labour costs in aggregate EU 27 
(labour  compensation  per  unit  of  output)  to  annual  unit  labour  costs  in  the  36  main  trading  partner 
countries of EU 27. Unit labour costs are calculated with a common currency using the average annual 
exchange rate of the EURO against the currencies of the trading partners (nominal effective exchange 
rate – see part 5 under "Foreign trade indicators"). 
Article  173 of  Treaty  on  the  Functioning of  the  European  Union (TFEU)  stipulates  that  “[t]he  Union 
and the Member States shall ensure that the conditions necessary for the competitiveness of the Union's 
industry exist.” Article 173 further specifies a number of objectives to this end, such as speeding up the 
adjustment of industry to structural changes, a favourable business environment, particularly for SMEs, 
and  fostering  better  exploitation  of  the  industrial  potential  of  policies  of  innovation,  research  and 
technological  development.  The  Commission  is  invited  to  take  any  useful  initiative  to  promote  co-
ordination,  in  particular  initiatives  aiming  at  the  establishment  of  guidelines  and  indicators,  the 
organisation of exchanges of best practice, and the preparation of the necessary elements for periodic 
monitoring and evaluation. 
COM(2010) 614 of 28 October 2010. 
COM(2011) 25 of 2 February 2011. 
COM(2011) 78 of 23 February 2011. 
COM(2011) 311 and COM(2011)315 of 1 June 2011. 
Council  Recommendation  of  13  July  2010  (2010/410/EU)  on  broad  guidelines  for  the  economic 
policies of the Member States and of the Union. 

5 

 
 
 
 
                                                 
 
Annex provides details on the indicators and industry classifications used as well as the data 
used in the preparation of the various graphs. 

Box 1: The Implementation of the Industrial Policy Flagship  

The Europe 2020 flagship initiative on “An Integrated Industrial Policy for the Globalisation 
Era” is an ambitious action plan with more than 70 key actions. It has been well received by 
the  EU  institutions8  and  major  stakeholders.  In  the  first  year  following  its  adoption,  the 
Commission has been vigorously pursuing implementation of the proposed actions. Here are 
some of the highlights of the progress achieved so far. 

The Competitiveness proofing process has been launched as a part of the impact assessment 
process  to  ensure  a  reinforced  analysis  of  the  impact  on  competitiveness  of  new  policy 
proposals.  Commission  services  have  been  working  on  the  methodology  to  put  this 
commitment  into  practice.  Competitiveness  is  now  increasingly  taken  into  account  in 
Commission impact assessments. This has notably been the case for the proposals on banks' 
capital requirements ("CRD IV") and their impact on access to credit for companies. 
The Small Business Act for Europe was reviewed in February 20119 and related follow-up 
actions,  such  as  a  new  strategy  to  support  internationalisation  of  SMEs  should  be  adopted 
before the end of the year.  

An Action Plan for SME access to finance will also be adopted before the end of the year. 
SME Access to finance has been established as a major priority in the dedicated programme 
for  industrial  competitiveness  and  SMEs  to  be  proposed  by  the  Commission  in  the 
framework of the Multiannual Financial Framework for 2014-202010.  
The Single Market Act was adopted in April 201111. It contains twelve priority actions to 
relaunch the single market aiming at favouring the revival of a strong industrial economy in 
Europe.  

In the area of industrial innovation, the High-Level Group on Key Enabling Technologies 
presented its final report in June 2011 with concrete recommendations on development and 
deployment  of  these  technologies12.  The  Commission  has  included  a  major  increase  in 
investments  in  current  and  future  enabling  and  industrial  technologies  and  services  in  its 
proposals  for  the  future  Horizon  2020  programme  for  research  and  innovation.  The 
Commission also proposed in June a major modernisation of the European standardisation 
system13.  

On the global dimension of industrial policy, a new trade policy agenda was put in place in 
November 2010 and is currently being implemented. It ensures a more focused and incisive 
battle  against  trade  and  investment  barriers  in  major  partner  economies  to  assure  a  global 
level playing-field for European companies.14 On international dialogue, the Commission has 
made  steps  towards  mutually  beneficial  cooperation  with  third  countries,  such  as  the 
Mediterranean  neighbours,  Latin  American  countries  and  the  African  Union  to  improve 
market access for European products.  

Concerning  sector-specific  initiatives,  the  Commission  has  presented  a  strategy  for  space 
policy15, relaunched the CARS21 process16 and continued its efforts to address concerns of 
energy-intensive  industries,  in  particular  through  initiating  the  Sustainable  Industry  Low 
Carbon Scheme (SILC) and by promoting ultra-low carbon production technologies. 

8  Council  conclusions  of  10  December  2010;  European  Parliament  resolution  of  9  March  2011,  European 
Economic and Social Committee opinion of 4 May 2011.  
9 COM(2011)78 of 23 February 2011. 

6 

 
 
                                                 
2  STRUCTURAL CHANGE AND THE COMPETITIVENESS OF EU MEMBER STATES 

2.1 

Introduction 

Structural  change  is  the  long-term  evolution  of  an  economy  stimulated  by  secular  trends  in 
income and wealth, technology, innovation and preferences or it can be initiated by changes 
in  economic  and  other  policies.  Structural  change  is  typically  manifest  by  changes  in  the 
composition  of  national  output  over  time.  The  key  features  of  a  structural  change  are  the 
secular decline in the share of primary production (agriculture, fishing and mining); a rise and 
then stabilisation in the share of the manufacturing sector; and the increasing domination of 
modern industrial economies by services sectors. However, the nature of sector shifts and the 
secular  transition  to  services-dominated  economies  reflect  changes  in  competitiveness.  As 
successful  enterprises  grow  and  take  advantage  of  market  opportunities,  technology  and 
innovation,  it  is  inevitable  that  they  will  also  experience  changes  in  their  domestic  and 
international market shares over time. 

This  section  highlights  some  of  the  shifts  of  production  and  trade  shares  between  sectors 
based on a detailed study of structural change in the EU17. It analyses four country groupings 
based upon similarities in terms of industrial structure The criteria used for these groupings 
are  GDP  per  capita,  R&D  intensity  (including  the  R&D  intensity  of  inputs)  and  a  range  of 
industry and trade specialisation indicators. These groups18 are: 

•  Group 1: Countries with higher GDP/person than the EU average, with specialisation 
in  technologically  advanced  sectors:  Austria,  Belgium,  Denmark,  Finland,  France, 
Germany, Ireland, Netherlands, Sweden, United Kingdom. 

•  Group 2: Countries with higher GDP/person than the EU average, with specialisation 
in  less  technologically  advanced  sectors:  Cyprus,  Greece,  Italy,  Luxembourg, 
Portugal, Spain. 

•  Group  3:  Countries  with  lower  GDP/person  than  the  EU  average,  with  trade 
specialisation  in  technologically  advanced  sectors:  Czech  Republic,  Hungary,  Malta, 
Poland, Slovakia, Slovenia. 

•  Group 4: Countries with lower GDP/person than the EU average, with specialisation 
in  less  technologically  advanced  sectors:  Bulgaria,  Estonia,  Latvia,  Lithuania, 
Romania. 

The  four  country  groups  display  a  hierarchy  in  terms  of  GDP  per  capita.  Income  levels 
correlate  closely  with  economic  structure.  Shares  of  agriculture  are  lowest  in  group  1,  the 
wealthier group, and highest in group 4, the less wealthy group; shares of manufacturing are 
lower  in  the  higher  income  countries  (group  1  and  2)  than  in  the  lower  income  countries 
(group  3  and  4),  while  for  services,  both  market  and  (other)  public  services,  shares  are  in 

10 COM(2011)500 of 29 June 2011. 
11 COM(2011)206 of 13 April 2011. 
12 http://ec.europa.eu/enterprise/sectors/ict/key_technologies/kets_high_level_group_en.htm  
13 COM(2011)311 and COM(2011)315 of 1 June 2011. 
14 COM(2011)114 of 10 March 2011. 
15 COM(2011)152 of 4 April 2011. 
16 First meeting of the relaunched High Level Group on 10 November 2010.  
17  

Detailed results will be included in a forthcoming study ”Structural change and the competitiveness of 
EU Member States“ under preparation by WIFO.   
Group averages are weighted by the relative importance of countries within the EU. 

18  

7 

 
                                                                                                                                                         
reversed  order,  consistent  with  longstanding  accounts  of  structural  change  as  economies 
develop.  

In  this  presentation,  the  focus  is  on  indicators19  of  relative  value  added  share  (RVA)  and 
revealed  comparative  advantage  (RCA)  for  high-technology  industries  and  high-education 
sectors,  as  well  as  indicators  of  world  market  share  and  international  trade  prices.  High-
technology industries and high-skill industries are important because they tend to have higher 
productivity  growth.  Moreover,  they  tend  to  be  less  exposed  to  international  competition, 
since they face weaker price-based competition from the emerging economies than traditional 
labour intensive industries.  

Since strong cyclical effect dominate the post-2007 data, for the analysis of structural change 
this report concentrates on data up to 2007. 

2.2  Structural change in the European Union  

2.2.1 

Industry specialisation and structural change 

Structural change is generally a slow process where substantial movements may take several 
decades  to  occur.  Examining  the  changes  in  industrial  structure  in  the  period  1999-2007, 
industries  have  followed  different  paths  towards  higher  technology  or  higher  skills  base. 
Changes in the production share of different sectors in national income may ultimately lead to 
sector specialisation and could also result in improving competitiveness. Similarly, firm-level 
specialisation  and  changes  in  the  sector  composition  of  output  may  also  be  a  reflection  of 
improving  competitiveness,  especially  if  firms  upgrade  their  capabilities  and  intangibles  by 
absorbing or developing new technologies or production routines, or if new, more innovative 
firms enter a sector. In general, a predominantly less advanced country might play a key role 
in the production of technologically advanced products as a result of specialisation and of the 
geographical  disaggregation  of  production.  The  data  should,  therefore,  be  interpreted  with 
caution  when  making  judgements  about  industrial  structure  and  the  level  of  economic 
development.  

FIGURE  2  compares  the  change  and  the  level  of  relative  valued  added  (RVA)  in  technology-
driven industries. The 2007 level  of  the relative valued  added on the horizontal axis and its 
change relative to 1999 on the vertical axis. Countries can be in one of four areas, as shown in 
Figure 2: i) high and improving – level and change values above the EU average, in the top 
right of the figure; ii) high and declining – levels above the EU average and changes below 
the EU average, in the bottom right of the figure; iii) weak and improving – meaning levels 
below the EU average and changes below the EU average, in the top left of the figure; and 
finally,  iv)  weak  and  declining  –  meaning  level  and  change  values  below  the  EU  average 
(bottom left of figure).  

Group 1 is in the strong and improving area, which means that the share of technology driven 
industries is high and increasing. Countries in groups 3 and 4 are also improving, but from a 
weaker  position,  indicating  a  catching  up  path.  On  the  other  hand  the  share  of  technology-
driven  industries  seems  to  be  declining  in  group  2,  from  an  already  low  level.  The  level  of 
group 3 is above the one of groups 2 and 4. Finland and Germany have improved most and 
the Netherlands, Spain, Austria and Sweden have lost most.  

19  

See the Annex for a summary presentation and Table A for details. 

8 

 
 
 
 
 
                                                 
For  countries  specialised  in  labour-intensive  industries  (as  opposed  to  those  specialised  in 
more  technology-driven  industries),  competitiveness  can  be  improved  by  shifting  towards 
higher  skilled  activities  –  typical  examples  include  the  manufacturing  of  machine  tools, 
furniture, or electrical equipment. 

FIGURE 2: Change (1999/2007) vs. level (2007) of relative value added in technology-driven industries  

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Level of RVA in technology-driven industries

Note: Change in relative value added of Greece was cut to a half to improve the graphical representation. The 
intersection of the horizontal and the vertical line represents the EU average. Countries where data are 
incomplete are not shown (Estonia, Cyprus, Latvia, Lithuania, Luxembourg, Malta, and the United States). 
Source: Eurostat (SBS). 

FIGURE 3 shows the value added shares of high education intensity sectors, including services 
sectors  in  addition  to  manufacturing.  Classic  service-oriented  countries  such  as  the  United 
Kingdom  excel  here.  Group  1  is  characterised  by  a  strong  and  improving  level.  Despite 
substantial  differences  in  levels,  most  countries  are  increasing  their  share  of  value  added 
arising  from  these  sectors,  again  proving  that  the  Member  States  are  moving  up  the  value 
chain. The progress towards high-education sectors in groups 3 and 4 is broadly similar to that 
of  group  1.  However,  the  development  of  high-education  sectors  is  progressing  on  average 
more  slowly  in  group  2.  There  thus  appears  to  be  room  for  countries  in  the  lower  part, 
including many countries in group 2, to further develop their high-skill sectors, particularly in 
service industries.  

9 

 
 
 
 
 
 
 
 
 
 
 
FIGURE 3: Change (1999/2007) vs. level (2007) of value added in high-education sectors 

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27.5

Level of value added in high-education sectors

Note: Change in value added share of UK was reduced by a factor of 1.8 to improve the graphical representation. 
The intersection of the horizontal and the vertical line represents the EU-25.  
Source: OECD (STAN), EU KLEMS databases. 

2.2.2  Trade specialisation and structural change  

Regarding trade performance, consider world export market shares in 2009 and their changes 
compared to 1999 for industry and to 2004 for services.20  

In  total  manufacturing,  the  EU  (27  Member  States)  increased  its  market  share  by  2.5 
percentage points to 22.1% between 1999 and 2009, while the US and Japan both lost market 
share,  by  6.6  and  4.3  percentage  points  to  12.2  and  7.6%,  respectively.  China  increased  its 
share  of  manufacturing  exports  by  11.2  percentage  points  to  almost  17%,  while  the  other 
BRIC  countries  showed  slower  growth.  In  terms  of  trade  specialisation,  the  EU  has  gained 
more than 5 percentage points in its market share in exports by technology-driven industries, 
in  which  it  is  now  specialised  as  compared  to  1999.  Like  the  US  and  Japan,  the  EU  has  a 
higher  market  share  in  technology-driven  industries  than  in  the  total.  Only  mainstream 
manufacturing industries have an even higher market share, but the dynamics over the time 
period in question (1999-2009) are much less pronounced. The second-strongest growing area 
by market share is capital-intensive industries, where the EU is not specialised but might soon 
be  if  current  trends  continue.  By  contrast,  the  market  share  of  labour-intensive  industries  is 
declining quickly, along with the market share of marketing-driven industries.  

The performance of the EU in services sectors has been evaluated over a shorter period 2004-
2009. It is less positive given a fall in market share by 1.8 percentage points between 2004 

20  

See the Annex for details. Note that detailed service data is not available prior to 2004. 

10 

 
 
 
 
 
 
 
 
 
 
 
                                                 
and 2009, as opposed to the moderate decrease observed in the US and in Japan over the same 
period.  In  comparison  with  the  latter  two  countries,  the  fall  in  market  share  is  most 
pronounced  for  insurance,  financial  and  ICT  services,  in  which  the  EU  holds  substantial 
world market shares. 

Overall,  the  market  share  developments  in  services  are  much  more  stable  than  in 
manufacturing.  The  EU,  the  US  and  Japan  have  held  up  their  export  market  shares  much 
better in comparison with the BRIC. China has only 5.8%, with an increase of 1.5 percentage 
points (about as much as India’s market share gain to 4%). China achieved substantial market 
share only in construction, whereas India has a considerable 35.5% market share in computer 
services.  

A more detailed example of trade shifts in technologically-driven industries using the country 
groupings  can  be  provided  using  the  revealed  comparative  advantage  indicator21.  Figure  4 
positions  countries  and  groups  according  to  their  revealed  comparative  advantage  in 
technology-driven industries over the period 1999-200722.  
The data show that, in contrast with relative value added, group 3 is improving specialisation 
in  technology-driven  industries,  while  group  1  in  the  positive  and  stable  category;  this 
relationship  is  mirrored  by  group  2  and  4,  both  in  the  weak  area,  with  group  4  improving 
while group 2 is stable. Group 3 thus seems to be well integrated with the supply chains of 
advanced firms in group 1, as is well known for example in the automobile industry. Group 3 
may  thus  be  seen  as  a  form  of  ”China“  of  the  EU.  It  remains  to  be  seen  whether  trade 
specialisation  is  a  predictor  of  future  industry  specialisation  as  measured  by  value  added 
shares. 

FIGURE 4: Change (1999/2007) and level (2007) of revealed comparative advantage in technology-driven industries 

s
e
i
r
t
s
u
d
n

i

n
e
v
i
r
d
-
y
g
o
o
n
h
c
e
t

l

n

i

A
C
R

f
o

e
g
n
a
h
C

5
.
1

1

5
.

0

5
.
-

BG

-1.5

LV

RO

LT

EL

PL

G4

G2

SK

LU

CZ

G3

SI

BE

G1

DE

NL

UK

FR

SE

DK

AT

ES

IT

PT

FI

EE

CY

HU

IE

MT

-1

.5
Level of RCA in technology-driven industries

-.5

0

1

21  
22   

See the Annex for a definition of this indicator. 
See TABLE L in the Annex.  

11 

 
 
 
 
 
 
 
 
 
 
                                                 
Note: The intersection of the horizontal and vertical line in the origin represents the EU average.  
Source: Eurostat (Comext). Includes intra-EU exports. 

2.2.3  Quality content of exports 

To  look  at  the  quality  content  of  export,  prices  are  taken  as  a  proxy  for  quality.  Figure  5 
illustrates the change (1999/2009) and the level (2009) of Member States’ share of exports in 
the low price segment compared to the EU average, on the grounds that this reflects a country 
performance in terms of its position on the quality ladder and in terms of upgrading over time. 
A  low  or  declining  share  in  the  low  price  segment  may  be  regarded  as  an  advantageous 
outcome. Therefore, countries in the bottom left area – level and change values below the EU 
average – can now be interpreted as being in a strong and improving position. 

FIGURE 5 shows the shares of exports in low-skill and labour-intensive industries. Group 2 is 
in  the  strong  area,  mainly  due  to  the  good  performance  of  Italy.  Many  more  countries  now 
display substantial changes in performance revealed by a decline in the share of exports in the 
low-price  segment.  This  suggests  that  many  countries  react  to  rising  competition  in  labour-
intensive industries from low-wage countries by improving the quality of their products. The 
quality performance in labour-intensive industries also seems to explain how Italy is able to 
sustain  exports  in  this  industry  type,  and  also  how  Italy  achieves  relatively  high  GDP  per 
capita  in  industrial  structures  which  are  poorly  associated  with  firm  capabilities.  Moreover, 
even  in  labour-intensive  and  low-skill  industries,  in  which  Italy  is  heavily  specialised,  it 
seems to be possible to defend competitive advantage in terms of product quality.  

More generally, the data are in line with evolutionary theories of the firm, according to which 
technology  or  routines  developed  by  firms  to  achieve  product  quality  cannot  be  copied  that 
easily by others. A high share of tacit knowledge involved in production – even e.g. in textiles 
–  means  that  any  diffusion  of  this  knowledge  is  tied  to  learning  by  doing,  which  implies  a 
learning  process  during  production.  Such  processes  usually  take  time,  just  like  Italian  firms 
have  accumulated  their  routines  and  recipes  for  production  over  decades.  Hence,  while 
competitive pressure is certainly rising and the EU is losing market share in labour-intensive 
industries, the potential for upgrading by EU firms in a variety of sectors and the time it takes 
for firms from emerging countries to reach the same level of firm capabilities should not be 
underestimated. Competitiveness can be sustained in traditional structures, on the condition of 
high quality. 

12 

 
 
 
FIGURE 5: Change (1999/2009) and level (2009) of low price segments in low-skill labour-intensive industries 

s

l
l
i

k
s

r
e
w
o

l

h

t
i

w
s
e
i
r
t
s
u
d
n

i

I

L
n

i

M
S
P
w
o

l

f

o

e
g
n
a
h
C

0
5

0
4

0
3

0
2

0
1

0

0
1
-

0
2
-

0
3
-

0
4
-

IT

FR

DK

DE

FI
SE SI
G1

G2

AT

IE

ES

MT

NL

EL

HU

PT

UK

G3

EE

SK

CZ

LV

PL

BE

LU

CY

G4

RO

LT

BG

10

20

30

40

50

60

70

80

Level of low PSM in LI industries with lower skills

Note: Change is expressed in percentage points and level as percentage. The intersection of the horizontal and 
the vertical line represents the EU 27.  
Source: Eurostat (Comext). 

2.3 

Summary of findings 

Indicators of structural change, patterns of specialisation and sector upgrading shed light on 
firm  capabilities,  prospects  for  growth  and  on  how  to  cope  with  adjustment  pressure  in  the 
wake of rising competition. 

Due to the high level of country heterogeneity within the EU, interpreting simple comparisons 
between  individual  countries  and  the  EU  average  would  not  necessarily  be  particularly 
that  share  similar  characteristics  facilitates 
enlightening.  Building  country  groups 
considerably the structuring and interpretation of the information in hand. The performance of 
the  country  groups  is  consistent  across  indicators  and  in  line  with  theoretical  and  empirical 
research on drivers of country competitiveness. 

The group of countries with higher GDP/person than the EU average, and with specialisation 
in  technologically  advanced  sectors  (group  1)  consists  of  Belgium,  Denmark,  Germany, 
France,  Ireland,  Netherlands,  Austria,  Finland,  Sweden  and  the  United  Kingdom.  A  key 
development is that for the years under review the specialisation of this group in technology-
driven industries and high education intensity sectors increases further. 

The group of countries with higher GDP/person than the EU average, and with specialisation 
in  less  technologically  advanced  sectors  (group  2)  consists  of  Greece,  Spain,  Italy,  Cyprus, 
Luxembourg, and Portugal. A positive trend is a strengthening of its specialisation in sectors 

13 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
presenting high educational intensity (essentially services), albeit from a low level. However, 
the  shift  towards  higher  education  sectors  is  still  too  slow  relative  to  the  other  groups. 
Moreover, taken as a group, its specialisation in labour intensive industries and low education 
intensive sectors, its weakness with respect to gaining market share in fast growing emerging 
markets signal risks of relative decline, at least with respect to the first group of countries. 

The  group  of  countries  with  lower  GDP/person  than  the  EU  average,  and  with  trade 
specialisation in technologically-advanced sectors (group 3) consists of the Czech Republic, 
Hungary,  Malta,  Poland,  Slovakia  and  Slovenia.  This  group  is  similar  to  group  1  regarding 
trade  specialisation  in  technology-driven  industries.  In  terms  of  change,  group  3  shows  a 
decline in trade specialisation in labour-intensive industries and similarly strong but opposite 
trends in technology-driven industries, both in terms of production and in trade. Thus Group 3 
looks like shifting towards becoming an. assembly powerhouse for the more technologically 
advanced countries of group 1. 

The group of countries with lower GDP/person than the EU average, and with specialisation 
in  less  technologically-advanced  sectors  (group  4)  consists  of  Bulgaria,  Estonia,  Latvia, 
Lithuania and Romania. In terms of specialisation it is very similar to group 2, with which it 
also shares the strengthening of specialisation in sectors with high educational intensity. But 
group  4  experiences  more  positive  changes  than  group  2  as  regards  industry  and  trade 
specialisation in technology-driven industries. 

Qualifying to some extent the above considerations, the analysis shows that competitiveness 
can  be  sustained  in  very  different  industries  or  sectors;  there  is  not  only  one  industrial 
structure that is conducive to growth and the creation of more and better jobs. Ultimately, it is 
the  successful  transformation  of  different  production  factors  into  innovative  or  high-quality 
outputs that determines the competitiveness of firms in developed countries. These processes 
take  time  to  be  established  and  cannot  be  copied  overnight.  However,  it  is  clear  that  in 
technologically  less  advanced  industries  the  task  of  maintaining  competitiveness  is  harder. 
Even though in some countries labour-intensive industries produce high product quality, the 
fact remains that these industries are clearly declining, both in terms of export market share 
and  in  terms  of  shares  in  national  value  added.  Apart  from  firm  capabilities,  structures  can 
also provide information about future growth prospects. These may be linked to  knowledge 
spillover,  but  may  simply  arise  from  trade  growth  patterns,  i.e.  international  demand  for 
European exports. Technologically advanced industries feature much higher shares in exports 
to fast growing emerging countries than industries characterised by low innovative activity. 

14 

 
 
 
 
3  OVERVIEW OF PROGRESS BY BROAD POLICY AREA 

3.1  Towards an innovative industry 

3.1.1  R&D: there is margin for improvement 

industrialised  countries  have  also 

The EU has achieved research excellence while in terms of R&D intensity it is on the third 
place  behind  the  US  and  Japan,  largely  because  of  lower  private  investment.  Some  of  the 
recently 
innovation 
investments. Within the EU, Denmark, Germany, Finland and Sweden are innovation leaders. 
This  year's  Innovation  Union  Scoreboard23  concluded  that  while  less  innovative  Member 
States  grow  faster  and  have  been  catching  up  with  the  more  innovative  countries,  this 
convergence process seems to be slowing down.  

their  research  and 

increased 

Direct  comparisons  of  R&D  expenditures  relative  to  GDP  are  heavily  influenced  by  the 
industrial structure of each country and so give a distorted picture, especially business R&D 
expenditures (BERD). The decomposition of business R&D intensity into a sector effect and a 
country  effect allows  for appropriate  assessments of the  level  and change  of  R&D  intensity 
over time, both showing structural change between sectors and sector upgrading in terms of 
rising (or falling) R&D intensities. 

R&D  intensity  in  a  given  country  is  defined  as  the  ratio  of  R&D  expenditure  to  total  value 
added. In the context of cross-country comparisons this ratio can be analysed as the result of 
two  effects:  a  "structural"  effect  measuring  aggregate  innovation  intensity  if  all  business 
sectors, relative to their value-added, invested in R&D like the cross-country average, and a 
"country" effect taking account of deviations of country-specific R&D intensities to the cross-
country average for all business sectors. 

FIGURE 6 shows all EU countries, with the exception of Luxembourg, and a variety of non-EU 
countries relative to the size of their country and sector effect. Countries above the 45°-line 
show a positive country effect, meaning that the sum of their sector R&D intensities is above 
the  sector  R&D  intensities  averaged  across  a  set  of  benchmark  of  12  countries  at  the 
technology  frontier:  Japan,  the  US,  Norway;  and  EU  Member  States  Belgium,  Denmark, 
Germany, France, the Netherlands, Austria, Finland, Sweden and the United Kingdom24. The 
size of the country effect corresponds to the vertical distance between the 45 degree line and 
the individual countries. If the country effect is below this line,  it is negative, meaning that 
sector R&D intensities are below the average of the benchmark countries.  

The  sector  effect  (horizontal  distance  from  the  origin)  reflects  the  industrial  structures  of 
countries. Group 1 is above the line, while group 2, 3 and 4 are below the line, in principle 
lending support to the view that structural specialisation is related to innovative ability or at 
least to the intensity of R&D investment. 

At  the  country  level,  some  countries  specialised  in  knowledge-intensive  structures,  such  as 
Ireland  and  Hungary,  are  well  below  the  line,  but  some  countries  featuring  less-knowledge 
intensive structures – e.g. within group 1, Denmark and Austria feature high R&D intensities. 

23 
24   

http://www.proinno-europe.eu/inno-metrics/page/innovation-union-scoreboard-2010, page 4 
See the Annex and TABLE Q for details; 

15 

 
 
 
 
 
 
 
                                                 
Some  countries  featuring  high  sector  specialisation  in  technology  driven  industries  do  not 
seem to have yet reached full potential in R&D intensity (Germany). Again, as with quality 
indicators, this comes as a qualifier that while industrial structure is an important concept, it is 
advisable to complement it with indicators measuring structural change within industries, or 
sector  upgrading.  The  ”within  industry“  indicators  provide  important  clues  as  to  why 
countries with structures which are only poorly associated with advanced firm capabilities and 
the potential for future growth prospects are able to sustain high incomes per capita, and the 
other  way  around  –  why  countries  with  structures  which  seem  to  indicate  advanced  firm 
capabilities  have  not  reached  a  high  level  of  income  per  capita,  an  indication  that  these 
countries  work  in  less  technology  intensive  value  chain  segments.  Moreover,  the  Member 
States  at  the  forefront  of  innovation,  specialising  in  technology-driven  sectors,  such  as 
Germany,  Ireland  or  the  Netherlands,  may  need  to  invest  even  more  in  research  and 
innovation than they currently do to maintain their position. 

FIGURE 6: R&D decomposition: country and sector effect 2007 

)
d
e
d
d
A
e
u
a
V

l

/

D
R
E
B
%

(

y
t
i
s
n
e
t
n

i

D
R
E
B

)
e
n

i
l
°
5
4
o
t
e
c
n
a
t
s
d
(

i

t
c
e
f
f
e
y
r
t
n
u
o
C

IL

SE

FI

JP

DE

KR

CZ

SI

HU

MT

IE

IS

DK

AT

US

FR

BE

UK

CA
NO

NL

AU

ES

EE

PT

NZ

EL

LV

CY

LT

BG

IT

TR

RO

PL

SK

4

3

2

1

0

0

Source: Eurostat, OECD. 

1
Sector effect (% BERD / Value Added)

2

3

4

The  rest  of  the  section  focuses  on  recent  innovation  policy  developments25  with  particular 
relevance to the business sector. Analysis on Member State performance regarding innovation 
and research can be found in recent publications of the European Commission and others26.  

25  

26  

the 

country 

available 

reports  of 

The 
at  http://www.proinno-
Innovation  Trendchart 
europe.eu/trendchart/annual-country-reports providing detailed information about innovation policies of 
the Member States. However, as there will be no Trendchart edition in 2011, the innovation sub-section 
of this report has been expanded. 
Innovation Union Scoreboard 2010, http://ec.europa.eu/enterprise/policies/innovation/files/ius/ius-
2010_en.pdf, and Innovation Union Competitiveness Report, http://ec.europa.eu/research/innovation-
union/pdf/competitiveness-report/2011/iuc2011-full-report.pdf. The OECD Working Group of National 
Experts on Science and Technology Indicators (NESTI) has developed statistical methodologies for the 
analysis of science and technology performance. 

16 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.1.2  Facilitating private research efforts  

Research, development and innovation are key sources of economic and productivity growth 
with  private  research  deemed  orientated  towards  shorter  term  results.  Many  Member  States 
have  therefore  enacted  measures  to  promote  business  sector  research,  in  particular  tax 
incentives, grants and credits. 

Concerning  tax  incentives,  France  has  a  comprehensive  system  to  support  innovation27 
including a tax credit28 of up to 50% for first time applicants in the first year and 40% in the 
second year. Portugal has now one of the most competitive tax credit systems for R&D in the 
EU 27  in  place  and  is  expanding  it  further.  Denmark  provides  tax  deductions  for  R&D 
expenditures and subsidises R&D by SMEs. Italy has also tax credits for companies financing 
research projects in universities. Austria, Belgium and Ireland have extended their R&D tax 
incentives,  while  Finland  and  the  Czech  Republic  are  planning  to  introduce  them.  The 
Netherlands is cutting subsidies and transforming them into generic tax deductions, especially 
for R&D wages and R&D based profits. The United Kingdom is reviewing its R&D tax credit 
scheme.  

All  Member  States  are  encouraging  closer  cooperation  between  academia  and  enterprises, 
with some new developments: Malta even plans to only fund projects involving at least one 
commercial  actor.  Sweden,  Slovenia  and  Latvia  have  set  up  further  competence  centres  to 
bridge  the  gap  between  companies  and  academic  research.  Innovation  vouchers  for 
enterprises to buy services from R&D providers are an increasingly popular policy measure. 
For instance Estonia, Slovenia, Portugal, Greece and Lithuania and two regions in the Czech 
Republic recently introduced them. 

3.1.3  Promoting technology development and diffusion 

Key  enabling 
technologies,  e.g.  micro  and  nano-electronics,  advanced  materials, 
nanotechnology, industrial biotechnology, photonics and advanced manufacturing systems are 
the basis for future competitiveness of EU industry29. Several Member States are promoting 
such technologies explicitly, while others set  up  functionally  similar  programmes:  Germany 
adopted a new high-tech strategy until 2020 while Estonia has set up a loan scheme. France 
invests heavily in digital infrastructures, while Sweden, Italy, Portugal and Slovenia promote 
high-tech  projects.  Lithuania  incentivises  technology  investment  by  tax  relief,  Greece  by 
grants  but  is  moving  towards  tax  reliefs  as  well.  Going  a  step  further,  the  United  Kingdom 
adopted a new key technologies strategy.  

Some  countries  pursue  active  cluster  policies  to  promote  regional  links  between  academia, 
enterprises,  banks  and  policy-makers,  for  instance  Denmark,  France,  Germany,  Poland, 
Sweden  and  all  regions  in  Belgium.  Lithuania  has  adopted  an  ambitious  programme  with 
significant  funding  while  Malta  aims  for  ”smart  specialisation“.  Italy  promotes  cooperation 
among companies and Greece has published a first call for expression of interest in clusters. 
But  more  could  be  done  in  line  with  the  Innovation  Union  Communication30.  The 

27  
28  
29  

30 

http://www.oseo.fr/votre_projet/innovation/aides_et_financements 
http://www.oseo.fr/votre_projet/creation/guides_de_la_creation/credit_d_impot_recherche_cir 
See  the  report  of  the  High  Level  Expert  Group  on  Key  Enabling  Technologies  and  its  policy 
recommendations http://ec.europa.eu/enterprise/sectors/ict/files/kets/hlg_report_final_en.pdf  
http://ec.europa.eu/research/innovation-union/index_en.cfm?pg=intro  

17 

 
                                                 
development  of  clusters  and  networks  can  be  supported  through  smart  specialisation 
strategies, with the assistance of the EU Regional Policy31.  

Eco-innovation  programmes  aimed  at  greening  the  economy  are  spreading  quickly.  For 
instance,  Germany  extended  a  sustainable  energy  research  programme,  Denmark  set  up  a 
”renewal  fund“  for  green  technologies  in  SMEs,  and  Italy  has  introduced  incentives  for 
sustainable  energy  production.  France  and  Belgium  shifted  considerable  funding  towards 
clusters for environmental technologies.  

Several Member States have set up ambitious programmes to use public procurement better as 
a tool to promote innovation: The United Kingdom is extending its Small Business Innovation 
Research programme. Spain has recently adopted a package of measures in order to promote 
innovative  public  procurement.  Pre-commercial procurement  is  being  introduced  in  Cyprus, 
while Slovenia intends to use conventional public procurement better for innovation.  

3.1.4  Unlocking the transformative power of service innovation 

The  boundaries  between  manufacturing  and  services  are  increasingly  blurring  and  service 
innovation  can  have  a  transformative  power  to  change  value  chain,  sectors  and  markets. 
Service innovation is now recognised by an increasing number of Member States as element 
of  innovation  policy  that  reaches  beyond  manufacturing  enterprises.  Service  innovation  can 
contribute to smart, sustainable and inclusive growth with profound effects on industrial value 
chains. Examples include amongst others public-private partnerships for efficient logistics in 
Germany, real-time vessel fuel consumption optimisation services in Finland and initiatives to 
innovate  tourism  and  hospitality  service  in  the  Czech  Republic  and  Slovenia  through 
bundling, support services and regional competitions.32 

If  service  innovation  escapes  the  logic  of  conventional  R&D  projects  and  rather  occurs 
through  experimental  interaction  with  users  and  potential  clients,  policies  to  foster  service 
innovation  require  such  ‘experimentation  environments’.  It  is  recognised  that  the  model 
regions  for  e-mobility  in  Germany  and  demonstrator  projects  for  healthcare  services  in  the 
UK integrate such aspects. It can therefore be observed that Member States have started to use 
service  innovation  to  address  societal  challenges.  However,  the  transformative  power  of 
service innovation is not yet exploited at a policy level in all Member States.  

3.1.5 

Improving skills for innovation 

Technological  and  industrial  changes  are  increasing  demand  for  people  with  high  and 
intermediate levels of skills33. Excellence in management, research, engineering and science 
needs  to  be  accompanied  by  a  broader  skills  base  (including  team  work,  creativity,  and 
design).  A  better  trained  and  more  entrepreneurial  workforce  is  crucial  to  ensure  that 
enterprises  can  benefit  from  new  technologies  and  develop  innovative  products,  but  also 
innovative process and work organisation. 

Some Member States have started to experience skills gaps, partly related to a decrease in the 
working age population due to decreasing birth rates over the last decades and emigration of 

31  

32  

33   

Specialisation 

"Smart 
innovation/s3platform.cfm 
Expert  Panel  on  Service  Innovation  in  the EU, http://www.europe-innova.eu/web/guest/innovation-in-
services/expert-panel/about 
Cedefop (2011), "What next for skills on the European labour market?", Briefing note 

http://ipts.jrc.ec.europa.eu/activities/research-and-

Platform": 

18 

 
 
 
                                                 
well-qualified persons . This issue is likely to become more important in the future. However, 
progress is slow. For instance, most Member States have a low share of graduates in science, 
technology  and  engineering  (FIGURE  7),  but  only  a  few  have  taken  ambitious  action.  The 
positive  examples  include  Germany,  which  is  rewarding  the  excellence  of  universities,  the 
Czech Republic which will provide grants to attract more students to science, technology and 
engineering  studies  and  Finland  plans  to  extend  a  distinguished  professor  programme. 
Luxembourg  liberalised  immigration  rules  for  researchers  and  provides  grants  for  PhD  and 
post-docs  of  all  nationalities  whereas  Estonia  has  announced  plans  for  tax  deductions  for 
work-related studies of enterprises' employees. 

FIGURE 7: Tertiary graduates in science and technology per 1000 of population aged 20-29 

2005

2009

Unweighted average 2005

Unweighted average 2009

30

25

20

15

10

5

0

EU 27

BE

BG

CZ

DK

DE

EE

IE

EL

ES

FR

IT

CY

LV

LT

HU

MT

NL

AT

PL

PT

RO

SI

SK

FI

SE

UK

Note: Latest available data for Greece and Italy are from 2008 instead of 2009.  
Source: Eurostat, 2011. 

Innovation  management  has  been  identified  as  a  further  bottleneck  for  innovation  in  many 
enterprises. Some Member States have therefore set up advisory services. Ireland is stepping 
up  cooperation  between  enterprises  and  higher  education  institutions  to  increase  the 
managerial capacity. Malta plans to provide advice on innovation management. Innovation in 
workplace  organisation  is  also  receiving  increased  attention,  but  only  few  Member  States 
have put an emphasis on it, for instance the Netherlands and Belgium. 

3.1.6  Good governance in the area of innovation policy 

Many  Member  States  have  improved  the  governance  of  their  innovation  system.  However, 
further steps to better monitor and evaluate policy impacts are needed.  

With  regard  to  evaluation,  a  recent  study  concluded:  «An  evidence-based  approach  to 

19 

 
 
 
informed  agenda  setting  and  policy  adjustments  is  relatively  weak  in  many  EU  countries. 
Evaluations, benchmarking, foresight studies, etc. are not as frequent and generalised as might 
be  expected.  One  argument  may  be  that  there  is  reluctance  to  spend  scarce  resources  on 
intelligence gathering, another that there is an inherent reluctance to be evaluated and a third 
is a belief that internal knowledge is sufficient.34 

In fact, there is evidence that the practice of evaluation is progressing. Austria has evaluated 
its  innovation  system  recently  while  Finland  has  performed  an  extensive  international 
evaluation of its innovation system in 2009 and is planning further evaluations of its strategic 
centres for science, technology and innovation. France plans to evaluate of its clusters policy 
in  2012  and  of  its  research  tax  credit  programme  in  2013.  The  Netherlands  has  performed 
several evaluations of its R&D wage tax deduction scheme and innovation vouchers. Italy has 
developed a national research programme which has a potential to improve evaluation and to 
simplify funding instruments. Poland has started to evaluate its innovation policies. Romania 
and  Greece  have  committed  under  their  Memoranda  of  Understanding  to  monitor  and 
evaluate  its  innovation  policy.  Slovakia  is  planning  an  external  audit  on  the  institutional 
aspects  of  its  innovation  system  and  the  Czech  Republic  is  already  in  the  process  of  an 
international audit.  

Policy fragmentation due to overlapping programmes, unclear competences of public bodies 
and  lack  of  an  overall  strategy  to  promote  innovation  has  been  identified  as  a  challenge  in 
many Member States over the last few years. However, there have been a number of positive 
steps taken to improve governance and overcome policy fragmentation. Denmark has adopted 
a  new  strategy  in  2010  and  had  good  results  from  reducing  the  number  of  funding 
programmes  but  increasing  the  funding  level.  Austria  has  adopted  a  new  comprehensive 
innovation  strategy  in  2011.  Spain  has  a  new  strategy  for  innovation  in  place  and  plans  to 
revise its science and innovation law, putting the emphasis also on structural factors, not just 
on  funding  levels.  Slovenia  has  adopted  a  new  Research  and  Innovation  Strategy  in  March 
2011 for the next 10 years with an increase in public investments in R&D and an increased 
autonomy  of  scientific  research  institutions.  Poland  is  planning  to  reform  its  innovation 
strategy on the basis of ongoing evaluations. Sweden is also planning a reform, to make its 
strategy  more  coherent  and  reduce  overlaps  and  gaps  between  funding  programmes.  France 
has adopted a new national strategy for research and innovation. Lithuania has a new strategy 
2010-2020  in  place  which  seems  to  address  the  main  challenges.  Portugal  has  started 
preparations for a new comprehensive innovation strategy until 2020. Governance will also be 
addressed in the new strategy planned in Cyprus. 

Some  other  countries  are  moving  in  a  similar  direction:  Finland  is  reforming  its  rather 
fragmented  innovation  system  and  Hungary  is  reforming  its  innovation  system  further. 
Slovakia  is  merging  institutes  and  promotes  specialisation  to  rationalise  the  innovation 
system, but policy coordination is still a weakness. 

Stakeholder  involvement  has  been  recognised  as  an  important  success  factor  in  public  and 
private  innovation  governance  systems.35  However,  only  for  Austria,  Portugal,  Italy  and 
Malta consultations have been explicitly mentioned. 

In this context, there is some evidence that improving the business environment for start-ups, 
reduction of administrative burden, SME policy and entrepreneurship can be more useful for 

34  
35  

Innovation Trendchart European Progress Report 2009, published in January 2010, page 11 
Innovation Trendchart European Progress Report 2009, published in January 2010, page 11 

20 

 
                                                 
fostering  innovation  than  fine-tuning  innovation  subsidies  or  increasing  tax  incentives  for 
private R&D expenditure.36 In this regard, it is interesting to note that Switzerland grants no 
specific innovation subsidies to profit-oriented enterprises, but scores very well according to 
the key innovation surveys. However, it provides an excellent business environment, a good 
education and research system and a well-functioning public administration. 

Last  year's  report  referred  to  the  risk  of  a  widening  innovation  gap  between  EU  Member 
States  due  to  the  diverging  way  in  which  they  have  reacted  to  the  financial  and  economic 
crisis,  with  innovation  leaders  addressing  the  challenges  of  the  crisis  proactively  while 
innovation followers likely to cap or reduce their funding and support for R&D. 

This  year's  Innovation  Union  Scoreboard  came  to  a  more  differentiated  conclusion:  ”There 
continues to be a steady convergence, where less innovative Member States have – on average 
–  been  growing  faster  than  the  more  innovative  Member  States.  This  convergence  process 
however seems to be slowing down […]. While the Moderate and Modest innovators clearly 
catch-up  to  the  higher  performance  level  of  both  the  Innovation  leaders  and  Innovation 
followers, there is no convergence between the different Member States within these 2 lower 
performance groups”.37 It should be noted, however, that the full impact of the crisis may still 
be underestimated because of a lag in data availability. The positive news is that, as evidenced 
in the previous section, individual governments can embark on ambitious policies regardless 
of their rank in the Innovation Scoreboard – if they have the political will. 

3.2  Towards a sustainable industry 

Decoupling economic growth from natural resources usage is a major societal challenge and 
the related policies – regulation and/or incentive schemes – have direct  implications for  the 
business sector, particularly industry. At the same time, change brings about opportunities and 
building  up  strongholds  and  first  mover  advantages  in  environmental  as  well  as  new  and 
innovative goods and services is a strategic challenge, associated to the need for dealing with 
progressive scarcity of resources and resources' price volatility38. 

Overall, the path towards sustainable ways of production requires a stable policy framework, 
providing  for  short-  and  long-term  incentives  to  encourage  market  creation,  and  addressing 
the whole value chain, including recycling. 

3.2.1  Energy consumption 

Particular emphasis in this context should be put to energy consumption as improvements in 
energy efficiency directly translate into widespread benefits for the whole economy and help 
in  achieving  ambitious  climate  and  environmental  goals.  Energy  savings  means  indeed 
energy-related  costs  savings;  reduced  CO2  and  other  greenhouse  gas  emissions;  increased 
energy  and  resources  security  (by  reducing  import  dependency);  improved  industrial 
competitiveness on a world-wide scale, therefore, ultimately it represents a fundamental way 
for delivering growth and jobs. 

36  

37  
38  

See Bronzini and Iachini (2011) on the risk of deadweight loss. (Raffaello Bronzini/Eleonora Iachini: 
Are incentives for R&D effective? Evidence from a regression discontinuity approach, Banca d'Italia 
Working Papers, Number 791, February 2011) 
http://www.proinno-europe.eu/inno-metrics/page/innovation-union-scoreboard-2010, page 4 
By  mainly  referring  to  a  MS  perspective,  the  present  section  does  not  deal  with  non-energy  raw 
materials  and  strategic  natural  resources.  For  a  focus  on  such  important  issues  at  EU  industry  level, 
please refer to the related sections in the European Competitiveness Report 2011. 

21 

 
 
 
                                                 
For  the  EU 27  as  a  whole,  final  energy  consumption  in  industry  (including  construction)39 
decreased by more than 18 % between 1995 and 2009, compared to increases of about 22 %, 
23 % and 5 % recorded over the same period in the transport (mainly pulled by road transport 
and  aviation),  services  and  residential  sectors,  respectively.  As  a  consequence,  the  share  of 
industry  in  total  final  energy  consumption  dropped  from  30.7 %  to  24.2 %,  while  transport, 
residential and the services sectors absorbed 33 %, 26.5 % and 12.6 %, respectively, of final 
energy  demand  in  2009.  It  must  be  noted,  however,  that  the  recent  financial  and  economic 
crisis contributed decisively to this result. 

3.2.2  Energy intensity 

Energy intensity40 in EU 27 industry decreased by 27.5 % between 1995 and 2009, indicating 
an absolute decoupling41 as the result of absolute energy savings combined with an increase in 
value  added.  In  this  respect,  it  can  be  noted  that  the  financial  and  economic  crisis  has  only 
reinforced a positive trend, already operating before 2007. Over the last decades, industry in 
the  EU  has  indeed  clearly  improved  its  overall  energy  performance,  as  the  combination  of 
positive  results  in  most  of  the  individual  sectors,  although  some  unexploited  margins  for 
further improvements persist, as well as the great variety of conditions at the level of Member 
States. 

FIGURE 8 below illustrates the wide variety of Member State performance in terms of energy 
efficiency42 in industry and energy. A  striking development  concerns the  rapid convergence 
of  the  twelve  Member  States  that  joined  in  2004  to  the  older  Member  States.  Estonia, 
Romania,  Poland,  Bulgaria,  Slovakia  and  Czech  Republic  have  all  reduced  their  energy 
intensity  by  more  than  50 %  over  the  period  up  to  2009  (64.5%,  63.3%  and  62.5%, 
respectively  for  the  first  three  countries),  compared  to  a  decrease  of  about  21 %  for  the  27 
EU countries as a whole. Results well above the EU average were also registered for Ireland, 
Luxembourg, Sweden, Finland and France. 

39  
40  

41  

42  

If not otherwise specified, the definition of industry used always includes the construction sector.  
For ease of comparability between sectors and countries, energy intensity is here measured as the ratio 
between energy consumption and gross value added and is measured as kg of oil equivalent per euro. 
An  important  distinction  needs  to  be  made  between  the  two  concepts  of  relative  and  absolute 
decoupling  which,  while  both  indicating  a  positive  development  in  terms  of  performance,  imply 
different  paths  of  sustainability.  In  particular,  the  concept  of  either  energy  or  carbon  efficiency  (as 
measured  by  intensity  indicators)  refers  to  the  use  of  less  energy  inputs,  or  to  the  generation  of  less 
emissions,  associated  to  an  equivalent  level  of  economic  activity,  therefore  signaling  relative 
decoupling. Absolute decoupling occurs when energy or CO2 savings in absolute terms are associated 
to increased level of outputs. Therefore, it can be stressed that gains in efficiency do not automatically 
translate into a reduction of overall energy consumption or emissions (the so-called rebound effect, that 
is, an increase in demand triggered by lower costs) and that important implications stem from the need 
to induce behavioral changes in production and consumption activities. 
Due to data availability and to the specific structure of the Eurostat databases on energy and national 
accounts as well as of European Economic Area greenhouse gas inventories, the indicators of energy 
and carbon intensity calculated in the present report with regards to Member States have been built in 
order  to  include  a  broader,  still  consistent  definition  of  industry  and  provide  information  for  all 
countries  (with  the  exception  of  Malta)  and  the  most  recent  available  year.  In  particular:  energy 
intensity calculations refer to final energy consumption in industry (including construction), final non-
energy  consumption  (i.e.  for  chemical  reduction  activities)  as  well  as  to  consumption  in  the  energy 
sector. On the other hand, the carbon intensity indicator refers to CO2 emissions in industry (including 
construction), from industrial processes and from solvent and other product use in industry as well as 
CO2 emissions from energy industries. Both aggregates (energy consumption and emissions) have been 
then  put  into  relation  with  consistent  gross  value  added  data  at  constant  price  (2000  as  the  reference 
year). 

22 

 
 
                                                 
FIGURE 8: Energy intensity in industry and the energy sector 

1995

2000

2005

2007

2009

2,0

1,5

1,0

0,5

0,0

BG

RO

SK

LT

CZ

EE

HU

NL

LV

PL

BE

PT

FI

EL

ES EU27

SE

SI

DE

AT

LU

FR

IT

CY

UK

DK

IE

Notes: Includes construction and final non-energy consumption. Measured in kilogrammes of oil equivalents per 
euro gross value added (reference year 2000). Due to lack of data on gross value added, for Greece and Romania 
only the periods 2000-2009 and 1996-2009, respectively, could be covered by the analysis on energy intensity. 
No data were available for Malta.  
Source: Calculations based on Eurostat data. Countries are sorted by the level of energy intensity in 2009. 

Overall,  all  countries  have  attained  improvements  in  their  energy  performance  by  reducing 
energy  intensity  over  the  period  1995-2009.  Again,  the  recent  crisis  has  certainly  had  an 
impact on results but mainly it has reinforced a positive trend already in place. By 2009, 17 
Member  States  have  achieved  absolute  decoupling43,  that  is,  an  absolute  decrease  in  energy 
consumption  combined  to  an  increase  in  activity  levels,  while  the  remaining  ones  have 
recorded relative decoupling. 

A closer look at data for 2008 and 2009, indicates that for some countries (Belgium, Ireland, 
Latvia, Portugal and Slovakia) the decrease in activity levels brought about by the crisis has 
been  decisive  for  the  positive  results  in  terms  of  absolute  decoupling,  although  relative 
decoupling  was  already  registered  up  to  2007.  On  the  other  hand,  for  four  countries 
(Germany, Cyprus, Latvia and Sweden) a strong decrease in gross value added between 2007 
and 2009 was associated to an increase in energy intensity. 

In most cases, the assessment of recent policy developments in Member States in the field of 
industry's energy efficiency does not reveal major strategic changes, in line with the fact that 
national  policy  frameworks  up  to  2010  were  already  set  under  the  first  National  Energy 
Efficiency  Action  Plans  (NEEAPs).  Rather,  efforts  at  country  level  have  mainly  concerned 
the implementation of already planned measures as well as the assessment of results in view 
of the submission of NEEAPs 2011-2014. 

43  

Belgium,  Bulgaria,  Czech  Republic,  Denmark,  Estonia,  Ireland,  Greece,  France,  Cyprus,  Latvia, 
Luxembourg,  Hungary, Poland, Portugal,  Romania, Slovakia, and Sweden. 

23 

 
 
 
 
                                                 
Member States showed a different pace in the implementation of the highly differentiated set 
of actions which constitutes the core of their strategies, according to a great variety of national 
framework conditions and level of ambitions. Overall, although on a different scale and with 
wide-ranging  results,  almost  all  Member  States  have  implemented  some  sort  of  grant  and 
support schemes for improving sustainability and energy efficiency in industry, in most cases 
accompanied by energy audit schemes. 

From a sector-wide perspective, the analysis of the responses provided by Member States to a 
specific questionnaire at the end of 201044, showed that most of the national measures so far 
implemented under the NEEAPs have targeted energy performance in buildings (public and 
private  services  as  well  as  residential),  energy  services  and  the  simultaneous  generation  of 
heat and power. At the same time, despite the fact that not all countries have focused on each 
of  the  remaining  sectors  (tertiary,  industry  and  transport),  measures  oriented  towards  the 
promotion  of  energy  efficiency  and  savings  in  industry  (outside  the  scope  of  the  EU 
Emissions  Trading  System)  and  industrial  buildings  have  also  been  the  focus  of  specific 
attention and implementation efforts (FIGURE 9). 

FIGURE 9: Total number of energy efficiency measures in the Member States 

163

157

130

127

117

113

107

180

160

140

120

100

80

60

40

20

0

Industry (in the ESD scope) (not bldg)
Households (not bldg)
Buildings - industry
ublic (service) sector (not bldg)
Buildings - public services
Buildings - residential
mercial (service) sector (not bldg)
Buildings - private services

P

Com

91

82

76

73

59

41

y sector
Energ

Transport - public

Transport - private

Transport - goods

9

et group
Agriculture
Other targ

Source: Commission Staff Working Paper, National Energy Efficiency Action Plans (NEEAPs): update on 
implementation, SEC (2011) 276 final. 

With regards to industry, it is important to note that it has not been the object of any direct 
priority  measures  in  the  framework  of  the  EU  Energy  Efficiency  Action  Plan  2006.  In  fact, 
many industrial installations (in particular, the most energy intensive ones) are already subject 
to  provisions  implemented  under  the  EU  Emissions  Trading  System,  aiming  at  reducing 
carbon emissions. Therefore, besides the natural vocation of industry towards reducing costs 
and  exploiting  solutions  for  increasing  competitiveness  (including  recourse  to  energy 

44  

Commission  Staff  Working  Paper,  National  Energy  Efficiency  Action  Plans  (NEEAPs):  update  on 
implementation, SEC(2011) 276 final. 

24 

 
 
                                                 
efficiency), the cap-and-trade system has introduced a market based mechanism for pursuing 
a reduced (more rational) use of energy sources. 

Though industry is the part of the economy which has attained the biggest improvements in 
energy  efficiency  over  the  past  decades,  according  to  recent  projections45  a  cost-effective 
potential  for  further  increasing  energy  savings  (estimated  at  3 %  of  GDP)  still  remains 
unexploited and will not be reaped by 2020 if additional measures are not implemented on top 
of the current scenario represented by NEEAPs. 

In  particular,  room  for  action  is  envisaged  with  regards  to  SMEs,  for  which  lack  of 
information,  insufficient  price  signals  and  lack  of  financial  resources  and  expertise  all 
represent major obstacles to significant improvements in energy performance46. 

Overall,  the  positive  developments  attained  so  far  by  some  Member  States  in  defining  and 
implementing  a  consistent  legislative  framework  for  stimulating  energy  efficiency  and 
savings in the economy, contrast with clear difficulties experienced by others for which lack 
of experience and adequate administrative capacity proved to be major obstacles. Especially 
with  regards  to  the  latter  group  of  countries,  it  is  then  evident  the  key  role  played  by  a 
consistent advancement in framework legislation at the EU level, providing for clear guidance 
and support. This holds particularly true when considering that for many Member States the 
submission  of  the  first  NEEAPs  represented  the  very  first  attempt  to  define  a  strategy 
addressing energy efficiency in a comprehensive way. 

In  particular,  a  field  of  action  which  still  needs  specific  attention  and  improvement  is  the 
implementation of consistent monitoring systems at national level, as a priority for assessing 
progresses  towards  commitments  and  inspire  the  adoption  of  effective  solutions.  In  this 
respect,  particular  attention  should  be  paid  to  limit  the  compliance  burden  on  business  and 
industry  through  minimising  as  much  as  possible  enforcement  and  compliance  costs  arising 
from the regulatory framework. 

3.2.3  Carbon intensity 

In terms of carbon intensity47, significant improvements have been achieved in all countries 
and, in particular, in most of the EU-12 Member States which, as already signalled for energy 
efficiency, have undergone a virtuous path towards progressive reduction of the gap with the 
EU-15 average, although the process is clearly not yet completed (FIGURE 10). 

Over  the  period  examined,  almost  all  Member  States  have  recorded  absolute  decoupling  in 
industry, by reducing the total amount of CO2 emissions while experiencing a growth in the 
value  added  of  industry  and  the  energy  sector.  The  remaining  countries  have  however  still 
recorded relative decoupling, either because of absolute CO2 emissions increasing at a lower 
pace  than  GVA  (Spain  and  Austria)  or  due  to  CO2  emissions  reduction  well  above  the 
contraction  registered  in  value  added,  (UK,  Italy  and  Germany).  The  only  exception  is 
represented by Cyprus, for which CO2 intensity increased between 1995 and 2009. 

45  
46  

47  

See footnote 23 above. 
As reported in SEC(2011) 277 final, p. 10: "For some industry sectors, with the right technology and 
support, could make energy savings of around 20%. By changing certain production processes, energy 
savings of 30% and even up to 65% can be obtained". 
See note 21. 

25 

 
 
                                                 
FIGURE  10:  CO2  intensity  in  industry  (including  construction,  process  emissions  and  solvent  and  other 
product use) and the energy sector, kg CO2 per euro gross value added (reference year 2000) 

1995

2000

2005

2007

2009

14,0

12,0

10,0

8,0

6,0

4,0

2,0

0,0

BG

EE

RO

CZ

PL

CY

EL

SK

HU

LT

LV

PT

SI

NL

DE

EU27

ES

BE

DK

IT

LU

FI

UK

AT

FR

IE

SE

Note: Due to lack of data on gross value added, for Greece and Romania only the periods 2000-2009 and 1996-
2009, respectively, could be covered by the analysis on CO2 intensity. No data was available for Malta.  
Source: Calculations based on Eurostat data. Countries are sorted by the level of CO2 intensity in 2009. 

3.2.4  Development of environmental industries 

The development of eco-industries48 inside the EU represents a key factor towards reaching 
the ambitious climate change and environmental targets set at the Union's level, by ensuring 
the  availability  of  the  wide  range  of  goods  and  services  needed  for  greening  the  economy 
while sustaining job creation and innovation. At the same time, it also implies great business 
opportunities and the possibility to strengthen the EU competitiveness on a world-wide scale. 

All  these  aspects  may  be  captured  to  a  certain  extent  by  the  analysis  of  the  share  of 
environmental  goods  over  the  total  flows  of  exports  of  goods.  In  2010,  such  share  for  the 
EU 2749 amounted to 0.76%, representing a significant increase compared to 2005 (0.28 %). 
The  result  can  certainly  be  considered  as  extremely  positive,  although  the  situation  remains 
highly differentiated at Member State level. 

FIGURE 11 reports the composition of environmental goods exports in 2010, when the group 
"photosensitive semiconductor devices, incl. photovoltaic cells" represented almost half of the 
total value, compared to less than 25 % in 2005. This is in line with the leadership achieved 
by  the  EU  (and  some  of  its  countries  in  particular)  at  world  level.  An  important  share  of 
exports  is  then  absorbed  by  the  groups  of  "machinery"  or  "parts  of  machinery  for 

48  

49  

The notion of "eco-industry" refers to sectors whose products measure, prevent, limit, minimize or 
correct environmental damage. The trade codes considered to cover eco-industry goods are those 
identified in the Ecorys study on the “Competitiveness of the EU eco-industry” (pages 190/191) of 22 
October 2009, carried out for DG ENTR. 
For  the  EU  as  a  whole,  the  share  was  calculated  by  taking  into  account  both  intra-  and  extra-EU27 
exports. 

26 

 
 
 
                                                 
filtering/purifying liquids, air and gases, which all registered sustained growth rates over the 
five years examined. 

FIGURE 11: Composition of intra- and extra-EU 27 exports of environmental goods, 2010 (volumes) 

El ectroni c i ns truments  or 
a ppa ra tus  for mea s uri ng or 
checki ng va ri a bl es  of 
l i qui ds  or ga s es , n.e.s .
2%

Non-el ectroni c ga s  or 
s moke a na l ys i s  a ppa ra tus
2%

Non-el ectroni c ins truments  
or a ppa ra tus  for mea s uri ng 
or checki ng va ri a bl es  of 
l iqui ds  or ga s es , n.e.s .
1%

Photos ens i tive 
s emi conductor devices , 
i ncl . photovol ta i c cel l s
50%

El ectroni c ga s  or s moke 
a na l ys i s  a ppa ra tus
3%

Submers i bl e pumps , s i ngl e-
s ta ge
3%

Pa rts  of i ndus tri a l  or 
la bora tory furna ces , non-
el ectri c, i ncl . i nci nera tors , 
n.e.s .
3%

Li ght-emi tti ng di odes , i ncl . 
la s er di odes
4%

Ma chi nery a nd appa ra tus  
for fi l teri ng or puri fyi ng 
ga s es  (other tha n a i r), by a 
ca ta l yti c proces s  (excl . 
i s otope s epa ra tors )
5%

Ma chi nery a nd a ppa ra tus  
for fi l teri ng or puri fyi ng a i r 
(excl . ...)
6%

Ma chi nery a nd a ppa ra tus  
for fi l teri ng or puri fyi ng 
l i qui ds  (excl . …)
8%

Pa rts  of ma chinery a nd 
a ppa ra tus  for fi lteri ng or 
puri fyi ng li qui ds  or ga s es , 
n.e.s .
13%

Source: Eurostat COMEXT. 

Measures  in  favour  of  the  development  of  environmental  industries  take  various  forms. 
Financial support to green innovation and environmental industries has been actively pursued 
by several Member States, such as Germany, Denmark, Finland, Ireland, Sweden, France and 
Portugal. 

Concrete measures of a more sectoral nature have been taken by Germany (‘Electro-Mobility’ 
initiative  adopted  in  2011),  Estonia,  Portugal  (MOBLE  programme)  and  Spain  (in  the 
framework  of  the  recent  2010  Industrial  Action  Plan)  in  designing  strategies  for  the 
development of the market for electrical vehicles and related infrastructures, accompanied by 
demand  side  measures  and  setting  of  specific  targets.  In  the  same  field  of  electro-mobility, 
also Romania has started preliminary discussions at ministerial level for implementation of ad 
hoc interventions. 

An interesting and innovative action has been announced by the UK for supporting access to 
finance for green projects: the establishment of a dedicated green investment banks is indeed 
planned, by 2012 and with a provision of £ 3 billion as initial funding. 

27 

 
 
 
 
Specific  attention  towards  SMEs  and  the  need  to  foster  the  integration  of  environmentally 
compatible  solutions  in  their  business  models  can  be  signalled  in  Ireland,  Lithuania  and 
Greece where financial support schemes have been put in place also via the use of structural 
funds. In Austria, more focus has been devoted instead to the provision of energy efficiency 
consulting services to SMEs. 

Green  public  procurement  is  gaining  in  momentum  throughout  Europe.  A  majority  of 
Member States (21) have adopted specific national action plan on green public procurement 
or  sustainable  public  procurement,  which  outline  a  variety  of  national  actions  and  support 
measures.  Most  have  set  targets  for  green  public  procurement,  either  in  terms  of  overall 
procurement, for different levels of public procuring entities or for individual product/service 
groups.  Although  the  use  of  green  public  procurement  criteria  between  and  within  Member 
States  has  been  uneven,  significant  progress  was  achieved  in  all  Member  States  in  the  last 
three  years.  Denmark,  Germany,  the  Netherlands,  Austria,  Finland,  Sweden,  and  the  UK  
stand out as front-runners on green public procurement, with reaching on average over 50% 
of  green  purchasing  contracts  in  ten  priority  product  groups  and  services.  These  Member 
States have well defined green public procurement schemes, have developed their own criteria 
and  made  proactive  capacity-building  efforts.  Belgium,  France,  Cyprus,  Portugal  and  in 
particular some regions in Italy and Spain are also fairly advanced, with well-established and 
elaborate approaches to green public procurement. Progress has been achieved also by the rest 
of the EU countries, although they appear to fall noticeably behind the front-runners in terms 
of  the  communication,  levels  of  support,  uptake  and  institutionalisation  of  green  public 
procurement. 

Finally,  an  important  development  in  2010  is  certainly  represented  by  the  design  and 
submission  by  Members  States  of  National  Renewable  Energy  Action  Plans,  according  to 
provisions  set  out  by  the  EU  Renewable  Energy  Directive  (2009/28/EC)  and  providing 
detailed  indication  of  the  path  to  be  followed  in  order  to  meet  the  legally  binding  2020 
national targets. 

Besides  the  essential  contribution  of  an  increased  use  of  renewable  energy  sources  towards 
reaching environmental and climate targets, the promotion of renewable energy sources and 
the encouragement of bio-based products positively imply targeted support in favour of eco-
innovation and environmental industries, while also contributing to the objective of increased 
energy  security.  At  the  same  time,  provided  that  a  great  majority  of  Member  States  has 
already  implemented  concrete  actions  in  this  field  (mainly  by  adopting  feed-in  tariffs  and 
subsidies  schemes),  particular  attention  should  be  paid  to  the  rationalisation  of  national 
energy markets and to avoid further distortions in energy prices, as they have been registered 
in a number of Member States in recent years and which negatively  affect final consumers, 
particularly SMEs. 

In 2011, Germany decided on far-reaching changes in its energy policy, including a gradual 
phasing-out  of  nuclear  energy  production  until  2022;  measures  to  accelerate  grid  expansion 
and a more market-based development of renewable energies. Such a major strategic change 
could certainly further stimulate the demand for environmental technologies and services. At 
the same time, possible side effects should be carefully analysed and properly anticipated in 
terms of the expected evolution in energy prices and availability, in particular for industry, not 
only in Germany but in all neighbouring countries. 

28 

 
3.3  The business environment 

An  open,  efficient  and  competitive  business  environment  provides  opportunities  and 
incentives  to  improve  performance  throughout  an  economy  and  across  borders  by  reducing 
unnecessary costs for enterprises and promoting business activity. Also, studies on the effects 
of  foreign  direct  investment  suggest  that  its  contribution  is  most  significant  when  domestic 
capability  is  high50.  Capability  is  understood  as  a  function  of  human  capital,  of  the  state  of 
infrastructure, and of the institutional framework in which enterprises operate in the market. 

According  to  the  Ernst  &  Young  Survey  of  201151,  the  EU  remains  the  largest  regional 
destination for foreign direct investment52, with a quarter of all consumption and investment 
taking place within its expanding borders. This remains a formidable advantage, but the EU 
must  continue  investing  in  its  potential  to  lead  by  innovation  and  entrepreneurship  in  an 
increasing competitive world. Despite progress made over the last decade in the EU business 
environment,  further  improvements  can  still  be  achieved  in  terms  of  the  quality  of 
infrastructure, quality of legislation and the modernisation of public administrations.  

like  IMD  competitiveness 

Indeed,  the  international  rankings  measuring  the  legal  and  regulatory  framework  for 
businesses 
the  World  Economic  Forum  Global 
index, 
Competitiveness  Report  or  World  Bank  Doing  Business  (see  FIGURE  12  and  FIGURE  13 
below) show how half of the EU Member States included in the ranking have slid down since 
the previous year. This does not necessarily mean that the business environment has worsened 
in  absolute  terms  in  those  Member  States  but  rather  that  other  countries  in  the  world  have 
progressed much faster in the improvement of theirs. 

50  
51  

52  

World Bank 2001, Building Coalitions for Effective Development Finance, Washington DC. 
Ernst & Young: Restart, European Attractiveness Survey 2011, 
http://www.ey.com/Publication/vwLUAssets/Europe_attractiveness_2011_web_resolution/$FILE/Euro
pe_attractiveness_2011_web_resolution.pdf . 
The  United  States,  Germany  and  the  UK  remain  the  leading  source  countries  for  FDI  projects  in 
Europe. China and India provide 6% of all FDI projects in Europe, unchanged year on year, but fewer 
of the new jobs.  

29 

 
                                                 
FIGURE 12: Changes in rank of the IMD competitiveness index 2010-2011. 

6

Improvement in rank

4

4

2

2

2

1

1

1

1

1

B

CZ

IE

EL

FR

IT

LT

BE

DK

DE

EE

ES

HU

NL

AT

PL

PT

0

LU

RO

SI

SK

FI

SE

UK

-1

-2

-3

-2

-2

-2

-2

-3

-4

-5

-5

-10

Decrease in rank

Source IMD. 

FIGURE 13: Changes in rank of ease of doing business 2010-2011 

Improvement in rank

19

6

2

3

3

3

2

BE

0

0

DE

0

IE

EL

ES

IT

CY

LU

NL

AT

BG CZ DK

-1

EE

-1

FR

-1

LV

LT

HU

-1

-1

PL

PT

-3

-2

-4

-3

4

1

SI

RO

-2

SK

FI

0

SE UK

-1

-2

-12

Decrease in rank

Source: World Bank. 

3.3.1 

Infrastructure  

The  quality  and  availability  of  both  transport  and  energy  infrastructure  varies  significantly 
across Member States. Effective transport systems are important for the EU companies' ability 
to compete inside the EU and in the world economy. Improvement of transport infrastructure 
is  a  major  challenge  in  the  new  Member  States  and  transport  systems  in  rural  areas  is  a 
general challenge throughout the whole EU. With the support of the Structural Funds, some of 
those  Member  States  (e.g.  Bulgaria,  Estonia)  have  started  important  investments  of 

30 

 
 
 
 
 
modernisation. The Commission has outlined recently a plan with 40 initiatives to upgrade the 
EU transport sector until 205053.  

EU's energy infrastructure is outdated and poorly interconnected as it has been pointed out in 
a  recent  Commission  Communication54,  although  the  situation  varies  across  the  EU. 
Developing  EU's  energy  infrastructure  will  not  only  enable  the  EU  to  deliver  a  properly 
functioning  internal  energy  market,  it  will  also  enhance  security  of  supply,  enable  the 
integration of renewable energy sources, increase energy efficiency and enable consumers to 
benefit  from  new  technologies  and  intelligent  energy  use.  Also,  decentralisation  of  energy 
infrastructure  would  make  it  more  adapted  and  flexible  to  smaller  energy-generation  plants 
and reduce transmission losses for electricity. 

3.3.2  Reducing administrative burden and improving the quality of legislation  

Regulation  is  important  and  necessary,  but  implementation  can  also  entail  costs.  Some  of 
these expenses are linked to legal obligations to provide information either to public or private 
parties.  These  are  called  administrative  costs.  The  Commission  introduced  in  2006  a 
distinction between administrative costs and administrative burdens: the latter designate costs 
specifically linked to information that businesses would not collect and provide in the absence 
of a legal obligation. It started a large-scale operation to reduce administrative burden in the 
EU. The EU Action Programme for Administrative burden reduction fixed a target of 25 % by 
2012  and  invited  MS  to  set  similar  targets  at  national  level.  By  October  2009,  all  Member 
States  had  adopted  national  targets  for  reducing  administrative  burden  by  about  25 %,  with 
the  exception  of  ES  and  LT  which  adopted  a  target  of  30 %  and  five  Member  States  set 
targets below 20 %. However, not all Member States have effectively started to measure the 
current administrative burden which is needed as a baseline against which its reduction can be 
monitored.  Only  16  Member  States  have  carried  out  measurement  work  by  June  2011. 
Progress in simplification has been achieved in all sectors but agriculture, public procurement 
and company law are the areas where progress has been greater.  

Substantive progress has been made regarding the Single Market for services. However it is 
not  yet  delivering  its  full  potential.  Intra-EU  services  trade  lacks  dynamism  since  it  still 
represents  only  one-fifth  of  total  intra-EU  trade,  a  share  that  is  modest  compared  with  the 
presence  of  services  in  the  economy.  Since  2004,  trade  in  services  between  the  EU  and  the 
rest  of  the  world  has  been  growing  faster  than  inside  the  Single  Market.  The  Services 
Directive (Directive 2006/123/EC) has been a crucial milestone in improving the functioning 
of  the  Single  Market.  It  has  done  so  by  removing  unjustified  barriers,  simplifying  the 
regulatory  framework  and  helping  modernise  public  administrations.  Member  States  have 
done  important  efforts  in  the  implementation  of  the  Services  Directive  but  it  is  still  under 
completion in some of them. Moreover, the recent mutual evaluation process55 has identified 
a number of areas in which work remains to be done with a subsequent proposal of actions to 
improve it.  

Use of impact assessment in preparing legislation can also be an important tool in limiting the 
increase  of  administrative  burden  for  enterprises.  In  the  last  months,  progress  has  been 
achieved  in  some  countries  regarding  the  developing  and  implementing  impact  assessment 

53  

54  
55  

Roadmap to a Single European Transport Area – Towards a competitive and resource efficient transport 
system, COM(2011) 144 final. 
Energy infrastructure: Priorities for 2020 and beyond COM (2010) 677 final of 17 November 2010. 
Towards  a  better  functioning  Single  Market  for  services  –  building  on  the  results  of  the  mutual 
evaluation process of the Services Directive  - COM (2011) 20 final of 27 January 2011. 

31 

 
                                                 
systems. Hungary has extended the areas to be examined in impact assessments, Slovakia has 
made  it  mandatory  since  July  2010  and  the  UK  obliges  an  impact  assessment  for  all  policy 
proposals with potential policy or regulatory impacts as well as expressing costs and benefits 
in monetary values. Up to June 2011, impact assessments for new legislative proposals were 
mandatory  in  18  Member  States,  although  not  all  of  them  have  a  full  coverage  of  all 
significant economic, social and environmental issues. 

The  early  involvement  of  stakeholders  in  designing  legislation  is  crucial  for  getting  a 
significant  impact  on  the  quality  of  new  legislation.  Almost  all  Member  States  require  a 
formal  consultation  of  stakeholders  for  major  policy  proposals.  There  are  diverse  ways  for 
these  consultations.  Some  Member  States  have  created  institutionalised  bodies  (advisory 
boards) whereas others identify and then consult concerned parties. The minimum period of 
consultation also varies widely, from 10 days in Hungary and Lithuania, to at least 12 weeks 
in the United Kingdom. 

3.3.3  Modernising public administration 

A  highly  performing  and  innovative  public  sector,  enabling  the  delivery  of  sustainable, 
modern  and  quality  public  services,  is  a  prerequisite  for  economic  competitiveness.  The 
reform of public administration is high on the agenda of several Member States, and the area 
of e-government has taken special importance recently. E-government initiatives range from 
data centers and shared networks to unified service centers for the public.  

Developing e-government could permit SMEs to spend less time on administrative procedures 
and  to  gain  new  business  opportunities.  In  particular,  a  full  switch-over  to  e-procurement, 
practical  e-identification  and  e-authentication  for  cross-border  services  would  open  up 
numerous  new  business  opportunities  across  borders.  According  to  recent  surveys56  the  e-
government  performance  in  the  EU  has  greatly  converged  in  geographic  terms  since  the 
expansion of the EU in 2004 – there are both old and new Member States among the leading 
e-government nations. If we look at the different aspects of the service delivery by the public 
administrations, Ireland, Malta, Austria and Portugal are the top performing Member States in 
the EU, followed closely by Sweden, Germany and Italy.  

Motivated  by  clear  benefits  of  better  efficiency  and  productivity,  European  administrations 
are  accelerating  their  transition  towards  e-procurement.  Indeed  e-procurement  is  one  of  the 
high impact services representing a major portion of Europe’s economy – in 2009, total EU 
procurement  accounted  for  some  EUR 2.1 trillion  of  public  administration  expenditure. 
Increasing the use of trans-EU procurement services can make Europe more competitive for 
particularly SMEs, and offers substantial efficiency gains.  

Another reform among Member States to modernise the public administration is the creation 
of one stop shops. Besides the obligations of the Services Directive regarding the "Points of 
Single Contact" to allow businesses to get all relevant information and complete procedures 
online,  Member  States  have  created  one  stop  shops,  either  physical  or  virtual,  to  carry  out 
many other integrated functions, like business registration, licensing, investment, completion 
of company taxes, etc. Creation of one stop shops does not necessarily require big spending or 
legal  changes  and  entrepreneurs  and  citizens  see  immediate  benefits.  Single  interfaces  not 
only save time and money but they also increase transparency. 

56  

Digitising Public Services in Europe: Putting ambition into action, 9th Benchmark Measurement. 
December 2010, prepared by CapGemini. 

32 

 
                                                 
3.3.4  Market functioning and competition policy 

A  well  functioning  Internal  Market  results  in  increased  opportunities  for  business  and 
ultimately  improves  competitiveness  of  European  industry.  Recent  initiatives  like  the 
proposed Regulation on European Standardisation57 can help to boost EU companies’ export 
activities and competitiveness. Moreover, the contribution of information and communication 
technologies  to  this  objective  is  not  trivial.  Lowering  barriers  to  internet  take-up  and 
acceleration of  the  delivery  of  the  Digital  Single  Market58 will help kick-start GDP growth, 
enhance Europe's competitive edge and create new jobs and businesses. 

In order to exploit the Internal Market's full potential the legislation needs to be timely and 
correctly transposed into national law and properly applied by all Member States. Despite the 
current  economic  difficulties,  Member  States  have  maintained  a  satisfactory  rate  of 
transposition  of  internal  market  directives  into  national  law.  The  latest  Internal  Market 
Scoreboard,  published  in  March  2011,  shows  that,  at  0.9 %,  the  percentage  of  non-
transposition  of  legislative  texts  for  which  the  deadline  has  passed  remains  just  beneath  the 
1 % limit set by the heads of state and government in 2007. Twenty Member States meet the 
1 %  deficit  target,  with  Malta  the  top  performer  with  only  two  directives  awaiting 
transposition. A year ago, the Member States took an average of nine months to transpose EU 
directives. This has been brought down to 5.8 months, an improvement of nearly 40 %. Seven 
Member States - Austria, the Czech Republic, Estonia, Cyprus, Hungary, Poland and Italy - 
are still above the 1 % transposition target. 

The number of infringement procedures related to the Internal Market still remains high but 
has  decreased,  with  taxation  and  environment  the  biggest  areas  of  infringements.  In  recent 
years, the Commission has introduced a number of alternative problem solving and complaint 
handling  mechanisms  that  have  had  a  considerable  influence  on  the  decrease.  Belgium 
continues to account for the highest number of infringement proceedings, followed by Greece 
and Italy. 

The level and quality of state aid granted by national governments has a significant impact on 
the  functioning  of  the  Internal  Market.  State  aid  should  not  distort  competition  and  trade 
inside the Internal Market. To this end, Member States committed to reduce the general level 
of state aid and to shift the emphasis from supporting individual companies or sectors towards 
tackling  horizontal  objectives,  environment,  SMEs  or  training.  The  2011  spring  State  Aid 
Scoreboard  shows  that  state  aid  to  support  expenditure  in  research,  development  and 
innovation  has  steadily  increased  in  the  last  10  years  to  support  job  creation  and  increase 
Europe's competitiveness. R&D and innovation state aid stood at 0.09 % of GDP in 2009, the 
last year for which figures are available, against 0.05 % in 2005. In this period, more than half 
of  the  total  EUR 46.5 billion  of  R&D  and  innovation  aid  was  spent  by  two  Member  States: 
Germany  (29 %)  and  France  (22 %)  while  five  other  Member  States  accounted  for  another 
third of the total: Italy (11 %), Spain (9 %), the United Kingdom (7 %), Belgium (5 %) and 
The  Netherlands  (4 %).  In  2009,  EUR 13.2 billion  of  state  aid  was  granted  in  the  EU  for 
environmental  objectives,  either  as  direct  aid  or  through  tax  reductions  and  exemptions. 
Germany  accounted  for  half  of  this.  Regarding  support  exclusively  for  SMEs,  the  vast 

57   

58  

Proposal  for  a  regulation  of  the  European  Parliament  and  of  the  Council,  COM  (2011)  315  final, 
01.06.2011 
The Digital Single Market could deliver 4% extra GDP growth over the next ten years. Monti Report 
2010 

33 

 
                                                 
majority of support between 2004 and 2010 concerned risk capital measures, with Germany, 
the UK and Italy accounting for more than half of these measures. 

3.4  Entrepreneurship and SME policy 

3.4.1  Entrepreneurship in the EU 

The  Small  Business  Act  for  Europe  (SBA)  Fact  Sheets  2010/201159  provide  a  detailed 
analysis  of  the  structure  of  small  and  medium-sized  enterprises  (SMEs)  and  provide 
indications for both economic and societal environment for entrepreneurship in the EU. The 
results  vary  considerably  among  Member  States  and  reveal  different  attitudes  towards  self-
employment,  different  reasons  for  becoming  an  entrepreneur,  but  also  different  perceptions 
about the feasibility of starting a business under the current conditions. 

The results indicate that on average about 45 % of the adult population in the EU generally 
preferred to be self-employed. In countries such as Cyprus (66 %), Greece (60 %), Romania 
(52 %),  Portugal  (51 %),  Bulgaria,  France  or  Italy  (50 %  each),  this  preference  was 
pronounced  even  stronger  than  the  EU  average.  However,  in  countries  such  as  Belgium 
(30 %),  Czech  Republic,  Denmark  or  Sweden  (32 %  each),  as  well  as  Malta  (36 %)  for 
example, respondents were more reluctant in this respect. 

According  to  the  survey,  11 %  of  the  adult  population  in  the  EU  had  concrete  intentions  to 
start  a  business  over  the  next  three  years.  In  countries  such  as  Latvia  (21 %),  France  or 
Hungary  (14 %  each)  for  example,  this  figure  exceeded  the  EU  average.  However,  in 
countries  such  as  Italy  (4 %),  Austria  or  the  UK  (5 %  each),  Denmark,  Finland,  Germany, 
Ireland, the Netherlands or Spain (each 6 %), the intention to become an entrepreneur was less 
pronounced.  

The results also illustrate very different reasons for becoming an entrepreneur. Opportunity-
driven  entrepreneurship  (EU  average  55 %)  was  more  pronounced  in  countries  such  as 
Denmark (81 %), the Netherlands (78 %), Belgium (72 %), Finland (71 %) or Sweden (69 %) 
for example. By contrast, it was a less important factor in countries such as Estonia (36 %), 
Bulgaria (38 %), Greece (39 %), Latvia (41 %), Cyprus (42 %) for example. Hence, in these 
countries,  a  larger  share  of  entrepreneurial  activities  was  triggered  by  necessity  and  lack  of 
other alternatives. 

Also  in  respect  to  the  perceived  feasibility  of  starting  a  business,  the  results  varied 
considerably  across  Member  States.  Overall,  28 %  of  the  respondents  in  the  EU  believed  it 
was  feasible  to  become  self-employed  under  the  current  circumstances.  Becoming  self-
employment was perceived as being more difficult in countries such as Belgium (13 %), the 
Netherlands  (15 %),  Portugal  (18 %),  Hungary  or  Malta  (19 %  each)  for  example.  By 
contrast, respondents were generally more optimistic in their assessment in countries such as 
Poland (36 %), Cyprus or the Czech Republic (37 % each), Finland (45 %) or Sweden (49 %). 

59  

SBA Fact Sheets 2010/2011, European Commission, DG Enterprise & Industry,     
http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/index_en.htm#h2-
2 

34 

 
 
                                                 
3.4.2  Policy measures to promote entrepreneurship  

Many  Member  States  have  made  substantial  progress  over  the  last  years  in  promoting  the 
sense of initiative and entrepreneurship60. Some have introduced programmes aimed at raising 
awareness particularly among young people but also among adults by integrating the subject 
into  school  and  university  curricula  as  well  as  by  organising  targeted  awareness-raising 
projects.  

However,  Member  States  have  made  variable  progress  in  facilitating  entrepreneurship 
education.  Some  countries  (e.g.  Belgium,  Denmark,  Finland,  Lithuania,  the  Netherlands, 
Portugal, Sweden, the United Kingdom) have set up strategies dedicated to entrepreneurship 
education  while  others  are  planning  to  do  so  (e.g.  Austria,  Estonia,  Ireland,  Malta,  Poland, 
Slovenia and Spain).61 

The  majority  of  Member  States  has  launched  initiatives  aimed  particularly  to  increase  the 
share  of  female  entrepreneurs,  for  example  by  supporting  female  entrepreneurship 
ambassadors and networks of  women entrepreneurs. A number of Member States have also 
intensified support dedicated to entrepreneurship among migrants and ethnic minorities (e.g. 
Belgium  and  Denmark).  Belgium  has  been  particularly  active  in  promoting  entrepreneurial 
activity after having fallen considerably behind the EU average in this field. Examples include 
projects  to  enhance  entrepreneurial  education,  support  for  the  temporary  replacement  of 
entrepreneurs, the introduction of a platform to facilitate business transfers, the introduction 
of a specific company statute for business starters etc. 

Finally, in order to stimulate the creation of micro and small enterprises, several governments 
have  also  permanently  reduced  or  abolished  the  minimum  capital  requirements  to  set  up  a 
company (e.g. Belgium, Estonia, Germany, Netherlands, Latvia, Luxembourg). In France, the 
Independent Contractor Limited Liability Statute was adopted in January 2011, which allows 
individual entrepreneurs who own or who are starting a business in any sector of activity to 
separate  the  business  assets  from  their  personal  assets  regardless  of  the  turnover,  and  thus 
ensure the protection of any personal assets.  

3.4.3  Challenges faced by SMEs  

SMEs  perform  a  critical  role  in  the  European  economy.  Despite  their  small  individual  size, 
they are the most important source of employment in the EU. Some 23 million SMEs provide 
about  90 million  jobs  (or  67 %)  within  the  private  sector  in  the  EU,  thereof  about  30 % 
deriving  from  micro  enterprises,  20 %  from  small  enterprises  and  17 %  from  medium-sized 
enterprises. Until 2008, the number of jobs in SMEs increased by 1.9 % annually, while the 
number  of  jobs  in  large  enterprises  increased  by  0.8 %  annually.  Moreover,  among  high-
growth firms, as measured by employment expansion rates, small firms exhibit higher net job 
creation rates than larger ones. 

60  

61  

Progress towards the Lisbon objectives in Education and Training. Analysis of implementation at the  
European and national levels. European Commission, 2009, pp. 66 
http://ec.europa.eu/education/lifelong-learning-policy/doc/joint10/sec1598_en.pdf  
‘Towards Greater Cooperation and Coherence in Entrepreneurship Education, Report and Evaluation of 
the Pilot Action High Level Reflection Panels on Entrepreneurship Education initiated by DG 
Enterprise and Industry and DG Education and Culture’, A report by ECOTEC, 2010. Available at 
http://ec.europa.eu/enterprise/policies/sme/promoting-entrepreneurship/education-training-
entrepreneurship/reflection-panels/files/entr_education_panel_en.pdf 

35 

 
                                                 
SMEs account for nearly 59 % of the value added produced in the EU and they are also an 
important driver for innovation and economic growth. However, due to their smaller size and 
limited  resources,  SMEs  face  a  number  of  particular  challenges  which  can  have  a  negative 
impact on their profitability. FIGURE 14 provides an overview of the most pressing problems 
reported by SMEs. 

FIGURE 14: The most pressing problem faced by euro area SMEs (percentage of respondents) 

Source: ECB, April 2011. 

While some of the problems faced by SMEs are due to general market developments such as 
increasing  competition  and  finding  customers,  which  are  beyond  the  scope  of  direct  public 
intervention, other problems such as access to finance or the complexity of regulation can and 
should be addressed by EU and national authorities. Addressing these challenges will improve 
the growth prospects of all enterprises, whether industry, services or socially oriented. As it is 
the second most pressing problem, the issue of access to finance is explored in more detail in 
the following section. 

3.4.4  Access to finance 

Access to finance has become an important challenge for many SMEs since the beginning of 
the  financial  and  economic  crisis,  as  SMEs  have  been  particularly  affected  by  tightening 
credit  conditions.  As  a  response  to  the  financial  and  economic  crisis,  most  Member  States 
have adopted measures to enhance SMEs’ access to finance, especially bank lending, through 
advantageous  subordinated  loans,  loan  guarantee  schemes  or  microcredit  programmes.62 
Member  States  also  increasingly  use  parts  of  their  EU  Structural  Funds  to  support  SMEs' 
access to finance, including through financial instruments available under the 'Joint European 
Resources  for  Micro  to  Medium  Enterprises'  (JEREMIE)  managed  by  the  European 
Investment  Fund.  However,  the  use  of  financial  instruments  for  SMEs  could  be  further 
intensified,  including  in  particular  in  the  areas  of  innovation,  business  modernisation  and 
energy efficiency.  

With the gradual economic recovery, there have been signs of improvement compared to the 
previous  year,  when  the  effects  of  the  crisis  were  still  felt  acutely  and  –  with  very  few 
exceptions – conditions for bank loans to businesses remained tight. The following chart gives 
an overview of the significant decline in new corporate loans below and above EUR 1 million 
during the period 2004 – 2011 in the euro area. 

62  

Review of the Small Business Act for Europe, COM(2011)78, 23.2.2011, 
http://ec.europa.eu/enterprise/policies/sme/small-business-act/index_en.htm 

36 

 
 
 
 
                                                 
FIGURE 15: Change in new loans to firms  

Up to EUR1m

Over EUR1m

40

30

20

10

0

-10

-20

-30

-40

r
a
M
4
0
0
2

l

u
J
4
0
0
2

v
o
N
4
0
0
2

r
a
M
5
0
0
2

l

u
J
5
0
0
2

v
o
N
5
0
0
2

r
a
M
6
0
0
2

l

u
J
6
0
0
2

v
o
N
6
0
0
2

r
a
M
7
0
0
2

l

u
J
7
0
0
2

v
o
N
7
0
0
2

r
a
M
8
0
0
2

l

u
J
8
0
0
2

v
o
N
8
0
0
2

r
a
M
9
0
0
2

l

u
J
9
0
0
2

v
o
N
9
0
0
2

r
a
M
0
1
0
2

l

u
J
0
1
0
2

v
o
N
0
1
0
2

r
a
M
1
1
0
2

l

u
J
1
1
0
2

Note: Year on year change; data up to July 2011. Source: ECB 

The results of the latest ECB-Commission survey on access to finance of SMEs63 indicate that 
access  to  external  financing  –  and  in  particular  bank  loans  –  continued  to  improve,  albeit 
moderately.  However,  there  is  considerable  variance  across  the  EU.  SMEs  in  Spain,  for 
example, have continued to report significantly lower success rates when applying for a bank 
loan  (about  50 %,  compared  to  66 %  in  the  euro  area).  By  contrast,  the  success  rate  of 
German firms has increased substantially (from 69 % in the previous survey to 79 %). SMEs 
in Germany and Italy are generally expecting the availability of bank loans to improve, which 
is not the case in Spain or France. Despite improvements in several Member States, access to 
finance therefore remains an important obstacle for SMEs in many countries.  

Moreover, SMEs still face more difficult financing conditions than large enterprises. 16 % of 
SMEs  identified  access  to  finances  as  their  most  pressing  problem  according  to  the  ECB-
Commission  survey  (FIGURE  14).  By  contrast,  access  to  finance  is  considered  as  the  most 
pressing issue by only 10 % of large enterprises. In the second half of 2010, SMEs assessed 
the availability of external financing still negatively, but the situation had improved since the 
first half of 2010. By contrast, large enterprises generally reported positive developments in 
the  availability  of  external  financing.  About  one  quarter  of  SMEs  applied  for  a  bank  loan 
between September 2010 and February 2011. In 63 % of the cases, the firms received the full 
amount they had applied for. The rejection rate for SMEs remained essentially unchanged at 
11 %, compared with  about 2 % for  large enterprises.  More  than  half  of  the  SMEs  reported 
increases  in  interest  rates  charged  and  other  costs  of  financing  (charges,  fees  and 
commissions) while there was a small improvement in the requirements related to collateral 
and loan covenants.  

In  line  with  the  recovery  in  economic  activity,  SMEs  increasingly  need  external  sources  of 
finance. Increases have been noted in particular regarding overdrafts and use of existing credit 
lines, trade credit, as well as leasing, hire-purchase or factoring (FIGURE 16). 

63  

ECB-Commission survey on the access to finance of SMEs,     
http://www.ecb.int/stats/money/surveys/sme/html/index.en.html  

37 

 
 
                                                 
FIGURE 16: Sources of external financing of euro area SMEs 

Note: Over the preceding six months; percentage of respondents.  
Source: ECB, Survey on the access to finance of SMEs in the euro area, April 2011. 

Looking forward, SMEs expected the availability of internal funds to slowly improve, while 
the  availability  and  conditions  for  bank  loans  and  trade  credit  was  still  expected  to  further 
deteriorate.  Larger  enterprises,  on  the  other  hand,  were  clearly  more  positive  in  their 
assessment and expected an improvement for all sources of finance.64  

The results of the SME survey also correspond with the latest ECB Bank Lending Survey65, 
which  confirmed  a  further  slight  tightening  for loans to SMEs and a  continued  widening of 
margins  on  loans  for  SMEs  compared  to  large  enterprises.  Looking  forward,  the  Euro  area 
banks  expected  a  further  moderate  tightening  of  their  credit  conditions  in  2011,  primarily 
affecting  long-term  loans.  They  also  expected  a  moderate  increase  in  demand  for  corporate 
loans, relating to both SMEs and large firms. 

The  average  payment  time  also  has  an  important  impact  on  the  financing  needs  of  SMEs. 
According to the 2011 European Payment Index, about 25 % of all bankruptcies in Europe are 
due  to  late  or  non-payment  of  outstanding  invoices,  and  28 %  of  companies  stated  that  late 
payments posed a threat to their survival. Moreover, almost half considered that late payments 
were  detrimental  to  their  growth66.  In  2010,  the  average  payment  delay  for  firms  in  the  EU 
was 54 days. However, the differences across Member States are significant. Countries which 
considerably exceeded the EU average in 2010 included Cyprus (73 days), Portugal (97 days), 
Spain  (104  days),  Greece  (107  days)  and  Latvia  (117  days).  By  contrast,  the  situation  was 
better in countries like Finland (23 days), Estonia (26 days), Germany (32 days), Ireland (33 
days) or Sweden (33 days) for example.67 Regarding the public sector, not much progress has 
been made to further reduce late payments and in some Member States, the situation has even 
deteriorated  (including  Czech  Republic,  Greece,  Cyprus,  Hungary,  Austria  and  Slovakia). 
FIGURE 17 illustrates the average payment time in the public sector. 

64  
65  
66  
67  

ECB-Commission survey on the access to finance of SMEs in the euro area, April 2011 
ECB Bank Lending Survey, July 2011, http://www.ecb.int/stats/money/surveys/lend/html/index.en.html 
European Payment Index 2011, Intrum Justitia 
SBA Fact Sheets 2010/2011, European Commission, DG Enterprise & Industry,   
http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/index_en.htm  

38 

 
 
 
 
                                                 
FIGURE 17: Payment times for public authorities  

2010

2011

Unweighted average 2010

Unweighted average 2011

180

160

140

120

100

80

60

40

20

0

BE

CZ

DK

DE

EE

IE

EL

ES

FR

IT

CY

LV

LT

HU

NL

AT

PL

PT

SK

FI

SE

UK

Source: European Payment Index 2011, Intrum Justitia. 

By far the largest scope for improvement can be found in countries such as Italy (180 days), 
Greece  (168  days),  Spain  (153  days)  and  Portugal  (139  days).  The  late  payment  directive 
adopted  by  the  Council  in  January  2011  requires  payments  by  public  authorities  to  be 
processed within 30 days. Meeting this objective will be a challenge for many Member States, 
but  at  the  same  time,  a  further  reduction  in  late  payments  by  public  authorities  could 
contribute significantly to easing the financing needs of enterprises and in particular those of 
SME. 

3.4.5 

Internationalisation of SMEs 

According  to  a  recent  study  on  opportunities  for  the  internationalisation  of  SMEs68,  about 
29 %  of  SMEs  in  the  EU 27  are  engaged  in  importing  and  about  25 %  are  engaged  in 
exporting,  both  referring  to  EU  and  non-EU  markets.  Hence,  the  business  activities  of  the 
bulk of SMEs are concentrated on their domestic market. Moreover, the survey indicates that 
only 2 % are investing abroad and 7 % have technical cooperation with partners abroad. From 
those SMEs which are involved in international business activities, about 46 % are active only 
within  Europe,  45 %  are  active  both  within  and  beyond  Europe  and  9 %  are  active  only 
outside  the  EU.  About  23 %  of  SMEs  which  are  active  abroad  are  engaged  in  key  target 
markets including Brazil, China, India, Japan, Russia, South Korea and Ukraine. On average, 
however, internationalised European SMEs still generate only a relatively small percentage of 
their  total  turnover  from  international  business  activities  (less  than  20 %  from  other  EU 
countries and about 10 % from third markets). 

According to the study, payment risks, difficult bureaucratic procedures and lack of financing 
have been identified as the most important barriers to international business activities beyond 
the Internal Market. 

68  

“Opportunities for the internationalisation of SMEs”, forthcoming, EIM Business & Policy Research 

39 

 
 
 
                                                 
Most  Member  States  support  the  internationalisation  of  SMEs,  both  financially  but  also  by 
providing  information  and  support  on  market  access  and  regulation  or  the  organisation  of 
trade  fairs.  During  the  crisis,  many  Member  States  intensified  their  efforts  in  this  field, 
particularly  regarding  export  credit,  export  insurance  and  bank  loan  guarantees.  Interesting 
recent measures in this field include for example the launch of a mentoring scheme, whereby 
big  companies  support  the  internationalisation  of  SMEs,  which  is  currently  being  piloted  in 
France.  Another  interesting  example  is  Estonia,  which  has  launched  a  training  program  for 
potential export sales manager, which can benefit from training over a period of one year and 
which are matched with companies which intend to expand their international activities. 

The study provides some surprising results regarding the awareness and the effectiveness of 
public support measures in this field. Only about 27 % of internationalised SMEs stated they 
were sufficiently aware of existing public support measures and only 7 % stated they actually 
used public support for their international business activities. This figure was slightly higher 
among  the  subgroup  of  enterprises  with  business  activities  in  non-EU  countries  (12 %). 
Nevertheless,  among  those  SMEs  which  used  public  support  measures  to  develop  their 
international business activities, nearly 60 % were quite positive about the effects (3 % stated 
the  support  increased  their  international  business  activities,  9 %  reported  they  started  their 
international business activities earlier because of the support, and 12 % stated they would not 
have engaged in international business activities without the public support). This discrepancy 
might  be  explained  to  some  extent  by  the  fact  that  the  majority  of  entrepreneurs  (60 %) 
consider  it  too  difficult  to  get  an  overview  of  existing  support  for  business  activities  in 
markets outside the EU. At the same time, an equally large share of  SMEs thought that the 
existing support measures were not easily accessible.  

In view of the general positive  assessment by those enterprises which  use public  support to 
internationalise their business, the results seem to suggest that the awareness and accessibility 
of  public  support  in  this  field  could  be  further  improved.  The  Commission  will  present  in 
autumn  2011  a  Communication  for  a  coherent  approach  on  supporting  EU  SMEs  in  their 
attempts to develop business internationally. 

3.4.6 

Implementing the Small Business Act (SBA) 

The Small Business Act for Europe (SBA), adopted by the Heads of State and Government in 
2008 and reviewed in 2011, recognises the important role of SMEs in the economy and aims 
to  promote  SMEs'  growth  by  helping  them  tackle  barriers  that  hamper  their  further 
development.  The  SBA  consists  of  ten  principles  which  should  guide  the  conception  and 
implementation of policies both at EU and national level. The aim is to create a level playing 
field for SMEs throughout the EU and to improve the administrative and legal environment so 
that these enterprises can realise their full potential. 

The  results  of  the  SBA  Performance  Review,  published  in  February  201169,  recognise  that 
considerable  progress  has  been  made  in  a  number  of  areas.  For  example,  a  recent  survey 
suggests  that  SMEs  experience  fewer  administrative  burdens  when  accessing  public 
procurement and have better opportunities for joint bidding70. Another example includes the 
new  SME  Centre  in  China  launched  in  November  2010,  which  helps  SMEs  accessing  the 
Chinese  markets.  As  part  of  the  SBA  Review,  the  Commission  invited  Member  States  to 

69  

70  

Review of the Small Business Act for Europe, COM(2011)78, 23.2.2011, 
http://ec.europa.eu/enterprise/policies/sme/small-business-act/index_en.htm  
http://ec.europa.eu/enterprise/policies/sme/business-environment/public-procurement/index_en.htm  

40 

 
                                                 
nominate a national SME Envoy to complement the role of the European Commission's SME 
Envoy.  Together  with  representatives  of  SME  business  organisations,  the  Network  of  SME 
Envoys will make up an SBA advisory group.  

Considerable progress has also been made over the last five years to reduce the average time 
and cost required to start a business (FIGURE 18).  

FIGURE 18: Time needed to start a business (days)  

2005

2010

Unweighted average 2005

Unweighted average 2010

70

60

50

40

30

20

10

0

BE

BG

CZ

DK

DE

EE

IE

EL

ES

FR

IT

CY

LV

LT

LU

HU

NL

AT

PL

PT

RO

SI

SK

FI

SE

UK

Source: World Bank, Doing Business, 2011. 

The average time to start-up a company was 15 days in 2010 according to the World Bank.71 
Recent good examples include Italy, where since April 2010 it has been possible to register a 
company in one day. The Companies Register in Italy submits the data also to other relevant 
bodies  like  tax  and  social  security  offices.  Another  good  example  is  Greece,  which  has 
launched  a  new  Commercial  Electronic  General  Registry.  This  allows  the  registering  of  a 
business in one day and considerably reducing the related cost. 

Despite noticeable progress in a number of areas, the results of the SBA Performance Review, 
published  in  February  2011  also  point  out  that  the  approach  taken  and  the  results  achieved 
vary  considerably  across  Member  States.  For  example,  while  most  Member  States  have 
adopted national targets for reducing administrative burden, not all of them have effectively 
reduced it.  

Several  Member  States  have  already  integrated  an  SME  Test  into  their  national  decision-
making approach (including Austria, Denmark, France, Finland, Germany, Hungary, Latvia, 
Luxembourg, Netherlands, Romania, Sweden and the United Kingdom). Malta, Slovenia and 
the Slovak Republic are in the process of setting it up. Among those that apply the SME test 
there  are,  however,  disparities  in  practical  terms.  Only  half  of  those  Member  States 
systematically  consult  SME  stakeholders  as  part  of  the  SME  test.  Most  of  these  countries 

71  

World Bank, Doing Business 2011; see http://www.doingbusiness.org  

41 

 
 
 
                                                 
target a mix of SME organisations, individual SMEs and public authorities working on SME-
related issues in their consultations. 

Some Member States have started to promote the European Code of Best Practices in order to 
facilitate SMEs’ access to public procurement (Austria, Cyprus, France, Germany, Hungary, 
Ireland,  Lithuania,  Poland,  Portugal,  Sweden  and  the  United  Kingdom).  In  the  majority  of 
Member  States,  SMEs’  access  to  public  procurement  is  not  subject  to  a  specific  strategy  or 
policy. The most widespread SME-friendly measures in this area remain cutting tenders into 
lots,  whenever  possible,  and  facilitating  access  to  information  through  centralised  websites, 
interactive web pages, and other e-procurement developments. 

Finally, there is still scope to further shorten the time needed to wind up a business in case of 
non-fraudulent bankruptcy. So far only five Member States (Belgium, Finland, Ireland, Spain 
and the UK) comply with the recommendation to complete all legal procedures to wind up a 
business in the case of non-fraudulent bankruptcy within a year.72 

72  

Review of the Small Business Act for Europe, COM(2011)78, 23.2.2011, 
http://ec.europa.eu/enterprise/policies/sme/small-business-act/index_en.htm  

42 

 
                                                 
4  COUNTRY CHAPTERS 

4.1  Belgium 

Belgium

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked  (EU27=100; 2009)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2009)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

N.A.

N.A.

N.A.

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

43 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Belgium (2009) 

Refined petroleum products

Paper products; publishing and printing
Wood and wood products

Textiles and textile products

Leather and leather products

Chemicals, chemical products

Food products

Rubber and plastic products

Other non-metallic mineral products

Manufacturing n.e.c.

Transport equipment

Electrical and optical equipment

Basic metals and fabricated metal products

Machinery and equipment n.e.c.

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.1.1 

Introduction 

Trade and industry specialisation 

Most prominent sectors in Belgium 

Manufacturing  contributes  14 %  to  Belgium's  total 
value  added  against  14.9 %  for  the  EU  in  average 
(2009).  At  the  detailed  manufacturing  industry 
level,  Belgium  is  specialised  in  capital-intensive 
industries, such as iron processing, basic chemicals 
and  man-made  fibres.  At  the  more  aggregated 
sector  level,  Belgium  is  specialised  in  sectors 
featuring  medium-high  educational  and  innovation 
intensity,  such  as  chemicals,  coke  and  refined 
petroleum, but also textiles.  

Belgium’s  sectoral  R&D  and  export  quality 
performance  are  positive:  R&D  intensity  is  above 
the  EU  average  given  its  industrial  structure.  The 
shares  in  the  low  price  segments  of  exports  are 
below  the  EU  average,  in  high  price  segments 
above  the  EU  average,  indicating  that  Belgium  is 
high up on the quality ladder. 

44 

Highest relative value added (2007)
 Coke, refined petroleum and nuclear fuel
 Chemicals and chemical products
 Textiles and textile products

Change in the relative value added (1999/2007)
Increasing specialisation
 Coke, refined petroleum and nuclear fuel
 Water transport
 Tobacco products
Decreasing specialisation
 Electricity and gas
 Inland transport
 Recycling

Structural change 

In  terms  of  change,  Belgium  has  considerably 
increased its specialisation in higher quality market 
segments.  It  has 
its  sectoral  R&D 
increased 
intensity  and  its  relative  share  of  value  added  in 
high education intensive sectors such as computers 
and business services, and the share of technology-
as 
in 
driven 

industries 

exports, 

such 

 
 
 
 
 
 
 
 
 
pharmaceuticals  and  pesticides.  It  has  decreased 
even further its share of labour intensive industries. 
Manufacturing 
has 
recovered relatively fast from the crisis, reaching in 
March 2011 its previous cyclical peak.  

in  Belgium 

production 

increased 

the  Euro  area 

Nominal  unit 
in 
labour  costs  have 
Belgium by 23% between 2000 and 2010, which is 
slightly  higher  than  the  average  increase  in  the 
(14%  and  20% 
EU27  and 
respectively).  Estimated  labour  productivity  per 
hour  worked  has  declined  over  the  last  decade, 
indicating  a  gradual  loss  in  productivity  as  well  as 
cost  and  price  competitiveness.  However,  labour 
productivity  is  still  about  34  percentage  points 
above  the  EU27  average  and  about  20  percentage 
points above the Euro area average. 

4.1.2 

Towards an innovative industry 

According  to  the  Innovation  Union  Scoreboard 
2010,  Belgium  is  an  innovation  follower.  It  has  a 
low share of new science and technology graduates 
and  a  low  share  of  high-tech  exports  in  total 
exports. 

Business R&D is highly concentrated in a few large 
companies  and  multinationals.  A  large  majority  of 
these  firms  are  in  the  chemicals,  pharmaceuticals 
and  biotech  sectors, 
thus  giving  Belgium  a 
specialist  profile  for  these  sectors.  The  increasing 
importance of the service sector, growing at a faster 
rate than manufacturing, would also justify specific 
measures  to  improve  the  knowledge  intensity  of 
this sector over time. 

Increased tax credits for R&D have been introduced 
and  there  are  also  plans  to  provide  suitable 
incentives  for  setting  up  and  developing  new 
science-base  companies  spinning  out  of  large 
enterprises  or 
research 
spinning  off 
institutions is foreseen. 

from 

All  Belgian  Regions/Communities  are  drafting 
innovation  plans  covering  all  major 
strategic 
elements  of  an  innovation  strategy.  Flanders  is 
planning  a  new  Innovation  Pact,  while  Wallonia, 
the  Brussels  Capital  Region  and  the  French-
speaking  Community  are  contemplating  a  joint 
at 
research 
Regional/Community 
federal 
research  covers  25-30 %  of  total  public  research 
to  space  research  (a 
expenditure  mainly  due 
remaining federal competence). 

strategy.  Most 
level, 

actions 
although 

are 

In  the  Walloon  Region  the  focus  has  been  on  the 
implementation  of  the  so-called  "Marshall  plan" 
with  a  stronger  focus  on  competitiveness  clusters 
(les  pôles  de  compétitivité,  a  cluster  approach). 
Various  initiatives  are  developed  in  order  to 

to 

the 

clusters 

companies 

regional,  national  and 
up 
opening 
regions, 

and 
competitiveness 
strengthen 
business networks: creation of a 6th cluster focused 
on  environmental  technologies  (February  2011), 
higher  involvement  of  SMEs,  closer  collaboration 
international 
between 
from 
clusters, 
neighbouring 
for 
sustainable  development  projects,  boosting  the 
funding  and  the  training  component  and  fostering 
the  development  of  spin-off  (specific  R&D  grants, 
support  from  public  equity  funds,  financing  of 
experts). 
the 
competitiveness clusters policy is to strengthen the 
specialisation  of  the  regional  economy  in  key 
sectors.  In  this  regard  it  can  be  considered  as  a 
“smart specialisation” strategy. 

launching  a  call 

objective 

overall 

The 

of 

In  2010,  more  focus  was  placed  on  fostering 
the  so-called 
innovation  and  creativity  with 
“Creative Wallonia” Action Plan. Some innovative 
measures were implemented within this framework 
such  as  grants  to  support  commercialisation  of 
prototypes  developed  by  SMEs  or  allowing  SMEs 
to undertake an audit of their innovation potential. 

The "Marshall plan" has also a strong focus on the 
implementation  of  a  new  culture  intending  to 
increase  public  private  partnerships.  European 
Structural  Funds  are  being  substantially  used  in 
establishing  partnerships  and  networks  between 
large  firms  and  SMEs  and  financing  innovation  in 
SMEs. 

for  green 

strategy  mainly 

In  Flanders,  cluster  policy  is  also  part  of  the 
innovation 
and 
sustainable  development.  Societal  challenges  are 
the  main  drivers,  leading  to  a  shift  towards  new 
fields.  The  Science  and  Technology  Council 
identified  six  priority  areas: 
regulation  and 
education  in  general;  framework  conditions  for 
private  R&D;  a  model  for  mobilising  industry 
towards  the  factory  of  the  future;  the  role  of 
infrastructures  in  supporting  intelligent  networks; 
the  role  of  industrial  innovation  with  risk  funding; 
and the role of human capital and social innovation. 
In  the  scope  of  networking  and  facilitating  cluster 
formation, there is the Flemish Innovation Network 
(VIN),  whose  main  task  is  to  stimulate  knowledge 
cooperation  between 
transfer 
companies  and  knowledge  institutes.  As  difficult 
access to capital is often a bottleneck for innovative 
entrepreneurship, 
the  governmental  authorities 
provide  some  instruments  in  support  of  innovation 
initiatives,  such  as  Vinnof,  PMV  Innovation 
Mezzanine,  ARKimedes  (Activating  Risk  capital) 
and  win-win  loans.  In  the  future,  Flanders  seeks  a 
higher  international  profile  and  wishes  to  position 
itself as an innovative region.  

intensify 

and 

In  the  Brussels  Capital  Region,  strategic  platforms 

45 

 
and 

information 

are  being  or  will  be  launched  in  three  innovative 
sectors: 
communication 
technologies  (ICT)  in  2010,  the  life  sciences  in 
2011  and  the  environment  in  2012.  It  is  worth 
mentioning  that  about  90 %  of  the  research  is 
concentrated  on  ICT  and  ICT  services.  The 
government  foresees  greater  assistance  to  smaller 
innovative  companies  and  more  resources  for 
European and international cooperation. 

4.1.3 

Towards a sustainable industry 

The higher energy intensity in the Belgian industry 
and  energy  sector  is  to  some  extent  explained  by 
the industrial structure of the country. Nevertheless 
it  represents  a  potential  disadvantage  due 
to 
overexposure to energy and CO² price volatility. 

On the energy and climate fronts, key measures of 
Belgium  stem  directly  from  the  implementation  of 
the  Energy  &  Climate  package.  Some  other 
measures  that  will  be  applied  by  the  federal 
authorities  are  an  adjustment  to  the  tax  cuts  for 
energy saving investments for achieving maximum 
efficiency,  and  specific  integrated  procedures  for 
obtaining  permits  for  new  energy  production 
transmission 
facilities  and  electricity  and  gas 
systems  that  could  provide  energy  savings  in  the 
case  of  generation  and  transmission.  In  2003, 
Belgium  adopted  a  law  that  provides  for  a  gradual 
nuclear phase-out between 2015 and 2025. 

There  is  a  wide  variety  of  actions  put  forward  by 
the three Belgian regions. A main policy orientation 
of Flanders concerns energy efficiency in buildings: 
the  Flanders  region  tightened  up  and  stringent 
energy standards for new construction and imposed 
a  minimum  share  of  renewable  energy  for  new 
buildings.  

Flanders  also  focuses  on green  growth. In order  to 
speed  up 
its  greening  process,  Flanders  has 
developed  a  plan  to  establish  a  system  of  green 
guarantees  and  a  green  investment  fund.  Flanders 
also  promotes  green  jobs.  In  the  scope  of  the 
Employment and Investment plan (WIP) the VDAB 
(Flemish  Service  for  Vocational  Training  and 
Employment)  organises 
training  programmes 
through  outsourcing  for  vulnerable  groups.  VDAB 
further  consults  with 
the  sectors,  employer 
organisations  and  companies  about  training  paths 
that  can  be  arranged  within  the  provided  WIP 
funds.  Further  to  the  above  mentioned  priority 
measures, 
‘20-20-20’ 
realisation  of 
objectives  will  also  be  supported  by  sustainable 
measures in the area of mobility and transport (e.g. 
e-mobility;  mobility  plan  Flanders;  general  reform 
of  traffic  taxes),  in  terms  of  governmental  actions 
(sustainable  living  and  building;  Flemish  action 
plan  on  sustainable  public  procurement)  and  in 

the 

the 

terms  of  agricultural  production  (attention  will 
focus  on  self-sufficiency  and  competitive  strength 
of agricultural businesses).  

the 

the 

organising 

construction 

Key measures of the Walloon Region are applicable 
both  to  the  energy  performance  of  buildings, 
support for controlling energy consumption (of the 
corporate sector through second generation sectoral 
agreements,  and  to  consumers  through  continuing 
actions  concerning  social  energy  guidance),  and 
sensibilisation  via  the  public  social  assistance 
centres.  An  overall  objective  of 
first 
Employment-Environment  Alliance,  part  of  the 
Marshall 2 Green Plan, is to improve the quality of 
Walloon  buildings  and  their  energy  performance, 
while 
industry 
according to a sustainable approach and increasing 
the  level  of  employment  in  that  industry.  The  role 
of the public authorities as an engine for sustainable 
development  has  been  strengthened.  In  the  case  of 
industrial  policy  and  innovation,  an  environmental 
technologies  competitiveness  cluster  has  been 
created  and 
is 
reflected  in  all  competitiveness  clusters.  New 
“sustainable  innovation  grants  were  also  launched 
to help SME to develop eco-innovative products or 
services  and  a  strong  focus  has  been  put  on 
supporting the development of Walloon expertise in 
the  area  of  sustainable  vehicles,  especially  electric 
cars.  Finally,  a  research  programme  on  energy 
efficiency  and 
renewable  energies  has  been 
launched.  

the  environmental  dimension 

for 

the  Brussels 

Energy efficiency in buildings is also a main policy 
orientation 
region.  An 
Employment-Environment  Alliance  is  seeking  to 
ensure  the  availability  in  the  construction  industry 
of  a  series  of  local  companies  capable  of  meeting 
the  challenge  set  by  the  new  energy  requirements 
for  buildings.  The  Iris2  Plan  aims  to  reduce  the 
traffic  load  by  20 %  in  2018  relative  to  2001, 
thereby  helping  to  cut  greenhouse  gas  emissions 
and  other  pollutants  generated  by  the  transport 
sector. 

4.1.4 

The business environment  

legal 

Belgium  presents  a  mixed  picture  regarding  the 
business environment as negative perceptions about 
and 
regulatory 
the 
administrative 
good 
performance on specific issues such as regulation of 
business start-up.  

coexist  with 

framework 

burden 

and 

Belgium  scores  above  the  EU  average  concerning 
the  availability  of  high-speed  broadband  lines. 
However,  prices  for  many  goods  and  services  are 
generally  higher  than  in  other  Member  States, 
reflecting weak competitive pressures, especially in 
the retail sector and network industries.  

46 

 
to  reduce 

in  some  areas  and 

In  the  retail  sector,  barriers  to  entry  have  been 
reduced  but  some  operational  restrictions  remain, 
especially  in  terms  of  specific  (zoning)  regulation 
of large outlets and the regulation of shop opening 
hours.  While  measures  to  make  regulations  less 
the 
stringent 
administrative  burdens  involved  in  opening  new 
shops,  have  been  taken  in  the  retail  sector  -  under 
the  new  law  on  "Market  Practices  and  Consumer 
Protection"  (WMPC,  2010)  and  the  "Ikea  law" 
(2004)  -  Belgium  still  has  economic  and  social 
regulations  that  aim  to  allow  fair  competition 
between  all 
types  of  shops.  A 
recommendation  on  this  subject  has  been  made  by 
the Council in its Council Recommendations of 12 
July 2011 (2011/C 209/01). 

forms  and 

Despite  liberalisation,  prices  in  many  network 
sectors  (electricity,  gas  and  telecom)  are  higher  in 
Belgium  than  in  other  Member  States.  A  common 
competition  problem  in  the  network  sectors  in 
Belgium is the strong position of the incumbent and 
the  high  entry  barriers  compared  to  other  Member 
States,  meaning  that  former  monopolists  in  these 
sectors  can  still  reap  higher  profits  by  charging 
higher  prices  than  a  competitive  market  would 
allow. 

Belgium's  business  environment 
is 
characterised by an administrative burden resulting 
from  procedures  and  administrative  obligations  at 
regional and local levels.  

in  general 

landscape 

the  different 

Specifically, 
in 
the  administrative 
Flanders  has  a  multitude  of  governance  levels  and 
rules  and  regulations.  The  result  is  insufficient 
levels  or 
synchronisation  of 
departments  of 
administration. 
the  Flemish 
Administrative simplification and faster delivery of 
permits  can  help  create  the  conditions  for  a  good 
long 
business  climate.  The 
term  programme 
‘Decisive  Governance’ 
includes  four  strategic 
objectives  and  twelve  key  projects  to  enhance  the 
efficiency  and  effectiveness  of 
the  Flemish 
to  a  more  efficient 
authorities,  and  commits 
government  administration  vis-à-vis  the  business 
sector (e.g. the establishment of a one stop shop for 
entrepreneurs  in  Flanders,  the  further  development 
of e-procurement, etc.). 

The  Walloon  Region  established 
the  Plan 
'Ensemble  Simplifions'  (Let's  Simplify  Together 
Plan)  2010-2014  and  the Industry Action  Plan:  the 
aim  is  to  minimise  administrative  complexity  and 
reduce  administrative  burden  affecting  all  users  of 
public  services,  particularly  companies,  and  the 
public  services  themselves.  Adopted  in  February 
2010,  the  Plan  'Ensemble  Simplifions'  will  be 
applied during the 2010-2014 period as part of the 
European  objectives  of  achieving  a  25 %  cut  in 

in 
administrative  burden  by  2012.  Adopted 
September 2010, the Industry Action Plan seeks to 
identify  industry's  general  demands  and  rapidly 
eliminate  specific  obstacles  restricting  industrial 
activities.  

In November 2009 the Government of the Brussels 
Capital  Region  has  approved  the  Brussels  plan  for 
administrative  burden.  The  goal  is  to  reduce  the 
administrative  burden by  25%  by  the  end of 2012. 
To succeed in this goal the government approved a 
first list of 11 projects. While some of the projects 
aim  to  prevent  administrative  burden  in  future 
legislation,  some  other  projects  aim  to  reduce 
existing  administrative  burden  through  renewing 
existing  processes.  The 
is  mainly  on 
businesses,  for  example  an  E-procurement  system 
introduced.  Furthermore, 
has 
screening  existing 
consultants 
economic legislation which will lead to proposals to 
reduce administrative burden. 

already  been 

currently 

focus 

are 

4.1.5 

Entrepreneurship and SME policy  

and 

enterprises 

The SME sector in Belgium has a similar structure 
as  that  of  the  EU:  the  percentages  of  micro,  small 
and  medium-sized 
their 
contributions  to  employment  and  value  added  are 
on  a  par  with  the  European  averages.  Concerning 
general  SME  policy, 
the  federal  government 
adopted  in  2008  an  action  plan  inspired  by  the 
European  "Small  Business  Act"  (SBA)  comprising 
40 measures. An "SME test" is also in preparation. 
Most  of 
initiated  or 
implemented;  however  some  difficulties  still  exist, 
such  as  for  example  the  long  payment  delays  by 
public  authorities  to  enterprises.  Wallonia  also 
intends  to  launch  before  end  2011  a  regional 
framework  to  strengthen  the  SBA  implementation 
at  regional  level.  This  approach  will  complement 
the “Pacte de soutien à l’initiative” (part of the Plan 
Marshall 2.green) which is currently the framework 
for SME policy in Wallonia. 

the  actions  have  been 

Initiatives  have  been  undertaken 
to  stimulate 
entrepreneurship  in  education  (Unizo  Enterprising 
School  in  Flanders,  Boost  your  Talent  in  Brussels 
region  or  starters  grants  by  Agence  de  Stimulation 
the  Flemish 
économique  wallonne).  In  2006, 
government 
‘Ondernemend 
the  Flemish  Entrepreneurial 
Onderwijs’  plan, 
Educational Action Plan. The objective was to give 
each  child  a  sense  of  entrepreneurship  and  to  put 
any interested children on the road to starting their 
own business.  

approved 

the 

Platforms  for  mediating  business  transfers  have 
been  set  up  in  Flanders  (Unizo),  Brussels  region 
(BruTrade)  and  Wallonia  (SOWACCESS).  A 
special  tax  regime  for  succession  has  been  put  in 
place to allow smooth transfer of family businesses 
between generations. At the federal level, a Family 

47 

 
New  programmes  (some  of  them  being  financial 
engineering  instruments  co-financed  with  ERDF' 
resources)  have  been  put  in  place  to  support  and 
stimulate 
innovation  for  SMEs  by  means  of 
subordinated  low  interest  loans  for  innovative 
projects  (for  example  "Novallia"  in  Wallonia)  and 
funds  to  stimulate  the  economic  tissue  towards 
innovative  sectors  of  activity  (for  TINA  fund  in 
Flanders). 

4.1.6  Conclusion 

In  terms  of  change,  Belgium  has  increased  its 
specialisation in higher quality  market segments in 
a  few  specific sectors (e.g. pharmaceuticals)  and  it 
has  decreased  further  its  share  of  labour  intensive 
industries.  Manufacturing  production  in  Belgium 
has recovered relatively fast from the crisis notably 
as  a  result  of  the  favourable  economic  situation  in 
Germany.  The  impact  of  the  crisis  in  terms  of 
structural change was rather limited. 

in 

there 

total  exports, 

As  Belgium  has  a  low  share  of  new  science  and 
technology  graduates  and  a  low  share  of  high-tech 
exports 
is  room  for 
improvement  of  innovation  policy.  The  energy 
intensity  of  the  industry  could  also  be  improved. 
Notwithstanding  the  fact  that  the  higher  energy 
intensity  in  the  Belgian  industry  and  energy  sector 
is  to  some  extent  explained  by  the  industrial 
structure  of  the  country,  it  represents  a  potential 
disadvantage, and further action on the energy and 
climate  fronts  will  be  important  to  reduce  the 
energy  intensity  of  the  industry  and  energy  sector. 
Finally,  administrative  simplification  and  faster 
delivery  of  permits  can  help  create  the  conditions 
climate.
for 

business 

good 

a 

their  business 

Plan  to  improve  the  social  conditions/situation  has 
been  put  in  place  as  well  as  special  measures  for 
female entrepreneurs on maternity leave. A register 
for  replacing  entrepreneurs  has  been  set  up  for 
entrepreneurs  who  want  to  suspend  their  activities 
to 
temporarily  while  ensuring 
continue.  Other  measures  include  advisory  for 
young entrepreneurs and a special type of company 
statute  for  starters  (SPRL  -  Starter  -  BVBA)  with 
limited  capital  requirements  (the  limited  capital 
may  however  lead  to  difficulties  when  obtaining 
bank 
female 
entrepreneurs  from  Belgium  in  being  put  in  place. 
Some  more  measures  were  mentioned  indicating 
that this area has got wide attention.  

federal  network  of 

loans).  A 

Enterprises  welcomed  the  anti-crisis  measures  put 
in  place  at  federal  level,  such  as  easier  access  to 
finance  and  the  credit  mediator  (CeFiP  –  KeFik). 
Also 
temporary  unemployment 
(extended  for  employees)  was  very  effective  for 
companies as it allowed them to keep staff on board 
and restart business activity very quickly. 

the  system  of 

Concerning  access  to  credits,  in  particular  for 
SMEs,  federal  and  regional  governments  have 
taken measures to reinforce the capital of SMEs and 
other structural or short-term measures: for instance 
creation  of  a  credit  ombudsman  (such  as  Conciléo 
in  Wallonia),  the  export  credit  guarantee  scheme 
Belgacap,  steps  to  reduce  public  payment  delays 
and a system for cash advancements on outstanding 
payments  for  SMEs  (Casheo).  Loan  guarantee 
schemes have been put in place in cooperation with 
banks  (for  example  Microcrédit  PME  in  Wallonia, 
PMV  Flanders  or  BruStart/BruSoc  in  Brussels 
region). 

48 

 
 
4.2  Bulgaria 

Bulgaria

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

-3.9

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2006)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

N.A.

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

49 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Bulgaria (2006) 

Wood and wood products

Leather and leather products

Textiles and textile products

Paper products; publishing and printing

Refined petroleum products

Food products

Chemicals, chemical products

Rubber and plastic products

Other non-metallic mineral products

Manufacturing n.e.c.

Transport equipment

Electrical and optical equipment

Basic metals and fabricated metal products

Machinery and equipment n.e.c.

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.2.1 

Introduction 

Trade and industry specialisation 

is 

in 

in 

specialised 

capital-intensive 

Manufacturing  contributes  18.6 %  to  Bulgaria's 
total  value  added  against  14.9 %  for  the  EU  as  a 
whole. At the detailed manufacturing industry level, 
Bulgaria 
labour-intensive 
industries  (manufacture  of  knitted  and  crocheted 
articles), 
industries 
(manufacture  of  cement,  lime  and  plaster)  and  in 
marketing-driven  industries  (manufacture  of  grain 
mill  products).  In  the  top  5  industries,  mainstream 
manufacturing  industries  (such  as  the  manufacture 
of  batteries)  can  also  be  found.  At  the  more 
aggregated sector level, Bulgaria is characterised by 
strong  trade  specialisation  in  sectors  with  a  low 
intensity of innovative activity and low educational 
intensity,  such  as  wearing  apparel  and  recycling. 
The  high  share  of  high  growth  enterprises  in  the 
population  of  active  enterprises  indicates  that 
Bulgaria is catching up. 

ladder. Overall, Bulgaria is a typical member of the 
group  of  countries  featuring  relatively 
lower 
income levels and specialisation in labour-intensive 
industries. 

Most prominent sectors in Bulgaria 

Highest relative value added (2007)
 Wearing apparel, dressing and dyeing of fur
 Tobacco products
 Recycling

Change in the relative value added (1999/2007)
Increasing specialisation
 Recycling
 Wearing apparel, dressing and dyeing of fur
 Non-metallic mineral products
Decreasing specialisation
 Water transport
 Tobacco products
 Water supply

Structural change 

Bulgaria’s R&D intensity is below the EU average 
given its industrial structure. The share in low price 
segments of exports by technology driven industries 
are above the EU average, while the shares in high 
price  segments  are  below 
the  EU  average, 
indicating  an  unfavourable  position  on  the  quality 

In  terms  of  change,  Bulgaria  shows  a  different 
picture to its current position, almost the flip side. It 
has increased the relative value added share in high 
in  computers  and 
education  sectors  (such  as 
software),  and  exports 
technology-driven 
in 
industries (such as the manufacture of radio and TV 

50 

 
 
 
 
 
 
 
transmitters). However, its specialisation in labour-
intensive 
the 
manufacture of wearing apparel) has also continued 
to increase.  

industries  (such  as 

low-skill 

in 

Bulgaria has improved its export quality strongly, it 
has  increased  its  share  in  high-price  exports  and 
decreased  export  share  in  low-price  segments 
considerably. However, the sectoral R&D intensity 
has  decreased  relative  to  the  change  of  the  EU 
average;  a  positive  change 
in  sectoral  R&D 
intensity was recorded in machinery and software. 

Manufacturing  production  fell  dramatically  during 
the  crisis  (-35 %).  It  has  rebounded  moderately 
since then (8.5 %) but in April 2011 was still lower 
by  16.7 %  from  its  previous  cyclical  peak.  The 
crisis  seems 
to  have  accelerated  Bulgaria’s 
structural  change  towards  more  advanced  and 
knowledge-intensive 
industries  and  sectors,  as 
demonstrated  by  the  sizeable  gains  in  exports  by 
technology-driven  and  mainstream  manufacturing 
industries. 

Bulgaria  has  experienced  a  strong  appreciation  of 
the real effective exchange rate over the last decade 
(55%, compared to 21% in the EU27), indicating a 
loss  in  cost  and  price  competitiveness.  Here,  the 
increase 
labour  costs  (73%) 
between  2000  and  2010  played  a  significant  role. 
While  labour  productivity  per  hour  worked  has 
gradually  increased  over  the  last  years,  it  is  still 
about  58  percentage  points  below 
the  EU27 
average. 

in  nominal  unit 

Overall,  Bulgaria  can  be  seen  as  catching  up  with 
respect  to  competitiveness,  in  particular  as  regards 
specialisation  and  the  quality  ladder,  but  not  with 
respect to R&D. 

4.2.2 

Towards an innovative industry 

Bulgaria is one of the catching-up countries with an 
innovation  performance  well  below 
the  EU 
average.  The  industrial  R&D  activity  essentially 
takes  place  in  the  sectors  of  information  and 
communication  technology,  electronic  equipment 
and  machine  building.  The  development  of 
adequate  human  capital,  well-established  clusters 
and 
the 
innovation  capacity  of  Bulgarian  companies  in  the 
long term. 

technology  centres  would  help 

for 

target 

The  national 
the  National  Reform 
in 
Programme  of  1.5 %  GDP  spending  in  R&D  by 
2020 has mainly been based on future increases of 
the private R&D investments73. Although the R&D 

73  

Private  R&D 
at 
LEVS 30 million  in  2002  and  they  were 

investments 

stood 

expenditures  in  Bulgaria  are  increasing,  they  are 
still  much  lower  than  the  EU  average  level.  The 
structure  of  R&D  expenditure  remains  strongly 
imbalanced and the share of public sector financing 
is double that of businesses. 

to 

is  unsuited 

The  current  policy  support  system  is  fragmented 
and  uncoordinated  and 
the 
implementation  of  the  coherent  and  coordinated 
science,  technology  and  innovation  policy.  The 
Bulgarian  Innovation  Strategy,  which  was  adopted 
in 2004, will be updated. It is mainly implemented 
by  the  Operational  Programme  “Competitiveness 
2007-2013”  funded  by  the  European  Regional 
Development  Fund  (ERDF)74  and  the  National 
Innovation  Fund.  However,  the  Fund  has  not  been 
operating for the past 2 years as there were no new 
calls  for  proposals.  Moreover,  the  peer  evaluation 
of the Fund has been continuously postponed due to 
lack of funds. 

The  Ministry  of  Economy,  Energy  and  Tourism 
works on a proposal for a new law on innovation to 
set  appropriate  framework  for  the  private  sector. 
Such a law will try as well to address among other 
the  lack  of  appropriate  funding  instruments  to 
innovation  policy.  The 
support 
Bulgaria  Academy  of  Sciences  increasingly  works 
with  enterprises  in  order  to  support  its  research 
activities  as  there  are  planned  only  a  few  calls  in 
2011.  However,  there  is  still  no  officially  adopted 
the  National 
national  strategy 
Assembly. 

for  R&D  by 

the  national 

4.2.3 

Towards a sustainable industry 

Although  the  sustainability  indicators  continue  to 
improve, the Bulgarian industry lags behind the EU 
average  in  terms  of  energy  intensity,  carbon 
intensity,  waste  generation  by  enterprises  and 
exports  of  environmental  goods.  The  decrease  in 
foreign  direct  investments  due  to  the  economic 
crisis has slowed the process of catching-up in this 
area.  The  industry  is  particularly  vulnerable  to 
energy  price  shocks  and  stringent  environmental 
and emissions obligations because of the high level 
of  energy  intensity  and  Bulgaria's  dependency  on 
limited number of foreign energy suppliers. 

The  increase  of  the  energy  efficiency  should  be  a 
key  priority,  as  the  industry  still  remains  several 
times  more  energy-intensive  than  the  EU  average. 

74  

already  LEVS 108 million  in  2009.  R&D 
increased 7 % only in 2009. 
EUR 250 million have been earmarked for 
innovation and R&D by the end of 2015. 

51 

 
                                                 
                                                                       
The  Energy  Efficiency  Strategy  has  to  address  the 
bottlenecks in the area of industrial sectors.75 

time, 

the  same 

the  compliance  with 

technologies.  Therefore, 

the 
At 
environmental  and  climate 
requirements  will 
require  significant  financial  efforts  from  industrial 
enterprises  in  order  to  improve  their  processes, 
know-how  and 
the 
increased use of EU Structural Funds will be crucial 
to  support  important  investment  projects  in  the 
field.  The  ERDF  earmarked  via  the  Operation 
Programme  Competitiveness  EUR  206  euro  for 
SMEs  and  enterprises  for  projects  in  these  fields, 
which have to be implemented by the end of 2015. 
The achievement of the renewable energy targets76 
will  mainly 
successful 
implementation  of  the  Renewable  Energy  Action 
Plan.  The  adoption  of  a  National  Climate  Change 
Action Plan77 has been delayed.  

depend 

the 

on 

A  System  for  Certification  of  Green  Jobs  is 
operational  since  January  2011.  It  is  a  measure  to 
promote  green  jobs  in  which  eligible  companies 
receive  public  support.  The  companies  need 
amongst  other  to  put  in  place  an  environmental 
management  system  in  place  such  as  ISO  1400178 
and EMAS. 

Operational  Programme  “Environment”  for  the 
period 2007–2013 (EUR 1.5 billion envisaged) and 
the  pre-accession  programme  ISPA  are  the  main 
instruments  for  the  development  of  environmental 
infrastructure. This concerns the reduction of water 
basins contamination by untreated municipal waste 
waters,  improvement  of  the  quality  of  drinking 
regional  waste 
water,  and  development  of 
management  systems.  Timely  implementation  and 
the design of quality projects, although challenging, 
can  help  fostering  the  development  of  related 
industries,  mainly  in  the  field  of  water  and  waste 
management. 

4.2.4 

The business environment 

The  indicators  regarding  business  environment 
show a mixed picture of Bulgaria. On one hand, it 

75  

76  

77  

78  

200 

Regional 

The  European  Regional  Development 
the  Operational 
Fund  earmarked  via 
Development 
Programme 
approximately  EUR 
for 
euro 
municipal and educational buildings.  
16 % of renewable energy sources in final 
energy  consumption  and  a  10 %  share  of 
renewable energy in the transport sector by 
2020. 
135  installations  in  Bulgaria  are  covered 
by EU Emissions Trading System. 
In  Bulgaria,  around  700  enterprises  are 
certified with ISO 14001. 

scores  above  average  regarding  the  availability  of 
broadband infrastructure or prices of electricity for 
businesses.  On  the  other  hand,  Bulgaria  scores 
below  average  in  the  availability  and  quality  of 
infrastructure  and 
regulatory 
framework. 

legal  and 

the 

include 

The  implementation  of  the  Programme  for  Better 
Regulation  2008-2010  has  somewhat  enhanced  the 
the 
business  environment.  Measures 
abolishment  of  112  illegal  municipality  regimes, 
reduced minimum paid-in capital for registration of 
a  company,  and  the  removal  and/or  facilitation  of 
32  licensing  regimes.  The  2nd  Programme  for 
Better  Regulation  2010  –  2013  has  been  in  force 
since 1 June 2010 and sets again concrete actions to 
further  improve  the  regulatory  and  administrative 
environment.  The  complete  implementation  of  the 
Programme is expected to have a positive impact on 
the business environment. 

However, challenges remain, both at local and state 
level.  These  include  the  alleviation  of  regulatory 
regimes/permitting  (e.g.  construction,  chemistry 
and  pharmaceuticals);  simplification  and  decrease 
of  administration  fees,  implementation  across  the 
the  practice  of  silent  approval79; 
board  of 
significantly 
the  provision  of  e-
government  services;  development  of  the  one-stop 
the  public 
shop  practice; 
procurement 
contract 
enforcement.  

improvement  of 

framework, 

increasing 

better 

It  should  be  stressed  that  the  progress  of  the  key 
initiatives  for  better  regulation  and  e-government 
has  been  rather  slow  and  irregular.  In  2010,  the 
usage  by  enterprises  of  e-government  services  still 
stands below the EU average. 

The  actions,  in  the  spheres  of  improving  the 
functioning  of  the  judicial  system  and  fighting 
against  corruption  and  organised  crime,  could  be 
further  strengthened  in  order  to  address  their 
negative  impacts  on  the  economic  and  social 
development  as  well  as  on  the  implementation  of 
EU funds. In the long term Bulgaria needs to build 
up  more  stable  and  efficient  institutions  as  well  as 
to  increase  their  capacity  to  support  the  business 
environment.  

The absorption of EU funds is low because of low 
administrative  capacity  and  lack  of  support  by 
commercial  banks.  The  administrative  procedures 
are  complicated  and,  at 
the 
enterprises do not find the needed co-financing for 

the  same 

time, 

79  

If a business does not receive a reply to its 
request  from  the  administration  within  a 
certain  time  period,  this  means  that  its 
request has been approved. 

52 

 
                                                 
                                                 
the  projects.  EU  funding  does  not  seem  riskless  to 
banks  because  there  is  a  chance  of  suspension  of 
funds (e.g. corruption, fraud) or liquidity problems 
due to delayed payments by the administration. The 
administrative reform has only been focused at the 
reduction  of  administration  staff  costs  without 
improving 
for  effective  policy 
implementation80.  

the  capacity 

The modernisation of the transport infrastructure is 
a major challenge after years of underinvestment in 
important  core  areas  such  as  highways,  ports,  and 
rail.  The  better  usage  of  European  structural  funds 
will be a prerequisite for the successful completion 
of  these  projects  as  Bulgarian  public  funding  is 
limited.  The  current  efforts  to  accelerate  the 
construction  of  important  infrastructural  projects 
(e.g.  Trakia  highway,  Sofia  subway)  will  have 
positive  effects  on  the  business  environment  in 
terms  of  putting  in  place  new  key  transport 
infrastructure. 

4.2.5 

Entrepreneurship and SME policy 

The  Operational  Programme  "Competitiveness 
2007-2013"  envisages  special  support  to  export 
oriented  SMEs  equal  to  EUR  40  million.  The 
support includes encouragement of SMEs to benefit 
from  the  growth  of  the  markets,  support  for 
participation 
trade, 
investment  and  innovation  events,  creation  of 
electronic portals and increase of export training. 

international  economic, 

in 

to  benefit 

face  many  obstacles 

However,  Bulgarian  small  and  medium  enterprises 
still 
from 
internationalisation  as  they  experience  pre-export 
financing  problems  which  are  not  properly 
addressed  by  the  current  export  framework.  The 
support  institutions  (e.g.  trade  representatives)  do 
not always provide useful practical information for 
companies  and  export  guidance  seems  to  be  rather 
outdated. A better support is crucial for the further 
internationalisation  of  Bulgarian  SMEs  via 
available,  regularly  updated,  commercial  statistics 
and  data,  export  guarantees,  and  pre-export 
financing. 

The  access  to  finance  for  SMEs  has  become 
difficult  and  often  impossible  as  there  has  been  a 
substantial 
to 
slow-down  of  bank 
businesses,  in  particular,  to  young  and  innovative 
enterprises.  SMEs  face  severe  credit  conditions 
with  excessive  interest  rates  and  requirements  for 
collateral.  This  hinders  the  SMEs  from  matching 
EU Structural Funds and as a result such funding is 
lost.  

lending 

80  

An  average  12 %  cuts  of  the  number  of 
civil  servants  in  the  administration  was 
reported in February 2011. 

for 

financing 

Private  capital  finance  is  undeveloped  and  has 
insignificant  share  in  the  market.  Commercial 
banks  rarely  finance  start-ups  and  there  is  no 
integrated  venture  capital  framework  setting  the 
conditions 
start-ups.  Concrete 
examples  of  active  venture-capital  entities  such  as 
business  angels  can  be  found  in  the  field  of 
information  technologies  (e.g.  software  for  mobile 
phones,  video  games),  however,  these  are  rather 
exceptions  than  common  practice  and  the  invested 
amounts are below EUR 100 000. There is need to 
engineering 
intensify 
instruments 
the  area  of 
innovation,  business  modernisation  and  energy 
efficiency. 

expand 
for  SMEs  also 

financial 

and 

in 

The recently agreed JEREMIE financial instrument 
managed  by  the  European  Investment  Fund  (EIF) 
will  cover  a  significant  part  of  the  needs  of  the 
market. EUR 200 million have been earmarked for 
venture capital, seed capital, equity and mezzanine 
funds  as  well  as  guarantee  fund  to  be  allocated  by 
Programme 
the 
2015 
"Competitiveness". 

Operational 

via 

The  education  system  does  not  fully  reply  to  the 
market requirements i.e. it does not provide all the 
necessary qualifications for the businesses. Primary 
and  secondary  education  lacks  dedicated  training 
for  entrepreneurial  skills.  Existing  business  and 
management  training  and  other  related  subjects  in 
tertiary  education  do  not  sometimes  prepare 
entrepreneurs  with  the  needed  skills  to  success  in 
highly  competitive  market.  Concerning  different 
crafts, there are no sufficient technological learning 
training 
programmes  and  adequate  practical 
courses.  Finally,  wage  differentials  within  the  EU 
as  well  as  social  systems  benefits  (e.g.  pensions, 
medical cover) mainly explain the lack of qualified 
workers and employees. 

4.2.6  Conclusion 

fostering 

improving 

innovation 

Bulgaria  faces  some  important  challenges  on  its 
way to improve its competitiveness such as cutting 
red  tape  at  different  levels  of  the  state  and  local 
in  view  of 
authorities, 
increasing  productivity, 
the  energy 
efficiency  across  all  sectors  of  the  economy  and 
developing the transport infrastructure. In the short 
term, absorption of structural funds which is crucial 
remains 
in 
implementing 
dramatically 
mechanism  for  management  and  control  of  the 
funds  can  help  remedy  that  situation,  in  particular 
the EU co-financed programmes. 

undertakings 
proper 

these 
low.  A 

supporting 

Cooperation  and  coordination  between  research 
institutions  and  businesses  is  still  limited.  The 
implementation  of  the  measures  of  the  existing 

53 

 
                                                 
innovation  and  R&D  programmes  is  rather  slow 
and  there  is  lack  of  large  flagship  projects  of 
excellence  in  the  field.  Bulgaria  needs  to  improve 
its  administrative  capacity  and  simplify  existing 
rules  and  procedures  in  order  to  accelerate  the 
absorption of funding in all sectors. 

In  the  short  term,  high  loan interest  rates,  required 
collateral  and  securities  and  government  arrears 
remain a significant burden to business. 

54 

 
 
4.3  Czech Republic 

Czech Republic

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

55 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Czech Republic Cyprus (2009) 

Chemicals, chemical products

Rubber and plastic products

Refined petroleum products

Paper products; publishing and printing
Wood and wood products

Textiles and textile products

Leather and leather products

Machinery and equipment n.e.c.

Electrical and optical equipment

Food products

Manufacturing n.e.c.

Other non-metallic mineral products

Transport equipment

Basic metals and fabricated metal products

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.3.1 

Introduction 

Trade and industry specialisation 

Manufacturing plays an important role in the Czech 
economy,  contributing  23.6 %  to  total  value  added 
(EU 14.9 %) in 2009. At the detailed manufacturing 
industry level, the Czech Republic is specialised in 
capital-intensive  industries  (parts  and  accessories 
for  motor  vehicles),  mainstream  manufacturing 
(manufacture  of  rubber  products),  and  labour-
intensive industries in terms of value added. At the 
more aggregated sector level, the Czech Republic is 
specialised 
innovation 
in  sectors  with  high 
intensity,  such  as  electrical  machinery,  but  also 
medium-low  innovation  sectors  (such  as  printing 
and  publishing).  Trade  specialisation  is  to  some 
extent  different  to  industry  specialisation  in  terms 
of  being  more  tilted  towards  knowledge-intensive 
sectors,  with  the  Czech  Republic  specialising  in 
technology-driven industries (such as computers), a 
defining  characteristic  of  the  group  of  countries 
with lower income levels and trade specialisation in 
knowledge-intensive 
the 
relatively  large  share  of  high-tech  exports  (mostly 
related  to  electronics  and  telecommunications)  has 
also  coincided  with  a  large  share  of  high-tech 

sectors.  However, 

56 

imports,  resulting  in  only  small  value  added  in 
these sectors.   

The  Czech  Republic  could  benefit  from  increased 
specialisation  in  those  sectors  where  educational 
intensity is high, both in trade and industry, such as 
in  financial  services  or  research  and  development. 
Its  R&D  intensity  is  also  below  the  EU  average, 
given  its  industrial  structure.  The  export  quality 
performance  is  characterised  by  low  share  in  high 
price and high shares in low price export segments, 
indicating  an  unfavourable  position  on  the  quality 
ladder.  

Overall, the Czech Republic is a typical member of 
country  group  3,  where  trade  specialisation  in 
advanced manufacturing industries and sectors and 
relatively low R&D activity reflect these countries’ 
position  in  the  international  value  chain,  i.e.  they 
are  more  focused  on  assembly  and  production, 
whereas innovation and R&D are more likely to be 
done  in  the  group  of  countries  with  higher  income 
levels  and  specialisation  in  knowledge-intensive 
sectors 
In  contrast,  educationally 
intensive  service  sectors  are  underrepresented,  as 
there  is  less  scope  for  the  international  division  of 
labour. 

(group  1). 

 
 
 
 
Most prominent sectors in Czech Republic 

Highest relative value added (2007)
 Motor vehicles, trailers and semi-trailers
 Rubber and plastics
 Electricity and gas

Change in the relative value added (1999/2007)
Increasing specialisation
 Rubber and plastics
 Air transport
 Motor vehicles, trailers and semi-trailers
Decreasing specialisation
 Wearing apparel, dressing and dyeing of fur
 Coke, refined petroleum and nuclear fuel
 Recycling

Structural change 

In  terms  of  change,  the  Czech  Republic  shows 
similar behaviour to its country group. The relative 
export  and  value  added  share  in  labour  intensive 
industries  (such  as  the  dressing  and  dying  of  fur) 
and  low  innovation  intensity  sectors  (such  as 
wearing  apparel)  have  decreased,  while  they  have 
increased  in  high  innovation  and  high  education 
sectors  as  well  as  in  technology-driven  industries, 
the  manufacture  of  radio  and  TV 
(such  as 
transmitters  and  receivers,  or  computers).  The 
quality ladder and the R&D indicators show strong 
improvement.  Overall,  this  points  to  a  positive 
outlook  in  terms  of  competitiveness  and  catching 
up potential to group 1. 

Manufacturing  production  fell  by  23 %  during  the 
crisis  but  has  mostly  recovered,  reaching  in  April 
2011 a level 3.4 % lower than its previous cyclical 
peak. The impact of the crisis on structural change 
in  the  Czech  Republic  was  very  limited,  as  no 
major change in specialisation patterns occurred. 

indicating  a 

The  Czech  Republic  has  experienced  a  strong 
appreciation of the real effective exchange rate over 
the  last  decade  (62%,  compared  to  21%  in  the 
in  cost  and  price 
loss 
EU27), 
competitiveness.  In  spite  of  this,  the  Czech  export 
performance  has  improved,  as  growth  in  real 
exports  has  averaged  11.8%  between  2000  and 
2008  and  the  balance  of  trade  has  improved. 
Nominal  unit  labour  costs  have  increased  by  34% 
between 2000 and 2010, compared to an increase of 
14% in the EU27 and 20% in the Euro area. While 
labour  productivity  per  hour  worked  has  gradually 
increased  over  the  last  years,  it  is  still  about  38 
percentage points below the EU27 average. 

4.3.2 

Towards an innovative industry 

According  the  Innovation  Union  Scoreboard  2010, 
the Czech Republic is moderate innovator. A major 

challenge  for  the  Czech  research  and  innovation 
system is to increase domestic private research and 
innovation  investment.  While  in  2009,  the  level  of 
business  enterprise  expenditure  in  R&D  rose  to 
0.92 %  of  the  national  GDP,  one  of  the  highest  in 
Central  and  Eastern  Europe,  a  large  share  of  this 
investment  was  carried  out  by  multi-national 
corporations.  Indigenous  firms,  especially  SMEs, 
have  not  engaged  yet  in  boosting  its  technological 
and  innovative  capacity  and  to  a  large  extent  the 
majority 
compete 
internationally  in  costs,  instead  of  differentiation 
through innovation. Concerning the indirect support 
of  private  R&D,  the  existing  fiscal  incentive 
scheme falls short of its objectives: While it allows 
the  Czech  enterprises 
their  R&D 
expenditures from the tax base, they can do so only 
for R&D carried out in own premises. The ongoing 
revision  of  the  tax  scheme  aims  at  rectifying  this 
situation  and  including  the  purchased  R&D  into 
deductible  items.  It  is  planned  to  be  finalised  in 
2012. 

of  Czech 

to  deduce 

firms 

still 

The  low  share  of  private  contribution  to  the 
university  and  public  research  organisations´  R&D 
(below 1 %), and the low number of public-private 
co-publications evidence the relative weak linkages 
between science and industry. 

international  audit  of 

A  strategic  document  in  the  area  of  R&D  and 
innovation  in  the  Czech  Republic  is  The  National 
Research,  Development  and  Innovation  Policy  of 
the  Czech  Republic  2009-2015.  Its  revision  is 
foreseen  for  end  2011,  by  when  the  results  of  an 
ongoing 
the  R&D  and 
innovation  system  in  the  Czech  Republic  will  be 
known.  An 
is  elaborated 
innovation  element 
separately in the recently tabled Czech International 
Competitiveness Strategy prepared by the Ministry 
of  Industry.  The  objective  of  the  strategy  is  to 
promote  the  Czech  Republic  amongst  the  first 
twenty  most  competitive  economies  in  the  world. 
Besides  innovation,  it  includes  another  eight  key 
pillars  for  reform:  Effectiveness  of  the  goods  and 
services  markets,  financial  markets,  labour market, 
education, 
macroeconomics, 
infrastructure  and  institutions.  It  is  linked  to  the 
Czech  Cohesion  policy  and  the  forthcoming  Pro-
export Strategy for 2012-2020. 

healthcare, 

The  Operational  Programme  Enterprise  and 
Innovation  (OPEI)  includes  support  for  increasing 
the innovative performance of firms (innovation of 
products, processes, organisation and marketing), as 
well as for improving access to finance for new and 
developing SMEs, stimulating cooperation between 
the  science  and  industry  and  developing  high 
the 
quality  services 
programmes  within  the  OPEI  support  explicitly 
innovation:  Innovation  (innovation  projects  and 

for  business.  Four  of 

57 

 
 
 
 
protection of IPR), Potential, Prosperity (centres for 
technology  transfer,  business  incubators,  business 
angels)  and  Cooperation  (technological  platforms 
and clusters). 

industry 

The  recently  established  Technology  Agency  in 
charge  of  applied  and  collaborative  research 
launched in 2011 its first R&D support programmes 
focused  on  advanced  prospective  technologies  and 
on  the  stimulation  of  cooperation  between  R&D 
institutions  and 
in  sectors  such  as 
transport,  energy  or  environment.  Alongside  its 
programmes  ALFA,  BETA  and  OMEGA,  the  so 
called  Competence  Centres  programme  supports 
the creation and operation of research, development 
and  innovation  centers  with  strong  application 
potential. It is expected that around 35 centers, each 
including  at  least  3  enterprises  and  one  public 
research  organisation,  will  be  supported  in  the 
period  from  2012  to  2019.  This  entails  a  budget 
amounting  to  CZK 6 billion  for  the  whole  period 
and CZK 366 million for the first call.  

Two  voucher  programmes  supporting  cooperation 
of  SMEs  and  universities  or  research  institutes 
currently exist at the regional level (South Moravia 
and  Hradec  Králové).  The  subsidies  reach  up  to 
CZK 150 000 per voucher with a ceiling of 75 % of 
the project's value. The South Moravian Innovation 
Centre  (JIC)  launched  the  first  call  in  the  Czech 
Republic  in  summer  2009.  So  far,  more  than  90 
vouchers  worth  more  than  CZK 12 million  were 
distributed  among  Czech  companies  with  the  first 
payment made in February 2010. 

Within  the  specific  programme  of  the  Ministry  of 
Industry and Trade, called "TIP", 423 projects were 
approved  in  2009;  118  in  2010  and  192  in  2011. 
The programme supports industrial applied research 
and  experimental  development  in  the  areas  of  new 
materials 
progressive 
technologies  and  new  information  systems.  The 
overall  budget  is  CZK 11.2 billion  for  the  period 
2009-2017. 

products, 

new 

and 

Besides  a  higher  mobilisation  of  resources  for 
research  and  innovation,  the  challenge  remains  to 
ensure  the  efficiency  of  these  investments,  in 
particular  by  enhancing  the  creation  of  linkages 
between  science  and  industry.  In  this  respect,  a 
stronger  reflection  of  the  innovation  aspect  in  the 
forthcoming  revision  of  national  Research  and 
Innovation  Policy  2009-2015,  together  with  the 
inclusion  of  a  multiannual  funding  framework, 
would be desirable.  

4.3.3 

Towards a sustainable industry 

The  Czech  Republic  is  one  of  the  most  energy 
intensive  countries  in  the  EU,  mainly  due  to  high 

intensity  of  its  industry  (such  as  metallurgy,  steel 
In  parallel,  potential  of  cleaner 
and  coal). 
technologies 
untapped. 
largely 
Interestingly,  the  share  of  environmental  goods  in 
the exports of Czech enterprises is high (the Czech 
Republic  scores  as  the  fourth  in  the  EU)  and  they 
generate comparatively low volume of waste.  

remains 

Electricity  and  gas  markets  are  still  dominated  by 
incumbents and the Czech Republic has one of the 
highest  electricity  prices  for  businesses  in  the  EU. 
The Government intends to continue using a system 
for the operational support of electricity production 
from  renewable  energy  sources  in  the  form  of 
guaranteed  prices.  Although  the  Czech  National 
Reform Programme 2011 envisages a modification 
of the RES targets if needed, it does not analyse any 
impacts  of  the  RES  support,  particularly  linked  to 
the state of the infrastructure, electricity prices and 
subsequently the competitiveness of businesses. 

to 

reduce 

The  Energy  Efficiency  Action  Plan  of  the  Czech 
Republic  sets  an  indicative  energy  savings  target 
for 2010 of 3 573 GWh, i.e. 1.6 % of the volume of 
average  energy  consumption 
in  2002–2006. 
Although  the  Czech  National  Reform  Programme 
the 
2011  acknowledges  a  need 
consumption of primary energy sources, it foresees 
that the Czech Republic will set an indicative target 
only  once  a  thorough  feasibility  analysis  is  carried 
out. Ongoing and foreseen measures improving the 
energy  intensity  focus  on  thermal  insulation  of 
buildings and improvement of efficiency of district 
heating  networks,  reduction  of  energy  intensity  in 
industries,  public 
in 
particular,  improvement  of  conditions  of  energy 
performance  contracting  and  energy  services  in 
general.  However,  these  measures  are  not  foreseen 
to  bring  about  any  absolute  reduction  of  primary 
energy consumption. 

transport  and 

railways 

far, 

little  progress 

there  has  been 

technologies,  particularly 

So 
in 
implementation of the 2009 Programme for support 
of  environmental 
in 
the  sectoral  research 
prioritising  R&D  across 
programmes.  A  new 
is 
therefore  being  prepared,  focusing  on  energy 
and  protection  of 
resources 
resources  of  energy, 
environment 
protection  of  ecosystems,  environmentally  friendly 
technologies).  It  will  be  implemented  by  the 
Technology Agency under its programme ALFA.  

creation 
(renewable 

research  programme 

and 

The  Rules  of  the  application  of  environmental 
criteria  in  public  procurement  and  purchases  of 
government  and  public  administration  are  binding 
since  30  June  2011  for  seven  product  groups.  So 
far,  the  progress  seems  to  be  limited  to  the  two 
originally  selected  product  groups  (office  and 
computer  equipment),  with  31  manufacturers  of 

58 

 
furniture  holding  the  eco-label  "Ekologicky  šetrný 
výrobek".  For  the  office  equipments,  hundreds  of 
models  already  comply  with 
stipulated 
methodology. 

the 

An  important  incentive  for  investment  in  clean 
technologies  could  be  seen  in  a  set  of  proposals 
currently  in  preparation,  embedding  the  polluter 
pays  principle  in  the  sectoral  regulation  on  water, 
air  and  waste.  Concretely,  in  the  area  of  air 
pollution  the  draft  proposal  foresees  a  substantial 
increase of all fees related to certain pollutants (i.e. 
TZL,  NOx,  SO2  and  VOC)  as  of  2016  while 
focusing  on  the  largest  sources  of  pollution.  The 
preparation of the new Water Act will be launched 
in 2013. 

While  the  new  Waste  Act  is  in  preparation  and 
the  Government  by 
to 
should  be  submitted 
September  2011,  the  Waste  Management  Plan  is 
scheduled  only  for  two  years  later.  The  aim  of  the 
Waste  Management  Plan  will  be  to  set  long-term 
priorities  for  the  management  of  municipal  and 
hazardous  waste,  the  prevention  of  the  generation 
thereof,  and  the  obligation  to  return  products, 
appliances and packaging.  

Despite  past  efforts  and  ETS,  the  Czech  Republic 
remains one of the most energy intensive countries 
in  the  EU,  which  in  combination  with  the  high 
electricity  prices  poses  a  significant  burden  for  its 
additional  measures 
businesses.  Developing 
promoting  take-up  of  energy  efficient  solutions, 
especially  in  private  and  public  buildings  and 
energy-intensive  industries  is  therefore  a  key,  in 
particular  in  light  of  the  current  Czech  projections 
which  do  not  foresee  any  decrease  of  the  Czech 
primary energy consumption by 2020. At the same 
time,  the  challenge  for  the  Czech  Republic  is  to 
ensure  that  the  capacity  and  performance  of  the 
transmission  and  distribution  network  enables  the 
implementation  of  the  Czech  RES  target  while 
safeguarding  that  electricity  prices  do  not  hamper 
the competitiveness of businesses.  

4.3.4 

The business environment 

The  Czech  Republic  ranks  significantly  below  the 
EU  average  concerning  the  quality  of  its  legal  and 
regulatory 
regulatory 
framework:  Business 
environment  remains  subject  to  frequent  changes, 
often  adopted  without  a  thorough  analysis  of  their 
impacts  and  notably  impacts  on  SMEs.  Such  a 
regulatory  management  policy 
the 
complexity  of  business  environment  and  imposes 
unnecessary burdens on businesses. Combined with 
the  lack  of  transparency  and  credibility  of  public 
procurement  rules,  it  significantly  reduces  the 
overall investor confidence.  

increases 

of 

the 

high-speed 
availability 
Concerning 
broadband lines, the Czech Republic belongs to the 
weakest EU countries. On the other hand, the usage 
of  e-government  services  by  the  Czech  enterprises 
seems  to  be  well  above  the  EU  average  despite 
delays hampering the full launch of those services. 
The  Czech  Republic  also  provides  relatively  high 
levels of state aid (0.5 % of GDP in 2009).  

to  CZK 11,541 

The  progress  on  the  better  regulation  agenda  has 
been  made  in  implementing  the  Action  Plan  for 
Reducing Red Tape: Until the end of 2010, 15.6 % 
reduction  was  already  achieved,  which 
of 
billion.  The 
corresponds 
Government  has  set  a  new  administrative  burdens 
reduction target of 30 % in 2020 compared to 2005. 
By the end of 2012, the reduction of administrative 
burden  is  expected  to reach  the  intermediate  target 
of 25 %. While the reduction measures undoubtedly 
facilitate  doing  business  in  the  Czech  Republic, 
they  remain  to  be  of  an  ex  post  nature  and  do  not 
prevent new unnecessary burdens being imposed on 
businesses in the course of the legislative process.  

its 

improvement 

In 
the 
its  decision  of  16  February  2011, 
Government took account of the deficiencies of the 
existing impact assessment system and of proposals 
for 
to  be  delivered  by  30 
September  2011.  A  crucial  element  of  the  reform 
will  be  to  ensure  an  adequate  quality  control  of 
regulatory  impact  assessments  and  to  define  the 
status  of  the  Board  for  Regulatory  Reform  and 
Effective  Public  Administration  vis-à-vis 
the 
Legislative  Council.  Unfortunately,  the  proposal 
fails 
treatment  of 
stakeholders  during  open  consultations  and  to 
promote  the  Methodology  on  public  consultations 
among  mandatory 
impact 
assessments. 

the  unequal 

to  address 

provisions 

on 

the 

The  Czech  government  adopted  in  May  2011  a 
revised version of the Public Procurement Act with 
the  aim  to  increase  the  efficiency  of  the  public 
expenditure  and 
transparency  of  public 
procurements  by  using  the  IT  tools.  While  notable 
progress  has  been  achieved  in  publication  of 
information  on  ongoing  tenders  and  their  results, 
several  electronic  auction  tools  seem  to  being 
developed  in  parallel.  For  the  tenders  of  low 
amount,  an  electronic  market  place 
is  being 
developed. 

An important measure to increase the efficiency of 
public  administration  is  the  introduction  of  the  e-
government.  It  has  been  launched  on  the  basis  of 
the  recently  revised  Smart  Administration  Strategy 
(December  2010)  and  financially  supported  by  the 
ERDF  Integrated  Operational  Programme.  Despite 
the  fact  that  the  strategy  defines  the  priorities  and 
time schedule for the introduction of e-government 

59 

 
in  the  Czech  Republic,  its  implementation  remains 
hampered  by  insufficient  legal  framework  for 
accessing  and  interlinking  public  databases  and 
issuing electronic certificates, weak coordination of 
individual 
public 
administration.  

unstable 

projects 

and 

The data boxes (electronic delivery system destined 
for the sending and receiving of documents relating 
to  the  public  authorities)  were  launched  on  1 
November  2009  and  so  far  have  not  lead  to  a 
noticeable  reduction  of  administrative  burden  – 
their  usage  remains  limited,  they  are  used  only 
passively  for  obtaining  documents  while  it  is 
impossible 
communicate/send  documents. 
Therefore,  in  the  future,  new  functions  of  the  data 
boxes  will  be  introduced  (e.g.  link  to  the  bank 
account of users by end 2011).  

to 

The  main  part  of  the  e-government  measures 
represent  the  so  called  basic  registers  which,  once 
operational,  will 
the 
for  both  citizens  and 
administrative  burden 
enterprises.  Contracting  procedure  for  them  has 
been  launched  and  they  are  foreseen  to  become 
operational as of July 2012.  

significantly 

reduce 

Discussion  is  also  ongoing  on  the  extension  of  the 
scope of the Czech Points ("all in one place points", 
where the citizen can obtain all the information on 
the  data  kept  about  him  or  her  by  the  state  in  its 
central  registers),  such  as  the  possibility  to  access 
the  Czech  Points  from  home  or  to  link  them  with 
data boxes.  

A  new  broadband  strategy  "Digitalni  Cesko"  was 
approved  by  the  Czech  government  in  January 
2011.  It  specifies  individual  tools  to  reach  the 
strategy,  the  deadlines  and  responsible  bodies. 
Among  others,  the  strategy  sets  a  target  to  ensure 
the  availability  of  access  to  high-speed  Internet  in 
all  populated  areas  of  the  Czech  Republic  with  a 
minimum  transmission  speed  of  at  least  2  Mbps 
(download),  and  in  cities  of  at  least  10 Mbps  by 
2013. By the end of 2015, the Czech Republic aims 
to have eGovernment services used by at least 50 % 
of the population and 95 % of businesses (89 % in 
2010  according  to  EUROSTAT).  The  main  tools 
criteria 
of 
are: 
(preference  of  areas  not  yet  covered  by  the 
internet), reduction of costs of frequency, use of the 
Structural  Funds  for  building  high  speed  internet 
infrastructure.  

establishment 

development 

A  major  challenge 
the  Czech  business 
for 
regulatory framework is to reduce the frequency of 
legislative  changes  and  to  promote  evidence-based 
policy  making.  The  progress  achieved  so  far  in 
increasing the transparency of public procurements 
sustained  and  possible  non-
needs 

to  be 

60 

compatibility  of  several  electronic  auction  systems 
avoided.  In  order  to  alleviate  the  burden  of  public 
administration  processes 
is 
important to complete and increase the efficiency of 
the e-government services. 

for  businesses 

it 

4.3.5 

Entrepreneurship and SME policy 

The  Czech  Republic  is  placed  well  below  EU  27 
average regarding  the  share of people  expecting  to 
start  a  business,  their  desire  to  become  self-
employed and the degree to which school education 
helped  to  develop  an  entrepreneurial  attitude  (the 
second  worse  performer  in  the  EU).  Access  to 
finance  remains  extremely  difficult  for  SMEs, 
especially 
financing. 
Concerning  bankruptcy  procedures,  it  takes  the 
longest  time  in  the  EU  to  wind  up  a  business  (2 
years in the EU on average versus 6.5 years in the 
Czech Republic). Czech businesses also face higher 
cost  to  start  a  business  and  it  takes  them  longer  to 
register a property that the EU average. The cost of 
enforcing contracts is the most expensive in the EU.  

the  early  stage  of 

in 

Despite  the  fact  that  the  curricula  in  general 
includes  essential 
secondary  education  already 
is  not 
it 
for  entrepreneurship, 
competences 
implemented  on  a  systematic  basis  and  remains  at 
the  full  discretion  of  teachers.  Businesses  in  the 
Czech  Republic 
of 
consider 
entrepreneurship  education  as  one  of  the  main 
barriers in creating start-ups jobs and expanding in 
third country markets. Becoming an entrepreneur is 
seen  too  risky  to  try  and  becomes  only  the  last 
resort  solution.  From  this  perspective,  it  is  no 
surprise that very few export oriented Czech SMEs 
are willing  to open subsidiaries  companies in  third 
countries. 

lack 

the 

The  national  scheme  of  guarantees  for  SMEs 
expired  in  2010  as  it  was  seen  only  as  one  of  the 
anti-crisis  measures.  Guarantee  and  loan  schemes 
under  the  Operational  Programme  Enterprise  and 
Innovations  are  not  sufficient  to  substitute  the 
national  scheme  from  the  magnitude  perspective. 
Several  other 
temporary  measures  supporting 
businesses were discontinued in 2010 but so far, no 
evaluation  of  their  efficiency  has  been  made 
available.  

Financial 
instrument  focusing  on  early  stage 
financing  is  still  missing  in  the  Czech  Republic. 
The  Operational  Programme  Enterprise  and 
Innovations includes a commitment to implement a 
pilot  project  of  the  venture  capital  in  the  current 
programming  period  so  that  the  instruments  of 
financial engineering can be used for the support of 
the SMEs more widely after 2014+. The concept of 
the  venture  capital  fund  co-funded  from 
the 
Operational Programme Enterprise and Innovations 

 
The  Czech  business  environment  is  an  important 
bottleneck 
investor 
to  economic  growth  and 
confidence. In the absence of evidence-based policy 
making, it is subject to frequent legislative changes 
increasing  uncertainty  and  imposing  unnecessary 
burdens on businesses. The progress achieved so far 
in 
public 
procurements  needs  to  be  sustained.  It  is  similarly 
important to complete and increase the efficiency of 
the e-government services. 

transparency 

increasing 

the 

of 

Improving  access  to  early  stage  financing  has 
become a matter or urgency, particularly in relation 
to the development of the venture capital fund. The 
fact that the school education in the Czech Republic 
does not help students to develop an entrepreneurial 
attitude will deserve closer attention. However, the 
Czech International Competitiveness Strategy could 
be  an  important  step  forward  in  developing  the 
longer  term  vision  of  the  Czech  economy  and 
society. 

was  finalised  in  March  2011  by  the  Ministry  of 
Industry and Trade. The legislative proposal should 
be finalised in the autumn 2011 so that the holding 
fund  implementing  the  venture  capital  can  launch 
its activities during 2012.  

A  special  "Entrepreneurship  Council"  gathering 
officials,  business  and  employees  stakeholders  is 
meeting  at  least  three  times  a  year  to  discuss  and 
assess  new  legislation  having  a  direct  impact  on 
business environment.  

the  export  orientation  of 

Given 
the  Czech 
economy,  an  increased  attention  is  being  paid  to 
the  pro-export  measures.  Work  is  ongoing  on  the 
new  Czech  Export  Strategy  for  2012-2015,  the 
Government  operated  also  a  special  green  line  for 
export companies, which since 2006 provided over 
8 400  answers  to  interested  SMEs.  The  so  called 
"Export  Academy"  delivered  complex  export 
education  for  SMEs  with  sectoral  and  territorial 
focus.  A  number  of 
thematic  seminars  and 
workshop  was  planned  for  2011  focusing  on  the 
following  markets:  Turkey,  South  Africa,  Russia, 
Argentina, Australia, and New Zealand.  

It is still to be seen if the revised Act on Insolvency 
facilitated  the  restructuration  and/or  shortened  the 
bankruptcy procedure of insolvent companies.  

The  main  challenge  for  the  Czech  authorities 
remains  to  establish  the  venture  fund  as  soon  as 
possible  and 
to  explore  all  existing  funding 
possibilities  available  under  the  EU  Operational 
to  support  SMEs.  A  particular 
Programmes 
enhancing 
attention 
entrepreneurship education. 

should 

paid 

be 

to 

4.3.6  Conclusion 

In  line  with  the  relatively  low  R&D  intensity,  the 
majority of Czech firms compete internationally on 
costs, instead of differentiation through innovation. 
Alongside  a  need  to  mobilise  and  coordinate 
resources for research and innovation, the challenge 
is to ensure that the scientific output corresponds to 
the industrial need. The foreseen revision of the tax 
scheme has a potential to boost private research and 
innovation.  

Developing  additional  measures  promoting  the 
take-up  of  energy  efficient  solutions  is  desirable, 
particularly  in  the  light  of  the  current  projections 
foreseeing an increase of the Czech primary energy 
consumption by 2020. In this respect and given the 
fact  that  the  Czech  Republic  is  one  of  the  most 
energy  intensive  countries  in  the  EU,  electricity 
the  competitiveness  of 
prices  may  hamper 
businesses.  

61 

 
4.4  Denmark 

Denmark

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

N.A.

N.A.

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

62 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Denmark (2009) 

Refined petroleum products

Paper products; publishing and printing
Wood and wood products

Chemicals, chemical products

Rubber and plastic products

Machinery and equipment n.e.c.

Food products

Textiles and textile products

Manufacturing n.e.c.

Transport equipment

Other non-metallic mineral products

Basic metals and fabricated metal products

Leather and leather products

Electrical and optical equipment

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.4.1 

Introduction 

Trade and industry specialisation 

industries 

the  detailed 

in  2009).  At 

transformers),  and 

Manufacturing  plays  a  smaller  role  for  Denmark 
than for the EU in total (13.2 % vs. 14.9 % of value 
added 
level  of 
manufacturing industries, Denmark is specialised in 
(electric 
mainstream  manufacturing 
motors,  generators  and 
in 
marketing-driven  industries  (the  manufacture  of 
games  and  toys,  or  meat  and  fish  products).  In 
addition,  in  exports  Denmark  is  also  specialised  in 
labour-intensive  industries  (the  manufacture  of 
builders’  carpentry  and  joinery).  At  the  more 
aggregated  sector  level,  Denmark  features  value 
added specialisation in sectors with high innovation 
intensity  (machinery),  and  with  low  innovation 
intensity  (water  transport).  In  exports,  Denmark  is 
strongly  specialised  in  sectors  with  low  innovation 
and  medium-low  education  intensity  (again,  water 
specialisation 
transport).  Overall,  Denmark’s 
profile  is  strongly  driven  both  by  intangible  assets 
(marketing-driven  industries  such  as  games  and 
toys), but at the same time by natural endowments 
(agricultural products, sea,...), explaining its bipolar 
specialisation in both innovative and less innovative 
sectors. 

Denmark’s  business  R&D  intensity  is  above  the 
expected level given its industrial structure, and its 
quality  indicators  are  above  average  (with  the 
exception  of  the  high  price  segment  in  labour-
intensive  industries)  and  indicate  a  favourable 
position  on  the  quality  ladder.  This  explains  how 
Denmark  manages  to  sustain  competitiveness  in 
sectors characterised by low innovation intensity. 

Most prominent sectors in Denmark 

Highest relative value added (2007)
 Water transport
 Real estate activities
 Tobacco products

Change in the relative value added (1999/2007)
Increasing specialisation
 Real estate activities
 Electrical machinery and apparatus, nec
 Tobacco products
Decreasing specialisation
 Supporting and auxiliary transport activities; activities of travel agencies
 Inland transport
 Water transport

Structural change 

In terms of change, Denmark has strongly increased 
its  relative  value  added  share  in  technology-driven 
industries such as in  medical equipment as well as 

63 

 
 
 
in  sectors  with  high  educational  and  innovation 
intensity  (electrical  machinery  e.g.  wind  turbines), 
while  substantially  reducing  its  specialisation  in 
sectors with low innovation and education intensity 
(land  and  water  transport).  The  change  dynamics 
for  exports  have  been  somewhat  different,  with 
high  education  sectors  having  increased  strongly 
(financial  services)  but  high-innovation  sectors 
(communication equipment) and technology-driven 
industries  (aircraft  and  spacecraft)  having  slightly 
decreased.  

Denmark’s  R&D  intensity  has  risen  considerably, 
while  there  has  been  little  change  in  the  quality 
indicators.  At  the  sectoral  level,  Denmark  has 
gained  R&D  intensity  mainly  in  services  sectors 
such  as  distribution,  software  and  research  and 
development,  while  decreasing  R&D  intensity  in 
transport  and  communications. 
machinery  and 
Overall, this points to a mostly unchanged positive 
outlook for competitiveness. 

the 

impact  of 

crisis  on  Denmark’s 
The 
specialisation  patterns  was  limited,  with  no  clear 
overall  direction  of  change  in  the  crisis  years.  The 
impact  on  total  manufacturing  production  was 
severe  and  its  level  was  in  April  2011  still  14 % 
below its previous cyclical peak. 

Denmark  showed  an  appreciation  of  the  real 
effective  exchange  rate  over  the  last  decade  by 
22%,  which  is  only  slightly  above  the  EU27 
average  (21%),  indicating  nevertheless  a  loss  in 
cost and price competitiveness. Nominal unit labour 
costs  have  increased  by  34%  between  2000  and 
2010, compared to an increase of 14% in the EU27 
and  20%  in  the  Euro  area.  Over  the  last  decade, 
Denmark's labour productivity per hour worked has 
remained  relatively  stable  at  about  18  percentage 
points  above  the  EU27  average  and  4  percentage 
points above the Euro area average. 

4.4.2 

Towards an innovative industry 

According  to  the  Innovation  Union  Scoreboard 
2010,  Denmark  is  one  of  the  innovation  leaders 
with  a  second  place,  well  above  the  EU.  While 
Denmark  scores  high  in  sub-indicators  such  as 
linkages  and  entrepreneurship  and 
intellectual 
assets,  output  in  terms  of  innovating  firms  is 
relatively low.  

The  innovation  system  is  well  functioning.  Private 
investment in R&D has increased by 54 % over the 
last  decade.  The  public  part  of  the  innovation 
system  has  been  consolidated  through  institutional 
reforms and mergers the last years. More funding in 
fewer  funds  has  yielded  a  more  efficient  funding 
system,  and  more  risk  capital  and  incubators  have 
been put in place. The co-operation between public 

64 

sector  has 

and  private 

increased 
research 
significantly the last years and is expected to result 
in higher productivity for the participating firms. In 
the June 2011 "Agreement of Denmark as a Growth 
Nation", the government launches several initiatives 
aiming  at  further  strengthening  the  innovation 
system  in  Denmark  by  re-organisation  of  the 
research councils and research institutions.  

The Business Innovation Fund ("Fornyelsefonden") 
was  launched  in  2010  for  2010-2012.  A  total  of 
DKK 760 million was allocated to the fund with the 
purpose  of  promoting  restructuring  and  renewal  of 
especially  SMEs  in  the  area  of  green  technologies 
and welfare solutions.  

The  Danish  Government's  Globalisation  Strategy 
which  expires  in  2012  and  corresponding  and 
including 
matching  national  policies 
innovation, education, energy and the environment, 
indicate how Denmark aims at being a country with 
industries able to be highly competitive.  

in  areas 

The  government  published  the  innovation  strategy 
"Strengthened  innovation  in  businesses"  in  2010. 
The  strategy  includes  37  initiatives  aiming  at 
strengthening  the  innovation  capacities  of  Danish 
SMEs.  Initiatives 
include  activities  promoting 
participating  in  cluster  activities,  subsidies  for 
SMEs'  R&D  activities  and  a  strengthening  of  the 
Industrial PhD programme.  

Several  initiatives  aiming  at  strengthening  the 
innovation  capacity  in  the  Danish  economy  are 
launched  in  the  "Agreement  of  Denmark  as  a 
Growth  Nation".  These  include  tax  deductions  for 
firms' R&D expenditures up to 5 million DKK per 
year.  

Though  Danish  innovation  policy  is  modern  and 
comprehensive,  a  number  of  challenges  remain. 
Indeed,  despite 
the  growth-friendly  business 
environment, there are concerns about the relatively 
limited  innovation  capacity.  Despite  impressive 
efforts to increase R&D and innovation, the results 
in  terms  of  high-tech  exports  and  high-growth 
enterprises are below EU average.  

4.4.3 

Towards a sustainable industry 

The  performance  of  the  Danish  industry  can  be 
characterised  as  rather  strong.  This  relates  to,  for 
example,  the  relatively  low  energy  and  carbon 
intensity  in  the  industry.  In  2008  an  Energy 
Technology  Development  and  Demonstration 
Programme 
(EUDP)  was  established.  EUDP 
supports  the  development  and  demonstration  of 
new  energy  technologies  that  can  contribute  to  the 
ambition of independency of fossil energy in 2050. 
technologies  action  plan, 
An  environmental 

 
 
 
 
 
 
in  2010 

in  2010,  aims 

to  promote  new 
launched 
environmental  technological  solutions  and  foster 
growth and employment in the Danish industry. As 
the  government 
mentioned  earlier, 
established 
Innovation  Fund 
(“Fornyelsesfonden”)  of  DKK 760 million  for  the 
period  2010-2012  with  the  aim  of  supporting 
innovation  and  market  maturity  within  the  green 
and  welfare  areas  to  create  growth,  employment 
and export for Danish businesses.  

the  Business 

The  government  presented  the  Energy  Strategy 
2050  in  February  2011.  The  strategy  aims  at 
making  Denmark  independent  of  fossil  fuels  by 
2050  and  includes  a  number  of  initiatives  targeted 
toward  fostering  new  green  solutions  for  business. 
Initiatives  are  planned  for  the  wind  area  with 
opportunities for development of wind turbines, the 
the  biogas  area, 
biomass  and  biofuels  area, 
development  of  smart  grids  and  measures  for 
energy  savings  aiming  at  further  reducing  the 
already  low  energy  and  carbon  intensities  in  the 
Danish enterprises.  

of 

Exports 

solutions. 

Danish industry has a clear advantage in exports of 
green-tech 
energy 
technologies  and  equipment  goods  made  up  12 % 
of  total  Danish  manufacturing  exports  in  2009, 
thereby  doubling  the  share  since  2000.  As  a 
comparison,  energy  technologies  and  equipment 
only  constituted  of  some  6 %  of  EU-15  exports  in 
2009.  Danish  industry  is  particularly  strong  in  the 
segment  wind-turbine  components, 
insulation 
materials and energy efficient pumps. 

4.4.4 

The business environment 

Denmark scores clearly above the EU average in all 
indicator categories with the exception of the level 
of state aid. Denmark ranks among Member States 
with  the  lowest  burden  of  government  regulation, 
with a legal and regulatory environment that highly 
encourages the competitiveness of enterprises. 

Regulatory  reform  has  been  on  the  agenda  of  the 
Danish  government  for  over  two  decades  with  the 
aim of modernising the public sector and promoting 
an  efficient  business  environment.  As  regards  the 
for 
reduction  of 
businesses, the Government's objective has been to 
achieve  the  target  of  25 %  reduction  in  2010 
relative  to  the  2001  level.  Over  the  period  2001-
2010, 24.6 % of the 25 % target has been achieved.  

the  administrative  burdens 

In  the  "Agreement  of  Denmark  as  a  Growth 
Nation",  the  Government  sets  a  new  target  of 
reduction  of  administrative  burdens  with  another 
10 % in 2015 relative to the 2010 level. 
In  January  2011  the  Danish  Parliament  decided  to 
complement  the  efforts  of  reducing  administrative 

burdens by setting a target of 10 % reduction of the 
perceived burdens also to be reached by 2015. 
From 1 July 2011, for a period of three years, start-
ups and  firms  with  less  than 10  employees will  be 
exempted 
incurred  by 
legislation.  

from  new  burdens 

third 

The 
to  develop 
strategic  programme 
eGovernment  is  focused  on  improving  digital 
services,  efficiency  and  collaboration  across  all 
levels  of  governments.  It  includes  the  ambitious 
objective of digitalising all relevant communication 
between  government  and  business  by  2012.  In 
2010, the online availability of public services was 
95 %  for  enterprises,  and  eGovernment  usage  by 
business one of the highest in the EU. "Virk.dk”, a 
business-to-government  one-stop-shop,  is  a  main 
initiative  aiming  at  facilitating  the  provision  of 
information  to  government  authorities,  including 
invoicing.  Some  30 %  of  all  information,  which 
enterprises must report to government authorities, is 
sent  via  "Virk.dk".  Denmark  is  one  of  the  best 
performing  countries  regarding  one-stop-shops. 
Virk.dk is fully operational and web based (Danish 
Commerce and Companies Agency, DCCA). 

is 
recently  adopted  "Konkurrencepakke" 
The 
mainly  targeting  the  construction  sector,  the  retail 
sector  and  health  services  and  the  public  sector 
/public  services.  Other  sectors  for  which  measures 
are  considered  include  taxis,  postal  services  and 
public  transportation  services.  The  question  of 
liberalisation  of  the  pharmacies  sector  will  be 
investigated  further  before  any  measures  will  be 
implemented. This also concerns the question about 
allowing larger hypermarkets in the retail sector. 

in 

announced 

The  market  for  construction  materials  will  be 
addressed  by  measures 
the 
"Konkurrencepakke".  The  measures  aim  among 
other  initiatives  at  increasing  imports  of  foreign 
construction materials. Increased imports of foreign 
building materials is likely to increase the supply on 
the  Danish  market  and  result  in  a  downward 
the  prices  of  building  materials. 
pressure  on 
Ownership  of  clinics  for  dentists  and  general 
physicians  by others outside the  profession will  be 
opened  up  which  may  encourage  establishment  of 
larger firms on these markets.  

increasing  public  procurement 
target 
regions.  New 

The  government  has  launched  a  strategy  aiming  at 
increasing  competition  for  public  services  by 
in 
gradually 
municipalities  and 
for 
municipalities:  31.5 %  of  all  procurement  shall  be 
public  in  2015.  In  the  "Konkurrencepakke"  it  also 
announced  that  negotiations  with  the  regions  will 
take place aiming at increasing public procurement 
in the regions to 2015. 

65 

 
 
 
 
 
 
 
 
 
4.4.5 

Entrepreneurship and SME policy 

Danish SMEs constitute on average just as much of 
total enterprises as the EU-27 average. The Danish 
SME share of total employment is a bit smaller and 
the  share  of  value  added  larger  than  the  EU-27 
average, indicating a higher productivity in Danish 
SMEs. Danish SMEs are a bit larger than the EU-27 
average.  Micro  enterprises  represent  87%  of  all 
SMEs in Denmark while the corresponding share in 
the  EU-27  is  92%.  As  a  consequence,  small  and 
medium-sized  SMEs  hold  larger  shares  of  all 
the  EU-27. 
enterprises 
Therefore  the  average  SME  size  is  larger  in 
Denmark than in the EU-27, 5.6 employees per firm 
compared  to  the  average  EU  SME  which  employs 
4.2 persons.  

in  Denmark 

than 

in 

Indicators, from the EU SBA fact sheets, reveal that 
the entrepreneurship rate is lower in Denmark than 
in  the  EU.  Attitudes  towards  entrepreneurship  and 
self-employment indicate that Danes are less prone 
than  the  average  EU  citizens  to  start  their  own 
businesses.  On  the  other  hand,  Danish  SMEs  are 
more internationalised than the average EU SME.  

Denmark  has  a  high  level  of  start-ups.  The 
challenge is a low level of high growth firms. This 
underpins  almost  all  policy  measures  in  the  SME 
area, e.g. the "Erhvervspakken" and the New firms 
package with measures aiming at providing funding 
and  easing  financial  constraints  for  start-ups  and 
SMEs.  

Measures  include;  provisions  of  DKK 500 million 
to venture capital markets to be matched by private 
funding;  a  growth  loan  guarantee  scheme  of 
DKK 1.5 billion  to  small  businesses  with  high 
growth  potential  as  well  as  a  strengthening  of  the 
loan guarantees and counselling for new and micro 
enterprises;  also  the  Export  Credit  Fund  was 
extended and introduced the SME guarantee, a new 
targeted  scheme,  of  DKK 2 billion,  which  aims  to 
facilitate  export  firms  to  gain  new  orders.  With 
"Agreement  of  Denmark  as  a  Growth  Nation",  it 
has  been  decided  to  provide  an  additional  600 
million  DKK  to  the  loan  guarantee  scheme.  The 
measure "Seed 2.0" is targeted specifically to start-
ups and new firms and provides seed and pre-seed 
loan  of  500 million  to  be  matched  by  private 
funding up to DKK 1.5 billion. 

Among  other  measures  to  facilitate  exports  for 
SMEs,  in  the  Agreement  of  Denmark  as  a  Growth 
Nation,  the  Export  Credit  Fund  has  been  extended 
to 2015. 

The New firms package was launched in late 2010 

66 

early 2011 and contains an agreement with pension 
funds which strengthens the market for risk capital 
with  up  to  10  billion  DKK  for  entrepreneurs  and 
SMEs with growth potential (25 % risk, 75 % loan). 
The  scheme  is  guaranteed  by  the  Growth  Fund. 
Also  a  new  fund  "Dansk  Vækstkapital"  was 
established with the purpose of investing in private 
equity/venture capital funds focusing on SMEs with 
a  growth  potential.  The  government  has  also 
initiated analyses to explore possibilities to provide 
corporate bonds market for SMEs. 

for 

investments 
tax  exemptions 

In  order  to  ease  financial  constraints  for  start-ups 
and young firms, tax legislation has been amended 
in  some  respects.  These  amendments 
include 
corporate tax exemptions, under certain conditions, 
in  young  unlisted 
for  return  on 
savings  by 
companies, 
individuals who  use  the  money  to  start  a  company 
("Etablerings-  og 
Iværksætterkontoordningen"). 
Non-financial  measures  include  the  initiative  for 
easing  transfer  of  business  from  retiring  business 
owners  to  new  owners.  Some  16 000  firms  are 
affected  in  the  coming  years.  As  a  part  of 
"Agreement  of  Denmark  as  a  Growth  Nation",  a 
committee  has  been  established  with  the  task  of 
investigating  possible  ways  of  reducing  corporate 
taxes from 25 to 20 pct. 

4.4.6  Conclusion 

to  a 

The  main  challenges  facing  the  Danish  industry 
remain  the  weak  competition  and  low  productivity 
growth, low shares of innovating enterprises, high-
tech  exports  and  high-growth  enterprises.  The 
limited  innovation  performance  may  be  due  to  a 
limited 
combination  of  factors  relating 
entrepreneurial  culture,  weak  competition 
in 
especially  the  services  sector  and  the  fact  that  the 
results  of  reforms  of  the  public  innovation  system 
have  not  yet  showed  up  in  the  statistics.  The 
increased co-operation between public research and 
private companies that have taken place during the 
last  years,  could  lead  to  a  better  performance  in 
terms  of  high-growth 
innovating  enterprises 
exporting  high-tech  products  in  a  near  future.  A 
number  of  measures  addressing  these  problems 
were  put  in  place  during  the  last  year  with  effects 
yet to materialise.  

Further  policy  actions  aiming  at 
fostering 
competition could also spur innovation and increase 
the  share  of  innovating  enterprises.  An  especially 
important area is the service sector where there is a 
large  number  of  SMEs  who  would  benefit  from 
The 
more 
the 
"Konkurrencepakke"  was  a  first  step 
direction  of  opening  up  public  procurement  for 
SMEs  and  increasing  productivity  in  the  service 

service  markets. 

competitive 

in 

 
 
 
 
 
 
 
 
sector  by  liberalising  some  important  sub-sectors.

67 

 
4.5  Germany 

Germany

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

N.A.

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

68 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Germany (2009) 

Rubber and plastic products

Other non-metallic mineral products

Chemicals, chemical products

Refined petroleum products

Machinery and equipment n.e.c.

Paper products; publishing and printing

Wood and wood products
Textiles and textile products

Food products

Leather and leather products
Manufacturing n.e.c.

Electrical and optical equipment

Transport equipment

Basic metals and fabricated metal products

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.5.1 

Introduction 

Trade and industry specialisation 

in 

Manufacturing  plays  a  bigger  role  for  Germany 
than for the EU on average of value added (22.7 % 
against  14.9 %  in  2009).  At  the  detailed  level  of 
is  strongly 
industries,  Germany 
manufacturing 
industries 
specialised 
technology-driven 
(manufacture  of  motor  vehicles, 
electricity 
distribution  and  control  apparatus),  and  less  so  in 
mainstream manufacturing, e.g. in the manufacture 
of transport equipment. Germany is also specialised 
in capital-intensive industries (e.g. the manufacture 
of parts and accessories for motor vehicles) in terms 
of value added but not in exports. The only labour-
intensive industry in the top five industries is a high 
skill 
the  more 
aggregated  sector  level,  Germany  is  specialied  in 
high and medium-high innovation intensive sectors 
(motor  vehicles,  electrical  machinery  and  medical, 
precision  and  optical 
instruments).  However, 
Germany  is  not  overly  specialised  in  sectors  with 
high educational intensity because of the relatively 
low  value-added  share  in  financial  services  and 
software.  The  share  of  exports  by  technology-
driven  industries  going  to  the  BRIC  countries  is 
very  high,  indicating  further  growth  potential  for 
Germany. 

industry  (machine 

tools).  At 

Germany’s  export  shares  in  technology-driven  and 
labour-intensive industries are extremely low in the 
low price segments, and in line with the average of 
the  higher  income,  knowledge-intensive  countries 
in  the  high  price  segments,  indicating  a  strong 
position  on  the  quality  ladder.  The  R&D  country 
effect  is  slightly  negative,  i.e.  Germany’s  business 
R&D  investments  are  below  the  expected  level 
given its industrial structure.  

Most prominent sectors in Germany 

Highest relative value added (2007)
 Motor vehicles, trailers and semi-trailers
 Office, accounting and computing machinery
 Electrical machinery and apparatus

Change in the relative value added (1999/2007)
Increasing specialisation
 Office, accounting and computing machinery
 Motor vehicles, trailers and semi-trailers
 Radio, television and communication equipment
Decreasing specialisation
 Renting of machinery and equipment
 Air transport
 Real estate activities

Structural change 

In terms of change, Germany has further increased 

69 

 
 
 
 
 
lost 

relative 

(radio,  TV 

(recycling,  wholesale 

its  value-added  specialisation  in  technology-driven 
industries  and  highly  innovation-intensive  sectors, 
e.g.  in  computers  and  electronic  components.  In 
exports,  technology-driven  industries  have  stayed 
stable,  while  highly  innovation-intensive  sectors 
and 
share 
have 
communication equipment). Interestingly, Germany 
has also considerably increased its relative share in 
low  innovation  sectors,  due  to  a  mix  of  several 
trade,  water 
sectors 
transport...).  Germany’s  share  in  the  high  quality 
segments  of 
industries  has 
technology-driven 
decreased, as has its sectoral R&D intensity (R&D 
country effect) and its relative value added share of 
educationally  highly 
the 
sectoral level, Germany’s R&D intensity (i.e. R&D 
expenditure  in  relation  to  total  value  added)  has 
decreased  in  motor  vehicles,  transport  equipment, 
pharmaceuticals  and  communication  equipment, 
while  other  sectors  saw  small  increases  (e.g. 
machinery). 

intensive  sectors.  At 

Germany's  manufacturing  production  rebounded 
fast  after  the  crisis  and  was  in  April  2011  4.1 % 
below its previous cyclical peak. The impact of the 
crisis  on  Germany’s  specialisation  patterns  was 
limited  overall,  with  technology-driven  industries 
declining as compared with before the crisis.  

target  of  3 %.  In  order  to  move  a  step  closer 
towards  reaching  the  defined  target,  Germany 
invests  an  additional  EUR 12 billion  in  education 
and  research  over  the  period  of  2009-2013,  about 
EUR 6 billion  in  research  and  EUR 6 billion  in 
education and training. 

Nevertheless,  from  a  global  perspective,  Germany 
is  still  lagging  behind  major  competitors  such  as 
Japan  or  South  Korea,  in  particular  concerning 
business R&D investments.  

launched 

The measures to support innovation in Germany are 
described  in  the  new  high-tech  strategy  2020, 
presented  in  July  2010,  which  continues  a  first 
initiative 
in  2006.  The  overarching 
strategy aims to foster cooperation between science 
and  industry  in  key  technology  areas  and  lead 
markets  and  to  improve  the  general  framework 
conditions  for  innovation.  The  strategy  focuses  on 
R&D  in  priority  areas  such  as  energy  and  climate 
protection, health and nutrition, mobility, as well as 
security  and  communication.  It  also  supports  the 
development  of  key  enabling  technologies,  which 
act  as  drivers  of  innovation  and  which  build  the 
basis  for  new  products,  processes  and  services, 
for  example  optical 
technologies, 
including 
materials 
biotechnology, 
technologies, 
nanotechnology, micro-systems technology etc. 

the 

Germany  is  among  the  few  Member  States  which 
have experienced a depreciation of the real effective 
last  decade  (-6%, 
exchange  rate  during 
compared to an appreciation of 21% in the EU27), 
indicating a gain in cost and price competitiveness. 
Nominal  unit 
increased 
moderately  by  6%  between  2000  and  2010, 
compared  to  an  increase  of  14%  in  the  EU27  and 
20% 
labour 
productivity  per  hour  worked 
is  about  24 
percentage  points  above  the  EU27  average  and  10 
percentage points above the Euro area average. 

the  Euro  area.  Germany's 

labour  costs  have 

in 

Overall,  Germany  occupies  a  very  favourable 
competitive  position,  which 
it  could  however 
strengthen  even  further  by  boosting  sectoral  R&D 
intensity. 

4.5.2 

Towards an innovative industry 

The  Innovation  Union  Scoreboard  2010  classified 
Germany  among  the  innovation  leaders  in  the  EU. 
It  belongs  to  those  countries  with  the  biggest 
research and development (R&D) capital stock, and 
the  output  of  R&D  and  innovation  activities  in 
terms  of  patents,  new  products  and  high 
productivity  is  remarkable. German  R&D intensity 
(percentage  of  GDP  spent  on 
research  and 
development) is clearly exceeding the EU average, 
which  was  2.0 %  in  2009.  With  2.8 %  in  2009, 
Germany  is  already  closely  approaching  the  R&D 

The  new  strategy  also  includes  SME  funding  via 
the  Central  Innovation  Programme  for  SMEs 
(ZIM).  In  order  to  meet  the  challenges  of  global 
competition,  SMEs  are  supported  to  enhance  their 
research and innovation efforts and to intensify the 
development  of  new  products,  processes  and 
services.  The  programme  provides  funding  for 
cooperation  and  network  projects  and,  since  2009, 
also  for  individual  R&D  projects.  The  planned 
approximately 
annual 
EUR 500 million.  The  strategy  also  comprises 
support  to  regional  thematic  clusters  that  bring 
together  public  research  and  enterprises  to  further 
develop high technologies in various areas. 

amounts 

budget 

to 

and 

In the long-term, one of the main challenges faced 
by  Germany  will  be  to  avoid  a  systematic  skill 
shortage in industry and academia, considering the 
emerging  demographic  challenge  of  the  country 
(low  birth  rates  and  ageing  society)  and  its 
relatively 
science, 
low  availability  of  new 
technology 
engineering  graduates.  The 
emerging  shortage  of  skilled  workers  has  already 
become  an  increasingly  important  obstacle  to 
further  growth  in  many  industries.  High  skilled, 
professions  – 
in  areas  such  as  Mathematics, 
Informatics, Natural Sciences and Technology – are 
particularly  affected,  though  difficulties  in  the 
recruitment  of  skilled  workers  are  also  visible  in 
other  sectors,  including  health  care  and  certain 

70 

 
crafts.  

in 

in 

initiative 

its 
launched 

"Konzept 
June 

The  imminent  shortage  of  skilled  labour  in  both 
academia and industry is recognised by the federal 
government 
für 
201181.  
Fachkräfte", 
The  federal  government  estimates  that  within  the 
next 15 years, the German labour market could face 
a shortage of up to 6.5 million skilled workers, if no 
measures  were  taken.  The  Federal  Ministry  of 
Labour and Social Affairs expects that a large part 
of  the  additional  skilled  labour  could  be  met  by 
fully  seizing  the  potential  of  the  domestic  labour 
market.  The  related  measures  are  in  particular 
aimed  at 
the  number  of  students, 
reducing  school  drop-out  rates  and  increasing  the 
labour  market  participation  of  older  workers  and 
women. In particular regarding the latter, Germany 
performs considerably below the EU average, with 
only 55% of employed women working full time.  

increasing 

Germany has committed to spend 10 % of GDP on 
education  and  research  by  2015,  thereof  7 %  on 
education and 3 % on research. Though the budget 
has  already  been  considerably  increased  in  this 
respect, further efforts will be necessary to meet the 
objective. According to the results of the first phase 
of  the  higher  education reform  package82,  progress 
has been made in certain fields, including in respect 
to  increasing  the  number  of  study  places  and 
improving 
tertiary  education. 
Nevertheless,  further  improving  the  quality  of 
education  and  training  will  remain  an  important 
challenge.  

the  quality  of 

In  addition  to  strengthening  the  education  system 
and  the  labour  market,  however,  the  German 
economy  will  also  depend  on  better  attracting 
skilled  workers  from  other  EU  and  non-EU 
countries.  The  initiative  "Konzept  für  Fachkräfte" 
foresees  a  number  of  measures  in  this  respect, 
including  for  example  simplified  procedures  for 
recruiting  engineers  and  doctors  as  well  as  easier 
recognition  of  foreign  diplomas.  While 
these 
initiatives  go  into  the  right  direction,  it  remains  to 
be 
they  will  be  effectively 
implemented and whether they will be sufficient to 
address this increasingly important problem. 

seen  whether 

4.5.3 

Towards a sustainable industry  

Overall, 
the  environmental  performances  of 
Germany’s  industry  can  be  characterised  as  good. 
The energy intensity in manufacturing is below the 
EU average, the carbon intensity in the non-energy 
supplying  industry  is  close  to  EU  average,  and  in 

81  Bundesregierung,  "Konzept 

für  Fachkräfte", 

22.6.2011 
82 Hochschulpakt  

71 

terms of waste generated by enterprises and exports 
of  environmental  goods,  Germany  scores  better 
than  the  EU  average.  Germany  also  continues  the 
raw  materials 
trend 
further 
of 
consumption  while 
industrial  Gross 
Value  Added  (GVA).  Moreover,  the  support  to 
environmentally  friendly  technologies  has  been  a 
focus  of  both  Germany’s  structural  reform  agenda 
and its economic recovery packages.  

reducing 
increasing 

The  national  "Energy  Concept"  presented 
in 
September 2010 outlines the country's path towards 
renewable  energy  in  a  long-term  strategy  up  to 
2050. In 2011, Germany has decided on additional 
far-reaching changes in its energy policy, including 
a  gradual  phase-out  of  nuclear  energy  production 
until  2022,  measures  to  accelerate  grid  expansion, 
and  a  more  market-based  development  of 
renewable  energies.  Germany  intends  to  increase 
the  share  of  renewable  energy  sources  in  the  total 
energy  consumption  from  currently  17 %  to  35 % 
by 2020. Challenges remain particularly in ensuring 
the  cost-effectiveness  of  renewable  energy  and  in 
providing 
infrastructure. 
Germany’s  interregional  and  international  energy 
grids  still  need  to  be  further  enhanced  in  order  to 
allow for a wide distribution and storage of energy 
produced 
sources.  Several 
renewable 
regulatory and non-regulatory measures, such as the 
“Netzausbaubeschleunigungsgesetz”, 
are 
addressing 
effective 
implementation  will  be  required  in  order  to  ensure 
the intended progress.  

the  required  network 

issue, 

from 

this 

but 

an 

As  part  of  the  national  "Energy  Concept",  the 
existing  Energy  Research  Programme 
("5. 
Energieforschungsprogramm")  has  been  extended 
and  funds  dedicated  to  research  in  the  field  of 
sustainable  energy  have  been 
increased.  For 
2010/2011, EUR 1.27 billion are dedicated to R&D 
in  modern  energy  technologies,  including  smart 
networks  and  energy  storage  techniques.  In  2011, 
the  German  federal  government  also  decided  to 
launch  a  new  Energy  Research  Programme  ("6. 
Energieforschungsprogramm"), which increases the 
financing for R&D in these areas using funds from 
the  special  "energy  and  climate  fund".  Between 
2011 and 2014, about EUR 3.5 bn will be dedicated 
to energy research. 

Initiatives  to  increase  the  share  of  electricity  from 
renewable  energy  sources  launched  in  recent  years 
have  been  continued,  including  in  particular  the 
“Renewable  Energy  Law”,  which  stipulates  the 
guaranteed  feed-in  tariffs  to  be  paid  by  network 
providers  to  producers  of  renewable  energy.  In 
2011  feed-in  tariffs  for  solar  energy  have  been 
incentives  have  been 
further 
increased  in  other  sectors  such  as  off-shore  wind 

reduced  while 

 
                                                 
parks, geothermal and hydroelectric energy.  

the 

to  establish  Germany  as 

The automotive sector is of particular importance to 
Germany.  In  2011,  the  federal  government  has 
adopted  the  initiative  "Electro-mobility",  which 
leading 
aims 
international market for electric vehicles. The target 
foresees that one million electric vehicles should be 
on  German  roads  by  the  year  2020  and  up  to  six 
million by the year 2030. The promotion of electric 
mobility  needs  to  be  coupled  with  the  use  of 
renewable  energy  in  order  to  have  a  significant 
positive 
the 
importance  of  the  automotive  sector  for  Germany, 
in  promoting  electric  mobility  and 
progress 
renewable  energies  will  be  crucial 
the 
competitiveness of its industry. The German federal 
government  has  allocated  additional  funding  of 
EUR 1 billion until 2013 for this initiative and will 
establish a national project coordinator. 

impact.  Given 

environmental 

for 

friendly  products  given 

The  public  procurement  system  in  general  has  an 
important  potential  to  support  the  deployment  of 
environmentally 
its 
significant level of expenditure. Public procurement 
on  federal  and  regional  level  in  Germany  has 
increasingly  integrated  sustainability  aspects  such 
as  resource  efficiency  and  emissions  based  on  a 
life-cycle  approach,  though  so  far  this  was  mainly 
than  a 
based  on 
systematic  approach.  The  proposed 
legislative 
package foresees the introduction of legally binding 
energy efficiency criteria in the public procurement 
regulations  to  support  the procurement  of  products 
and  services  complying  with  the  highest  energy 
efficiency standards. 

initiatives  rather 

individual 

4.5.4 

The business environment 

Germany offers a favourable business environment 
and  successfully  attracts  foreign  direct  investment. 
It  scores  the  highest  among  the  27  Member  States 
concerning  the  overall  satisfaction  with  the quality 
of infrastructure. However, it scores around average 
and 
regulatory 
regarding 
administrative  burden,  as  well  as  other  related 
indicators.  

framework 

the 

Ex  ante  impact  assessments  are  mandatory  for 
initiatives  of  the  federal  government  and  also  the 
"Länder"  increasingly  use  impact  assessments. 
Public  consultation  by  the  federal  government  is 
formally regulated by the Joint Rules of Procedures, 
which specifies that federal ministries must consult 
early  with  an  extensive  range  of  stakeholders, 
including SMEs. 

The simplification of the regulatory framework and 
the reduction of administrative burden are crucial to 
encouraging 
strengthening 

investment 

and 

entrepreneurship.  In  this  sense,  the  Bureaucracy 
Reduction and Better Regulation programme of the 
German federal government comprises a number of 
important measures to further reduce administrative 
burden  in  the  business  sector.  A  number  of 
measures  have  been  taken  over  the  last  years  to 
further reduce reporting obligations in the business 
sector.  By  the  end  of  2010,  the  administrative 
burden  associated  with  reporting  obligations  has 
been  reduced  by  22.6 %  compared  to  the  level  of 
2006 according to a report published by the federal 
government83.  Continued  efforts  will  be  necessary 
in  order  to  meet  the  defined  target  of  a  25% 
reduction  by  2012.  The  programme  is  currently 
being  extended  to  address  in  addition  to  reporting 
obligations also other measurable compliance costs, 
based  on  a  standard  cost  model.  In  2011,  a  tax 
simplification act has been proposed by the federal 
government,  which  aims  among  others  at 
introducing  the  possibility  to  submit  income  tax 
declarations every two years, simplifying the use of 
electronic  invoicing  and  improving  the  electronic 
communication with tax authorities. 

in 

is  still  potential 
in  services. 

to 
further  stimulate 
There 
  Regarding  network 
competition 
is  still  hampered  as 
industries,  competition 
enterprises 
these  markets  are  still  highly 
vertically  integrated,  although  there  are  indications 
of  some  progress  due  to  initiatives  launched  in 
recent  years84. 
interregional 
Improving 
in 
increase 
lead 
interconnection  might 
competition  in  the  future.  In  2011,  the  federal 
government  decided  to  further  liberalise  long-
distance bus services within Germany, which could 
contribute  to  enhancing  competition  in  passenger 
transport.  

the 
to  an 

4.5.5 

Entrepreneurship and SME policy 

The share of large enterprises in Germany is higher 
than  the  EU  average  and  also  SMEs  tend  to  be 
larger than their average EU counterparts. The SME 
sector  accounts  for  61 %  of  employment 
in 
Germany  (EU  67 %)  and  generates  54 %  of  value 
added  (EU  59 %).  Large  enterprises  contribute 
39 % to employment (EU 33 %) and generate 46 % 
of  value  added  (EU  41 %).  The  contribution  of 
micro-enterprises  to  employment  is  considerably 
lower  than  the  European  average  (19 %  vs.  30 %). 
Both  the  preference  for  self-employment  and  also 
the entrepreneurship rate are slightly lower than the 
EU average.  

83  

84  

"Bericht  der  Bundesregierung  2010  zur 
Anwendung  des  Standardkosten-Modells 
und  zum  Stand  des  Bürokratieabbaus", 
Dezember 2010 
E.g. "Kraftwerksnetzanschlussverordnung" 
and "Energieleitungsausbaugesetz" 

72 

 
                                                 
German SMEs perform particularly well in respect 
to innovation. The share of SMEs with activities in 
process  innovation,  product  innovation,  as  well  as 
marketing  or  organisational  innovation  is  overall 
considerably higher than EU average. In the area of 
skills  and  training,  however,  the  results  are  more 
mixed  and  the  performance  is  much  closer  to  the 
EU average. 

to 

The business environment is overall favourable for 
entrepreneurial  activities  and  federal  and  regional 
programmes  are 
the 
in  place 
development  of  SMEs  through  a  broad  range  of 
consulting  and  financing  services.  The  well-
developed  network  of  chambers  of  commerce  as 
well  as  other  business  and  crafts  associations  also 
plays  an  important  role  in  supporting  SMEs  and 
entrepreneurs.  

support 

The funds dedicated to providing SMEs with loans 
and  guarantees  have  been  significantly  reinforced 
during  the  crisis,  which  has  contributed  to  the  fact 
that  concerns  of  a  credit  crunch  have  not 
materialised  in  Germany.  A  number  of  these  loans 
and guarantee funds were supported through ERDF 
the  general  economic 
resources.  In  view  of 
the  stimulus  package 
in  Germany, 
recovery 
"Wirtschaftsfonds  Deutschland"  was  phased  out  at 
the  end  of  2010.  Over  20  000  enterprises,  in 
particular  SMEs,  have  received  credit  funding  or 
guarantees  with  a 
total  amount  of  about 
EUR 14 billion. 

a 

start-up 

launched 

In  2010  the  Federal  Ministry  of  Economics  and 
Technology 
initiative 
"Gründerland  Deutschland"  comprising  a  broad 
range  of  programmes  and  activities.  The  aim  is  to 
raise  awareness  of  entrepreneurship  and  self-
employment,  including  among  pupils,  apprentices, 
students and adults.  

Both  in  terms  of  average  time  and  average  costs 
required  to  start-up  a  limited  liability  company, 
Germany  is  placed  clearly  below  the  EU  average 
and  has  further  improved  over  the  last  years. 
However,  an  analysis  performed  on  regional  level 
highlighted 
among 
individual "Länder" in respect to the time required 
for  business  and  tax  registration,  which  might 
indicate potential for further improvement. 

considerable 

differences 

process of European decision making, including the 
participation in public consultations. 

Considering  their  relatively  larger  size,  German 
SMEs also tend to be more active in other EU and 
non-EU  markets  than  their  European  counterparts. 
Information  and  support  for  SMEs  including  in 
respect  to  internationalisation,  market  access  in 
third countries as well as intellectual property rights 
is particularly provided through the well developed 
international  network  of  German  Chambers  of 
Commerce  ("Deutsche  Auslandshandelskammern") 
as  well  as  the  German  economic  development 
agency  "Germany  Trade  &  Invest".  Regarding 
patents and the enforcement of intellectual property 
rights,  costs  for  legal  and  tax  advisory  services 
role 
often  play 
than 
important 
administrative  costs.  In  particular 
in  non-EU 
countries,  the  enforcement  of  intellectual  property 
rights  is  an  increasingly  significant  obstacle  for 
SMEs,  due  to  complex  administrative  procedures 
and high costs for legal advisory services. 

a  more 

Effectively  addressing  the  challenge  of  a  possible 
emerging  shortage  of  high-skilled  work  force  will 
be  of  particular  importance  to  SMEs,  as  they  are 
often in a weaker position to attract and retain high 
skilled  workers  compared  to  large  enterprises, 
particularly 
competitive 
environment.  

increasingly 

an 

in 

4.5.6  Conclusion 

Overall, Germany enjoys a favourable position with 
respect 
to  competitiveness.  Its  economy  and 
industry  benefit  from  framework  conditions  which 
are conducive to R&D and innovation as well as to 
the  deployment  of  environmental  technologies. 
With its specialisation in capital goods, the German 
export sector was particularly well placed to benefit 
from  the  increasing  demand  in  emerging  markets 
and the incipient global recovery. 

The business environment is overall also favourable 
for  entrepreneurial  activities  as  SMEs  and 
entrepreneurs  have  at  their  disposal  a  broad  range 
of services provided by government authorities and 
the  well-developed  network  of  chambers  of 
and  business 
commerce 
associations. 

and  other 

crafts 

In  2011,  the  Federal  Ministry  of  Economics  and 
Technology  has  introduced  an  "SME  monitor" 
("Mittelstandsmonitor für EU-Vorhaben"). The tool 
aims  at 
legislative 
identifying  projects  and 
proposals on EU level that might be of interest for 
SMEs  and  at  strengthening  the  participation  of 
German  SMEs  and  their  representatives  in  the 

73 

In the long-term, a major challenge will be to avoid 
a  systematic  shortage  of  high-skilled  labour  force 
by  adapting  both  the  educational  system  and  the 
labour  market  to  the  changing  requirements  of 
technology and innovation. Overall Germany could 
benefit  from  further  investment  in  R&D  to  remain 
frontier.
at 

technological 

the 

 
4.6  Estonia 

Estonia

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

N.A.

N.A.

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

74 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Estonia (2009) 

Wood and wood products

Textiles and textile products

Leather and leather products

Paper products; publishing and printing

Refined petroleum products

Chemicals, chemical products

Rubber and plastic products

Food products

Manufacturing n.e.c.

Other non-metallic mineral products

Transport equipment

Basic metals and fabricated metal products

Electrical and optical equipment

Machinery and equipment n.e.c.

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.6.1 

Introduction 

relatively 

income 
in 

lower 
specialisation 

Estonia is one of the countries that are catching up 
fast:  among  the  population  of  active  enterprises,  it 
has a high share of enterprises that are growing fast; 
manufacturing  production  has  regained  all  the 
ground lost during the crisis, exceeding by 2.6 % its 
previous  cyclical  peak  in  April  2011.  Estonia 
remains a typical member of the group of countries 
levels  and  a 
with 
predominant 
labour-intensive 
industries.  However,  Estonia’s  R&D  intensity  is 
much higher than the average of this country group, 
even  though  it  is  below  average  when  taking  into 
account its industrial structure. Moreover, the share 
of  labour-intensive  exports  is  in  decline,  while  the 
shares of capital-intensive products and (difficult to 
imitate)  research-intensive  exports  is  expanding. 
Overall,  Estonia  is  improving  its  competitiveness 
and, if it keeps momentum, it will join the group of 
higher  income  countries  that  are  specialised  in 
labour-intensive industries. 

Trade and industry specialisation 

In 2009, the relative value added share of Estonia's 
the  EU 
industry  was  close 
manufacturing 
average  –  14.3 %  versus  14.9 %,  respectively.  The 
country's rapid recovery in industrial production has 

to 

75 

remains  predominantly  specialised 

been  driven  by  manufacturing  of  electronic 
products, fabricated metal products, motor vehicles, 
electrical  equipment  as  well  as  machinery  and 
equipment,  with  70%  of  the  whole  manufacturing 
production  sold  on  the  external  market.  However, 
in 
Estonia 
labour-intensive  manufacturing  industries,  such  as 
sawmilling  and  wood  planning,  carpentry  and 
joinery  and  manufacturing  of  textiles.  In  terms  of 
exports,  Estonia  is  weakly  specialised  in  capital-
intensive  industries,  such  as  refined  petroleum 
products.  At  the  more  aggregated  level,  Estonia 
remains  highly  specialised  in  sectors  with  low 
innovation and education intensity, such as clothing 
apparel  and  auxiliary  transport  activities, while  the 
top  sector  –  wood  and  wood  products  –  is 
characterised by medium innovation intensity. Most 
trade  happens  with  other  EU  countries,  with 
Sweden and Finland being partner number one and 
two;  however,  as  is  the  case  for  the  other  Baltic 
States  and  Finland,  Russia 
important 
destination  for  Estonian  exports.  This  explains 
Estonia's  relatively  high  share  in  exports  to  the 
BRICs.  While  Estonia's  share  in  the  low  price 
segment  of  exports  is  above  the  EU  average,  its 
share  in  the  high  price  segment  is  below  the  EU 
average,  thus  indicating  an  unfavourable  position. 
Nevertheless,  Estonia  has  been  climbing 
the 
technology ladder from low tech exports in the late 

is  an 

 
 
 
 
nineties  to  medium-to-low  tech  exports  in  the 
recent  decade  and  the  good  dynamism  of  its 
medium-to-high tech exports augurs relatively well 
for future trade developments. 

Most prominent sectors in Estonia 

Highest relative value added (2007)
 Wood and products of wood and cork
 Wood and products of wood and cork
 Textiles and textile products

Change in the relative value added (1999/2007)
Increasing specialisation
 Coke, refined petroleum and nuclear fuel
 Wood and products of wood and cork
 Electrical machinery and apparatus
Decreasing specialisation
 Wearing apparel, dressing and dyeing of fur
 Supporting and auxiliary transport activities; activities of travel agencies
 Water transport

Structural change 

In  Estonia,  the  crisis  seems  to  have  slowed  down 
structural change, as the variations in relative shares 
have  been  much  smaller  than  those  for  the  entire 
period 1999-2010.  

in 

Estonia  has  increased  its  industry  specialisation  in 
sectors  with  high 
innovation  and  education 
intensity, such as electrical machinery. In addition, 
trade  specialisation  has  decreased 
labour 
intensive  (e.g.  textile  weaving)  and  technology-
driven  industries  (e.g.  aircraft  and  spacecraft), 
while it has increased in mainstream manufacturing 
(e.g. manufacturing of electric motors) and capital-
refined  petroleum 
(e.g. 
intensive 
products,  man-made  fibres).  In  particular,  Estonia 
has substantially improved the R&D intensity in the 
transport,  communication  and  chemicals  sectors. 
While the quality of technology-driven industry has 
stagnated, Estonia has climbed the quality ladder in 
labour-intensive industries. 

industries 

largely  below 

in  nominal  unit 

Estonia has experienced a strong appreciation of the 
real  effective  exchange  rate  during  the  last  decade 
(53%, compared to 21% in the EU27), pointing to a 
possible loss in cost and price competitiveness. The 
increase 
labour  costs  (66%) 
between 2000 and 2010 was significant, but wages 
remained 
in 
Estonia's  main  trade  partners.  Nevertheless,  a  loss 
of profitability and competitiveness hurt low-skilled 
and  labour  intensive  sectors,  such  as  textiles,  and 
non-price  elements  were  not  always  sufficient  to 
maintain  Estonia's  market  shares.  While  labour 
productivity  per  hour  worked  has  gradually 
increased  over  the  last  years,  it  is  still  about  38 
percentage points below the EU27 average. 

those  prevailing 

4.6.2 

Towards an innovative industry 

The  Innovation  Union  Scoreboard  2010  classifies 
Estonia  as  an  innovation  follower.  It  has  been 
registering  a  rather  good  performance  in  as  far  as 
R&D  and  innovation  are  concerned:  Investment  in 
R&D  reached  1.4 %  of  GDP  in  2010.  However, 
public funding for R&D has been decreasing in the 
last two years and European Regional development 
Fund has continued to be a very important source of 
financing 
this 
situation,  the  government  is  planning  to  increase 
public sector investments to reach 1.2 % of GDP in 
2011,  hoping  that  this  will  foster  private  R&D 
investment.  

in  Estonia.  To  counterbalance 

Even though the percentage of Estonian enterprises 
providing training to their employees is higher than 
the  EU-average  –  67 %  versus  58 %,  respectively, 
one  of  the  main  challenges  of  the  Estonian 
economy  is  the  shortage  of  skilled  labour,  in 
particular engineers, as identified in a 2010 survey 
on export obstacles by the Chamber of Commerce. 
According  to  the  new  Research  and  Development 
Organisation  Act,  in  order  to  increase  the  number 
of high-skilled workers, the government is planning 
to offer state funding for university students taking 
classes  in  areas  related  to  competitiveness  and 
increase  the  number  of  PhD  students  by  offering 
them  an  employment  contract  with  appropriate 
social  guarantees.  It  is  worth  noting  that  the 
Estonian  Research,  Development  and  Innovation 
Strategy  2007-2013 
the  areas  of  IT, 
targets 
biomedicine,  and  material  sciences  as  having  the 
highest potential for increasing competitiveness.  

In  addition,  a  program  of  studies 
fostering 
entrepreneurship  as  an  elective  will  be  introduced 
in  secondary  education  as  of  2013.  A  similar 
the  2010  Entrepreneurial  Studies 
initiative  – 
Promotion Plan – identifies the relevant concepts in 
the  field  of  entrepreneurial  studies, 
including 
potential problems and recommendations on how to 
solve  them.  Furthermore,  by  exempting  work-
related  studies  from  the  tax  on  fringe  benefits,  the 
government  expects  to  encourage  companies  to 
invest in the improvement of employee skills. Once 
these measures are implemented, their effectiveness 
in improving the market of skilled labour will have 
to be assessed. 

In  order  to  improve  the  research  and  innovation 
capacity  of  enterprises,  the  government  intends  to 
create a financial instrument to support technology 
investments for manufacturers, offer venture capital 
to start-ups that innovate, improve the marketing of 
innovation output, but also attract more knowledge-
intensive  foreign  investment.  Further  measures  are 
envisaged  to  conduct  design,  IT  and  intellectual 
review  public  procurement 
property 

audits, 

76 

 
 
 
 
regulations  to  enable  innovation,  support  creative 
industries  and  space  technologies,  and  encourage 
the use of research infrastructure. 

Estonia remains below the EU average in terms of 
export of goods from eco-industries. 

In  order  to  support  new  innovative  enterprises, 
encourage  the  commercialisation  of  business  ideas 
and  develop  international  networks,  the  Start-up 
Estonia  Program  has  been  allocated  a  budget  of 
EUR 3.7 million. Moreover, a EUR 20 million new 
loan  scheme  for  technology  investments  is  being 
launched  by  the  Ministry  of Economic  Affairs  and 
will run until 2015. In addition, enterprises can now 
benefit  from 
to  5 
vouchers  per  enterprise,  worth  EEK 50 000  each) 
attached  to  R&D  providers;  the  list  of  providers  is 
currently  under  revision  to  include  private  R&D 
providers  and  creative  companies.  While  30 %  of 
Estonian  companies  produce  in-house  innovations, 
the  impact  of  these  new  measures  needs  to  be 
assessed  against 
innovation 
performance of Estonian enterprises. 

'innovation  vouchers'  (up 

the  research  and 

for  applied 

Estonia  has  been  taking  some  initiatives  aimed  at 
improving  the  cooperation  between  business  and 
academia.  While  Centers  of  Excellence,  managed 
by  the  Ministry  of  Education,  have  been  further 
to  carry  out  research,  Competence 
developed 
Centers, managed by the Ministry of Economy and 
responsible 
research,  have  been 
multiplying.  However,  in  order  to  increase  their 
effectiveness, Competence Centers could be further 
integrated  into  clusters  and  linked  to  similar 
Centers  in  the  Baltic  region.  In  general,  there  is 
room 
transfer 
between  universities  and  enterprises,  such  that 
R&D  output  could  be  efficiently  produced  and 
marketed. 

the  knowledge 

improving 

for 

Given  its  small  economy,  limited  resources,  and 
dependence  on  external  trade,  Estonia  has  to 
identify  and  prioritise  knowledge-intensive  sectors 
that are competitive internationally. This goes hand 
in hand with fostering a better cooperation between 
business  and  academia,  increasing  the  number  of 
high-skilled  workers,  and  enabling  the  business 
sector  to  innovate  and  boost  its  research  activity, 
including  through  the  use  of  Structural  Funds  and 
support schemes. 

4.6.3 

Towards a sustainable industry 

The  energy  intensity  of  the  Estonian  industry 
remains  high,  as  over  90 %  of  electrical  energy  is 
generated  from  oil  shale.  However,  the  share  of 
renewable energy has been growing in recent years, 
as a result of the 2007 support scheme and the 2010 
Renewable Energy Plan, and is likely to increase, as 
a  result  of  the  production  of  wind  energy  and  the 
use of wood. While there is a slight increase in the 
percentage  of  environmental  goods  exported, 

77 

in 

to  address 

the  region, 

In  order 
the  problem  of  energy 
efficiency,  the  government  is  considering  the  co-
generation of electricity and heat, the reconstruction 
of  plants  that  use  oil  shale,  improved  energy 
connections 
in  particular  with 
Finland,  the  development  of  an  intelligent  power 
grid  and  possibly  the  use  of  nuclear  energy.  In 
addition,  attention  is  paid  to  reducing  the  size  of 
individual  cars,  reinforcing  the  effectiveness  of 
public  transportation,  in  particular  railways,  and 
promoting the energy efficiency of households and 
public  buildings.  Estonia  has  a 
functioning 
environmental 
tax  system  and  revenues  from 
environmental  taxes  have  been  growing  in  recent 
years, from approximately 2.3 % of GDP in 2005 to 
around  3%  in  2009,  above  the  EU  average.  On 
sustainable  tourism,  Estonia  cooperates  with  the 
Destinations  of  Excellence  Program,  but  no 
particular investment measures are foreseen, as the 
infrastructure  –  i.e.  hotels  –  is  quite  recent  and 
considered  to  be  energy  efficient.  In  spite  of  these 
measures,  energy  intensity  needs  to  be  further 
reduced  through  the  adoption  of  new  technologies 
and  green  public  procurement,  which  will  have  a 
positive  impact  on  both  the  environment  and  the 
security of energy supply. 

The  sustainability  of  industry  remains  one  of  the 
in  Estonia,  which  has  been 
main  challenges 
addressed so far only through piecemeal initiatives. 
As  part  of  the  2008  Clusters  Program,  two  eco-
clusters  –  energy  efficiency  in  construction  and 
waste recycling – have been in operation since the 
end of 2009. In addition, a project enabling the use 
of  electric  cars  has  been  developed,  with  the 
infrastructure  –  200-300  chargers  –  being  partially 
funded by the Japanese government; by the end of 
2012  when  the  project  ends,  around  1 000  electric 
cars  could  be  in  use.  Further,  the  National  R&D 
Program  on  environmental  issues  has  an  energy 
technology  component  that  has  been  operating  for 
some time. Rather than tackling it through disparate 
measures,  a  comprehensive  strategy 
the 
decrease of resource intensity should be developed, 
including, 
additional 
other 
infrastructure  projects  and  the  development  of 
cross-border interconnections in the Baltic region. 

among 

things, 

for 

4.6.4 

The business environment 

terms  of 

Estonia's  business  environment  is  relatively  good 
and  business-friendly.  In 
legal  and 
regulatory  framework  and  burden  of  government 
regulation,  Estonia  scores  clearly  above  the  EU 
average.  While  satisfaction  with  the  quality  of 
infrastructure did not change and remains below the 
significant 
EU  average, 

there  has  been  a 

 
improvement  in  infrastructure  expenditure  and  the 
currently  planned  infrastructure  projects  appear 
adequate.  A  similar 
improvement  has  been 
registered 
the  availability  of  high-speed 
broadband  infrastructure,  but  the  percentage  of 
broadband  lines  in  Estonia  is  well  below  the  EU 
average.  

in 

to 

reduce 

further 

scheme 

stipulates 

identify  and 

Estonia is doing rather well in terms of the timeless 
of  tax  payment,  the  cost  of  enforcing  contracts, 
property registration and transfer, as well as start-up 
conditions: the one-stop-shop to start a company is 
fully operational and the current state-funded start-
administrative 
up 
simplifications.  Further  measures  have  been 
planned 
the  most 
burdensome  obligations  for  enterprises  and  allow 
companies  in  financial  difficulty  to  restart  their 
activities  faster.  The  2010  amendments  to  the 
Public  Procurement  Act  facilitate  the  participation 
of  companies  in  tenders  through:  a  web  portal  and 
the  possibility  of  electronic  submission  of  tenders, 
simplification  of  requirements  for  subcontractors 
and  bidders,  and  faster  procedures  for  signing 
contracts  and  solving  disputes.  Most  basic  public 
services – social contributions, corporate tax, VAT, 
declaration, 
company 
environmental  permits  –  are  available  online  to 
businesses.  The  single  contact  point  –  the  State 
Portal  www.eesti.ee  –  has  been 
to 
increase  its  user-friendliness  and  has  been  opened 
to  companies  from  other  Member  States.  In 
addition, the transposition of the Services Directive 
has been finalised and the single point of contact is 
already  operational  and  being  upgraded  with  more 
user-friendly applications. In spite of this progress, 
the  participation  of 
in  public 
procurement  is  rather  low  and  could  thus  be 
improved,  and  tendering  could  be  accelerated  and 
made  more  transparent.  Since  it  is  below  the  EU 
average, Estonia's e-commerce capacity and use of 
IT in sales could be further strengthened.  

registration, 

companies 

improved 

customs 

of 

economic 

The  Estonian  government  has  made  efforts  to  cut 
red tape by 20 %, as set in the 2007 Action Plan for 
Administrative  Burden  Reduction.  The  Economic 
Activities  Code  includes  the  target  of  reducing  the 
number 
requiring 
permits/licenses.  In  addition,  by  creating  a  one-
stop-shop  or 
existing 
procedures, Estonia has recently eliminated license 
renewal,  some  licenses  deemed  as  unnecessary,  as 
well  as  some  burdensome  steps  for  entrepreneurs 
requesting  licenses;  some  other  licenses  will  be 
replaced by simple notifications by 2014. 

consolidating 

activities 

simply 

The  reform  of  the  impact  assessment  system  has 
continued:  new  guidelines  extending  the  scope  of 
assessment  beyond  budgeting  to  aspects  of  policy 
and 
analysis 

economic, 

including 

social 

environmental  impacts  have  recently  been  adopted 
and are to be submitted to Parliament for approval. 
Business  organisations  are  confident 
the 
improvements  introduced  by  this  reform,  although 
they  are 
the  current 
consultation  system  –  i.e.  the  Advisory  Council 
attached to the Ministry of Economy. 

satisfied  with 

rather 

in 

the  secondary 

In order to further strengthen the infrastructure, the 
government  is  planning  to  continue  investments  in 
consolidating 
roads  grid  and 
extending airport runways and terminals, as well as 
to  improve  the  quality  of  equipment  and  reinforce 
transport 
connection  points  between  different 
means.  Special  attention 
to  ICT 
is  devoted 
infrastructure  and  the  continuation  of  the  large-
scale  broadband  project.  In  terms  of  cross-border 
networks,  there  are  plans  to  improve  connections 
between  Estonia,  the  Baltic  region  and  the  rest  of 
the EU. In order to attract investors, the government 
intends  to  further  develop  the  local  government 
infrastructure,  supply 
in 
English  and  consolidate  county  development 
centres. However, the energy-intensity indicators in 
transport  may  be  deteriorating.  This, 
freight 
together  with 
investment  and 
the  declining 
maintenance costs of rail infrastructure, requires to 
be monitored closely.  

information  materials 

4.6.5 

Entrepreneurship and SME policy 

Compared  to  the  EU  as  a  whole,  Estonia  has  a 
relatively  lower  share  of  micro-enterprises,  but  a 
relatively  higher  share  of  small  and  medium-sized 
enterprises, half of which  are active in services. In 
general, the business environment is SMEs-friendly 
and fosters entrepreneurship. 

Estonia  has  made  progress  in  simplifying  business 
conditions  for  SMEs.  In  order  to  facilitate  the 
creation  of  start-ups,  a  2010  amendment  of  the 
Commercial  Code  has  eliminated  the  minimum 
paid capital requirement of EUR 2 500 for start-ups 
in  their  first  year,  unless  debt  is  incurred.  In 
addition,  the  Ministry  of  Economy  is  preparing  a 
project  allowing  SMEs  to  do  their  book-keeping 
through  an  e-service  platform.  However, 
the 
business  organisations  are  concerned  that  such  an 
initiative  might  crowd  out  private  enterprises 
offering  accounting  services.  In  addition, 
the 
Reorganisation Act has enabled the closing of non-
fraudulent  businesses  in  fewer  months,  such  that 
enterprises in financial difficulty could restart their 
activities.  In  spite  of  this,  business  organisations 
complain  that  the  conditions  for  accessing  this 
scheme  are  too  strict,  which  has  resulted  in  a  low 
number  of  applications  in  the  first  two  years  of 
in  2009  and  10 
operation 
applications in 2010); the government has promised 

(5  applications 

78 

 
a future revision of the eligibility criteria. 

launched  by 

Access to finance is getting easier due to initiatives 
taken  to  facilitate  the  availability  of  credit  and 
equity  for  enterprises.  Some  measures  like  the 
Estonian Development Fund and the Large National 
Loan 
the  government  are  still 
operating. Start-up financing and venture capital are 
largely  available  in  Estonia,  although  the  lack  of 
interesting  investment  projects  is  seen  as  a  major 
bottleneck.  In  order  to  attract  more  capital  and 
leverage  the  effect  of  public  financing,  Estonia 
could  encourage  a  more  extensive  use  of  non-
financial 
funding  mechanisms  and 
traditional 
instruments  like  JEREMIE  or  JESSICA  of  the 
Structural  Funds,  although  business  organisations 
tend  to  perceive  the  implementation  of  these 
instruments as too burdensome.  

foreign 

training 

representations 

In  order  to  increase  Estonia’s  share  in  world 
exports, the government is planning to reinforce its 
support  to  entrepreneurs  oriented  towards  external 
markets,  to  facilitate  access  to  global  venture 
capital  markets,  to  encourage  the  participation  of 
creative  industries  in  foreign  markets  and  to  make 
better  use  of 
and 
international fairs. The Export Revolution Program, 
initiated  by  Enterprise  Estonia  in  February  2011, 
to  export  sales  managers  and 
offers 
matches 
them  with  exporting  enterprises:  25 
potential export managers will benefit from training 
during  an  entire  year,  after  which  they  will  be 
matched with 25 companies interested to boost their 
exports.  In  addition,  in  July  2010,  KredEx,  a  new 
state  credit  insurer,  became  the  provider  of  export 
guarantees, thus enabling a more efficient issuing of 
medium and long-term export guarantees, covering 
both  political  and  economic  risks  up  to  90 %. 
Similarly, as a result of an additional capitalisation 
of  the  system,  the  Export  Guarantee  Act  has 

increased  the  maximum  allowed  amount  for  state 
export  guarantees,  thus  being  able  to  cover  higher 
amount  transactions  that  take  place  on  foreign 
markets.  

In  order  to  promote  a  positive  attitude  towards 
entrepreneurship,  the  main  body  in  charge  of 
business support, Enterprise Estonia, has organised 
four  project  contests  in  the  last  year,  focused  on 
raising  business 
business  development 
awareness.  The 
included 
entrepreneurs  and  potential  entrepreneurs,  high 
school  and  university  students, 
teachers  and 
lecturers, as well as the wider public. 

and 
target  groups  have 

4.6.6  Conclusion 

In  order  to  continue  its  catch  up  with  the  average 
productivity  rate  in  the  EU,  the  share  of  higher 
value  added  products  and  services,  in  particular  in 
exports,  should  continue  to  rise.  Further  policy 
efforts  could  be  aimed  at  strengthening 
the 
contribution of capital to growth. At the same time, 
benefits would be available from reducing resource 
intensity,  developing 
and 
fostering  productivity  by  boosting  R&D  and 
innovation, identifying and prioritising knowledge-
intensive 
competitive 
that 
internationally  and  enhancing  human  capital 
through a comprehensive education reform.  

infrastructure 

sectors 

the 

are 

In  particular,  Estonia  would  benefit  from  an 
increase  in  the  supply  of  high-skilled  labour, 
enabling  the  business  sector  to  innovate  and  to 
increase research activity. Here the use of Structural 
fostering  better 
Funds  could  be  envisaged, 
cooperation  between  academia  and  business, 
integrating research activities and exploiting cross-
border  cooperation  opportunities  in  the  Baltic 
region.

79 

 
4.7 

Ireland 

l

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s
a

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t
s
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n

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S
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a
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s
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r
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r
t
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E

Ireland

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2009)

3.4

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

N.A.

N.A.

N.A.

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

80 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Ireland (2009) 

Refined petroleum products

Paper products; publishing and printing

Wood and wood products

Chemicals, chemical products

Food products

Machinery and equipment n.e.c.
Basic metals and fabricated metal products

Manufacturing n.e.c.
Transport equipment
Textiles and textile products
Rubber and plastic products

Other non-metallic mineral products

Leather and leather products

Electrical and optical equipment

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.7.1 

Introduction 

Trade and industry specialisation 

Manufacturing  plays  a  bigger  role  for  Ireland  than 
for the EU in total (24.2 % vs. 14.9 % of total value 
added  in  2009).  At  the  detailed  manufacturing 
industry  level,  Ireland  is  highly  specialised  in 
technology-driven  industries  such  as  computers, 
pharmaceuticals  and  electronic  valves.  In  valued 
added,  Ireland 
in  capital-
intensive  industries  (e.g.  basic  chemicals).  At  the 
more  aggregated  sector  level  Ireland  is  specialised 
in  high  and  medium-high 
innovation-intensive 
sectors  such  as  medical,  precision  and  optical 
instruments and chemicals.  

is  also  specialised 

Most prominent sectors in Ireland 

Highest relative value added (2007)
 Office, accounting and computing machinery
 Chemicals and chemical products
 Medical, precision and optical instruments

Change in the relative value added (1999/2007)
Increasing specialisation
Air transport
Medical, precision and optical instruments
Renting of machinery and equipment
Decreasing specialisation
Post and telecommunications
Radio, television and communication equipment
Chemicals and chemical products

Structural change 

Ireland  is  characterised  by  a  high  share  of  exports 
in  high  price  segments  and  low  share  in  low  price 
segments,  indicating  a  position  high  up  on  the 
quality ladder. In contrast, its R&D intensity is far 
below  the  average  given  its  industrial  structure. 
Overall,  while  in  specialisation  and  quality  Ireland 
is a typical member of the group of higher income 
in  knowledge-intensive 
countries 
industries (group 1), its R&D performance is more 
similar  to  the  group  of  lower  income  countries 
featuring 
in  knowledge-
specialisation 
intensive  industries  (group  3)  which  operate  at  the 
more  production-  and  assembly-oriented  segments 
of the value chain. 

specialised 

trade 

In  terms  of  change,  Ireland  has  considerably 
increased  the  R&D  intensity  of  its  industry  and 
climbed  up  the  quality  ladder  although  the  overall 
R&D intensity declined. This overall decline is due 
to  the  reduced  value  added  specialisation  in  high 
innovation  sectors  (communication  equipment).  At 
the  same  time  trade  specialisation  in  technology-
driven 
instruments, 
pharmaceuticals)  has  increased.  The  sector  with 
most value added is air transport. 

industries 

(optical 

The  crisis  of  2009  had  a  moderate  impact  on 
manufacturing production which recovered in 2010, 
but  has  turned  down  again  in  2011.  In  July  2011 
manufacturing  production  was  6  %  lower  than  a 

81 

 
 
 
 
 
year earlier. In general, the crisis seems to have hit 
capital-intensive  and  marketing-driven  industries 
harder, while technology-driven ones have suffered 
less. 

Ireland has seen an appreciation of the real effective 
exchange  rate  by  25%  over  the  last  decade 
(compared to 21% in the EU27), indicating a loss in 
cost and price competitiveness. Nominal unit labour 
costs  have  increased  by  27%  between  2000  and 
2010, compared to an increase of 14% in the EU27 
and  20%  in  the  Euro  area.  Over  the  last  decade, 
Ireland's  labour  productivity  per  hour  worked  has 
remained  relatively  stable  at  about  23  percentage 
points  above  the  EU27  average  and  10  percentage 
points above the Euro area average. This means that 
despite  the  exchange  rate  effect,  the  outlook  for 
position 
competitiveness 
Ireland’s 
the 
to 
opposed 
(as 
remains 
macroeconomic  and  financial  problems).  In  line 
with many other countries, to preserve and heighten 
its advantage, Ireland needs to move further up the 
value  chain  to  the  knowledge-creating  parts  of  the 
knowledge-intensive 
is  already 
specialised in. 

structural 
favourable 

industries 

it 

4.7.2 

Towards an innovative industry 

According  to  the  Innovation  Union  Scoreboard 
2010,  Ireland  is  an  innovation  follower.  While 
foreign  companies  are  expected  to  have  reduced 
R&D  outlays  slightly  in  2010  compared  to  2009, 
Irish  companies  are  expected  to  have  increased 
theirs  slightly.  As  a  consequence,  private  R&D 
expenditures 
to  be 
surprisingly resilient during the crisis. This is likely 
to  be  due  to  the  tax  exemption  for  small  start-up 
companies  and 
the  R&D  Tax  Credit  which 
contributed measurably to fostering R&D.  

Ireland  have  proven 

in 

The  new  government  has  made  the  accounting 
treatment  of  the  research  tax  credit  regime  more 
flexible to make it more attractive and accessible to 
smaller businesses. 

The  Irish  government  has  proposed  further  actions 
in  its  services  strategy  to  promote  the  continued 
development  of  the  services  sector.  These  actions 
include  integrated  inter-disciplinary  education  for 
service  activities,  dedicated  business  support 
measure  to  promote  R&D  and  the  use  of  public 
procurement to stimulate innovation in services. So 
far, however, public procurement rules, although in 
principle  innovation  friendly,  seem  to  be  applied 
even stricter to ensure that costs are kept low. 

One of the main challenges for the Irish innovation 
system  is  the  higher  education  sector.  The  sector 
received  significant  funds  since  2000  but  has  now 
to  cope  with  significant  cuts.  Given  the  budgetary 

situation,  the  focus  of  the  government  is  on  the 
deliverables from the previous investment in terms 
of  products  and  services,  which  could  be 
commercialised, and on setting priorities for future 
R&D  spending.  While  the  latter  is  clearly  needed, 
scientific  output  in  many  fields  has  increased 
considerably in recent years and has placed Ireland 
in the top league of research. However, it should be 
noted that commercialisation of research is a time-
consuming  process  and  its  use  as  a  short-term 
benchmark may distort the assessment of the utility 
of research spending. 

to 

increase 

indigenous  companies 

Another  important  challenge  is  to  help  medium-
sized 
their 
financial  and  managerial  capacity  to  innovate  and 
undertake  R&D,  including  by  closer  cooperation 
between  companies  and  institutions  of  higher 
education.  It  would  now  be  important  to  use  low-
budget instruments such as “knowledge brokers” in 
order  to  facilitate  closer  cooperation  with  third-
level institutions. Indeed, this would also offer new 
opportunities to commercialise research output and 
help universities to tap new sources of funding. 

There  are  no  indications  that  Ireland  is  currently 
suffering  from  significant  skill  gaps  in  any  sector 
and, until the onset of the crisis, the Irish Diaspora 
has  proved  to  be  an  important  source  of  skilled 
workers.  The  share  of  science  and  technology 
graduates  in  Ireland  is  still  above  the  EU-average. 
A  key  challenge  for  the  years  to  come  is  therefore 
to ensure that spending cuts in the higher education 
sector  will  not  translate  into  significantly  lower 
numbers  of  STE  students  compared  to  arts  and 
humanities  graduates,  whose  education  is  usually 
less costly. 

4.7.3 

Towards a sustainable industry 

the 

The  environmental  performance  of 
Irish 
industry  is  broadly  in  line  with  EU  trends.  If 
anything,  energy  intensity  is  somewhat  lower  than 
on  average  in the  EU, but  this  reflects  the absence 
of  heavy  industry  in  Ireland  rather  than  better 
performance.  The 
share  of 
environmental  goods 
total  goods  exports 
in 
indicates in any case that Ireland does not yet fully 
benefit  from  the  emergence  of  green  markets.  In 
fact,  its  position  relative  to  the  EU  average  has 
deteriorated in recent years although the share itself 
has somewhat increased. 

relatively 

low 

Moreover,  buoyant  economic  growth  has  led  to 
significantly increased CO2 emissions, in particular 
from transport, and the existing housing stock often 
suffers 
thermal  efficiency.  These 
challenges  provide  an opportunity  to  reallocate  the 
resources  freed  from  the  construction  sector  into 
sustained investment in transport infrastructure, and 

from  poor 

82 

 
can  provide  new  markets  for  ways  to  increase  the 
thermal efficiency. 

by 

presented 

opportunities 

Ireland has taken a number of policy measures and 
initiative to improve sustainability and to foster the 
development  of  a  genuine  environmental  products 
and  services  sector.  The  Environment  and  Green 
Technologies  Department  of  Enterprise  Ireland 
offers  a  GreenTech  Support  scheme  to  its  clients, 
particularly  in  the  SME  sector.  The  scheme  is 
designed to help these companies take advantage of 
the 
integrating 
environmental  sustainability  into  their  business. 
The  Dublin  Airport  Authority  is  pursuing  the 
establishment  of  a  specialist  'Cleantech  Incubation 
Facility' at the airport. It is intended to house up to 
20  high  potential  start-ups’  in  a  concentrated 
environment  allowing  research  synergies,  shared 
services  and  access  to  trade  services  to  take  place. 
Moreover,  capital  allowances  of  100 %  of  the  cost 
those  companies 
are  available  until  2014 
investing 
energy-efficient 
in 
equipment.  The  Better  Energy  programme, 
previously known as Home Energy Saving Scheme 
(HES),  has  also  received  additional  funding. 
Together  with  lower  individual  grants,  this  means 
that more homes can avail of these incentives. The 
programme  provides  grants 
retro-fitting 
insulation  and  other  energy  efficiency  measures  to 
housing  stock  built  before  2006.  The  measure  is 
thus  likely  to  help  the  construction  sector  to 
towards  more  sustainable 
reallocate  resources 
purposes.  

to 
high 

specific 

for 

The  National  Action  Plan  on  Green  Public 
Procurement  which  is  currently  subject  to  public 
consultation aims to harness public procurement to 
move  the  market  in  favour  of  eco-efficient  goods 
and services. It puts forward seven priority product 
groups for which the public sector should have GPP 
criteria  in  all  of  their  tendering  processes.  In  view 
of  the  amount  of  government  purchases,  GPP  has 
the  potential  to  provide  considerable  leverage.  It 
remains  to  be  seen  however  how  much  fiscal 
leeway  public  authority  will  have  to  apply  the 
criteria in practice. 

The main issue for Ireland in the years to come is to 
grasp  the  opportunities  a  comprehensive  greening 
of  the  economy  is  likely  to  offer.  To  ensure 
synergies and the efficient use of limited resources, 
efforts to prioritise R&D and strengthen innovation 
could  be  strengthened  by  taking  into  account  the 
need to foster sustainability. 

4.7.4 

The business environment 

Ireland  is  generally  perceived  as  one  of  the  most 
attractive  business  locations.  For  instance,  it  ranks 
ninth in the World Bank’s Doing Business index, in 

the  EU  surpassed  only  by  Denmark  and  the  UK. 
Together  with  being  an  English-language  location 
and due to historically close ties with the US, these 
factors have contributed to attracting a considerable 
amount  of  overseas  FDI.  Another  important  factor 
in  this  regard  has  been  the  availability  of  a  well 
increasingly  fuelled  by 
educated 
repatriates  and 
Ireland’s 
reversal  of 
traditional role as an emigration country. 

labour  force 

thus  a 

regulatory 

legal  and 

Going more into detail, Ireland scores significantly 
above  the  EU  average  concerning  infrastructure 
expenditures and clearly above average concerning 
framework  and  e-
the 
government usage by enterprises. However, Ireland 
still  scores  below  the  EU  average  concerning 
satisfaction  with  the  quality  of  infrastructure  and 
the  availability  of  high-speed  broadband  lines.  But 
for  medium-sized 
prices 
while 
enterprises  were  a  matter  of  concern  in  the  past, 
market  opening  and  increased  competition  have 
been improving the country’s ranking in almost all 
consumption bands since he second half of 2007.  

electricity 

to 

further 

improve 

Despite  its  all-in-all  satisfactory  position,  Ireland 
has  initiated  over  recent  years  a  number  of  policy 
the  business 
measures 
environment. Their track-record varies though. For 
instance,  the  government  has  initiated  in  2010  the 
construction  of  a  smart  broadband  network  called 
the  Exemplar  Network  that  makes  use  of  multiple 
colours  of  fibre  to  dramatically  boost  the  speed  of 
fibre-based  communications.  This  network  will  go 
live  for  test  and  trial  in  the  course  of  2011.  By 
contrast,  the  ambitious  Transport  21  programme, 
whose  implementation  was  well  under  way  until 
2008,  and  which  had  foreseen  major  investment 
projects  for  all 
to  be 
reassessed  in  view  of  the  budgetary  situation.  The 
original  allocation  for  Transport  21  totalled  about 
EUR 7 billion between 2008 and 2014. The capital 
review which is being currently carried out in order 
to establish a new capital investment framework for 
the  period  2012-2016  is  expected  to  be  completed 
by  the  end  of  September  this  year,  and  will 
supersede Transport 21.  

transport  modes,  had 

In  particular  infrastructure  development  did  not 
always keep pace with high growth in recent years 
and may therefore lead to bottlenecks once growth 
picks  up  again.  Against  this  background,  the 
relatively  high  level  of  infrastructure  expenditures 
for  both  transport  and  communications  must  be 
seen  as  an  attempt  to  compensate  for  insufficient 
outlays in the past. The main issue is therefore that 
infrastructure investment in real terms is maintained 
at an adequate level. 

Legal costs in Ireland are for quite some time being 
criticised  for  being  both  high  and  opaque.  In  an 

83 

 
to 

to 

contribute 

improved 
the  Irish  government 

price 
effort 
competitiveness, 
intends 
therefore to introduce legislative changes to remove 
restrictions  to  trade  and  competition  in  sheltered 
sectors, notably the legal profession, by establishing 
an  independent  regulator  for  the  profession  and 
implementing  the  recommendations  of  the  Legal 
Costs Working Group and outstanding Competition 
Authority 
the 
introduction  of  conveyors  as  a  new  profession. 
However, in spite of its good record, Ireland could 
strengthen  the  enforcement  of  its  competition  law 
by 
for 
effective 
infringements. 

recommendations 

introducing 

including 

sanctions 

Another  key  challenge  in  the  years  to  come  is  to 
ensure that the current economic situation does not 
initiate 
this  would 
Ireland’s  attractiveness  as  a  key 
undermine 
destination of FDI in Europe. 

large  scale  emigration  as 

4.7.5 

Entrepreneurship and SME policy 

The  economic  significance  of  SMEs  in  Ireland  is 
broadly in line with the European average. In terms 
of employment, the contribution of SMEs is slightly 
higher  than  the  European  average  (68.5 %  instead 
of  67.4 %)  whereas  in  terms  of  value-added  the 
share  of  SMEs  is  somewhat  lower  than  the 
European average (51.7 % instead of 57.9 %).  

In  terms  of  the  specific  framework  conditions  for 
SMEs, Ireland scores slightly above the EU average 
for  the  payment  duration  by  public  authorities. 
Nevertheless, 
there  was  some  criticism  from 
businesses complaining about lengthening payment 
periods.  As  to  financing,  Ireland  scores  slightly 
below average concerning the rate of business bank 
loan demands rejected by banks or bank loan offers 
to  companies  that  were rejected by  the  latter. As  a 
consequence  of  the  economic  and  financial  crisis, 
however,  there  is  now  even  more  widespread 
concern  about  both  access  to  finance  and  credit 
costs. Available statistics may indeed underestimate 
the  problem  as  many  businesses  are  reluctant  to 
apply  for  credit  in  the  first  place  or  are  given 
informal advice to abstain from a credit application. 

of 

are 

relevance 

particular 

Ireland  has  taken  a  number  of  policy  measures 
which 
for 
entrepreneurship and SMEs and which also address 
some  of  the  aforementioned  issues.  As  part  of  the 
anti-crisis  measures,  the  government  has  reduced 
the  payment  period  by  central  government 
departments  to  their  business  suppliers  from  30  to 
15  calendar  days  and  other  government  agencies 
have  been  asked  to  do  the  same.  A  credit  review 
system  has  also  been  set  up  to  ensure  that  SMEs, 
sole traders and farm enterprises will have recourse 
to an independent, external review of bank’s credit 

refusal decisions. In view of the limited success of 
this  review  system,  the  new  government  now 
intends  to  initiate  a  tendering  process  for  the 
development  of  a 
temporary,  partial  credit 
guarantee  scheme.  The  design  of  the  scheme  will 
draw  from  international  experience  to  support  new 
lending 
that  would  not  otherwise  have  been 
extended  by  the  banks.  The  scheme  is  intended  to 
complement, rather than be a substitute for, existing 
lending activities by the main financial institutions. 
Its objective is to encourage banks to lend to new or 
expanding  commercially  viable  SMEs  so  that  they 
can  grow  their  company,  develop  new  products  or 
In  addition,  a 
expand 
Microfinance  Start-Up  Fund  to  provide  loans  to 
small businesses is being developed. In this context, 
a  workable 
scheme  and  optimum  delivery 
mechanisms are currently being considered and the 
work  is  to  be  finalised  in  time  for  the  December 
Budget. 

into  new  markets. 

tendering 

procedures  without 

A  three-year  corporate  tax  and  capital  exemption 
for  start-up  companies  was  introduced  in  2009. 
New guidelines for procurement practices have also 
been  published  by  the  Department  of  Finance. 
These  guidelines  encourage  smaller  lot  sizes  and 
pre-
“open” 
qualification  of  tenders.  They  aim  to  encourage 
greater  SME  participation  in  tendering  for  public 
contracts.  A  nation-wide  one-stop-shop  allowing 
entrepreneurs 
the  necessary 
to  carry  out  all 
procedures  –  including  registration,  tax,  VAT  and 
social  security  –  at  once  and  at  one  administrative 
point  had  been  announced  for  December  2009  but 
is not yet fully functional. 

Ireland does not face major challenges with respect 
to entrepreneurship and SME policies. However, to 
facilitate  business  creation  and  growth  once 
economic  growth  picks  up  again,  a  timely  and 
comprehensive  implementation  of  the  broad  range 
of  initiatives  and  measures  which  are  currently  on 
the agenda would be helpful. 

4.7.6  Conclusion 

The  main  short-term  challenge  for  Ireland  is  to 
return  to  a  balanced  growth  path  in  line  with  the 
Council  recommendations.  At  the  same  time,  the 
undisputed  need  to  consolidate  public  finances 
necessitates  a  careful  review  of  spending  and 
taxation  priorities  with  a  view 
the 
emergence  of  future  bottlenecks  to  growth,  in 
particular with regard to infrastructure and research. 

to  avoid 

Ireland’s efforts to shift growth from foreign direct 
investment based on labour cost and construction to 
more  innovative  sectors  and  services  had  already 
born  some  fruit  before  the  onset  of  the  current 
crisis.  Long-term  efforts  to  provide  incentives  for 

84 

 
more  sustainable  growth  also  go  in  the  right 
direction.  In  addition,  Ireland  scores  significantly 
above  the  EU  average  on  many  aspects  of  its 
business environment and work force. The country 
is  therefore  relatively  well-placed  to  overcome  the 
In 
crisis  although  some  challenges 

remain. 

particular  the  capacity  of  indigenous  firms  to 
innovate could be stepped up further, capitalising as 
much  as  possible  on  the  increased  investment  in 
public  R&D  and  the  development  of  a  green  tech 
sector.

85 

 
 
4.8  Greece 

Greece

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2008)

R&D performed by business (% of GDP; 2007)

Share of innovating enterprises as % of all enterprises (2006)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

y
r
t
s
u
d
n

i

Infrastructure expenditures (euro per inhabitant; 2009)

N.A.

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

N.A.

N.A.

N.A.

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

86 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Greece (2009) 

Food products

Textiles and textile products

Leather and leather products

Refined petroleum products

Chemicals, chemical products

Wood and wood products

Paper products; publishing and printing

Manufacturing n.e.c.

Transport equipment

Electrical and optical equipment

Machinery and equipment n.e.c.

Rubber and plastic products
Other non-metallic mineral products

Basic metals and fabricated metal products

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.8.1 

Introduction85 

Trade and industry specialisation  

technology-driven industries, but still below the EU 
average. The same holds true for its R&D intensity, 
which is below average given its industrial structure 
but above its group average. 

industry 

the  detailed  manufacturing 

Greece belongs to the group of EU Member States 
characterised by higher income and a specialisation 
in  technologically  less  advanced  sectors  (group  2). 
At 
level, 
Greece  features  strong  specialisation  in  marketing 
driven  industries  (manufacture  of  vegetable  oils, 
processing  and  preserving  of  fruit  and  vegetables), 
as well as in labour-intensive (dressing and dying of 
fur) and capital-intensive industries (manufacture of 
cement,  lime  and  plaster).  At  the  more  aggregated 
sector  level,  Greece  is  specialised  in  low  and 
medium-low innovation and education sectors, such 
as wearing apparel and water transport. The shares 
of its exports to the BRIC countries are very low. 

Greece  differs  from  its  group  higher  income 
countries  specialised  in  labour-intensive  industries 
through  its  tendency  to  compete  in  the  low  price 
market segments of labour-intensive industries; it is 
somewhat  higher  up  on  the  quality  ladder  in 

85  

For main sources used see the 
methodological annex. The cut-off date for 
all data and qualitative information is 31 
August 2010. 

87 

Most prominent sectors in Greece 

Highest relative value added (2007)
Water transport
Coke, refined petroleum and nuclear fuel
Wearing apparel, dressing and dyeing of fur

Change in the relative value added (1999/2007)
Increasing specialisation
Coke, refined petroleum and nuclear fuel
Tobacco products
Wearing apparel, dressing and dyeing of fur
Decreasing specialisation
Hotels and restaurants
Retail trade, except of motor vehicles and motorcycles; 
   repair of household goods
Water transport

Structural change 

In  terms  of  change,  Greece  has  increased  the 
relative 
share  of  mainstream  manufacturing 
(manufacture  of  batteries,  accumulators)  and 
technology-driven  industries  (electronic  valves)  in 
exports,  while  the  relative  share  of  the  same 

 
 
 
                                                 
 
 
 
industry  types  in  value  added  (manufacture  of 
electric  motors,  motor  vehicles)  has  decreased.  It 
has  further  increased  its  specialisation  in  labour-
intensive 
industries.  Moreover,  Greece  has 
considerably  increased  its  relative  share  in  highly 
innovation-intensive  sectors  –  albeit  from  a  very 
low  level  –  (machinery,  computers,  instruments) 
and  has  decreased 
low 
innovation  sectors  (hotels  and  restaurants,  water 
a  mixed 
transport).  Greece 
performance  on  the  quality  ladder,  with  some 
indicators  improving  and  others  deteriorating.  Its 
sectoral R&D intensity has decreased relative to the 
average,  with  however  increasing  intensity  in 
computers. 

its  relative  share  of 

demonstrates 

economic 

on  Greece’s 

The  crisis  seems  to  have  had  a  limited  but  visible 
impact 
structure. 
Manufacturing seems to have reversed its declining 
trend  while  construction  accelerated  its  decline  in 
value 
added.  Nevertheless,  manufacturing 
production in March 2011 was 22.2 % less than its 
2008  peak.  Regarding  exports,  only  marketing-
driven  industries  fared  clearly  better  during  the 
crisis than before. 

a 

in 

loss 

cost 

Greece  has  showed  a  moderate  appreciation  of  the 
real  effective  exchange  rate  over  the  last  decade 
(11%,  compared  to  21%  in  the  EU27),  indicating 
nevertheless 
price 
competitiveness.  Nominal  unit  labour  costs  have 
increased  by  37%  between  2000  and  2010, 
compared  to  an  increase  of  14%  in  the  EU27  and 
20% in the Euro area. Labour productivity per hour 
worked  is  about  25  percentage  points  below  the 
EU27  average  and  39  percentage  points  below  the 
Euro area average. 

and 

is 

in 

unfavourable 
Overall,  Greece 
an 
the  structural 
competitiveness  position,  while 
dynamics  are  mixed,  showing  improvement  in 
some  areas  (from  low  levels)  but  deterioration  in 
others. 

4.8.2 

Towards an innovative industry 

According  to  the  Innovation  Union  Scoreboard 
2010, Greece is a moderate innovator. The structure 
of  the  Greek  economy  (specialisation  in  less 
technologically advanced sectors and predominance 
of micro to small, family owned enterprises) is not 
conducive to a strong R&D activity. Consequently, 
R&D  investments  in  relation  to  GDP,  particularly 
in the private sector, are amongst the lowest in EU 
and  the  innovativeness  of  the  Greek  economy 
depends heavily on imported technology and know-
how.  It  flourishes  thanks  to  organisational  and 
marketing  innovations  and  much  less  on  the 
production and exploitation of new knowledge. EU 
programmes  (the  Research Framework  Programme 

88 

and the Structural Funds) play a major role in both 
R&D and innovation activity in Greece. 

Private  R&D  projects  are  promoted  through  tax 
rebates  and  the  new  investment  law  which  also 
provides  grants  for  technology  upgrading  projects. 
The  co-funded  by  the  EU  Structural  Funds  action 
Collaboration 2011 (collaborative research projects 
between  companies  of  any  size  and  research 
institutions) of a total public expenditure of EUR 68 
million  has  been  launched  in  May  2011.  Further 
actions  are  being  planned  regarding  spin  offs  and 
spin outs (a similar action was completed in 2010), 
clusters  (preliminary  call  for  expression  of  interest 
published)  and  innovative  SMEs  (announcement 
made  for  a  call  for  projects  to  open  in  July  2011, 
budget EUR 30 million). In addition, the Innovation 
Vouchers  action  launched  in  2009  is  still  open 
(budget EUR 8.4 million). 

Following  the  transfer  in  November  2009  of  the 
Secretariat  General  for  Research  and  Technology 
from  the  Ministry  of  Regional  Development  and 
Competitiveness  to  the  Ministry  of  Education  (on 
the grounds that the majority of research is carried 
out  in Universities)  the  main  research  programmes 
suffered delays as the whole evaluation regime has 
been  redrawn.  It  is  now  based  on  an  electronic 
platform  and  is  conducted  entirely  in  English. 
However,  in  many  instances  this  led  to  research 
proposals being re-written and re-submitted. 

Producing new technology and transferring it to the 
market  are  both  problematic.  Bottlenecks  are 
funding  (R&D 
investments  and  early  venture 
capital are too low) but also structural issues, since 
existing  instruments  do  not  seem  to  be  very 
improve 
effective.  This  points 
innovation  policy  design  and 
implementation, 
notably  through  evaluating  and  drawing  lessons 
from  past 
improving 
experience.  However, 
the  business  environment  would 
drastically 
probably  do  more 
innovation 
improving 
for 
performance  as  new  investments  will  help  bring 
about new process and product innovation.  

to  a  need 

to 

4.8.3 

Towards a sustainable industry 

existing 

indicators 

the  basis  of 

the 
On 
environmental  performance  of  the  Greek  industry 
can  be  characterised  as  rather  poor.  This  relates  to 
weaknesses  in  the  regulatory  and  administrative 
environment  (inspection  and  enforcement,  absence 
of 
delivering 
environmental permits) and to the absence of basic 
infrastructures  (waste  treatment  facilities,  but  also, 
to a certain degree, organised industrial zones). 

land-use 

delays 

codes, 

in 

The  main 
for 
environmental policy is the Operational Programme 

instrument 

funding 

current 

 
Community 

Environment  and  sustainable  development  with  a 
EUR 2.550 billion 
total 
of 
envelop 
(EUR 1.800 billion 
and 
funds 
EUR 450 million national participation) over 2007-
2013. Some targeted actions focusing on businesses 
are  also  funded  by  the  OP  Competitiveness  and 
entrepreneurship. 
actions,  Green 
Infrastructures  2010  (promoting  SME  investments 
in 
rehabilitation,  waste  collection, 
treatment and disposal) and Green Enterprise 2010 
(encouraging  investments  of  manufacturing  SMEs 
aiming  at  reducing  their  environmental  impact), 
have entered the payments phase in 2011. 

recycling, 

two 

Its 

for 

started 

In  parallel,  work 

An  important  institutional  development  in  2011  is 
the  adoption  of  Law  3982/2011  simplifying  the 
licensing  of  business  parks  (previously  industrial 
zones). 
the 
rationalisation  and  simplification  of  procedures 
regarding  environmental  permits,  notably  by 
modernising 
installations 
the  classification  of 
according  to  the  nuisances  they  produce  and  by 
introducing strict deadlines for reaction by licensing 
authorities,  the  principle  of  silent  consent  and 
standardised  environmental  impact  assessments. 
The  same  action  plan  includes  actions  to  make 
operational  (i.e.  adopt  all  remaining  implementing 
regulatory  acts)  the  specific  regional  planning 
framework  for  industry  and  integrate  it  in  the 
regional  plans  under  preparation  as  well  as  the 
revision  of  the  national  management  scheme  for 
hazardous industrial waste. 

A consultation was launched to constitute an index 
of  available  products  and  services  with  a 
environmental  label  in  order  to  determine  the 
readiness  of 
the 
introduction  of  environmental  standards  in  public 
procurement.  

the  domestic  market 

for 

Lengthy  and  opaque  procedures  for  obtaining 
environmental  permits  and  the  absence  of  detailed 
and clear spatial planning codes are interlinked and 
constitute  a  major  hurdle  for 
investments  of 
significant  scale  in  Greece.  Therefore,  the  efforts 
being deployed to rationalise, simlify and complete 
this  framework  are  of  major  importance,  not  only 
from the sustainability point of view but also for the 
business environment in general. 

reinforce 

incentives 

Steps  are  being  taken  to  adapt  the  regulatory 
framework  and 
towards 
bringing about a more sustainable industry. Timely 
and  effective  implementation,  including  through 
overhauling enforcement, will be crucial in order to 
improve the situation in existing enterprises and to 
create a viable market for eco-industries. 

4.8.4 

The business environment 

89 

Greece  emerges  from  the  various  international 
benchmarking  exercises  as  among  the  weakest  EU 
countries.  Also,  the  very  low  level  of  inward  FDI 
bears  testimony  to  its  lack  of  attractiveness  as  a 
business  location.  In  comparison  with  other  EU  or 
OECD countries, Greece displays a higher number 
of  procedures  and  a  higher  cost  –monetary  or  in 
time-  in  carrying  out  routine  business  operations 
while basic instruments, such as land use codes, are 
not  operational.  Moreover,  slow  (energy,  port 
services)  or  inexistent  liberalisation  in  some  key 
markets 
(road  haulage,  professional  services) 
contributes to higher costs. 

In  the  May  2010  Memorandum  of  Understanding 
(MoU)  between  Greece  on  one  part  and  the 
European Commission, the European Central Bank 
and  the  International  Monetary  Fund  on  the  other, 
the Greek government committed itself to a number 
of  important  reforms  relating  to  product  markets 
which  complement  the  actions  relating  to  public 
finance and the labour market. These reforms target 
a  number  of  well  documented  weaknesses  of  the 
business  environment  (business  creation,  licensing 
of  activities,  investment  authorisations,  deficient 
land  use  regime,  administrative  burden  to  exports, 
absence  of  a  coherent  Better  Regulation  policy) 
directly and detailed milestones for addressing them 
have been set out.  

Further  actions  are  being  planned  under 
the 
forthcoming  Action  Plan  for  a  Business  Friendly 
Greece, which  focuses on  the  removal  of  the  most 
important  barriers  to  entrepreneurship  over  the 
period 2011-2012 by adddressing isssues related to 
law,  starting  up,  establishment  and 
company 
winding-up  of  a  business,  labour  and  insurance 
matters, transportation, market operating problems, 
transactions  with  the  public  sector  and  public 
the  EU 
procurement, 
Structural funds etc.  

taxation,  absorption  of 

Regarding  business  start-up,  Law  3853/10  of  17 
June  2010  on  the  simplification  of  procedures  for 
the establishment of personal and capital companies 
became  effective  in  April  2011  when  the  new 
Commercial  Electronic  General  Registry  (GEMI) 
started  operating.  The  new  one-stop-system  made 
possible  starting  up  new  business  in  one  day  and 
reducing considerably related cost and will acquire 
additional  functionalities  in  future,  including  on-
line registration and facilitation of start-up of more 
forms of businesses.  

It  was 

A  new  law  on  fast-tracking  the  authorisation  of 
large-scale  investments  was  adopted  earlier  in  the 
year. 
followed  by  Law  3982/2011 
of 
simplifying 
manufacturing  activities  (installation  and  operation 
permits),  adopted  in  June  2011.  It  simplifies 

accelerating 

licensing 

and 

 
licensing,  especially  for  lower  nuisance  activities 
and  introduces  strict  deadlines  for  reaction  by 
licensing  authorities  and  the  principle  of  silent 
consent,  while  at  the  same  time  it  offers  the 
possibility  of  licensing  through  certified  chambers. 
Moreover,  the  new  law  modernises  and  simplifies 
the licensing of a series of technical professions in 
the  context  of  the  Services  Directive.  Additional 
measures  to  simplify  environmental  permits  and 
make  the  land  use  codes  operational  (ref.  supra) 
will contribute towards removing some of the main 
bottlenecks for investment. 

With  respect  to  product  markets,  new  legislation 
strengthened  the  effectiveness  of  the  Hellenic 
Competition  Commission  (HCC),  essentially  by 
increasing  its  independence  and  its  autonomy  in 
fixing  its  agenda  through  pre-set  criteria.  Another 
law  targeted  regulated  professions,  removing  a 
number  of  restrictions  regarding  lawyers,  notaries, 
engineers  and  certified  auditors  and  outlawing 
horizontally a series of restrictive practices in other 
professions.  Additional  sector-specific  restrictions 
were  abolished  in  the  framework  of  implementing 
the  services  Directive  (retail  trade,  tourism  and 
education services). 

An  effort  to  reform  the  central  administration  is 
ongoing under the MoU but is still at a preparatory 
phase,  pending  the  realisation  of  a  number  of  in-
depth  functional  reviews.  They  should  provide  the 
basis  for  identifying  actions  to  streamline  public 
to  eliminate  overlapping 
organisations  so  as 
responsibilities.  A  major  reform  of 
territorial 
organisation and administration has been completed 
in 2010 and should reach steady state in 2011 with 
the  final  transfer  of  some  key  competencies.  Plans 
to  reorganise  state  companies  (including  those 
controlled  by  local  authorities)  proceed  rather 
slowly.  

A draft law on better regulation had been endorsed 
by  the  Council  of  ministers.  In  practice,  all  new 
legislation is the subject of public consultation and 
impact assessment analysis even though the quality 
of  the  latter  is  variable.  The  national  plan  for 
reducing administrative burden has suffered delays, 
especially  as  concerns  measuring.  However,  in 
substance, measures such as those recently adopted 
on  licensing  of  manufacturing  and  those  linked  to 
the  services  directive  will  achieve  considerable 
regulatory 
of 
administrative burden. 

simplification 

reduction 

and 

This situation has started to change with a number 
of  laws  adopted  in  2010-2011  while  many  others 
are  in  preparation.  They  address  some  business 
environment bottlenecks identified over the years in 
Greece, such as excessive red tape and insufficient 
competition  in  the  services  sector.  The  reform  of 

90 

the  Greek  public  administration  remains  a  crucial 
undertaking,  not  only  because  it  can  raise  the 
productivity of the public sector but also, and even 
more  importantly,  because  it  can  contribute  to 
raising  the  overall  efficiency  of  the  economy  by 
the 
improving 
necessary policies and by reducing its burden on the 
business  sector.  Indeed,  the  main  challenge  in  the 
immediate  future 
the  effective  design  and 
implementation  of  the  planned  measurest  through 
secondary acts. 

the  state's  capacity 

to  deliver 

is 

other 

determinants 

Over the longer term, it would be useful to address 
business 
also 
environment,  including  reducing  excessive  delays 
in  the  judiciary  and  restoring  stability  in  business 
taxation. 

the 

of 

4.8.5 

Entrepreneurship and SME policy 

The SME sector in Greece is more prominent than 
in  the  EU  as  a  whole,  and  dominated  by  micro 
total 
enterprises,  which  account  for  58 %  of 
employment, almost twice as much as in the EU on 
average.  The  total  SME  sector  employment  is  also 
significantly  higher  than  in  the  EU  as  a  whole 
for  self-
to  67 %).  The  preference 
(85.7 % 
employment  is  much  higher  than  in  the  rest  of  the 
EU  but  the  entrepreneurship  rate  is  average.  The 
economic  crisis  has  put  Greek  enterprises  under 
considerable  stress  both  through  a  credit  squeeze 
and an internal demand shock. 

for 

fostering 

The  government  has  redesigned  its  instruments  for 
providing targeted financial support to the business 
investment.  The  new 
sector 
Development  law  (national  state  aid  scheme  for 
investments)  is  marking  a  departure  from  grants 
towards  tax  rebates,  with  the  exception  of  the 
measures in support of new enterprises. Contrary to 
the past, it is fully budgeted with periodic calls for 
investment  projects  of  a  pre-determined 
total 
amount.  The  first  call,  for  projects 
totalling 
EUR 2.2 billion of tax rebates and EUR 800 million 
of  grants  run  in  April  and  May  2011.  Another 
EUR 1.2 billion  will  be  offered  in  the  second  half 
of  the  year,  to  which  will  be  added  the  credits  not 
absorbed in the first call. More specific calls, open 
all  year,  should  be  made  later  addressing  youth 
entrepreneurship 
clusters 
(EUR 50 million) and large projects. 

(EUR 150 million), 

is 

law, 

the  National  Fund 

Another  new  instrument,  complementary  to  the 
investment 
for 
Entrepreneurship  and  Development  (ETEAN  -  an 
instrument 
the 
competencies  of  the  ex-SME  Guarantee  Fund). 
ETEAN  is  financed  by  the  EU  Structural  Funds 
(OP Entrepreneurship and Competitiveness) and its 
modus  operandi  is  the  creation  of  funds,  together 

expanding 

replacing 

and 

 
the 

from 

loans 

banks 

to  provide  "softer" 

with  and  under  the  management  of  commercial 
banks,  destined 
to 
enterprises, mainly SMEs. It launched in May 2011 
a call86 for bank proposals aiming at the creation of 
business  loan  portfolios  totalling  EUR 1.2 billion 
and 
(EUR 800 million 
EUR 400 million  from  ETEAN).  The  loans  would 
be  long  term  (up  to  ten  years)  and  their  interest 
rates would be subsidised. The beneficiaries should 
be  SMEs.  Half  of  this  amount  of  loans  is  destined 
to  facilitate  the  financing  of  projects  submitted 
under  the  development  law  while  the  rest  will 
concern projects linked to SME internationalisation, 
the  development  of  alternative  tourism  and  the 
green  economy  (RES,  waste  management  and 
resource efficiency).  

between 

should  have  a positive  effect  over  the  longer  term. 
Of relevance in this context is also a partial revision 
of  bankruptcy  law  that  was  announced  recently, 
aiming at facilitating the surviving of over-indebted 
but  otherwise  viable  businesses.  In  essence,  the 
procedure  of  opening  up  consultations  and 
negotiations 
other 
stakeholders  will  become  pre-bankruptcy,  i.e.  will 
take  place  before  the  opening  of  the  bankruptcy 
process. Moreover, the agreement will also commit 
minority  creditors  (no  need  of  having  consensus) 
and there will be more flexibility on the modalities 
of  negotiations.  Additionally,  a  special  liquidation 
procedure is introduced allowing for the sale of the 
undertaking  either  en  bloc  or  partially,  following 
the submission to the court of a business proposal.  

creditors 

and 

A  similar  approach  is  followed  by  JEREMIE,  co-
financed  by  the  EU  Structural  Funds.  It  has 
launched  three  actions  so  far,  targeting  newly 
established  enterprises  (EUR 120 million),  seed 
capital 
ICT  projects 
and 
(EUR 180 million, still pending). 

(EUR 60 million) 

From the facilities launched earlier by the ex-SME 
Guarantee Fund, the offering of guarantees to micro 
and small enterprises for loans to pay-out suppliers 
of  a  total  around  EUR 1 billion  is  still  open  until 
December 2012 and close to exhaustion. 

With  a  view  of  supporting  internationalisation,  a 
co-funded  action  titled  Internationalisation  and 
Competitiveness  of  SMEs  addressed 
to  all 
enterprises was launched in March 2011 with a total 
budget  of  EUR 30 million,  with  a  possibility  to  be 
modified  reaching  55  million.  Another  action  co-
funded  by  the  EU  Structural  Funds,  which  is 
currently 
is 
Manufacturing  in  new  conditions  of  a  total  budget 
of EUR 200 million. 

implementation, 

the  phase  of 

in 

The  instruments  and  actions  mentioned  above 
support mainly new investment and, as such, do not 
address  directly  the  liquidity  problem.  However, 
their  quasi-simultaneous  entering  into  operation 
lifts  part  of  the  uncertainty  that  clouds  business 
prospects.  In  addition,  there  are  press  reports  of 
plans  to  put  in  place  a  more  massive  injection  of 
liquidity to the business sector in collaboration with 
the EIB but no details are available as yet. 

With  respect  to  entrepreneurship,  the  measures  the 
referred  to  in  the  previous  section  on  simplifying 
business  start-up  and 
licensing  and  removing 
restrictions  in  a  large  number  of  product  markets 

86  

The programme is currently (July 2011) in 
the phase of the drafting of agreements for 
financing  and  co-investments  with  the 
selected banks. 

91 

The  immediate  challenge for the  business  sector  is 
to  survive  the  crisis,  now  in  its  third  year.  The 
liquidity  problems  are  severe  and  since  they  also 
reflect  a  drop  in  internal  demand  of  a  more 
structural  nature,  policy  –  restricted  by  fiscal 
constraints - can only partially address them in the 
short  run.  Over  the  longer  term,  the  real  challenge 
will be to strengthen the structure of the productive 
base 
towards  higher  value-added  and  export-
oriented activities. The financial instruments put in 
place,  together  with  the  measures  to  remove 
regulatory  obstacles  to  growth  and  the  reforms  of 
the  labour  market  should  facilitate  this  structural 
change. 

4.8.6  Conclusion 

Apart  from  the  short-term  concerns  related  to  the 
economic  crisis,  such  as  getting  access  to  finance 
and  adjusting  to  the  internal  demand  shock,  the 
main  challenge  facing  industry,  but  also  the  real 
economy  overall 
is  a  business 
in  Greece 
environment that is not delivering optimally. 

the  business  environment 

Improving 
through 
actions  such  as  those  planned  in  the  MoU  will 
contribute to growth by reducing the costs of doing 
business in Greece across the board, thus increasing 
productivity. However, there remains the structural 
problem  of  specialisation  in  less  technologically 
advanced  and  low  growth  sectors.  The  policy 
response  to  this  problem  calls  for  actions  to 
facilitate structural change, some of which, such as 
labour  and  product  market  reforms  have  been 
adopted  or  are  in  progress,  and  to  raise  the 
knowledge base. 

The  public  administration  constitutes  an  important 
bottleneck  to  economic  growth,  through  its  huge 
cost  to  the  rest  of  the  economy,  both  through  its 
size and through its often ineffective functioning. In 
this  area,  as  in  the  business  environment,  some 
progress  has  been  made,  mainly  in  the  context  of 

 
                                                 
the MoU, but efforts will have to persevere over the 
medium term for setting in place the conditions for 

sustainable growth. 

92 

 
 
4.9  Spain 

Spain

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked  (EU27=100; 2009)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2009)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

-3.3

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

93 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Spain (2009) 

Refined petroleum products

Paper products; publishing and printing

Wood and wood products

Chemicals, chemical products

Rubber and plastic products

Machinery and equipment n.e.c.

Other non-metallic mineral products

Food products

Textiles and textile products

Leather and leather products

Manufacturing n.e.c.

Basic metals and fabricated metal products

Transport equipment

Electrical and optical equipment

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.9.1 

Introduction87 

Trade and industry specialisation 

Manufacturing contributes  less to Spain's economy 
than in the EU as a whole (12.7 % against 14.9 % in 
2009). At the detailed manufacturing industry level, 
Spain  is  specialised  in  marketing-driven  industries 
(particularly  in  exports,  processing  and  preserving 
of  fish  and  fruit,  manufacture  of  vegetable  oil), 
capital-intensive 
labour-
intensive industries (cutting and finishing of stone). 
At  the  more  aggregated  sector  level,  Spain  is 
specialised  in  low  innovation  and  low  education 
sectors (construction, wearing apparel), however in 
exports also specialises in medium-high innovation 
sectors  such  as  motor  vehicles  and 
low 
technology  sectors  such  as  non-metallic  mineral 
products. 

tiles)  and 

(ceramic 

in 

Spain  has  a  high  share  of  exports  in  the  low  price 
segment and a low share of exports in the high price 
segment, well below the EU average and its group 
of  higher  income  countries  specialised  in  labour-

87  

For main sources used see the 
methodological annex. The cut-off date for 
all data and qualitative information is 31 
August 2010. 

94 

intensive  industries.  While  its  R&D  intensity  is 
below  average  given  its  industrial  structure,  it  is 
close  to  the  average  and  higher  than  its  group 
average. 

Most prominent sectors in Spain 

Highest relative value added (2007)
Construction
Coke, refined petroleum and nuclear fuel
Non-metallic mineral products

Change in the relative value added (1999/2007)
Increasing specialisation
Coke, refined petroleum and nuclear fuel
Real estate activities
Recycling
Decreasing specialisation
Office, accounting and computing machinery
Wearing apparel, dressing and dyeing of fur
Leather, leather products and footwear

Structural change 

In terms of change, Spain has increased the relative 
value  added  in  high  education  sectors  (software, 
businesses  services)  but  has  decreased  it  in  high 
innovation  sectors  (computers),  as  well  as  in 
labour-intensive  low-skill  (dressing  and  dying  of 
fur) 
industries 
(communication  equipment).  Export  specialisation 

technology-driven 

and 

 
 
 
 
                                                 
 
 
 
in marketing-driven and labour-intensive industries 
(wearing  apparel,  knitted  and  crocheted  articles) 
has increased further. 

The  impact  of  the  crisis  on  the  Spanish  industrial 
structure  seems  to  have  been  limited  overall,  with 
technology-driven  industries  suffering  and  all  the 
other  industry  types  gaining  relative  shares  in  the 
crisis. However, manufacturing as a whole suffered 
considerably,  production  being  still  at  21.6 %  less 
than its previous peak. 

Spain  experienced  an  appreciation  of  the  real 
effective  exchange  rate  by  16%  over  the  last 
decade,  which  is  slightly  below  the  EU27  average 
(21%),  indicating  nevertheless  a  loss  in  cost  and 
price  competitiveness.  Nominal  unit  labour  costs 
have  increased  by  29%  between  2000  and  2010, 
compared  to  an  increase  of  14%  in  the  EU27  and 
20% in the Euro area. Over the last decade, labour 
productivity  per  hour  worked  has  gradually 
increased  to  about  10  percentage  points  above  the 
EU27  average  but  still  about  4  percentage  points 
below the Euro area average. However, along 2010 
and  in  the  first  months  of  2011,  Spanish  exports 
have  shown  a  relative  strength,  compared  to  the 
average of the EU27, which may mean competitive 
gains beyond prices. 

is 

in 

an 

Spain 

Overall, 
unfavourable 
competitiveness  position  with  mixed  signals  as  to 
change  dynamics.  Spain’s  public  efforts  to  boost 
R&D have been rather unsuccessful until now and a 
recently  adopted  innovation  strategy  reflects  those 
concerns and the need to a change of approach.  

4.9.2 

Towards an innovative industry 

Spain is considered as a  moderate innovator in the 
Innovation Union Scoreboard 2010 which is partly 
based  on 
that  R&D  performed  by 
businesses in 2009 was still below the EU average, 
accounting for only 0.72 % of GDP. 

the  fact 

in  public  funding  for 
increases 
After  strong 
innovation  until  200988,  public 
research  and 
investments  in  R&D  have  decreased  slightly  in 
2010.  In  2011  R&I  investment  has  been  protected 
to  other  budgetary 
from 
expenses.  CDTI's  (Centro  para  el  Desarrollo 
Tecnológico  e  Industrial)  budget  has  managed  to 
grow  substantially  in  the  last  four  years  and 
continues supporting R&D and innovation projects 

the  cuts  compared 

88  

The 
Spanish  Government  Budget 
Appropriations  or  Outlays  on  R&D  have 
increased  steadily  with  an  annual  growth 
rate  of  more  than  14%  between  2004  and 
2009. 

with  new  programmes  like  INVIERTE,  for  high 
risk-high return projects. 

There  are  two  recent  major  milestones  in  the 
Spanish  innovation  policy,  the  Innovation  Strategy 
(Estrategia Estatal de Innovación e2i) and the new 
Science and Innovation Law (replacing the previous 
law  of  1986),  adopted  in  May  2011.  This  new 
policy  proposes  a  structural  and  comprehensive 
approach  which  complements  the  funding-based 
strategy prevalent up to now.  

innovation, 

The  new  innovation  policy  focuses  on  enhancing 
increasing 
public  procurement  for 
funding  for  innovative  SMEs  and  for  risk  capital, 
improving  knowledge  transfer  by  changing  the 
legal  possibilities  for  public  researchers  to  start 
work  on 
the  commercialisation  of  scientific 
inventions, and by using the Technology platforms 
and boosting the science and technology parks.  

Another  priority  area  is  human  resources  for 
science  and  innovation,  strengthened  also  by  the 
new  legal  framework  provided  by  the  Spanish  law 
for  science.  This  new 
to 
restructure  the  funding  system  with  a  structure 
agencies:  Agencia  Estatal  de 
around 
Investigación  and  Centro  para  el  Desarrollo 
Tecnológico Industrial (CDTI). The former focuses 
on  research  and  the  latter  organisation  (which 
already exists) on innovation. 

law  also  proposes 

two 

The  size  of  the  skilled  force  in  Spain  has  been 
undermined in recent years by the still high level of 
early school leaving, one of the highest in the EU. 
The  Law  on  Sustainable  Economy  adopted  on  15 
February  2011 
includes  measures  aiming  at 
increasing the quality and quantity of human capital 
through education and vocational training.  

The current main challenge for Spain's research and 
innovation  policy  is  to  ensure  knowledge  transfer 
and  public-private  cooperation,  and  in  parallel 
increase the research activity of the business sector. 
These  are  also  areas  of  priority  for  the  Spanish 
policy in the broader context of a structural change 
to  a  more  knowledge-intensive  economic  and 
industrial structure. 

4.9.3 

Towards a sustainable industry 

Spain  scores  below  the  EU  average  on  several 
in 
sustainable 
particular  the Spanish  industry  is  still  more  energy 
intensive than the EU average.  

industry  related 

indicators  and 

As  a  follow-up  of  first  Energy  Saving  and 
Efficiency  Plan  2008-2011,  Spain  has  adopted  the 
second  National  Energy  Efficiency  Plan  for  the 

95 

 
                                                 
period 2013-2020 on the 30 of June 2011. This plan 
aims at fostering energy savings both in the end-use 
the 
consumption  of  energy  as  well  as 
transportation 
to 
chain 
transmission.  The  Law  on  Sustainable  Economy 
(Law  2/2011  of  4  March)  also  contains  relevant 
measures addressing energy efficiency. 

in 
generation 

since 

Another  priority  of 
the  Spanish  government 
continues  to  be  renewable  energy  and  as  a  result 
Spain has adopted its new Renewable Energy Plan 
for the period 2011-2020 (Plan de Acción Nacional 
en materia de Energías Renovables - PANER). The 
the  development  of  new 
PANER 
technologies such as geothermal and wave power in 
response  to  commitments  assumed  by  Spain  in  the 
Energy and Climate Change Package for 2020. 

includes 

The  Industrial  Action  Plan  for  the  next  10  years 
(PIN 2020) adopted in 2010 aims at increasing the 
size of the industrial sector in the Spanish economy, 
raise  its  level  of  internationalisation  and  guarantee 
its  long  term  sustainability.  The  Plan  identifies 
some  priority  sectors 
(automotive,  aerospace, 
pharma-health, ICT, agrofood, renewable energies) 
with a number of actions on greening the industry, 
like the development of the electric vehicle with the 
ambitious goal of 250 000 electric vehicles in 2014. 

4.9.4 

The business environment 

recently 

implemented 

significant 
Spain  has 
regulatory changes but the business environment in 
Spain is still more burdensome than the EU average 
according  to  international  indexes  such  as  the 
Global  Competitiveness  Report  or  IMD.  That  is 
especially 
regarding  entry  and  exit 
conditions of firms and the lack of competition and 
high regulation in some professional services.  

relevant 

burden 

existing 

administrative 

The  Spanish  government  is  continuing  efforts  to 
reduce 
for 
enterprises over the last months in order to achieve 
its  target  of  30 %  set  in  its  Action  Plan  for 
Administrative  Burden  Reduction  of  20  June  2008 
and,  ultimately,  the  50%  administrative  burden 
reduction target set for 2020 as part of the Strategy 
for  a  Sustainable  Economy,  approved  by  the 
Council  of  Ministers  in  2009.  Since  last  year  the 
government  has  passed  a  substantial  number  of 
initiatives  in  different  sets,  being  some  examples 
the Sustainable Economy Law and the RD 13/2010. 
The  estimate  burden  reduction  is  approximately 
2.000  million  Euros,  of  which  firms’  savings  are 
expected  to  be  1.400,  with  another  500  million 
Euros  expected  to  benefit  both  firms  and  citizens. 
However, 
regulation 
emerging  from  lower  levels  of  the  Administration 
over  the  last  years  due  to  a  lack  of  coordination 
between  Administrations  is  offsetting  in  part  the 

overlapping 

increasing 

innovation 

reduction  of  red  tape  and  is  having  pernicious 
effects  on 
and  productivity  of 
enterprises.  A  key  element  to  obtain  effective 
administrative 
greater 
simplification 
administrative  cooperation  between  the  3  layers  of 
public administration (national, regional and local). 

is 

Progress  has  also  been  achieved  regarding  impact 
assessments.  Regulated  by  RD  1083/2009,  all  new 
legislation  has  to  include  an  Impact  Assessment 
since  1  January  2011.  The  quality  of  Impact 
Assessment can still improve and efforts to change 
the  administrative  culture  of  officials  are  being 
done  by  the  Ministry  of  Public  Administration  in 
that respect. Draft laws which are not accompanied 
by  impact  assessments  are  simply  stopped  by  the 
State  Secretary  of  Public  Administration  and  sent 
back.  A  regular  cooperation  and  dialogue  of  the 
Administration  with  the  business  organisations 
before  drafting  new 
to  be 
effective in that respect. 

legislation  seems 

The transposition of the Services Directive, that has 
implied  the  amendment  of  a  considerable  number 
of  laws  and  decrees  at  national  and  regional  level, 
has  led  to  important  reduction  of  administrative 
burden  (estimated  at  around  1,700  million  euros) 
and liberalisation of certain services, namely retail, 
tourism,  industrial  services  and  services  of  the 
regulated  professions.  However,  some  professional 
services  still  present  high  regulation  by  the  means 
of  both  reserves  of  activity  and  obligation  of 
membership  of  a  professional  association  (colegio 
profesional). The government is working on a new 
Law on Professional Services that could be adopted 
before  the  end  of  of  2011.  The  new  law  intends  a 
substantial  reduction  of  the  mentioned  obligations 
to  keep  only  those  for  services  performed  in  the 
general 
those  requiring  maximum 
protection of the citizen (i.e.: doctors). The new law 
may  have  an  important  impact  in  reducing  prices, 
improving  quality  and  creating  more  opportunities 
for employment due to the economic dimension of 
the  sector.  Indeed  it  is  estimated  that  only  the 
professional  services  requiring  membership  of  a 
colegio  profesional  are  estimated  to  contribute 
8.8 % to the Spanish GDP. 

interest  or 

Spain  has  addressed  the  lengthy  delays  regarding 
business  start-up  by  adopting  Royal  Decree 
13/2010  of  3  December  2010  which  aims  at 
reducing  time  to  register  an  enterprise  to  up  to  5 
days as well as at reducing the notary and registrar 
costs involved to up to 250 euros. The Sustainable 
Economy  Law  has  also  contributed 
the 
simplification  of  the  start-up  process  by  reforming 
the  operating  licenses  and  permits  system  with  the 
introduction of ex-post controls, positive silence of 
the  Administration  and  electronic processes.  These 
measures, included in Royal Decree Law 8/2011 of 

to 

96 

 
1 July, still need further implementation by regional 
and local authorities. The city of Madrid has started 
to  subcontract  the  management  and  approval  of 
operating 
licenses  with  an  acceleration  of 
processes. 

A  series  of  measures  have  been  taken  to  simplify 
insolvency  and  bankruptcy,  via  supporting  greater 
use  of  court  settlements  (Royal  Decree  Law 
3/2009)  and  the  reduction  of  the  cost  of  judiciary 
officials  (RDL  5/2010).  A  new  draft  Insolvency 
Law which is in its final stages will introduce some 
simplification  measures.  The  Law  gives  a  greater 
impulse to extra-judiciary agreements (out-of-court 
settlements),  provides  greater  guarantees  for  any 
additional  funds  that  may  be  re-injected  into  the 
company  as  a  result  of  a  re-financing  agreement 
and  develops  a  new  abbreviated  and  simplified 
procedure.  These  measures  should  result  in  easier 
firm restructuring. 

4.9.5 

Entrepreneurship and SME policy 

Spain  has  a  high  share  of  micro  enterprises 
compared  to  the  EU  average  and  those  micro 
enterprises  employ  significantly  more  people  than 
their  counterparts  in  other  Member  States,  being 
consequently their contribution to the economy also 
higher  than  in  the  EU.  This  may  be  explained  by 
the  sectoral  distribution  of  SMEs  in  sectors  with 
smaller average enterprise size such as services and 
construction.  Promote  these  enterprises  to  grow 
would  contribute  to  increased  levels  of  innovation 
and productivity in the economy.  

Access  to  credit  continues  to  be  one  of  the  main 
concerns of Spanish enterprises. During 2011, ICO 
lines  of  credit  have  been  reformed  in  order  to 
improve  the  availability  of  financial  resources  to 
SMEs  and  self  employed  workers  (e.g.:  by 
implementing new credit lines such as ICO-liquidez 
and  ICO-directo).  The  Government  is  working  to 
develop  the  non-traditional  funding  mechanisms, 
like  venture  capital  and  business  angels,  which  is 
still  underdeveloped  compared  to  other  major 
European  economies.  A  new  fund  to  support 
intermediary  organisations  of  this  type  has  been 
launched  in 2010 with  the  aim  of  carrying studies, 
seminars  and  dissemination.  Also,  Royal  Decree 
8/2011  establishes 
the 
acquisition  of  shares  of  new  enterprises  under 
certain  circumstances.  The  CDTI  is  also  working 
with other Member States with the aim of creating a 
cross-border  venture  capital  market.  A  new 
Guarantee  programme  for  Entrepreneurs  has  been 
created in 2011 with the aim of encouraging small 
business  development,  being  the  financial  risk 
the  Spanish  Refinancing 
partially  covered  by 
Company  (CERSA).  Spain  still  has  a  potential  for 
developing  more  financial  engineering  instruments 

tax  exemptions 

for 

linked to the structural funds, like JEREMIE, with a 
view to increase public private partnerships. 

The long delays in payments, in particular by public 
administrations,  are  still  worrying  and  aggravating 
the  liquidity  problems  of  enterprises.  The  Spanish 
government  adopted  in  July  2010  a  law  to  reduce 
the  times  for  payments  by  both  businesses and  the 
public  administration  but  it  may  take  some  time 
until  we  see  a  real  impact  of  this  law  for  various 
reasons:  first,  the  law  will  only  be  implanted 
gradually  until  2013,  second,  there  is  a  strong 
culture of late payments in Spain, third, the law has 
no  retroactive  effects  (only  applies  to  operations 
after  7  July  2010).  Moreover,  due  to  the  difficult 
financial 
some  Autonomous 
of 
Communities  and municipalities, the law  may face 
significant  challenges  for  its  implementation  at 
regional and local level.  

situation 

Although  Spain  has  progressed  considerably  in 
Entrepreneurship  over  the  recent  years,  it  still 
scores  below  EU  average  in  most  of  the  SBA 
indicators  of  this  area,  and  in  particular  regarding 
the  society's  perception  of  entrepreneurship.  The 
Government  set  up  an  Entrepreneurs  Support 
Action  Plan  in  order  to  promote  entrepreneurship 
and  business  creation  through  financial  support, 
advice and promotion of entrepreneurship. Another 
area in which Spain scores below the EU-average is 
in  public  procurement.  Indeed,  the  Spanish  SMEs 
account for a slightly lower proportion of the value 
of public procurement contracts (33 % versus 38 % 
in the EU). 

4.9.6  Conclusion 

After  the  sharp  economic  adjustment  in  Spain 
during  the  years  2008  and  2009,  particularly  in  its 
construction  sector,  and  the  market  pressure  of 
2010  and  2011  in  the  context  of  the  euro  area 
sovereign  debt  stress,  Spain  has  put  in  place  a 
considerable number of measures in the last months 
structural  change  and  enhance 
to 
facilitate 
innovation 
the 
improving 
like 
productivity, 
framework,  access 
to  finance  for  SMEs  and 
simplifying  the  regulatory  framework  for  business 
creation and growth.  

firms. 

Some  challenges  still  remain  in  order  to  enhance 
the  business  environment  in  the  area  of  access  to 
finance  as  well  as  in  easing  entry  and  exit 
Improving  coordination 
conditions  of 
between  different  levels  of  public  administrations 
would  help  reducing  the  administrative  burden  for 
enterprises.  Enhancing  competition  and  lowering 
regulation  in  a  number  of  selected  services  sectors 
with  high  spill  over  effects  such  as  professional 
services  would  increase  potential  GDP  and  create 
opportunities  of  employment.  Another  challenge  is 

97 

 
the  low  private  sector  participation  in  R&D  and 
innovation  activities  besides  the  large  number  of 

public-backed 

initiatives 

in 

the 

area.

98 

 
4.10  France 

France

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
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B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked  (EU27=100; 2009)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2008)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

N.A.

N.A.

N.A.

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

99 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – France (2009) 

Refined petroleum products

Chemicals, chemical products

Paper products; publishing and printing
Wood and wood products

Textiles and textile products

Leather and leather products

Rubber and plastic products

Food products

Machinery and equipment n.e.c.

Other non-metallic mineral products

Manufacturing n.e.c.

Transport equipment

Basic metals and fabricated metal products

Electrical and optical equipment

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.10.1 

Introduction89 

Trade and industry specialisation 

in  2009).  At 

Manufacturing plays a significantly smaller role for 
France than for the EU in total (10.6 % vs. 14.9 % 
of  value  added 
the  detailed 
manufacturing  industry  level,  France  is  specialised 
in  technology-driven  (manufacture  of  air-  and 
spacecraft)  and  marketing-driven  industries  (soaps 
and detergents, luggage and handbags). At the more 
aggregated  sector  level,  France  is  specialised,  in 
export terms, in goods and services of medium-high 
innovation 
(transport 
education 
equipment  such  as  trains  and  aeroplanes)  and,  in 
terms of relative value added in medium innovation 
(air transport) and high education sectors (research 
and development, business services). France is less 
specialised  in  high  innovation  sectors,  notably  due 
to 
in  machinery  and 
computers.  A  high  share  of  France's  technology 
exports  goes  to  the  BRIC  countries,  indicating 
potential for higher growth. 

lower  specialisation 

sectors 

and 

its 

in 

labour-intensive 

France has a high R&D intensity with respect to its 
industrial  structure  and  a  particularly  good 
performance 
industries, 
reflecting  its  luxury  fashion  industry,  similarly  to 
Italy.  France  is  less  well-placed  on  the  quality 
ladder  in  technology-driven  industries.  Overall, 
together  with 
the 
Netherlands,  France  has  industry  specialisation  in 
high  education  sectors  which  are  predominantly 
services. 

the  UK,  Belgium  and 

Most prominent sectors in France 

Highest relative value added (2007)
 Transport equipment
 Air transport
 Recycling

Change in the relative value added (1999/2007)
Increasing specialisation
Real estate activities
Air transport
Research and development
Decreasing specialisation
Office, accounting and computing machinery
Coke, refined petroleum and nuclear fuel
Tobacco products

89  

For main sources used see the 
methodological annex. The cut-off date for 
all data and qualitative information is 31 
August 2010. 

Structural change 

100 

 
 
 
                                                 
 
 
 
(cement, 

In  terms  of  change,  France  has  considerably 
decreased  its  relative  share  of  capital-intensive 
industries 
refined  petroleum),  while 
increasing its industry specialisation in technology-
driven  industries  (air-  and  spacecraft).  In  exports, 
the 
relative  share  of 
France  has  decreased 
technology-driven 
(radio  and  TV 
industries 
transmitters)  and  increased  it  in  marketing-driven 
industries  (e.g.  musical  instruments).  The  relative 
share  in  sectors  with  high  education  (business 
services) has increased considerably while the share 
in  high 
sectors  has  decreased 
(computers, communication equipment). France has 
climbed  further  up  the  quality  ladder,  in  particular 
in  labour-intensive  industries.  Its  sectoral  R&D 
intensity  has  fallen 
in  manufacturing  sectors 
(chemicals,  cars  and  transport  equipment)  while 
increasing in services sectors (business services and 
research and development). 

innovation 

Manufacturing  production  fell  by  20 %  during  the 
recent economic crisis and has increased by 11.2 % 
since then (April 2011). The impact of the crisis on 
the  French  industrial  structure  was  limited  overall; 
technology-driven  industries  came  out  better  than 
capital-intensive  and  mainstream  manufacturing 
industries. 

a 

in 

and 

loss 

cost 

France  experienced  a  moderate  appreciation  of  the 
real  effective  exchange  rate  over  the  last  decade 
(8%,  compared  to  21%  in  the  EU27),  indicating 
price 
nevertheless 
competitiveness.  Nominal  unit  labour  costs  have 
increased  by  23%  between  2000  and  2010, 
compared  to  an  increase  of  14%  in  the  EU27  and 
20%  in  the  Euro  area.  The  employment  legislation 
remains  very  protective  and  the  minimum  wage  is 
among  the  highest  in  Europe.  Labour  productivity 
per hour worked has slightly declined over the last 
decade. Nevertheless, it is still about 27 percentage 
points  above  the  EU27  average  and  about  13 
percentage points above the Euro area average. 

Overall, France is in a a favourable competitiveness 
position,  with  change  dynamics  partly  positive  but 
partly  pointing  to  vulnerabilities  in  the  export  of 
knowledge-intensive manufacturing industries. 

4.10.2  Towards an innovative industry 

According  to  the  Innovation  Union  Scoreboard 
2010, France remains an innovation follower but its 
innovation  performance  tends  to  improve  faster 
than  most  Member  States  falling  in  this  category. 
Public R&D expenditures are above the EU average 
and they are in line with the 2020 target, but private 
R&D 
remain 
insufficient.  Enterprises,  especially  SMEs,  do  not 
innovate  sufficiently,  including  as  regards  non-

expenditures 

innovation 

and 

technological innovation.  

incentives 

Since  2008,  public 
to  business 
expenditures have been increased and focused on a 
few  key  instruments,  namely  the  Research  Tax 
Credit  (CIR),  the  ‘innovative  start-up  scheme’ 
the 
(Jeune  Entreprise  Innovante),  funding  by 
Innovation  Agency 
to 
(OSEO)  and  support 
‘Competitiveness clusters’ (Pôles de Compétitivité). 
the  new 
Numerous  projects 
‘Investments  for 
the  Future’  programme  also 
promote business R&D activities.  

financed  by 

R&D  expenditures  by  businesses  did  not  decrease 
during  the  crisis  and  even  increased  in  2009 
compared to 2008, possibly thanks to the Research 
Tax  Credit,  which  is  likely  to  remain  acutely 
necessary in the medium term in case of tightening 
access  to  finance.  No  significant  modification  of 
this scheme is expected before its thorough ex-post 
evaluation in 2013.  

and 

The  new  ‘Investments  for  the  Future’  programme 
aims at promoting both a knowledge economy and 
industrial competitiveness, and put the emphasis on 
the  excellence  of  the  science  base,  public-private 
transfer.  The 
cooperation 
programme  amounts  to  EUR 35 billion,  out  of 
which  13 %  are  dedicated  to  the  digital  economy, 
13 %  to  sustainable  industry,  6 %  to  SME  and 
industrial  competitiveness,  and  more  than  60 %  to 
strictly 
and 
education, 
speaking.  

knowledge 

innovation 

research 

the 

Future’ 

programme 

Investments in digital infrastructures are dealt with 
by the ‘Digital France 2012’ Plan. The ‘Investments 
for 
devotes 
EUR 4.25 billion  to  ICT  infrastructures  (mainly 
optic  fibre)  and  to  the  development  of  innovative 
digital  uses  (with  an  emphasis  on  household 
applications).  A  fund  to  provide  growing  SMEs  in 
the ICT sector with equity financing was created in 
June  2011.  The  creation  of  the  National  Digital 
Council  (April  2011)  is  meant  to  provide  the 
government  with  in-depth  insight  on  future  ICT 
business  applications,  including  in  SMEs,  future 
technological 
the 
developments 
competitiveness  of  the  ICT  sector.  The  impact  of 
these measures on the competitiveness of the digital 
sector  (and  its  contribution  to  GDP  growth)  is 
expected  to  be  positive  but  is  not  assessed  yet.  IT 
skills and business applications, including in SMEs, 
will be crucial to fully exploit the growth potential 
of the digital economy.  

and 

Regional  Innovation  Strategies  contributed 
to 
identify  the  major  needs  of  businesses  locally  and 
thus  complemented 
for 
Research  and  Innovation,  which  primarily  focuses 
on  the  priorities  of  public  research  bodies  and 

the  National  Strategy 

101 

 
laboratories.  

on 

clusters 

An  evaluation  of  the  economic  impacts  of  the 
Competitiveness  clusters  is  planned  in  2012.  In 
to  six  Competitiveness 
2010,  public  support 
to  new 
clusters  was  suppressed,  and  shifted 
Competitiveness 
environmental 
technologies. The impact of the 2011 adjustment of 
the  Research  Tax  Credit  and  of  the  ‘innovative 
start-up  scheme’  on  enterprises  below  2000 
employees 
assessed.  A 
to 
comprehensive ex-post evaluation will be necessary 
by  2013  to  assess  the  effectiveness  of  the  various 
schemes  and,  if  necessary,  to  prepare  a  refocusing 
of the policy mix. 

remains 

be 

to 

the 

remain 

prerequisites 

As  a  whole, 
innovation  ‘ecosystem’  has 
significantly improved since 2008. However, higher 
R&D and innovation expenditures by businesses, a 
larger  number  of 
innovative  enterprises  and 
stronger development of high-tech and high-growth 
sectors 
increase 
competitiveness  and  reach  the  2020  R&D  target. 
More  synergies  between 
the  main  fields  of 
excellence  in  academic  research  and  high-growth 
economic  sectors,  and  stronger  linkages  between 
the  scientific  base  and  businesses  could  contribute 
to  this  objective,  as  well  as  more  favourable 
framework  conditions  for  innovative  enterprises 
below 2000 employees, notably as regards access to 
finance,  the  tax  and  regulatory  environment,  and 
skills in SMEs.  

Efforts  to  consolidate  the  cooperation  between  the 
education system and the business community may 
be  usefully  pursued  and  amplified,  which  could 
include  more  vocationally-oriented  curricula  with 
technical  or  engineering  background,  innovation 
and managerial courses, introduction to careers and 
economic  sectors,  excellence  curricula  for  post-
graduate studies, etc. 

4.10.3  Towards a sustainable industry 

to  1990,  which 

target.  N2O  emissions 

Greenhouse  gas  emissions  followed  a  downward 
trend  since  2005  and  decreased  by  5.1 %  in  2009 
is  consistent  with 
compared 
France’s  Kyoto 
from 
agricultural soils significantly decreased. Emissions 
per capita remain low compared to most developed 
countries.  However,  emissions  from  transports  and 
buildings,  in  particular  CO2  emissions  from  road 
increased  since  1990,  and  energy 
transport, 
consumption  from  buildings  increased  by  4.8 % 
between 2000 and 2007. Overall, the projected gap 
to  the  2020  target  on  greenhouse  gas  emissions  is 
+6 %.  

to  allow 

is  still  necessary 

road  transportation  (i.e.  ports,  waterways  and  rail 
freight,  with  effective  intermodal  connexions,  in 
order  to  achieve  the  national  target  of  17.5 %  of 
non-road  freight  by  2012)  would  positively  affect 
traffic congestion and related transport costs. Policy 
the  full 
support 
development  of  the  market  of  electrical  vehicles, 
including  as  regards  infrastructures  (in  particular 
plug-and-ride terminals) and R&D, which could be 
complemented  by  demand-side  measures  such  as 
public  procurement.  EUR  1  billion  from  the 
‘Investments 
is 
dedicated to R&D on ‘vehicles of the future’, which 
should  include  R&D  on  hybrid  technologies  and 
electrical 
life).  The 
technologies  (e.g.  battery 
introduction  of  a  tax  on  heavy  transport  on  free 
roads has been delayed and is now planned in 2013.  

the  Future’  programme 

for 

is 

The  policy  framework  to  improve  the  energy 
performance  of  buildings 
comprehensive 
(regulation, audit and certification, tax and financial 
incentives,  consumer  information  and  training  of 
sustained 
professionals). 
implementation 
the 
to 
development  of  a  strong  eco-construction  market 
and  therefore  to  reaching  the  national  target  of  -
38 %  in  energy  consumption  from  buildings  by 
2020. 

and 
contribute 

Its 
could 

full 

and 

green 

chemicals, 

Two French producers of biomass heating are in the 
world  top  10,  but  there  is  no  significant  French 
manufacturer  in  the  solar  and  wind  sectors,  where 
France  seems  to  have  lost  the  competitive  race  so 
far. R&D is a priority to allow France to position on 
second  generation  technologies.  EUR 1.35 billion 
from the ‘Investments for the Future’ programme is 
dedicated  to  research  and  innovation  in  renewable 
energy 
including 
demonstration  projects  and  technology  platforms. 
The  development  of  a  competitive  supply  of 
renewable  energy  technologies  will  need  to  be 
combined with a predictable regulatory framework, 
notably  as  regards  legal  requirements  for  new 
installations  and  feed-in  tariffs  for  wind  and  solar 
electricity, to allow for the growth of this market in 
the medium term. This is also essential to reach the 
2020 target. The share of renewable energy in gross 
final  energy  consumption  was  11 %  in  2008, 
against  a  2020  target  of  23 %,  and  mainly  comes 
from biomass (heat and power) and hydropower. 

including  for  medium-sized 
Electricity  prices, 
low  and  energy 
relatively 
enterprises,  are 
dependency remains below the EU average. Energy 
intensity  decreased  by  15 %  between  1991  and 
2006  and  energy  efficiency  is  high  compared  to 
most developed countries. 

The quality of transport infrastructures remain very 
good as a whole, but stronger development of non-

The  ‘Investments  for 
the  Future’  programme 
devotes  EUR 4.6 billion  to  green  industry  and 

102 

 
to  build 

implement 

rightly  spots  major  industrial  challenges,  including 
renewable  energy,  green  chemicals,  waste  & 
recycling, sustainable cities and transports, thermal 
renovation  of  buildings,  green  vehicles.  Sustained 
efforts  will  be  necessary 
‘green’ 
competitive  advantages,  reach  the  Grenelle  targets 
and 
the  comprehensive  National 
Strategy  for  Sustainable  Development,  e.g.  as 
regards biological agriculture, adaptation to climate 
change, waste prevention, collection and recycling, 
integrated  policy  framework  for  green  products, 
elimination  of  environmentally  harmful  subsidies 
and  state  aids,  consolidation  of  a  knowledge  and 
scientific base in the environmental field etc.  

4.10.4  The business environment 

France  scores  significantly  better  than  the  EU 
average  concerning  electricity  prices  for  medium-
sized  enterprises,  infrastructure  expenditures  and 
satisfaction  with 
infrastructure. 
eGovernment usage by enterprises is slightly above 
the EU average.  

the  quality  of 

(e.g. 

recent  efforts.  Simplification  of 

France  scores  clearly  below 
the  EU  average 
concerning  the  burden  of  government  regulation 
and  the  legal  and  regulatory  framework.  The 
business  environment  remains  complex  and  costly, 
despite 
the 
regulatory  environment 
‘gold  plating’; 
corporate  and  labour  law;  hygiene,  safety  and 
environment  rules;  public  procurement  codes), 
administrative  procedures  and  interfaces  between 
businesses  and  public  authorities  (e.g.  single  IT 
interface 
to 
all  procedures 
strengthen 
enterprises) 
competitiveness, in particular for enterprises below 
2000 employees. The De la Raudière report (2010) 
also  points  out  some  recurrent  practices,  such  as 
regulatory inflation and legal instability. 

applicable 
to 

potential 

offer 

for 

fully 

Since  2008,  France  has  undertaken  several 
initiatives  to  improve  the  regulatory  environment. 
The  administrative  bill  of  17  February  2011 
extended  the  obligation  to  make  (and  publish)  ex-
ante impact assessments to implementing legal acts. 
The list of impacts to assess is comprehensive, but 
SME  test  is  not  included  and  the  methodology  is 
transparent  yet.  New  consultation 
not 
practices since 2008 (e.g. États généraux, Grenelle, 
Assises) 
and  wider 
consultation  of  all  legitimate  stakeholders,  but 
consultation  is  not  homogeneous  and  does  not 
always benefit to SMEs. A Commissioner in charge 
of Simplification was appointed in November 2010. 
The  most  recent  simplification  law (18  May  2011) 
includes  provisions  for  enterprises  but  is  not 
primarily focused on competitiveness of businesses. 
80 simplification measures have been announced in 
April  2011,  but  not  yet  implemented.  The  national 

allowed 

longer 

have 

target to reduce the most burdensome or ‘irritating’ 
procedures by 25 % by 2011 has not been assessed 
yet.  700  administrative  procedures  were  analysed 
so  far,  and  250  simplified,  but  the  approach  has 
been  enlarged  to  private  individuals  and  less 
focused on enterprises. A permanent, structured and 
systematic screening of the regulatory environment, 
to  ensure  effective  simplification  for  enterprises, 
would improve the business environment over time. 

The  current  constrains  on  public  finances  imply 
efforts to streamline public administrations (notably 
with the second General Review of Public Policies 
2011-2013).  There  are  synergies  between  these 
efforts  and  a  systematic  review  of  the  business 
environment from the ‘competitiveness’ angle. This 
offers  an  opportunity  to  simplify  the  interfaces 
between  businesses  and  public  authorities,  and  to 
screen  and  simplify  existing  state  aids,  subsidies 
and  other  public  support  schemes  benefiting  to 
enterprises90.  This  could  allow  a  simplification  of 
the  regulatory  and  tax  environment  and  thus 
improve the business environment, provided that it 
does  not  lead  to  an  increase  in  the  overall  fiscal 
pressure on enterprises.  

4.10.5  Entrepreneurship and SME policy 

The  SME  sector  in  France  employs,  in  total, 
relatively  less  people  than  in  the  EU  (60.4 % 
against  67 %)  and  lost  almost  5 %  of  its  total 
workforce  due  to  the  crisis.  The  time  required  to 
start  a  business  is  significantly  shorter  in  France 
compared  to  the  EU  average.  France  scores  below 
the EU average as regards the business churn.  

The volume of early financing is slightly below the 
EU  average.  SME  access  to  credit  remains  easier 
than  in  many  other  Member  States.  However,  in 
January 2011, one fourth of enterprises between 10 
and  500  employees  reported  cash  and  financing 
problems.  In  2009,  30 %  of  SMEs  noticed  a 
declining willingness of banks to provide loans and 
the  cost  of  credit  remains  significantly  higher  (by 
25 %)  for  small  enterprises.  Access  to  finance  is 
reported  to  be  especially  difficult  for  very  small 
enterprises, 
innovative  SMEs  and  mid-term 
investment91.  Mutual  guarantee  schemes  and 

Public  support  to  research  and  innovation 
by  businesses,  which  is  costly  for  the 
State,  has  been  more  systematically 
evaluated  ex-post  in  the  last  few  years. 
This  good  practice  could  be  extended  to 
other domains.  
Reportedly,  access 
is 
acceptable  as  regards  short-term  cash  and 
investment 
in  fixed  assets,  but  more 
difficult  for  long-term  investment  in  non-
fixed  assets  (e.g.  R&D,  patents,  brands) 

to  bank 

loans 

90  

91  

103 

 
                                                 
stronger  development  of  private  finance  (e.g. 
venture  capital,  private  equity)  may  improve  SME 
access to finance. The ‘Investments for the Future’ 
programme 
than 
EUR 800 million  to  finance  SME  growth  and 
competitive development, in addition to other funds 
available  from  the  Innovation  Agency  (OSEO)  and 
the Caisse des Dépôts et Consignations. 

allocates 

more 

also 

Between  2008  and  2010,  duration  of  payments  by 
public  authorities  decreased  (from  75  down  to  65 
days)  and  duration  of  payments  by  enterprises 
increased  (from  50  days  up  to  59  days).  This 
increase  may  be  due  to  the  crisis.  SMEs  report  an 
overall  shortening  of  payment  duration  but  more 
payment  delays  by 
customers.  The 
Subcontracting  Ombudsman  (appointed  in  April 
2010)  is  meant  to  improve  relationships  between 
large  customers  and  SME  suppliers,  including  as 
regards payment delays and insufficient compliance 
with 
the 
Economy92.  

the  Modernisation  of 

the  Law  on 

large 

The entrepreneurial spirit, in particular the positive 
image  of  entrepreneurship,  seems  to  be  relatively 
less embedded in the national culture than in other 
Member States. But the survival rate of enterprises 
after  2  years  was  80 %  in  2007,  against  76 %  in 
2006 and against 71 % in the EU on average. More 
entrepreneurial education and the new Independent 
Contractor  Limited  Liability  Statute  (which  allows 
to  separate  business  assets  from  personal  assets) 
may  improve  both  the  enterprise  creation  and 
survival rates. 

The  statute  of  'auto-entrepreneurs',  introduce  in 
2008 by the Law on the Modernisation of Economy 
(LME),  is  successfully  contributing  to  promote 
entrepreneurial spirit in France. This statute allows 
a  self-employed  person  to  start  a  business  with  no 
formalities  and  no  capital.  More  than  660 000 
‘auto-entrepreneurs’ were registered by end January 
2011,  which  means  almost  350 000  new  ‘auto-
entrepreneurs’  in  2010  (against  ~270 000  creations 
under  other  statutes).  Around  one  third  of  ‘auto-
entrepreneurs’  declared  sales  in  2010,  with  an 
average turnover of EUR 8 350. Around one half of 
auto-entrepreneurs  are  unemployed  and  17 %  are 

92  

for 

are 

crucial 

which 
non-price 
competitiveness of enterprises below 2000 
employees.  
This law (2008) sets a maximum duration 
of  payments  by  enterprises  of  45  days, 
with  derogations  in  34  sectors  until  2012. 
later 
By-passing 
registration of invoices, ‘slicing’ of orders, 
requests  for  rebates  and  discount  prices 
etc. 

practices 

include 

retired,  students  or  civil  servants.  Services,  retail 
trade and construction are the most popular sectors.  

The  rate  of  SMEs  which  import,  export  (intra  or 
outside  the  EU)  and  invest  abroad  as  well  as  the 
rate  of  innovative  SMEs  remain  below  the  EU 
average, as well as the share of SMEs participating 
in  EU  funded  research.  This  may  be  correlated  to 
the  insufficient  number  of  high-growth  SMEs  and 
to an overall insufficient growth of SMEs as well as 
to  the  insufficient  number  of  SMEs  in  high-tech 
sectors. Besides, IT skills in SMEs still need to be 
promoted.  To  enhance  their  innovation  capacity, 
non  innovative  SMEs  primarily  need  information 
and contacts, in particular at local or regional level, 
while  innovative  SMEs  need  financing,  especially 
in the expansion stage. Both need enhanced access 
to  skilled  workforce.  The  ‘Investments  for  the 
than 
Future’ 
EUR 1 billion to finance R&D, innovation, training 
and structural adaptation in SMEs. Pursuing efforts 
to  streamline  and 
the  efficiency  of 
increase 
structures  accompanying  SMEs  on  international 
markets  may  contribute  to  the  development  of 
export-oriented activities, in particular in emerging 
countries.  As  a  whole, 
improving  framework 
to  stimulate  higher  growth,  better 
conditions 
technological  and  geographical  positioning  and 
higher  differentiation93  of  SMEs  remain  the  major 
general  challenges  to  increase  competitiveness. 
This  includes  the  improvement  of  the  business 
environment.  

dedicates  more 

programme 

4.10.6  Conclusion 

Challenges  for  France  remain  to  improve  its 
external competitiveness and to facilitate structural 
change,  notably  through  higher  growth  and  better 
technological  and  geographical  positioning  of 
enterprises  below  2 000  employees.  To  this  end, 
efforts 
the  business  environment, 
including  by  alleviating  the  burden  of  regulation 
and  administrative  procedures  and  facilitating 
access  to  finance  would  be  helpful.  The  research 
and innovation ‘ecosystem’ would also benefit from 
further efforts. 

improve 

to 

93  

Differentiation  includes  non-technological 
improvements  to  products  and  services 
(e.g.  branding,  quality)  and  constitutes  a 
competitive advantage.  

104 

 
                                                                       
                                                 
4.11  Italy 

Italy

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2008)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh;2007)

y
r
t
s
u
d
n

i

Infrastructure expenditures (euro per inhabitant; 2009)

N.A.

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

105 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Italy (2009) 

Paper products; publishing and printing
Refined petroleum products

Wood and wood products

Textiles and textile products

Chemicals, chemical products

Leather and leather products

Rubber and plastic products

Machinery and equipment n.e.c.

Other non-metallic mineral products

Food products

Manufacturing n.e.c.

Transport equipment

Basic metals and fabricated metal products

Electrical and optical equipment

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.11.1 

Introduction 

Trade and industry specialisation 

in 

Manufacturing  contributes  16.1 %  to  Italy's  total 
value  added  against  14.9 %  for  the  EU  on  average 
(2009).  At  the  detailed  manufacturing  industry 
level,  Italy  is  relatively  specialised,  both  in  value 
added  and  exports 
labour-intensive 
terms, 
(leather  clothes,  cutting  and  shaping  of  stone)  and 
in  mainstream  manufacturing  industries  (fabricated 
metal  products,  domestic  appliances,  motorcycles 
and  bicycles)  and,  with  respect  to  exports,  also  in 
marketing-driven  industries  (tanning  and  dressing 
of  leather,  luggage  and  handbags).  At  the  more 
aggregated  sector  level,  Italy  is  specialised  in  low 
education  and  innovation  sectors  (leather,  wearing 
apparel),  but  also  in  highly  innovation-intensive 
sectors  such  as  machinery  and  automotive.  Its 
relative  share  in  high  education  sectors  is  low  due 
to  weaknesses  in  software,  business  services  and 
research and development.  

Italy’s position on the quality ladder is very high in 
labour-intensive  industries,  while  in  technology-
driven  industries  it  is  below  the  EU  average.  Its 
R&D intensity is below average given its industrial 

structure. Overall, Italy shows how specialisation in 
labour-intensive  industries  can  be  sustained  when 
sectoral  upgrading,  e.g.  through  climbing  up  the 
quality ladder, takes place.  

Most prominent sectors in Italy 

Highest relative value added (2007)
Leather, leather products and footwear
Wearing apparel, dressing and dyeing of fur
Textiles and textile products

Change in the relative value added (1999/2007)
Increasing specialisation
Air transport
Water supply
Wearing apparel, dressing and dyeing of fur
Decreasing specialisation
Inland transport
Electricity and gas
Coke, refined petroleum and nuclear fuel

Structural change 

In  terms  of  change,  Italy’s  changing  specialisation 
patterns are quite complex, with opposite directions 
in  trade  and  industry  specialisation:  while  it  has 
in  value 
decreased  capital-intensive 
added  (ceramic  tiles),  it  increased  them  in  exports 
(basic  non-ferrous  metals),  along  with  the  other 

industries 

106 

 
 
 
 
 
industry  types (e.g.,  technology-driven  industries  – 
TV  and  radio  transmitters)  with  the  exception  of 
labour-intensive  industries  (leather  clothes).  The 
same  holds 
innovation  sectors 
(increasing in value added – e.g. medical, precision 
instruments, decreasing in trade) and vice versa for 
high  education  sectors  (increasing  in  financial 
services). 

true  for  high 

Manufacturing  production  fell  by  around  25 % 
during  the  crisis  and  is  still  17.4 %  lower  than  its 
previous cyclical peak. The impact of the crisis on 
Italy’s  industrial  structure  was  limited  overall, 
favouring somewhat marketing-driven industries. 

Italy  has  experienced  an  appreciation  of  the  real 
effective  exchange  rate  by  19%  over  the  last 
decade,  which  is  slightly  below  the  EU27  average 
(21%),  indicating  nevertheless  a  loss  in  cost  and 
price  competitiveness.  Nominal  unit  labour  costs 
have  increased  by  31%  between  2000  and  2010, 
compared  to  an  increase  of  14%  in  the  EU27  and 
20% in the Euro area. Labour productivity per hour 
worked  has  declined  over  the  last  decade  and  is 
now  only  marginally  above  the  EU27  average  and 
about  13  percentage  points  below  the  Euro  area 
average. 

Italy  improved  its  sectoral  R&D  intensity  and  was 
stable  on  the  quality  ladder  gaining  in  the  high 
quality  segment  of  technology  industries,  but  also 
in  the  low  quality  segment.  Overall,  Italy  shows  a 
mixed  picture  with  respect  to  competitiveness. 
While 
features  strengths  and 
improvements  in  some  areas,  its  overall  outlook  is 
in  knowledge-
its  performance 
impaired  by 
intensive  industries  and  does  not  unequivocally 
point in direction of improving competitiveness. 

it  undoubtedly 

4.11.2  Towards an innovative industry 

According  to  the  Innovation  Union  Scoreboard 
2010,  Italy  is  a  moderate  innovator  with  below 
average  performance, 
in  particular  concerning 
private  R&D  investment  (0.65 %  of  GDP).  The 
share  of  high  tech  exports  is  another  weakness, 
illustrating 
the  relatively  unfavourable  product 
specialisation  of  the  Italian  industry.  On  the  other 
there  are  some  positive  developments 
hand, 
regarding  human  resources  (e.g.  new  doctorate 
graduates)  and  intellectual  assets  (e.g.  Community 
trademarks). 

A  tax  credit  for  research  has  been  established  in 
December  2010  and  subsequently  replaced  and 
strengthened,  in  May  2011,  by  a  tax  credit  for 
companies 
in 
universities or public research bodies equivalent to 
90 %  of  the  additional  expenditure  in  2011-2012 
(total 
compared 

the  2008-2010  average 

financing 

research 

projects 

to 

107 

allocation  for  this  instrument  is  EUR 484 million). 
This  tax  credit  does  not  cover  in-house  R&D  by 
companies.  

In  April  2011,  the  National  Research  Programme 
2011-2013  was  presented  and  welcomed  by 
stakeholders. The Programme has been prepared on 
the  basis  of  a  consultation  of  interested  parties 
through thematic working groups dealing inter alia 
with:  environment,  health,  life  sciences,  energy, 
agrofood, nano-sciences and new materials, "Made 
in  Italy",  ICT,  aeronautics  and  space,  sustainable 
mobility 
goods, 
transports, 
construction.  

cultural 

and 

is 

research 

intention 

and  public 

The Programme notably defines as major objectives 
for  the  Italian  research  system  increasing  R&D 
expenditure,  improving  competitiveness  in  key 
technological areas, favouring cooperation between 
companies 
institutions, 
improving  analysis  and  evaluation  of  research 
programmes  and  bodies.  The 
to 
rationalise  and  reinforce  a  number  of  existing 
measures,  such  as  Technology  Districts,  national 
technology  platforms  (interlinked  with  EU  ones), 
national  excellence  poles.  Furthermore,  14  priority 
projects  (progetti  bandiera)  have  been  identified, 
most  notably 
to  key  enabling 
relation 
technologies, energy or space, to be supported with 
EUR 1.7 billion  in  public  expenditure  in  the  2011-
2013  period.  The  Programme  also  focuses  on 
simplification  of  national  funding  instruments  and 
on  improving  support  to  participation  in  EU  and 
international research projects.  

in 

One  instrument  to  simplify  and  facilitate  access  to 
financing in the field of industrial research projects 
is  the  sportello  della  ricerca  (one-stop  shop  for 
research),  which  should  facilitate  contacts  between 
for  Education, 
the  Ministry 
companies  and 
University and Research and should be operational 
in 2011.  

implementation  of 

The 
the  "Industria  2015" 
programme, launched in 2006 and organised in five 
Industrial  Innovation  Projects  (Energy  Efficiency, 
Sustainable Mobility, New Life Technologies, New 
technologies  for  the  'Made  in  Italy',  Innovative 
Technologies  for  Cultural  Goods),  is  ongoing  and 
has  been  confirmed  as  a  priority  by 
the 
Government.  However,  the  progress  in  the  actual 
disbursement of funds appear to be quite slow.  

is 

for 

Italy 

reducing 

A  major  priority 
the 
North/South  gap,  which  is  particularly  evident  in 
terms of research and innovation. Indeed, the level 
of  expenditure  in  R&D  in  the  Mezzogiorno  is 
broadly one third inferior to that in the Centre and 
North  of  the  country.  Furthermore,  the  relative 
share of business R&D is especially low (about half 

 
in 

innovation, 

the  Northern 

regions).  Therefore, 
that 
guaranteeing  an  optimal  use  of  the  2007-2013 
Structural  Funds,  notably  in  the  area  of  research 
is  essential.  The  National 
and 
Operational  Programme 
and 
Competitiveness for the Convergence Regions has a 
total  budget  of  EUR 6.2 billion.  A  number  of  calls 
for  proposals  have  been  published  in  the  last  year 
including,  in  December  2010,  for  establishing  or 
reinforcing  High  Technology  Districts  and  for 
Public-Private laboratories (EUR 915 million).  

on  Research 

The  research  system  will  be  affected  by  a  law 
granting  more  autonomy  to  universities'  governing 
bodies,  increasing  their  ownership  of  performance, 
also  from  a  financial  point  of  view,  enhancing 
meritocratic  criteria  in  selection  procedures  and 
improving  quality  in  teaching  and  research.  A 
'Brain  return'  measure  to  attract  Italian  researchers 
living  abroad  through  a  tax  incentive,  initially 
introduced  in  2008,  has  been  confirmed  for  the 
2011-2013  period.  Also  significant  in  the  area  of 
skills,  the  reform  of  professional  and  technical 
institutes 
been 
implemented starting from Autumn 2010. 

education), 

(secondary 

has 

Summing  up,  the  National  Research  Programme 
2011-2013 includes positive ideas to achieve higher 
coordination  and  coherence  of  measures  and 
appears  consistent  with  priorities  defined  at  EU 
level,  for 
technologies. 
level  of  ambition  might  be 
However, 
insufficient,  given  that  the  challenges  to  Italy's 
competitiveness are high and a drastic improvement 
in  implementation  of  measures  is  essential  (e.g. 
the  Southern 
Structural  Funds,  especially  for 
regions, and the "Industria 2015" programme).  

instance  key  enabling 
the 

4.11.3  Towards a sustainable industry 

to 

year's 

report, 

Italy's 
Compared 
last 
environmental  performances  appear 
to  have 
improved  compared  to  the  EU  average.  While  the 
level of energy intensity in industry is a traditional 
positive feature – which can be partly explained by 
the  relatively  high  energy  prices  –  the  carbon 
intensity  is  now  better  than  the  EU  average.  The 
share of  environmental  goods  in  exports,  however, 
is a weak aspect.  

Environmental  regulation  in  Italy  is  particularly 
burdensome  and  unstable.  The  repartition  of 
competencies between different levels of the public 
administration  and  between  different  bodies  does 
not exclude duplications, is a source of delays, e.g. 
in authorisation procedures, and contributes to legal 
uncertainly.  Also, 
of  EU 
environmental  legislation  is  disappointing  with  a 
high number of infringement proceedings. 

implementation 

Concerning renewable energy sources, it should be 
recalled that Italy has been a relative laggard in the 
development of new renewable energy sources such 
as solar and wind. In the framework of the EU ”20-
20-20“  package,  a  new  impetus  has  been  given  to 
supporting  these  sources  and  most  notably  solar 
panels,  which  benefited  starting  in  2007  of  a 
relatively advantageous feed-in tariff system (conto 
energia). The result has been a significant increase 
in solar panel diffusion but also a larger impact on 
energy  prices,  as  reported  by  the  Italian  Energy 
Authority. In March 2011, in the framework of the 
implementation  of  Directive  2009/28/EC  on  the 
promotion  of  the  use  of  energy  from  renewable 
sources,  a  review  of  the  feed-in  tariff  has  been 
announced in order to reduce the level of incentive 
while preserving security for investments already in 
the  pipeline  (ministerial  decree  adopted  in  May 
2011).  

technological  and 

The  Italian  implementation  of  the  Directive  on 
renewable  energy  sources  also  foresees  measures 
industrial 
supporting  new 
developments  in  the  area,  with  particular regard  to 
energy  infrastructure,  biomass,  second  generation 
biofuels, new technologies for solar energy such as 
high  concentration  panels.  These  developments 
appear highly desirable, taking into account that up 
to  now  the  recent  and  rapid  growth  in  new 
renewable energy sources' penetration in Italy (fast 
development  of  wind  energy  in  the  Southern 
regions,  especially  Puglia  and  Sicilia,  is  a  case  in 
point)  does  not  appear 
to  have  fostered  an 
equivalent  growth  in  the  domestic  supply  of 
industrial  products  and  may  be  considered,  at  this 
stage, a missed opportunity. 

Concerning  waste,  it  should  be  noted  that  the 
operation  of  an  electronic 
Industrial  Waste 
Monitoring System (SISTRI) to monitor waste from 
industrial activities has been delayed.  

Concerning 
the  diffusion  of  Green  public 
procurement  in  Italy,  the  implementation  of  the 
2008  national  Action  Plan  is  in  progress.  In 
particular,  a  Ministerial  Decree  of  February  2011 
has defined minimum environmental standards for a 
number 
public 
administrations  (textile  products,  office  furniture, 
IT, public illumination). Further decrees for specific 
goods and services are in preparation. 

purchased 

goods 

by 

of 

The  absence  of  a  comprehensive  national  energy 
strategy  is  a  major  structural  weakness  of  Italy. 
Such  a  strategy  has  been  repeatedly  announced  in 
the  past  but  has  yet  to  be  presented.  A  number  of 
initiatives – quite often as direct consequence of EU 
legislation  and  orientations  –  are  taken,  at  national 
and regional level as well as in the private sector. A 
more  consistent,  stable  approach  provides  an 

108 

 
foster 

eco-innovation 

investments  and 

to 
improved  framework  for 
systematically 
the 
industrial  fabric,  notably  with  respect  to  SMEs 
would  improve  Italian  R&D  performance.  More 
generally,  the  opportunities  of  "green  growth", 
which  could  be  particularly  relevant  for  Southern 
regions,  are  still  not  fully  grasped  by  Italian 
industry.  

in 

4.11.4  The business environment 

the  quality  of 

The  Italian  business  environment  is  relatively 
unfavourable  across  the  board.  The  burden  of 
government  regulation,  the  complex  and  slow 
judicial  system, 
infrastructure 
(especially  but  not  only  in  the  Southern  regions) 
and  energy  prices  are  all  indicators  where  Italy 
compares  unfavourably  with 
the  EU  average. 
Furthermore, the degree of competition in a number 
of  services  sectors  is  still  generally  considered  a 
major  bottleneck  for  growth.  There  are  however 
improvements and positive efforts to be emphasised 
as  well  as  a  good  performance  concerning  the  e-
government usage by enterprises.  

In  October  2010,  the  Government  presented  the 
Administrative  Simplification  Plan  2010-2012, 
which  aims  at  a  25 %  reduction  of  administrative 
burden  (estimated  at  about  EUR 68 billion)  on 
companies  by  2012,  equivalent  to  an  estimated 
reduction of up to EUR 17 billion. The Plan focuses 
on  three  areas:  1.  measurement  and  reduction  of 
administrative  burden 
in  all  areas  of  State 
competence;  extension  of  the  State  approach  to 
Regions  and 
local  authorities;  3.Simplification 
focusing  on  SMEs  (criterion  of  proportionality  in 
administrative procedures).  

This approach was applied inter alia, in July 2011, 
with simplification several measures concerning the 
areas  of  fire  prevention,  environment,  public 
procurement  and  privacy  regulations  which,  all 
together,  should  allow  a  reduction  of  burden 
estimated  at  EUR 2.2 billion  per  year.  So  far  the 
Government  has  adopted  measures  that  should 
allow  for  a  reduction  in  administrative  burden  for 
companies estimated at EUR 7.6 billion per year.  

In  September  2010,  the  new  regulation  reforming 
the  Italian  one-stop-shops  for  productive  activities 
(Sportello  unico)  was  adopted.  With  these  new 
rules,  one-stop  shops  are  identified  as  the  only 
public  bodies  at  territorial  level  responsible  for 
interacting with operators on all procedures related 
with  access  and  exercise  of  productive  activities 
and 
Furthermore, 
communications  from  operators  to  one-stop-shops 
should be transmitted only through the Internet. The 
portal "impresainungiorno.gov.it" should ensure the 
infrastructure  and 
interoperability  of  existing 

provision 

services. 

of 

networks  and  has  also  been  designated  as  the 
national  point  of  single  contact  as  required  by  the 
Services Directive.  

The  public  administration  reform,  launched  in 
2008,  has  continued  in  the  last  few  months. 
Notably,  a  new  Digital  Administration  Code  has 
been  established 
legislative  decree 
through  a 
adopted in December 2010. The new Code intends 
in  particular  to  simplify  relationships  between  the 
administration  and  businesses  by 
facilitating 
exchanges of information, online payments, the use 
of  digital  signatures  and  guaranteeing  in  general 
more  transparent  procedures  through  enhanced 
institutional websites. The quantitative goals of the 
new  Code  are  a  reduction  of  up  to  80 %  in  the 
length  of  administrative  procedures,  saving  up  to 
90 % in costs of paper, and up to EUR 200 million 
in reduced mailing costs. 

In 
to 
terms  of  opening  of  services  sectors 
competition,  independent  assessments  show  that 
improvements  have  taken  place  in  energy  (with 
electricity  more  advanced  than  gas),  financial 
markets  and  postal  services  while  no  progress  or 
even  negative  trends  are  identified  in  sectors  such 
as professional services, transports, and local public 
services. Italian authorities were supposed to adopt 
an Annual Law on Competition, which would take 
into  account  the  main  recommendations  from  the 
National  Competition  Authority  and 
further 
opening  of  protected  sectors.  However,  the  Italian 
Government  has  not  yet  presented  the  draft  law  to 
the  Parliament.  This  is  a  major  disappointment  as 
this law could be a "best practice" at European level 
and  could  remove  remaining  bottlenecks  hindering 
growth  in  Italy.  It  should  be  noted  that  the 
Government  adopted  in  February  2011  a  proposed 
constitutional  reform  aimed  at  liberalising  the 
economy  but  it  is  unclear  whether  this  reform  will 
be  implemented  and  what  would  be  its  practical 
effects on the business environment.  

Concerning 
the  development  of  broadband 
infrastructure,  a  Memorandum  of  understanding 
(MoU) was signed in November 2010 between the 
Ministry  for  Economic  Development  and  the  main 
telecommunication  operators.  The  declared  aim  is 
a  public-private 
implement 
to  define 
partnership for the deployment of Next Generation 
Networks and ensure coverage of 50% of the Italian 
population  by  2020.  An  executive  committee 
formed  following  the  MoU  was  supposed  to 
complete  the  necessary  preparatory  activities  in 
three months but has yet to deliver.  

and 

Summing up, Italy starts from a very unfavourable 
position  in  terms  of  its  business  environment. 
Italian  authorities  are  implementing  an  ambitious 
programme  for  reducing  administrative  burden, 

109 

 
simplifying  procedures  and  improving  relations 
between  the  public  administrations  and  business, 
with  a  strong  emphasis  on  e-Government.  These 
developments  have  been  largely  welcomed  by 
stakeholders  but  their  actual  impact  is  yet  unclear 
and will  need to  be  carefully  assessed.  Opening  of 
services  sectors  to  competition  remains  a  key 
bottleneck  to  growth  and  on  this  front  there  is  no 
major progress to report.  

4.11.5  Entrepreneurship and SME policy 

Like  other  EU  economies,  Italy's  is  dominated  by 
SMEs  (99.9 %  of  companies  and  81.3 %  of 
employment) but has a higher prevalence of micro-
companies  of  less  than  10  employees  (47.4 %  of 
employment,  compared  to  29.8 %  in  the  EU 
average  –  this  share  is  even  larger  in  the  Southern 
regions  where  the  average  number  of  employees 
per  enterprise  is  5.8  in  the  manufacturing  sector 
compared to 8.5 at national level). On the one side, 
this  demonstrates  the  strong  entrepreneurial  spirit 
prevalent  in  Italy  but,  on  the  other  side,  it  raises 
specific 
overall 
related 
concerns 
competitiveness of the economy.  

the 

to 

Favouring  dimensional  growth  of  companies  is 
therefore  an  important  priority,  also  given  the  fact 
that  that  medium-sized  and  "medium-large"  (up  to 
500 employees) companies appear to be particularly 
export-oriented  and  crucial  in  contributing  to  the 
overall economy's competitiveness. 

The  financial  structure  of  Italian  SMEs,  which  are 
relative  less  capitalised  that  counterparts  in  other 
Member  States,  appears  to  be  a  factor  limiting 
dimensional growth, as well as a higher reliance on 
short-term borrowing. Attempts these last few years 
at  developing  alternative,  non-bank,  financing 
options  for  companies  have  been  only  partly 
successful  and,  for  example,  the  Italian  venture 
capital and private equity markets remain relatively 
underdeveloped  compared  to  other  EU  countries 
despite  the  potential  to  promote  firm  growth  and 
improve corporate governance.  

and 

bank 

groups 

intends 

The  Italian  Ministry  for  Economy  and  Finance, 
together  with 
business 
organisations,  have  set  up  in  2010  the  Italian 
Investment  Fund  (Fondo  italiano  d'investimento) 
that 
the  above-mentioned 
weaknesses  by  proving  risk  capital  (or  "expansion 
capital")  to  promising  SMEs  with  an  income 
between  EUR 10  and  EUR 100 million.  The  Fund 
has started its operations at the end of 2010 and has 
already invested in a few promising SMEs.  

to  address 

allows 

of  the  "network  contract"  (contratto  di  rete)  that 
became  operational  with  an  implementing  decree 
adopted in April 2011. This contract, supported by 
a dedicated tax incentive (EUR 48 million for 2011-
2013), 
remaining 
independent,  to  collaborate  on  specific  projects, 
such  as 
innovation  or  on 
internationalisation.  The  emphasis  on  «network 
contract»  seems  to  have  supplanted,  at  least  at 
national  level,  a  previous  focus  on  industrial 
districts. 

companies,  while 

research  and 

in 

Late  payments  by  public  authorities  are  a  major 
problem  in  Italy  (also  connected  with  the  difficult 
public  finances  situation  at  national,  regional  and 
local  level).  Since  January  2011,  enterprises  can 
compensate  their  debts  and  credits  with  the  Public 
Administration.  This  measure  reduces  the  cash 
problems of enterprises and accelerates the payment 
procedures of the Public Administration.  

To  address  financing  difficulties  of  SMEs  in  the 
framework of the crisis, the Italian Government has 
promoted  in  2009  a  "credit  moratorium",  which  is 
an agreement between business associations and the 
banking  association  allowing 
for  a  delayed 
repayment  of  loans.  This  moratorium  has  been 
prolonged in February 2011 until 31 July.  

The  time  required  to  start  a  business  is  below  the 
EU  average  and  could  even  further  improve. 
Indeed, the Certified Statement of Business Start up 
(SCIA – Segnalazione Certificata di Inizio Attività), 
which replaces since 2010 the existing Declaration 
of Business Start Up (DIA – Dichiarazione di Inizio 
Attività),  allows  a  new  company  to  start  operating 
from  the  first  day  (whereas  the  DIA  required  a 
thirty  day  standstill).  With 
the  SCIA,  public 
administrations  should  control  compliance  with 
relevant requirements in the following 60 days (or, 
after this period, only in exceptional circumstances 
such as for public safety reasons). 

There  is  a  wide  recognition  that  the  dimensional 
growth  of  companies  in  Italy  should  be  a  priority. 
Measures  such  as  the  Italian  Investment  Fund  and 
the "network contract" are now in place and appear 
steps in the right direction. Given the magnitude of 
the  issues  at  stake,  however,  it  is  unclear  whether 
they  will  be  sufficient  to  address  the  identified 
shortcomings.  Concerning  late  payments,  an  early 
transposition  by  Italy  of  new  Directive  2011/7/EC 
could be a welcome move.  

4.11.6  Conclusion 

To  overcome  the  disadvantages  related  to  the 
limited average size of companies in Italy, another 
approach  is  to  favour  cooperation.  This  is  the  aim 

While  it  maintains  a  diversified  and  in  some 
instances  globally  competitive  industrial  basis, 
Italy's  overall  growth  potential  is  a  source  of 
concern.  The  last  few  years  have  seen  some 

110 

 
measure  of  transformation  in  the  industrial  fabric, 
not  so  much  in  terms  of  relative  specialisation  but 
of climbing the quality ladder. 

As  the  policy  front,  significant  efforts  can  be 
reported,  notably  in  order  to  improve  the  business 
environment  or  ensure  a  more  coherent  research 
strategy,  but  much  more  would  be  required  in  a 
number  of  areas,  such  as  in  promoting  eco-
innovation,  in  enhancing  competition  in  services 
markets  or  in  fostering  dimensional  growth  of 
companies. 
there  are  no  major 
improvements  in  closing  the  North/South  gap, 
which  is  evident  in  a  wide  number  of  domains, 

In  general, 

meaning  that  there  is  considerable  scope  for 
that  would 
catching  up  of 
significantly 
overall 
competitiveness.  

the  Mezzogiorno 
Italy's 
enhance 

Some  policy  interventions  appear  uncoordinated 
and  fragmented  while  some  promising  measures 
remain  only  partly  implemented  or  are  delayed  by 
lack  of  resources  or  by  complex  decision-making 
procedures  and  practices.  Given  the  importance  of 
industry, Italy would benefit from putting forward a 
comprehensive  industrial  competitiveness  policy, 
which would make sense in a country with such an 
important industrial sector. 

111 

 
 
4.12  Cyprus 

Cyprus

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

4.9

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

N.A.

N.A.

N.A.

N.A.

N.A.

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

112 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Cyprus (2009) 

Textiles and textile products

Paper products; publishing and printing

Food products

Leather and leather products

Wood and wood products

Refined petroleum products

Chemicals, chemical products

Rubber and plastic products

Manufacturing n.e.c.

Transport equipment

Electrical and optical equipment

Machinery and equipment n.e.c.

Other non-metallic mineral products

Basic metals and fabricated metal products

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.12.1 

Introduction 

Trade and industry specialisation 

and 

industry 

in 
tiles) 

(bricks 
in 

the  detailed  manufacturing 

Cyprus belongs to the group of EU Member States 
characterised by higher income and a specialisation 
in technologically less advanced sectors (group 2)94. 
At 
level, 
Cyprus  features  specialisation  in  marketing-driven 
industries  (processing  and  preserving  of  fish,  fruit, 
manufacture of vegetable oils, dairy products etc.), 
labour-intensive 
value  added  specialisation 
industries 
export 
industries 
specialisation 
(electronic valves, photovoltaic systems). However, 
the share of manufacturing in Cyprus is very small 
(the three top economic sectors are all in services), 
and  exports  of  manufactures  even  smaller,  so  that 
(manufacturing)  export 
should  be 
interpreted with care. At the more aggregated sector 
level,  Cyprus  is  specialised  in  low  innovation  and 
education  intensity  sectors  such  as  water  transport 
and 
export 
specialisation  in  high  education  sectors  is  due  to 
financial services.  

restaurants.  The 

technology-driven 

indicators 

hotels 

and 

and 

94 

For main sources used see the Annex.  

113 

its 

industrial  structure,  Cyprus’  R&D 
Given 
intensity  is  (slightly)  below  average,  as  is  its 
position  on  the  quality  ladder.  It  is  closer  to  the 
average  in  technology-driven  industries  than  in 
labour-intensive industries. 

Most prominent sectors in Cyprus 

Highest relative value added (2007)
 Water transport
 Hotels and restaurants
 Air transport

Change in the relative value added (1999/2007)
Increasing specialisation
 Real estate activities
 Recycling
 Non-metallic mineral products
Decreasing specialisation
 Water transport
 Wearing apparel, dressing and dyeing of fur
 Hotels and restaurants

Structural change 

In  terms  of  change,  Cyprus  has  considerably 
increased  its  trade  specialisation  in  technology-
driven  industries  (electronic  valves,  photovoltaic 

 
 
 
 
                                                 
 
 
 
systems, air and spacecraft and medical equipment), 
and  its  relative  share  in  high  education  and 
innovation  sectors  (radio,  TV  and  communication 
equipment), while it has decreased its specialisation 
in  the  low  innovation  and  education  sectors  (water 
transport,  hotels  and  restaurants)  as  well  as  in 
exports  of  labour-intensive  industries.  Cyprus  is 
stagnant  on  its  sectoral  R&D  intensity,  and  the 
quality  indicators  paint  a  mixed  picture,  showing 
improvement  in  the  high  quality  segment  but  also 
reinforcing the low quality ones. 

Overall, Cyprus is clearly catching up with respect 
terms  of  specialisation; 
to  competitiveness 
however 
to  sectoral 
upgrading  such  as  R&D  and  quality  show  that 
Cyprus needs to move further up the value chain. 

indicators 

referring 

the 

in 

In Cyprus, the crisis clearly held back the structural 
change towards technology-driven industries, while 
leading  to  higher  shares  of  capital-intensive  and 
marketing-driven industries. 

Cyprus  experienced  an  appreciation  of  the  real 
effective  exchange  rate  by  18%  over  the  last 
decade,  which  is  slightly  below  the  EU27  average 
(21%),  indicating  nevertheless  a  loss  in  cost  and 
price  competitiveness.  Nominal  unit  labour  costs 
have  increased  by  32%  between  2000  and  2010, 
compared  to  an  increase  of  14%  in  the  EU27  and 
20% in the Euro area. While labour productivity per 
hour  worked  has  gradually  increased  over  the  last 
decade, it is still about 20 percentage points below 
the  EU27  average  and  about  33  percentage  points 
below the Euro area average. 

4.12.2  Towards an innovative industry 

improved  gradually  over 

The  Innovation  Union  Scoreboard  2010  classifies 
Cyprus  among  the  innovation  followers  with  a 
close  to  average  performance.  Its  relative  ranking 
has 
Its 
enterprises outperform in non-R&D innovation but 
underperform  in  R&D  expenditure.  Due  to  the 
structure  of  the  productive  sector,  with  a  clear 
predominance 
in 
services,  a  significant  increase  of  business  R&D 
expenditures is unlikely in the near future.  

firms  specialising 

the  years. 

in  small 

to  pursue  a  researcher  career, 

On  the  other  hand,  low  levels  of  R&D  activity  in 
the  business  sectors  weaken  the  incentives  for 
students 
thus 
constraining  the  development  of  human  capacities 
for research. This situation risks to persist as fiscal 
constraints do not allow for a significant increase in 
public research in the near future. The government 
is  preparing  a  National  Strategy  for  Research  and 
Innovation  for  2011-2015  aiming  at  addressing 
these  bottlenecks  in  a  coherent  way,  including  by 

114 

giving more emphasis toinnovation over research. 

implemented  by 

R&D  and  innovation  funding  actions  are  designed 
and 
the  Research  Promotion 
Foundation,  an  independent  body  co-financed  by 
the state and the EU structural funds. Actions under 
one of the five priorities are destined to enterprises 
even  if  the  latter  can  also  use  the  other  actions. 
There  are no policy  changes in  2011  as  all  actions 
take  place within  the  framework  defined for 2009-
2010.  

While  public  research  capabilities  and  innovation 
policy  have  been  considerably  improved  over  the 
last decade, the business sector is still considerably 
under-investing  in  R&D.  Innovation  policy  has 
evolved rapidly but in a rather fragmented way and 
the  government  is  planning  drawing  up  a  new 
national strategy. In a context of fiscal constraint, it 
will have to be well-targeted so as to contribute in 
achieving  the  long-term  objective  of  diversifying 
the economy towards higher value activities. 

4.12.3  Towards a sustainable industry 

The  high  energy  and  CO2  intensity  of  the  Cypriot 
business  sector,  in  combination  with  the  heavy 
dependence  on  imported  oil  for  energy  generation 
and  a  small  and  isolated  energy  grid  represent  a 
potential  risk  in  case  of  high  volatility  in  oil  and 
CO2  prices.  This  risk  is  addressed  by  investing  for 
the  incorporation  of  natural  gas  as  a  source  of 
energy  generation  and  by  encouraging  energy 
savings  and  the  development  of  renewable sources 
of energy. 

A  number  of  grant  schemes  were  in  force  to 
encourage  manufacturing  establishments  reducing 
their  environmental  nuisances  and  increase  their 
energy  efficiency.  The  legal  framework  has  been 
completed  by  the  recent  transposition  into  national 
law  of  the  eco-design  Directive  of  2009  and  the 
publication on-line of all relevant information. The 
regulation  on  energy  audits  has  been  submitted  to 
the Parliament. 

Cyprus  was  among  the  early  adopters  of  green 
procurement.  The  corresponding  framework,  valid 
for 2007-2009 is being revised to take into account 
the  GPP  toolkit.  The  use  of  green  standards  is 
widespread, including in the private sector. 

4.12.4  The business environment 

Cyprus  offers  a  generally  favourable  business 
environment.  Satisfaction  with 
regulatory 
burden and the quality of infrastructure is above the 

the 

 
 
EU  average.  The  small  size  and  the  geographic 
isolation  of  the  economy  pose  some  challenges 
regarding  the  functioning  of  competition.  More 
generally, domestic firms face high operating costs, 
especially  as  concerns  energy  and  water  but,  also, 
some  professional  services.  Also,  there  remain 
areas  where  dealings  with  the  administration  are 
lengthy and costly in comparison to EU average. 

a 

through 

is  subject 

carried-out 

to  a  simplified 

regulation  policy 

is  defined  by  an 
Better 
interdepartmental  Steering  Committee  and 
is 
implemented  by  a  Central  Specialised  Unit  at  the 
Ministry  of  Finance.  The  vast  majority  of  new 
impact 
legislation 
assessment 
standard 
questionnaire.  Consultation  of  stakeholders  during 
the  drafting  procedure  is  systematic.  For  the 
achievement of the national target of 20% reduction 
of  administrative  burden  by  2012,  a  sectoral 
baseline  measurement  in  all  national  legislation 
relating  to  enterprises,  based  on  8 national  priority 
areas, was completed in April 2011. The reduction 
proposals resulting from the project were approved 
by  the  Council  of  Ministers  and  are,  currently, 
under implementation 

The  eProcurement  initiative  is  operational  since 
November  2009.  Using  the  central  platform  is 
mandatory  for  all  calls  for  tender  of  all  public 
entities.  At  a  next  stage  also  offers  will  be  made 
electronically.  There  are  2500  registered  users  for 
restricted  calls,  10 %  of  which  are  non  resident  to 
Cyprus.  A  Help  Desk  contributes  to  making  the 
platform  SME-friendly  and, 
the 
transition to an electronic platform is considered as 
successful.  

in  general, 

Following  a  rapid  increase,  usage  of  eGovernment 
services  by  enterprises  reached  the  EU  average  in 
2009.  However,  the  supply  of  public  services  on-
line  is  still  among  the  weakest  in  the  EU  (2010). 
The  government  is  preparing  an  ambitious  Digital 
Strategy for 2011-2020 wich would also support the 
the  development  and  competitiveness  of 
the 
economy. 

4.12.5  Entrepreneurship and SME policy 

The  contribution  of  Cypriot  SMEs  to  the  overall 
economy  compared  to  that  of  large  firms  is 
significantly  higher  than  for  the  EU  average.  In 
particular,  the  contribution  of  micro  firms  to 
employment  is  in  Cyprus  (39 %)  higher  than  the 
European  average  (30 %)  and  the  contribution  of 
the  total  SME  sector  to  employment  (83 %)  is  in 
Cyprus higher than in the EU on average (67 %). In 
terms  of  value  added,  the  contribution  of  SMEs 
amounts  to  75 %  (EU  58.6 %),  pointing  to  their 
significantly lower productivity than larger firms.  

towards  entrepreneurship  are  more 
Attitudes 
favourable  as  the  entrepreneurship  rate  and  the 
preference 
for  self-employment  are  markedly 
higher in Cyprus in comparison to the EU average. 
The  one-stop-shop  for  setting  up  a  business  is 
operational  and  the  average  time  to  register  a  new 
company  (8  days)  is  shorter  than  EU  average.  It 
should  permit  handdling  the  registration  fully  on-
line  shortly  (eFilling  project,  launched  in  2008).  It 
also  serves  as  the  single  point  of  contact  for  the 
purposes  of  the  Services  Directive.  It  provides 
information  regarding  procedures  and  formalities 
needed  for  the  access  to,  and  exercise  of  service 
activities  either  through  the  establishment  of  a 
business  or  through  the  cross-border  provision  of 
services. The electronic completion of a number of 
procedures  is  available  through  the  Cyprus  PSC 
portal. 

in  April  2009  with 

Access to and the cost of credit constitute a concern 
for  Cypriot  SMEs.  The  creation  of  a  Loan 
Guarantee  Granting  Facility  to  support  SMEs  that 
are  not  able  to  provide  sufficient  collateral  is  still 
the  Financing  Agreement 
on  hold.  Following 
concluded 
the  European 
Investment Fund for an amount of EUR 20 million, 
Two  fionacial  products  were  put  in  place,  the 
Funded  Risk  Sharing  instrument  which  offers 
micro-credits  (up  to  EUR 100 000)  assorted  with 
favourable  conditions  to  small  and  very  small 
enterprises  with  co-funding  and  the  First  Loss 
Guarantee Financial instrument which offers credit 
risk  protection  (to  the  amount  of  (50 %  by  loan) 
with the aim of facilitating the access of micro and 
small  enterprises  and  start-ups  to  bank  credit.  The 
first  instrument  is  operational  since  January  2011 
while the second is in the phase of negotiation with 
the  financial  intermediary  that  will  implement  it. 
New 
and 
EUR 50 million in total are expected through these 
two  instruments.  Payment  delays,  both  from  the 
state to businesses but also in transactions between 
businesses  constitute  another  source  of  complaint. 
This  is  expected  to  be  improved with  the  adoption 
of the Late Payments Directive. 

respectively,  EUR 20 

loans  of, 

A  number  of  features  make  the  eprocurement 
platform  particularly  SME-friendly  (Help  Desk  – 
including for filing in the forms, existence of model 
documents  for  all  procedures,  system  of  alerts  and 
possibility  of  submitting  only  a  declaration  in 
honour in order to participate). In addition, tenders 
(for  example,  on  a 
are  divided 
geographical  basis)  and,  when  sub-contracting  is 
used,  sub-contractors  are  paid  directly  by  the 
procuring authority. 

into 

lots 

the  execution  of 
to  SMEs, 
Regarding  grants 
existing  actions  financed  by  the  EU  structural 
(total  budget 
Funds, 

targeting  manufacturing 

115 

 
problem  linked  to  its  structural    specialisation  in 
labour-intensive,  low-skills  and  low  technology 
sectors,  which  is  also  reflected  in  its  current 
account  deficit.  On  the  other  hand,  Cyprus  is 
endowed  with  highly  educated  and  multilingual 
workforce. The policy priority therefore remains to 
adjust  the  structure  of  the  economy  towards  more 
knowledge-intensive  and  high  growth  activities, 
primarily  in  services  and  tourism,  through  a  well 
and 
targeted  R&D 
encouraging  entrepreneurial  activity  in  high  value 
added sectors.  

innovation  policy 

and 

there  are 
this  overarching  challenge, 
Besides 
structural weaknesses that could be addressed in the 
short  term,  such  as  further  improving  the  business 
environment  by  addressing  regulatory  burden  and 
offering  more  public  services  on-line,  reinforcing 
in  some  professional 
competition,  especially 
efficiency.
services, 

and  promoting 

energy 

(total 

budget  EUR 5 

EUR 23 million),  the  processing  of  agricultural 
products  (total  budget  EUR 24 million),  tourism 
(total  budget  EUR 13 million),  agro  tourism  (total 
budget  EUR 15 million)  and  women  and  youth 
entrepreneurship 
and 
EUR 6 million  respectively)  is  ongoing.  The  latter 
was  particularly  successful 
in  creating  new 
enterprises  and  jobs,  also  thanks  to  its  skills 
acquiring  dimension.  Of  notable  interest  for  its 
reduced  administrative  burden  is  the  nationally-
funded action for the relocation of manufacturing or 
nuisance  producing  very  small  enterprises 
to 
authorised areas (Industrial Areas, Industrial Zones, 
etc). 

4.12.6  Conclusion 

The insular nature and distance from the rest of the 
internal  market  pose  a  challenge  for  small  Cypriot 
enterprises. Cyprus faces a chronic competitiveness 

116 

 
 
4.13  Latvia 

117 

 
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Latvia

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

N.A.

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

N.A.

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

Sectoral specialisation of manufacturing – Latvia (2009) 

118 

 
 
 
 
 
 
 
 
 
 
 
 
 
Textiles and textile products

Leather and leather products

Wood and wood products

Food products

Paper products; publishing and printing

Refined petroleum products

Chemicals, chemical products

Rubber and plastic products

Other non-metallic mineral products

Manufacturing n.e.c.

Transport equipment

Electrical and optical equipment

Machinery and equipment n.e.c.

Basic metals and fabricated metal products

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.13.1 

Introduction 

the 

industries  against 

Latvia is one of the countries that are catching up: 
among the population of active enterprises, it has a 
high share of enterprises that are growing fast. The 
impact of the crisis on Latvia’s economic structure 
seems  to  have  been  limited,  favouring  capital-
intensive 
trend.  While 
manufacturing  production  fell  by  almost  27 % 
during the crisis, it has partially recovered, reaching 
12.7 %  below  its  previous  cyclical  peak  in  April 
2011. Latvia belongs to the group of countries with 
relatively lower income levels and specialisation in 
labour-intensive 
industries.  Moreover,  Latvia’s 
R&D  intensity  is  higher  than  the  average  of  this 
country  group,  even  though  it  is  below  average 
when  taking  into  account  its  industrial  structure. 
The  same  holds  true  for  Latvia’s  position  on  the 
quality ladder: it is below the EU average but above 
its group average, while the low quality segment is 
on  par  with  the  EU  average.  Overall,  Latvia  is 
improving  its  competitiveness,  especially  in  terms 
of  specialisation  and  to  a  lesser  extent  in  as  far  as 
sectoral upgrading is concerned. 

Trade and industry specialisation 

In  2009,  when  compared  to  the  EU  average, 
to 
manufacturing  contributed  significantly 
Latvia's  total  added  value  –  9.9 %  against  the  EU 
average  of  14.9 %.  Latvia  is  specialised  in  labour-

less 

such 

industries, 

intensive  manufacturing 
as 
sawmilling  and  wood  planning,  manufacturing  of 
veneer  sheets  and  wooden  containers,  as  well  as 
marketing-driven  industries  (e.g.  fish  processing 
and  preserving).  At  the  more  aggregated  level, 
Latvia  is  specialised  in  sectors  with  low  and 
medium-low  innovation  and  education  intensity, 
such as metal processing and machinery, wood and 
wood  products, 
inland 
transport. As is the case for the other Baltic States, 
Russia  is  an  important  destination  for  Latvian 
exports. 

food  production,  and 

Most prominent sectors in Latvia 

Highest relative value added (2007)
Wood and products of wood and cork
Inland transport
Real estate activities

Change in the relative value added (1999/2007)
Increasing specialisation
Air transport
Real estate activities
Recycling
Decreasing specialisation
Post and telecommunications
Wood and products of wood and cork
Supporting and auxiliary transport activities; 
activities of travel agencies

Structural change 

119 

 
 
 
 
 
 
 
(e.g. 

towards 

communication 

In  terms  of  change,  Latvia  has  been  moving 
unequivocally 
knowledge-intensive 
industries: the share of technology-driven industries 
(e.g.  motor  vehicles,  radio  and  TV  receivers)  in 
exports has increased considerably, as has the share 
of  sectors  with  high  innovation  and  education 
intensity 
equipment, 
computers).  At  the  same  time,  trade  specialisation 
in  labour-intensive  industries  and  specialisation  in 
innovation  sectors  (e.g.  clothing  apparel, 
low 
auxiliary  transport)  has  decreased.  In  particular, 
Latvia  has  improved  its  position  on  the  quality 
ladder;  the  exception  is  the  share  of  technology-
driven  industries  in  the  low  price  segment  of 
exports,  which  has  been  decreasing  in  Latvia 
relative to the EU average trend. However, Latvia’s 
sectoral  R&D  intensity  has  remained  unchanged 
relative to the EU average. 

Latvia has experienced a strong appreciation of the 
real  effective  exchange  rate  during  the  last  decade 
(48  compared  to  21%  in  the  EU27),  indicating  a 
loss  in  cost  and  price  competitiveness.  Here,  the 
increase 
labour  costs  (87%) 
between  2000  and  2010  played  a  significant  role. 
While  labour  productivity  per  hour  worked  has 
gradually  increased  over  the  last  years,  it  is  still 
about  53  percentage  points  below 
the  EU27 
average. 

in  nominal  unit 

4.13.2  Towards an innovative industry 

Latvia  is  classified  as  a  modest  innovator  with  a 
performance  significantly  below  the  EU  average, 
according  to  the  Innovation  Union  Scoreboard 
2010. In 2009, 0.46 % of GDP was spent on R&D, 
out of which 37 % from the private sector. 

While reduction of  all public  expenditures  in 2010 
affected  the  implementation  of  R&D  and  thus 
continued  to  place  Latvia  well  below  the  EU 
average,  the  country  has  still  benefitted  from  ESF 
and  ERDF  funds  intended  for  developing  both 
research  and  IT  infrastructures,  attracting  human 
to  science,  commercialising  science 
resources 
output,  supporting  applied  research  as  well  as 
R&D. 

The  government  supports  innovative  enterprises  in 
developing new products and technologies through 
loans,  guarantees,  grants  for  the  manufacturing 
sector  and 
investment 
for  high-added  value 
projects, as well as the creation of a technology and 
business  incubators.  In  order  to  improve  access  to 
venture capital for innovative enterprises, seed and 
start-up funds have been made available for concept 
and/or  product  development;  a  venture  capital 
instrument is being created to develop and enhance 
production capacities.  

120 

The  Innovation  and  Entrepreneurship  Motivation 
Program encourages innovative enterprises through 
training and information sessions, consultations for 
new  entrepreneurs  and  an  annual  competition  of 
business plans – Cup of Ideas. However, the budget 
allotted  by  the  government  for  the  support  of 
innovative  enterprises  could  be  considered  rather 
limited in comparison to other countries, hence the 
low  likelihood  of  having  a  long  term  impact  on 
increasing  the  number  of  innovative  enterprises  as 
well  as  improving  the  innovation  performance  of 
Latvian companies.  

industrial  research 

In  terms  of  cooperation  between  business  and 
academia,  the  most  prominent  program  is  the 
support  of 
in  competence 
centers:  running  until  2015,  the  6  existing  centers 
are  active  in  the  main  exporting  industries:  wood, 
machine  building,  pharmaceuticals,  electronics, 
ICT  and  biotech.  In  addition,  in  order  to  facilitate 
the  commercialisation  of  state  funded  research, 
contact  points  for  technology  transfer  have  been 
established  in  8  universities,  under  a  program 
running  until  2013.  It  is  worth  mentioning  the 
Institute of Solid State Physics of the University of 
Latvia,  Latvian  Institute  of  Organic  Synthesis, 
Latvian Biomedical Research and Study Center and 
the Institute of Mathematics and Computer Science 
of  the  University  of  Latvia  as  stories  of  successful 
cooperation between scientists and entrepreneurs.  

As  most  universities  are  largely  involved  in  state-
funded  research,  the  Law  on  Scientific  Activity  is 
being  amended  to  allow  the  intellectual  property 
rights  on  inventions  funded  with  public  money  to 
stay  with  the  originating  universities  or  institutes. 
However,  state-funded  universities  do  not  have 
enough  incentives  to  reach  out  to  the  industry.  On 
the other hand, companies either do not know what 
universities can offer or have a short term approach 
that  disfavours  research  and  innovation,  as  long 
term projects. The R&D and innovation community 
argues that, should more funds be dedicated to new 
laboratories,  enterprises  will  have  an  incentive  to 
approach  universities  and  thus  sponsor  common 
projects.  Similarly,  more  should  be  done 
to 
encourage  applied  research,  continue  to  fund  the 
ongoing  clusters  program,  as  well  as  directly 
support  research  activities  in  companies.  Another 
way to bridge the gap between the science and the 
business communities is through several innovative 
companies that are led by former scientists. 

In  order  to  address  the  shortage  of  highly  skilled 
labour  force,  the  government  plans  to  increase  the 
number  of  people  employed 
in  science  and 
research,  strengthen  the  infrastructure  of  the  state 
state-of-the-art 
scientific 
equipment (a EUR 148 million program, starting in 
June  2011)  and  support  9  national  level  research 

institutions  with 

 
in  priority 

like:  energy  and 
fields 
centres 
environmental  resources,  extraction  technologies, 
pharmacy 
creative 
biomedicine, 
technologies,  nanotechnologies  and  nanomaterials 
etc.  

ICT, 

and 

if 

to 

increase 

it  wants 

to  address 

There  are  important  challenges  that  Latvia  will 
have 
the 
competitiveness  of  its  enterprises  by  improving 
their  innovation  capacity  and  boosting  R&D.  The 
infrastructure  for  science  and  research  should 
continue  to  be  upgraded,  the  number  of  highly 
skilled  people  should  be  increased  and  significant 
investment should be made in the high tech sector. 
In  addition,  the  commercialisation  of  research 
output should be further improved and cooperation 
between 
should  be 
encouraged by means of incentives.  

industry  and  academia 

and 

system 

governance 

Latvia  needs  to  continue  to  improve  its  R&D  and 
innovation 
its 
communication and coordination with the R&D and 
innovation  community.  Stakeholders  argue  that 
R&D  and 
further 
enhanced  by  offering  more  government  guarantees 
and better access to finance, for instance through an 
innovation  or  mezzanine  fund,  or  some  forms  of 
risk capital.  

innovation  could  also  be 

4.13.3  Towards a sustainable industry 

Latvia's  energy  intensity  still  remains  well  above 
the  EU  average.  Energy  consumption  in  Latvia  is 
high  and  the  situation  has  worsened  as  a  result  of 
the  crisis:  the  industry,  as  well  as  public  opinion, 
seems  rather  reluctant  to  'go  green'.  Given  that  the 
implied  costs  are  too  high,  companies  prefer  to 
either  stick  to  business  as  usual  or  expect  fiscal 
incentives  in  order  to  take  action.  Banks  are  also 
less  willing  to  provide  long  term  loans  for  green 
investments. 

the 

total  net 

in  Latvia  was  29.9 % 

Latvia has a good record on renewable energy: the 
energy produced from renewable energy sources as 
final  energy 
a  percentage  of 
consumption 
in  2008, 
compared to the EU average of 10.3 %. The largest 
sources  of  renewable  energy  are  hydro-power  and 
biomass; the quotas on the production of electricity 
from  renewable  sources  have  been  abolished 
recently.  There  are  measures 
to 
increasingly  replace  fossil  fuels  with  renewable 
energy:  the  new  draft  Renewable  Energy  Law 
replacing  the  current  support  mechanism  aims  at 
further increasing awareness and promoting the use 
of  renewables,  and  ensuring  a  long  term  supply  of 
renewable  energy.  The  Climate  Change  Financial 
electricity 
Instrument 
production  from  renewable  energy  sources  rather 
than  fossil  fuels  in  municipalities  and  households. 

in  place 

facilitates 

heat 

and 

In  addition,  there  are  some  ongoing  programs  that 
aim at developing co-generation power plants using 
renewables 
supporting 
(running  until  2015), 
technology  transfer  from  fossils  to  renewables, 
using  biofuels  in  the  transport  sector  and  enabling 
energy  production  from  agricultural  and  forest 
biomass  (to  be  used  outside  the  farm).  However, 
these measures need to be further implemented and 
their impact will need to be thoroughly assessed. 

increasing 

introduces  energy  audits 

In  terms  of  energy  efficiency,  the  law  on  end-use 
energy  efficiency 
in 
Latvia,  which  function  on  a  voluntary  basis  in 
industry,  but  become  mandatory  for  obtaining 
public  financial  support.  However,  stakeholders 
emphasise  that  there  is  a  lack  of  skilled  auditors 
who  could  carry  out  energy  audits.  While  there  is 
an ongoing program for the heat insulation of multi-
the  energy 
apartment  houses  and 
efficiency  of  centralised  heating  systems, 
the 
Climate  Change  Financial 
Instrument  has  a 
component  that  aims  at  increasing  the  energy 
efficiency of public and industrial buildings. Street 
lighting is becoming more energy efficient as well, 
through  the  use  of  LED  lamps,  under  a  grant 
scheme  of  LVL 7 million.  Most  importantly,  some 
industrial  sectors  are  becoming  more  energy 
efficient.  For  instance,  to  export  timber,  producers 
are  obliged  to  produce  a  certificate  of  sound 
environmental  management,  without  which  it  is 
difficult to find clients; this requirement has pushed 
the  sector  towards  more  environmentally-friendly 
solutions. Another  example  is  a  large  Latvian  beer 
producer  that  spent  more  than  1  million  euro  on  a 
new heat/water system that is more energy efficient. 
Moreover,  a  green  investment  scheme  is  being 
implemented  in  some  manufacturing  buildings  and 
technological  processes.  However,  despite 
the 
actions  taken  and  the  significant  impact,  the 
necessary  investments  are  still  delayed,  which  will 
eventually  lead  to  a  considerable  slowdown  of 
progress. Further on, more effort is needed to raise 
awareness on the importance of energy efficiency.  

The use of green procurement advances very slowly 
in Latvia, also as a consequence of the fact that it is 
implemented  on  a  voluntary  basis.  While  until 
recently  the  main  criterion  in  procurement  was  the 
lowest price, 'economically efficient' solutions have 
started  to  be  considered.  The  Climate  Change 
Financial  Instrument  also  supports,  among  other 
things,  green  public  procurement  although  its 
implementation is not broadly developed yet.  

As local demand is more inclined towards low cost 
products  and  services,  the  environmental  goods 
produced  in  Latvia  are  mainly  targeting  export 
markets.  However,  the  share  of  Latvia's  exports  of 
environmental  goods  as  a  percentage  of  total 

121 

 
exports is still lagging behind the EU average.  

Latvia is performing rather well in the area of waste 
management;  it  is  well  above  the  EU  average  in 
terms  of 
the  waste  generated  by 
enterprises.  An  ongoing  program,  running  until 
2013,  targets  the  development  of  water  and  waste 
management infrastructure.  

reducing 

Among the challenges that are still to be addressed, 
the decrease of energy intensity in industry remains 
a high priority, as is the utilisation of more efficient 
heating  solutions,  possibly  using  some  under-
exploited  technologies.  Financial  support  and  tax 
incentives could be used on a wider scale, in order 
to reduce the costs of green solutions and thus make 
them  more  affordable  for  companies.  In  addition, 
more  effort  needs  to  be  put  into  building  and/or 
modernising  the  Latvian  energy  infrastructure  and 
improve  the  interconnections  in  the  Baltic  region, 
including through a Baltic energy market. 

4.13.4  The business environment 

Latvia  has  made  noticeable  progress  in  improving 
its business environment, but there is still room for 
significant  development.  In  terms  of  burden  of 
government regulation, Latvia scores slightly below 
the EU average. While satisfaction with the quality 
of infrastructure did not change and remains below 
the  EU  average,  there  has  been  a  significant 
improvement  in  infrastructure  expenditure.  Latvia 
scores  well  above  the  EU  average  on  state  aid  for 
industry  and  services  and  slightly  above  the  EU 
average  on  electricity  prices  for  medium-sized 
addition,  Latvia  has  made 
enterprises. 
considerable  progress  in  increasing  the  percentage 
of  broadband  lines  with  speed  above  10 MBps, 
which places it slightly above the EU average. This 
year, Latvia moved from position 27 to position 24 
(position  9  among  EU  countries)  in  the  Doing 
Business indicators of the World Bank. 

In 

to 

the 

further 

improve 

to 
laws  on  property 

In  order 
the  business 
environment, the government is planning to enable 
foster  entrepreneurship  by 
municipalities 
amending 
lease  and 
redistribute  EU  structural  funds  to  improve  the 
business  infrastructure  by  developing  industrial 
areas,  ensuring  availability  of  public  services  and 
modernising  the  country's  regional  roads.  The 
government  Annual  Action  Plan  for  Improvement 
of  Business  Environment  has  stipulated,  among 
other  things,  a  new  microenterprises  tax  law,  a 
patent fee for individuals in certain professions, and 
amendments to the laws on property registration. A 
new  Construction  Law  has  been  adopted  in  May 
2011, aiming at reducing the number of procedures 
required  for  obtaining  a  construction  permit  from 
24 to 6, and cut the duration from 186 to 69 days; 

while  implementation  is  still  pending,  authorities 
claim  that  the  procedures  involved  have  already 
been simplified. In addition, the new legislation on 
insolvency  procedures  has  shortened  the  length  of 
procedures from 3 to 1 year.  

As  regards  business  start-ups,  the  minimum  equity 
capital requirement of a newly established company 
was reduced, such that it is now possible to start a 
new  company  with  a  minimum  equity  capital  of 
EUR 1.43  (one  Lat).  Additionally,  business  start-
ups  are  able  to  get  support  co-financed  by  ESF  in 
the  form  of  consulting,  training,  loans  and  grants; 
so  far,  396  loans  have  been  provided  and  966 
persons  have 
training.  The  Latvian 
authorities  claim  that  a  one-stop-shop  for  start-ups 
has  been  completed,  as  from  June  2010  the 
Enterprise  Register  enables  start-ups  to  apply 
simultaneously  for  VAT  registration.  However, 
individual  cases  have  been  reported  by  business 
organisations that the one-stop shop system for new 
entrepreneurs was not yet fully functional.  

received 

the  government 

In  terms  of  access  to  markets,  a  set  of  measures 
have been introduced by the government to support 
SMEs. Apart from export guarantees, which intend 
to  support  exporters  by  covering  risks  for  export 
transactions, 
is  developing  a 
Foreign  Direct  Investment  Attraction  Strategy 
aiming at bringing foreign direct investments (FDI) 
to  export-oriented  sectors  with  high  value  added. 
The Investment and Development Agency of Latvia 
has been developing similar measures. The Agency 
has 11 Foreign Economic Representative Offices in 
countries  that  are  Latvia’s  main  trade  partners  and 
provide  the  main  source  of  FDI  for  Latvia.  These 
offices  serve  as  points  of  contact,  provide 
information  on  market  access  and  support  the 
diversification of exports as well as the attraction of 
FDI. In 2010, 55 informative and training seminars 
have been organised by the Agency for enterprises 
interested  in  foreign  markets.  The  Agency  also 
offers 
to 
entrepreneurs,  organises  match-making  events  in 
Latvia and abroad, as well as individual trade visits 
and  trade  missions  to  foreign  countries,  including 
participation  in  trade  fairs  abroad.  Despite  these 
measures,  export  support  still  remains  a  priority 
and,  according  to  stakeholders,  there  is  still  room 
for  further  improving  the  effectiveness  of  existing 
instruments.  

individual  consultation  and  support 

The  use  of  e-commerce  by  both  enterprises  and 
private  individuals  could  be  further  improved. 
According  to  the  most  recent  government  data,  20 
basic  services  are  94 %  available  online,  70 %  of 
enterprises  submit  forms  electronically;  50 %  of 
e-transactions.  The 
full 
companies  perform 
government  has 
two  2011-2013 
in  place 
Development Plans for E-government and E-skills, 

122 

 
respectively,  aiming  at  developing  e-services,  e.g. 
the  e-declaration  system  for  the  State  Revenue 
Service  and  the  e-registration  of  a  company  in  the 
Register of Enterprises. In addition, the government 
intends to further develop the e-procurement system 
– at present containing almost 400 buyers and 100 
suppliers  –  as  well  as  a  business  section  in  the 
portal  www.latvija.lv,  which  contains  information 
on  all  state  and  local  government  services  and 
provides  access  to  e-services  for  both  companies 
and individuals. However, these measures have not 
been sufficiently advertised, such that entrepreneurs 
are  not  aware  of 
to  e-
government. 

the  simpler  access 

to 

areas 

are 
railways, 

In  terms  of  infrastructure,  Latvia  has  significantly 
increased  the  total  amount  of  funds  spent  on 
infrastructure,  including  from  the  EU  funds;  the 
the 
investment 
main 
construction/improvement  of 
roads, 
seaports and broadband networks. The government 
is  planning 
introduce  International  Freight 
Logistics  and  a  Port  Information  System  to  make 
freight 
transport  more  competitive.  The  Next 
Generation Access Network for rural areas aims to 
ensure  broadband  internet  connection  for  all  local 
administrations  and  facilities  by  2020.  However, 
more  could  be  done  in  the  area  of  transport,  as 
Latvian  roads  are  not  in  optimal  condition,  thus 
generating  higher  energy  consumption:  public 
transport  based  on  electricity  and  biofuels  (rather 
than fossil fuels) could be further developed.  

Despite noticeable progress, Latvia should continue 
its  efforts  to  create  a  better  business  environment. 
According to stakeholders, the procedures for both 
obtaining  licenses  and  permits,  and  paying  taxes 
could  be  further  simplified;  the  uncertainty  of  the 
tax situation seems to be particularly detrimental to 
enterprises  Standardisation  and  certification  were 
also  considered  rather  difficult  and  expensive  in 
Latvia.  In  addition,  property  registration,  starting 
and  closing  a  business  and  exploiting  the  ICT 
potential  to  raise  productivity  are  areas  where 
Latvia should continue reforms, so that the business 
environment would become more attractive for both 
local entrepreneurs and foreign investors.  

4.13.5  Entrepreneurship and SME policy 

Compared  to  the  EU  average,  Latvia  has  a  higher 
number  of  larger  SMEs  and  a  lower  percentage  of 
micro-enterprises.  The  SME  sector  contributes 
70 % of total value added to the Latvian economy, 
with services being the most important sector. The 
general  entrepreneurship  rate  is  slightly  below  the 
EU  average  and  there  is  a  relatively  low  share  of 
opportunity-driven entrepreneurs in Latvia. 

Latvia  has  made  good  progress  in  supporting 

micro-enterprises  –  companies  with  an  annual 
turnover  not  exceeding  LVL 70 000  and  less  than 
five  employees.  The  Micro-enterprises  Tax  Law 
and  the  implementation of  the  Program  of  Support 
Measures for Microenterprises has resulted in a set 
the 
intending 
of  30  measures 
administrative  burden  of  companies,  such  as: 
smoother  bookkeeping  and  access  to  finance;  a 
special  reduced  tax  for  micro-enterprises  (9 %); 
better access to information; and a lump sum patent 
fee for individuals in certain professions (crafts and 
services), essentially replacing their income tax and 
social  security  contributions.  These  measures  have 
proven  successful,  as  the  number  of  new  micro-
enterprises registered in Latvia has increased. 

reduce 

to 

to 

improve 

and  Land  Bank, 

the  Latvian  Guarantee  Agency, 

In  order 
the  competitiveness  of 
enterprises, the government has taken steps to offer 
more financial support instruments. It is intended to 
provide  support  to  at  least  300  enterprises  within 
the  framework  of 
the  state  support  program 
administered  by  the  Ministry  of  Economics  until 
2013. The following instruments have already been 
made  available  to  enterprises:  loans  for  increasing 
the  competitiveness  and  growth,  individual  credit 
guarantees, venture capital, seed and start-up capital 
funds;  so  far,  618  loans  and  490  guarantees  have 
been  provided,  both  together  providing  access  to 
finance  in  amount  of  almost  300  million  lats.  The 
government is in the process of creating one united 
Financial  Development  Institution  of  Latvia  by 
the 
merging 
the  Latvian 
Mortgage 
Environmental 
the  Rural 
Development Fund and JEREMIE Holding Fund to 
provide entrepreneurs with a one-stop-shop facility. 
Other instruments, such as a mezzanine instrument 
and a new co-investment fund to provide equity, are 
currently  being  developed.  Nevertheless,  access  to 
finance  still  remains  a  priority  and  an  analysis  of 
possible  additional  support  instruments  should  be 
made  in  order  to  better  meet  market  needs. 
Furthermore, business organisations believe that, in 
spite of the availability of existing instruments, the 
supply  of  good  business  ideas  that  could  receive 
funding  is  relatively  short  or  the  expectations  of 
investment readiness for new commercial proposals 
relatively  high.  As  a  result,  very  few  investments 
are  actually  made.  In  addition,  access  to  finance 
seems  to  be  especially  difficult  for  companies 
operating  in  the  domestic  market,  whereas  export-
oriented  companies  have  more  opportunities  to 
secure financing. 

Investment  Fund, 

The  Innovation  and  Entrepreneurship  Motivation 
Program encourages innovative enterprises through 
training and information sessions, consultations and 
mentoring  for  new  entrepreneurs  and  an  annual 
competition  of  business  plans  –  Cup  of  Ideas  (760 
participants  in  2010).  A  set  of  measures  has  been 

123 

 
4.13.6  Conclusion 

the  growth  potential  of 

In order to continue to improve its competitiveness 
conditions,  Latvia  would  benefit  from  a  further 
strengthening  of 
its 
economy  through  a  range  of  structural  reforms.  In 
particular,  stronger  policies  would  be  benefit  the 
absorption  of  EU 
improve  public 
procurement and competition; enhance performance 
of public administration; and improve active labour 
market  and  lifelong  learning  policies,  including 
skills upgrading and retraining.  

funds; 

to 

further 

improve 

the  business 
In  order 
environment,  increased  efforts  to  attract  FDI  and 
promote  exports  would  help  growth,  as  would 
further  implementation  of  the  program  for  the 
support  of  small  and  micro  companies,  continued 
reduction of the administrative burden, (re)building 
and  modernising  the  infrastructure  and  expanding 
the use of e-services. In addition, there is potential 
to  further  exploit  the  cooperation  opportunities 
offered in the Baltic region. 

taken  to  further  increase  the  attractiveness  of 
entrepreneurship:  567  people  have  benefited  from 
business  and  self-employment/start-up 
training 
through a life-long learning program; the training of 
1200  new  entrepreneurs  is  ongoing  as  well  as  the 
previously  mentioned  motivation  program.  In 
addition,  9  regional  business  incubators  have  been 
created,  encompassing  274  enterprises,  including 
one  incubator  in  Riga  for  creative  industries. 
to  foster 
However,  more  needs 
skills 
entrepreneurial 
by 
systematically 
entrepreneurship 
education in schools. During 2009 – 2011, support 
has  been  provided  under  The  Innovation  and 
Entrepreneurship  Motivation  Program  to  the  non-
government  organisation  Junior  Achievement  to 
widen involvement of school children (primary and 
secondary  schools)  in  the  Pupils  Learning  Firms 
Program.  Equally,  the  government  could  intensify 
its  efforts 
target  groups, 
including  in  particular  women  who  want  to  start  a 
business, for instance through mentoring programs. 

to  be  done 
and 

attitudes 
introducing 

to  support  specific 

124 

 
 
4.14  Lithuania 

Lithuania

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2009)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2005)

Early stage financing (% of GDP; 2009)

N.A.

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

125 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Lithuania (2009) 

Textiles and textile products

Leather and leather products

Wood and wood products

Food products

Paper products; publishing and printing

Refined petroleum products

Chemicals, chemical products

Manufacturing n.e.c.

Rubber and plastic products

Transport equipment

Other non-metallic mineral products
Basic metals and fabricated metal products

Electrical and optical equipment

Machinery and equipment n.e.c.

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.14.1 

Introduction95 

Trade and industry specialisation 

Manufacturing  contributes  16.4 %  to  Lithuania's 
total  value  added  against  14.9 %  for  the  EU  on 
average  (2009).  At  the  detailed  manufacturing 
industry  level,  Lithuania  is  specialised  in  labour-
intensive (wooden containers, sawmilling, builders’ 
carpentry) 
industries 
and  marketing-driven 
(processing  and  preserving  of  fish,  dairy  products) 
in  terms  of  value  added  and  exports.  It  is  also 
specialised  in  capital-intensive  industries  (refined 
petroleum products) regarding exports. At the more 
aggregated  sector  level,  Lithuania  is  specialised  in 
low  and  medium-low  innovation  and  education 
sectors  (wearing  apparel,  inland  transport)  and  in 
medium-high  sectors  (textiles,  coke  and  refined 
petroleum) for its exports. Its share of high growth 
firms indicates that Lithuania is catching up, while 
the  high  share  of  exports  to  the  BRIC  countries  is 
mainly due to exports to Russia. 

95  

For main sources used see the 
methodological annex. The cut-off date for 
all data and qualitative information is 31 
August 2010. 

126 

Given  its  industrial  structure,  Lithuania’s  R&D 
intensity is below the EU average, as are its shares 
in the high price segment of industries, while export 
shares are high in the low price segment, indicating 
an  unfavourable  position  on  the  quality  ladder. 
Overall,  Lithuania  shares  all  the  characteristics  of 
its  group  of  lower  income  countries  specialised  in 
labour-intensive industries (group 4). 

Most prominent sectors in Lithuania 

Highest relative value added (2007)
Wearing apparel, dressing and dyeing of fur
Wood and products of wood and cork
Inland transport

Change in the relative value added (1999/2007)
Increasing specialisation
Recycling
Furniture, jewellery, musical instruments, sports goods, 
games and toys
Office, accounting and computing machinery
Decreasing specialisation
Water supply
Water transport
Coke, refined petroleum and nuclear fuel

 
 
 
                                                 
 
 
Structural change 

it 

in 

has 

share 

export 

decreased 

In  terms  of  change,  Lithuania  has  increased  its 
relative value added share in high education sectors 
(computers,  software,  business  services)  and  its 
relative 
technology-driven 
(electricity  distribution  and  control 
industries 
apparatus),  while 
trade 
specialisation  in  labour-intensive  industries  and  in 
high  education  sectors;  it  has  also  decreased  its 
relative  share  in  high  innovation  sectors  further 
(communication  equipment),  but  has  gained  in 
medium-high innovation sectors (motor vehicles). It 
has  substantially  improved  its  position  on  the 
quality ladder, with the exception of the share in the 
low price  segment  of  technology-driven  industries, 
which  has  decreased  relative  to  the  EU.  While 
sectoral R&D intensity, e.g. in machinery, is rising 
more quickly than in the EU, it still remains below 
the EU average. 

Manufacturing  production  has  recovered  to  a  large 
extent  from  the  crisis,  being  in  April  2011  3.4 % 
lower  than  at  its  previous  cyclical  peak.  The  crisis 
structural  change 
clearly 
towards 
industries  while 
favouring capital-intensive industries. 

slowed  Lithuania’s 
technology-driven 

Lithuania  has  experienced  a  strong  appreciation  of 
the  real  effective  exchange  rate  during  the  last 
decade  (35%,  compared  to  21%  in  the  EU27), 
indicating a loss in cost and price competitiveness. 
Nominal  unit  labour  costs  have  increased  by  26% 
between 2000 and 2010, compared to an increase of 
14% in the EU27 and 20% in the Euro area. While 
labour  productivity  per  hour  worked  has  gradually 
increased  over  the  last  decade,  it  is  still  about  45 
percentage points below the EU27 average. 

Overall,  Lithuania  is  catching  up  with  respect  to 
competitiveness.  In  comparison  with  its  similar 
neighbour Latvia, Lithuania’s specialisation profile 
is 
its  sectoral 
upgrading performance is superior to Latvia. 

improving,  while 

less  clearly 

high  value  added,  knowledge  intensive  modern 
industrial  sectors,  regardless  of  their  position  in 
low-high tech classification. 

the 

An  amendment  to  the  Law  on  Corporate  Income 
Tax  entered  into  force  in  2009.  It  encourages 
companies'  investment  in  R&D  by  reducing  the 
taxable  profit  3  times  the  investment  and  reducing 
the  amortisation  process  to  2  years.  In  2009  98 
for  a  volume  of 
firms  used 
LTL 98 million.  Another  option  is  to  use  Income 
Tax Relief for Investments into New Technologies; 
assessable  profit  for  the  enterprises  could  be 
reduced  up  to  50 %  of  expenditures  incurred  by 
investing into equipment, means of communication, 
computers, etc. In 2009 this measure was used for a 
volume of LTL 475 million.  

scheme 

Another quite successful measure is the Innovation 
Voucher  scheme  which  started  being  implemented 
in 2010 with 86 SMEs benefitting during that year. 
It allows businesses to easily buy R&D services and 
technical  feasibility  studies  from  state  universities 
and  research  institutes.  The  allocated  budget  of 
LTL 1 million  was  distributed  in  less  than  one 
month thanks to the high number of applications. 

and 

implementation 

There have been some attempts recently to improve 
co-ordination 
regarding 
innovation  policy.  They  have  now  been  integrated 
in  a  broad,  horizontal  policy  paper,  the  Lithuanian 
Strategy  for  Innovation  2010-2020.  A  set  of 
measures  is  oriented  to  strengthen  innovation 
support  infrastructure  and  develop  its  institutional 
capacities,  to  improve  R&D  and  business  co-
operation  in  innovation  development,  to  improve 
quality  of  human 
for  R&D  and 
innovation and to strengthen the public and private 
R&D base.  

resources 

addressed 

The  innovation  policy  discussion  has  intensified 
and 
cluster 
innovation 
development  issues,  and  the  problems  industry  is 
facing  -  intensifying  brain-drain  and  international 
migration of qualified labour. 

culture, 

4.14.2  Towards an innovative industry 

Lithuania  is  classified  as  a  moderate  innovator  in 
the Innovation Union Scoreboard 2010, with a low 
share  of  innovating  companies  and  low  R&D 
expenditures  by  businesses.  On  the  other  hand,  it 
scores  well  in  the  share  of  science  and  technology 
graduates. 

The  current  Lithuanian  industry  structure  remains 
disadvantageous  for  rapid  productivity  growth  and 
high  value  added  manufacturing  development. 
Therefore,  the  major  challenge  for  Lithuania  is  to 
upgrade  its  sustained  traditional  industries  towards 

EU  structural  funds  are  used  for  nine  instruments 
focussing on both technological and other forms of 
innovation across different stages of the innovation 
process,  beginning  with  first  ideas  over  feasibility 
studies to putting ideas into practice.  

A  key  initiative  in  terms  of  reorganisation  of 
research  and  innovation  activities  is  the  ongoing 
establishment  of  five  integrated  science,  study  and 
business  centres  –  so  called  Valleys  –  which  are 
supposed  to  reinforce  the  strengths  of  regionally 
concentrated  research  and  innovation  networks. 
Each  Valley  gathers  in  one  place  higher-education 
institutions,  research  centres,  business  companies 

127 

 
and  Science  &  Technology  parks  which  are 
intermediaries  between  science  and  businesses. 
Each Valley is focussed on certain S&T fields and 
the 
is  now 
construction  of 
and 
research  centres  in  those  fields.  The  total  State's 
investment 
about 
EUR 320 million. 

its  programme  for 

infrastructures 

implementing 

5  Valleys 

research 

the 

in 

is 

In  order  to  increase  innovation  activities,  a  recent 
reform of the Law on Education and Science gives 
the ownership of intellectual property rights (IPRs) 
to  higher  education  institutions  which  belonged  to 
the  state  before.  Along  with  recommendations  on 
how  to  manage  these  IPRs  this  is  expected  to 
encourage scientists to patent research findings. 

Key  challenges  include,  first,  to  improve  skills  for 
innovation  and  entrepreneurial  attitudes.  Even 
though  Lithuania  has  a  relatively  high  share  of 
science  and  technology  graduates  there  remain 
concerns  about  skills  shortages  in  certain  fields 
(e.g.  highly  skilled  human  resources  in  specific 
areas  of  science  and  technology).  Secondly,  the 
Lithuanian  business  sector  suffers 
the 
relatively  low  R&D  potential,  both  in  terms  of  the 
number of researchers in the business sector and in 
terms  of  R&D 
Improving  R&D 
funding. 
capabilities  in  firms,  the  development  of  a  sound 
R&D base and closer links with public research and 
higher 
therefore 
important.  Thirdly,  there  is  a  need  to  develop 
knowledge-intensive 
public 
knowledge poles. 

institutions 

education 

clusters 

across 

from 

are 

4.14.3  Towards a sustainable industry 

Substantial  efforts  are  needed  for  Lithuania  to 
reduce  its  greenhouse  gas  emissions  in  line  with 
agreed policies. 

With  the  aim  to  promote  Cleaner  Production  (CP) 
technologies 
the  Lithuanian  Environmental 
Investment  Fund  (LAAIF)  provides  subsidies  to 
the  de  minimis 
environmental  projects  within 
threshold. The main recipients are SMEs that invest 
in  less  polluting  or  waste  preventing  technology. 
Funding  can  reach  60-80  percent  and  shortens  the 
to  a 
amortisation  period  of 
maximum of three years. 

investments 

the 

In spite of progress in recent years energy intensity 
in Lithuania is still twice as high as the EU average. 
In  order  to  increase  energy  efficiency  a  budget  of 
LTL 1.8 billion  is  available  since  2009  to  support 
renovation and insulation works of public buildings 
and  private  apartment  blocks,  co-financed  by  EU 
structural funds (ERDF). If the tendency of uptake 
of these funds from early 2011 (15 loan agreements 
signed from January to March) continues this could 

128 

indicate a problem of slow absorption. 

A  2007  Green  Procurement 
Implementation 
Programme  foresees  a  25  %  increase  in  the  share 
(in  2011)  of  public  procurement  for  which 
purchased  products  and  services  have  to  meet 
established environmental criteria.  

4.14.4  The business environment 

Lithuania  scores  clearly  above  the  EU  average 
concerning  the  e-government  usage  by  enterprises 
the 
and 
slightly  above  average  concerning 
lines. 
availability  of  high-speed  broadband 
However, 
the  country  scores  below  average 
concerning  infrastructure  expenditures.  Policies  to 
systematically  improve  the  business  environment 
are still relatively recent. 

in 

for  businesses. 

In  March  2009, 

In 2008, Lithuania adopted its National Programme 
for  Better  Regulation  with  the  aim  of  creating  the 
adequate institutional framework and strengthening 
administrative capacities, improving the quality and 
efficiency  of  regulations  as  well  as  reducing 
administrative  burden  and  unjustified  compliance 
costs 
the 
Government adopted the target of reducing by 30 % 
the administrative burden on businesses by the end 
of  2011 
the  seven  priority  areas:  Tax 
Administration,  Work  Relations  (Labour  Law), 
Statistics,  Environment  Protection,  Transport, 
Territorial  Planning  and  Construction  and  Real 
Estate Operations. The mapping of the information 
obligations  was  completed  in  the  beginning  of 
2009, and the corresponding baseline measurement 
to quantify the administrative burdens is delayed to 
the  second  half  of  2011.  Though,  by  June  2011 
about  50 
'fast  track'  measures  were  proposed 
corresponding to an estimated 6 % out of the 30 % 
targeted reduction.  

body 

expert 

equally 

composed 

An 
of 
representatives of public authorities and businesses 
(the Sunrise Commission) was established in March 
2009  and  has  presented  since  then  some  170 
proposals  to  improve  the  regulatory  environment; 
about  half  of  them  have  been  implemented.  For 
instance  the  process  of  establishment  of  individual 
enterprises  and  private  limited  liability  companies 
simplified  by  abolishing  notarial 
has  been 
registration  of  private 
limited  companies  and 
registration  term  of  legal  entities  in  the  Centre  of 
Registers  has  been  shortened  from  5  to  3  working 
days.  These  reforms 
the  area  of  start-up 
in 
conditions as well as others planned in the areas of 
licensing  and  business 
inspections  should  be 
rigorously  implemented  and  supplemented  by  the 
findings of the administrative burden measurement 
exercise. 

 
to 

reduce 

Two major regulatory reform projects are ongoing. 
The  reform  of  business  inspecting  institutions 
which  currently  involves  more  than  70  public 
institutions  aims 
the  burden  on 
businesses,  optimise  use  of  resources,  promote 
compliance  and  eliminate  abuse.  Although  the 
implementation  of  the  reform  is  slow  due  to 
scepticism  and  resistance  from  some  inspectorates, 
progress  is  tangible:  inspectorates  are  restructured 
in  9  clusters  in  order  to  pursue  joint  planning  and 
inspecting  functions  and  there  is  a  provision  that 
sets  two  dates  for  adoption  and  entry  into  force  of 
legal  acts  as  obligatory  for  inspectorates.  Second, 
during the implementation of the Services Directive 
300 out of more than 800 screened legal acts have 
been  identified  as  containing  requirements  that  are 
in conflict with provisions of the Services Directive 
and  create  administrative  burden  for  businesses. 
Some of these requirements have been removed.  

eGovernment  policy  is  part  of  the  Lithuanian 
Public  Administration  Development  Strategy  until 
the  Information  Society 
2010  as  well  as  of 
Development  Programme  2009-2015.  The  central 
eProcurement  platform  is  mandatory  and  allows 
contracting  authorities  to  implement  the  whole 
online  process  of  public  procurement.  Usage  of 
eGovernment by enterprises in general is quite high 
with  91  percent  compared  to  77 %  for  the  EU 
average. 

Since  the  closure  of  the  Ignalina  nuclear  power 
plant 
turned 
in  December  2009,  which  has 
Lithuania  from  a  net  exporter  to  a  net  importer  of 
electricity,  electricity  prices  have  risen  by  about 
30%.  In  2010  Lithuania  imported  more  than  62  % 
of  electricity  to  satisfy  its  demand  which  is  the 
highest import score among EU member states. The 
gas  sector  is  monopolised  by  a  single  supplier  and 
creates  high  dependence  on  gas  for  heating  and 
electricity  generation.  Therefore  structural  energy 
market  reforms  are  being  implemented,  including 
the  electricity  spot  market  BaltPool  for  the  Baltic 
region  since  January  2010,  deregulation  of 
electricity  tariffs,  implementation  of  ownership 
unbundling  in  the  electricity  and  gas  sectors  as 
foreseen  in  the  Third  Energy  Package  as  well  as 
increasing  physical  and  organisational  integration 
in  the  Nordic  (NordPool)  and  Continental  EU 
energy  market.  A  number  of  strategic  generation, 
interconnection  and  storage  projects  are  foreseen 
until 2020, some of them EU co-financed, including 
the  new  regional  Visaginas  nuclear  power  plant, 
Sweden 
electricity 
(NordBalt) 
an 
underground  natural  gas  storage  facility,  an  LNG 
terminal  and  a  gas  pipeline  between  Poland  and 

interconnections 
and  Poland 

with 
(LitPol  Link), 

Lithuania96.  Ensuring 
and 
stable 
long-term 
strengthened 
diversified 
supply  as  well  as 
competition  remains  a  challenge 
that  can  be 
achieved  by  implementing  the  mentioned  strategic 
projects and structural energy sector reforms. 

largely 

isolated 

In  transport  policy,  Lithuania's  rail  and  road 
networks  are 
its  EU 
neighbours.  Therefore  the  strategic  objective  is  to 
become  a  transport  hub  between  Western  and 
Eastern  markets  and  to  integrate  in  the  European 
networks,  with  the  North-South  flagship  projects 
Via Baltica and Rail Baltica.  

from 

4.14.5  Entrepreneurship and SME policy 

SMEs in Lithuania tend to be, relatively, larger than 
in  the  EU.  This  is  consistent  with  the  good 
performance  in  terms  of  share  of  high  growth 
enterprises.  The 
sector  employs 
total  SME 
proportionally more people in Lithuania than in the 
EU. 

The  national  education  strategy  for  2003-2012 
states  that  entrepreneurship  education  should  be 
introduced  at  all  levels  of  the  educational  system, 
including  secondary,  professional  and  university 
education,  as  well  as  in  training  programmes  for 
teachers  and  lecturers.  In  2008,  the  government 
enacted 
the  National  Youth  Entrepreneurship 
Education  and  Incentive  programme  with  a  budget 
of  EUR 35 million  until  2012.  It  focuses  on 
entrepreneurship 
for 
education, 
businesses  run  by  young  people  and  monitoring  as 
an  input  for  governmental  institutions  and  the 
society. Mentoring and support for entrepreneurs is 
provided  by  the  Public  institution  “Versli  Lietuva” 
and its representatives in the regions. 

incentives 

Current  policy  measures  to  support  SMEs  include 
access  to  finance,  business  internationalisation,  as 
well  as  shifting  priorities 
towards  exporting 
enterprises in granting financing.  

in 

funds 

(ERDF) 

In  order  to  actively  improve  SMEs'  access  to 
finance, which remains a bottleneck after the crisis, 
a number of financial engineering instruments (10) 
have  been  introduced  since  2009  that  use  EU 
the  order  of 
structural 
EUR 268 million (2007-2013). The uptake of some 
is  still  slow.  An  export 
of 
the 
its 
promotion 
for  2009-2013  and 
the 
implementation  plan  were  adopted  by 
government in 2009. It identifies services and high 
value  added  sectors  as  priority  as  well  as  some 
priority regions for exports: Scandinavian countries, 
large  EU  Member  States  including  Poland  and  the 

instruments 
strategy 

96  

These projects are outlined in the National 
Energy (Energy Independence) Strategy. 

129 

 
                                                 
CIS  countries.  The  share  of  exporting  SMEs  is 
currently  above  the  EU  average  but  clearly  lower 
than e.g. in Estonia. 

which  are  characterised  by  security  of  supply, 
ownership  unbundling,  increased  competition  and 
interconnection with European markets. 

The one-stop-shop to start-up a company (Centre of 
Registers) is fully operational and an SME Council 
was  set  up  in  2008  to  advise  state  authorities  on 
policy developments. 

A  mid  term  challenge  remains  to  ensure  SMEs 
access to finance. A longer term objective would be 
in 
to  promote  a  culture  of  entrepreneurship, 
particular  by  continuing 
the 
respective reforms in the educational system. Many 
of 
the  ongoing 
regulatory reforms are also relevant for SMEs, such 
as  reducing  burdens  related  to  starting  up  a 
business, obtaining licences or building permits. 

the  problems  addressed  by 

implement 

to 

Mid-  to  long-term  challenges  are  to  promote 
structural  change  towards  more  high  value  added 
intensive  sectors.  Appropriate 
and  knowledge 
policies 
links  between 
strengthening 
include 
industry  and  public  and  private  research,  increase 
R&D  and  innovation  funding  and  continue  the 
reform of the research system. 

The  business  environment  in  Lithuania  can  be 
further  improved  through  administrative  burden 
reductions,  in  particular  in  the  areas  of  licensing, 
territorial  planning, 
business 
through 
rail 
infrastructure  and  through  regulatory  reforms  that 
further improve start-up conditions. 

inspections  and 
further  developing 

road 

and 

4.14.6  Conclusion 

imminent  challenge 

The  most 
the 
competitiveness of Lithuania's economy is to create 
energy  markets  both  in  electricity  and  gas  sectors, 

to  ensure 

long-term  challenge 
efficiency 

increase 
Finally,  a 
resource 
industry 
significantly  and  to  transform  it  into  a  low  carbon 
economy.

to 
of  Lithuanian 

is 

130 

 
 
 
4.15  Luxembourg 

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Luxembourg

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

Labour productivity per hour worked  (EU27=100; 2009)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

N.A.

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

y
r
t
s
u
d
n

i

Infrastructure expenditures (euro per inhabitant; 2009)

N.A.

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

3.5

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

N.A.

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

131 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Luxembourg (2009) 

Chemicals, chemical products

Rubber and plastic products

Paper products; publishing and printing
Wood and wood products

Textiles and textile products

Other non-metallic mineral products

Food products

Manufacturing n.e.c.
Transport equipment

Electrical and optical equipment

Basic metals and fabricated metal products

Machinery and equipment n.e.c.

low  value  added  specialisation 

the  very 
in 
technology-driven industries and highly innovation-
intensive  sectors,  as  well  as  its  mixed  quality 
performance,  Luxembourg  was  attributed  to  the 
group 
countries  with 
specialisation in labour-intensive industries. 

income 

higher 

of 

Most prominent sectors in Luxembourg 

Highest relative value added (2007)
Research and development
Air transport
Basic metals

Change in the relative value added (1999/2007)
Increasing specialisation
Basic metals
Research and development
Business services
Decreasing specialisation
Post and telecommunications
Water transport
Recycling

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.15.1 

Introduction 

Trade and industry specialisation 

is 

industry 

in  2009).  At 

level,  Luxembourg 

Luxembourg 
the  Member  State  where 
manufacturing plays the lesser role in the economy 
(6.5 %  of  total  value  added  against  14.9 %  for  the 
the  detailed 
EU  on  average 
manufacturing 
is 
specialised in mainstream manufacturing industries 
(rubber  products)  and  capital-intensive  industries 
(basic  iron  and  steel,  cement,  basic  non-ferrous 
metals).  It  also  features  export  specialisation  in 
(radio  and  TV 
industries 
technology-driven 
transmitters).  However,  as  Luxembourg  is  a  small 
country with a small share of manufacturing, export 
indicators  should  be  interpreted  with  care.  At  the 
more  aggregated  sector 
is 
level,  Luxembourg 
in  high  education  sectors 
highly  specialised 
(research  and  development,  business  services, 
low  education  ones 
finance),  but  also 
in 
(construction, 
transport).  Furthermore, 
Luxembourg features specialisation in medium and 
medium-high innovation sectors (e.g., basic metals, 
textiles, air transport). 

inland 

Luxembourg  is  high  on  the  quality  ladder  in 
technology-driven industries, but slightly below the 
EU  average  in  labour-intensive  industries.  Due  to 

132 

 
 
 
 
Structural change 

It  has 

industries. 

In terms of change, Luxembourg has moved overall 
towards more knowledge-intensive industries and a 
higher position on the quality ladder, also in labour-
intensive 
trade 
specialisation in technology-driven industries (radio 
and  TV 
surgical 
transmitters,  medical  and 
equipment)  and  value-added  specialisation  in  high 
education  and 
(computers, 
research and development, business services), while 
it  has  decreased  its  trade  specialisation  in  high 
education sectors (financial services). 

innovation  sectors 

increased 

Manufacturing  production  fell  sharply  during  the 
crisis  (around  33 %)  and  has  partially  recovered 
since  then,  being  12.2 %  lower  in  April  2010  than 
its  previous  cyclical  peak.  The  crisis  has  had  an 
impact  on  Luxembourg’s  industrial  structure  in 
terms  of  slowing  down  structural  change  towards 
technology-driven  industries,  but  also  accelerating 
the decline of labour-intensive industries; the crisis 
“winners”  were  the  mainstream  manufacturing 
industries. 

increased 

Nominal  unit 
in 
labour  costs  have 
Luxemburg by 32% between 2000 and 2010, which 
is  considerably  higher  than  the  average  increase  in 
the  EU27  and  the  Euro  area  (14%  and  20% 
respectively). Labour productivity per hour worked 
remains  the  highest  within  the  EU,  exceeding  the 
EU27  average  by  about  89  percentage  points  and 
the  Euro  area  average  by  about  74  percentage 
points. 

Overall,  Luxembourg  faces  a  favourable  position 
with respect to competitiveness, in particular given 
its  improvement  in  terms  of  quality  segments  and 
specialisation.  Keeping  this  trend,  it  could  soon 
upgrade  to  the  group  of  higher  income  countries 
specialised 
industries, 
in  knowledge-intensive 
similar  to  countries  such  as  Belgium  and  the 
Netherlands  which  also  feature  specialisation  in 
high education sectors. 

4.15.2  Towards an innovative industry  

The  Innovation  Union  Scoreboard  2010  ranks 
Luxembourg  as  an 
innovation  follower  with 
innovation  performance  above  the  EU  27  average. 
Relative  weaknesses  are  in  firm  investments  and 
linkages & entrepreneurship. Relative strengths are 
in  open,  excellent  and  attractive  research  systems, 
innovators and outputs. 

R&D  intensity  in  Luxembourg  has  only  slightly 
increased  over  the  last  decade,  growing  from 

133 

(NRP)  submitted 

1.65 %  in  2000  to  1.68 %  in  2009,  with  a 
predominant  financing  by 
the  private  sector. 
Whereas  the  private  spending  fluctuated  over  the 
last decade, the public R&D spending has increased 
steadily,  but  remains  relatively  low,  at  0.44 %  in 
2009 (after 0.12 % in 2000). In its National Reform 
Programme 
in  April  2011 
Luxembourg  foresees  to  increase  its  efforts  in  this 
field  and  programs  to  drive  the  public  R&D 
by 
intensity 
2020.Luxembourg  has  made  efforts  in  order  to 
provide  support  for  R&D  and  innovation.  The 
reforms have encouraged public-private partnership 
and  increased  the  financial  support  for  R&D  for 
companies. Further actions are foreseen, both in the 
field of public and private research. The objective is 
to  concentrate  efforts  on  a  limited  number  of 
priority  fields  and  to  develop  the  'knowledge 
triangle'  concept  aiming  at  strengthening  links 
between research, high education and innovation.  

of  GDP 

0.7%-0.8% 

to 

Its sole University, which was only set up in 2003, 
cannot  fully  meet  the  economy's  needs  for  high 
skilled workforce. Therefore, Luxembourg's growth 
depends  most  on  its  capacity  to  attract  and  retain 
talent.  Recent  reforms  have  increased  the  mobility 
of  researchers  mainly  through  a  new  law  on  free 
movement of people and immigration and the grant 
scheme  "Aid  for  Research  Training"  providing 
funding for PhDs and post-docs of all nationalities. 

Due  to  the  country's  specificities,  such  as  a  small 
and  service-oriented  economy,  large  companies 
undertaking  research  abroad  and  a  deficit  of 
entrepreneurial 
has 
difficulties to attract and keep the necessary human 
resources  for  developing  local  competitive  centres 
of excellence and small innovative firms.  

Luxembourg 

culture, 

4.15.3  Towards a sustainable industry 

The  main  challenges  that  Luxembourg  seems  to 
face  as  regards  climate  change  and  energy  are  the 
national targets for the reduction of greenhouse gas 
emissions (-20 % by 2020 compared to 2005 levels) 
and  for  the  increase  of  the  share  of  renewable 
energy  in  energy  consumption.  A  Partnership  for 
Environment and Climate was launched in February 
2010 in order to gather representatives from public 
administration, social partners and NGOs to reflect 
on  optimal  policies  and  measures  in  the  field  of 
environment  and  climate  change.  A  Second 
National  Action  Plan  for  CO2  reduction  was 
adapted in May 2011. 

In  November  2010,  Luxembourg  adopted 
the 
Second National Plan for Sustainable Development: 
the  social  (health,  poverty);  economic  (economic 
diversification, 
environmental 
renewable  energies)  pillars  of 
(biodiversity, 

transport) 

and 

 
 
sustainable development.  

created, 

covering 

Luxembourg is active on green technology support 
measures.  In  the  framework  of  the  2009  Action 
Plan  on  ecotechnologies,  the  EcoDev  cluster  has 
eco-construction/eco-
been 
materials, 
renewable  energies,  eco-design/eco-
conception,  rational  use  of  energy  and  other 
selected topics. It is a network of public and private 
actors at national and international level, aiming at 
creating and developing new business opportunities 
dedicated 
the  eco-
technologies sector in Luxembourg.  

the  development  of 

to 

The  law  of  18  February  2010  on  aid  schemes  for 
environmental  protection  and  the  rational  use  of 
natural resources provided for new possibilities for 
financial  support  for  companies  implementing  an 
environmental and energy efficient policy. Eligible 
investments  for  this  support  should  be  aimed  at 
increasing 
the  environment, 
adapting  to  future  standards,  achieving  energy 
savings,  installing  high-efficiency  cogeneration  or 
at  producing  energy 
renewable  energy 
sources.  

the  protection  of 

from 

4.15.4  The business environment 

Luxembourg  has  performed  well  as  regards  the 
setting-up of the Single Contact Point "Enterprises", 
which is already operational as regards information 
providing  pillar.  Further  work  is  ongoing  to  make 
the  system  fully  operational  where  a  range  of 
important 
can  be 
administrative  procedures 
performed online.  

Different measures have been undertaken to reduce 
administrative  burden  such  as  the  simplification  of 
the social security regime. Although the progress in 
the  field  of  business  environment  has  been  made, 
further  measures  are  needed.  .  A  new  legislation 
regarding  "establishment/setting-up  of  businesses" 
in view of implementing the Services Directive was 
voted by the Chamber of Deputies on 13 July 2011. 
It aims to regulate in a horizontal manner the access 
to almost all economic activities.  

by 

improving 

Under the Euro Plus Pact, which is reflected in the 
NRP, the Luxembourgish government committed to 
a  number  of  measures  to  reinforce  structural 
competitiveness 
business 
environment  through  administrative  simplification 
and  better 
to  reduce 
infrastructure.  Measures 
formalities  for  companies  to  obtain  permits  and 
measures  to  reduce  the  delays  for  their  treatment 
are  planned  to  be  taken  during  2011.  Since  June 
2010,  administrative  simplification  and  better 
regulation  issues  are  under  the  State  Minister's 
responsibility.  

Luxembourg faces high-cost of land and difficulties 

134 

for  enterprises  to  find  suitable  industrial  zones.  In 
addition,  mainly  due  to  a  considerable  increase  in 
the  number  of  cross-border  commuters 
in 
Luxembourg  in  recent  years  (from  8 %  in  1990  to 
40 %  in  2010),  the  level  of  saturation  of  road  and 
from  neighbouring 
to  and 
train  connections 
countries has constantly risen to a point where this 
transport  bottleneck  could  have  important  negative 
consequences  on  enterprises  and  on  the  whole 
economy  in  the  future.  . Therefore  the  cooperation 
with  neighbouring  countries  has  been  intensified, 
especially  with  France  where  a  strategic  program 
for  the  development  of  cross-border  mobility  has 
been  worked  out.  A  similar  approach  has  been 
launched  with  Germany  and  Belgium.  Meanwhile, 
besides 
the  complementary  extension  of  road 
infrastructure,  the  Government  pursuits  a  strategy 
seeking promotion of public transport (extension of 
railway  infrastructure,  new  cross-border  train  and 
bus  connections,  more  attractive  transport  pricing 
etc.).  

4.15.5  Entrepreneurship and SME policy 

The average size of SMEs in Luxembourg is larger 
than  the  average  in  the  EU.  The  share  of  medium 
enterprises  in  the  total  number  of  enterprises  in 
Luxembourg is double the EU-average (2 % versus 
1 %)  but  as  Luxembourg's  economy  is  service-
oriented, only 4 % of SME are manufacturing firms 
against  EU  average  of  11 %.  Luxembourg's 
entrepreneurship rate is below the EU average (8 % 
versus  EU 
'opportunity-driven 
entrepreneurship'  rate  is  above  the  EU  average 
(62 %  versus  EU  55 %).  Different  initiatives  have 
been  launched  to  promote  entrepreneurship  spirit 
and  to  assist  entrepreneurs  to  develop  his/her 
businesses (Jonk Entrepreneuren in 2005, Business 
Mentoring Programme in March 2010).  

12 %) 

but 

the 

in  specialised 
SMEs  face  however  shortages 
professions,  mainly 
and 
industrial 
in 
construction  sectors.  Certain  measures  have  been 
initiated  to  better  match  people's  skills  to  labour 
demand,  such  as  creating  a  professional  skills 
observatory  and  the  obligation  for  enterprises  to 
declare their vacant posts. 

Globally,  Luxembourg  enjoys  a  good  average 
performance  in  access  to  finance  for  SMEs,  state 
aid  and  share  of  SMEs  with  intra-EU  imports  and 
exports. On the contrary, the country performs less 
as regards SMEs outside-EU imports and exports. 

4.15.6  Conclusion 

Luxembourg  occupies  a  favourable  position  with 
respect  to  competitiveness.  The  country  is  also 
ranked in the category of innovation followers with 
innovation  performance  above  the  EU  27  average 
but  due  to  the  country's  specificities,  there  are 

 
difficulties  in  attracting  and  keeping  the  necessary 
human  resources  for  developing  local  competitive 
centres of excellence and small innovative firms.  

The  business  environment  is  improving,  even  if 
further  measures  are  needed.  The  main  challenges 

that  Luxembourg  seems  to  face  as  regards  climate 
change  and  energy  are  the  national  objectives  for 
the reduction of green house gas emissions and the 
increase of the share of renewable energy in energy 
consumption.

135 

 
 
 
4.16  Hungary 

Hungary

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

136 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Hungary (2009) 

Chemicals, chemical products

Rubber and plastic products

Refined petroleum products

Paper products; publishing and printing

Wood and wood products

Textiles and textile products

Machinery and equipment n.e.c.

Food products

Leather and leather products
Manufacturing n.e.c.

Electrical and optical equipment

Transport equipment

Other non-metallic mineral products

Basic metals and fabricated metal products

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.16.1 

Introduction 

Trade and industry specialisation 

industries 

intensive 
the 
knowledge-creating part is provided by other, more 
R&D intensive countries. 

(group  3),  where 

industry 

in  capital-intensive 

the  detailed  manufacturing 

is 
in 
specialised 
(radio  and  TV 

Manufacturing  plays  a  more  important  role  in  the 
Hungarian  economy  than  in  the  EU  on  average 
(21.3 % of value added against 14.9 % in the EU). 
At 
level, 
technology-driven 
Hungary 
transmitters  and 
industries 
receivers),  both  in  value  added  and  exports  terms, 
and 
(petroleum 
refining)  in  value  added  terms.  At  the  more 
aggregated  sector  level,  Hungary  features  high 
specialisation  in  innovation  intensive  sectors  such 
as  communication  equipment,  electrical  machinery 
and computers, but not in high education intensive 
sectors,  because  of  relatively 
in 
software,  R&D  and  business  services.  Hungary 
shows  also  a  high  share  of  exports  to  BRIC 
countries. 

low  shares 

industries 

is  particularly 
is  focusing  on 

Given  its  industrial  structure,  Hungary’s  R&D 
low, 
intensity 
that 
indicating 
Hungary 
the  production  and 
assembly-parts  of  the  value  chain.  Its  low  position 
this.  Overall, 
ladder  confirms 
on 
Hungary is a typical member of the group of lower 
in  knowledge-
income  countries 

the  quality 

specialised 

137 

Most prominent sectors in Hungary 

Highest relative value added (2007)
Coke, refined petroleum and nuclear fuel
Electrical machinery and apparatus, nec
Radio, television and communication equipment

Change in the relative value added (1999/2007)
Increasing specialisation
Radio, television and communication equipment
Real estate activities
Electrical machinery and apparatus
Decreasing specialisation
Wearing apparel, dressing and dyeing of fur
Office, accounting and computing machinery
Coke, refined petroleum and nuclear fuel

Structural change 

In  terms  of  change,  in  Hungary  the  relative  value 
added share of labour-intensive low-skill industries 
(leather,  clothes)  and  of  low  education  sectors  has 
decreased,  while  it  has  increased  in  mainstream 
isolated  wire, 
manufacturing 
batteries).  Its  trade  specialisation  in  technology-
driven  industries  (air-  and  spacecraft,  measuring 

(electric 

lamps, 

 
 
 
 
 
and  highly 

innovation-intensive 
instruments) 
sectors 
(computers,  electrical  machinery)  has 
increased  as  well.  Hungary  has  considerably 
improved  its  sectoral  R&D  intensity,  while  its 
movements on the quality ladder have been mixed, 
partly improving and partly deteriorating. 

Industrial production grew by 22.3 % from the lows 
reached during the crisis; in April 2011 it was still 
7.9 % lower than its previous peak. In Hungary, the 
crisis  clearly  slowed  structural  change  towards 
knowledge-intensive 
labour-
industries,  while 
intensive industries gained relative shares. 

Hungary  has  experienced  a  strong  appreciation  of 
the  real  effective  exchange  rate  during  the  last 
decade  (36%,  compared  to  21%  in  the  EU27), 
indicating a loss in cost and price competitiveness. 
Here,  the  increase  in  nominal  unit  labour  costs 
(58%) between 2000 and 2010 played a significant 
role, similar to most of the countries in the region. 
While  labour  productivity  per  hour  worked  has 
gradually  increased  over  the  last  years,  it  is  still 
about  40  percentage  points  below 
the  EU27 
average. 

is  clearly  catching-up  with 
Overall,  Hungary 
respect  to  competitiveness.  If  it  moves  further  up 
the  value  chain,  i.e.  increases  the  R&D  intensity 
and output quality within existing sectors, Hungary 
will  ultimately  join  the  group  of  higher  income 
in  knowledge-intensive 
countries 
industries. 

specialised 

4.16.2  Towards an innovative industry 

to 

the  moderate 

Based  on  the  Innovation  Union  Scoreboard  2010, 
Hungary  belongs 
innovators, 
representing  a  below  average  performance.  R&D 
investments relative to GDP (in 2010: 1.14 %) is far 
below  the  EU  average.  Business  sector  R&D 
spending  has  been  growing  since  2004  both  in 
absolute  and  relative  terms,  however  it  is  still  low 
(in  2009:  0.66 %  of  GDP).  A  recent  survey  on 
R&D97  reported  that  three-quarter  of  medium  and 
large  enterprises  do  not  intend  to  increase  R&D 
expenditures in the coming years.  

are 

enterprises 

less 
Generally,  Hungarian 
innovative  than  the  European  average.  Moreover, 
R&D  and  innovation  activities  are  concentrated 
mainly  to  large  foreign-  owned  enterprises.  Also 
R&D  activity  is  not  evenly  distributed  across 
regions,  with  high  concentrations  in  the  most 
advanced  regions.  Patent  activity  is  similar  to  that 
of  the  regional  competitors,  and  high-tech  export 
exceeds  the  European  average,  which  is,  however, 
largely  attributable  to  activities  of  foreign-owned 
enterprises 
and 
telecommunication) and thus it does not necessarily 
reflect a technology-leader position of the sectors.  

(especially 

electronics 

in 

One  of  the  main  problems  of  the  Hungarian 
science,  technology  and  innovation  policy  in  the 
past  was  its  low  priority,  but  the  institutional 
system was recently reorganised. Priority measures 
for  2011  consist  of  the  comprehensive  revision  of 
the  R&D  strategy  and  a  consolidated  R&I 
supporting 
system.  The  National  Research, 
Innovation  and  Science  Policy  Council  was  set  up 
in  2010,  ensuring  efficient  decision  making  on 
policy  issues  of  strategic  relevance  and  major 
projects.  The  national  support  system  will  also 
undergo  significant  changes; 
the  support  of 
adaptive  innovation  and  technology  transfer  will 
stimulate the R&D and innovation potentials of the 
SME 
loss  of 
specialisation  advantages  in  the  office  machinery 
sector  over 
indicating 
vulnerability. 

sector.  An  example 

ten  years, 

the  past 

the 

is 

Economic 

Development 

Hungary set the target to raise R&D expenditure to 
1.8 % by 2020, while further increasing the share of 
the  business  sector.  Under  the  Structural  Funds 
more than EUR 990 million have been allocated in 
the 
Operational 
Programme  to  support  R&D  and  innovation  in  the 
the 
targeting 
2007-2013  period, 
promotion 
between 
enterprises,  universities  and  research  institutes,  the 
establishment of modern research infrastructure and 
innovation parks,  as well  as patenting  activity.  For 
earmarked 
2011 
HUF 122.5 billion 
innovation 
purposes. 

for  R&D  and 

in  particular 

government 

cooperation 

of  R&D 

has 

the 

terms  of  human  resources  for  R&D  and 
In 
innovation  there  are  also  bottlenecks,  both  on  the 
supply and demand sides. The share of science and 
technology  graduates, 
the  EU 
average.  Both  the  new  reform  programme  on 
education and the new STI strategy are expected to 
address  skills  challenges  for  a  knowledge-based 
economy  and  provide  policies  aimed  at  increasing 
the proportion of science and technology graduates.  

is  well  below 

97  

Deloitte: Vállalati K+F Jelentés 2011  

The  low  level  of  overall  innovation  activities, 
especially  among  domestic  SMEs,  remains  a 
significant  challenge.  Moreover,  the  links  and 
networks  between  public  and  private  research  are 
weak  or  missing  and  there  are  still  gaps  in  the 
quality  and  quantity  of  scientific  human  resources. 
Multinationals  would  represent  a  potential  for 
raising  innovation  capacities  more  widely  if  they 
were  better  embedded  into  the  local  research  and 
economic  networks  and  the  regional  innovation 
systems. 

138 

 
                                                 
4.16.3  Towards a sustainable industry 

Environmental  sustainability  of 
the  Hungarian 
industry  is  rated  low.  The  energy  insensitivity  of 
the  industrial  sector  is  above  the  EU  average.  The 
share of renewable energy (7.3 % in 2010) in gross 
inland  energy  consumption  increased  in  the  past 
decade  with  significant  ground  to  cover  to  reach 
2020 target (14.6 %). 

others 

among 

sustainable 

The  Hungarian  National  Climate  Change  Strategy 
for  the  period  2008-2025  was  adopted  by  the 
Parliament in 2008. A long-term energy strategy is 
currently  under  public  consultation,  which  will 
cover, 
tourism, 
agriculture and industry. Pursuant to the revision of 
the  National  Energy  Efficiency  Action  Plan,  a 
national strategy on energy efficiency in buildings, 
will  be  prepared  in  2011.  Adoption  of  the  act  on 
sustainable energy management and the revision of 
the feed-in tariff scheme in the course of 2011 will 
further 
regulatory 
environment  that  facilitates  the  production and use 
of renewable energy sources.  

increase 

stability 

the 

in 

One  of  the  seven  priorities  of  the  New  Széchenyi 
Plan  is  the  green  economy.  Different  measures 
encourage  investments  in  the  sectors  associated 
with  greening  the  economy.  Energy  efficiency, 
renewable  energy,  bioenergy,  recycling  industry, 
green  employment,  R&D,  innovation,  and  training 
and education are all covered in the green economy 
programme. Calls for bids in these areas have been 
announced  continuously.  In  the  next  programming 
period  more  sources  are  expected  to  allocate  into 
and  Energy  Operational 
the  Environment 
Programme in order to deliver the goals. 

One of the main challenges in this policy area is to 
reduce  energy  intensity  of  production.  Shifting 
towards  a  green  economy  requires  not  only 
financial  sources  and  a  transparent  regulatory 
framework,  but 
effective 
implementation  from  all  type  of  actors.  Recent 
initiatives are going in the good direction, reflecting 
that industrial and growth objectives are compatible 
with sustainability targets.  

timely 

also 

and 

4.16.4  The business environment 

Hungary  scores  clearly  below  the  EU  average  on 
business  environment  indicators,  such  as  the  legal 
and regulatory framework with the exception of the 
e-government usage by enterprises. In particular, it 
provides  a  high  level  of  state  aid  for  industry  and 
services  (excluding  crisis  measures)  compared  to 
other  Member  States.  Direct  support  from  the 
central  budget  has  been  allocated  mainly  to  public 
transport services.  

Like in most Member States the high administrative 
burden  on  enterprises,  such  as  wide  range  of 
reporting  obligations  and  other  requirements  have 
negative  effects  especially  on  SMEs.  In  Hungary, 
the  time  it  takes  to  prepare,  file  and  pay  corporate 
social 
income 
contributions  is  277  hours  per  year,  while  the 
OECD  average  is  199  hours98.  It  has  been  also 
reported that administrative costs account for more 
low 
than  10 %  of 
transparency  in  public  administration  has  been 
considered as a barrier to start and run a business.  

the  GDP.  Furthermore, 

tax,  value 

added 

and 

tax 

burden 

reduction 

competitiveness  of 

One of the main goals of the new Government is to 
improve 
the  Hungarian 
economy  by  creating  better  business  environment. 
In the frame of the Széll Kálmán Structural Reform 
Programme  a  comprehensive  programme  on 
been 
administrative 
announced. The first two packages are estimated by 
the  authorities  to  yield  some  HUF 500 billion  in 
administrative  burden  reduction  already  in  2011. 
By  the  end  of  2011,  new  laws  will  be  adopted  for 
quicker  foreclosure  and  liquidation  proceedings 
with  more  transparency  to  reduce  burdens  on 
enterprises.  The  planned  measures  are  expected  to 
ensure  a  25 %  administrative  burden  reduction  by 
2012. 

has 

eGovernment is a key element of the administrative 
reform.  In  the  first  half  of  2011,  the  e-government 
pillar  of  the  Magyary  Programme  (the  strategy  on 
renewal  of  public  administration)  was  finalised.  It 
provides  digital  solutions  to  cut  administrative 
burdens, simplify processes, implement on-demand 
programmes  with  the  participation  of  the  citizens, 
develop  public  services  and  support  information 
and  knowledge-based  asset  management  and 
economy. 

A new public procurement law was adopted in July 
2011.  The  new  and 
less  complicated  and 
transparent  framework  law  is  aimed  at  better 
serving the transparency of public spending and fair 
competition.  

If  the  implementation  of  the  above  measures  is 
effective, considerable improvement of the business 
environment  can  be  expected.  Reduction  of  the 
administrative  burdens, 
regulatory 
framework  and  the  improvement  of  the  quality  of 
public  administration  can  contribute  to  the  growth 
of the business sector and facilitate of starting new 
businesses.  

the  better 

4.16.5  Entrepreneurship and SME policy 

98  

World Bank Doing Business 2011. 

139 

 
                                                 
The  SME  sector  in  Hungary  provides  73.8  %  of 
employment  in  the  business  economy  and  56.1  % 
of  the  business  sector´s  value  added.  The  share  of 
micro  enterprises  is  higher  than  the  EU  average. 
Unlike in other European countries the net number 
of SMEs declined during the last decade.  

averages99.  Statistics 

Over the period 2005-2011 the performance in most 
of  the  SBA  areas  has  considerably  improved, 
however,  still  two-third  of  them  are  trailing  the 
respective  EU 
show 
significant  gaps  in  entrepreneurship,  skills  and 
innovation,  as  well  as  in  internationalisation.  The 
willingness  to  start  up  companies  is  lower  than  in 
other  Member  States  in  general.  This  can  be 
explained  by  the  complexity  of  the  regulatory  and 
legal  framework  and  high  administrative  burdens, 
but  also  entrepreneurial  attitude  and  perceptions 
were  found  to  be  weak  in  Hungary.  Skills  and 
innovation  is  one  of  the  most  problematic  areas  in 
international  comparison.  The  rate  of  Hungarian 
SMEs  with  innovation  activities  scores  clearly 
below  the  EU  average.  Employees´  participation 
rate  in  education  and  training  is  very  low.  Despite 
the  very  high  openness  of 
the  economy, 
internationalisation  of  the  SME  sector  is  far  from 
the EU average, which is mainly attributable to the 
relative  high  costs  and  time  required  to  export  or 
import outside the EU. 

the 

To  address  these  challenges  Hungary  initiated 
several actions. First of all, the New Széchenyi Plan 
has  identified  new  investment  priorities  in  a  frame 
of a restructured development and support policy. A 
more  efficient  support  system,  which  allocates  the 
EU  sources,  provides  new  tenders  for  SMEs 
(including  e.g.  enhancing  innovation  activity).  The 
simplification  of 
tendering  system  also 
encourages  enterprises  to  apply  for  non-refundable 
sources.  Due  to  these  steps  the  number  of  grant 
contracts  has  also 
increased  significantly  and 
number  of  payments  has  doubled  in  the  recent 
months.  .Second,  the  Széchenyi  Card  programme 
has  been  extended,  which  provides  preferential 
loans for SMEs, creating better financial conditions 
for  SMEs.  The  role  of  non-banking  funding 
mechanisms,  like  seed  capital,  business  angels  and 
venture  capital  is  lagging  behind  that  of  other 
European  economies.  However,  significant sources 
(EUR 700 million)  under  the  JEREMIE  Holding 
Fund have been available; it has not had a sufficient 
leveraging  effect.  Recently,  the  allocation plan  has 
been modified aiming at leveraging more additional 
private 
example, 
combinations  of  non-repayable  grants  with 
revolving  instruments  such  as  guarantees  and 
microloans have recently been introduced under the 
heading of JEREMIE. 

before.  For 

funds 

than 

99  

SBA Factsheet 2010/2011, Hungary. 

140 

to 

was 

At  the  beginning  of  2011  a  new  governmental 
agency 
facilitate 
established 
internationalisation  of  Hungarian  enterprises.  It  is 
feasible  to  raise  the  share  of  the  SMEs´  exports 
from 18 % to 20 % of total export of Hungary. The 
Hungarian  Investment  and  Trade  Agency  works 
closely  with  professional  associations,  business 
chambers  and  trade  development  agencies.  173 
export  development  programmes  in  20  sectors  on 
40  target  markets  are  planned  this  year  and  some 
3 000 companies can be affected. Emphasis will be 
placed on competitive, job-creating sectors, such as 
biotechnology,  the  pharmaceutical  industry,  green 
industries,  the  food  industry,  IT  and  software 
development. 

The  corporate  income  tax  was  decreased  to  10 % 
for  enterprises  with  profit  up  to  HUF 500 million, 
which is especially beneficial for SMEs. 

Increasing employment is one of the main targets of 
the  Hungarian  Government,  in  which  SMEs  are 
expected  to  play  a  significant  role.  Administrative 
burden  reduction,  supporting  programmes,  easier 
access to finance are all aspects likely to encourage 
entrepreneurship;  however  entrepreneurial  mindset 
and  innovative  attitudes  remain  a  challenge.  As 
international  experiences  show,  entrepreneurship 
role  here. 
education  can  play  an 
However, 
loan 
the  share  of 
applications is lower than the EU average, access to 
financing  for  SMEs,  early  stage  financing  and  the 
insufficient  leverage  of  private  funds  remain  a 
challenge.  

important 
rejected  SME 

4.16.6  Conclusion 

The  crisis  period  and  slow  recovery  shed  light  on 
the  bottlenecks  of  the  Hungarian  economy  that 
hamper  sustainable  and  balanced  growth.  In  2011 
structural  measures  have  been  identified  in  key 
areas  such  as  the  labour  market,  the  pension  and 
welfare system, education and public administration 
etc.  

One  of  the  priorities  of  the  Government  is  to 
improve  business  environment  by  reducing  high 
administrative  burdens  and  introducing  a  new 
public  procurement  legal  framework  beneficial  for 
SMEs. Along with the full implementation of these 
measures  significant  positive 
the 
profitability  and  investment  activity  of  enterprises 
can  be  expected.  Access  to  finance  and  reducing 
policy and institutional uncertainty, the reallocation 
of EU funds for innovation and green development 
purposes  and  entrepreneurship  are 
remaining 
challenges  as  well  as  the  low  R&D  intensity  of 
companies.
many 

impacts  on 

 
                                                 
4.17  Malta 

Malta

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked  (EU27=100; 2009)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

-3.4

Electricity prices for medium size enterprises (euro per kWh; 2010)

-3.6

y
r
t
s
u
d
n

i

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

141 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Malta (2009) 

Refined petroleum products

Chemicals, chemical products

Rubber and plastic products

Other non-metallic mineral products

Basic metals and fabricated metal products

Machinery and equipment n.e.c.

Paper products; publishing and printing

Wood and wood products

Textiles and textile products

Leather and leather products

Food products

Manufacturing n.e.c.

Electrical and optical equipment

Transport equipment

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.17.1 

Introduction 

Trade and industry specialisation 

Manufacturing  in  Malta  accounts  for  13.3  %  of 
total  value  added  (2009).  In  terms  of  export 
specialisation at the detailed industry level, Malta is 
highly  specialised  in  technology-driven  industries 
(electronic  valves  mechanical  systems,  electricity 
distribution control apparatus, pharmaceuticals) and 
weakly  specialised  in  marketing-driven  industries 
(printing and services activities related to printing). 
However  as  Malta  is  a  very  small  country,  the 
export  data  should  be  interpreted  with  care  as  a 
small  number  of  enterprises  can  dominate  the 
market  and  export  content  might  be  significantly 
the  more 
influenced  by 
features 
aggregated 
innovation  and 
specialisation 
education 
(communication  equipment, 
chemicals), as well as in low innovation sectors. 

sector 
in  medium-high 

inputs.  At 
level,  Malta 

imported 

sectors 

intensity  considering 

its 
While  Malta’s  R&D 
industrial structure is far below the EU average, its 
position  on  the  quality  ladder  is  much  better, 
featuring  only  a  slightly  higher  share  in  the  low 
price segment of labour intensive industries. 

effective  exchange  rate  by  16%  over  the  last 
decade,  which  is  below  the  EU27  average  (21%), 
indicating  nevertheless  a  loss  in  cost  and  price 
competitiveness.  Nominal  unit  labour  costs  have 
increased  by  29%  between  2000  and  2010, 
compared  to  an  increase  of  14%  in  the  EU27  and 
20% in the Euro area. Estimated labour productivity 
per  hour  worked  is  about  18  percentage  points 
below  the  EU27  average  and  about  32  percentage 
points below the Euro area average. 

Most prominent sectors in Malta 

Highest relative value added (2007)
Hotels and restaurants
Chemicals and chemical products
Sale, maintenance and repair of motor vehicles and motorcycles; 
retail sale of fuel

Change in the relative value added (1999/2007)
Increasing specialisation
n.a.
n.a.
n.a.
Decreasing specialisation
n.a.
n.a.
n.a.

Malta  has  experienced  an  appreciation  of  the  real 

Structural change 

142 

 
 
 
 
 
intensive 

In  terms  of  change,  Malta  has  decreased  trade 
specialisation in labour-intensive industries (leather 
clothes) and in technology-driven ones (computers, 
TV  and  radio  transmitters,  medical  and  surgical 
equipment),  as  well  as  decreased  value  added 
specialisation in low innovation and low education 
sectors.  It  has  increased  trade  specialisation  in 
(basic  chemicals), 
capital 
industries 
mainstream  manufacturing 
and 
ammunition,  transport  equipment)  and  marketing-
driven  industries  (prepared  animal  feeds).  Like 
other 
trade 
specialisation  in  knowledge-intensive  industries, 
Malta has improved its sectoral R&D intensity and 
has climbed the quality ladder in technology-driven 
industries, but not in labour-intensive ones, where it 
deteriorated its position. 

income  countries  featuring 

(weapons 

lower 

Manufacturing  production  has  partially  recovered 
from the crisis, reaching a level 11.6 lower than its 
previous  cyclical  peak  in  April  2011.  The  crisis 
clearly  slowed  down  structural  change  towards 
technology-driven  industries,  while  it  also  slowed 
down the decline of labour-intensive industries. 

However,  it  can  be  said  that  Malta  is  catching  up 
with respect to competitiveness, even if the patterns 
of  change  yield  a  mixed  picture  in  terms  of 
specialisation and sectoral upgrading. 

Unit labour costs and effective exchange rate 
developments 

Malta  has  experienced  an  appreciation  of  the  real 
effective  exchange  rate  by  16%  over  the  last 
decade,  which  is  below  the  EU27  average  (21%), 
indicating  nevertheless  a  loss  in  cost  and  price 
competitiveness.  Nominal  unit  labour  costs  have 
increased  by  29%  between  2000  and  2010, 
compared  to  an  increase  of  14%  in  the  EU27  and 
20% in the Euro area. Estimated labour productivity 
per  hour  worked  is  about  18  percentage  points 
below  the  EU27  average  and  about  32  percentage 
points below the Euro area average. 

4.17.2  Towards an innovative industry 

consultations  with 

the  European 
Following 
Commission, Malta has set its national R&D target 
at  0.67 %  of  GDP  by  2020  (down  from  0.75%  in 
2010).  Malta  has  defended  its  rather  low  R&D 
structural 
target 
disadvantages  (market  size,  structure  and  location, 
absorption capacity).  

regarding 

realistic 

its 

as 

The  National  Reform  Programme  (NRP)  of  April 
2011  focuses  on 
the  following  four  priority 
measures: 

143 

and 

(new): 

extension 

concentrating 

1-  Continuation  of  R&I  programme  (on-
towards 
going) 
the 
commercialisation 
implementation  of 
the  national  R&I 
programme  is  an  ongoing  measure,  the 
objective  of  which  is  to  fund  research 
projects  of  between  EUR 50 000  and 
EUR 200 000 
on 
technology transfer between academia and 
industry  with  specific  focus  on  the  four 
priority  sectors  identified  in  the  National 
R&I  Strategy,  namely  Environment  and 
Energy  Resources,  ICT,  Value  Added 
Manufacturing,  and  Health  and  Biotech. 
By  2012,  the  Research  and  Innovation 
Programme  will  be  supplemented  by  a 
Commercialisation programme to provide 
the 
support 
dedicated 
commercialisation of research results.  

to 

2- 

the  Government 

Incentives  for R&D  in  Industry  (new):  in 
launched  an 
2009, 
incentive  package  to  support  Industrial 
Research and Experimental Development. 
It  incorporates  a  total  of  eight  incentives 
that  provide  assistance  to  increase  the 
amount  of  research  and  development 
activities in Malta. The Government plans 
to  continue  investigating  and  addressing 
gaps  in  funding  and  provide  support  for 
ideas to innovation, thus closing the cycle 
between the generation of a new idea and 
its realisation as a new product/process on 
the market.  

3-  Doctoral  and  post-doctoral  scheme  (on-
going):  the  post-graduate  programme  of 
the  Malta  Government  Scholarship 
Scheme  and  the  ESF  funded  STEPS 
project  (ongoing  until  2013)  have  both 
yielded  important  results  in  enlarging  the 
pool  of  Malta’s  researchers,  especially  in 
areas  which  have  been 
identified  as 
priority  research  areas  in  the  2007-2010 
national R&I strategic plan.  

local 

4-  Set-up  of  a  Life  Science  Centre  (new):  a 
state-of-the-art  Life  Sciences  Centre  is  a 
key  factor  in  maintaining  existing  FDI  in 
Malta,  attracting  new  FDI  and  sustaining 
the 
industrial  base.  The  Life 
Sciences Centre will encompass the whole 
Innovation  life  cycle  and  Supply  Chain 
process  for  companies  specialising  in 
areas  related  to  Life  Sciences,  from  the 
development  of  the  Innovation  process 
and  the  start-up  of  new  businesses  and 
entrepreneurial 
to 
activity 
ongoing  growth  within  the  Centre.  The 

through 

 
 
 
 
 
 
 
 
 
 
Centre  is  being  financed  through  the 
ERDF  programme  and  is  expected  to  be 
fully operational by end 2013. 

A National Research and Innovation Strategy 2011 
– 2020 is being drawn up which builds on progress 
made  and  lessons  learnt  in  implementing  the 
previous  strategy,  but  which  will  put  particular 
attention to the whole cycle of innovation from blue 
sky to market by providing a policy framework for 
the coming decade.  

In addition, the NRP identifies the need to smartly 
specialise  its  R&I  investments  in  niche  markets.  It 
identifies  health  as  a  first  area,  which  is  also  the 
first  pilot  area  for 
the  European  Innovation 
Partnerships.  The  links  with  education  (especially 
higher education in biotechnologies and medicines) 
should be analysed further. 

As  with  other  policy  areas, 
the  design  and 
announcement  of  sophisticated  strategies  is  not 
necessarily  a  guarantee  that  they  will  be  fully 
implemented in the way they were intended to. The 
Smart  City  project  is  a  case  in  point.  Originally 
conceived  as  an  IT  cluster-  similar  to  the  planned 
Life  Science  centre-  it  is  criticised  to  have  turned 
into  a  real  estate  venture  at  the  expense  of  the 
envisaged  IT-focus.  In  this  context  it  should  be 
noted  that  a  new  strategy  is  to  be  flanked  by  a 
dedicated  system  monitoring  implementation  by 
using  key  performance  indicators.  The  various 
existing support schemes may need to be reviewed 
so  as 
they  are  not  overly 
differentiated.  Hence,  establishing  clearer  and 
broader  programmes  and  better  communication 
remains a priority. 

to  ensure 

that 

Finally,  to  support  a  wide-spread  knowledge-
intensive production, it seems indispensable to raise 
level  of 
the  qualification 
in 
particular  with 
demographic 
view 
a 
developments  and  the  expected  increase  in  skill 
demands. 

the  workforce, 

to 

4.17.3  Towards a sustainable industry 

Malta's  energy  provision 
is  characterised  by 
considerable  dependence  on  imported  oil.  This 
makes the economy vulnerable to oil price changes, 
which may be posing problems to entrepreneurship 
and  the  competitiveness  of  its  businesses.  In 
addition,  in  spite  of  the  influence  of  the  economic 
crisis,  the  recent  evolution  of  the  greenhouse  gas 
emissions  does  not  appear  in  line  with  the  2020 
national target defined at the European level (+5 % 
compared  to  2005  level),  suggesting  additional 
emissions  reduction  measures  and/or  the  use  of 
flexibility mechanisms may be required. Exploiting 
the  potential  to  produce  energy  from  renewable 

sources could bring the double benefit of improving 
competitiveness  and  achieving  energy  and  climate 
targets. The Government has announced a series of 
actions to address these issues:  

Issues  pertaining  to  security  of  supply  are  being 
addressed  in  the  NRP  with  plans  to  extend  the 
power station at Delimara by 2012 and to build an 
electricity 
interconnector  with  Sicily  partially 
funded  under  the  European  Economic  Recovery 
Plan that is expected to be completed by 2013. 

In  terms  of  energy-efficiency  some  clear  national 
targets have been set as part of the climate change 
strategy: 22 % primary energy savings are targeted 
by  2020  (0.235 Mtoe)  with  an  intermediate  target 
for  2014  of  15 %  or  0.145 Mtoe.  The  energy 
efficiency  target  for  2020  is  based  on  primary 
energy consumption for Malta, capped for aviation 
(energy  consumed  in  aviation  is  included  in  the 
calculation  of  the  target  only  up  to  the  level  of 
4.12 %  of  the  overall  energy  consumption)  in  the 
same manner as the target for renewables sources of 
energy.  It  is  based  on  national  models  of  energy 
consumption  projections,  and  assumes  primarily 
that  the  energy  end  use  savings  envisaged  in  the 
NEEAP  are  achieved  and  that  the  new  electricity 
generation  plant  in  Delimara  is  commissioned  as 
well  as  a  new  interconnector  with  Sicily.  The 
proposed actions in this area also include measures 
to  improve  electricity  generation  efficiency  by 
10 %, with a third of this expected to come from the 
promotion  of  energy 
saving  upon  end-use 
consumption. The introduction of smart meters will 
also help in this regard. 

regards 

As 
the  proposed 
renewable  energy, 
measures  include  extending  schemes  to  encourage 
solar  water  heaters  and  micro-generation  from 
renewable  sources  and  supporting  investment  in 
renewable  energy  sources  through  the  introduction 
of a feed-in tariff system. The success of the latter 
largely 
the 
implementation  of  the  renewable  energy  projects 
announced  in  the  NRP  and  ensuring  that  the  costs 
of support schemes remain limited.  

avoiding  delays 

rely 

on 

in 

As  far  as  the  use  of  community  funds  go,  only 
4.67 %  of  Malta's  total  ERDF  and  Cohesion  Fund 
allocation  for  the  2007-2013  programming  period 
was  dedicated  to  renewable  energy  and  energy 
efficiency  investments.  The  take  up  of  these 
investments  has  been  relatively  high,  however, 
especially  under  the  ERDF  Energy  Grant  Scheme 
for  SMEs,  where  the  initial  allocation  has  already 
been increased by 50 %. Using new possibilities for 
introducing  financial  engineering  instruments  for 
energy  efficiency  and  the use  of  renewable  energy 
in buildings (including in existing housing) through 
the  Structural  Funds  has  until  now  not  been 

144 

 
 
 
 
 
 
 
 
 
 
exploited.  Malta  is  in  the  process  of  preparing  a 
second National Energy Efficiency Plan, due to be 
submitted  in  August  this  year,  which  should 
underpin  the  government's  strategy  on  energy 
efficiency in a more comprehensive way. 

Despite recent upgrades to Malta’s public transport 
system, it should be noted that further measures in 
the road transportation and waste sectors would be 
of key importance given their weight in the national 
emissions. 

Overall,  the  envisaged  measures  appear  to  help 
reducing the country's vulnerability to the oil price, 
contribute  to  sustainability  and  foster  business´ 
competitiveness.  The  information  provided  in  the 
National Reform Programme on energy measures is 
limited, however, making it difficult to assess their 
feasibility and cost-effectiveness. 

4.17.4  The business environment 

Malta’s significant progress in reducing state aids is 
acknowledged (but requires continued monitoring). 
The most important institutional development is the 
establishment  of 
the  Malta  Competition  and 
Consumer  Affairs  Authority  which  is  a  more 
institutionally  independent  body  (previously  the 
corresponding 
functions  were  covered  by  a 
department  and  an  Authority  falling  within  the 
portfolio  of  the  Ministry  of  Finance,  the  Economy 
and  Investment  and,  more  recently,  the  Office  of 
the  Prime  Minister).  The  new  Authority  was  to  be 
operational  during  the  first  half  of  2011.  At  the 
same 
the 
Competition  Act  (Cap.379)  were  also  expected  to 
come into force so as to make the Competition Act 
more  effective 
its  objective  of 
in  achieving 
regulating  competition  and  providing  for  better 
functioning  markets.  At  this  time,  a  leniency 
programme was to be in place by the second half of 
2011 to complement the new administrative fines in 
the amended Competition Act.  

amendments 

significant 

time 

to 

Government also reported about liberalisation steps 
in  the  transport  sector  (coaches  and  minibuses 
completed,  taxi  services  to  be  completed  until 
2015). 

However,  a  number  of  issues  persist.  For  instance, 
the  grey  carry trade from  Italy  putting  law-abiding 
entrepreneurs  at  a  disadvantage  as  such  imports 
would  regularly  not  comply  with  certain  standards 
and not be submitted to fees etc, is in need of even 
closer  surveillance  following  the  recent  set–up  of 
an  inter-ministerial  committee  tasked  with  co-
the  different 
ordinating  enforcement  between 
the  objective  of 
authorities  concerned  with 
curtailing this.  

145 

4.17.5  Entrepreneurship and SME policy 

The  Malta  Small  Business  Act  was  enacted  in 
Parliament  on 29 June 2011.  The objectives  of  the 
SBA,  or  at  least  parts  thereof  have  become 
enshrined  in  national  law.  The  Malta  SBA  is, 
however, not a 1:1 translation of the EU-level SBA. 
Instead  of  addressing  all  the  ten  SBA  principles, 
there  has  been  a  deliberate  focus  on  those  issues 
that were considered to be of specific priority in the 
national context. This refers in particular to "Think 
Small  First"  and  responsive  administration.  The 
SBA Malta is regarded by government and business 
representatives  alike  as  a  major  achievement. 
Government is now working on the implementation 
of the Act including the implementation of the SME 
training  of  officials  at  all 
Test  and 
administrative 
crucial 
is 
levels.  This 
accompanying  so  as  to  ensure  that  the  legal 
provisions  set  out  in  the  SBA  Malta  will  also  be 
consequently  adhered  to  in  the  administrative 
practice.  On  this  specific  point,  the  Government’s 
Better Regulation Unit (BRU), has already prepared 
a  detailed  training  plan  as  part  of  their  better 
regulation  strategy.  Overall,  the  BRU  activities 
seemed to be the area with the clearest strategy and 
commitment to follow-through with actions.  

the 

a 

In other areas, access to finance appeared to be the 
most  challenging  one.  Timely  access  to  micro-
credit  programmes  such  as  Jeremie,  to  venture 
capital,  as  well  as  selected  delayed  payment 
practices  by  some  government  institutions  (late 
clearing of invoices, protracted pay-out of promised 
subsidies,  etc)  are  important  issues  in  this  respect. 
Some  steps  to alleviate  the  existing  problems  have 
been already undertaken, though: the recent launch 
(April 2011) of the Jeremie programme has been a 
step  in  the  right  direction  with  the  local  financial 
intermediary  signing  around  €4  million  worth  of 
contracts that total to 28 contracts with an average 
loan  value  of  €145,000.  Also,  with  regard  to  the 
delayed payment practices, the revised Directive on 
late  payments  as  well  as  the  agreement  that 
Government  had  signed  with  the  pharmaceutical 
sector  are  meant  to  ensure  a  positive  approach  for 
the way forward.  

On the issue of simplification as part of responsive 
administration  the  question  of  the  one-stop-shop 
(OSS) requires specific attention. Since a number of 
years  the  establishment  of  the  OSS  has  been 
promised  but  full  implementation  has  been  the 
subject  to  several  postponements.  The  most  recent 
plan is that the planned OSS will actually turn, still 
in 2011, into "Business Service Centres" said to be 
equipped  with 
comprehensive 
even  more 
authorities  than  a  regular  OSS.  The  eventual 
establishment  of  a  functioning  OSS  or  Business 
Service  Centre  is  clearly  needed  and  the  further 

 
 
 
 
 
 
 
 
 
and  reliable  implementation  strategies  (one-stop-
shops,  leniency  programme).  So  as  to  fully  realise 
the results of the announced measures, a reinforced 
emphasis  on  implementation,  follow-up  and  tools 
or  processes  that  help  to  regularly  measure  the 
implementation progress of announced policies in a 
advisable.
does 
transparent 

seem 

way 

progress 
monitored. 

in 

this  matter  needs 

to  be  closely 

4.17.6  Conclusion 

The  Government  continues  to  pursue  the  reform 
agenda. However, the often prevailing impetus and 
ambitious plans are not always backed up by clear 

146 

 
 
 
 
4.18  The Netherlands 

The Netherlands

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

y
r
t
s
u
d
n

i

Infrastructure expenditures (euro per inhabitant; 2009)

N.A.

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

147 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Netherlands (2009) 

Paper products; publishing and printing

Wood and wood products

Textiles and textile products

Refined petroleum products

Food products

Chemicals, chemical products

Rubber and plastic products

Other non-metallic mineral products

Basic metals and fabricated metal products

Leather and leather products

Manufacturing n.e.c.

Transport equipment

Electrical and optical equipment

Machinery and equipment n.e.c.

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.18.1 

Introduction100 

The  first  part  of  this  country  chapter  considers 
mainly 
the  sector  structure  of  manufacturing 
industries, while the remaining four parts extend to 
policies  that  support  business  activities  in  all 
sectors, in particular manufacturing. 

Trade and industry specialisation 

fibres, 

refined 

petroleum) 

Manufacturing  plays  a  slightly  smaller  role  in  the 
Netherlands (12.6%) than the EU on average (14.9 
%).  At  the  detailed  manufacturing  industry  level, 
the  Netherlands  is  specialised  in  capital-intensive 
(man-made 
and 
marketing-driven industries (prepared animal feeds, 
tobacco) as well as in technology-driven industries 
(computers,  radio  and  TV  transmitters)  as  regards 
exports  only.  At  the  more  aggregated  sector  level, 
the  Netherlands 
i  value  added  and  exports 
specialisation  in  high  and  medium-high  education 
sectors  (computers,  software,  R&D  and  business 
services),  trade  specialisation  in  high  innovation 
intensive  sectors,  but  also  in  medium-low  sectors 

(tobacco)  and  value-added  specialisation  in  low 
innovation-intensive sectors (water transport).  

Overall,  the  Netherlands  form  together  with  the 
UK,  France  and  Belgium  a  group  of  countries 
intensive  sectors, 
specialised 
within  the  group  of  higher  income  countries 
specialised in knowledge-intensive industries. 

in  educationally 

Most prominent sectors in the Netherlands 

Highest relative value added (2007)
Manufacture of tobacco products
Water transport
Air transport

Change in the relative value added (1999/2007)
Increasing specialisation
Tobacco products
Air transport
Coke, refined petroleum and nuclear fuel
Decreasing specialisation
Research and development
Radio, television and communication equipment
Water supply

100 

For main sources used see the 
methodological annex. The cut-off date for 
all data and qualitative information is 31 
August 2010. 

Structural change 

In terms of change, the Netherlands has increasd its 
specialisation  in  capital-intensive  industries  (man-

148 

 
 
                                                 
 
 
 
made fibres) and in value-added also in mainstream 
manufacturing  (lighting  equipment  and  electric 
lamps),  as  well  as  trade  specialisation  in  high 
innovation  sectors 
(computers,  communication 
equipment).  It  has  decreased  its  specialisation  in 
high  education  sectors  (R&D),  low  education 
sectors  (water  and  inland  transport),  in  labour-
intensive 
in 
technology-driven  industries  (television  and  radio 
intensity  has  fallen 
receivers).  Sectoral  R&D 
considerably 
in 
communication equipment. 

the  relative  share 

industries  and 

computers 

risen 

and 

in 

Industrial  production  fell  by  15 %  at  the  trough  of 
the  crisis  but  recuperated  most  of  the  ground  lost 
since  then.  In  April  2011  it  was  2.7 %  lower  than 
during its previous peak. The impact of the crisis on 
the  industrial  structure  of  the  Netherlands  was 
limited,  with  a  trend  reversal  only  in  labour-
intensive industries (gaining in relative share). 

The Netherlands has experienced an appreciation of 
the  real  effective  exchange  rate  by  15%  over  the 
last  decade,  which  is  below  the  EU27  average 
(21%),  indicating  nevertheless  a  loss  in  cost  and 
price  competitiveness.  Nominal  unit  labour  costs 
have  increased  by  23%  between  2000  and  2010, 
compared  to  an  increase  of  14%  in  the  EU27  and 
20% in the Euro area. Labour productivity per hour 
worked  has  slightly  increased  over  the  last  decade 
to  about  38  percentage  points  above  the  EU27 
average  and  about  25  percentage  points  above  the 
Euro area average. 

Overall,  while 
the  Netherlands’  position  with 
respect  to  competitiveness  is  still  favourable,  the 
pattern of change is mixed. 

4.18.2  Towards an innovative industry 

According  to  the  Innovation  Union  Scoreboard 
2010,  the  Netherlands  are  an  innovation  follower, 
partly due to its relatively low share of science and 
technology  graduates,  mainly  due  to  the  fact  that 
the  process  of  turning  scientific  research  into 
product innovation (valorisation) is staying behind. 
The  R&D  intensity  of  the Netherlands was  1.84 % 
in 2009 which is below the EU average.  

It  should  be  noted  that  the  Netherlands  has  a 
relatively  large  service  sector,  which  is  not  very 
R&D  intensive.  The  overall  share  of  high-tech 
sectors  is  relatively  low  and  attracting  more  R&I 
intensive  companies  from  abroad  has  proven 
difficult.  

Mainly  private  R&D  and  innovation  expenditures 
remain  relatively  low  compared  to  other  EU 
Member  States,  while  public  R&D  spending  is 

149 

generous in quantity and has a high efficiency and 
effectiveness  (when  measured  by  the  number  and 
impact  of  scientific  publications  and  of  patents). 
The  Netherlands 
average 
performs 
concerning the number of patents. 

above 

Given  that  public  R&D  expenditure  is  unlikely  to 
grow in the next few years, it is hoped that private 
R&D  will  increase  significantly.  In  order  to  foster 
private  R&D,  the  new  enterprise  policy  of  the 
Netherlands  is  aimed  at  achieving  more  space  for 
entrepreneurs,  less  regulatory  burden,  lower  taxes 
and increased tax incentives for innovation. 

The government has also stated its ambition to turn 
the Netherlands into one of the Top five knowledge 
economies in the world, measured according to the 
Global  Competitiveness  Report  of 
the  World 
Economic  Forum.  In  its  2010-2011  edition,  the 
Netherlands 
ranked  eighth.  The  new  Dutch 
enterprise  policy  ("Naar  de  top")  consists  of  two 
components.  The  first  part  is  a  sectoral  approach 
with  more  demand-side  management  by  industry. 
The  “Top  sectors”  on  which  activities  will  be 
concentrated  are:  agro-food, horticulture, high-tech 
systems  and  materials,  logistics,  creative  industry, 
energy, 
life 
headquarters. 

chemicals,  water, 

sciences, 

The  government  has  identified  these  sectors  as  the 
ones  in  which  the  Netherlands  has  a  comparative 
to 
advantage  and  performs  well  with  regard 
research.  In  order  to  bring  research  closer  to 
foster  valorisation  and  product 
business 
innovation, 
the  Top-sector  approach  aims  at 
stimulating more cooperation between government, 
business and knowledge institutes. 

to 

for 

the 

tax 

incentives 

The  second  part  of  the  Dutch  enterprise  policy  is 
aimed  at  giving  entrepreneurs  more  space  by 
lowering  administrative  burden  and  taxes  and 
increasing 
innovation. 
Various specific subsidies have been or will be cut 
(including  innovation  programmes  and  innovation 
the  remaining 
vouchers)  and  a  big  part  of 
innovation  budget 
tax 
into 
incentives.  For  example,  the  RDA  (Research  and 
Development Aftrek) will be implemented as a new 
instrument  to  stimulate  innovation.  It  can  be 
expected  to  encourage  capital-intensive  R&D  in 
larger companies. A drawback may be the complex 
interaction  with  other  incentive  schemes  like  the 
special  tax  rate  of  the  "Innovation  box"  and  the 
WBSO wage cost subsidy. 

transformed 

is 

from 

The  new  government  has  decided  to  use  the 
revenues 
Economische 
the 
the 
(FES) 
Structuurversterking 
budget  and  to  fund  transport  infrastructure,  no 
longer  to  invest  in  science  and  innovation.  The 

to  consolidate 

Fonds 

 
 
 
 
 
funding for innovation and science from this source 
will  be  phased-out  until  2015.  It  is  not  clear  yet 
how  large  scale  research  infrastructure  will  be 
funded  in  the  future  (so  far  by  FES).  On  the  other 
hand,  the government  has  decided  that  a  revolving 
innovation  fund  will  be  set  up  in  favour  of  fast-
growing  innovative  SMEs  with  a  size  of  EUR 500 
million by 2014. It will be developed together with 
the EIB/EIF.  

The  subsidy  for  wage  costs  of  R&D  personnel 
(WBSO)  is  now  by  far  the  largest  measure  in  the 
Dutch  innovation  policy,  with  a  budgetary  weight 
of  EUR 0.8 billion  in  2011.  It  has  been  positively 
evaluated  in  several  studies.  Second  in  importance 
is  the  “Innovation  Box”  (reduced  tax  rates  for 
profits associated with R&D activities) which had a 
budget of more than EUR 600 million in 2010.  

An  interesting  feature  of  the  Dutch  innovation 
system  has  been  the  innovation  voucher  scheme 
which  allowed  enterprises  to  purchase  knowledge 
from public and private research organisations. Due 
to  budgetary  constraints  and  a  general  policy  of 
phasing  out  subsidies,  this  mechanism  is  likely  to 
be discontinued in the future. 

is 

inflow  of  new  science  and 

The  potential  shortage  of  skilled  professionals 
could  become  an 
important  barrier  for  more 
innovation and enhanced private R&D investments. 
The 
technology 
graduates  is  below  the  EU  average.  An  interesting 
practice  example  of  innovation  policy  in  the 
Netherlands 
(Small  Business 
the  SBIR 
Innovation  Research  programme).  It  consists  of 
calls  for  tender  to  procure  an  innovative  product 
that  still  needs  to  be  developed  in  maximum  two 
years.  In  a  first  step,  companies  hand  in  their 
proposals 
for  product  development.  Several 
companies  are  funded  for  half  a  year  to  perform 
feasibility studies. In the light of these studies, three 
companies  are  asked  to  develop  their  idea  into  a 
marketable  product  and  are  subsidised  for  18 
months  with  up  to  EUR 450 000  each.  After  that, 
the  procuring  authority  is  free  to  buy  one  of  these 
three products. The advantages of this scheme are: 
It  is  quick,  result-oriented  and  adapted  to  SME 
needs, with 100 % funding and little administrative 
burden.  The  programme  has  been  positively 
evaluated.  More 
than  a  dozen  marketable 
innovations  (e.g.  traffic  guiding,  dyke  monitoring, 
bio-based  catalytic)  have  been  developed  through 
this tool since 2004. 

A  second  interesting  practice  example  is  the 
concept  of 
Innovation  Performance  Contracts 
(Innovatie  Prestatie  Contracten  –  IPC):  Groups  of 
ten  to  twenty  SMEs  that  develop  an  innovation 
together  are  funded  with  up  to  EUR 30 000  each. 
SMEs  have  to  contribute  another  EUR 30 000  as 

150 

co-financing.  The  project  is  coordinated  via  a 
branch organisation. The programme has been very 
positively  evaluated  and  is  very  popular  among 
enterprises.  The  advantage  is  that  this  programme 
fosters SME collaboration for bottom-up product or 
little  administrative 
service  development  with 
burden for the SMEs.  

4.18.3  Towards a sustainable industry 

The  national  strategy  of  2008  with  a  time  horizon 
until 2030 remains valid. It states that sustainability 
is  part  of  competitiveness.  The  government  also 
encourages all nine Top-sector teams under the new 
enterprise  policy  to  include  the  topic  in  their 
agendas and action plans. 

One  specific  topic  to  be  addressed  in  each  of  the 
nine  sectors  is  the  further  development  of  a  “bio-
based  economy”  for  which  the  Netherlands  has 
good  starting  conditions  (well  developed  agro-
industry  sector,  chemicals  sector,  etc).  The  Social 
the 
and  Economic  Council  (SER)  has  asked 
government  to  concentrate  on  high-value  products 
within its bio-economy policies and to ensure strict 
sustainability criteria. 

Also  the  Dutch  cabinet  has  launched  a  “Green 
Deal”  with  the  society.  It  is  aimed  at  removing 
concrete barriers which hamper projects for energy 
saving  and  renewable  energy  (e.g.  quality  of 
legislation  and  rules),  to  help  citizens,  companies 
and  other  stakeholders  to  realise  their  plans  for 
sustainability,  without  additional  public  subsidies. 
30  concrete  projects  have  been  put  on  track  now 
and more are planned. 

However,  in  light  of  budgetary  constraints  and 
general  policy  considerations,  the  new  government 
has  reduced  the  ambition  in  several  important 
dimensions in the environmental field: It has not set 
a  quantitative  energy  efficiency  target  and  is  not 
committed to more ambitious targets for renewable 
energy  and  CO2  emission  reductions  than  those 
already  legally  required  under  EU  law.  However, 
even  concerning  these  not  overly  ambitious  policy 
goals, the measures envisaged appear most likely to 
be insufficient.  

Concerning green public procurement, it remains to 
be  seen  whether  the  envisaged  reforms  will  allow 
pragmatic steps forward or whether they will in fact 
mean a reduction of ambition and commitment. The 
former  government  had  aimed  at  a  very  high 
percentage  of  green  public  procurement,  but  the 
criteria  set  were  deemed  too  inflexible  by  many 
SMEs.  

The  current  Dutch  energy  production  is  oriented 
international  gas 
towards  gas  and  developing 

 
  
 
to 

further.  According 

the  national 
pipelines 
statistical  office's  environmental  accounts, 
the 
Dutch gas reserves could be depleted in the next 19 
years, assuming constant net exploitation at the rate 
as in 2009. 

Renewable  energy  is  subsidised  via  an  electricity 
levy (SDE+). The government puts high priority on 
building  a  sea  electricity  line  to  Denmark,  to  have 
access  to  Danish  sea-based  wind  park  electricity, 
but this should not deflect attention from increasing 
investments in renewable energy in the Netherlands 
itself. 

The  Dutch  government  wants  to  encourage  more 
nuclear  energy.  It  has  announced  to  issue  licenses 
to  build  new  reactors  if  enterprises  submit  an 
application.  But  it  has  made  clear  that  it  will  not 
provide any subsidies for this technology. 

this  will 

The  plans  to  expand  nuclear  power  will  take  time 
and  raise  questions  of  sustainability  with  regard  to 
the  radioactive  waste  generated.  It  is  not  clear 
whether  these  plans  are  a  strategic  anti-cyclical 
move towards competitiveness at a time when other 
countries try to reduce their dependency on nuclear 
lock-in 
power,  or  whether 
investments  into  a  transitional  technology  with 
potentially higher adjustment costs in the future. In 
particular,  additional  centralised  power  stations 
(large 
the 
development  of  a  smart  grid  which  is  more 
appropriate  for  decentralised  renewable  energy 
distribution,  unless  a  more  coherent  approach  is 
taken  to  integrate  all  sources  into  smart-grid  type 
solutions.  

scale  coal,  nuclear)  may  delay 

lead 

to 

The electricity levy has been revised to concentrate 
subsidies  mainly  on 
those  renewable  energy 
investments  that  are  highly  cost-effective  in  the 
short  run.  The  main  advantage  of  SDE+ 
in 
comparison  to  the  previous  SDE  system  is  that  it 
provides  an  incentive  to  apply  for  a  relatively  low 
subsidy  which  is  expected  to  spur  innovation  and 
cost-effective 
the 
technologies.  One  disadvantage  may  be  that  solar 
panel projects are unlikely to get any subsidy at all. 
The  new  scheme  will  be  operational  from  1  July 
2011 to 2020. 

development 

of  more 

4.18.4  The business environment 

The Netherlands ranks among Member States with 
a  legal  and  regulatory  environment  that  highly 
encourages  the  competitiveness  of  enterprises  and 
scores clearly above the EU average concerning the 
satisfaction  with 
infrastructure. 
Permits  and  other  administrative  procedures, 
including  for  import  and  export,  can  be  very 

the  quality  of 

quickly settled.  

to 

SMEs  still  complain  about  the  difficult  situation 
regarding  access 
finance.  The  anti-crisis 
measures in this field have been extended again. A 
task force is currently looking at the situation on the 
Dutch  financial  market.  A  previous  study  in  2010 
found  that  the  level  of  credit  granted  in  the 
Netherlands  is  similar  to  the  period  before  the 
crisis, but the conditions for SMEs are tighter. The 
top-sector  agendas  should  provide  an  insight  into 
sectoral problems of access to finance.  

The  Dutch  microfinance  scheme  appears  useful. 
SME  associations  consider  that  the  main  problem 
of  access 
the  range 
to  finance  occurs  now 
EUR 100 000  to  EUR 1 million  loans.  A  micro-
credit 
("Qredits")  co-financed  by 
government and big banks was set up in late 2010. 

foundation 

Progress  on  the  new  public  procurement  law  is 
slow.  In  June  2010,  a  revised  proposal  for  a  new 
public procurement law was sent to the Parliament 
which  includes  the  proportionality  principle,  less 
paperwork  upfront  and  an  ombudsman  system.  It 
was hoped that this version could finally pass both 
chambers of parliament, but it was held up again in 
September  2011.  It  is  also  planned  to  issue  an 
important guidance document developed jointly by 
enterprise associations and public authorities and to 
train public procurers better.  

New  legislative  proposals  have  to  go  through  an 
impact  assessment.  One  part  (“bedrijventoets”) 
concerns  the  impact  on  businesses,  both  large  and 
small.  But  there  is  no  separate  SME  test.  There  is 
now  an  integrated  guideline  document  on  how  to 
perform 
than  nine 
different  guides  for  various  aspects  (business, 
gender, etc.), but the system still has to prove itself. 

impact  assessments,  rather 

Public  internet  consultations  have  become  more 
frequent  but  only  address  a  small  share  of 
legislative proposals. A central website has been set 
up: www.internetconsultatie.nl 

target  of  25 %  reduction  of 

Regulatory  reform  has  been  on  the  agenda  of  the 
Dutch government for over two decades. The 2007-
2011  Regulatory  Burden  Action  Plan  had  set  a 
quantitative 
the 
administrative burdens on businesses to be achieved 
by  2011  which  is  going  to  be  largely  met.  A  new 
target is a reduction of 10% in 2012 and 2013 and 
thereafter.  The  actual 
of  5% 
in 
performance 
burden 
administrative 
assessment  works  well:  A  specialised  body 
(ACTAL)  looks  at  the  most  important  pieces  of 
new draft legislation at national level. 

the  years 
the 

of 

Concerning infrastructure, project investments have 

151 

 
been speeded up as part of the anti-crisis measures 
(concerning  bridges, 
and 
measures against rising sea level). 

roads,  waterways 

4.18.5  Entrepreneurship and SME policy 

in 

to  employment 

SMEs'  contribution 
the 
Netherlands  is  the  same  as  in  the  EU  (67%)  but 
they  tend  to  be  larger  on  average  than  in  the  EU, 
the  share  of  small  and  medium-sized 
with 
enterprises  relatively  higher.  The  Netherlands 
scores clearly above the EU average concerning the 
time  required  to  start  a  business  and  early  stage 
average 
significantly 
financing, 
concerning bank loan conditions deemed acceptable 
by  companies  and 
slightly  below  average 
concerning  the  share  of  high-growth  enterprises.  It 
is remarkable that the share of "opportunity-driven" 
entrepreneurs for whom being an entrepreneur was 
the first career priority (rather than accepting it due 
to  a  lack  of  other  options)  is  very  high  in  the 
Netherlands. 

below 

but 

The  Dutch  government  does  not  have  a 
comprehensive  plan  of  implementation  of  the 
“Small  Business  Act”  at  national  level,  but  the 
“think  small  first”  principle  is  being  mainstreamed 
into all kind of government programmes. 

One policy success of the last few years is that the 
number of entrepreneurs has risen and more young 
in  entrepreneurial 
interest 
people  express  an 
thinking. But most companies do not grow or, from 
the  viewpoint of  the  government,  do  not grow  fast 
enough. 

On  late  payments,  the  governments  has  enacted  a 
30 day rule and increased compliance significantly. 
The  different  ministries  are  monitored  for  their 
individual performance. 

There  is  some  concern  among  SMEs  that  the 
"Prepare  to  start"  programme  will  be  abolished  to 
cut  subsidies.  This  programme  provided  coaching 
for internationalisation. The same may happen with 
a  programme  which  subsidised  SME  participation 
in  trade  missions.  On  the  other  hand,  the  Dutch 
foreign  service  will  in  the  future  increase  its 
activities to help internationalisation of companies. 
Better  communication  towards  starting  companies 
about this subject is necessary. 

Entrepreneurship  education  programmes  were  very 
successful in the last few years and the government 
is  planning  to  extend  the  six  entrepreneurship 
centres  at  higher  education  institutions  (if  the 
budget  is  available).  The  next  step  would  be  to 
extend it to the vocational training (MBO). 

Since  the  tax  year  2011,  the  corporate  taxes  have 
been decreased from 25.5 percent to 20 percent for 
SMEs. This will increase profitability and provides 
more  financial  means  for  investments  in  capital 
equipment  and 
innovation.  A  new  Integrated 
(Geïntegreerde 
Facility 
Entrepreneurship 
Ondernemersfaciliteit)  was  set  up,  combining 
various  measures 
successful 
to 
entrepreneurship.  The  first  actions  are  expected  in 
2011. 

support 

The  public  procurement  agency  “Pianoo” 
is 
offering  trainings  to  contracting  authorities  on 
the 
their  notifications  according 
writing 
standards set out in the EU Code of good practice to 
ease participation of SMEs in public procurement.  

to 

No  notable  challenges  have  been  identified  in  this 
policy area. 

4.18.6  Conclusion 

Important  structural  challenges  in  the  Netherlands 
are  to  increase  private  R&D  investments  and  to 
promote  renewable  energy  and  energy  efficiency. 
The  recent  new  enterprise  policy,  with  a  focus  on 
top  sectors  and  a  move  from  specific 
nine 
innovation subsidies to more generic tax incentives 
could  be  an  interesting  example  to  reduce  the 
administrative  burden  for  applicants  and  may 
promote  the  efficiency  and  effectiveness  of  public 
spending.  However,  the  move  should  be  carefully 
evaluated  in  order  not  to  jeopardise  the  overall 
innovative  capacity  of  the  Dutch  economy.  The 
level  of  budgetary  expenditure  for  research  and 
innovation  is  an  important  factor  for  the  future, 
even if the FES will no longer be used to fund these 
activities.  The  transition  towards  a  more  energy 
efficient and low carbon economy could be stepped 
up with further measures.  

The  policy  recommendation  of  the  Council  of  the 
European  Union  is  to  promote  innovation,  private 
R&D  investment  and  closer  science-business  links 
by  providing  suitable  incentives  in  the  context  of 
the new enterprise policy (‘Naar de top’).101 

101  

Country-Specific Recommendation No. 4 
in the Council Recommendation of 12 July 
2011 on the National Reform Programme 
2011 of the Netherlands and delivering a 
Council opinion on the updated Stability 
Programme of the Netherlands, 2011-
2015, published in the Official Journal of 
the European Union, C 212, 19 July 2011, 
page 15.  

152 

 
 
                                                 
4.19  Austria 

Austria

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2008)

y
r
t
s
u
d
n

i

Infrastructure expenditures (euro per inhabitant; 2009)

N.A.

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2010)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

N.A.

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

153 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Austria (2007) 

Chemicals, chemical products

Paper products; publishing and printing

Rubber and plastic products

Other non-metallic mineral products

Refined petroleum products

Machinery and equipment n.e.c.

Wood and wood products

Textiles and textile products

Leather and leather products

Food products

Manufacturing n.e.c.

Transport equipment

Basic metals and fabricated metal products

Electrical and optical equipment

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.19.1 

Introduction 

Trade and industry specialisation 

industries 

Manufacturing  contributes  20.1 %  to  total  value 
added  in  Austria  against  14.9 %  in  the  EU  on 
average.  At  the  detailed  manufacturing  industry 
level,  Austria  features  value  added  and  export 
specialisation 
in  mainstream  manufacturing 
(manufacture  of  railway  and  rolling  stock,  electric 
motors)  and  labour-intensive  industries  (builders’ 
carpentry  and  joinery,  sawmilling,  machine-tools) 
as well as in capital-intensive industries (man-made 
fibres)  regarding  valued  added  and  in  marketing-
driven 
(sports  goods,  beverages) 
regarding  exports.  At  the  more  aggregated  sector 
level,  Austria  is  specialised  in  highly  innovation-
intensive sectors such as machinery and, in exports, 
in medium-innovation sectors (such as wood, basic 
and fabricated metals), but also in sectors with low 
innovation  and  education,  such  as  in  hotels  and 
restaurants  and  auxiliary 
transport  activities. 
Austria’s  R&D  intensity  considering  its  industrial 
structure is very high and its position on the quality 
industries  and  quality 
ladder 
is  high  across 
segments.  Overall,  Austria 
that 
competitiveness  can  be  sustained  in  structures 
which  are  not  markedly  knowledge-intensive,  if 
sectoral  upgrading  in  terms  of  R&D  and  quality 

shows 

takes  place, 
if  a  country  moves 
knowledge-creating parts of the value chain. 

i.e. 

to 

the 

Most prominent sectors in Austria 

Highest relative value added (2007)
 Wood and products of wood and cork
 Coke, refined petroleum and nuclear fuel
 Basic metals

Change in the relative value added (1999/2007)
Increasing specialisation
 Real estate activities
 Electrical machinery and apparatus, nec
 Renting of machinery and equipment
Decreasing specialisation
 Tobacco products
 Inland transport
 Radio, television and communication equipment

Structural change 

in 

specialisation 

In terms of change, Austria has further increased its 
industry 
mainstream 
manufacturing (motorcycles, steam generators) and 
labour-intensive industries (veneer sheets, made-up 
textile  articles,  machine-tools),  as  well  as  in  high 
innovation  and  high  education  sectors  (computers, 
electrical  machinery,  communication  equipment). 

154 

 
 
 
 
 
Austria  has  increased  its  R&D  intensity  taking 
account  of  its  industrial  structure  and  overall 
maintained its position on the quality ladder. 

Austrian manufacturing output fell by around 20 % 
during the crisis but recovered rather fast. In April 
2011  it  was  3.7 %  lower  than  its  previous  cyclical 
peak.  The  crisis  has  slowed  structural  change 
towards  technology-driven  industries  in  Austria, 
labour-intensive 
while 
industries. 

it  has  also  boosted 

insufficient.  To  address  the  emerging  mismatches 
on  the  labour  market,  the  government  introduced 
the  so-called  "red-white-red  card"  as  from  July 
2011.  The  card  facilitates  immigration  of  highly 
qualified  labour  force  from  third  countries.  The 
rights  provided  by  the  card  to  the  successful 
applicants can be extended also to their relatives. In 
addition,  the  successful  candidates  need  not  speak 
German upon entry and only have to learn it within 
the first two years. 

competitive 

Overall,  Austria’s 
is 
favourable,  with  trends  mostly  going  in  the  right 
direction  both 
terms  of  specialisation  and 
in 
sectoral upgrading. 

position 

4.19.2  Towards an innovative industry 

According  to  the  Innovation  Union  Scoreboard 
2010,  Austria  is  an  innovation  follower,  with  a 
developed innovation system and an above average 
innovation performance.  

Austria's economy exceeds the EU average in R&D 
intensity.  The  overall  investment  in  R&D  grew 
from  1.94 %  in  2000  to  2.78 %  of  GDP  in  2010, 
which  was  faster  than  in  most  other  EU  countries. 
The share of private sector amounted to remarkable 
60 % of the total, including a significant portion of 
R&D  investment  coming  from  abroad.  In  spite  of 
the  substantial  level  of  public  and  private  R&D 
funding,  the  economic  structure  still  seems  largely 
based on low R&D intensive sectors, partly due to 
the services industry and its weight in the economy. 
However,  R&D  intensity  in  these  sectors  is  higher 
in Austria than average. 

Although the high-technology industries have been 
gaining ground, their overall share is still relatively 
the  share  of  high-tech 
low.  In  consequence, 
products  in  total  exports  is  below  the  EU  average, 
suggesting  that  the  economic  benefits  of  the  R&D 
investment  are  yet  to  be  better  exploited.  Looking 
only  at  the  importance  of  high-tech  sectors  would 
however 
innovation 
underestimate  Austria’s 
performance, as mentioned in the structural change 
sub-section.  Moreover,  Austria  has  witnessed  a 
high growth of community trademarks, license and 
patent revenues from abroad. 

The  share  of  Austria's 
innovative  businesses 
accounts  for  2/3  of  total  enterprises.  The  industry 
specialises  in  sectors  demanding  high  and  low-
intermediate  labour  skills.  After  several  years  of 
incremental  improvement,  the  number  of  science 
and  technology  graduates  nearly  reached  the  EU 
average  in  2009  (14 %  vs.  14.3 %).  Nonetheless, 
Austria gradually begins to face shortage of skilled 
workforce  and  the  number  of  researchers  seems 

the 

formation  of  human  capital 

The 
remains  a 
challenge  also  due  to  persistent  weaknesses  in  the 
education  system,  including  the  tertiary  level.  In 
view  of 
relatively  high  expenditure  on 
education  (per  student),  the  quality102  of  primary 
and  secondary  education  in  particular  appears 
mediocre.  On the  other hand,  in  indicators  such  as 
the  share  of  high-impact  publications  or  patents, 
Austria  outperforms  the  EU27  average,  indicating 
decent  scientific  performance  and  technological 
knowledge  productivity.  There  are  several  specific 
initiatives103  to  further  promote  the  number  of 
science  and  technology  students,  motivate  more 
women  to  engage  in  research,  and  give  incentives 
for expatriate researchers to return. 

the 

facilitating 

In March 2011, the Austrian Government adopted a 
comprehensive  strategy  for  research,  technology 
and  innovation  -  "Realising  potentials,  increasing 
dynamics,  creating 
future:  Becoming  an 
Innovation  Leader"104.  The  strategy  confirms 
commitment  to  invest  more  in  R&D  (3.76 %  of 
GDP  by  2020)  and  highlights  the  importance  of 
R&D  for  economic  policy  and  the  long-term 
competitiveness of Austria’s economy. It outlines a 
series  of  measures  aimed  at  reforming  education 
system and improving its links with the innovation 
system, 
and 
cooperation  between  science  and  business,  or 
making the framework conditions for R&D activity 
more innovation-friendly. The further promotion of 
high  quality 
including 
university  and  extramural  research  institutions  are 
formulated  as  important  objectives.  The  role  of  a 
more  innovation-oriented  procurement  practices  is 
also  spelled  out.  The  strategy  further  intends  to 
strengthen  fundamental  research,  which  is  in  the 
current  research  mix  less  developed.  The  key-
enabling  technologies  do  not  seem  to  be  explicitly 
addressed  by  a  dedicated  policy,  the  strategy 
however  calls  for  the  formulation  of  national 

infrastructure 

technology 

research 

transfer 

102  
103  

104  

PISA 2006, 2009. 
e.g.  MINT  –  awareness-raising  and 
promotion  campaigns  targeting  potential 
students  in  Mathematics,  Information  and 
communication  technologies,  Natural  or 
Technical sciences 
Der Weg zum Innovation Leader. 

155 

 
 
 
 
 
 
                                                 
programs for generic science and technology fields. 
For  its  part,  the  strategy  also  recognises  the  low 
share  of  tertiary  graduates  and  foresees  improving 
the  rate  of  tertiary  and  equivalent  graduates  in  the 
30-34 population to 38 % by 2020. 

The public R&D and innovation funding consists of 
two main components: (i) broad variety of funding 
programmes  with  general  (bottom-up)  or  thematic 
(top-down)  focus;  complemented  by  (ii)  indirect 
instruments  based  on  tax  incentives.  The  funding 
schemes  played  in  recent  years  a  more  prominent 
role.  Three  dedicated  major  agencies105  operate 
various  schemes  supporting  (i)  basis  research,  (ii) 
applied  research  and  business  R&D,  and  (iii) 
innovation  projects  in  companies,  seed  financing 
and  start-ups.  As  indicated  in  the  strategy,  the 
currently  horizontal  and  diversified  focus  of  the 
public funding schemes shall be reoriented towards 
well-defined  research  sectors.  Smaller  number  of 
thematic  priorities 
for  more 
should 
specialising  and  synergy  in  sectors  where  Austrian 
economy  has  comparative  advantage.  An  example 
of  thematic  focus  is  the  climate  and  energy  funds 
that annually invest EUR 150 million in innovative 
and  demonstration  projects  in  the  field  of  climate 
change. 

allow 

the 

from 

rest  originated 

The  total  R&D  expenditure  amounts  in  2011  to 
EUR 8.29 billion,  out  of  which  EUR 2.7 billion 
came  from  federal  government,  EUR 3.7 billion 
from corporate sector, EUR 1.3 billion from abroad 
and 
federal  states, 
municipalities  or  NGOs.  In  2010,  the  Austrian 
Research  Promotion  Agency  co-financed  2 950 
applied  research  projects,  amounting  in  total  to 
EUR 429 million106.  As  regards  tax  incentives,  in 
its  budget  bill  for  2011  the  federal  government 
increased the research tax bonus from 8 % to 10 %. 
The impact of the measure is estimated at EUR 100 
million. 

Although  still  respectably  high,  the  private  R&D 
investments  have  been  somewhat  losing  ground  in 
2008-2010,  stagnating  in  nominal  terms.  This 
unfavourable  trend,  observed  in  many  Member 
States, was compensated by robust growth in public 
funding,  which,  as  a  part  of  anti-crisis  measures, 
increased  its  share  from  31 %  in  2007  to  almost 
39 % in 2010. To achieve the 2020 R&D intensity 
target  in  a  context  of  fiscal  consolidation  efforts 
though,  it  is  instrumental  to  reverse  this  trend  and 
mobilise  the  contribution  of  private  sector.  To  this 
end,  the  strategy  recognises  the  relative  under-

105  

106  

Austrian Science Funds (FWF), Austria 
Research Promotion Agency (FFG), 
Austria Wirtschaftsservice (AWS) 
Source: 
Research 
Austrian 
Technology Report 2011 

and 

156 

development of venture capital and the role it could 
play in financing innovation. It spells out a number 
of  measures  to  improve  the  regulatory  framework 
for  venture  capital  and  non-banking  financing.  Of 
particular  interest  are  the  measures  planned  to 
and 
strengthen 
entrepreneurship  at  universities, 
the 
establishment of knowledge transfer centers, which 
are expected to help universities better capitalise on 
their intellectual property rights. 

competence 

including 

finance 

from 

suffer 

implementation 

involved  and  ensure 

The  competence  for  R&D  and  innovation  policies 
is  currently  fragmented  and  shared  by  several 
institutions.  In  consequence,  policy  development 
and 
complex 
governance  structure.  Under  the  new  strategy,  all 
relevant  ministries  are  to  cooperate.  The  newly 
established  Task  Force  for  Research,  Technology 
and Innovation shall coordinate the activities of the 
government  bodies 
their 
effective  collaboration.  The  composition  of  this 
task  force  and  its  institutional  standing  vis-à-vis 
other  governmental  departments  will  determine  to 
what  extent  it  can  fulfil  its  role.  The  "Council  for 
technology  development"  will 
research  and 
annually  provide  for  strategic  guidance  and  advise 
the federal government as to the implementation of 
the  strategy  and  its  future  orientation.  Although 
monitoring  and  assessment  mechanisms  are  in 
place,  the  findings  evaluating  the  effectiveness  of 
the existing R&D and innovation instruments could 
better feed into policy formulation. 

The  strategy  shows  awareness  of  all  major 
challenges  and  sets  feasible  targets.  The  effective 
implementation  of  the  announced  measures  and 
initiatives 
the 
economic  benefits  of  R&D 
investments  and 
speeding  up  structural  shift  towards  economic 
activity with higher value added. 

is  crucial  for  better  exploiting 

4.19.3  Towards a sustainable industry 

in  2006 

to  28.5 % 

Over  the  last  decade,  the  overall  energy  efficiency 
of  Austria's  economy  has  continuously  been 
improving.  The  relatively  high  share  of  renewable 
energy  in  final  energy  consumption  further  rose 
from  24.8 % 
in  2008, 
representing fourth rank in the EU.  
As regards the environmental footprint of industry, 
Austria  sends  positive  but  somewhat  blurry  a 
message. Between 1990 and 2008, the final energy 
consumption  in  industry,  measured  in  quantity, 
grew by 48 % (from 6 091 to 9 014 million toe). In 
the  same  years,  however  values  for  EU27  and 
EU15 diminished or  stagnated  respectively. Whilst 
in  2008,  energy  consumption  of 
culminating 
Austrian 
(to 
8 263 million  toe) during  the  crisis  year  2009.  The 
largest energy consuming sectors of manufacturing 
were  paper  and  pulp,  followed  by  iron  and  steel, 

industry  significantly 

fell  back 

 
 
 
 
                                                 
 
 
the  energy 

non-metallic minerals and chemical industry. More 
importantly  however, 
intensity  of 
industry  has  been  declining  over  the  last  decade, 
and  Austria  belongs  to  the  better  performing 
Member  States.  The  carbon  intensity  of  industry 
also  improved  and  was  slightly  below  the  EU 
average of 2009. The amount of waste generated by 
enterprises grew from 6.1 kg per habitant in 2006 to 
6.3 kg  in  2008,  contrary  to  the  EU  weighted 
average that decreased from 5.5 kg to 4.81 kg in the 
same period.  

is 

to 

the 

the  Ministry 

In  April  2010,  the  Federal  Ministry  of  Economy, 
for 
Family  and  Youth  and 
Environment  concluded  the  elaboration  of  the 
national  Energy  Strategy.  It  targets  three  main 
policy areas: increase in energy efficiency, share of 
renewables,  and  energy  security.  One  of  the  main 
final  energy 
stabilise 
objectives 
consumption  at  2005  levels.  To  this  end,  the 
transport  sector,  heating  and  cooling,  and  the 
electricity  sector  are  expected  to  most  reduce  their 
energy consumption. In addition to 21 % for sectors 
subjected to ETS, Austria aims at a 16 % reduction 
of CO2 emissions for the sectors outside the ETS by 
2020.  Following 
the  "Green 
Electricity  Act  2012"107  by  the  Parliament  in  July 
2011,  Austria  has  strengthened 
its  renewable 
electricity  targets.  It  is  investing  to  triple  the 
production  of  wind  power  and  plans  to  achieve  a 
tenfold increase in the production capacity of solar 
panels.  The  construction  works  of  a  new  pumped-
storage  power  plant  (Kaprun-Limberg  II),  worth 
EUR 400 million,  approaches  completion.  In  near 
future  it  will  add  a  capacity  of  480 MW  to  the 
hydroelectric  power  generation.  To  accommodate 
towards  the  national  2020  target  of  34 %  of 
renewable  energy, 
the  electricity  grids  would 
benefit  from  upgrading  investments  and  better 
cross-border connectivity of distribution networks. 

the  adoption  of 

The Energy Strategy translated into a broad variety 
of  horizontal  and  sector-specific  measures  of 
regulatory,  financial  or 
information  campaign 
nature.  The  thematic  sectors  include  buildings, 
production  and  services  in  industry,  mobility, 
energy  supply  and  security.  At  federal  level,  the 
most  significant  legal  instruments  include  the 
National  Renewable  Energy  Action  Plan,  Climate 
and  Energy  Fund  Law,  Green  Electricity  Act, 
Environmental  Aid  Act,  Environmental  Assistance 
Austria, Bio-fuels Directive, Action Programme for 
Mobility  Management,  Waste  Management  Act. 
developing 
provide 
Altogether, 
environmentally-friendly  mobility,  feed-in  tariffs 
for  renewable  energy,  financial  support  for  solar 
energy,  finances  to  reduce  atmospheric  pollutants 
or dangerous waste, thermal insulation of buildings, 

these 

for 

107  

Ökostromgesetz 2012 

157 

rules  promoting 

renewable  energy 
technical 
systems  in  buildings,  certification  of  installers, 
energy  efficiency  consulting  for  SMEs,  including 
promotion of voluntary actions by industry sectors, 
awareness 
sustainable 
raising  campaigns  or 
consumption initiatives. 

The  existing  funding  schemes  target  "greening  of 
industries" by supporting efficient energy, resource 
and  emission  management  plans,  as  well  as 
sustainable  business  models  and 
take  up  of 
environment-friendly  technologies.  In  2010,  2399 
projects  were  financed  with  a  total  value  of  EUR 
571.1  million.  The  energy  efficiency  of  buildings 
remained in 2010 an explicit goal. In view of their 
multiplication  effect  and  positive 
impact  on 
employment,  the  existing  funding  instruments  for 
thermal  insulation  were  reinforced  and  extended 
into  2011-2014.  For  2011,  EUR 100 million  were 
made available, out of which 70 % is envisaged for 
residential  and  30 %  for 
industrial  buildings. 
Depending  on 
the  expected  energy  savings, 
investments can be co-financed by up to 35 %. The 
awareness 
raising  campaigns  and  consulting 
services  on  energy  efficiency  targeted  in  2010  in 
particular energy intensive SMEs.  

it  more 

environment-friendly 

The  Energy  Strategy  indicates  the  intention  to 
overhaul  the  public  procurement  law,  aiming  at 
making 
and 
conducive 
to  energy  efficiency.  The  planned 
strategy  for  introducing  electro-mobility  in  Austria 
has  still  been  in  discussion  in  2010.  On  the  other 
hand,  the  first  parts  of  the  environmental  tax 
reform,  which  aims  at  increasing  taxation  of 
resources  and  energy  consumption,  were  adopted 
with  the  budget  bill  for  2011:  e.g.  the  tax  on 
mineral  oil  went  up  (20  EUR/tonne);  an  airline 
ticket tax was introduced (EUR 8, 20, 35 for short, 
medium,  and  long-haul  flights  respectively);  the 
ecological elements of the car registration tax were 
further strengthened. 

elaborating 

To  secure  the  supply  of  mineral  resources  for  its 
industry,  and  to  allow  better  planning  of  future 
mining  activities,  federal  and  state  governments 
the  Austrian  Mineral 
continued 
Resources  Plan.  The  first  phase  devoted 
to 
identifying  and  estimating  the  value  of  mineral 
deposits  was  accomplished.  The  crucial  second 
stage,  which  aims  at  (i)  eliminating  any  protection 
conflicts (e.g. with residential areas, national parks, 
water  management  zones)  and  (ii)  declaring 
exploitable  deposits  as  "mineral  protection  zones", 
is  still  underway.  In  parallel,  the  Federal  Ministry 
for  Agriculture,  Forestry,  Environment  and  Water 
management is working on the Resource Efficiency 
Action Plan. 

Austria  has  advanced 

in 

the  application  of 

 
 
 
                                                 
 
 
 
 
sustainability  patterns  in  public  procurement.  In 
July 2010, the federal government adopted National 
Action  Plan  for  Sustainable  Public  Procurement, 
drawing  lessons  from  the  pilot  phase  and  the  EU 
GPP  Toolkit.  The  Action  Plan  targets  primarily 
procurement practitioners by providing guidance on 
good  organisational  practices,  showing  how  to 
effectively  apply  environmental  or  sustainability 
criteria at various stages of procurement procedure. 

4.19.4  The business environment 

Austria has a favourable business environment and 
scores  well  in  the  overall  competitiveness  of  its 
economy.108 Businesses highly regard especially the 
stability  of  legal  and  regulatory  framework,  the 
enforcement 
of 
contracts 
infrastructure.  Despite  the  high  share  of  renewable 
energy,  the  electricity  prices  for  SMEs  remain 
competitive at below EU average.  

quality 

and 

of 

To  foster  efficiency  of  the  public  sector  and  thus 
indirectly  improve  business  environment,  Austria 
implemented a budgetary and administrative reform 
(Haushaltsrechtsreform)  coming  into  operation  in 
two stages (2009 and 2013). Inter alia, it introduced 
and  further  developed  the  Impact  Assessment 
System, including ex-ante und ex-post evaluations. 
The  so  called  outcome-oriented  impact  assessment 
will  be  enforced  as  from  2013.  It  puts  the  cost  of 
public  policies  and  regulation  into  context  with 
outcome  objectives  and  expected  environmental, 
social and economic impacts. 

Ministry  of  Finance  developed  a  tool  for  the 
calculation  of  administrative  burden  for  businesses 
and citizens (Verwaltungskostenrechner), screening 
all  new  legislative  proposals.  It  also  actively 
supports  other  ministries  in  their  estimations  of 
administrative  burden.  The  tool  takes  into  account 
the  size  of  an  enterprise.  An  SME  test  is  not 
included  therein,  however  it  is  already  under 
development.  Overall,  the  impact  assessment  still 
tends  to  be  limited  to  estimation  of  administrative 
burden rather than the overall cost to businesses.  

In  2007,  the  government  launched  an  action 
program  for  reducing  administrative  burden  for 
businesses, setting a 25 % reduction target for 2012. 
It identified 5687 information obligations stemming 
from 561 legal acts, which, based on the standard-
cost-model, 
induce  administrative  burden  of 
EUR 4.31 billion.  In  2010,  the  implementation  of 
the  initiative  further  progressed  and  achieved  its 

108  

Austria  ranked  18th  in  the  2010-2011 
Global  Competitiveness  Report  of  the 
World  Economic  Forum,  and  32nd  in  the 
2011 Doing Business survey of the World 
Bank. 

accounting 

for  mandatory 

2010  target  of  EUR 564 million.  For  instance,  the 
new  thresholds  for  VAT  registration  (raised  to 
EUR 30 000)  came  into  force  in  2010.  The  new 
accounting act, which amongst others increased the 
threshold 
to 
EUR 700 000, is estimated to trigger administrative 
burden  reduction  of  EUR 55 million.  The  second 
phase of the initiative, which is focused on burdens 
arising  from  EU  legislation,  too,  shall  bring  about 
administrative  burden  reductions  of  additional 
512 million. In 2010, the government extended the 
scope  of  the  campaign.  It  now  focuses  also  on 
administrative  burden  for  citizens.  Starting  from  a 
focused  baseline  measurement  of  the  100  most 
burdensome  administrative  procedures  more  than 
150 simplification measures have been identified to 
cut red tape for citizens. To build up on the already 
enacted  measures  and  to  boost  their  effect,  the 
the  better  regulation 
institutional  capacity  for 
agenda could be strengthened by closer cooperation 
between  the  central  government  and  the  federal 
states. 

on 

impact 

positively 

companies 

authorities, 

The  existence  of  broad  variety  of  e-government 
solutions  and  online  services,  and  their  uptake  by 
enterprises 
business 
conditions.  The  implementation  of  the  Business 
Service  Portal  (USP)109,  a  flagship  initiative  aimed 
at  establishing  a  central  gateway  for  any  contact 
between 
further 
and 
advanced.  The  first  stage  of  USP  (provision  of 
official  information  services  for  business)  was 
completed in 2010. Whilst ensuring the single-sign-
on  approach  in  2012,  the  second  stage  shall  be 
completed  by  2013.  Further  developments  will 
integrate  all  existing  (e.g.  tax  declarations,  social 
security  contributions)  and  develop  new  electronic 
transactions including the public procurement area. 
If its full functionality is successfully achieved, this 
electronic  single-point-of-contact  has  the  potential 
to  streamline  many  administrative  procedures. 
Based  on  the  initial  estimates,  the  USP  could 
reduce  administrative  burden  by  100  up 
to 
EUR 300 million. The internet uptake by businesses 
is relatively high, although the penetration of fixed 
broadband 
lines  with  high-speed  connection 
remains  significantly  below  EU  average.  On  the 
other  hand,  Austria 
the  best 
performing EU countries as regards mobile internet. 
To  further  increase  broadband  capacity,  in  2010, 
the  government  assigned  the  800 MHz  frequency 
band  for  mobile  broadband  services  and 
the 
regulator  conducted  auction  in  the  2.6 GHz  band. 
the  government 
Moreover, 
program110  worth 
launched 

in  February  2011, 
new 

ranks  among 

support 

109  

110  

Unternehmensserviceportal 
www.usp.gv.at 
Breitband Österreich 2013 (BBA 2013) 

(USP) 

– 

158 

 
 
 
 
 
                                                 
 
                                                 
EUR 30 million 
infrastructure in rural areas.  

to  prop  up 

the  broadband 

4.19.5  Entrepreneurship and SME policy 

in 

Austria’s  SME  sector  resembles  the  EU  average, 
both 
terms  of  employment  (67.2 %)  and 
contribution  to  valued  added  (61.9 %).  As  regards 
its  structure  though,  the  small  and  medium-sized 
companies  play  a  more  prominent  role.  In  contrast 
to  that,  the  number  of  micro  firms  as  well  as  their 
contribution  to  employment  and  value  added  is 
below  EU  average  (88 %,  25 %  and  18.9 % 
compared to the EU average of 92.1 %, 29.8 % and 
21.9 %  respectively).  The  business  demography 
indicators  show,  on  one  hand,  lower-than-EU-
average birth and exit rate of enterprises, and one of 
the  highest  survival  rates  after  two  years  on  the 
other hand. 

the 

also 

carried  out 

the  beginning  of  2011, 

the  “SME  Report  2010”111, 

the  government 
At 
published 
listing 
support  measures  for  SMEs  that  were  structured 
along  the  10  principles  of  the  EU  Small  Business 
Act  (SBA).  In  2010-2011,  Austria  was  one  of  the 
countries that launched actions in all SBA areas. In 
cooperation  with  the  Federal  Economic  Chamber 
(WKÖ),  the  Federal  Ministry  of  Economy,  Family 
and  Youth 
"SBA-
Begleitprogramm  2009/2010" 
-  a  programme 
accompanying the SBA implementation. It targeted 
in  particular  sole  traders;  topics  included  e.g. 
transfer  of  business,  knowledge  management, 
women  &  innovation.  In  2011-2012,  the  program 
thematic  projects  such  as  e.g. 
will 
“Reinvent  your 
“Success-factor  Knowledge”, 
company”,  “Applying  new 
legal  frameworks”. 
Building  up  on  other  measures,  the  systematic 
introduction  of  entrepreneurship  education  was 
stepped  up  in  the  competence-based  curricula. 
Nonetheless,  the  attitude  towards  entrepreneurship 
and  risk-taking  still  remains  a  cultural  challenge 
that will require more time to change. 

include 

The  one-stop-shop  for  businesses  is  operational, 
though  there  is  still  some  room  for  improving  the 
conditions  for  start-ups.  In  spite  of  gradual 
reduction  over  recent  years, 
the  number  of 
procedures (8) and time (up to 28 days) required to 
start  a  typical  company  are  markedly  above  the 
OECD  average. 
licensing 
procedures112,  registration  at  courts  and  notary 
certifications113,  as  well  as 
the  compulsory 
announcement  requirements114  would  benefit  from 

In  particular, 

the 

111  
112  
113  
114  

Mittelstandsbericht 2010. 
Betriebsanlagegenehmigungen. 
Notariatsaktspflicht. 
Veröffentlichungspflichten 
Zeitung). 

further streamlining. In this respect, the government 
has  advanced  in  preparations  to  reform  the  private 
limited  liability  company  (GmbH),  which  should 
enhance  its  attractiveness.  The  Austrian  Corporate 
Governance  Code  has  been  adapted  over  the  last 
years.  Additional  improvements  could  help  further 
solidify 
in  particular  for 
minority shareholders. 

investor  protection, 

to  SMEs.  Various 

The  banking  sector  dominates  the  financial  market 
in  Austria,  and  bank  loans  prevail  as  the  main 
source  of  financing  for  industry.  The  relatively 
smaller  stock  market  and  venture  capital  (VC) 
industry  do  not  generate  sufficient  availability  of 
capital-raising  alternatives.  Total  venture  capital 
investments  in  2009  were  at  0.05 %  of  GDP, 
the  European  average115  of  0.19 %. 
against 
Although  the  government  succeeded  in  stabilising 
the  banking  sector  during  the  financial  crisis,  the 
banks have restricted their lending policies and the 
forthcoming  additional  capital  needs  (Basel  III)  of 
the  banking  sector  risk  further  limiting  lending,  in 
financing  and 
particular 
guarantee schemes using public funds are already in 
place  and  are  being  operated  e.g.  by  the  Austria 
Wirtschaftsservice  (AWS).  Acting  as  a  fund  of 
funds,  the  AWS  invests  in  VC  funds  participating 
in  high-tech  innovative  start-ups.  To  prop  up  the 
availability  of  early-stage  financing,  in  2010  the 
government  launched  additional  “Venture  Capital 
Initiatives”,  worth  EUR 15 million  for  high-tech 
start-ups and 6 million for the Cleantech-Fund. The 
development  of  VC  industry  and  thus  also  the 
access  to  private  non-banking  financing  could 
further be improved through reforms increasing the 
attractiveness  and  transparency  of  the  legal  forms 
used  for  (i)  venture  capital  funds  and  (ii)  for 
investment vehicles, and also by (iii) analyzing and 
mitigating  possible  disincentives 
caused  by 
different tax treatment.  

in  2009 
the  access  of  SMEs 

the 
As  regards  public  procurement, 
government  eased 
to 
procurement  by  temporally  having  increased  the 
threshold  for  direct  awarding  of  contracts  from 
EUR 40 000 to EUR 100 000. This  measure is still 
in  force,  however  will  not  be  extended  beyond 
2011.  

4.19.6  Conclusion 

Austria  scores  well  in  the  overall  competitiveness 
of  its  economy,  the  labour  productivity  is  clearly 
above  the  EU  average,  and  it  need  not  cope  with 
any  major  bottlenecks  in  the  short  run.  In  the 
context  of  a  developed  high-income  country 
however,  it  faces  relative  structural  weaknesses  in 

(Wiener 

115  

European  Private  Equity  and  Venture 
Capital Association. 

159 

 
 
 
 
                                                 
 
 
 
                                                 
some  areas,  which  may  harm 
potential of its economy.  

the 

long-term 

The  knowledge  triangle  (education,  research  and 
innovation)  is  one  of  the  areas  in  need  of  priority 
action.  Better  performance  and  interaction,  and 
more effective public spending in these policy areas 
are  instrumental  to  fully  exploit  the  potential 

contribution  of  R&D  to  the  competitiveness  of  its 
economy,  and  thus  facilitate  the  structural  shift 
towards  more  skill-intensive  higher-value-added 
activities.  The  favourable  business  environment 
could be made even more attractive by streamlining 
administrative  procedures  for  start-ups,  higher 
availability  of  non-banking  financing,  and  by 
improving the corporate governance practices. 

160 

 
 
4.20  Poland 

Poland

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

N.A.

N.A.

N.A.

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

161 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Poland (2005) 

Paper products; publishing and printing

Wood and wood products

Textiles and textile products

Refined petroleum products

Food products

Leather and leather products

Manufacturing n.e.c.

Transport equipment

Electrical and optical equipment

Machinery and equipment n.e.c.

trade 

Taking  account  of  its  industrial  structure,  Poland’s 
R&D  intensity  is  below  average,  as  is  its  position 
on the quality ladder as evidenced by low shares in 
high  price  segments  and  high  shares  in  low  price 
segments  across  industries.  This  profile  is  very 
similar  to  its  group  of  lower  income  countries 
featuring 
in  knowledge-
specialisation 
intensive  industries  (group  3),  while  in  terms  of 
industry  specialisation  Poland  really  is  between 
countries  specialised  in  labour-intensive  (group  4) 
and  countries  specialised  in  knowledge-intensive 
industries.  However,  Poland  has  no 
trade 
specialisation  in  technology-driven  industries,  a 
lower  specialisation  in  labour-intensive  industries 
and  a  higher 
in  mainstream 
relative  share 
manufacturing  compared  to  group  4,  making  its 
structure more akin to group 3. 

Most prominent sectors in Poland 

Chemicals, chemical products

Rubber and plastic products

Other non-metallic mineral products

Basic metals and fabricated metal products

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.20.1 

Introduction116 

Trade and industry specialisation 

leather 

labour-intensive 

Manufacturing  plays  a  more  important  role  in 
Poland  than  in  the  EU  as  a  whole  (18.5 %  against 
14.9 %  in  2009).  Analysis  at  the  manufacturing 
sector level shows that Poland is not specialised in 
technology-driven  industries,  but  in  most  of  the 
other  industry  types,  such  as  marketing-driven 
(processing  and  preserving  of  fruit  and  vegetables, 
soap  and  detergents), 
(wood 
products, 
and  mainstream 
(domestic  appliances, 
manufacturing 
lighting,  batteries).  At  the  more  aggregated  sector 
level, Poland features low specialisation in the high 
innovation  and  high  and  medium-high  education 
sectors, but above average relative shares in the low 
to  medium  (medium-high  in  innovation  intensity) 
segments  of  these  sectors,  such  as  in  tobacco, 
wood, non-metallic minerals, as well as textiles and 
rubber  and  plastics 
innovation 
intensity). 

(medium-high 

industries 

clothes) 

116  

For main sources used see the 
methodological annex. The cut-off date for 
all data and qualitative information is 31 
August 2010. 

162 

 
 
                                                 
Highest relative value added (2007)
Furniture, jewellery, musical instruments, sports goods, games and toys
Water supply
Wood and products of wood and cork

Change in the relative value added (1999/2007)
Increasing specialisation
Recycling
Real estate activities
Rubber and plastics
Decreasing specialisation
Research and development
Coke, refined petroleum and nuclear fuel
Tobacco products

Structural change 

In  terms  of  change,  Poland  has  strongly  increased 
its  relative  value  added  share  in  technology-driven 
industries  (computers,  optical  instruments)  and  in 
mainstream  manufacturing  (domestic  appliances), 
as  well  as  its  exports  in  education  and  innovation 
communication 
intensive 
sectors 
equipment)  while 
labour-
(leather  clothes,  wearing 
intensive 
apparel) has decreased.  

(computers, 
its  specialisation 

industries 

in 

Manufacturing production in Poland rebounded fast 
after the recent economic crisis, being 8 % higher in 
April  2011  than  its  pre-crisis  peak.  The  impact  of 
the  crisis  on  Poland’s  economic  structure  was 
limited.  Nominal  unit  labour  costs  have  increased 
by  16%  between  2000  and  2010,  compared  to  an 
increase of 14% in the EU27 and 20% in the Euro 
area.  While  labour  productivity  per  hour  worked 
has gradually increased over the last years, it is still 
considerably below the EU27 average. 

Overall,  Poland  is  clearly  catching  up  with respect 
to  competitiveness;  its  pattern  of  change  has 
established  it  more  firmly  in  country  group  3. 
However, R&D investments have not yet followed 
the positive trend. 

4.20.2  Towards an innovative industry 

innovator  by 

Compared with other European countries, Poland is 
one of  the  least  innovative  economies,  ranked  as  a 
moderate 
the  Innovation  Union 
Scoreboard  2010.  In  particular,  it  has  a  relatively 
low share of innovating enterprises and of business 
investment  in  R&D.  On  the  other  hand,  it  scores 
around the EU average on the share of science and 
technology graduates. 

Although  the  level  of  investment  in  innovation  is 
rising, Polish companies in general rarely base their 
business strategies on innovation and tend to focus 
rather on short term investments in new machinery 
and  equipment.  This  is  partially  caused  by  low 
absorptive  capacities  and  lack  of  long  term  vision 
among  entrepreneurs,  especially  in  case  of  SMEs. 

This  situation  is  also  a  result  of  frequent  changes 
and  uncertainty  of  the  legal  framework  which 
discourages  companies 
strategic 
planning.  

from  more 

Recently  Poland  has  adopted  comprehensive 
reforms  of  science  and  higher  education  sectors 
with  an  aim  to  boost  research  and  innovation  and 
improve  the  functioning  of  the  tertiary  education. 
The reform of science sectors has introduced more 
competitive  rules  for  funding  of  research  and 
decentralised  implementation  of  science  policy  by 
establishing a National Science Centre dealing with 
basic  research  and  a  National  Research  and 
Development  Centre  in  charge  of  applied  research 
and  cooperation  with  industry.  According  to  the 
reform,  the  priority  areas  of  research  are  to  be 
defined  in  National  Research  Programme  and 
strategic research programmes. The prioritisation of 
research  projects  and  research  agenda  are  to  be 
assured through technological foresight that should 
identify  growth  potentials  of  industrial  and  service 
sectors  and  key  technologies  for  the  future.  The 
initial  strategic  research  programmes  and  projects, 
which  engage  science  units  and  entrepreneurs, 
include  carbon  capture  and  storage  and  nuclear 
related  technologies.  There  are  also  attempts  to 
promote  smart  specialisation  of  the  regions  but  it 
seems  that  more  coordination  will  be  necessary  to 
ensure  more  realistic  and  coherent  planning  of 
research policies at the local level. 

The  reform  of  higher  education  has  created  a 
special  pro-quality  fund  for  higher  education, 
additional  funding  for  the  so-called  “national 
leading  scientific  centres”  (abbreviation  in  Polish: 
“KNOWs”).  The  reforms  have  also  introduced 
changes  aimed  at  better  use  of  the  potential  of  the 
science units (i.e. research institutes and the Polish 
institutes), 
Academy  of  Sciences 
improvement  in  quality  of  the  scientific  research 
conducted  at  the  institutes  and  in  quality  of 
education,  improvement  in  management  efficiency 
(i.e. 
for 
reorganisation,  commercialisation  and  liquidation 
of  institutes)  as  well  as  greater  autonomy  of 
universities.  Further  initiatives  are  planned  to 
increase  the  internationalisation  of  Polish  science 
(i.e.  new  mechanisms  supporting  mobility  of 
researchers and knowledge transfer). 

framework 

improving 

legal 

and 

the 

its 

The government is currently evaluating the ongoing 
innovation  support  measures.  It  will  integrate  the 
results  of  the  evaluation  in  the  new  innovation 
strategy  that  should  be  adopted  before  the  end  of 
the  year.  It  should  allow  focussing  on  the  most 
effective  support  measures  by  the  government.  In 
the  immediate  a  new  support  measure  will  be 
developed  to  help  more  effective  management  of 
clusters  by  providing  targeted  training  to  cluster 

163 

 
 
 
managers. 

funds 

Innovative  Economy  and 

An  outstanding  challenge  is  the  need  to  radically 
increase  funding  both  for  public  and  private 
research. The difficult fiscal situation might impede 
planned  increases  in  spending  on  public  R&D. 
Important  part  of  public  support  comes  from  the 
the  Operational 
structural 
through 
Programme  – 
the 
Regional  Operational  Programmes.  To  match  the 
plans  of  increased  R&D  support  from  public 
sources  an 
increase  of  budgetary 
spending  would  need  to  take  place,  which  is 
currently difficult given the budget austerity plans. 
The  underinvestment  of  the  private  sector  is  even 
more worrying and more ambitious policy schemes 
such  as  fiscal 
that  are 
considered  by  the  government  are  more  than 
necessary.  

incentives  for  R&D 

important 

the 

reform  of 

Workforce  education  remains  one  of  the  major 
obstacles  for  firm  operation  in  Poland.  Apart  from 
advanced  technical  or  vocational  skills,  it  is  often 
general  competences  that  the  young  graduates  are 
missing,  such  us  responsibility  and  reliability, 
commitment,  team  working  or  self-management. 
The  skills  shortage  is  not  only  a  result  of  the 
underperforming  education  system,  but  also  of  an 
ongoing  restructuring  of  the  economy  that  makes 
demand for skills rather unstable. The latest reform 
of  general  education  with  more  focus  on  learning 
tertiary 
recent 
outcomes  and 
education  address  many  of  these  gaps.  Concerning 
the  low  science  and  technology  graduate  numbers 
compared 
the 
Ministry  of  Science  and  Higher  Education  has  run 
an intensive programme to support universities and 
students of selected courses of interest for industry 
using  the  structural  funds.  The  reform  of  higher 
education put particular emphasis on strengthening 
links  between  labour  market  needs  and  didactic 
offers,  i.e.  participation  of  employers  in  teaching 
and in evaluating its outcomes as well as obligatory 
and  systemic  monitoring  by  universities  of  their 
graduates’ careers. What remains to be dealt with is 
improvement of life long learning system including 
adaptability  of  employees  and  expansion  of  early 
childhood development. 

industry  needs,  since  2008 

to 

Important  challenges  remain,  such  as  assuring 
adequate  funding,  especially  from  national  funds, 
implementing  effectively  new  legislative  proposals 
to improve science-industry cooperation, especially 
in sectors that have already invested significantly in 
R&D, and promoting multidisciplinary profile skills 
for innovation in order to ensure that the supply of 
innovation skills meets the industry demand. 

4.20.3  Towards a sustainable industry 

164 

The  structure  of  the  industry  and,  in  case  of  some 
industries,  use  of  older  technologies  continue  to 
contribute  to  higher  energy  and  carbon  intensity. 
Poland  is  performing  worse  than  the  EU  average 
with respect to the share of environmental goods in 
export, but has managed to reduce waste generation 
of  enterprises  following  a  recent  introduction  of  a 
national  waste  management  plan.  Nonetheless, 
Poland has taken few steps to use the crisis to green 
the  economy.  From  the  Polish  perspective  EU 
climate action proposals can be a real challenge and 
burden for Poland’s industry. 

capacities.  Together  with 
they 

The  recent  projections  of  the  World  Bank  indicate 
that  the  2020  national  target  (+14 %  for  non-ETS 
sectors,  compared  to  2005  levels)  may  not  be 
reached if no adequate actions are taken. The main 
challenge  to  be  faced  in  the  energy  sector  is  the 
problem  of  uncertainty  of  investors  about  the 
for  new 
possibility  of  obtaining  permission 
the  aging 
capacities 
that  soon  must  replace 
old 
generation 
to 
transmission  networks 
undersupply of energy and increases in energy costs 
for  end-consumers  and  industry.  Moreover,  the 
majority of planned investments are to be still based 
on coal due. This issue may require more intensive 
policy measures to change this bias and to meet the 
2020 
limited 
competition  on  the  Polish  energy  market  and  slow 
progress in development of international connectors 
of  the  electricity  grid,  this  might  also  result  in 
passing  carbon  price  increases  into  electricity 
prices.  

targets.  Considering 

emission 

could 

lead 

To address this issue Poland plans also to build its 
first nuclear power plant which should be launched 
in  2020.  However, 
into  account  huge 
taking 
funding  requirements  and  rather  unfavourable 
climate for development of nuclear energy sources, 
the  implementation  of  these  plans  could  be  rather 
difficult.  

Poland  has  high  expectations  for  the  Clean  Coal 
technologies that could make its energy production 
from  coal  much  more  ecological.  Consequently, 
relevant legislation as well as research on potential 
deployment  of  these  technologies  is  underway. 
Poland  has  even  launched  a  Carbon  Capture 
Storage (CCS) demonstration project for an energy 
power  plant.  However,  the  break-even  point  for 
CCS is estimated for a carbon price of EUR 60 per 
ton, which means that today CCS seems to be not a 
cost-effective  technology,  posing  a  considerable 
risk of a rise in energy prices. 

According  to  the  adopted  legislation  (climate  and 
energy  package),  by  2020  15 %  of  energy 
consumption 
from 
renewable  resources  i.e.  (5 %  less  than  the  target 

should  come 

in  Poland 

 
for the EU). In December 2010 Poland adopted the 
National  Renewable  Energy  Action  Plan  aimed  at 
reaching  this  target.  The  plan  is  to  be  fully 
implemented,  but  still  the  main  source  of  support 
for investments in renewable energy sources would 
be coming from the European funds.  

In addition, Poland intends to adopt in 2011 the 2nd 
National Energy Efficiency Action Plan which will 
responsibilities,  deadlines  and 
define  clearly 
budgets. The current measures include subsidies for 
investments  in  thermo-modernisation  of  buildings 
and  a  system  of  white  certificates  for  energy 
providers.  It  is  necessary,  though,  to  stimulate 
investments  in  energy  saving  in  public  buildings 
with  reduced  need  for  the  engagement  of  public 
budgets,  which  requires  a  clearer  and  more 
favourable legal framework for energy performance 
contracting. Besides, a special attention needs to be 
paid 
transportation,  buildings  and 
agriculture sectors given their weight in the national 
emissions and the current trend.  

road 

to 

technologies, 

The  development  of  CCS 
the 
Renewable  Energy  Action  Plan  should  indirectly 
stimulate the green industry sectors in Poland. The 
investment  in  thermo-modernisation  of  buildings 
and the future energy efficiency norms would have 
a  similar  effect.  The  government  will  support 
investments  in  the  field  of  energy  efficiency, 
allocating  PLN  224.7  million  for  this  purpose  in 
2011,  which  should  encourage  industry  to  become 
more energy efficient and stimulate green industries 
further.  The  government  will  also  analyse  the 
industry's needs in terms of raw materials in view to 
increase the efficiency of the use of raw materials. 

4.20.4  The business environment 

Poland  scores  slightly  below  EU  average  in  most 
indicators  related  to  business  environment,  in 
particular  concerning  satisfaction  with  the  quality 
of infrastructure.  

them.  Nonetheless,  yet  again 

Spending  on  a  new  transport  network,  co-financed 
with  the  EU  funds  has  accelerated  in  2010.  Also 
there  are  substantial  modernisation  works  of  local 
road  networks.  The  forthcoming  Euro  2012  gives 
an  additional  stimulus  to  improve  infrastructure  of 
the  hosting  cities  and  of  the  transport  networks 
connecting 
the 
planned  investments  have  been  revised  down  in 
2010 and the availability of funds for new projects 
is  uncertain  taking  into  account  the  need  to 
consolidate  public  finances.  Furthermore,  it  seems 
that 
lack  of  proper  cost-benefit 
prioritisation  of  investments  and  projects  are  run 
based  on  the  possibility  to  spend  European  funds. 
Two  years  after  adoption  of  the  master  plan  for 
railways  in  2008  Poland  prepared  the  necessary 

is  a 

there 

implementation document, which is currently being 
negotiated  with  the  EC.  The  negotiations  will  lead 
to a revision of the plan in mid-2012. This time lag 
in  implementation  results  in  a  slow  modernisation 
and  development  of  railway  transport.  Moreover, 
the spending of cohesion funds is strongly focussed 
on  the  development  of  the  road  networks  rather 
than  railways.  It  is  reinforced  with  recent  requests 
of  the  Polish  government  to  reallocate  some 
initially  planned  for  railway 
structural  funds 
development 
to  road  constructions.  The  new 
integrated  transport  strategy  to  be  adopted  in  2011 
is  expected  to  address  those  issues  and  better 
in  various 
balance  new 
transport modes. 

investments  priorities 

in  gas 

As  far  as  the  gas  market  is  concerned,  the  lack  of 
possibility  of  third  party  access  (TPA)  is  still  an 
outstanding  problem  and  Poland  needs  to  further 
invest 
interconnectors  and  domestic 
transmission  pipelines  in  order  to  successfully 
address  energy  security  and  market  liberalisation 
challenges. The construction of the gas terminal in 
Swinoujscie  is  ongoing,  in  spite  of  controversies 
over 
that  might  be 
blocking the entry to the port for the largest tankers. 
The terminal is to be finished in 2014. 

the  Northstream  pipeline 

in 

of 

power 

development 

Despite  some  progress  made  in  energy  market 
competition  and  energy  infrastructure,  Poland's 
energy market is still rather isolated from the rest of 
the  EU.  The  competition  is  limited  by  slow 
progress 
international 
interconnections  of  the  electricity  grid  and  strong 
presence of the state. Given the high maturity of the 
and 
generation 
existing 
underinvestment  in  distribution  grid,  they  might 
become  soon  a  bottleneck  to  growth  in  Poland. 
Available  projections  of  demand  and  supply  of 
power  indicate  the  need  to  significantly  increase 
import  of  energy  in  Poland  and  to  modernise 
interconnections with neighbouring countries. More 
efforts  may  also  be  needed  to  open  up  the  Polish 
energy  market  to  outside  competition  and  to 
increase the market's flexibility. 

capacity 

Concerning  legal  and  regulatory  framework,  in 
March 2008, Poland adopted a target of reducing by 
25 % the administrative burden on businesses until 
the end of 2011 in seven priory areas: environment, 
land  development  plan,  social  security,  economic 
activity law, hallmarking law, employment law, and 
tourist  services.  In  2008  the  first  phase  was 
accomplished 
information 
obligations  (IO)  in  these  priory  areas.  In  the  same 
year a new project – Package for Entrepreneurship 
–  was  introduced.  On  the  basis  of  these  two 
initiatives, some concrete solutions for reducing the 
administrative  burden  started  being  proposed: 
amendments  in  the  Code  of  Commercial  Law 

i.e.  mapping 

of 

165 

 
for  small 

law  suits;  or 

making  it  cheaper  to  set-up  up  limited  liability 
companies;  changes  in  the  Civil  Code  facilitating 
business transfer to next owners; introduction of e-
judiciary 
increasing 
transparency in the taxation system. Furthermore, a 
major  business  environment  reform  –  the  act  on 
reducing  administrative  burdens  on  entrepreneurs 
and  citizens  –  came  into  force  in  July  2011.  The 
objective  of  the  act  is  to  abolish  licences  and 
permits,  replace  redundant  attestations  issued  by 
public  institutions  with  declarations  of  honour  as 
well as some other changes like: reducing court fees 
related  to  civil  law  cases,  introducing  a  consumer 
an 
a 
leasing, 
entrepreneur  (natural  person)  to  transform  into 
capital  company  or  to  transform  a  cooperative 
society into commercial company. Since the launch 
of  the  Package,  19  major  acts  of  law  have  been 
either  implemented  or  amended  in  favour  of 
businesses,  particularly  SMEs.  Several  other  bill 
projects are still in preparation, notably another act 
on reduction of administrative burdens. 

introducing 

possibility 

for 

Poland  has  also  recently  implemented  e-judiciary 
for  certain 
legal  proceedings.  Still  contract 
enforcement is not very easy due to lengthy judicial 
proceedings  and  legal  enforcements.  Obtaining 
construction  permit  is  another  unfavourable  factor 
for business operation. It is not only a complicated 
and  lengthy process but  also very  costly  compared 
to  other  European  countries.  This  together  with  a 
lack of predictable and binding local zoning plans is 
one of the main challenges to be dealt with. 

on 

The  Regulatory  Reform  plan 
for  2009-2011 
promotes preparation of better Impact Assessments, 
including  impacts  on  SMEs.  The  Ministry  of 
Economy  has  been  providing  training  on  impact 
assessment  preparation  since  December  2009  with 
an intended number of almost 3 000 public officials 
from different ministries to be trained until the end 
of  2011.  Currently,  The  Ministry  of  Economy  is 
working 
e-consultations  which,  when 
implemented  in  2012,  will  strengthen  the  role  of 
public  consultations  in  new  regulations.  A  manual 
for  conducting  such  consultations  was  adopted  in 
July  2009.  The  weak  point  of  the  system  is  that 
there is no single institution which would represent 
in  public  consultations,  such  as  SME 
SMEs 
associations. Despite these systemic improvements, 
so  far  there  are  only  a  few  examples  of  proper 
applications  of  the  impact  assessment  or  public 
consultations.  

eGovernment  usage  by  enterprises  in  2010  was 
above  the  EU  average  and  has  increased  since 
2005.  eGovernment  policy  is  part  of  a  wider 
Information Society Strategy until 2014 (adopted in 
2008)  and 
improving  basic 
focused  on 
infrastructure  across  all  levels  of  government.  The 

is 

technical platform has been already created but the 
local authorities do not have qualified resources or 
strategies to develop e-government services at their 
level. The use of e-signature is mainly restricted to 
the social security declaration.  

4.20.5  Entrepreneurship and SME policy 

Polish  SMEs  wait  shorter  for  a  payment  by  public 
authorities compared to their EU peers. The time to 
start  a  business  should  also  shorten  thanks  to  the 
fact  that  from  July  1st  2011  each  entrepreneur  can 
register  the  business  online  through  the  Central 
Register  and  Information  on  Business  Activity117. 
There  is  a  similar  share  of  SMEs  in  Poland 
compared  to  the  EU.  The  main  difference  consists 
in a higher share of micro enterprises at the expense 
of small ones. It is most likely the artificial effect of 
self-employment visible in the statistics in the form 
of micro enterprises, but could also be the symptom 
of  an  enterprise  growth  problem.  The  structure  of 
Polish  enterprises 
is  dominated  by  micro-
enterprises  (especially  those  with  up  to  2  persons 
employed)  mainly  active  in  trade  and  services. 
Majority  of  SMEs  in  Poland  do  not  have  mid  and 
long  term  development  strategies  or  plans  for 
innovative activities. As a consequence they are not 
eager to use external financial sources. 

The  entrepreneurship  attitude  is  one  of  Poland’s 
main strengths while access to finance is at the EU 
average level. All remaining areas of SME policies 
could be improved. Foremost, the general business 
environment could be made more business friendly. 
The  business  registration  procedures  need  to  be 
made  finally  more  efficient  and  its  costs  reduced. 
The  bankruptcy  procedures  are  still  very  long,  but 
could  be  made  shorter  thanks  to  the  ongoing 
'second  chance'  programme  of  the  Ministries  of 
Economy and of Justice. The innovation capacities 
of  Polish  enterprises  are  also  behind  EU's  average 
and their involvement in the single market as well. 
In  the  latter  domain  the  government  claims  to 
ensure  better  monitoring  of 
law 
applications,  but  will  need  to  redouble  efforts  to 
reduce 
transposition  deficit  of 
internal market directives. 

the  worrisome 

the  EU 

for 

the 

business 
one-stop-shop 
Although 
registration  was  introduced  in  March  2009,  it  has 
not been evaluated positively due to the lack of an 
integrated IT system. Such an integrated IT solution 
was lunched in July 2011 and it enables setting-up a 
company  fully  online  within  24  hours  (zero-stop 
shop).  The  central  commercial  register  created  for 
this  purpose  may  be  expanded  further  with 
increased  functionality  giving  an  opportunity  for 

117  

www.firma.gov.pl 

166 

 
                                                 
and international companies. Yet, the country faces 
many  challenges  and  could  fare  better  with 
improved policies.  

Despite government's efforts to solve some of these 
issues,  entrepreneurs  keep  on  complaining  about 
persistent  administrative  burden  and  an  inefficient 
administration apparatus. The general improvement 
of business environment requires more efficient and 
stable  governance.  This  implies  simpler  and  more 
transparent 
improved 
efficiency  of  public  administration  and  of  the 
judiciary  as  well  as  enhanced  e-government 
services. 

regulations, 

steadily 

the 

transport 
Furthermore, 
underdeveloped 
infrastructure  does  not  match 
raising 
transportation  needs  of  the  expanding  economy. 
Similarly  the  energy  infrastructure  is  not  adequate 
to  facilitate  competition  or  to  assure  stable  and 
secure  electricity  provision.  The  latter  will  need  to 
be  upgraded  especially  to  meet  the  environmental 
challenges  and  to  replace  the  obsolete  generation 
capacities  without  increasing  the  prices  of  energy 
excessively.  

longer 

to  make 

Finally,  the  low  level  of  innovation  becomes  an 
increasingly 
the 
important  challenge 
growth  of  the  Polish  economy  more  sustainable  in 
the 
term.  Adopting  and  creating  new 
technologies  and  social  innovations  would  help 
Poland to keep its economic activity up and to cope 
with external competition. To achieve this, industry 
needs 
long-term 
development  strategies  and  invest  more  in  human 
capital  development,  innovation  and  R&D,  and 
SMEs  need  more  organisational  skills  to  develop 
business in a fast changing environment. Incentives 
to  develop  growth  poles  and  measures  to  link 
universities  with  industry  more  effectively  would 
also help. 

to  prepare  and 

implement 

further  efficiencies  in  the  functioning  of  public 
administration. 

The  Polish  Agency  for  Enterprise  Development 
(PAED)  implements  at  full  scale  the  project  of  its 
network of SME information and advisory centres. 
More  than  100  of  these  centres  located  across 
Poland  not  only  provide  information,  signpost  to 
other more targeted information providers, but also 
offer tailored advisory services to entrepreneurs and 
start-ups. 

innovation 

in  Polish  SMEs 

To  stimulate 
the 
government  has  simplified  access  to  the  so  called 
'technology  credit'.  It  could  be  a  positive  factor 
encouraging catch-up innovation, but its effects will 
need  to  be  monitored.  In  particular,  innovation  in 
SMEs  needs 
to  be  effectively  supported  by 
measures improving the innovation environment.  

SMEs  in  Poland  do  not  have  yet  access  to  public 
procurement  equal  to  EU  average.  For  this  reason, 
to  facilitate  SME  access  to  public  procurement, 
legislative  changes  were  made, 
the  Public 
Procurement Office introduced further IT solutions 
and also launched a training programme for SMEs. 
The  government  took  some  limited  measures  to 
improve  access  to  finance:  one  of  the  available 
sources  in  this  respect  is  ERDF  acting  through  the 
financial  engineering  instruments,  the  JEREMIE 
programme in particular. In principle, these lending 
operations  should  be  directed  to  support  more 
innovative investments. Further measures might be 
necessary  to  ease  access  to  capital  given  a  more 
restrictive attitude of banks towards lending.  

4.20.6  Conclusion 

The  Polish  economy  withstood  well  the  crisis  and 
continues to grow. Poland benefits from its position 
as a manufacturing hub for Europe and increasingly 
as  a  business  service  provider  for  many  European 

167 

 
 
4.21  Portugal 

Portugal

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2008)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

168 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Portugal (2005) 

Wood and wood products

Textiles and textile products

Leather and leather products

Paper products; publishing and printing

Refined petroleum products

Chemicals, chemical products

Rubber and plastic products

Other non-metallic mineral products

Food products

Manufacturing n.e.c.

Transport equipment

Electrical and optical equipment

Basic metals and fabricated metal products

Machinery and equipment n.e.c.

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.21.1 

Introduction 

Trade and industry specialisation 

Most prominent sectors in Portugal 

(cement, 

Manufacturing plays a similar role in Portugal than 
in  the  EU  as  a  whole  (14.6 %  against  14.9 %).  At 
the  detailed  manufacturing  industry  level,  Portugal 
is  highly  specialised  in  labour-intensive  (low-skill) 
industries (wood and cork, cutting and finishing of 
stone, made-up textile articles) as well as in capital-
intensive 
and 
marketing-driven industries (footwear). At the more 
aggregated 
features 
specialisation  in  low  and  medium-low  innovation 
and  education  sectors  (wood  and  cork,  leather, 
wearing  apparel).  Its  share  of  exports  to  the  BRIC 
countries  is  low,  thus  not  taking  full  advantage  of 
the  opportunities  offered  by  these  high-growth 
emerging economies. 

level,  Portugal 

petroleum) 

refined 

sector 

Portugal’s R&D intensity is slightly below average 
given its industry structure, while its position on the 
quality  ladder  is  clearly  below  the  EU  average. 
While Portugal is very similar to its group of higher 
income  countries  specialised  in  labour-intensive 
countries  in  terms  of  specialisation,  in  terms  of 
sectoral upgrading it shows better R&D, but worse 
quality performance. 

Highest relative value added (2007)
Leather, leather and footwear
Wearing apparel, dressing and dyeing of fur
Textiles and textile products

Change in the relative value added (1999/2007)
Increasing specialisation
Tobacco products
Air transport
Recycling
Decreasing specialisation
Hotels and restaurants
Wearing apparel, dressing and dyeing of fur
Non-metallic mineral products

Structural change 

In  terms  of  change,  Portugal  has  decreased  its 
specialisation  in  labour-intensive  (textile  weaving, 
other  wearing  apparel  and  accessories)  and 
industries  (electronic  valves, 
technology-driven 
electrical  equipment),  but  increased  specialisation 
in  capital-intensive  (cement,  articles  of  concrete 
and  cement,  refined  petroleum)  and  marketing-
driven  industries  (luggage  and  handbags).  At  the 
sector  level,  the  relative  share  of  high  education 
sectors  has  increased  (computers,  research  and 
development,  software,  business  services),  while 
developments in high innovation sectors have been 
split  between  trade  (decreasing)  and  value-added 
(increasing).  The  specialisation  in  low  innovation 
and  education  sectors  is  unequivocally  decreasing 

169 

 
 
 
 
 
 
(e.g.  apparel,  hotels  and  restaurants).  Portugal  has 
substantially  improved  its  R&D  intensity,  taking 
into account its industrial structure, and moved into 
higher-quality 
industries. 
However,  the  share  of  low  quality  segments  has 
also been rising. 

segments 

across 

Manufacturing  production  fell  by  more  than  20% 
during  the  crisis  and  has  recovered  only  modestly 
(by  2.7 %)  since  then.  The  impact  of  the  crisis  on 
Portugal’s  economic  structure  was  limited,  with 
only  technology-driven  industries  declining  even 
faster than before the crisis. 

Portugal has experienced an appreciation of the real 
effective  exchange  rate  by  15%  over  the  last 
decade,  which  is  below  the  EU27  average  (21%), 
indicating  nevertheless  a  loss  in  cost  and  price 
competitiveness.  Nominal  unit  labour  costs  have 
increased  by  25%  between  2000  and  2010, 
compared  to  an  increase  of  14%  in  the  EU27  and 
20% in the Euro area. While labour productivity per 
hour  worked  has  gradually  increased  over  the  last 
years,  it  is  still  about  35  percentage  points  below 
the  EU27  average  and  about  49  percentage  points 
below the Euro area average. 

areas 

Overall, Portugal faces an unfavourable competitive 
position, while the pattern of change is mixed, with 
some 
(knowledge-intensive 
services,  R&D,  high-quality  segments)  but  others 
deteriorating  (knowledge-intensive  manufacturing, 
low quality segments). 

improving 

The  vulnerability  of  the  Portuguese  economy, 
exacerbated  by  the  economic  and  financial  crisis, 
rendered  sustainable  refinancing  difficult  and  led 
Portugal  to  request  financial  assistance  on  7  April 
2011. Financial assistance to Portugal (from EFSM, 
EFSF  and  IMF)  was  approved  by  the  ECOFIN 
council on 17 May 2011 (on the basis of an agreed 
Memorandum  of  Understanding  on 
specific 
Economic  Policy  Conditionality  -  hereafter  MoU  - 
programme).  The  MoU  includes  significant  fiscal 
consolidation  measures,  efforts  to  safeguard  the 
financial  sector  and  ensure  a  smooth  deleveraging 
process and a set of comprehensive and frontloaded 
structural  reforms  aimed  i.a.  at  unlocking  growth 
potential and creating more jobs and the conditions 
for  future  productivity  growth.  In  particular, 
Portugal needs to create more favourable conditions 
for investment, innovation and entrepreneurship, to 
improve  its  overall  business  environment,  foster 
competition,  economic  flexibility  and  speed  up 
adjustment to structural change.  

4.21.2  Towards an innovative industry 

Portugal continued improving its overall innovation 
performance  and  is  now  leading  the  group  of 

170 

moderate  innovators  identified  in  the  Innovation 
Union Scoreboard 2010. Its relative weaknesses are 
in  a  low  business  R&D  investment  and  low  high-
tech-exports.  On  the  other  hand,  its  strength  is  a 
relatively  high  share  of  science  and  technology 
graduates. R&D expenditure reached 1.71 % of the 
GDP in 2009 (close to 1/2 in the private sector). 

Portugal  made  a  considerable  effort  and  adopted  a 
wide set of public policy measures promoting R&D 
and  innovation  in  the  recent  years.  Important 
structural  measures  included  the  Technological 
Plan,  a  sustained  favourable  tax  credit  framework 
for  R&D  expenses  (SIFIDE  is  one  the  most 
competitive  tax  credit  system  for  R&D  in  the 
EU27)  and  series  of  programmes  and  incentives, 
largely supported by EU funds, targeted at backing 
innovation and R&D investment by SMEs and their 
cooperation with research institutes and universities 
(e.g.  through  R&D  and  innovation  vouchers)  and 
public policy measures aiming at the promotion and 
development  of  clusters  and 
technology  and 
implementation  of 
competitiveness  poles)  or 
technology clusters. 

recently  adopted 

Measures 
included  granting 
additional  tax  advantages  (through  SIFIDE)  for 
expenditures  incurred  by  SMEs  in  contracting 
Doctorates,  or  the  "Zero  rate  for  innovation" 
programme, exempting innovative SMEs and start-
ups from paying public services charges and fees. 

Portugal  has  also  started  preparatory  works  and 
public  consultations  for  a  comprehensive  strategic 
initiative  on  Entrepreneurship  and  Innovation, 
aiming  the  improvement  of  business  environment, 
the  reinforcement  of  linkages  between  science  and 
industry, the creation of better conditions to attract 
venture capital investments and the development of 
an  entrepreneurial  and  innovation  culture  in  our 
society.  

In  line  with  the  EU2020  Strategy,  Portugal  has 
launched  the  Digital  Agenda  2015  in  order  to 
provide further impetus to the development of firms 
and  high  value  added  ICT  products  and  services 
applied to different domains and economic sectors. 
The  Digital  Agenda  2015  is  now  being  reinforced 
having  in  consideration  the  priorities  of  the  new 
strategic 
and 
Innovation.  

initiative  on  Entrepreneurship 

possible 

The  challenges  ahead  include  maintaining,  to  the 
extent 
demanding 
(giving 
macroeconomic adjustments ahead), the efforts and 
investments  in  R&D  and  innovation,  and  at  the 
same  continue 
the  efficiency  and 
visibility  of  outputs  and  economic  effects  of 

improving 

the 

 
 
innovation.  Continuing  the  efforts  in  reducing 
administrative  burden,  improving  the  efficiency  of 
public  services  and  promoting  adequate  access  to 
finance  -  including  effectively  reinforcing  the 
mechanisms  of  public  and  private  risk  capital  and 
the  attraction  of  international  venture  capital  -  are 
crucial  framework  conditions  to  attract  and  foster 
investments with high innovation potential. 

4.21.3  Towards a sustainable industry 

Portugal  has  adopted  a  series  of  comprehensive 
programmes  and  important  initiatives  promoting 
sustainable  growth,  renewable  energies  and  some 
eco-industries.  Further  to  the  National  Strategy  for 
Energy  2020  presented  in  April  2010,  Portugal 
adopted  in  July  2010  the  National  Action  Plan  for 
renewable  energy  (PNAER  2020).  The  PNAER 
aims at achieving an ambitious quota target of 31% 
of  gross  final  energy  consumption  and  60%  of 
electricity  production  from  renewable  sources  by 
2020 and sets out detailed targets and development 
plans  and  actions  per  different  types  of  renewable 
energy  (Hydro,  Wind,  Solar,  Biogas  and  Waste, 
Biofuels,  Geothermal,  etc.).  Portugal  introduced 
significant  incentives,  made  large  investments  and 
the 
is  one  of 
development  of  renewable  energies  (e.g.  in  2010, 
52 %  of  the  gross  electricity  consumption  was 
sourced  from  renewables).  An  example  of  the 
the  MOBI.E 
promotion  of  eco-industries 
the 
programme  (including 
acquisition  of 
the 
development  of  a  pilot  infrastructure  that  in  June 
2011  had  1 300  charging  points  -50  of  which  for 
quick  charging-  covering  25  municipalities)  as  a 
basis for the development of sustainable mobility in 
Portugal. 

incentives  for 
and 

leading  EU  countries 

electrical  vehicles 

the 

tax 

in 

is 

i) 

energy 

include: 

The  National  Strategy  for  Energy  2020  sets  out  a 
20 %  target  for  energy  efficiency  gain  by  2020 
(superseding  the  -2008-2015-  10%  reduction  in 
energy consumption target foreseen in the National 
Action  Plan  for  Energy  Efficiency  adopted  in 
2008).  Some  of  the  specific  measures  adopted  to 
improve 
a 
efficiency 
management system for energy intensive firms, put 
in  place  in  2008,  covers  now  850  industrial 
installations  (representing  around  ¼  of  the  energy 
industry  and  construction). 
consumption  by 
Installations 
energy 
rationalisation 
setting  out 
minimum  energy  efficiency  thresholds),  are  object 
of  regular  energy  audits  and  benefit  from  some 
financial 
related 
for 
investments  and  expenditures;  ii)  Set  up  of  the 
Energy  Efficiency  Fund 
in  May  2010  (and 
definition of eligibility conditions in January 2011) 
aimed  at  supporting  investments  and  equipment 
efficiency  by 
acquisition 

and 
(including 

submit 
plans 

their  energy 

improving 

incentives 

discuss 

energy 

companies and households. iii) The Energy Agency 
performs audits to houses and buildings resulting in 
417 000  energy  certifications  up  to  May  2011;  iv) 
promotion  of  smart  electricity  grids  and  launch  of 
pilot  experiences  in  some  cities;  v)  some  thematic 
information 
energy  efficiency  awareness  and 
campaigns e.g. in transport, housing, work, etc. 

ecological 

The  Ecological  Public  Procurement  intends  to 
public 
incorporate 
procurement, 
and 
environmental 
sustainability, giving priority to climate change and 
the problem of CO2 emissions. 

in 
policy 

criteria 

Energy  efficiency, 
the  coherence  and  cost-
efficiency of energy related incentives adopted and 
their effect on competitiveness, in particular for the 
industry,  continues  to  be  an  issue.  Portugal  will 
instruments, 
review 
including taxation and energy incentives, introduce 
modifications to ensure that they provide incentives 
for  rational  use,  energy  savings  and  emissions 
reduction (MoU paragraphs 5.13-5.14). 

existing 

related 

energy 

4.21.4  The business environment 

Portugal scores significantly above the EU average 
in the availability of high-speed broadband lines but 
below the average in other indicators related to the 
business  environment  such  as 
legal  and 
regulatory framework. 

the 

Portugal has made e-Procurement mandatory for all 
contracting  authorities  and  virtually  all  purchases 
(small  value  contracts  may  still  be  conducted  on 
paper)  since  1  November  2009.  According  to  the 
latest  figures,  75%  of  public  procurement  was 
carried out electronically in 2010. 

improving 

The continued implementation of programmes such 
the  "Simplex",  "Legislar  Melhor"  and  e-
as 
Government 
reduced 
initiatives  has  overall 
administrative  burden  with  positive  effects  on 
business conditions. Recent measures include a new 
("Simplegis")  programme  adopted  in  2010,  aimed 
at  simplifying  and 
the  quality  of 
legislation,  facilitate  citizens  and  firms  access  to 
legislation  (e.g.  by  publishing  online  summaries  in 
plain  language  of  legislative  acts),  and  improving 
enforcement.  An  ex-ante  impact  assessment  for  all 
government legislative acts was introduced as from 
January  2011.  An  "SME  test"  (for  evaluating  the 
effects of new legislation on the competitiveness of 
SMEs, the large majority of companies in Portugal) 
is not included in the impact assessment. Examples 
of  other  positive 
initiatives  recently  adopted 
include:  the  "Zero  Licensing"  programme  that  is 
now being tested and will be fully implemented in 
electronic 
2012 
licences, 
registration 

simplified 
eliminating 

(introducing 

process, 

a 

171 

 
threshold 

(EUR 10 million 

authorisations and other similar administrative acts 
for  setting-up  and  running  business  activities  such 
as  shops,  restaurants,  bars);  simplifications  and  a 
lower 
instead  of 
EUR 25 million)  for  projects  to  be  granted  PIN 
("Projectos  de  Interesse  Nacional")  programme 
treatment 
approval  procedures). 
Examples  of  announced  forthcoming  initiatives 
include  the  "Simplex  Exports"  programme  (aimed 
at  reducing  administrative  burden  for  exporting 
companies) are also welcome.  

(streamlined 

Actions  are  being  developed  and  reinforced  in 
certain  areas,  such  as  dealing  with  construction 
permits,  taxation  complexity  and  compliance  costs 
for firms, the full implementation of simplification 
programme 
("Simplex 
for  Municipalities 
Autárquico"), or the simplification of procedures to 
attract  national  and  foreign  investment.  Other  key 
areas  include  (as  indicated  in  the  MoU)  improving 
the efficiency of public services, particularly in the 
judicial 
the  application  of 
in 
rules,  promote  competition  and 
competition 
flexibility  overall  and  in  particular  in  the  energy 
and  transport  sectors,  other  network  industries, 
services and housing markets, broadening the scope 
of the "Zero Licensing" programme.  

system  and 

4.21.5  Entrepreneurship and SME policy 

The  SME  sector  in  Portugal  is  relatively  more 
important  than  in  the  EU  as  a  whole  and  is 
dominated by micro firms (accounting for 40 % of 
total employment compared to the 30 % in the EU). 
Portugal  performs  significantly  better  than  the  EU 
average  concerning  the  time  required  to  start  a 
business  and  the  business  churn  but  significantly 
worse  concerning  the  firm  survival  after  two  years 
and duration of payments by public authorities. 

Portugal adopted during the crisis a set of important 
measures  easing  access  to  finance  to  SMES  (the 
large  majority  of  Portuguese  firms  and  highly 
dependent  on  bank  credit  for  funding).  Supported 
by  Structural  Funds'  contributions,  the  series  of 
credit  lines  "PME  Investe"  and  "QREN  Investe", 
targeted  to  specific  sectors  or  exporting  SMEs 
provided a total volume of credit of EUR 7.9 billion 
to 55 000 SMEs (including micro-sized companies) 
since July 2008 (total capacity of these credit lines 
EUR 9.7 billion). Other significant measures easing 
liquidity  and  financing  constraints  for  SMEs 
included:  reinforcement  of  the  National  Mutual 
Guarantee  System  (with  total  of  EUR 5.7 billion 
outstanding  guarantees  in  2010,  +  48 %  compared 
to  2009)  and  credit  export  insurance  lines;  some 
progress in the reduction of late payments by public 
entities  (although  recently  there  was  again  a 
deterioration, particularly in some health care areas 
and  in  municipalities)  and,  as  from  1st  September 

2010,  mandatory  payment  of  interest  by  the  state 
and  other  public  entities  (including  municipalities) 
in case of late payments; program of annual ("SME 
leader"  and  "SME  Excellence")  awards  granted  to 
best  economic  and  financial  SME  performers, 
improving  financing  conditions  for  these  SMEs; 
some  efforts  have  been  made  in  the  promotion  of 
venture capital funds, and including Business Angel 
initiatives;  introduction  of  a  number  of  fiscal 
the 
simplifications 
recapitalisation 
programmes 
supporting  reorganisation,  concentration  or  the 
transfer  of  the  ownership  of  SMEs  (including 
management  buy-outs  or  real  state  sale  and  lease 
back operations). 

and 
of  SMEs 

incentives 
and 

for 

In this context, several measures were implemented 
specifically  aimed  at  promoting  exports  and  the 
the 
internationalisation  of  SMEs, 
as 
such 
programme  “Internationalisation 
for  Growth”, 
(“Internacionalizar  para  Crescer”)  by  AICEP 
Portuguese Foreign Investment Agency. 

to  effectively  further  develop 
Portugal  needs 
alternative (equity related) funding mechanisms for 
SMEs,  taking  into  account  the  current  budgetary 
constraints.  At  the  same  time,  it  needs  to  monitor 
indebtedness, secure (re)financing in the short term 
to  economically  viable  SMEs,  particularly  young 
and  more  vulnerable  SMEs  highly  dependent  on 
banking  loans,  promote  liquidity  conditions  for 
business  by  timely  implementing  the  New  Late 
Payments Directive (as indicated in the MoU). 

for 

the 

those 

direct 

promotion 

Portugal has a structural weakness in the quality of 
entrepreneurship  and  some  measures  have  been 
of 
adopted 
entrepreneurship  skills:  a  training  program  for 
managers of micro and SMEs, aimed at improving 
their managerial skills; the Institute of Employment 
and Vocational Training runs a programme actively 
supporting  entrepreneurship  and  self-employment, 
including  by 
receiving  unemployment 
benefits;  the  EU  structural  funds  through  some 
programmes  within  the  QREN  are  also  being  used 
to  actively  support  entrepreneurship,  including 
female  entrepreneurship, 
training  and 
coaching measures oriented for SME managers and 
its  human 
for 
Entrepreneurship  Education  entrepreneurship  was 
introduced in the curriculum tested in of around 130 
secondary  schools  between  2006  and  2009  is  this 
project  is  currently  being  evaluated,  aiming  at  the 
development of integrated measures to stimulate an 
entrepreneurial culture in schools.  

resources;  a  National  Plan 

through 

Further  proactive  promotion  of  entrepreneurship  is 
required  and  it  is  one  of  the  concerns  for  the  next 
initiative  on 
the  new  strategic 
months  under 
Entrepreneurship  and  Innovation. Possible  areas  of 
the  existing 
action 

include:  exploiting  further 

172 

 
knowledge, experiences and good-practices (e.g. in 
its  Research  and  University  system  and  other 
initiatives  from  the  civil  society  such  as  awards 
granted  to  the  Portuguese  Diaspora  by  Cotec); 
promoting  second  chance  and  a  wider  range  of 
the 
in 
restructuring  options 
insolvency law (foreseen in the MoU). 

revision  of 

the 

securing access to finance under regular conditions 
to  economically  viable  SMEs,  particularly  young 
SMEs  and  start-ups,  and  effectively  develop 
alternative funding and recapitalisation mechanisms 
for  SMEs,  including  venture  capital  and  business 
angels.  

industries, 

The  full  implementation  of  the  set  of  structural 
measures  included  in  the  MoU  (such  as  fostering 
competition,  particularly  in  the  services  sector  and 
further 
network 
administrative 
simplification,  burden 
reduction  and  greater 
efficiency of public services, notably in the judicial 
conditions, 
system)  will 
contributing  to  unlocking  growth  potential  the 
jobs.
creation 

business 

improve 

more 

of 

4.21.6  Conclusion 

to  promote 

Portugal  would  benefit  from  maintained  and 
reinforced  efforts 
research  and 
innovation,  from  an  integrated  policy  to  boost 
entrepreneurship  and  overall  skills  development. 
Further,  it  could  continue  to  support  a  gradual 
transition  to  a  sustainable,  low  carbon,  energy  and 
resource  efficient  economy.  Equally  important  is 

173 

 
 
4.22  Romania 

Romania

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2008)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

N.A.

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

174 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Romania (2008) 

Leather and leather products

Textiles and textile products

Wood and wood products

Food products

Paper products; publishing and printing

Refined petroleum products

Chemicals, chemical products

Rubber and plastic products

Other non-metallic mineral products

Manufacturing n.e.c.

Transport equipment

Basic metals and fabricated metal products

Machinery and equipment n.e.c.

Electrical and optical equipment

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.22.1 

Introduction 

Trade and industry specialisation 

Most prominent sectors in Romania 

services.  At 

Manufacturing plays a bigger role in Romania than 
in  the  EU  on  average  (22.4 %  vs.  14.9 %  of  total 
value  added).  As  a  consequence,  Romania  ranks 
among  the  EU  Member  States  with  the  highest 
share  of  manufacturing  in  GDP  and  the  lowest 
the  detailed 
share  of  market 
manufacturing  industry  level,  Romania  is  highly 
industries 
specialised 
in 
(preparation  and 
fibres, 
sawmilling,  wearing  apparel  and  accessories),  as 
well as in capital-intensive industries (cement), and 
marketing-driven 
only; 
footwear).  At  the  more  aggregated  sector  level, 
Romania  features  specialisation  in  low  innovation 
and  education  sectors  (wearing  apparel,  leather), 
but  also 
innovation  sectors 
(textiles, basic metals). 

labour-intensive 
spinning  of 

in  medium-high 

(value-added 

textile 

ones 

In  line  with  its  group  of  lower  income  countries 
specialised in labour-intensive industries (group 4), 
Romania’s R&D intensity considering its industrial 
structure  is  below  average  and  its  position  on  the 
quality ladder is far below the EU average.  

175 

Highest relative value added (2007)
Wearing apparel, dressing and dyeing of fur
Leather, leather and footwear
Water supply

Change in the relative value added (1999/2007)
Increasing specialisation
Sale, maintenance and repair of motor vehicles and motorcycles; 
retail sale of fuel
Computer and related activities
Real estate activities
Decreasing specialisation
Wearing Apparel, Dressing And Dying Of Fur
Water supply
Tobacco products

Structural change 

In  terms  of  change,  Romania  is  again  very  similar 
to group 4, with strongly increased relative share of 
technology-driven 
(radio  and  TV 
industries 
transmitters  and  receivers)  and  of  mainstream 
manufacturing  (motorcycles  and  bicycles,  isolated 
wire  and  cables),  as  well  as  of  high-education  and 
innovation-intensive 
(communication 
equipment, software), and decreasing specialisation 
in 
industries  (leather  clothes, 
dressing and dyeing of fur, cutting and finishing of 

labour-intensive 

sectors 

 
 
 
 
 
 
labour-intensive 

industries,  but  not 

stone)  and  low  innovation  and  education  sectors 
(apparel).  Romania  has  climbed  the  quality  ladder 
in 
in 
technology-driven ones. Its  sectoral  R&D  intensity 
is declining relative to the EU, probably partly as a 
result  of  the  pronounced  change  in  specialisation 
patterns  towards  the  parts  of  the  value  chain  in 
knowledge-intensive 
industries  which  are  not 
knowledge-creating. 

impact  of 

The 
the  crisis  on  manufacturing 
production was moderate (around -13 %). By April 
2011  it  had  reached  its  previous  cyclical  peak.  In 
Romania,  the  crisis  seems  to  have  accelerated 
structural 
technology-driven 
towards 
industries  at 
the  expense  of  capital-intensive 
industries. 

change 

Romania  has  experienced  a  strong  appreciation  of 
the real effective exchange rate over the last decade 
(80%, compared to 21% in the EU27), indicating a 
loss  in  cost  and  price  competitiveness.  Here,  the 
significant  increase  in  nominal  unit  labour  costs 
(326%) between 2000 and 2010 coupled with high 
inflation  played  an  important  role.  While  labour 
productivity  per  hour  worked  has  gradually 
increased  over  the  last  years,  it  is  still  about  58 
percentage points below the EU27 average. 

Overall,  Romania  is  clearly  catching  up  with 
respect to competitiveness as evidenced by quickly 
changing  structures,  but  needs  to  pay  attention  to 
sectoral upgrading in terms of quality and R&D. 

4.22.2  Towards an innovative industry 

Romania 
innovator 
is  classified  as  a  modest 
according  to  the  Innovation  Union  Scoreboard 
2010,  with  a  performance  well  below  the  EU 
average,  partly  due  to  a  relatively  low  share  of 
innovating 
business 
investments  in  R&D.  Still,  its  growth  rate  makes 
Romania one of the growth leaders in the 'catching–
up' group of countries. 

enterprises 

low 

and 

is  characterised  by 

Romania's  economy 
the 
prevalence of low- and medium-technology sectors, 
with  low  demand  for  knowledge  and  with  an 
underdeveloped innovation culture. The innovation 
infrastructure  and  mechanisms  are  still  at  an  early 
stage  of  development.  This  situation  is  due  to  a 
large  extent  to  chronically  low  public  and  private 
R&D  and  innovation  expenditures  (the  latter  may 
be somewhat underestimated since enterprises face 
few 
such  expenditures 
report 
correctly).  Low  levels  of  business  R&D  and 
innovation both in large firms and SMEs, are rooted 
in  several  structural  and  managerial 
in 
deficiencies, such as the reluctance of firms to take 
on  financial  and  commercial  risks  arising  from 

incentives 

turn, 

to 

R&D  and  innovation,  poor  financial  services  and 
instruments to mitigate risks, little awareness of the 
funding opportunities for innovative enterprises that 
have  recently  become  available,  the  excessive 
reliance on government funds, and the low share of 
funding attracted from EU funds and other sources.  

indirect 

includes  direct 

instruments,  such  as 

The current set of innovation policy instruments in 
Romania 
instruments,  which 
continue  to  be  the  dominant  funding  mechanism, 
and  a  few 
tax 
incentives, which are still largely insufficient. There 
are  three  main  instruments:  (1)  the  National  Plan 
for  RDI  2007-2013,  which  is  oriented  towards 
enterprises  with  a  view  to  support  innovation, 
technological  development  and  implementation  of 
research  results  in  industry,  (2)  tax  allowances  of 
up  to  120 %  of  R&D  and  innovation  investment 
(through  an  increase  of  the  deductibility  of  R&D 
and  innovation  expenditure  from  100 %  to  120 %) 
and  (3)  accelerated  depreciation  on  machinery  and 
equipment  used  for  R&D  and  innovation  activities 
since  January  2009.  Moreover,  the  OP  Increase  of 
Economic  Competitiveness  provides  support  for 
several R&D and innovation activities with the aim 
of  increasing  the  R&D  capacity,  stimulating  the 
innovation 
cooperation  between  R&D 
institutions  and  enterprises,  and  increasing  the 
enterprises'  access  to  R&D  and  innovation.  In 
addition,  the  adoption  at  the  end  of  2010  of  the 
Public-Private  Partnership  Law  created  the  legal 
basis in order to foster investments, including those 
in R&D. 

and 

Given the reduction of public R&D and innovation 
spending  in  2009  (50 %  less  than  foreseen  in  the 
multiannual  planning  and  25 %  less  than  in  2008) 
and with no significant changes thereafter, there are 
concerns about how to ensure adequate funding for 
ongoing research programmes and projects. In light 
of  this,  the  Romanian  government  adopted in  May 
2010,  in  line  with  the  conditionalities  attached  to 
the  Memorandum  of  Understanding  (MoU)  of  the 
EU  financial  assistance  to  Romania  concluded  in 
June  2009  in  the  framework  of  the  EU-IMF 
adjustment programme, a plan setting out a number 
of  measures  with  a  view  to  improve  the  efficiency 
and  effectiveness  of  R&D  and  innovation.  These 
measures aim at facilitating the adjustment to more 
limited 
the 
consistency  of  R&D  and  innovation  policies  and 
programmes, stimulating private sector activities, as 
well  as  establishing  and  implementing  uniform 
procedures  for  monitoring  and  evaluation  of  R&D 
and innovation activities. 

resources, 

financial 

ensuring 

The  challenge  remains  to  increase  the  innovative 
potential of enterprises, particularly SMEs. Another 
major  challenge  is  to  improve  technology  transfer 
and  the  business  support  infrastructure  (business 

176 

 
incubators, technology transfer offices, science and 
technology  parks  and  clusters)  which 
is  still 
underdeveloped  and  poorly  functional,  in  spite  of 
recent  significant  improvements.  In  this  respect, 
there  are  bottlenecks  in  the  absorption  of  foreign 
technology  as  well  as  challenges  to  reduce  high 
innovation  costs,  particularly  for  SMEs,  which 
could  be  addressed  through  appropriate  assistance 
programmes, 
information 
the  availability  of 
regarding  technology,  and  facilitating  access  to 
financing instruments. 

Moreover,  partnerships  among  industry,  university 
and R&D institutions could be improved and public 
funding  could  be  used  more  to  leverage  private 
sector 
links  between 
business  and  research  institutes  and  better  adjust 
research to market needs.  

investments,  strengthen 

A  cross-cutting  challenge  is  the  shortage  of  a 
medium  and  highly  skilled  labour  force.  The  high 
share  of  science  and  technology  graduates  and  the 
quality  of  math  and  science  education  are  not 
converted  into  competitive  advantages,  partly  due 
to  the  higher-education  system  suffering  from 
repeated institutional changes, and substantial brain 
drain.  In  this  respect,  a  new  National  Education 
Law  was  adopted  at  the  end  of  2010  in  order  to 
substantially reform the education system. 

4.22.3  Towards a sustainable industry 

The  sluggish  restructuring  of  the  industrial  base 
which,  prior  to  1989,  was characterised by  a  high-
share  of  energy-intensive  and  non-sustainable 
industries  and  a  poor  energy-saving  culture,  has 
resulted  in out  of  date  technologies  and  equipment 
which  does  not  meet  contemporary  environmental 
standards.  In  addition,  foreign  direct  investment  in 
industries  has  shown  a  clear 
manufacturing 
preference for low-technology and energy-intensive 
sectors.  As  a  consequence,  the  environmental 
performance  of  the  Romanian  industry  remains 
relatively 
considerably 
improvements  can  be  noted,  energy-intensity  in 
industry is still the third highest in the EU while the 
amount  of  waste  per  inhabitant  generated  by 
enterprises  is  almost  twice  the  EU  average.  At  the 
same  time,  exports  of  environmental  goods  score 
well below the EU average. 

Although 

poor. 

a 

total 

budget 

The  main  funding  instrument  for  environmental 
policy  is  the  Operational  Programme  Environment 
with 
of  EUR 5.6 billion 
(EUR 4.5 billion  EU  contribution  and  around 
EUR 1.1 billion  national  public  participation)  over 
the period 2007-2013. The Operational Programme 
Increase  of  Economic  Competitiveness  provides 
also  funding  for  the  development  of  eco-efficient 
production, for increasing energy efficiency and for 

promoting  renewable  energy  sources.  Major  recent 
initiatives  with  direct  relevance  to  industry  are  the 
state  aid  scheme  for  promoting  the  upgrading  of 
existing and the construction of new electricity and 
heat generating capacity, and the Rabla programme 
for stimulating the renewal of the car fleet. 

institutional 

On  an 
level,  main  developments 
include  the  government  decision  to  implement  the 
various  Regulations  and  Directives  on  eco-design 
requirements for the energy performance of energy-
using products as well as setting up the basis of the 
2010-2013  roadmap  for  the  implementation  of  the 
Romanian Environmental Technologies Action Plan 
(ETAP  Romania).  The  National  Action  Plan  on 
Green Public Procurement (GPP) which sets multi-
annual  green  procurement  targets  for  different 
categories of products and services will be finalised 
by  the  end  of  2011.  Targets  are  currently  being 
discussed but no specific measures have been taken. 
Finally,  an  inter-ministerial  working  group  was 
established  in  April  2010  in  order  to  develop  the 
Romanian  strategy  on  electric  cars,  but  again  no 
action has been taken so far. 

radically 

As  one  of  the  most  energy-intensive  economies  in 
Europe,  improving  energy  efficiency  should  be  a 
key priority in Romania. Whilst some measures are 
already  foreseen  in  the  context  of  the  Operational 
Program Increase of Economic Competitiveness, an 
ambitious and integrated strategy is now required to 
the  energy  efficiency  of 
improve 
production  in  order  to  reduce  energy  dependency, 
curb CO2 emissions and reduce costs for end-users. 
environmental 
Moreover, 
industrial 
for 
standards,  which 
competitiveness,  will  require  significant  financial 
the  adoption  of  standards, 
efforts 
implement 
upgrade  productive  processes,  and 
eco-efficient 
environmentally 
technologies.  Given  scarce  financial  resources, 
further efforts should therefore be made to increase 
the use of EU Structural Funds. 

complying  with 
is  essential 

to  support 

friendly, 

4.22.4  The business environment 

environment 

in  Romania 

The  business 
is 
characterised  by  weak  administrative  capacity  at 
both  central  and  local  level.  Insufficient  structural 
and 
in  a 
institutional  reforms  have  resulted 
cumbersome  regulatory  environment,  characterised 
by  a  lack  of  transparency  in  decision-making 
processes  and  significant  red  tape  in  all  sectors  of 
the  public  administration.  The  high  number  of 
authorisations and permits combined with delays in 
obtaining  them,  as  well  as  the  world’s  second 
highest  number  of 
(113)  are 
responsible  for  the  weak  position  of  Romania  in 
various 
the 
underdeveloped road and rail infrastructure is also a 

rankings.  Moreover, 

tax  payments 

international 

177 

 
drag on economic competitiveness. 

in  order 

crisis.  Furthermore, 

In accordance with the requirements set through the  
MoU of June 2009the Law on the reorganisation of 
public  authorities  and  institutions,  streamlining 
the  business 
public  spending  and  supporting 
environment  adopted  in  2009,  and  the  Laws  on 
salaries  of  the  civil  servants  adopted  in  2009  and 
2010 include several measures to reduce budgetary 
expenditure and to help businesses to overcome the 
economic 
to 
consolidate the achievements of the 2009-2011 EU-
IMF  adjustment  programme,  a  precautionary  EU-
IMF  programme  for  2011-2013  was  concluded  in 
2011.  The  new  programme  puts  a  strong  emphasis 
on  structural  reforms  in  product  markets  (in  the 
energy and transport sectors), namely to strengthen 
corporate  governance  of  State  Owned  Enterprises 
(SOEs) and to improve the collection of the arrears 
in  the  economy  based  on  quarterly  targets.  As  a 
consequence,  a  new  legal  framework  aiming  at 
introducing  private  management  in  the  SOEs  is  in 
place  and  a  decision  on  the  first  5  companies  that 
will  benefit  from  private  management  has  been 
taken.  In  addition,  the  Government  adopted  the 
strategies  for  the  privatisation  of  4  SOEs  in  the 
enrgy sector and 1 SOE in the quarrying sector. In 
the  context  of  the  2009  MoU,  several  structural 
reforms  that  should  contribute  to  improving  the 
business  environment  have  been  initiated  over  the 
period  2009-2010.  A  functional  review  of  the 
public  administration  led  by  the  World  Bank  – 
which  aims  at  addressing  both  specific  challenges 
in  individual  ministries  and  the  systemic  problems 
that  may  require  a  government-wide  approach  – 
started in 2010; it was carried out in two phases and 
finalised in May 2011. Based on its outcomes, both 
the  government  and  the  individual  institutions 
under  investigation  have  adopted  action  plans  in 
order to implement the recommendations on how to 
streamline  decision  makings  processes 
and 
strengthen strategic planning. However, to this day 
the government has taken no steps to implement its 
action plans (a first set of action plans of which was 
adopted already at the end of 2010). 

Romania  recently  amended  regulations  related  to 
construction permitting to reduce fees and expedite 
registration  was 
the  process  while  property 
expedited  with  the  introduction  of  new  procedures 
at  the  land  registry  and  cadastre.  Substantial 
amendments  to  Romania’s  bankruptcy  laws  were 
also  made  which  introduce,  among  other  things,  a 
procedure 
restructuring 
negotiations.  

out-of-court 

for 

Institutionally,  reform  efforts  are  underpinned  by 
the creation of a National Competitiveness Council 
and the establishment of the Business Environment 
the  Ministry  of 
Department 

(DMA)  within 

178 

Economy,  Trade  and  Business  Environment 
(MECMA). The Department has prepared an Action 
plan  to  improve  the  business  environment,  which 
provides for a set of measures to support Romanian 
entrepreneurs.  Some  of  the  measures  are  merely 
conceptual,  while  others  comprise  substantial 
actions  such  as  the  introduction  of  a  voucher 
scheme  which 
to  purchase 
consultancy  services  for  innovation  purposes,  the 
creation of a credit facility, or setting-up companies 
by young entrepreneurs. 

allows  SMEs 

the 

A  Better  Regulation  Strategy  for  the  period  2008-
2013  was  adopted  in  2008.  Romania  assumed  a 
national  target  of  25 %  for  administrative  burden 
reduction  by  2012  and 
identification  of 
information  obligations  was  completed  in  June 
2009 (4.430 information obligations were identified 
in  13  sectors).  The  present  stage  involves  the 
measurement of administrative costs in 11 fields. In 
the  development  of  a  sector-specific 
parallel, 
methodology 
impact 
improve 
assessments in the field of education and health was 
completed. It should also be noted that the number 
of taxes and tariffs in the area of para-fiscality has 
been  reduced  substantially  from  491  in  early  2009 
to a total of 237 today. At the same time, the single 
statement regarding social contributions and record 
of  insured  persons  were  implemented  by  January 
2011.  Finally,  work 
to  draft  an 
Administrative  Code 
an  Administrative 
Procedure Code. 

is  ongoing 
and 

ex  ante 

to 

for 

for 

eGovernment 

Romania  has  also  taken  a  number  of  measures  to 
improve the quality of public services via Internet. 
and 
Ambitious  objectives 
eBusiness have been set through the Governmental 
Strategy 
Communications 
Broadband 
Development in Romania for the period 2009-2015, 
which  was  adopted  in  2009.  However,  very  little 
progress  has  been  made  in  the  implementation  of 
this  Strategy.  Moreover,  the  creation  of  a  national 
portal  (eRomania)  is  under  way,  but  has  not  made 
visible  progress.  It  should  be  noted  that  in  March 
'Ghiseul.ro',  the  electronic 
2011  was  launched 
system  for  the  payment  of  taxes,  duties  and  fines, 
operational  at  present  only 
local 
administrations.  

in  several 

its 

While  the  size  and  scope  of  the  government 
program for infrastructure investment appear rather 
ambitious, both the timeline for its implementation 
financial  underpinnings  are  unclear. 
and 
Furthermore,  ICT  up-take  by  enterprises  and 
administration  is  still  low,  in  particular  in  rural 
areas,  in  spite  of  a  percentage  of  broadband  lines 
with  speed  above  10  MBps  above  the  European 
average. 

By cutting red tape and developing the information 

 
in 

society,  the  measures  already  initiated  or  foreseen 
the  business 
some  deficiencies 
address 
environment. 
strengthening 
However, 
administrative  capacity  remains  the  key  challenge 
to  be  addressed.  Thus,  implementing  timely  and 
effectively  the  recommendations  of  the  functional 
review of the public administration currently led by 
the  World  Bank  is  an  important  undertaking. 
Another major challenge is to continue and broaden 
the  scope  of  administrative  simplification  initiated 
in  the  frame  of  the  MoU  conditionalities.  Since 
many  of  the  categories  of  authorisations  and 
permits already simplified do not have a significant 
impact  on  businesses,  particularly  on  SMEs,  it  is 
essential  to  further  extend  the  inventory  to  other 
areas  of  the  public  administration  and  to  work  in 
close  collaboration  with  stakeholders  and 
the 
business community. Although a massive reduction 
in  the  number  of  taxes  and  tariffs  in  the  area  of 
been 
para-fiscality 
the 
has 
administrative  and 
remains  a 
fiscal  burden 
challenge.  Above  all,  a  massive  reduction  of  the 
number  of  tax  payments  is  essential.  Last  but  not 
least,  sufficient  and  timely  investment  in  transport 
and communication infrastructure will be critical to 
improving 
attracting 
investment in the longer run.  

competitiveness 

implemented, 

and 

4.22.5  Entrepreneurship and SME policy 

SMEs are prevailing in the Romanian economy and 
represent  over  99 %  of  all  enterprises.  In  recent 
years,  the  SME  sector  has  consolidated  its  role  in 
the economy in terms of the number of employees 
and the average turnover per enterprise although the 
crisis has left its mark. The recession has resulted in 
much  more  restrictive  credit  terms  for  SMEs  and 
larger  enterprises.  Although  the  steady  decline  in 
private credit growth appears to have bottomed out, 
SMEs  in  particular  suffer  from  insufficient  access 
to  bank  financing  as  the  latter  appears  to  be 
crowded  out  by  the  financing  needs  of  the  public 
sector. The financing problems of SMEs are further 
compounded  by  excessive  delays  of  VAT  refunds 
and  other  payments  to  companies  by  state-owned 
enterprises and the government. All this is likely to 
have  contributed 
the  number  of  SME 
bankruptcies,  which  increased  in  both  2009  and 
2010.  Being  aware  of  these  problems  and  in  order 
to  reduce  payment  arrears,  the  government  has 
recently adopted a number of measures in order to 
address  these  issues.  In  this  respect, good progress 
has been made by reducing the payment arrears by 
two thirds from 2009 up to present.  

to 

In  the  wake  of  the  crisis,  Romania  had  taken  a 
small number of stimulus  measures with a view to 
supporting businesses and help them weathering the 
crisis.  Some  of  the  measures  announced  in  early 
the 
2009  have  been  adopted  very 

late  (e.g. 

taken 

in  2009 

result  of 

to  ensure 

temporary  tax  exemption  for  reinvested  profits), 
thus  considerably  delaying  the  expected  effects 
while some have not been adopted at all. Financial 
support  to  SMEs  is  primarily  being  provided  via 
multi-annual  national  programmes  and  guarantee 
instruments.  Thus  the  National  Credit  Guarantee 
Fund  for  SMEs    was  capitalised  and  improved  its 
guarantee  activity,  also  as  a 
the 
establishement  of  the    Counter  Guarantee  Fund  of 
Loans  to  SMEs  in  2009.  In  addition,  legislative 
measures  were 
the 
implementation of the JEREMIE initiative. Starting 
from  February  2011  the  guarantee  facility  under 
this initiative has become operational while the risk 
facility  will  be  operational  by  the  end  of  2011. 
Moreover, there are several actions, financed by the 
OP  Increase  of  Economic  Competitiveness,  which 
provide  support  for  new  investments,  for  the 
the 
of 
internationalisation 
implementation  of  international  standards,  and  for 
advisory 
for 
investment  projects  of  micro-enterprises  as well  as 
for  developing  the  regional  business  infrastructure 
is  provided  through  the  OP  Regional  Operational 
Programme.  Finally,  the  projects  financed  through 
the  OP  Administrative  Capacity  Development 
implementing  a  coherent  plan  for 
aiming  at 
improving the business environment, implementing 
at  national  level  the  Small  Business  Act,  and 
developing  an  operational  one-stop-shop  pilot 
model were completed.  

In  addition, 

services. 

support 

SMEs, 

for 

the 

public 

procurement, 

Regarding 
public 
procurement  law  was  modified  with  the  aim  to 
accelerate  and  render  more  flexible  the  procedures 
for  the  absorption  of  European  funds.  In  addition, 
an  assessment  of  the  participation  rate  of  SMEs  in 
the  public  procurement  process  was  carried  out, 
showing  that  over  55 %  of  contracts  with  a  total 
value of EUR 4 billion were allocated to SMEs. At 
the  same  time,  public  procurement  is  not  yet  used 
proactively to foster innovation or the help greening 
of 
specifications 
sometimes  stipulate  conditions,  such  as  experience 
with  prior  projects,  which  are  difficult  to  fulfil  for 
SMEs  or  market  entrants  with  innovative  products 
or services. 

economy 

tender 

and 

the 

Romania's  efforts  to  help  SMEs  to  survive  the 
economic crisis were hindered by the need for fiscal 
consolidation, which left little room for manoeuvre 
to  launch  costly  recovery  measures.  Mitigating 
the 
further  high  financing  costs,  overcoming 
scarcity of credit and reducing the lack of working 
capital are therefore the main challenge in the short 
term.  Related  to  this,  Romania  needs  to  increase 
support 
in 
accessing EU funds, as well as to reduce effectively 
payment  arrears.  Moreover,  facilitating  the  access 
of  Romanian  companies  to  markets  could  help  to 

to  enterprises,  particularly  SMEs, 

179 

 
offset  the  decline  in  domestic  demand.  In  this 
respect,  using  public  procurement  in  a  more 
proactive  manner  and  further  supporting 
the 
internationalisation  of  SMEs  could  be  important 
steps.  

4.22.6  Conclusion 

Whilst  the  short-term  priority  is  to  bring  public 
finances  under  control  and  stabilise  the  macro-
economic  situation, 
implementation  of  a 
the 
number of urgent structural reforms should help to 
significantly  improve  the  business  environment.  In 
this  light,  the  effective  and  timely  implementation 
of  the  measures  included  in  the  2009  and  2011 
MoU will be critical as it will help to pave the way 
for a return to sustainable growth.  

is, 

for 

investors.  Strengthening 

An effective reform of the public administration at 
central  and  local  level  would  be  key  since  weak 
administrative  capacity  limits  reforms,  hinders  the 
in  general, 
absorption  of  EU  funds  and 
the 
dissuasive 
efficiency,  effectiveness  and  independence  of  the 
public  administration  should  help  improve  the 
quality  and  enforcement  of  policies  as  well  as  the 
effective absorption of structural funds. Making an 
increase  of  the  low  rate  of  absorption  of  the  EU 
Structural  Funds  a  priority  for  economic  policy 
would  also  allow 
the  necessary 
investment  in  infrastructure  and  human  capital 
without an excessive burden on the national budget. 

increasing 

in 

transparency 

decision-making 
Moreover, 
processes  and  accountability  of  public  resource 
mobilisation  and  use  are  essential  cross-cutting 
issues  to  consider.  At  the  same  time,  it  is  also 
important  to  maintain  some  institutional  stability 
and  to  abstain  from  rushing  reforms  unnecessarily 
since  the  success  of  reforms  depends  also  on  the 
ability  of  economic  actors  to  adjust  and  get 
accustomed to new rules and procedures. 

improving 

Nevertheless, 
the  heavy  regulatory 
environment  and  reducing  the  significant  red  tape 
in all sectors of the administration would contribute 
to  unlocking  the  business  potential  and  reducing 
costs  of  doing  business.  Furthermore,  developing 
the  weak  transport  (especially  motorways)  and 
communication  infrastructure  would  be  critical  to 
improving 
attracting 
investments.  

competitiveness 

and 

In  the  long  term,  the  challenge  will  be  to  ensure  a 
paradigm  shift  away  from  unskilled  labour  and 
energy  intensive  sectors  towards  more  smart,  low-
carbon  and  resource-efficient  activities.  Upgrading 
productive  capacities  and  processes,  investing  in 
environmentally 
eco-efficient 
technologies, increasing the innovative potential of 
enterprises,  and  upgrading  labour  force  skills  and 
improving  vocational  and  higher  education  and 
training  will  be 
future 
essential 
industry.
competitiveness  of 

the  Romanian 

friendly, 

the 

for 

180 

 
 
4.23  Slovenia 

Slovenia

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

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s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

N.A.

N.A.

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

181 

 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Slovenia (2009) 

Chemicals, chemical products

Paper products; publishing and printing

Refined petroleum products

Rubber and plastic products

Machinery and equipment n.e.c.

Other non-metallic mineral products

Wood and wood products

Leather and leather products

Textiles and textile products

Food products

Manufacturing n.e.c.

Transport equipment

Basic metals and fabricated metal products

Electrical and optical equipment

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.23.1 

Introduction 

Trade and industry specialisation 

Most prominent sectors in Slovenia 

industries 

(sawmilling 

Manufacturing  contributes  19.6 %  to  total  value 
added  in  Slovenia  against  14.9 %  for  the  EU  on 
average  (2009).  At  the  detailed  manufacturing 
industry  level,  Slovenia  features  specialisation  in 
labour-intensive 
and 
planning  of  wood,  made-up  textile  articles)  and 
mainstream  manufacturing  (domestic  appliances, 
other  non  metallic  mineral  products).  At  the  more 
aggregated  sector  level,  Slovenia  is  specialised  in 
innovation-intensive  sectors  (machinery, 
highly 
electrical  machinery,  R&D)  in  value  added  only, 
but  also  in  the  low  to  medium  range  of  education 
and  innovation  intensive  sectors  (e.g.  wood  and 
cork). 

Slovenia’s  R&D  intensity  is  below  average  given 
its  industrial  structure,  as  is  its  position  on  the 
quality  ladder.  However,  in  comparison  with  its 
group  of  lower  income  countries  with  export 
specialisation  in  knowledge  intensive  industries, 
Slovenia  manages  a  higher  R&D  intensity  and 
better  quality  performance 
labour-intensive 
industries. 

in 

Highest relative value added (2007)
Textiles and textile products
Leather, leather and footwear
Wood and products of wood and cork

Change in the relative value added (1999/2007)
Increasing specialisation
Recycling
Electricity and gas
Post and telecommunications
Decreasing specialisation
Supporting and auxiliary transport activities; activities of travel agencies
Leather, leather and footwear
Wearing apparel, dressing and dyeing of fur

Structural change 

technology-driven 

In  terms  of  change,  Slovenia  has  increased  the 
relative  share  of 
industries 
(computers,  industrial  process  control  equipment), 
as  well  as  the  relative  value-added  of  mainstream 
manufacturing  (domestic  appliances,  batteries)  and 
capital-intensive industries (e.g., man-made fibres), 
but  its  specialisation  in  labour-intensive  industries 
(builders’  carpentry  and 
joinery,  apparel  and 
accessories)  has  decreased.  This  has  also  been  the 
case  in  low  innovation  and  low  education  sectors 
(leather, auxiliary transport activities). Slovenia has 

182 

 
 
 
 
 
gained  export  share  in  the  high-quality  segments, 
but  also  in  the  low-quality  segment  in  technology-
driven industries; its R&D intensity considering its 
industrial structure has decreased relative to the EU. 

Industrial  production  fell  by  26.5 %  during  the 
crisis  and  has  partially  recovered  since.  In  April 
2011 it was 14.5 % lower than its previous cyclical 
peak.  The  crisis  slowed  down  structural  change 
towards  technology-driven  industries,  favouring 
instead capital-intensive ones. 

Slovenia  has  experienced  a  moderate  appreciation 
of  the  real  effective  exchange  rate  over  the  last 
decade  (12%,  compared  to  21%  in  the  EU27), 
indicating  nevertheless  a  loss  in  cost  and  price 
competitiveness.  Nominal  unit  labour  costs  have 
increased  by  53%  between  2000  and  2010, 
compared  to  an  increase  of  14%  in  the  EU27  and 
20% in the Euro area. Labour productivity per hour 
worked  has  gradually  increased  over  the  last  years 
and  is  currently  about  17  percentage  points  below 
the  EU27  average  and  31  percentage  points  below 
the Euro area average. 

Overall,  Slovenia  is  catching  up  with  respect  to 
competitiveness,  but  needs  to  pay  attention  to 
sectoral  upgrading,  i.e.  increase  R&D  investments 
and output quality within existing industries. 

4.23.2  Towards an innovative industry 

to 

the  2010 

According 
Innovation  Union 
Scoreboard,  Slovenia  is  part  of  the  second  most 
advanced  group  of  innovative  countries  in  the  EU, 
the  innovation  followers  and  has  a  high  rate  of 
improvement.  Its  R&D  as a share of  GDP reached 
1.9 % in 2009. Slovenia performs particularly well 
in  international  scientific  co-publication,  in  public-
private  scientific  co-publications,  in  innovative 
SMEs  collaborating  with  others  and  in  non-R&D 
innovation  expenditure  but  not  very  well 
in 
business  R&D  innovation  expenditures.  In  2010, 
numbers  of  policy  measures  were  introduced  to 
overcome  the  implementation  deficit,  to  reinforce 
the  knowledge  triangle:  research,  education  and 
innovation  and  to  further  increase  public  spending 
on R&D.  

In  2010,  numbers  of  policy  measures  have 
supported public spending on R&D and intended to 
reinforce 
research, 
education and innovation.  

the  knowledge 

triangle: 

industry, 
industry,  pharmaceutical 
automotive 
biotechnology,  energy,  electric  engineering  and 
electronics industry.  

More  than  EUR  120  million  has  been  committed 
for 2009-2013 by the Ministry of Higher Education, 
Science  and  Technology  to  support  investment  in 
R&D  in  specialised  technology  areas.  Priority 
technology areas were defined by the Government: 
User  Platforms  and  Interfaces,  Network  Systems 
and  Services,  Food  and  Health  Biotechnological 
Research  and  Innovation,  Biomedical  Engineering, 
Process  Technologies,  Sustainable  Building 
Industry,  Effective  use  of  energy  (smart  grids). 
Seven  competence  centres  were  designed  and  are 
operational 
together 
2010, 
competencies  of  the  public  R&D  institutions  and 
companies on the defined technology priority areas 
for  joint  strategic  investment.  In  2009,  Ministry  of 
Higher  Education,  Science  and  Technology 
launched  the  call  for  proposals  for development  of 
Centres  of  Excellence  in  the  areas  recognised  as 
international, 
potential  for  Slovenia 
worldwide  excellence.  Eight  centres  were  selected 
and have been operational since 2010.  

to  reach 

bringing 

since 

Despite considerable progress in the area of public 
procurement in Slovenia, public procurement is still 
under-used  to  support  technological  innovation. 
The government intends to use more systematically 
public  procurement  to  promote  areas  where  the 
Slovenian  technologies  and  solutions  could  stand 
out, in particular in relation to social challenges and 
sustainable  growth.  For  instance,  EU  cohesion 
policy  funds  are  to  be  used  to  target  sustainable 
construction and efficient energy use. 

Financial  instruments  were  introduced  to  support 
R&D  and  innovation  investments.  The  Ministry  of 
Higher Education, Science and Technology backed 
the  Slovenian  Enterprise  Fund  with 
in  2010 
EUR 50 million  enabling 
through  commercial 
banks EUR 150 million of loans for R&D projects. 
The  objective  is  to  provide  more  investments  and 
technology  projects. 
working  capital 
Additional  EUR 35 million  is  invested  by  the 
Ministry  of  Economy  to  a  holding  fund  promoting 
development of venture capital market. Moreover, a 
financial  engineering 
for 
new  holding 
instrument  is  being  established  by  the  SID  Bank 
with  EUR  50  million  backed  by  the  Ministry  of 
Higher  Education,  Science  and  Technology  and  it 
will be operational later in 2011. 

to  high 

fund 

The  Ministry  of  the  Economy  is  co-financing  17 
projects  of  Economic  development  centres.  The 
projects  sum  up  to  EUR 425.483.576  and  will  be 
co-financed  with  EUR  179.581.344.  Building  on 
the  knowledge  base  in  Slovenia,  the  targeted  areas 
cover  wood-processing  sector,  new  materials,  ICT, 

A  new  financing  scheme  has  been  launched  for 
SMEs  to  develop  their  R&D  and  innovation 
activities,  linked  with  IPR  and  design.  It  is  worth 
highlighting  that  many  applications  were  made  in 
the field of design.  

183 

 
to 

the  Slovenian  National  Reform 
According 
Programme,  the  number  of  graduates  in  the  fields 
of  natural  sciences,  technology  and  other  sciences 
relevant for innovation is considered as too low. As 
a  response, 
the  NRP  highlights  numbers  of 
measures,  like  training  programmes  in  natural 
sciences  and  encouraging  entrepreneurship  among 
young  doctors  of  science.  As  a  response,  a  new 
measure  was  introduced  recently  by  two  relevant 
Ministries  with  EUR  20  million  in  2011-2013  to 
strengthen  competencies  for  R&D  in  companies, 
stimulate  development  of  R&D  departments  and 
co-finance employment of researchers, engineers as 
well  as  both  local  and  foreign  high  qualified 
personnel 

Finally,  Slovenia’s  academic  research  is  still  not 
sufficiently  connected  to  corporate  research  and 
vice-versa.  For  instance,  some  of  the  largest  and 
most  competitive  Slovenian  firms  have  their  own 
research  departments  and  hardly  interact  with 
research institutions. 

A rationalisation and simplification in the system of 
EU  funds  drawing  is  under  way.  Some  significant 
steps were implemented and as a result the amount 
of  funds  for  R&D  and  innovation  increased  in 
2010. If properly implemented, it would generate a 
better  absorption  of  EU  funds  and 
therefore 
reinforce R&D and innovation in Slovenia.  

Proper  coordination  and  collaboration  between  the 
various organisations  is  essential  to  avoid  overlaps 
and make the R&D and innovation policy measures 
more  transparent  and  user-friendly.  In  this  respect, 
the 
the  Government 
implementing  agencies  and  thereby  increase  their 
transparency and efficiency. 

reorganise 

plans 

to 

4.23.3  Towards a sustainable industry 

therefore 

The  volume  of  emission-intensive  industries  in 
Slovenia dropped significantly because of the crisis. 
Some  of  the  most  emission  intensive  sectors,  such 
as  the  aluminium  one,  have  seen  their  production, 
and 
(GHG) 
emissions,  reduce  considerably.  Along  with  the 
recovery, the GHG emissions have peaked up again 
in  2010.  Due  to  high  share  of  emission-intensive 
sectors, Slovenia has one of the highest propensities 
for  high  emission  in  the  EU.  In  2008118,  it  ranked 
fifth among EU countries. 

their  greenhouse-gas 

Slovenia  was  the  10th  most  energy-intensive  EU 
country 
inland 
in  2009.  Slovenia’s  gross 
consumption of energy divided by GDP represented 
150 %  of  the  EU  average  in  2009.  In  comparison 
with  the  EU  average,  Slovenia  is  characterised  by 

118  

UMAR-IMAD Development report 2011 

184 

intensive 
the  predominance  of  many  energy 
manufacturing  sectors.  In  addition,  intense  road 
traffic due to transit of freight transport worsens the 
overall outcome. 

in  gross 

renewable  energy 

Slovenia  is  the  10th  country  with  the  highest  share 
of 
final  energy 
consumption  in  2008.  In  fact,  the  proportion  of 
renewable  as  a  share  of  total  energy  consumption 
has  considerably  increased  in  comparison  with  the 
rest  of  the  EU.  Slovenia  benefits  from  highly 
favourable  conditions  as  it  has  large  hydro-electric 
installations and is rich in biomass.  

In the area of energy efficiency, the Slovenian Eco-
Fund  and  the  Ministry  of  the  Economy  have 
launched  calls  for  tenders  targeting  the  public  and 
private  sector,  and  also  households.  Energy 
efficiency  in  buildings,  supported  by  ad  hoc 
financial  mechanisms,  is  a  priority.  The  use  of 
decentralised  renewable  energy  sources  is  also 
fostered.  

to 

regards 

With 
renewable  energy  sources, 
investments  are  supported  and  in  absolute  terms 
until  2020  use  of  hydro  and  biomass  are  projected 
to  increase  the  most.  The  measures  are  also  meant 
to encompass energy distribution and transportation 
services 
‘SMART 
GRIDs’.  Call  for  tenders  in  renewable  energy  will 
aim  at  developing  co-generation,  creating  facilities 
using  sustainable  biomass  (heat  and  power)  and 
building district heating facilities.  

the  building  of 

including 

A  new  coal-fired  plant,  implying  an  estimated 
EUR 1.2 billion  investment  is  under  way.  And  the 
second  Slovene  power  company  (that  represent 
22 %  of 
is 
capacity) 
installed  generation 
considering building a new nuclear power plant. 

Green  procurement:  The  use  of  green procurement 
could  be  more  developed.  EU  cohesion  policy 
funds  are 
target  sustainable 
to  be  used 
construction and efficient energy use. 

to 

Waste  recovery  from  production  and  services  has 
represented  about  60 %  of  waste  in  the  last  few 
years. The Government intends to further intensify 
the  building  of  waste  management  plants  and  to 
promote waste prevention measures. 

4.23.4  The business environment 

Considerable  progress  has  been  achieved 
in 
different  areas  relative  to  the  Slovenian  business 
environment,  for  instance:  on  preventing  illegal 
work,  on  public  procurement,  on  setting  up  a 
business, on tax relief for intangible investment, on 
value added tax and on online tax declarations. The 

 
                                                 
single  point  of  contact  called  VEM  has  been  very 
successful.  This  one-stop-shop  solution  offers 
information,  advice  and  mentoring.  It  has  seen 
considerable  improvement  and  the  government 
wants to push it even further in the years to come. 

International surveys point to areas that can still be 
improved,  mainly  with  regards  to  the  legal  and 
regulatory  framework.  According  to  the  Slovenia 
World  Bank  Doing  Business  rankings  in  2011, 
Slovenia  is ranked  low  with  regards  to  registration 
of real estate and duration of procedures for dealing 
with  construction  permits.  According  to  the  IMD 
World  Competitiveness  report,  Slovenia  does  not 
offer  an  attractive  legal  and  regulatory  framework. 
In  fact,  Slovenia  is  the  worst  performing  EU 
country119  for  this  indicator.  Besides,  governance 
standards  are  evaluated  to  be  deficient  in  both  the 
public  and  private  sectors.  The  2011  issue  of  the 
IMD 
the 
supervisory  board  of  Slovene  companies  as  one  of 
the  poorest  among 
that  are 
benchmarked. It is not surprising therefore that the 
governance of state-owned companies will be under 
the  responsibility  of  a  new  agency  for 
the 
management of state-owned assets. Besides, a land 
register  act  has  already  been  adopted.  It  offers  a 
digital version of all the procedure of a registration 
and the access to the land register is free of charge 
and  available  in  a  decentralised  manner  (in  every 
local court and notary instead of only the main land 
register).  

competitiveness 

the  countries 

evaluates 

report 

sector 

The  level  of  competition  in  many  Slovenian 
services 
enhanced.  High 
could  be 
concentration  and  high  mark-ups  can  be  observed 
in  certain  services  sector,  notably  food  retail, 
construction,  professional 
land 
transport.  Slovenia  still  had  the  lowest  share  of 
knowledge-based  market  services  in  the  EU  in 
2009.  According  to  a  survey  of  58  countries  from 
the  IMD  2011  Global  Competitiveness  report, 
Slovenia  is  the  second  country  with  the  highest 
threat of relocation of its services activities.  

services  and 

javnim 

interesom 

Administrative burden is also visible in the area of 
regulation  of  professions.  Slovenia  has  one  of  the 
highest numbers of regulated professions in the EU. 
A report is underway (‘Deregulacija poklicev v RS 
–  med 
in  konkurenčnostjo, 
Deregulation  of  Professions  in  the  Republic  of 
the  Public  Interest  and 
Slovenia  –  Between 
Competitiveness’) 
international 
benchmark  of  regulated  professions  by  March 
2012. Concomitantly, the European Commission is 
to  offer  in  2012  a  proposal  of  a  new  legislation 
based  on  the  results  of  an  evaluation  of  the 
implementation of the Directive on the recognition 
of 
(Directive 
2005/36/EC). 

to  provide  an 

qualifications 

professional 

is 

The  Services  directive 
fully 
implemented.  Single  points  of  contact  should  see 
some improvements by autumn 2011, at first for for 
tourism,  construction  and  crafts  with  a  progressive 
extension to all services sectors by end of 2013. 

still  not 

Administrative burden is to be reduced by 25 % by 
2012. There are five phases in the program and the 
third  phase  was  finalised  in  June  2011.  The  fourth 
phase  is  going  more  or  less  according  to  plans, 
which  means 
the  deadline  should  be  met. 
Concerning  impact  assessment,  a  resolution  was 
taken  by  the  parliament  and  the  government  in 
2009.  Technical  support  has  been  set  up  both 
internally  and  externally.  The  consultations  take 
place  online,  so  that  the  public  can  react.  The 
implementation  is  unequal  across  ministries.  Some 
are very good and others are lagging behind.  

The  competition  protection  office  has  become 
extremely under-staffed over the last 3 years. Only 
competition authorities of smaller countries such as 
Luxembourg  or  Malta  have  as  few  employees. 
While the office is to become fully independent in 
2012, it is still questionable whether it will function 
at  full  scale.  With  the  institutional  changes  planed 
for  2012,  issues  related  to  staff  increase  and  their 
capacity-building are also to be resolved 

119  

Cyprus, Latvia and Malta are not included 
in the ranking. 

185 

Concerning Slovenia’s resources and infrastructure, 
several elements are worth highlighting. Despite the 
rise  in  unemployment  resulting  from  the  crisis, 
there  is  still  a  lack  of  qualified  staff  in  the  health, 
tourism, engineering and science sectors. Access to 
resource  is  also  an  issue  in  Slovenia,  especially  in 
the  field  of  rare  earth.  Transport  infrastructure  has 
developed  unevenly,  with  a  strong  road  network 
and much less modern and developed railways. The 
priorities  with  regards  to  railway  infrastructure  in 
2011  and  2012  are  supposed  to  be  modernisation, 
electrification  and  development  of  the  second 
Divača-Koper track.  

is 
The  Slovenian  export  promotion  strategy 
undergoing  organisational  changes.  The  previous 
trade  promotion  organisations  (TPO)  are  now 
merged  with  JAPTI.  In  fact,  JAPTI  is  going  to  be 
reorganised  further.  Its  support  activities  for 
internationalisation  will  be  shared  differently 
among  different  organisations.  The  Slovenian 
embassies  but also  the  chambers  of  commerce  and 
business  clubs  will  join  forces.  Concerning  the 
export  promotion  policies, 
content  of 
cooperation  with  new  emerging  markets 
is 
promoted  as  Slovene  firms  generally  turn  to 

the 

 
                                                 
The 

barriers 

companies. 

neighbouring  EU  and  Balkan  markets.  Slovenian 
companies  are  already  to  some  extent  present  in 
emerging  countries.  Nonetheless,  foreign  markets 
are  more  easily  accessible  for  large  than  for  small 
Slovenian 
to 
internationalisation  are  mainly  the  fact  that  most 
Slovenian  companies  are  small  companies  and 
cannot  extend  their  activities  abroad  or  produce 
large  enough  quantities  of  goods  for  certain 
internationalisation  measures, 
markets.  Among 
Slovenia  also  strongly  supports  direct  foreign 
investment  through  national  scheme.  Besides,  the 
insurance scheme for internationalisation offered by 
SID bank works well for companies. Exception are 
small  companies  that  have  to  get private  insurance 
schemes.  Among  other  measurements,  Slovenian 
business clubs abroad have been established and are 
a  Slovene  specificity; 
there  are  17  currently 
operating, but not all of them are financed through 
country revenue. Most of them are in the Balkans in 
Russian regions.  

environment.  Better 

In  conclusion,  the  legal  and  regulatory  framework 
is  still  the  most  problematic  area  of  the  Slovene 
regulation  of 
business 
employment 
professions 
between 
opportunities 
qualifications  and  jobs.  Last  but  not  least,  better 
absorption  of  ERDF  funding  could  play  a  role  in 
strengthening the railway infrastructure. 

create  new 
better  match 

should 
and 

4.23.5  Entrepreneurship and SME policy 

to 

Despite  the  long  lasting  effects  on  unemployment, 
the  Slovenia's  SME  sector  is  expected  to  reach 
again  pre-crisis  levels  in  2012.  SMEs'  production 
has  progressively  recovered  since  2009.  The 
breakdown  of  SMEs  by  size  class  in  Slovenia  is 
the  EU  average.  A  higher 
comparable 
in 
concentration  of  SMEs  can  be  observed 
manufacturing  (15%  vs.  11%  in  the  EU)  and 
construction  (19%  vs.  14%).  Slovenia  scores  well 
for  almost  all  Small  Business  Act  dimensions  and 
has  addressed  all  of  them  except  one.  It  performs 
better  than  the  rest  of  the  EU  in  entrepreneurship, 
think  small  first,  state  aid  and  public  procurement, 
and Single market.  

Despite  some  management  buy-out  scandals  and 
difficult  economic  situation,  the  entrepreneurship 
culture  in  Slovenia  is  increasing.  Entrepreneurship 
is  even  well  perceived  as  77.6 %  of  the  Slovenian 
successful 
population  had  consideration 
entrepreneurs  in  2009120.  Young  people  are  more 
entrepreneurial  and  open.  In  2009  and  2010, 
entrepreneurial  activity  dropped  by  1.7  p.p, 
however,  Slovenia  ranked  10th  in  terms  of  early 
stage  entrepreneurial  activity  compared  to  the  20 

for 

120  

Global entrepreneurship monitor 

186 

EU countries ranked by the Global entrepreneurship 
monitor.  Slovenia  is  considered  as  more  ‘passive’ 
in  terms  of  entrepreneurship  compared  to  its  peer 
group.  Necessity  entrepreneurship  is  the  lowest 
prevalent 
entrepreneurship  while 
opportunity  driven  entrepreneurship  is  the  most 
widespread.  This  is  consistent  with  the  fact  that 
early stage entrepreneurs in Slovenia come from the 
highest household income category. 

form 

of 

The  Global  entrepreneurship  monitor  found  that 
female  entrepreneurs  are  under-represented 
in 
Slovenia. Their share has even decreased in 2009 to 
represent 24.2 % of early stage entrepreneurs. As an 
answer,  the  government  organised  four  female 
entrepreneurship  events  in  2010.  The  business 
organisations think that more could be done in this 
area. The forthcoming programs, still at pilot stage, 
are concentrated on mentoring vouchers for women 
and promotion of female entrepreneurship.  

The public guarantee scheme designed as an answer 
to  the  crisis  has  not  had  the  expected  impact.  SID 
bank,  which  has  coordinated  the  use  of  the 
guarantee  scheme  through  commercial  banks,  has 
only  channelled  a  third  of  the  amount  available. 
The banks have passed on the funds to individuals 
rather  than  to  companies.  Although  banks  have 
tightened  loan  conditions,  access  to  finance  is 
generally not an issue for sound companies. 

A lot of progress has been achieved in the field of 
financial engineering. In addition to SID Bank, the 
Slovenian  Enterprise  Fund  implements  guarantees 
with  subsidies  of  interest  rate  -  with  this  measure 
890  projects  have  been  already  supported  (with 
investments’ value of EUR 378 million: loans EUR 
243  million  and  guarantees  EUR  153  million). 
Important  progress  has  been  in  the  field  of  equity 
financing:  there  are  currently  nine  venture  capital 
firms  in  Slovenia,  including  six  supported  by  the 
Government  through  a  EUR  26.7  million  holding 
fund  of  the  Slovenian  Enterprise  Fund  and  this 
measure  is  co-financed  by  the  ERDF.  The  first 
investments  by  venture  capital  firms  in  SMEs  are 
expected in the second half of 2011. 

Compared  to  the  2010  edition  of  ‘Member  States 
competitiveness  performance  and  polices’,  an  act 
on  prevention  of  late  payments  has  already  been 
voted.  It  provides  a  maximum  30  days  payment 
deadline  for  public  institutions  and  a  60  days 
payment  for  economic  agents  (with  possible 
exceptions for 120 days). It has been in force since 
16 March 2011. 

Concerning the SBA, Slovenia has made a progress 
in  the  third  principle,  the  ‘Think  Small  First’ 
principle’  and  SME  envoy  was  nominated  by  the 
Ministry  of  economy.  A  proposal  for  ‘SME  Test’ 

 
                                                 
has  been  prepared.  The  eighth  principle  ‘Promote 
the  upgrading  of  skills  in  SMEs  and  all  forms  of 
innovation’ could also be developed further. In fact, 
the  government‘s  future  priorities  of  the  Small 
business act in Slovenia will consist of: 1. Access to 
legislation,  3. 
finance,  2.  Think  small 
Innovation and skills, 4. Internationalisation.  

first 

A  three  year  program  targeting  young  people  is 
supposed  to  foster  creativity  and  innovation.  The 
program  is  monitored  jointly  by  the  Ministry  of 
economy and the Ministry of education and sports. 

Summing  up,  several  areas  of  the  Small  business 
act  are  still  to  be  put  into  action.  Nonetheless,  the 
recent  reforms  in  financial  engineering  and  in  late 
payment  legislation  are  signs  that  the  areas  that 
were  highlighted  in  the  previous  report  have 
consequently started to be tackled. 

4.23.6  Conclusion 

Notwithstanding its size, Slovenia is faced with the 
challenge to increase both the competitiveness of its 
export  and  domestic  sectors.  Better  regulation, 
especially  in  the  area  of  services,  can  be  achieved 
thanks  to  the  revision  of  regulation  of  professions. 
Along  with  the  proper  implementation  of  the 
services 
fully-functional 
and 
competition  protection  office,  the  potential  of  the 
services sector could be unleashed.  

directive 

a 

Slovenia  was  one  of  the  first  countries  to  allocate 
part  of  its  EU  funds  to  competitiveness  programs 
(up  to  40 %).  Europe  2020  could  facilitate  further 
the  alignment  between  competitiveness  goals  and 
EU  funds  allocations.  Focusing  on  regions  and 
sectors  undergoing  the  most  significant  structural 
changes,  such  as  the  Pomurje  region  as  one 
example,  could  be  an  opportunity  to  accelerate  the 
restructuring processes. 

187 

 
 
 
4.24  Slovakia 

Slovakia

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

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b
a
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a
t
s
u
s
a

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a
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o
T

s
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r
a
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T

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e
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M
S
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a
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t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

N.A.

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

188 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Slovakia (2009) 

Chemicals, chemical products

Paper products; publishing and printing

Rubber and plastic products

Refined petroleum products

Machinery and equipment n.e.c.

Wood and wood products

Leather and leather products

Textiles and textile products

Electrical and optical equipment

Food products

Manufacturing n.e.c.

Other non-metallic mineral products

Transport equipment

Basic metals and fabricated metal products

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.24.1 

Introduction121 

Trade and industry specialisation 

in 

(Basic 

average 

(2009).  At 

specialisation 

iron  and  steel)  and 

The  manufacturing  industry  in  Slovakia  accounts 
for  19.6 %  of  value  added  against  14.9 %  for  the 
EU  on 
the  detailed 
manufacturing  industry  level,  Slovakia  features 
industry 
mainstream 
manufacturing  (lighting  equipment  and  electric 
lamps,  wire  and  cable)  and  capital-intensive 
industries 
trade 
specialisation  in  technology-driven  (radio  and  TV 
industries 
receivers) 
(manufacture  of  steam  generators).  At  the  more 
aggregated 
shows 
level, 
specialisation  in  high  and  medium-high  innovation 
sectors  (communication  equipment  and  motor 
vehicles),  as  well  as  in  medium  to  medium-low 
education  sectors  (fabricated  and  basic  metals). 
Slovakia  features  a  high  share  of  exports  to  the 
BRIC  countries,  especially  Russia,  by  technology-
driven industries. 

labour-intensive 

Slovakia 

sector 

and 

knowledge-intensive 

Slovakia’s  R&D  intensity  is  far  below  average 
when  taking  account  of  its  industrial  structure, 
indicating a position in the production-oriented part 
of 
Slovakia 
features  high  shares  of  exports  in  the  low  price 
segment and low shares in  the high price segment, 
indicating  an  unfavourable  position  on  the  quality 
ladder,  similar  to  its  group  of  lower  income 
countries 
in  knowledge-intensive 
industries (group 3). 

specialised 

industries. 

Most prominent sectors in Slovakia 

Highest relative value added (2007)
Leather, leather and footwear
Basic metals
Electricity and gas

Change in the relative value added (1999/2007)
Increasing specialisation
Radio, television and communication equipment
Leather, leather and footwear
Basic metals
Decreasing specialisation
Electricity and gas
Coke, refined petroleum and nuclear fuel
Tobacco products

121  

For main sources used see the 
methodological annex. The cut-off date for 
all data and qualitative information is 31 
August 2010. 

Structural change 

189 

 
 
                                                 
 
 
 
share 

in  high 

In  terms  of  change,  Slovakia  has  increased  its 
relative  value  added  and  export 
in 
technology-driven 
(radio  and  TV 
industries 
receivers  and  transmitters),  as  well  as  its  value 
added  specialisation  in  mainstream  manufacturing 
(lighting  equipment  and  electric  lamps).  Further, 
Slovakia  has  increased  its  relative  value  added 
share 
innovation  sectors  (computers, 
communication  equipment,  medical,  optical  and 
its 
precision 
specialisation 
low-skill 
industries  (dressing  and  dying  of  fur)  and  low 
education  sectors  (wearing  apparel).  Slovakia  has 
climbed the quality ladder in contrast with its peer 
group,  but  its  R&D  intensity,  taking  account  of  its 
industrial structure, has continued to fall. 

instruments)  and  has  decreased 

labour-intensive 

in 

Manufacturing  output  fell  sharply  during  the  crisis 
(-32 %)  but  recovered  remarkably,  being  in  April 
2011  4.1 %  higher  than  in  its  previous  peak.  In 
total,  the  impact  of  the  crisis  on  Slovakia’s 
economic  structure  was  limited,  slowing  down  the 
decline of capital-intensive industries and structural 
change towards technology-driven industries. 

Slovakia  has  experienced  a  strong  appreciation  of 
the real effective exchange rate over the last decade 
(80%, compared to 21% in the EU27), indicating a 
loss in cost and price competitiveness. Nominal unit 
labour  costs  have  increased  by  33%  between  2000 
and  2010,  compared  to  an  increase  of  14%  in  the 
EU27  and  20%  in  the  Euro  area.  While  labour 
productivity  per  hour  worked  has  considerably 
increased  over  the  last  years,  it  is  still  about  22 
percentage  points  below  the  EU27  average  and  35 
percentage points below the Euro area average. 

Overall,  Slovakia  is  catching  up  with  respect  to 
competitiveness,  however  R&D  trends  constitute  a 
cause for concern.  

4.24.2  Towards an innovative industry 

to 

Slovakia  has  been  classified  as  a  moderate 
the  Innovation  Union 
innovator  according 
Scoreboard 2010, with a performance below the EU 
average.  In  particular,  it  ranks  amongst  Member 
States with the lowest share of R&D expenditure in 
relation to GDP. 

liaising  activities  with  Slovak 

Slovakia  has  a  small  and  underdeveloped  R&D 
system.  Currently,  large  multinational  companies 
operating within the country, with high productivity 
levels, mainly  run their R&D activities abroad and 
limit 
research 
facilities.  On  the  other  hand,  national  companies, 
including  SMEs,  are  characterised  by  low  R&D 
expenditure.  As  a  result,  the  production  system  is 
mainly 
imports. 
by 
Aggregated  across  all  sectors,  the  indicator  has 

technology 

dominated 

indeed experienced a steady decline from 0.66 % in 
1999  to  0.48 %  in  2009.  R&D  performed  by  the 
Slovak  businesses  has  also  declined  and  from 
0.41 % in 1999 has reached 0.2 % of GDP in 2009. 

The  "Long  term  plan  of  the  state  science  and 
technology  policy  by  the  year  2015",  setting  the 
national  policy  framework  in  terms  of  R&D,  is 
expected  to  be  updated  in  2011  with  a  view  to 
redefine fields of intervention and related measures. 
At the moment, the overall objective is the gradual 
shift  from 
to  project-based  R&D 
funding  of  both  universities  and  research  institutes 
including  a  rationalisation  of  the  system  (mergers 
of 
institutes,  promotion  of  higher 
specialisation). In order to proceed in this direction, 
a revision of the evaluation system is being carried 
out.  

institutional 

research 

The  legal  Act  on  R&D  incentives  to  the  business 
sector,  which  was  adopted  in  2009  as  part  of  anti-
crisis  measures,  provides  state  aid  for  basic  and 
applied research, feasibility studies, employment of 
qualified  researchers,  experimental  development, 
establishment  of  a  research  laboratory  and  income 
tax relief. Out of 35 applicants, 14 companies have 
used  the  support  so  far,  4  starting  in  2009  and  the 
remaining in 2010. Incentives are conditional to the 
establishment  of  new  laboratories  (creation  of 
workplaces) or the employment of researchers to be 
maintained  for  at  least  5  years  and  will  run  until 
2014. No further calls are open at the moment. 

Innovation policy in Slovakia is currently based on 
two  strategic  documents:  the  Innovation  Strategy 
for  2007-2013,  which  sets  the  general  framework 
for  intervention,  and  its  translation  into  concrete 
measures  via  the  Innovation  Policy  document, 
covering  a  three-year  period.  The  document  for 
2011-2013  sets  3  priority  areas  (infrastructure; 
quality  of  human  resources  and  support  for 
innovation)  and  13  measures  such  as:  clusters; 
support  to  innovation  for  regional  projects;  human 
resources  and  SMEs  trainings.  A  national  project 
for  increasing  innovation  of  entrepreneurs  is  being 
prepared and discussed with coordinators of the OP 
Competitiveness and Growth. 

A  positive  development  in  the  governance  of 
innovation  policy  seems  to  be  the  appointment  in 
February 
a  High  Government 
Representative 
for  knowledge  economy  and 
information society.  

2011 

of 

The  lack  of  coordinated  intervention  in  the  policy 
areas  of  research,  education  and  innovation  is, 
together  with a  weaker human  capital  formation,  a 
the 
fundamental 
efficiency  of 
innovation  system. 
Responsibilities  in  these  areas  remain  fragmented 

that  negatively  affects 

the  national 

issue 

190 

 
and  are  shared  between  different  ministries  and 
their  implementing  agencies.  In  the  period  2008-
2011,  the  national  budget  for  innovation  has  been 
diverted  to  other  priorities  due  to  the  crisis  and 
resources  were  channelled  only  via  Structural 
Funds  (OP  Competitiveness  and  Growth).  The 
system of innovation vouchers which was designed 
in  2009  and  expected  to  be  implemented  in  2010 
did  not  receive  financial  coverage  so  far.  At  the 
same  time,  the  call  for  tenders  to  create  Regional 
Innovation  Centres  (RICs)  was  launched  for  a 
budget  of  EUR 5 million  and  7  applications  were 
received  from  local  governments  but  technical 
implementation did not start due to procedural and 
financing  issues.  Clusters  have  been  mapped  but 
not  fully 
implemented,  with  an  exception  at 
regional  level  (cluster  for  software  applications  in 
the Kosice region). 

In  order  to  properly  take  into  account  concrete 
business  needs  in  terms  of  innovation,  an  external 
audit  on  the  most  relevant  institutional  aspects  is 
expected  to  be  launched  in  June/August  2011.  At 
the  same  time,  undercapitalised  companies  may 
profit  from  new  measures  through  JEREMIE  (in 
particular venture capital funds). 

4.24.3  Towards a sustainable industry 

According  to  the  reference  indicator  here  adopted, 
Slovakia  ranks  third  amongst  the  most  energy 
intensive countries in the EU. In particular, despite 
significant  recent  improvements,  relatively  high 
energy  intensity  is  still  registered  in  the  industrial 
sector  (dominated  by  traditional  manufacturing 
activities) to which relatively high carbon intensity 
in energy consumption is also associated. 

Several actions have been undertaken over the past 
years  in  order  to  set  both  energy  production  and 
consumption  activities  on  a  sustainable  path. 
Slovakia  has  progressively  transposed  at  national 
level  most  of  the  relevant  EU  legislation  and  the 
overall  legislative  framework  is  now  in  place 
concerning  energy  efficiency,  promotion  of 
renewable energy sources (RES) and energy supply 
security. 

The Slovak Energy Policy is the strategic document 
defining  the  long-term  framework  in  terms  of 
objectives  and  actions.  Developed  in  2006  for 
adapting  policy  intervention  to  the  new  national 
situation  and  to  the  adoption  of  EU  directives,  it 
covers  a  period  of  25  years  and  is  expected  to  be 
updated by the end of 2011. 

As  prescribed  at  the  EU  level,  the  second  Energy 
Efficiency  Action  Plan  (NEEAP)  for  the  period 
2011-2013 has been adopted in May 2011, setting a 
target  of  8 362  TJ, 
total 

energy 

saving 

corresponding  to  a  2.7 %  reduction  in  final  energy 
consumption  compared  to  the  2001-2005  average. 
Most of the energy savings are expected by the new 
document to be achieved in industry (about 30 %), 
public  sector  (27 %)  and  buildings  (21 %)  but 
measures are also foreseen with regards to electrical 
appliances and transport. In terms of the total public 
and  private  financial  resources  expected  to  be 
mobilised  over 
than 
EUR 4.5 billion),  about  50 %  will  be  absorbed  by 
the transport sector, while EUR 316 million (7 % of 
the  total)  will  be  channelled  towards  industry  via 
three  measures 
innovation  and 
focused  on: 
technology transfer; increase in energy efficiency of 
industrial production and enforcement of the law on 
compulsory  energy  audits  in  industry  (the  latter 
accounting for about 90 % of the planned savings in 
the sector). 

three  years 

(more 

the 

The  assessment  of  the  previous  three-year  period 
(2008-2010)  reveals  that  the  2010  intermediate 
energy  savings  target  of  3 %,  corresponding  to 
12 405  TJ,  has  been  achieved  and,  in  particular, 
indicates  the  good  performance  registered  for 
construction and manufacturing, although both still 
present  big  potential  for  energy  consumption 
reduction. 

impact 

The  economic  crisis  had  also  an 
in 
determining  positive  results:  a  significant  decrease 
in  energy  intensity  was  indeed  registered  both  in 
2008 and 2009. However, the crisis acted on top of 
a  trend  which  was  already  undergoing,  pushed  by 
two  important  drivers  for  energy  saving,  namely: 
the  increase  in  energy  prices  and  the  development 
of the regulatory framework. 

Funds for implementing sustainable energy projects 
in the private sector (industry and households) were 
the  EBRD's 
provided  via  national  banks  by 
Slovakia  Sustainable  Energy  Financial  Facility, 
created in 2007 with a provision of EUR 60 million, 
extended by additional EUR 90 million in 2010 due 
to  high  demand  from  beneficiaries  and  supporting 
350  projects  overall.  In  February  2011,  the  EBRD 
has announced a further EUR 15 million loan which 
will  cover  investment  grants,  accompanied  by 
technical assistance to borrowers. 

For better exploiting the energy efficiency potential 
across  all  sectors,  a  new  data  collection  and 
monitoring system is expected to be launched in the 
second half of 2011. 

Energy  efficiency  and  environmental  performance 
will become obligatory part of the selection criteria 
in  public  procurement  as  from  January  2012.  The 
Slovak Innovation Agency is in currently charge for 
their definition. 

191 

 
for 

in  gross 

trajectories 

target  of  14 % 

The  National  Renewable  Action  Plan  published  in 
October  2010  defines 
the 
development  in  the  use  of  RES  up  to  2020  and  a 
final 
final  energy 
consumption.  Since  2009,  Slovakia  has  adopted 
legislative  actions for  supporting  the  production  of 
electricity  from  RES,  also  as  a  response  to  major 
national  concerns  in  terms  of  energy  security  and 
industrial  diversification.  However,  the  feed-in 
price  mechanism  put  in  place,  while  ensuring 
predictability  for  investors,  has  caused  distortive 
effects on prices in the energy markets detrimental 
to  business.  Actions  have  been  announced  by  the 
government  in  the  NRP  2011-2014  for  redefining 
the support schemes to RES as well as to domestic 
energy  sources  (coal)  in  order  to  maintain  cost-
effective  incentives  while  limiting  negative  effects 
on the electricity prices. 

4.24.4  The business environment 

environment 

in  Slovakia 

Business 
remains 
characterised today by important drawbacks, which 
may  limit  the  attractiveness  of  the  country  and 
hinder  the  potential  for  higher  economic  activity 
levels. The situation is captured by the related set of 
indicators presented above. Compared to the EU27 
average, Slovakia performs relatively well in terms 
of  the  share  of  enterprises  using  e-government 
services. However, a closer look at complementary 
indicators shows that the range of available services 
is  limited  and  the  country  ranks  in  the  latest 
positions  at  the  EU  level.  The  potential  for  further 
improvements  in  this  area  is  indeed  recognised 
within the NRP 2011-2014 in which legislative acts 
are  announced,  while  a  'Revision  of  eGovernment 
Building - Medium Term Priorities Implementation 
Plan' has been approved early in 2011. 

the  quality  of 

Low performance compared to the EU27 average is 
also  registered  with  regards  to  the  availability  of 
high-speed  broadband  lines  and  to  the  level  of 
satisfaction  expressed  by  business  representatives 
on 
infrastructures. 
According  to  the  2011  Doing  Business  survey  by 
the  World  Bank,  Slovakia  ranks  41  out  of  183 
economies  in  the  overall  ease  of  doing  business 
indicator  and  amongst  the  last  EU  countries  in 
terms of cost and length of procedures for enforcing 
contracts and closing a business. 

transport 

Legislation in Slovakia remains highly complex and 
subject  to  frequent  changes.  As  an  example, 
reported  by  analyses  at  national  level,  the  15  most 
important 
legislative  acts  governing  business 
environment  were  amended  more  than  once  every 
two  weeks,  on  average,  in  the  last  decade  (2000-
2010).  This  is  associated  with  the  overwhelming 
amount  of  laws  and  regulations  for  which  targeted 
intervention  is  also  needed.  Efforts  are  to  be 

192 

towards 

legislative  simplification, 

the 
oriented 
improvement of consultation practices in the design 
of  primary 
and 
developing impact assessment capacities. 

legislation 

secondary 

and 

the 

In  2007  Slovakia  adopted  the  Action  Program  for 
Reducing  Administrative  Burdens,  establishing  a 
target  of  25 %  reduction  by  2012.  Since  2009 
important  steps  have  been  undertaken  in  order  to 
legislative  areas  for  most  urgent 
define 
intervention  and  of  greater  reduction  potential, 
although  concrete  measures  did  not  find  proper 
implementation as a follow-up. At the end of 2010, 
a  second  phase  of  assessment  has  started  and  lead 
to the definition of a set of 94 measures, included in 
the  Business  Environment 
the  Proposal  of 
Improvement  Policy,  adopted  by 
the  Slovak 
Government  in  July  2011.  With  a  main  focus  on 
administrative  burden  reduction,  law  procedures 
acceleration and improvement in impact assessment 
activities, 
the 
document 
implementation  over  the  short-  to  medium-term 
(2011-2015)  of  a  comprehensive  better  regulation 
agenda  which  has  been  lacking  so  far  in  the 
country.  In 
this  respect  and  based  on  past 
difficulties encountered in the domain, the concrete 
implementation  and  monitoring  of  the  measures 
identified will prove of utmost importance. 

proposes 

the 

In  July  2010,  an  updated  Unified  Methodology  to 
Assess Selected Effects was introduced, containing 
an  obligatory  methodology  for  evaluating  the 
impact on the business environment and other four 
areas (public finance, social area, environment and 
information  society/e-government),  to  be  used  by 
all departments when preparing legislative and non-
legislative  proposals.  The  actions  undertaken  seem 
then  to  go  into  the  right  direction  although  further 
efforts  are  still  required  for  the  new  system  to  be 
responsible 
fully  deployed 
authorities,  contributing  to  make  legislation  more 
effective. 

in  practice  by 

The transposition of the EU Services Directive was 
completed  via  a  law  in  force  since  January  2010, 
also  addressing  the  issue  of  the  points  of  single 
contact  which  are  now  in  places  for  both  legal 
persons and professions since June 2010 as well as 
for  sole  traders.  There  are  currently  50  one-stop-
shop  offices  in  Slovakia  and  8  of  them  provide 
services also to EU persons. Proposals are currently 
under  discussion  concerning  the  simplification  of 
the  business  licensing  system  and  reduction  of 
registration  fees.  The  creation  of  electronic  points 
of  single  contact  is  expected to  be  finalised  by  the 
end of 2011. 

A major challenge is today represented by the limits 
to  a  truly  cost-effective  access  to  energy  for 
transposing  EU 
business.  By  progressively 

 
regulations,  Slovakia  has  formally  liberalised  its 
energy  market  but  significant  bottlenecks  still 
persist.  Electricity  prices  paid  in  Slovakia  by 
industry  and  by  medium-sized  enterprises 
in 
particular,  are  indeed  amongst  the  highest  in  the 
EU.  High  levels  of  upstream  concentration  in  gas 
and electricity markets (e.g. the dominant producer 
accounts 
than  80 %  of  electricity 
generation)  and  low  competition  in  the  retail 
market;  excessive  use  of  price  regulation;  non-
transparent 
framework  and  price 
formation  process  are  some  of  the  main  issues 
characterising  the  current  scenario.  At  the  policy-
making  level,  focus  is  currently  given  to  the 
concrete  implementation  of  the  third  EU  Energy 
package. 

for  more 

regulatory 

A  further  obstacle  to  the  improvement  of  the 
business environment in Slovakia is associated with 
poor  enforceability  of  rights  and  underperforming 
judicial  system.  These  bottlenecks  have  been 
clearly  recognised  within  the  NRP  2011-2014  and 
specific  measures  are  expected  to be  implemented, 
in  particular,  in  order  to  streamline  civil  court 
procedures;  set  deadlines  for  action  by  courts  on 
selected  matters;  support  the  use  of  alternative 
methods  of  dispute  settlement  in  commercial  law; 
improve  the  qualification  of  personnel  and  the  use 
of  ICT  solutions;  ensure  publicity  to  judicial 
decisions  on  internet.  Effective  implementation  of 
these actions is essential. 

As  a  way  for  improving  transparency  in  public 
procurement, new rules have been introduced since 
February  2011,  based  on  an  e-auctioning  system: 
including  regional  and 
public  administrations, 
municipal  governments,  will  have  to  publish  all 
procurements, contracts and invoices above certain 
values  on  the  internet  and  contracts  will  be  valid 
only  after  publication.  The  reform  certainly  goes 
into  the  right  direction  for  ensuring  increased 
transparency  in  the  public  administration,  fighting 
corruption  and  reinforcing  trust  of  citizens  and 
businesses. 

Overall,  a  more  efficient public  administration  and 
stronger institutions in general would be beneficial 
to the business environment in Slovakia. 

4.24.5  Entrepreneurship and SME policy 

Although  the  Slovak  banking  sector  has  proved 
sound during the financial and economic crisis and 
initiatives have been taken at national level in order 
to  support  corporate  cash  flows,  lending  and 
guarantee  conditions  have  inevitably  tightened  for 
enterprises, 
the 
implementation  of  anti-crisis  measures  is  expected 
only to continue until natural conclusion while their 

particular  SMEs, 

and 

in 

extension is currently not envisaged. 

Overall,  insufficient  access  of  SMEs  to  suitable 
financing  may  represent  in Slovakia  an  obstacle  to 
the  improvement  of  the  business  environment, 
growth and job creation. This holds true especially 
with  regards 
to  small  and  micro  enterprises, 
innovative  start-ups  and  entrepreneurs  who  have 
experienced bankruptcy. 

Support  provided  by  Structural  Funds  currently 
represents  the  main  tool  available  to  SMEs  but  a 
clear  need  arises  for  improving  overall  absorption 
capacity;  simplifying  and  shortening  length  of 
procedures  and 
transparency  and 
increasing 
effectiveness.  On  the  other  hand,  despite  the 
support  offered  via  public  funds,  the  situation 
concerning  the  provision  of  guarantees  remain 
and 
problematic: 
Guarantee  Bank  (SRZB)  which  used  to  provide 
guarantees  up  to  80 %,  after  some  defaults  now 
only  guarantees  up  to  65 %  while  conditions 
applied  by  commercial  banks  for  applicants  with 
insufficient collateral remain prohibitive. 

the  Slovak  Development 

Following  new  operating  rules  adopted  by  the 
government in 2010 and the start of a restructuring 
process of the National Agency for Development of 
SMEs (NADSME) in October, traditional financing 
instruments,  such  as  a  micro-credit  scheme  run  by 
the  Agency  and 
implemented  via  partnership 
regional  centres  were  suspended  with  the  intent  to 
centralise operations, including final approval of all 
credits  to  be  allocated.  The  quick  completion  of 
such  restructuring  and  the  restart  and  possible 
reinforcement of related successful programmes are 
considered as of great importance. 

three 

Funds 

innovative 

introducing 

A  positive  development  for  improving  access  to 
financial 
funding  and 
instruments  is  certainly  represented  by  the  start, 
after several delays, of the concrete implementation 
of  the  JEREMIE  initiative,  financed  from  the  EU 
Structural 
2007-2013 
under 
Operational  Programmes  and  managed  by  the  EIF 
through  the  Slovak  Guarantee  and  Development 
Fund (SZFR). The latter was established already in 
2009  and  will  work  as  a  local  state-owned  entity, 
participated  by  SZRB  and  EIF  (until  2015),  aimed 
at  ensuring  support  to  SMEs  financing  also  in  the 
longer-term.  Three  calls  for  expression  of  interest 
from  financial  intermediaries  are  expected  to  be 
launched  in  the  second  half  of  2011,  and  the  first 
two  will  focus  on  portfolio  guarantees  and  risk 
capital,  for  the  amount  of  EUR 33 million  and 
EUR 31 million,  respectively.  The  effective  and 
timely implementation of the scheme is now crucial 
and  should  be  strongly  pursued,  as  well  as  the 
setting  up  of  a  proper  monitoring  and  evaluation 

193 

 
system. 

Officially,  today  there  is  not  an  SME  test  in  place 
and the 'think small first' principle is not concretely 
implemented  by  Slovak  authorities.  Under  the 
the  Ministry  of  Economy, 
responsibility  of 
NADSME  currently  only  conducts  an  annual 
assessment  of  the  impact  of  new  legislation  on 
SMEs, that is, an ex-post evaluation. 

Another important issue in Slovakia is associated to 
bankruptcy  and  the  lack  of  services  and  funds 
available to companies in order to promote 'second 
chance'.  In  this  respect,  no  specific  developments 
have  been  registered  lately  and  the  attempt  is  still 
today to find solutions, amongst which the selection 
of a nominee who will be in charge of coordinating 
and boosting initiatives on ‘second chance’. 

the 

supporting 

integration 

In terms of vocational training, Act 148 is in force 
since  2009,  giving  entrepreneurs  the  possibility  of 
financing training at secondary and university level, 
of 
therefore 
entrepreneurship  and  specific  skills  into  curricula. 
Projects  were  also  organised  by  NGOs  and  co-
financed by  EU  funds:  over the  period 2009-2010, 
pilot  projects  on  “Quality  in  school”  and  “Success 
in  life”  involved  more  than  40 000  students  of 
secondary  schools  and  proved  highly  successful, 
inspiring  the  preparation  for  the  future  of  a  more 
permanent approach, provided that previous actions 
in the field were more of a “one off” nature. 

in 

of 

terms 

However, 
entrepreneurship 
development,  a  weak  link  between  educational 
system  and  the  business  environment  still  persists, 
generating  a  significant  mismatch  between  skills 
demand  and  supply.  Major  obstacles  are  still 
represented  today  by  the  overall  lack  of  funds 
(which  mainly  are  of  public  nature);  too  low 
incentives 
to  cooperate  with 
educational  institutions  and  the  lack  of  a  broader 
strategy 
that 
responsibility  for  vocational  education  policies  has 

for  enterprises 

provided 

national 

level, 

at 

been progressively transferred from the government 
to regions and then to municipalities, leaving room 
for  uncoordinated  actions,  mainly  carried  out  on  a 
voluntary basis. 

4.24.6  Conclusion 

The  economic  and  financial  crisis  has  emphasised 
the 
in 
importance  of  creating  and  sustaining 
Slovakia  the  necessary  framework  conditions  for 
ensuring  substantial  improvements  in  the  business 
environment,  as  a  fundamental  prerequisite  for 
growth and job creation. This holds particularly true 
in  periods  of  complex  economic  recovery  and 
public  finances  constraint.  Calls  for  action  and 
enhanced  intervention  in  this  respect  are  not  new 
and  mainly  concern:  the  need  for  better  regulation 
and 
the 
reduction  of  administrative  burden; 
enforcement  of  legal  rights;  access  to  finance;  the 
availability  of  human  capital;  energy  prices  for 
businesses 
public 
administration. 

efficiency 

and 

the 

of 

Overall,  today  Slovakia  has  set  the  relevant  legal 
framework  for  supporting  the  development  of 
sustainable  production  and  consumption  models 
and  the  main  focus  should  be  on  the  effective 
implementation  of  available  tools  for  greening  the 
economic  system.  However,  specific  attention 
should  be  paid  not  only 
reaching 
environmental  targets  but  also  to  the  possibility  of 
exploiting  related  business  opportunities,  therefore 
increase  competitiveness,  support  innovation  and 
job creation. 

towards 

In terms of R&D and innovation, today the lack of 
a national coordinated approach adds up to the main 
challenges  represented  by  a  weaker  human  capital 
formation,  low  level  of  funding  and  quality  of 
bureaucratic 
supported 
procedures,  low  participation  of  Slovak  enterprises 
to R&D and innovation programmes and weak ties 
between  industry  and  academia  sectors.  All  these 
issues would benefit from targeted responses. 

activities, 

highly 

194 

 
 
4.25  Finland 

Finland

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2005)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

195 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Finland (2009) 

Refined petroleum products

Chemicals, chemical products

Rubber and plastic products

Paper products; publishing and printing

Leather and leather products
Wood and wood products

Textiles and textile products

Machinery and equipment n.e.c.

Food products

Manufacturing n.e.c.

Transport equipment

Other non-metallic mineral products

Basic metals and fabricated metal products

Electrical and optical equipment

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.25.1 

Introduction 

Trade and industry specialisation 

in  knowledge 

Finland belongs to the group of EU Member States, 
which  is  characterised  by  higher  income  and  a 
specialisation 
intensive  sectors 
(group  1).  The  contribution  of  manufacturing  to 
total  value  added  is  higher  in  Finland  than  in  the 
EU on average (18.2 % against 14.9 % in 2009). In 
comparison  with  a  year  earlier,  the  importance  of 
manufacturing  has  somewhat  declined  (22 %  vs. 
17 %  of  total  value  added  in  2008).  The  economic 
and financial crisis, which led to an historical drop 
in  Finnish  manufacturing  output,  exports,  and  in 
industry value added in 2009, has had an impact on 
the 
the  Finnish 
economy.  More  than  40 000  jobs  were  lost  in  the 
technology industry alone.122 

industry  driven  structure  of 

At detailed manufacturing industry level (NACE 3-
digit),  Finland  is  specialised  in  capital-intensive 

122  

The Federation of Finnish Technology 
Industries, 27/05/2011, 
http://www.teknologiateollisuus.fi/fi/uutis
huone/tiedotteet/2011-5/kilpailukyvyn-
heikkeneminen-vaarantaa-suomalaiset-
tyopaikat. 

196 

(manufacture  of  pulp,  paper  and 
industries 
paperboard),  both  in  terms  of  value  added  and 
exports,  as  well  as  in  mainstream  manufacturing 
(agricultural  and 
forestry  machinery,  electric 
motors) and labour-intensive industries (sawmilling 
and  planning  of  wood,  steam  generators,  building 
and  repairing  of  ships).  As  regards  exports  and 
technology-driven  industries  (apparatus  for  line 
telephony),  Finland  features specialisation  in  value 
added  only.  At  the  more  aggregated  sector  level 
(NACE  2-digit),  Finland  is  specialised  in  highly 
(communication 
innovation-intensive 
equipment)  and, 
in  medium 
innovation-intensive sectors (pulp and paper, wood 
and  cork).  Finland  is  not  specialised  in  high 
education  sectors,  due  to  low  relative  shares  in 
R&D and in business services. 

sectors 
in  exports,  also 

its 

Given 
industrial  structure,  Finland’s  R&D 
intensity  and  position  on  the  quality  ladder  for 
technology-driven industries are well above the EU 
average. However, the quality indicators for labour-
intensive  industries  are  below  the  EU  average 
(interestingly, 
the  other 
the  same  applies 
Scandinavian  countries).  Overall,  within  the  group 
of  higher 
in 
knowledge-intensive  industries,  Finland  is  more 
similar  to  countries  featuring  specialisation  in 
as 
knowledge-intensive  manufacturing, 

specialised 

countries 

income 

such 

to 

 
 
                                                 
Germany,  Austria  and  Sweden,  than  to  countries 
specialised in knowledge-intensive services. 

with  respect  to  competitiveness,  however,  both 
structural  change  and  trends  within  sectors  (R&D 
intensity  and  quality  upgrading)  may  present  risks 
for competitiveness in the medium term. 

Most prominent sectors in Finland 

4.25.2  Towards an innovative industry 

Highest relative value added (2007)
Radio, television and communication equipment
Pulp, paper and paper
Wood and products of wood and cork

Change in the relative value added (1999/2007)
Increasing specialisation
Radio, television and communication equipment
Coke, refined petroleum and nuclear fuel
Recycling
Decreasing specialisation
Post and telecommunications
Water transport
Pulp, paper and paper products

Structural change 

its 

trade  specialisation 

terms  of  structural  change,  Finland  has 
In 
drastically  reduced 
in 
technology-driven  industries  (manufacture  of  TV 
and  radio  transmitters).  This  is  in  contrast  with 
increasing 
industry  specialisation  and  can  be 
explained by the more recent trade data, which may 
reflect  Nokia’s  problems  with 
smartphones. 
Moreover,  Finland  has  increased  its  specialisation 
in  mainstream  manufacturing 
transport 
equipment,  forestry  machinery)  as  well  as  in  high 
innovation and education sectors (machinery, R&D, 
business  services).  Finland’s  R&D  intensity  is 
declining,  considering  its  industrial  structure,  and 
its  movement  on  the  quality  ladder  is  mixed,  with 
some segments improving and others deteriorating.  

(other 

Manufacturing  production  fell  by  some  27 % 
during the recent crisis and suffered sharp reversals 
at the beginning of 2010 and again in early 2011. In 
April  2011  manufacturing  output  was  still  23.5 % 
lower 
its  previous  cyclical  peak. 
Technology-driven  industries  saw  a  considerable 
slump, which may be explained partly by the crisis, 
but also by ongoing restructuring. 

than  at 

a 

in 

loss 

cost 

Finland has experienced a moderate appreciation of 
the real effective exchange rate over the last decade 
(11%,  compared  to  21%  in  the  EU27),  indicating 
nevertheless 
price 
competitiveness.  Nominal  unit  labour  costs  have 
increased  by  22%  between  2000  and  2010, 
compared  to  an  increase  of  14%  in  the  EU27  and 
20% in the Euro area. Labour productivity per hour 
worked  is  about  11  percentage  points  above  the 
EU27  average  but  3  percentage  points  below  the 
Euro area average. 

and 

Overall, while Finland enjoys a favourable position 

197 

Finland  has  a  very  good  innovation  performance 
that puts this country in the group of EU innovation 
leaders.  Finland  scores well  above  the  EU average 
in  terms  of  high  quality  scientific  publications, 
patents  and  their  contribution  to  a  knowledge-base 
economy.  Both  public 
and  private  R&D 
expenditure is well above EU average. Despite high 
public  R&D  inputs,  only  a  relatively  small  part  of 
companies  are  active 
innovation 
activities. Maintaining the level of R&D funding at 
a minimum of 4 % up to 2020 is a national goal in 
the  context  of  the  EU2020  Strategy,  where  the 
share of public investment should be at least 1.2 % 
of  GDP  and  the  share  of  private  sector  investment 
at least two thirds. The on-going restructuring in the 
ICT  sector  is  expected  to  have  an  impact  on  the 
business  R&D 
intensity,  which  may  decrease 
already in 2012.  

regular 

in 

As  an  innovation  leader  Finland  faces  a  particular 
competitiveness challenge. Finnish industry sectors, 
particularly  firms  in  ICT,  forest-based  industries, 
and  mechanical  engineering  have  already  reached 
the  international  productivity  front.  This  implies 
that  further  growth  requires  experimental  R&I, 
rather  than  achieving  growth  by  relatively  more 
simple catch-up strategies.  

problem 

structural 

regarding 
The  main 
internationalisation  of  the  R&I  system  is  the  low 
share  of  foreign  experts,  researchers  and  students 
compared  to  most  western  European  countries. 
Lack of foreign human capital poses a challenge in 
efforts  to  create  an  internationally  competitive 
innovation environment. Although being among the 
scientific  and  technological  leaders  in  Europe, 
Finland's 
science  and 
technology still remains behind the reference group, 
notably in terms of technological cooperation. This 
may  signal  an  untapped  potential  for  progress  that 
could  benefit  future  competitiveness  and  growth. 
Other major challenges are a low volume of inward 
FDIs, a fragmented innovation support system, and 
a 
innovative  growth-oriented 
companies.  

internationalisation 

low  number  of 

in 

Against  this  background,  the  entire  research  and 
innovation system is currently undergoing reforms:  

- 

In  2008,  a  new  innovation  strategy  was 
adopted,  which  advocates  transformation 
towards  a  broad-based  innovation  policy 

 
 
 
 
with demand and user based elements. 

- 

by 

followed 

In  2009,  a  broad  international  evaluation 
of  the  Finnish  innovation  system  was 
completed 
action 
programme  for  2010-2013,  which  aims  at 
improving  the  effectiveness  of  innovation 
policy  by  increasing  the  number  of  actors 
and by utilising innovations also in solving 
challenges in society.  

an 

-  Comprehensive  research  and  innovation 
policy  guidelines  for  2011-2015  were 
adopted  by  the  Research  and  Innovation 
Council  chaired  by  the  Prime  Minister 
setting out the national strategic guidelines 
for the next few years. 

-  Major  policy  developments 

include  a 
possible R&D tax incentive for companies, 
a new strategy for the government funding 
agency  (Tekes),  and  a  major  university 
funding reform.  

-  Diversification will be promoted by broad-
based investment in expertise and research 
quality,  for  example  through  the  Finland 
Distinguished 
(FiDiPro) 
programme,  which  is  a  joint  funding 
programme  of  Aalto  University, 
the 
Academy of Finland and Tekes. 

Professor 

- 

Public-private  partnerships 
(PPPs),  or 
Strategic Centres for Science, Technology 
and Innovation (known as SHOKs)123, will 
be  used  to  speed  up  innovation  processes 
and renewal in traditional industry sectors. 
An  evaluation  of  the  Strategic  Centres  of 
Excellence  in  Science,  Technology  and 
Innovation will begin in 2011.  

The  Finnish  education  system  performs  well  in 
relation  to  all  European  benchmarks  and  headline 
targets.  Finland  scores  well  above  the  average  on 
indicators  measuring  human  resources  in  science 
and  technology,  which  represents  34%  of  total 
employment  and  29%  of  all  degrees.  Participation 
in lifelong learning has traditionally been very high 
in  Finland  (22.1%  in  2009  while  the  EU  average 
was  9.3%).  In  view  of  emerging  new  skills 
requirements and the demographic changes there is 
a  need  to  ensure  its  adequate  provision  also  in  the 
future.  Efficient  foresight  systems  exist  to  predict 

123  

“SHOKs”  are  Strategic  Centres 
for 
Science,  Technology  and  Innovation  and 
operate  in  six  strategic  areas:  forest,  ICT, 
metals  and  engineering,  energy  and 
environment, 
environment 
built 
innovations, health and well-being. 

the  needs  of  the  future  labour  market,  but  their 
results  need  to  be  put  into  practice  also  on  a 
regional basis, which is a long-term challenge. 

4.25.3  Towards a sustainable industry 

are 

industrial 

the  major 

The  Finnish  industrial  sector  is  more  energy-
intensive  compared  to  the  EU  average.  The  pulp 
and  paper  industry,  as  well  as  the  iron  and  steel 
energy 
industries 
consumers  in  Finland.  Finnish  industry,  research 
institutes  and  universities  are  working  together  to 
develop  globally  competitive 
in 
energy  and  environment.  The  overall  objective  of 
The  Finnish  Energy  and  Environment  Competence 
Cluster124 established in 2008 is to leverage Finnish 
competitiveness to top level in international energy 
and  environmental  markets.  Its  research  agenda 
includes  reducing  energy  intensity  in  products  and 
services  and 
in 
industrial processes.  

improving  energy  efficiency 

technologies 

The  Climate  and  Energy  Strategy  adopted  in  2008 
envisages  that  growth  of  energy  consumption  will 
be  halted  and  reduced  by  2020.  According  to  the 
Climate  and  Energy  Strategy  Finland  has  set  a 
primary  energy  saving  target  of  49  TWh.  A 
Government  Foresight  Report  on  Climate  and 
Energy  Policy  published  at  the  end  of  2009 
supplements  the  strategy  from  2020  onwards  by 
setting long-term targets for priority areas, such as, 
reducing  greenhouse  gas  emissions  and  energy 
efficiency of buildings. In June 2009, a broad-based 
Energy  Efficiency  Committee  proposed  125 
measures to achieve the 37 TWh of energy-savings 
by  2020.  Based  on  the  Committee’s  report,  in 
February 2010 the Finnish Government adopted an 
Action  Plan  on  intensifying  measures  to  enhance 
energy efficiency to be implemented in 2010-2020. 
It  is  estimated  that  the  greatest  savings  of  energy 
could  be  achieved  in  industry  and  services  (13.4 
TWh)  and  transport  (12.7 TWh)  sectors.  Finland 
plans  to  tighten  energy  efficiency  regulations  for 
new  buildings  from  the  beginning  of  2012  by 
around 12 %.  

Developing  an  efficient  energy  system  has  been  a 
long-standing priority in the Finnish energy strategy 
driven  by  high  domestic  energy  needs  and  scarce 
energy resources. Voluntary agreement schemes are 
applied in a drive to promote energy efficiency and 
the 
for 
latest  energy  efficiency  agreements 
industries  were  signed  for  the  period  2008-2016. 
During  1998-2008  Finnish 
companies  have 
voluntarily  invested  nearly  EUR 400 million  in 
energy  efficiency.  The  agreements  will  play  a 

124  

CLEEN  Ltd.  is  one  of  the  Strategic 
Centres 
for  Science  and  Technology 
(SHOKs). 

198 

 
                                                 
                                                 
is 

to  make 

the  agreements  are  a  part  of 

central  role  in  the  national  implementation  of  the 
EU  Energy  Services  Directive  applying 
to 
companies that are not part of the emissions trading 
scheme.  The  goal 
their  energy 
consumption  9 %  more  efficient  by  2016. 
the 
Moreover, 
implementation  of  the  EU  climate  action  and 
renewable  energy  package125.  The  continuous 
modernisation  of  the  energy  system  has  helped 
Finnish  energy  related  technology  to  reach  world-
class  standard  providing  opportunities  for  energy 
technology  exports,  which  has  been  growing  in 
recent years.  

Finland  has  signed  up  to  an  EU  commitment  to 
raise  the  use  of  renewable  energy  to  38 %  of  its 
overall  energy  production  by  2020.  Currently  the 
share  is  about  30 %.  To  respond  to  this  challenge, 
the  Finnish  government  agreed  in  April  2010  to 
fund the growth of renewable energy, mainly wood-
based  energy,  wind  power,  biofuels  and  heat 
pumps. The renewable energy package will include 
feed-in-tariff  for  wind,  biogas,  and  small-scale 
combined  heat  and  power  production.  In  total,  the 
support  for  renewable  energy  will  be  more  than 
EUR 300 million per year by 2020126. On 1 January 
2011,  Tekes  (the  Finnish  funding  agency  for 
technology  and 
launched  a  new 
innovation) 
programme  “Groove-Growth  from  Renewables”, 
which will run from 2010-2014 with a total budget 
of  EUR 96 million.  The  main  objective  is  to  find 
new  ways  of  commercialising  technology  more 
swiftly  by  enhancing  the  business  capabilities  and 
international  competitiveness  of  Finnish  SMEs 
working on renewable energy. 

The  relative  share  of  waste  generated  by  Finnish 
enterprises  is  one  of  the  highest  in  the  EU.  The 
largest  amounts  of  waste  are  generated  within  the 
construction,  and  the  mining  and  quarrying  sector. 
The goal of the new Waste Act, which was adopted 
in March 2011, is to reduce the amount and adverse 
effects  of  waste  and  to  promote  sustainable  use  of 
natural  resources.  The  waste  tax,  gradually  to  be 
raised  in  2011  and  2013,  is  extended  to  cover  all 
waste that is delivered to landfill sites which from a 
technical  and  environmental  perspective  could  be 
utilised.127 

In  comparison  with  other  industrialised  countries, 
Finland’s  economy  is  extensively  based  on  natural 

125 

126 

127  

http://www.energy-

enviro.fi/index.php?PAGE=17&NODE_I
D=19&LANG=1. 

http://www.energy-
enviro.fi/index.php?PAGE=2&NODE_ID
=4&ID=3101. 
Finland’s  National  Reform  Programme 
2011. 

resources (such as forest, mineral ores, and peat). A 
report  on  “Building  an  Intelligent  and  Responsible 
Natural  Resource  Economy”  was  submitted  to  the 
Parliament by the Finnish Government in February 
2011. It defines a vision for 2050 where Finland is 
pioneering the development of a responsible natural 
resources economy.  

4.25.4  The business environment 

Finland  scores  significantly  above  the  EU  average 
concerning  almost  all  business  environment 
indicator categories, with the exception of business 
churn and the availability of high-speed broadband 
lines,  where  it  scores  slightly  below  average. 
Regarding  the latter  indicator,  as from  1 July  2010 
Finland  became  the  first  country  in  the  world  to 
recognise broadband access to 1 Mbps (Megabit per 
second)  as  a  universal  legal  right.  The  national 
broadband  action  plan  2009-2015  is  ambitious 
aiming  at  making  connections  of  very  high  speed 
(100 Mbps)  available  throughout  the  country  to 
permanent  residencies,  business  premises  and 
government offices from 2015.  

In  Finland,  the  Better  Regulation  Strategy  is 
embedded in the 2011 Government Programme and 
Government  Strategy  Document 
implementing 
them.  It  includes  tools  and  processes,  such  as  the 
forward looking legislative plan, the instructions on 
effective  law  drafting,  legal  quality  and  ex  ante 
impact 
and 
administrative burden reduction for businesses. The 
Prime Minister’s Office and the Ministry of Justice 
are 
the 
Government legislative plan in accordance with the 
Government Programme. 

the  monitoring  of 

simplification 

assessment, 

responsible 

for 

Uniform ex ante impact assessment guidelines were 
adopted  in  2007,  which  include  assessing  the 
impacts  on  SMEs,  entrepreneurship  and  growth  of 
enterprises.  The  responsibility  of  conducting  an 
impact assessment is decentralised. The Ministry of 
Employment  and  the  Economy  has  the  lead  in 
assessment  of  impacts  on  enterprises,  including 
costs  and  earnings,  competition  and  functioning  of 
the  market,  SMEs,  entrepreneurship  and  growth 
opportunities, 
innovation  and 
international  competitiveness.  These  developments 
are  a  step  in  the  right  direction,  but  there  is  still 
scope  for  making  the  impact  assessment  more 
systematic 
through  a  uniform  application  of 
guidelines. In particular, the assessment of impacts 
on  SMEs  should  be  more  strongly  integrated  into 
the 
ex-post 
assessment.  

legislative  process 

investments  and 

instead  of 

Public  consultation  of  stakeholders  on  new 

199 

 
                                                 
 
regulations is based on guidelines adopted in 2010, 
and recent trends include electronic consultation in 
order  to  encourage  a  wider  participation.  Further 
efforts are needed to make the consultation process 
more  standardised  and  to  involve  the  maximum 
the 
number  of  stakeholders.  In 
programme  Sähköinen  asiointi  ja  demokratia  (e-
services  and  e-democracy,  SADe  2009-2013)  will 
establish  a  modernised  version  of  an  interactive 
participation environment.  

this  respect, 

In March 2009, the Government approved an action 
plan  2009-2012  for  reducing  the  administrative 
burden on businesses. The aim of the action plan is 
to  reduce  the  administrative  burden  by  25 % 
compared to 2006 level by 2012. According to the 
baseline  estimates, 
the  overall  administrative 
burden on businesses in Finland is slightly under €2 
billion.  In  terms  of  the  eight  priority  areas  of  the 
action  plan,  the  greatest  administrative  burden  is 
imposed  by  statutory  employers’ 
information 
obligations  and  taxation  amounting  to  over  one 
billion euro every year. One of the key methods of 
reducing the administrative burden on business is to 
develop  eGovernment  and  projects  are  under  way 
within all the priority areas of the action plan. The 
electronic  communication  services  for  central 
government are coordinated by means of the SADe 
programme,  which  aims  at  making  electronic 
communication  with  all  key  services  possible  for 
both public and individual companies by 2013. 

online 

improved 

In  2010,  Finland  was  one  of  the  top  performers  in 
the  EU  on  most  eGovernment  benchmarks.  It  has 
considerably 
availability, 
especially for enterprises (from 50 % to 88 %) and 
leads  in  eGovernment  usage  and  userfriendliness. 
Regarding  eProcurement,  Finland  still  lags  behind 
the  EU  average,  but  has  a  mandatory  notification 
is 
database 
developing  non-mandatory  common  platforms  for 
the other phases of eProcurement128. 

for  ongoing  public 

tenders  and 

The  one-stop-shop  to  start-up  a  company  (in  the 
Trade Register of the National Board of Patents and 
Registration (PRH) is fully operational. 

Competition  in  services  continues  to  be  partly 
hindered  by  regulations,  despite  some  recent 
loosening.129  There 
are  occasionally  highly 
concentrated business structures, particularly in the 

128  

129  

2011, 9th eGovernment Benchmark Report, 
http://ec.europa.eu/information_society/ne
wsroom/cf/item-detail-
dae.cfm?item_id=6537. 
Commission Staff Working Paper 2011, 
Assessment of the 2011 national reform 
programme and stability programme for 
Finland. 

130  

131  

200 

wholesale and retail trade, which are reflected in a 
relatively  high  consumer  price  level,  although  a 
small domestic market and long transport distances 
may  also  be  attributable  to  the  higher  consumer 
price level. The Finnish aggregate price level is the 
third highest in the EU, and the consumer prices for 
food and non-alcoholic beverages the highest in the 
euro  area.  More  competition,  particularly  in  the 
services  sector,  has  become  increasingly  relevant 
for  enhancing  potential  economic  growth  and 
stimulating innovation with impact on productivity. 
The R&D intensity in the service sector is currently 
relatively  low,  where  59%  of  companies  are  not 
active in regular innovation activities.130   

4.25.5  Entrepreneurship and SME policy 

Finland  scores  above  the  EU  average  on  all 
indicators  regarding  entrepreneurship  and  SMEs, 
except  on  the  share  of  high-growth  enterprises  as 
percentage  of  all  enterprises.  SMEs  constitute  the 
majority  of  all  enterprises  (99.8 %),  of  which 
represent  93 %131.  Although 
micro-enterprises 
entrepreneurial activity in Finland is currently at an 
all  time  high  (almost  50  firms/1000  inhabitants, 
2009), the number of high-growth enterprises is low 
in EU comparison and some weaknesses exist in the 
conditions  for  entrepreneurship.  For  example, 
entrepreneurship  culture  is  not  supporting  high-
growth  ventures,  risk  taking  and  learning  from 
failure.  Innovative  high-growth  companies  are  a 
key  issue,  which  is  addressed  in  several  growth 
venture policy measures:  

-  A new financing instrument for innovative 
companies  was  launched  by  the  Finnish 
Funding  Agency  for  Technology  and 
Innovation (Tekes) in 2008; 

-  The  Vigo  Start-up  Accelerator 

for 
innovative  fast  growing  companies  was 
launched in 2009. Currently six accelerator 
enterprises  are  active  on  clean  technology 
ventures, 
innovative  human  nutrition 
related  businesses,  web  and  mobile,  life 
sciences 
information 
technology,  media  technology,  B2B  ICT 
and ICT enabled growth businesses;  

telecom 

and 

- 

Fund  for  Growth  Funds:  Joint  fund  of 
private  pension  insurance  companies  and 
Finnish Industry Investment Ltd (2008); 

innovation  council  of 
innovation 

Research  and 
Finland:  Research 
guidelines 2011-2015. 
Estimate  by  FI  Ministry  of  Employment 
and The Economy, 2008. 

and 

 
                                                 
                                                 
-  Establishment  of 

regional  evaluation 
service  of  business  ideas  coming  from 
private  inventors  (Foundation  for  Finnish 
Inventions, 2009); 

-  Growth  Avenue:  A  joint  “one  stop  shop” 
service for growth oriented-companies that 
have a clear strategy to internationalise of 
which  there  are  five  pilot  projects  testing 
whether  to  expand  the  service  to  national 
level. 

- 

- 

Proposed  policy  measures 
venture policy include: 

in  growth 

Possible  introduction  of  an  R&D  tax 
incentive for all enterprises to increase the 
number  of  start-ups  with  great  growth 
potential  and  to  promote  the  innovation 
culture among SMEs.  

(for  example  possible 

-  Measures  to  improve  access  to  equity 
tax 
financing 
incentive  for  business  angels,  increased 
risk taking by public financing institutions, 
establishment  of  new  sector  specific  VC 
funds (mining, forests, etc); 

-  Reforming 
structure 
universities. 

the 

and 

technology 
procedures 

transfer 
the 
of 

At EU level, ERDF funding is supporting measures 
in  favour  of  enterprise  development  and 
the 
innovation system (applied research and interaction 
and  cooperation  between  research  centres  and 
enterprises). 

to  promote 

Due  to  the  structure  of  Finnish  exports  and 
exporting  industry,  peripheral  location  and  small 
home  market,  appropriations 
the 
internationalisation  of  companies  have  been 
increased  and  services  have  been  enhanced.  The 
FinNode  network  was  expanded  to  India  in  2011, 
internationalisation  is  promoted  through  several 
agencies (ex. Finpro, Tekes), financing instruments 
(Finnvera)  and 
joint 
internationalisation  projects  involving  a  minimum 
of  four  companies.  A  strategic  programme  in  the 
forest 
international 
business  in  the  wood  products  sector  and  to 
increase  cooperation  with  sector  enterprises  and 
the 
advocacy  groups.  A  strategy  paper  on 
internationalisation  of  companies  and  export 
promotion  2011-2015  was  published  in  2011, 
which  concludes  that  the  current  support  system  is 
fragmented and would benefit from streamlining in 

through  State  aid 

industry  aims 

to  expand 

for 

order  to  better  cater  to  the  needs  of  enterprises 
aiming at international markets132. 

A  particular  challenge  relates  to  business-transfers 
due  to  the  age  structure  of  the  entrepreneur 
population in Finland. About 28 % of entrepreneurs 
are over 55 years of age and over half of them are 
aged  between  35  and  54  years.  The  current 
estimations show that about 10 000 businesses face 
a transfer of ownership every year. Action has been 
taken to raise awareness among aging entrepreneurs 
on the business transfer-related issues and available 
services,  but  sustained  measures  would  be  needed 
to ensure the transfer of viable businesses. 

secondary 

system.  Conditions 

Entrepreneurship  is  included  in  school  curricula 
both in lower secondary school curricula and in the 
upper 
study  programmes.  Female 
is  promoted  by  strengthening 
entrepreneurship 
business  expertise,  peer  guidance  and  a  business 
mentoring 
cultural 
entrepreneurship will be improved and employment 
strengthened through measures in the Development 
Programme 
and 
Internationalisation of Creative Sectors 2007-2013, 
and 
the  Creative  Economy  Strategy. 
Entrepreneurship  in  the  sports  and  exercise  sector 
will  be  reinforced  through  a  development  strategy 
extending to 2020. 

Business 

Growth 

for 

for 

in 

4.25.6  Conclusion 

Overall,  Finland  enjoys  a  favourable  position  with 
respect to competitiveness, however both structural 
change  and  trends  within  sectors  (R&D  intensity 
and  quality  upgrading)  may  present  risks  for 
competitiveness in the medium term. Finland faces 
a  number  of  challenges, 
the 
globalisation  driven  restructuring,  especially  in  the 
dominant  ICT  sector,  has  made  it  even  more 
relevant  to  diversify  the  economy,  attract  FDI  and 
promote  high-growth  companies  and  spin-offs  that 
are  internationalising  successfully.  Improving  the 
external competitiveness of enterprises and industry 
is also important for employment creation. 

in  particular 

in 

the 

the 

exist 

is  high, 

conditions 

Although  entrepreneurial  activity 
the 
number  of  high-growth  enterprises  is  low  and 
for 
weaknesses 
entrepreneurship.  The national  policy  measures for 
improving 
and 
modernising the industrial base broadly address the 
main challenges. There are several policy initiatives 
for  promoting  innovative  high-growth  enterprises. 
Regarding 
for 
entrepreneurship,  a  speedy  implementation  of  the 
recently  updated  Small  Business  Act  would  be 

improvement 

environment 

conditions 

business 

of 

132 

http://www.tem.fi/files/29592/YKE-

linjaus_2011-2015.pdf. 

201 

 
                                                 
measures  would  be  important  to  reach  the  climate 
change targets, but also to help address commodity 
price shocks. The mid-term  review of the National 
Climate and Energy Strategy foreseen by the end of 
2011  is  an  opportunity  to  assess,  whether  the 
is 
financing  available 
appropriate.  The  proposed  actions  in  the  National 
Renewable  Energy  Action  Plan  may  however  be 
insufficient for reaching the national target of 38 % 
in  final  energy 
of  renewable  energy  sources 
consumption  by  2020,  due  to  high  reliance  on 
biomass.  

for  energy  efficiency 

occasionally 
the 

Existing business structures in the services market, 
particularly  in the  food,  wholesale  and  retail  trade, 
concentrated.  By 
are 
highly 
redesigning 
and 
regulatory 
removing  restrictions,  new  entry  to  the  service 
markets  could  be  facilitated  paving  the  way  for 
more  competition,  productivity  growth,  and 
prices.
downward 

framework 

pressure 

on 

important. Measures to improving attitudes towards 
entrepreneurship  and  risk-taking  and  promoting 
SMEs  access  to  public  procurement,  including 
implementation  of  the  ‘European  Code  of  Best 
Practices’, 
this  context  of  particular 
importance.  

in 

is 

system 
for 

and  developing 
competitive 
a 

Finland  has  showed  commitment  to  a  holistic 
development  of  its  R&I  system  and  is  one  of  the 
EU innovation leaders. Nevertheless, there is scope 
for  further  streamlining  the  national  innovation 
framework 
support 
conditions 
innovation 
environment, attracting more foreign human capital 
and 
for 
supporting  open 
innovation  and  user-driven 
innovation projects are still at an initial phase. The 
Strategic  Centres  for  Science,  Technology  and 
Innovation  are  innovative  initiatives  aiming  at 
leveraging Finnish competitiveness. 

investments.  The  current 

schemes 

Finnish  industry  is  relatively  energy-intensive  and 
implementing  energy  efficiency  related  policy 

202 

 
 
4.26  Sweden 

Sweden

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked (EU27=100; 2010)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2010)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

203 

 
 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – Sweden (2009) 

Refined petroleum products

Paper products; publishing and printing

Chemicals, chemical products

Rubber and plastic products

Wood and wood products

Textiles and textile products

Food products

Machinery and equipment n.e.c.

Manufacturing n.e.c.

Other non-metallic mineral products

Transport equipment

Basic metals and fabricated metal products

Electrical and optical equipment

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.26.1 

Introduction 

Trade and industry specialisation 

industry 

The  contribution  of  manufacturing  to  total  value 
added  is  marginally  higher  in  Sweden  than  in  the 
EU  on  average  (15.5 %  against  14.9 %).  At  the 
detailed  manufacturing 
level,  Sweden 
features  value  added  and  exports  specialisation  in 
capital-intensive  industries  (pulp  and  paper,  first 
processing  of  iron  and  steel),  as  well  as  in 
mainstream manufacturing (isolated wire and cable, 
general  and  special  purpose  machinery)  in  exports 
and in technology-driven industries (manufacture of 
TV  and  radio  transmitters  and  receivers)  in  value 
added. At the more aggregated sector level, Sweden 
is specialised in highly innovation-intensive sectors 
(communication  equipment,  machinery,  medical, 
precision, and optical instruments, R&D, software) 
and  medium-high  to  medium  education  sectors 
(pulp  and  paper).  In  exports,  Sweden  features 
specialisation also in high education sectors, due to 
high  relative  shares  in  royalties  and  license  fees, 
computer and information services and research and 
development. 

Given  its  industrial  structure,  Sweden’s  R&D 
intensity is well above the average, as is its position 
technology-driven 
on 

the  quality 

ladder 

for 

industries.  By  contrast,  its  position  on  quality 
indicators  for  labour-intensive  industries  is  below 
the  EU  average  (interestingly,  just  like  the  other 
Scandinavian  countries).  Its  share  of  high-growth 
firms is above the EU average. Overall, within the 
group  of  higher  income  countries  specialised  in 
knowledge-intensive  industries,  Sweden  is  more 
similar  to  countries  featuring  specialisation  in 
knowledge-intensive  manufacturing 
as 
Germany,  Austria  and  Finland,  rather  than  in 
knowledge-intensive services. 

such 

Most prominent sectors in Sweden 

Highest relative value added (2007)
Pulp, paper and paper
Radio, television and communication equipment
Wood and products of wood and cork

Change in the relative value added (1999/2007)
Increasing specialisation
Renting of machinery and equipment
Real estate activities
Wood and products of wood and cork
Decreasing specialisation
Air transport
Motor vehicles, trailers and semi-trailers
Water transport

Structural change 

204 

 
 
 
 
 
transmitters  and  receivers); 

In  terms  of  change,  Sweden  has  increased  its 
relative share in labour-intensive industries (bodies 
for  motor  vehicles,  sawmilling)  while 
it  has 
decreased  its  relative  share  of  technology-driven 
industries  (motor  vehicles,  aircraft  and  spacecraft, 
in 
radio  and  TV 
exports,  Sweden  has  gained  relative  shares  in 
marketing-driven industries (prepared animal feeds, 
processing  and  preserving  of  fish,  footwear). 
Furthermore,  Sweden  has  increased  its  relative 
share  of  high  education  sectors  and  its  relative 
export share of high innovation sectors (computers, 
R&D,  computer  and  information  services).  As  a 
its  R&D 
consequence  Sweden  has 
intensity  given  its  industrial  structure,  but  has 
reduced somewhat its position on the quality ladder, 
as demonstrated in Figures 2 to 5. 

improved 

The  crisis  seems  to  have  had  a  limited  impact  on 
Sweden’s  industrial  structure.  Swedish  industrial 
production  fell  by  almost  25 %  during  the  crisis, 
bottoming  out  in  May  2009  (seasonal  variations 
taken  into  account).  The  recovery  since  then  has 
been strong but is still 9 % lower (April 2011) than 
at its previous peak.  

the 

Sweden  is  among  the  few  Member  States  which 
have experienced a depreciation of the real effective 
exchange  rate  during 
last  decade  (-9%, 
compared to an appreciation of 21% in the EU27), 
indicating a gain in cost and price competitiveness. 
Nominal  unit  labour  costs  have  increased  by  16% 
between 2000 and 2010, compared to an increase of 
14%  in  the  EU27  and  20%  in  the  Euro  area. 
Sweden's  labour  productivity  per  hour  worked  is 
about 15 percentage points above the EU27 average 
and  2  percentage  points  above  the  Euro  area 
average. 

Overall, while Sweden enjoys a favourable position 
with  respect  to  competitiveness,  its  pattern  of 
change  in  specialisation  and  sectoral  upgrading  is 
mixed,  improving  in  some  areas  while  others 
deteriorate. 

4.26.2  Towards an innovative industry 

including 

The  Innovation  Union  Scoreboard  2010  ranked 
Sweden as one of four innovation leaders in the EU, 
its innovation performance being among the highest 
of  all  compared  countries.  The  Swedish  national 
innovation  system  shows  clear  strengths  in  several 
stable  macroeconomic 
areas, 
environment, a well-educated workforce, a number 
of  R&D-intensive  multinational  corporations, 
appropriate 
public 
investments  in  activities  related  to  R&D  and 
capital 
innovation,  high 
availability 
scientific 
and 
performance.  These  strengths  are  reinforced  by 

levels  of  venture 
state-of-the-art 

infrastructures, 

ambitious 

a 

Sweden  being  highly 
markets. 

integrated 

into  global 

Sweden  remains  one  of  the  top  performers  in  the 
world  in  terms  of  R&D  spending.  Total  R&D 
expenditure  (BERD  and  public  R&D  spending 
combined)  is  predicted  to  have  reached  3.8 %  of 
GDP  in  2010,  well  above  the  EU  average  and  not 
far from the target Sweden has set itself for 2020 of 
around  4.0 %.  The  commercialisation  of  research 
results  on  the  other  hand  remains  a  problem.  In 
comparison  with  other  countries  around  the  world 
with very high R&D spending, Swedish researchers 
appear less able to turn their results into innovative 
and  growth-enhancing  products,  processes  and 
services  (an  observation  known  as  ‘the  Swedish 
paradox’),  so 
to  be  room  for 
improvement  in  the  commercialisation  of  research 
results. 

there  appears 

in  Sweden 

the  economy 

The  share  of  science  and  technology  graduates 
among  20-to-29-year-olds 
stayed 
virtually  unchanged  from  2007  to  2009  (the  latest 
year  for  which  data  are  available)  but  meanwhile 
the  EU  average  share  has  increased  considerably 
and Sweden is now slightly below average, whereas 
in last year's assessment it was above average. The 
sectors  of 
in  which  Sweden 
specialises require high-intermediate skills; the risk 
of  skill  shortages  therefore  needs  to  be  taken 
seriously.  In  this  regard,  the  introduction of  higher 
vocational  education  through  the  establishment  in 
2009  of  the  Swedish  National  Agency  for  Higher 
Vocational Education was timely and relevant. The 
introduction 
their 
certification  by  social  partners  represent  another 
step in the right direction. 

‘Teknikcolleges’ 

and 

of 

and 

innovations, 

A  recent  addition  to  the  innovation  landscape  in 
Sweden  is  the  creation  of  innovation  offices  at 
Swedish  universities  and  equivalent  institutions.  A 
total  of  eight  innovation  offices  have  been  set  up 
with  the  aims  of  helping  commercialise  research 
results 
stimulating 
entrepreneurship at universities, and assisting in the 
creation  of  spin-off  companies.  Eleven  institutions 
have access to the services of the innovation offices 
and  are  legally  bound  to  assist  institutions  without 
and 
access 
entrepreneurship efforts. The creation of innovation 
offices  is  a  positive  development  which  may  help 
address 
the 
Swedish  R&D  and  innovation  system.  It  would 
however seem appropriate to evaluate, by 2012 and 
on  a  regular  basis  thereafter,  the  activities  of  the 
innovation offices in order to draw lessons from the 
first years of operation and allow improvements to 
be made. 

the  commercialisation  deficit  of 

commercialisation 

their 

in 

Another  new  initiative  is  the  publicly-owned  risk 

205 

 
is 
capital  company  ‘Inlandsinnovation’  which 
expected to start investing in 2011. Its purpose is to 
make  risk  capital  available  to  innovators  in  the 
interior of central and northern Sweden in order to 
stimulate  growth,  strengthen  competitiveness  and 
create  jobs  in  the  region.  As  in  the  case  of  the 
innovation  offices,  a  timely  and  regular  evaluation 
of  its  activities  should  be  foreseen  so  as  to  ensure 
its efficiency and avoid potential distortions such as 
crowding out existing risk capital in the region. 

and 

research 

The Swedish Governmental Agency for Innovation 
Systems  (VINNOVA)  manages  the  ‘Research  and 
innovation  programme 
grow’ 
addressing  SMEs  and  promotes  eight  Institute 
Excellence Centres creating the right conditions for 
research,  development  and 
innovation  activity 
within  areas  of  great  importance  for  the  future 
the  Swedish 
competitiveness  and  growth  of 
economy:  wood-based  materials  and  products; 
controlled  delivery  and 
release  of  chemical 
substances;  advanced  sensors,  multi-sensors  and 
sensor  networks;  optical  fibres;  process  integration 
in  steelmaking;  casting 
integrated 
components 
systems;  networked 
systems. 

technology; 

imaging 

in 

Notwithstanding  the  strong  Swedish  R&D  and 
innovation  performance,  a  number  of  challenges 
remain, primarily in converting large investments in 
productive 
R&D 
paradox’).  This 
innovations 
challenge  could  be  addressed  by 
facilitating 
entrepreneurial activity. 

growth-enhancing 

(‘the  Swedish 

into 

Another challenge facing Sweden will be to take a 
more  coherent  and  coordinated  approach  to  the 
funding  of  innovation.  There  appears  to  be  no 
shortage  of  funds  and  instruments  set  up  for  that 
purpose,  but  in  some  cases  objectives  overlap, 
while 
there  are  gaps.  The 
forthcoming  national  innovation  strategy  could 
introduce  a  more  coordinated  approach  to  the 
multitude  of  instruments  and  funds  so  as  to 
optimise  their  combined  efficiency  and  close  any 
gaps in the system. 

in  other  cases 

4.26.3  Towards a sustainable industry 

In  comparison  with  most  other  industrial  nations, 
Sweden has low emissions, per capita as well as in 
relation  to  GDP,  largely  due  to  its  high  proportion 
of  hydroelectric  and  nuclear  power  production,  as 
well as the increasing use of biofuels. 

Sweden  places  great  emphasis  on  the  transition  to 
an “eco-efficient economy”, not only nationally but 
in the EU and worldwide. Nationally it implements 
a comprehensive policy mix focused on sustainable 
growth,  energy  and  transport,  climate  change, 

environmental technologies and green taxes. 

The  Swedish  environmental 
technology  sector 
employs  around  42.000  persons  and  in 2009  had  a 
turnover  of  SEK 119 billion,  39 billion  of  which 
exported  goods.  According  to  a  2008  study  the 
sector 
is  highly  diverse  and  made  up  of 
heterogeneous companies active in a wide range of 
industries,  from  knowledge-intensive  and  R&D-
traditional  manufacturing 
intensive  services 
companies.  Sweden's  carbon  dioxide  tax  and  other 
policy  instruments  with  a  similarly  general  scope 
drive sustainable development forward while at the 
same  time  being  important  for  the  development  of 
environmental technologies. 

to 

The  government  prioritises  such  development  and 
in  its  most  recent  Budget  Bill  proposed  to allocate 
technology, 
for 
more 
renewable energy and energy research. 

environmental 

funds 

The  climate  targets  Sweden  has  set  itself  are  to 
reduce greenhouse gas emissions by 40 % by 2020 
(from  their  1990  levels)  for  activities  not  covered 
by  the  EU  emissions  trading  system;  a  50 %  share 
of renewable energy in total energy use by 2020; at 
least 10 % renewable energy in the transport sector 
by 2020 with a view to a vehicle fleet free of fossil 
fuels  by  2030;  a  reduction  in  energy  intensity  by 
20 % from 2008 to 2020. The government believes 
these  targets,  which  are  more  ambitious  than  what 
Sweden  is  committed  to  do  at  the  EU  level,  are 
within  reach  if  the  right  policies  are  implemented 
and  necessary  resources  made  available.  The 
government  has 
for 
identified 
research,  development  and  demonstration  of 
technology referred to above as important tools for 
reaching  the  climate  targets.  In  its  June  2011 
assessment 
reform 
Sweden’s 
programme  2011,  the  Commission  considered  the 
credibility of the foreseen reduction path difficult to 
assess due to a lack of detail in the programme.133 

the  measures 

national 

of 

A national strategy for greener public procurement 
has been implemented, consisting of training of and 
support  to  procurement  officers,  stricter  guidelines 
for  government  agencies  and  authorities,  and 
ensuring that local and regional decision makers are 
fully involved and support the objectives. 

Swedish  enterprises  continue  to  generate  more 
waste  per  capita  than  enterprises  in  many  other 
Member States, largely due to iron ore slag from its 
mining industry. The amount of waste generated by 
Swedish  enterprises  has  however  diminished 
considerably,  from  12.4 kg  in  2006  to  8.9 kg  per 
inhabitant  in  2008.  Even  so,  the  latter  figure  is 
almost twice the EU average. 

133  

SEC(2011) 735 final, 7.6.2011. 

206 

 
                                                 
4.26.4  The business environment 

Sweden  continues  to  score  better  than  the  EU 
average  on  all  indicator  categories  for  business 
environment, with the exception of the level of state 
aid which is still above the EU average. 

The  Swedish  government  undertook  in  2006  to 
reduce  administrative  burdens  for  businesses  by 
25 %  by  2010.  However,  the  latest  available 
information  points  to  a  reduction  of just  over  7 %. 
In addition, new legislation has meanwhile entered 
into force (in particular in the financial area) so that 
the  actual  administrative  burden  has  remained 
relatively  unchanged  for  many  enterprises.  The 
government  has  recognised  the  need  to  continue 
efforts  to  reduce  the  administrative  burden  for 
enterprises and has set a new target date, 2012, for 
the  25 %  reduction.  The  new  Regulatory  Council, 
mandated  with  ensuring  the  quality  of  impact 
assessments  and  promoting  administrative  burden 
reduction  in  regulatory  design,  became  operational 
in 2009 and has recently had its mandate extended 
until 2014. 

Two 
and 
new  websites,  www.verksamt.se 
www.enklareregler.se, were launched in 2010. The 
former provides a one-stop shop for information for 
companies,  the  latter  a  forum  where  entrepreneurs 
can  express  their  views  on  laws,  regulations  and 
procedures  and  subsequently  see  how  their  views 
are followed up. 

eGovernment use by enterprises in 2010 was above 
the  EU  average.  In  January  2008,  the  Government 
adopted  an  eGovernment  Action  Plan  focused  on 
back-office 
infrastructure 
development.  Sweden  has  a  non-mandatory 
national eProcurement platform. 

integration 

and 

In  November  2009  the  government  presented  a 
national  broadband  strategy.  The  objective  is  to 
achieve  at  least  90 %  coverage  of  all  households 
and  businesses  having  access  to  at  least  100 Mbps 
broadband by 2020. 

to 

address 

competition 

Sweden  has  stepped  up  its  pace  of  reform  in 
increasing 
concerns 
expressed  by  the  Commission  as  well  as  in  other 
fora.  In  2008 
the 
the  government 
Swedish  Competition  Authority  to  undertake  a 
broad  review  of  the  competitive  situation  and 
propose  how  to  improve  the  situation.  In  2009  the 
Competition  Authority  delivered 
report, 
including an assessment of the state of play and 59 
proposals for the government to consider. 

instructed 

its 

The  government  and  the  parliament  have  since 
acted on around a third of the proposals, notably the 
phasing-out  of  the  exclusive  rights  of  SJ  AB  to 

207 

train 

services; 
operate  profitable  passenger 
reforming  the  rent  control  system;  new  licensing 
processes in the energy sector; more competition in 
animal  healthcare;  and  giving  the  Competition 
Authority  the  right  to  take  legal  action.  Another 
third  of  the  proposals  are  in  the  process  of  being 
implemented,  whereas  no  action  has  so  far  been 
taken concerning the remaining third of proposals. 

4.26.5  Entrepreneurship and SME policy 

Swedish  SMEs  are  even  more  dominated  by 
microenterprises  than  in  the  EU  overall  –  almost 
95 % of all Swedish SMEs are microenterprises. As 
a  consequence,  small  and  medium-sized  SMEs  are 
slightly underrepresented in Sweden in comparison 
with  other  Member  States:  only  4.4 %  of  all 
Swedish SMEs are small and less than one percent 
medium-sized.  Another  aspect  of  the  skewed  size 
distribution  of  Swedish  SMEs  is  that  the  average 
Swedish  SME  has  just  under  three  employees 
whereas the average EU SME employs 4.2 persons. 

Most  Swedish  SMEs  are  active  in  the  service 
sector.  At  56 %,  the  service  sector  proportion  is 
higher  than  the  average  EU  share  of  SMEs  in  the 
service  sector.  Service  sector  SMEs  only  account 
for 40 % of Swedish SME employment and 45 % of 
SME  value  added  though,  suggesting  that  most 
Swedish service sector SMEs are smaller than other 
Swedish SMEs. 

Turning  to  entrepreneurship,  an  interesting  recent 
development  is  the  new  role  given  to  a  number  of 
holding companies attached to universities in order 
to manage their purely commercial activities. With 
a  view  to  increasing  the  commercial  activities  of 
universities  and  strengthening  their  entrepreneurial 
edge,  a  new  law  has  been  introduced  giving  more 
capital and greater coordinating powers to six such 
holding  companies,  combined  with 
increased 
responsibilities  for  the  commercial  activities  of 
universities with no such companies. 

Sweden  has  also  introduced  a  freedom-of-choice 
reform  in  the  provision  of  social  services  and 
primary  health  care,  in  some  places  replacing 
previously existing public procurement contracts or 
publicly-run  services.  The  purposes  of  the  reform 
are  to  empower  service  users  to  determine  which 
service  provider  to  use,  increase  quality  and 
efficiency  in  the  provision  of  services,  promote  a 
stimulate 
greater  variety  of  providers  and 
entrepreneurship in these sectors. 

The  overall  birth  rate  of  new  firms  is  lower  in 
Sweden  than  in  other  Member  States  and  so  is  the 
overall exit rate, meaning that business churn is low 
and possibly indicating a lack of dynamism. While 
the  survival  rate  of  new  businesses  is  higher  than 

 
the  EU  average,  relatively  fewer  SMEs  grow  to 
become  large  companies  in  Sweden  than  in  other 
Member  States.  The  proportion  of  high-growth 
companies is also lower than the EU average. 

As  the  Swedish  economy  is  coming  out  of  the 
crisis,  the  previously  existing  credit  rationing  has 
been  lifted  and  companies  are  increasingly  having 
sufficient access to risk capital. 

sized enterprises). There is therefore a risk that the 
concerns  of  the  95 %  of  SMEs  which  are  in  fact 
microenterprises  (up  to  nine  employees)  are  not 
fully taken into account. The rigour of the cost and 
benefit  analysis  contained  in  Swedish  SME  tests 
could also be strengthened. 

4.26.6  Conclusion 

long-term 

Sweden  remains  one  of  the  most  competitive 
economies  in  the  world  and  is  identified  as  an 
innovation  leader  in  the  EU.  Though  it  faces  no 
to  competitiveness,  Sweden 
major  challenges 
skills  needs, 
its 
should  consider 
especially  in  science,  technology,  engineering  and 
mathematics  (STEM)  and  what  measures  can  be 
taken  to  avoid  shortages,  bearing  in  mind  negative 
demographic  developments  and  prevailing  gender 
imbalances  among  STEM  graduates.  Secondly, 
total  R&D  spending  by 
despite  having  high 
international 
less 
impressive  record  in  the  commercialisation  of 
research  results  and  innovations.  It  may  need  to 
consider  how  to  align  R&D  and  innovation  closer 
to  the  needs  of  markets  and  of  society  at  large. 
Sweden  could  also 
to 
improve  competition,  reduce  the  administrative 
burden  to  reach  the national  target,  and  establish a 
research  and 
more  coherent 
funding.
innovation 

standards,  Sweden  has  a 

take  further  measures 

framework 

for 

of 

to 
improve 
SMEs.  While 

Sweden  has  undertaken  to  implement  the  ten 
principles  of  the  Small  Business  Act  as  well  as  a 
the  business 
series  of  actions 
Sweden's 
environment 
performance  across  the  ten  Small  Business  Act 
principles  is  generally  above  the  EU  average,  the 
development  since  2005  is  characterised  by  a  high 
degree  of  stagnation,  or  even  deterioration  in 
comparison with other Member States. Unlike some 
other Member States, Sweden has not yet adopted a 
plan  for  the  national  implementation  of  the  Small 
Business  Act.  Nevertheless, 
the 
government tasked the Swedish Agency for Growth 
Policy Analysis with evaluating the implementation 
of the Small Business Act in Sweden. 

in  2011 

Although SME tests – an important element of the 
Think  Small  First  principle  of  the  Small  Business 
Act  –  are  systematically  carried  out  in  Sweden, 
current  SME  consultations  do  not  include  a  size 
class  breakdown  (into  micro,  small  and  medium-

208 

 
 
4.27  United Kingdom 

United Kingdom

Distance from the EU average (measured in standard deviations)

-3

-2

-1

0

1

2

3

l

i

e
b
a
n
a
t
s
u
s
a

y
r
t
s
u
d
n

i
e
v
i
t
i
t
e
p
m
o
c
d
n
a
n
r
e
d
o
m
a
s
d
r
a
w
o
T

s
d
r
a
w
o
T

t
n
e
m
n
o
r
i
v
n
E
s
s
e
n
s
u
B

i

i

s
E
M
S
d
n
a
p
h
s
r
u
e
n
e
r
p
e
r
t
n
E

Labour productivity per hour worked  (EU27=100; 2009)

Labour productivity per person employed (EU27=100; 2010)

Labour productivity per person employed in manufacturing (1000 PPS; 2009)

Share of science and technology graduates (% of 20-29 years old population; 2009)

R&D performed by businesses (% of GDP; 2009)

Share of innovating enterprises as % of all enterprises (2008)

Share of high-tech exports in total exports  (2009)

Energy intensity in industry and the energy sector
(kg oil eq. / euro GVA; reference year 2000; 2009)

-3.9

CO2 intensity in industry and the energy sector
(kg CO2 / euro GVA; reference year 2000; 2009)

-3.9

Waste generated by enterprises (all NACE sectors;
tonnes per capita; 2008)

-4.2

y
r
t
s
u
d
n

i

Exports of environmental goods as % of all exports of goods (2010)

State aid for industry and services as % of GDP (2009)

Electricity prices for medium size enterprises (euro per kWh; 2010)

Infrastructure expenditures (euro per inhabitant; 2009)

Satisfaction with quality of infrastructure (rail, road, port and airport)
(1=underdeveloped / 7=extensive and efficicient by int'l standards; 2010-11)

% of broadband lines with speed above 10 MBps (2011)

Legal and regulatory framework (0= neg. / 10=pos.; 2011)

Burden of government regulation (1 = burdensome 7 = not burdensome; 2010-11)

E-government usage by enterprises (%; 2010)

Time required to start a business (days; 2010)

Enterprise survival rate after two years (2008)

Business churn (enterprise entries and exits as % of existing stock; 2008)

Share of high-growth enterprises as % of all enterprises (2007)

N.A.

Early stage financing (% of GDP; 2009)

Rejected loan applications, and loan offers whose conditions were deemed
unacceptable, as % of all loan applications by SMEs (2009)

Duration of payments by public authorities (days; 2011)

Note : In the graph, data are presented in such a way that data bars pointing to the right (left) always indicate performance which is better (weaker) than the EU 
average.

209 

 
 
 
 
 
 
 
 
 
 
 
 
Sectoral specialisation of manufacturing – United Kingdom (2005) 

Paper products; publishing and printing

Refined petroleum products

Wood and wood products

Textiles and textile products

Chemicals, chemical products

Rubber and plastic products

Other non-metallic mineral products

Food products

Leather and leather product

Manufacturing n.e.c.

Basic metals and fabricated metal products

Transport equipment

Machinery and equipment n.e.c.

Electrical and optical equipment

Note : n.e.c. (not elsewhere classified) 
Source: Eurostat 

4.27.1 

Introduction 

Trade and industry specialisation 

in 

industry 

is  specialised 

Manufacturing contributes 13 % to UK's total value 
added against 14.9 % for the EU on average. At the 
level,  United 
detailed  manufacturing 
Kingdom 
technology  driven 
industries (aircraft and spacecraft, computers, radio 
and  TV  receivers,  instruments  for  measuring, 
pharmaceuticals)  both  in  value  added  and  exports 
terms.  It  is  also  specialised  in  marketing-driven 
industries  (grain  mill  products,  publishing  and 
printing)  in  value  added.  At  the  more  aggregated 
sector level, the UK is specialised in educationally 
highly 
industries  (financial  services, 
research and development, software) and in sectors 
with  medium  innovation  intensity  (air  transport, 
business services). The UK achieves a high share of 
exports  to  the  BRIC  countries,  indicating  further 
export growth potential. 

intensive 

its 

structure,  but 

The UK’s R&D intensity is below the EU average, 
showing 
given 
industrial 
particularly  high  sectoral  R&D 
in 
pharmaceuticals and transport equipment (aircraft). 
Its  position  on  the  quality  ladder  is  mostly  above 
the  EU  average,  with  the  exception  of  the  low 
quality  segment  in  technology-driven  industries, 

intensity 

its  group  of  higher 

where  it  is  on  par  with  the  EU  average.  Overall, 
income  countries 
within 
specialised  in  knowledge-intensive  industries,  the 
UK  is  more  similar  to  France,  Belgium  and  the 
Netherlands  with  its  specialisation  in  knowledge-
intensive services. 

Most prominent sectors in United Kingdom 

Highest relative value added (2007)
Research and development
Computer and related activities
Air transport

Change in the relative value added (1999/2007)
Increasing specialisation
Real estate activities
Research and development
Tobacco products
Decreasing specialisation
Office, accounting and computing machinery
Other transport equipment
Radio, television and communication equipment

Structural change 

In terms of structural change, the United Kingdom 
has  further  increased  its  industry  specialisation  in 
high  education  sectors  (R&D,  business  services), 
but  decreased  its  export  specialisation  (computers 

210 

 
 
 
 
 
in 

share 

sectors 

intensive 

labour-intensive 

and  telecommunications  equipment),  as  well  as  its 
relative 
industries 
(wooden  containers,  leather  clothes)  and  in  highly 
innovation 
(communication 
equipment). It has increased relative value added in 
marketing driven industries (processing of fish) and 
revealed comparative advantage in capital-intensive 
industries  (nuclear  fuel,  coke  oven  products).  The 
UK has increased its export share in the high price 
segments of labour-intensive and technology-driven 
industries,  pointing  to  a  favourable  movement  on 
the  quality 
it  has  slightly 
decreased  its  R&D  intensity,  when  taking  into 
account its industrial structure. 

ladder.  However, 

Manufacturing  output  fell  by  15 %  during  the 
course of the crisis and has partially recovered since 
then,  reaching  in  May  2011  a  level  6.1 %  lower 
than  at  its  previous  cyclical  peak.  In  the  UK,  the 
crisis  has  clearly  favoured  technology-driven  and 
labour-intensive  industries,  at  the  expense  of  the 
other industry types. 

The  UK  is  among  the  few  Member  States  which 
have experienced a depreciation of the real effective 
exchange  rate  during 
last  decade  (-13%, 
the 
compared to an appreciation of 21% in the EU27), 
indicating a gain in cost and price competitiveness. 
Nominal  unit  labour  costs  have  increased  by  33% 
between 2000 and 2010, compared to an increase of 
14%  in  the  EU27  and  20%  in  the  Euro  area.  The 
UK's labour productivity per hour worked is about 
7  percentage  points  above  the  EU27  average  but 
about  7  percentage  points  below  the  Euro  area 
average. 

Overall,  the  UK  enjoys  a  favourable  position  with 
respect  to  competitiveness,  but  its  pattern  of 
structural  change  sends  mixed  signals,  with  some 
areas improving while others are deteriorating. 

4.27.2  Towards an innovative industry 

innovation  performance 

The  UK's  strong 
is 
confirmed by its fifth rank in the Innovation Union 
Scoreboard, which places the UK with an above EU 
average  performance  at  the  top  of  the  group  of 
innovation  followers.  The  British  research  and 
innovation system is characterised  

indicators, 

by strong performance over a range of research and 
innovation 
such  as  high  quality 
publications,  high  quality  patents  for  which  it 
obtains  high  licence  and  patent  revenues  from 
abroad or the high share of the population working 
in  knowledge  intensive  activities.  On  the  other 
hand,  the  system  underperforms  in  terms  of  public 
and private R&D investment as a share of GDP.  

Amidst significant overall expenditure cuts, the UK 

211 

Review 

research  will  be  a 
Spending 

government  has  indicated  that  support  to  science 
top  priority.  The 
and 
Comprehensive 
(CSR) 
announced  that  current  spending  on  the  core 
government  science  R&D  budget  will  be  fixed  in 
cash terms at GBP 4.6 billion per year for the next 
four  years 
(2011-2015).  Nevertheless  science 
investment spending will be reduced by some 40 %. 
Moreover,  some  departmental  R&D  spending  has 
been reduced sharply e.g. on defence and it is likely 
that  this  will  also  seriously  affect  private  sector 
R&D spending.  

by  UK 

companies.  An 

The  R&D  tax  credit  is  the  biggest  single  funding 
mechanism  provided  by  Government  to  support 
business  investment  in  R&D.  The  latest  R&D  tax 
credit  data  shows  that  the  schemes  supported 
almost GBP 11 billion of R&D investment in 2008-
estimated 
09 
GBP 980 million of support was provided to around 
8 350  companies  undertaking  qualifying  R&D 
activity  that  year.  The  Government  published  a 
consultation  on  the  schemes  in  November  2010, 
and announced a number of changes to the scheme 
at Budget 2011, including increasing the SME rate 
from 175% to 200% in 2011 and to 225% in 2012. 
In  June  2011,  the  Government  launched  a  further 
consultation to improve the working of the scheme. 

In  the  Plan  for  Growth  published  in  March  2011, 
the  UK  announced  measures  on 
investment 
incentives, support for SMEs and for the promotion 
of  skills.  Other  new  areas  of  policy  development 
include: 

The  announcement  of  a  series  of  reductions  in  the 
main rate of corporation tax from 28 % to 23 % by 
financial  year  2014-15  to  improve  incentives  for 
firms to invest. 

Pre-commercial  public  procurement 
through  a 
competitive  Small  Business  Research  Initiative 
(with  budget  GBP 20-30  million  per  year),  where 
SMEs  will  compete  for  funds 
to  undertake 
innovation  projects  with  high  relevance  for  the 
public sector.  

A review of rules and formats to facilitate access to 
(e.g.  mapping  data,  crime 
government  data 
statistics) to allow the development of new business 
opportunities.  

document 

for  Technologies" 

In  technology  policy,  the  UK  has  published  the 
"Blueprint 
in 
November  2010.  The  Technology  Strategy  Board 
(TSB) will become the Government’s main channel 
to  support  business-led  technology  innovation  and 
will  be  provided  with  additional  funding  of  over 
GBP 200 million  to  establish  a  network  of  high 
quality  Technology  and  Innovation  Centres.  The 

 
TSB's  strategy  for  national  business  innovation 
2011-2015  was  published  in  May  2011.  The  focus 
is  particularly  on  stimulating  a  range  of  new  and 
including  high  value 
emerging 
manufacturing, 
materials, 
nanotechnology,  bioscience,  electronics,  photonics 
and electrical systems, and ICT.  

technologies, 

advanced 

result 

the  Regional  Development 
The  abolition  of 
in  a  centralisation  of 
Agencies  will 
innovation  funding  and  some  strengthening  of  the 
role of the Technology Strategy Board. In addition, 
the  Coalition  government 
is  putting  special 
emphasis  on  improving  access  to  private  sector 
financing  for  highly  innovative  SMEs  through  e.g. 
the  bank-led  Business  Growth  Fund  and  other 
national equity funds. 

The overall research and innovation (R&I) intensity 
in  the  UK  has  been  relatively  stagnant  for  some 
time  and  is  below  the  EU  average.  This  is  partly 
explained  by  the  nature  of  the  highly  service-
intensive economic structure of the UK, but there is 
nevertheless  a  case  to  increase  R&D  to  move 
towards  a  more  sustainable  and  knowledge-
intensive  economy  in  order  to  preserve  future 
growth  and  competitiveness.  In  the  context  of  the 
current  weakness  in  some  parts  of  the  labour 
market,  a  major  opportunity  is  to  create  jobs  in 
more R&I- and knowledge-intensive sectors.  

4.27.3  Towards a sustainable industry 

The  UK  scores  above  the  EU  average  on  all 
sustainable  industry  related  indicators,  except  on 
exports of environmental goods. 

The  UK  is  committed  to  promoting  a  low  carbon 
economy  and  has  published  a  Low  Carbon 
Industrial  Strategy  in  July  2009,  which  deploys  a 
comprehensive  range  of  policies  to  support  the 
transition  to  a  low  carbon  future.  A  low  carbon 
review was also included in the Government’s Plan 
for Growth published in March 2011, which set out 
the key actions required to put the whole economy 
on  a  low  carbon,  resource-efficient  path.  The  UK 
will  introduce  a  package  of  measures  during  2011 
for  the  energy  intensive  setor,  whose  international 
competitiveness is most affected by UK energy and 
climate change policies. 

the  2011  budget 

In 
the  government  has 
strengthened  its  commitment  to  the  low  carbon 
economy  with  the  announcement  to  establish  a 
Green 
2012  with 

Investment  Bank134 

in 

GBP 3 billion  of  initial  funding135.  It  would  be  the 
first  such  institution  in  the  world  with  the  mission 
to  exclusively  fund  green  projects.  The  Electricity 
Market  Reform  sets  out  key  measures  to  attract 
investment,  reduce  the  impact  on  consumer  bills, 
and create a secure mix of electricity sources. Key 
elements  of  the  reform  package  include  a  carbon 
floor  price,  a  long-term  Feed-in-Tariff,  a  Capacity 
Mechanism,  and 
the  use  of  an  Emissions 
Performance Standard. 

To  promote  energy  efficiency  improvements  the 
government  is  preparing  the  roll-out  of  the  "Green 
finance  mechanism,  which  allows 
Deal",  a 
consumers to pay back the cost of energy efficiency 
improvements  through  their  energy  bills.  It  is 
designed to enable private firms to offer consumers 
energy  efficiency  improvements  to  their  homes, 
community  spaces  and  businesses  at  no  upfront 
cost,  and  recoup  payments  through  a  charge  in 
instalments  on  the  energy  bill.  The  programme 
should  be  monitored  on  regular  basis  and  the 
funding  realigned  if  necessary136.  The  Government 
also  uses  a  range  of  policy  levers,  such  as  the 
climate change levy, carbon reduction commitment, 
and  climate  change  agreements  to  incentivise 
energy efficient behaviour amongst UK businesses. 

in 

final 

energy 

Under  Directive  2009/28/EC  on  the  promotion  of 
the  use of  energy  from  renewable  sources,  the  UK 
has  committed  to  reach  a  target  of  15 %  of 
energy 
sources 
renewable 
consumption and a 10 % share of renewable energy 
in  the  transport  sector  by  2020.  In  2010  the  UK 
submitted  its  National  Renewable  Energy  Action 
the  current  and  future 
Plan,  which  outlines 
measures  to  be  used  to  follow  the  trajectory  for 
developing renewable energy sources established in 
the  Directive  and  sets  sectoral  targets.  A  step  to 
implement this plan and complete the transposition 
of  the  Directive  would  be  to  clarify  the  support 
regime  to  be  applied  in  both  the  heating  and  the 
the 
electricity 
together  with 
Electricity  Market  Reform,  should  ensure 
the 
creation  of  a  stable  regulatory  environment  that 
promotes the development of new markets in green 
goods and services137. 

sectors  which, 

The Government has also published a draft Carbon 
Plan,  which  is  a  cross-Government  action  plan  on 
climate  change  setting  strict  actions  and  deadlines 

135  

136  

137  

http://climatechange.cbi.org.uk/news/the-budget-and-the-low-

carbon-economy 

Commission Staff Working Paper 2011,  Assessment  of the 2011 

national  reform  programme  and  convergence  programme  for  the 

UK.  

Commission Staff Working Paper 2011,  Assessment  of the 2011 

national  reform  programme  and  convergence  programme  for  the 

134  

http://www.bis.gov.uk/policies/business-sectors/low-carbon-

business-opportunities/gib 

UK. 

212 

 
                                                 
                                                 
over  the  coming  5  years138.  The  draft  plan  takes 
account  of  the  existing  first  three  UK  carbon 
budgets covering the period from 2008 to 2022 and 
the  final  version  will  also  take  into  account  the 
fourth  carbon  budget  (for  2023-2027),  which  was 
set into law in June 2011. 

4.27.4  The business environment 

On business environment indicators, the UK scores 
above  the  EU  average  on  all  except  on  E-
government  usage  by  enterprises,  and  electricity 
prices for medium-sized enterprises. The UK scores 
clearly better than the EU average concerning state 
aid.  

the  Coalition  better 

The Government introduced a ‘one-in, one-out’ rule 
in 
regulation  document 
published  on  20  May  2010.  The  rule  requires  that 
no  new  domestic  regulation  is  brought  in  without 
other  regulation  being  cut  by  a  greater  amount.  In 
2010  the  Government  announced  the  intention  to 
reduce  the  costs  of  administrative  burden  by  a 
further  GBP 6.5 billion  in  2010-15.  This  objective 
builds  on  the  previous  five-year  Programme  on 
Administrative  Burden  Reduction  ending  in  2010, 
which  delivered  more  than  GBP 3.5 billion  of  net 
annual  savings,  representing  a  reduction  of  over 
26.5 % in administrative burden placed on business 
by  government.  A  periodically  updated  Forward 
Regulatory  Programme  is  implemented  to  improve 
regulatory outcomes with impact on UK businesses. 
In  March  2010,  the  Government  published  an 
update  of  its  first  Forward  Programme  issued  in 
October  2009139.  The  Spring  2010  Forward 
Programme  covers  12  months  starting  from  April 
2010  and  includes  large  announced  measures  that 
are  expected  to  be  implemented  after  April  2011, 
where  average  annual  costs  or  benefits  are  greater 
than  GBP 50 million.  In  addition,  in  the  Plan  for 
Growth published in March 2011, the Government 
announced  a  moratorium  on  new  domestic 
regulation for micro-businesses and start-ups for the 
next  3  years.  The  Government  also  announced  its 
intention to scrap proposals for specific regulations, 
which would have cost business over £350m a year. 
launching  a  public 
The  Government 
thematic  review  to  reduce  the  stock  of  regulation, 
and  the  first  results  have  led  the  Government  to 
propose  scrapping  or  simplifying  more  than  160 
regulations from the retail sector. 

is  also 

of 

or 

exemptions 

The  ex  ante  impact  assessment  policy  has  been 
updated. An SME Test has been integrated into the 
national  decision  making  process  whereby  all  new 
regulatory  and  policy  proposals  require  in  their 
impact  assessment  and  explanatory  memorandum 
simplified 
consideration 
enforcement  for  small  businesses.  A  guidance 
document  on  the  Small  Firms  Impact  Test  and  a 
handbook  for  officials  on  regulating  for  small 
businesses  have  also  been  published.  In  addition, 
the introduction of a forward-looking planning tool 
has  been  announced  to  allow  companies  to  predict 
more  clearly  the  effect  of  upcoming  regulation. 
Public  consultation  of  stakeholders  on  new 
regulations is embedded in the Code of Practice on 
Consultation. It is estimated that in 2009 only 14 % 
of  Impact  Assessments 
included 
quantified  effects  on  SMEs.  Nevertheless,  the 
quality of Impact Assessments has been improving. 

the  UK 

in 

Despite  significant  improvement  over  the  period 
2005-2009,  take-up  by  businesses  of  eGovernment 
services is still below the EU average. The UK has 
implemented  a  decentralised  eProcurement  policy, 
whereby  contracting  authorities  are  free  to  decide 
on  their  own  procurement  strategies.  A  non-
mandatory  national  portal  “Buying  solutions”  is 
permitted 
to  procure  on  behalf  of  all  UK 
contracting  authorities140.  It  includes  an  electronic 
marketplace  containing  details  of  Public  Sector 
supplier contracts, a Purchase to Pay solution and a 
pan-Public  Sector  data  warehouse  e  Procurement. 
The  UK  has  started  to  implement  the  European 
Code of Best Practices to facilitate SMEs access to 
public procurement141, for example: 

the 

initiatives 

Recent 
the 
include 
‘Contracts  Finder’  in  early  2011,  an  online  facility 
for  public  sector  contract  opportunities  over 
£10,000  (including  a  feed  from  the  OJEU  Tenders 
Electronic Daily). 

launch  of 

The  UK  Government  has  also  announced  a 
Government  eMarketplace,  whereby  Government 
Departments  can  raise  requests  for  low  value 
projects enabling easier registration for SMEs. 

The  BusinessLink network  operating  since 2007  is 
the  government’s  website  for  businesses  of  all 
sizes.  By  2011  all  business-related  content  from 
95 % of government websites has been moved onto 
the  BusinessLink  website  resulting  in  a  single 

138 

139  

http://www.decc.gov.uk/en/content/cms/tackling/carbon_plan/car

140  

“Digitizing  public  services  in  Europe:  Putting  ambition  into 

action”,  9th  Benchmark  Measurement,  December  2010.  Report 

bon_plan.aspx 

prepared for European Commission. 

http://www.bis.gov.uk/assets/biscore/better-regulation/docs/10-

141 

http://ec.europa.eu/enterprise/policies/sme/small-business-

p96a-governments-forward-regulatory-programme 

act/files/sba_review_en.pdf 

213 

 
 
                                                 
                                                 
online  government  resource  for  businesses142 The 
BusinessLink  is  primarily  becoming  an  online 
service  and  is  the  portal  for  accessing  the  UK's 
point of single contact under the Services Directive. 

4.27.5  Entrepreneurship and SME policy 

The  UK  scores  above  the  EU  average  in  all  the 
entrepreneurship  and  SMEs  related  indicators,  for 
which  data  is  available.  However  SMEs  access  to 
finance remains a significant issue for the UK. The 
economic  crisis  has  had  long  lasting  effects  on 
access  to  finance  for  SMEs,  particularly  for  small 
firms. The UK banking sector was badly hit by the 
financial  crisis  and  many  banks  still  remain  with 
substantial public shareholding and/or benefit from 
the  UK  government's  asset  protection  scheme. 
Despite  recent  policy  efforts,  the  Bank  of  England 
recently  noted  that  credit  conditions  for  small 
companies generally remain tight, both in terms of 
cost  and  availability  and  that  lending  to  SMEs 
continued to contract in the second half of 2010143. 
The  UK  has  recently  put  in  place  a  number  of 
measures  to  improve  SME  access  to  finance 
including  state  sponsored  investment  vehicles  and 
reaching  an  agreement  with  UK  banks  requiring 
them  to  increase  their  gross  lending  to  SMEs,  for 
example:144. 

-  The  highest  profile  measure  was  project 
Merlin, a deal negotiated between the UK 
government  and  HSBC,  RBS,  Lloyds  and 
Barclays  (plus  Santander  for  the  lending 
targets). 

including  an  extension  of 

-  The  Government  published  the  Financing 
Business  Growth  green  paper145 
in 
November  2010.  It  includes  a  range  of 
measures  to  support  access  to  finance  for 
the 
SMEs 
Enterprise 
(ECFs) 
programme  by  GBP 200 million  over  the 
next  four  years,  providing  more  than 
GBP 300 million  of  investment  into  the 
equity  gap  for  early  stage  innovative 
SMEs  with  the  highest  growth  potential, 

Capital 

Funds 

142 

143  

144  

145  

https://online.businesslink.gov.uk/Horizontal_Services_files/busin

ess_link_annual_review_0910.pdf 

Commission Staff Working Paper 2011 - Assessment of the 2011 

national  reform  programme  and  convergence  programme  for  the 
UK 
Commission Staff Working Paper 2011,  Assessment  of the 2011 

national  reform  programme  and  convergence  programme  for  the 

UK, and UK NRP 2011. 

Green Paper: Financing Business Growth: 

http://www.bis.gov.uk/assets/biscore/corporate/docs/f/10-1242-

financing-business-growth-response.pdf 

after  taking  private  sector  contributions 
into account.  

also 

-  The  Government 
announced 
continued  support 
the  Enterprise 
to 
Finance  Guarantee  (EFG)  Scheme 
enable  over  GBP 2 billion  of  new  lending 
to viable SMEs, over the next 4 years.  

for 

and 

-  To  help  build  up  SME  demand  for  equity 
finance 
the 
growth 
Government announced that it will roll out 
a  network  of  Business  Coaching  for 
Growth  services  across  England  from 
January 2012.  

capital, 

The  Plan  for  Growth  in  March  2011  also  includes 
action  to  facilitate  access  to  finance  for  new  and 
tax 
growing  businesses, 
measures146. 

including 

through 

As  regards  the  internationalisation  of  SMEs,  the 
Export Credits Guarantee Department (ECGD) has 
implemented three new products, which share risks 
with  banks  in  providing  financial  services  to 
exporters:  a  bond  support  product,  an  export 
working  capital  product  and  a  foreign  exchange 
credit support product. ECGD has also extended the 
scope  of  its  Export  Insurance  Policy  (EXIP)  to 
cover  products  other  than  just  capital  goods.  It  is 
not  possible  to  predict  levels  of  demand  for  the 
products  at  the  outset,  but  the  Government  will 
review  the  new  ECGD  products  in  the  light  of 
the  year147.  The 
experience  at 
Government is also launching the Export Enterprise 
Finance Guarantee (ExEFG) and promoting its use 
to  SMEs.  The  scheme  is  aimed  at  viable  SME 
exporters  with  an  annual 
to 
GBP 25 million  and  which  require  export  finance. 
Under  the  ExEFG  the  Government  will  guarantee 
lenders  to  facilitate  the  provision  of  short-term 
export  finance  lines  of  up  to  GBP 1 million  to 
exporting SMEs. The ExEFG is being launched on 
a pilot basis based on a GBP 40 million facility. 

turnover  of  up 

the  end  of 

The  Government  is  also  introducing  a  package  of 
measures  to  support  exporters  through  UK  Trade 
and Investment (UKTI), the UK’s trade and export 
promotion  agency.  UKTI  will  deliver  a  new  range 
of support to help SMEs with an ambition to break 
into overseas markets. This will include promotion 
of ”Passport to Export‟, which helps SMEs new to 
exporting  to  build  their  trade  capacity.  Around 
1 250 companies a year benefit from the Passport to 
Export  programme  and  companies  on 
the 
programme  will  receive  up  to  GBP 1 000  match 
funding to carry out activities in their action plans. 

146  
147  

UK NRP 2011. 
UK NRP 2011. 

214 

 
 
                                                 
                                                 
is  a  commitment 

towards  building  a 
There 
comprehensive  policy  approach  to  the  transition  to 
agreen  and  growing  economy,  which  requires 
substantial  investment  in  key  green  sectors.  The 
Green  Investment  Bank  has  potential  to  become  a 
key  component 
to  a  green 
economy,  complementing  other  green  policies  to 
allocate additional capital. 

transition 

the 

in 

The  UK  has  an  excellent  record  with  respect  to 
better regulation and the business environment and 
has  continued  to  give  priority  to  making  further 
progress. 
and 
eProcurement  still  leave  room  for  improvement 
relative to other EU Member States. 

eGovernment 

However, 

The  UK  has  recently  put  in  place  a  number  of 
measures  to  improve  SME  access  to  finance.  It 
would be important to implement measures already 
announced  and  continue  to  work  to  improve  the 
availability  of  bank  and  non-bank  financing  to  the 
private  sector  and  in  particular  to  SMEs,  while 
recognising  potential  challenges  on  the  demand 
side.  It  would  also  be  important  to  encourage 
competition  within  the  banking  sector  and  explore 
with  the  market  ways  to  improve  access  to  non-
financing such as venture and risk capital and debt 
issued on public markets. 

the  Foreign  and 
The  Government  will  use 
Commonwealth  Office  and  UKTI  to  provide  UK 
businesses  with  local  intelligence  on  high  value 
projects overseas and intensive support to win these 
deals. 

Initiative 

Regarding  entrepreneurship  promotion,  the  Local 
Enterprise  Growth 
(LEGI)  was 
implemented  until  March  2011  and  a  total  of 
EUR 482 million  was  allocated  to  the  programme 
up  to  2010/2011  helping  the  most  deprived  local 
areas, 
In 
December  2010,  an  independent  evaluation  of  the 
LEGI programme148 concluded that LEGI has had a 
positive  impact  on  enterprise  activity,  especially 
start-ups,  however  its  impact  on  worklessness  has 
been less evident. 

through  enterprise  and 

investment. 

Moreover,  to  promote  entrepreneurship  as  a  viable 
route  off  benefits,  the  Jobcentre  Plus  scheme  is 
delivering  the  New  Enterprise  Allowance  (NEA), 
which  will  be  available  to  individuals  who  have 
been  claiming  Job  Seekers‟  Allowance  (JSA)  for 
six months or more. Following piloting in six local 
authorities,  the  scheme  will  be  available  nationally 
from  autumn  2011.  GBP 80 million  will  be  made 
available for up to 40 000 JSA claimants to take up 
NEA by the end of 2012-13.149 

The  women’s  enterprise  ambassadors’  network 
involves  more  than  1 000  ambassadors.  Moreover, 
an Enterprise Network works to improve the quality 
and  quantity  of  entrepreneurship  education  in 
schools  and  colleges 
in  England  and  has  a 
sustainable  network  of  54  Enterprise  Learning 
Partnerships  (ELPs).  The  National  Council  for 
Graduate  Entrepreneurship  (NCGE)  has  developed 
its  University  Enterprise  Networks  which  bring 
together universities, private sector businesses, and 
to  promote 
the  regional  agencies 
entrepreneurship to students and post graduates.  

in  projects 

4.27.6  Conclusion 

Overall,  the  UK  enjoys  a  favourable  position  with 
respect  to  competitiveness,  but  its  pattern  of 
structural  change  sends  mixed  signals,  with  some 
areas improving while others are deteriorating. The 
UK faces a number of challenges, in particular, its 
economic  performance  depends  to  a  higher  than 
average degree on the financial services industries, 
whilst  the  manufacturing  base  is  comparatively 
small.  

148 

149  

http://www.communities.gov.uk/publicatio
ns/regeneration/lgipfinalreport 
UK NRP 2011. 

215 

 
                                                 
5  ANNEX: METHODOLOGY AND INDICATORS USED 

The  report  uses  a  number  of  indicators  and  industry  classifications  in  order  to  make  a 
systematic  and  consistent  presentation  of  specialisation  patterns  (section  2  on  Structural 
Change  and  introduction  of  country  chapters)  and  of  developments  in  Member  States 
regarding various other aspects relevant to industrial competitiveness (section 3 and indicators 
graph  opening  the  country  chapters).  Below  are  the  methodological  details  on  the 
classifications and the indicators as well as the datasets underlying the graphs of the report. 

5.1 

Industry  classifications  and  indicators  used  in  section  2  and  introductions  of 
country chapters  

5.1.1  Detail of industrial classifications 

5.1.1.1  Manufacturing 3-digit classifications 

Factor-input classification 

The  classification  groups  individual  industries  according  to  their  typical  combinations  of 
factor inputs, in order to reveal information about differences across industries with regard to 
the dominant modes of creating competitive advantage in specific marketplaces. In particular, 
the  typology  is  directed  towards  distinction  between  (i)  exogenously  given  competitive 
advantages based  on  factor endowments and (ii) endogenously  created advantages based  on 
strategic  investment  in  intangible  assets  such  as  marketing  and  innovation.  The  new 
classification is based on Eurostat’s revised NACE classification at the 3-digit level150.  

Data and the choice of variables 

The clustering process is based on the following  four variables, which are designed to span 
four orthogonal dimensions of how to spend available units of productive inputs: 

•  wages and salaries 

•  physical capital 

•  advertising 

• 

research and development 

Ratios to total value added have been calculated for wages and physical capital. Expenditures 
on advertising and R&D  are  represented by their ratios  to  total  sales.  The latter  are derived 
directly from balance sheet data. All four variables have been used in their standardised form, 
i.e. transformed by calculating the difference to the mean divided by the standard deviation of 
the  variables.  Data  sources  are  DEBA  (labour  and  capital  inputs)  and  COMPUSTAT 
(advertising  and  R&D).  Since  all  four  dimensions  of  input  data  were  available  only  for  the 
US,  the  clustering  process  is  exclusively  based  on  US  data.  Correlations  between  the  four 
variables are low or non-existent. 

150  

For more details see Peneder (2002). 

216 

 
 
 
                                                 
Statistical clustering 

Cluster  analysis  classifies  individual  observations,  depending  on  their  relative  similarity  or 
nearness  to  an  array  of  different  variables.  The  basic  idea  is  one  of  dividing  a  specific  data 
profile  into  segments  by  creating  maximum  homogeneity  within  and  maximum  distance 
between groups. For the current analysis one hundred NACE 3-digit manufacturing industries 
are  taken  as  observations,  while  the  four  factor  inputs  given  above  determined  the 
discriminating variables. 

A  two  step  procedure  was  applied.  In  the  first  step,  a  non-hierarchical  optimisation  cluster 
technique, based on the iterative minimisation of within group dispersion, was used to provide 
a more aggregate picture of typical input combinations, which resulted in 32 clusters. 

In a second step, the 32 clusters from the first partition were taken as individual observations 
on which a hierarchical clustering algorithm was applied. In the following iterative process, 
clusters  are  formed  according  to  the  average  linkage  between  groups,  which  aggregates  the 
distances of all single pairs between an observation outside and each observation inside the 
cluster. 

The  final  solution  of  the  hierarchical  clustering  algorithm  groups  all  observations  into  four 
categories, each one related to  particularly  high values in one of the four dimensions. After 
applying  several  variations  on  both  (i)  the  measures  for  distance/similarity  and  (ii)  the 
clustering algorithm itself no successful alternative partition to this solution emerged. Finally, 
a  number  of  industries  which  had  no  particularly  pronounced  reliance  on  any  of  the  input 
variables were placed in a residual category called ‘mainstream’ manufacturing. This more or 
less represents the input combination of a ‘typical’ 3-digit manufacturing industry. 

The typology 

Finally,  precisely  100  NACE  3-digit  manufacturing  industries  have  been  completely 
categorised  under 
the  following  five  mutually  exclusive  groupings  of  mainstream 
manufacturing,  particularly  labour-,  capital-,  advertising-  and  research  intensive  industries. 
Like  any  broad  classification,  this  typology  must  be  interpreted  with  care,  since  industries 
within  these  five  categories  are  still  heterogeneous  and  exhibit  combinations  of  some  or  all 
these variables. A full list of industries is in TABLE A. 

A full list of industries is in TABLE A. The classification of trade data can be done along the 
lines  of  the  value  added  classification,  there  are  only  minor  differences  –  overall,  6  value 
added  industries  are  missing  in  the  trade  classification,  while  2  industries  are  present  in  the 
trade but not in the value added classification. 

217 

 
 
 
TABLE A: Industries used for 3-digit manufacturing industries 

Nace

151 Meat products
152 Fish and fish products
153 Fruits and vegetables
154 Vegetable and animal oils and fats
155 Dairy products; ice cream
156 Grain mill products and starches
157 Prepared animal feeds
158 Other food products
159 Beverages
160 Tobacco products
171 Textile fibres
172 Textile weaving
173 Finishing of textiles 1)
174 Made-up textile articles
175 Other textiles
176 Knitted and crocheted fabrics
177 Knitted and crocheted articles
181 Leather clothes
182 Other wearing apparel and accessories
183 Dressing and dyeing of fur; articles of fur
191 Tanning and dressing of leather
192 Luggage, handbags, saddlery and harness
193 Footwear
201 Sawmilling, planing and impregnation of wood
202 Panels and boards of wood
203 Builders' carpentry and joinery
204 Wooden containers
205 Other products of wood; articles of cork, etc.
211 Pulp, paper and paperboard
212 Articles of paper and paperboard
221 Publishing
222 Printing
223 Reproduction of recorded media 1)
231 Coke oven products 2)
232 Refined petroleum and nuclear fuel 2)
233 Nuclear fuel 2)
241 Basic chemicals
242 Pesticides, other agro-chemical products
243 Paints, coatings, printing ink
244 Pharmaceuticals
245 Detergents, cleaning and polishing, perfumes
246 Other chemical products
247 Man-made fibres
251 Rubber products
252 Plastic products
261 Glass and glass products
262 Ceramic goods
263 Ceramic tiles and flags
264 Bricks, tiles and construction products
265 Cement, lime and plaster
266 Articles of concret, plaster and cement
267 Cutting, shaping, finishing of stone
268 Other non-metallic mineral products
271 Basic iron and steel, ferro-alloys (ECSC)
272 Tubes
273 Other first processing of iron and steel
274 Basic precious and non-ferrous metals 
275 Casting of metals 1)

218 

Factor inputs
4
4
4
4
4
4
4
4
4
4
3
2
1
2
1
1
1
2
2
2
4
4
4
2
2
2
2
2
3
1
4
4
4
3
3
3
3
5
1
5
4
5
3
1
1
1
2
3
2
3
1
2
1
3
1
3
3
2

Labour skills
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
3
3
3
3
3
3
3
3
3
3
3
4
3
3
3
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

 
 
Nace

281 Structural metal products
282 Tanks, reservoirs, central heating radiators and boilers
283 Steam generators
284 Forging, pressing, stamping and roll forming of metal 1)
285 Treatment and coating of metals 1)
286 Cutlery, tools and general hardware
287 Other fabricated metal products
291 Machinery for  production, use of mech. power
292 Other general purpose machinery
293 Agricultural and forestry machinery
294 Machine-tools
295 Other special purpose machinery
296 Weapons and ammunition
297 Domestic appliances n. e. c.
300 Office machinery and computers
311 Electric motors, generators and transformers
312 Electricity distribution and control apparatus
313 Isolated wire and cable
314 Accumulators, primary cells and primary batteries
315 Lighting equipment and electric lamps
316 Electrical equipment n. e. c.
321 Electronic valves and tubes, other electronic comp.
322 TV, and radio transmitters, apparatus for line telephony
323 TV, radio and recording apparatus
331 Medical equipment
332 Instruments for measuring, checking, testing, navigating
333 Industrial process control equipment 1)
334 Optical instruments and photographic equipment
335 Watches and clocks
341 Motor vehicles
342 Bodies for motor vehicles, trailers
343 Parts and accessories for motor vehicles
351 Ships and boats
352 Railway locomotives and rolling stock
353 Aircraft and spacecraft
354 Motorcycles and bicycles
355 Other transport equipment n. e. c.
361 Furniture
362 Jewellery and related articles
363 Musical instruments
364 Sports goods
365 Games and toys
366 Miscellaneous manufacturing n. e. c.

1) Only value added. 2) Value added: only Nace 23 (2-digit) available.

219 

Factor inputs
2
4
2
2
2
4
1
1
1
1
2
1
1
1
5
1
5
1
1
1
2
5
5
5
5
5
5
5
4
5
2
3
2
2
5
1
1
2
2
4
4
4
4

Labour skills
2
2
2
2
2
2
2
4
4
4
4
4
4
3
4
3
3
3
3
3
3
3
3
3
3
3
3
3
3
2
2
2
2
2
4
2
2
2
2
2
2
2
2

1..Mainstream

1..Low skill industries

2..Labour intensive 
industries

2..Medium skill/blue 
collar workers

3..Capital intensive 
industries

3..Medium skill/white 
collar workers

4..Marketing driven 
industries

4..High skill 
industries

5..Technology 
driven industries

 
 
5.1.1.2  Manufacturing and services 2-digit classifications 

Education intensity 

This  taxonomy  classifies  forty-nine  manufacturing  and  service  industries  according  to  their 
educational workforce composition151. It derives from statistical cluster techniques applied to 
data  for  the  US,  Germany,  France,  the  UK  and  Austria.  For  that  purpose,  an  industry’s 
workforce  was  segregated  by  the  individual’s  highest  level  of  educational  attainment,  for 
which the shares in total employment, wages or hours worked were calculated. In summary, 
the taxonomy separates the five following mutually exclusive classes of industries: 

•  Low educational intensity: agriculture, food, textiles and clothing, wood and products 
of  wood,  mineral  products,  basic  metals  and  metal  products,  construction,  sale  & 
repair of motor vehicles, or hotels and catering. 

• 

•  Medium-low  educational  intensity:  rubber  and  plastics,  manufacturing  of  jewellery, 
games and toys, furniture etc., recycling, retail trade, inland and water transport.  
Intermediate  educational  intensity:  mining,  pulp  and  paper  (products),  printing  and 
publishing,  mechanical  engineering  and  apparatus,  electrical  machinery,  motor 
vehicles  and  other  transport  vehicles,  electricity,  gas  and  water  supply,  wholesale 
trade,  communications,  real  estate,  renting  of  machinery,  public  administration  and 
other services. 

•  Medium-high  educational 

intensity:  oil  refining,  chemicals,  radio,  TV  and 
communication  equipment,  medical,  precision  and  optical  instruments,  transport 
equipment, air transport. 

•  High  educational  intensity:  computer  and  related  activities,  financial  intermediation, 

software, research and development, other business services, and education. 

A full list of sectors is in TABLE B below.

151  

For the theoretical underpinnings of the taxonomy see Kegels et al., (2008, p. 20) and for the detailed 
methodology see Peneder (2007). 

220 

 
 
 
                                                 
TABLE B: Sectors used for the 2-digit manufacturing and services education taxonomy (EDU) 

ED U

EUKLEMS

Peneder 
2007

7-scale 

Eur ostat
SBS

OEC D 
S TAN

5- scale

5- scale

7

4

6

7

7
7
7
7
4
4
4

3
3

5
6
6
6
6
4

2

4

3

3

4
3

5

4
4

4
6

6
4
5
7

5

3

5

5

5
3

2
2

4
5
5

3
2

3

4

3

5

5
3
4
5

3

5
5

5
5
5
5

3
3

2
2

4
5

5
5
3

1

3

2

2

3
2

4
4

3

3
5

5
3
4
5

5

5
5
5
5

3
3

2
2

4
5

5
5
3

1

3

2

2

3
2

4

3

3
5

5
3
4
5

code
TOT
AtB
A
1
2
B
C
10t12
10
11
12
13t14
13
14
D
15t16
15
16
17t19
17t18
17
18
19
20
21t22
21
22
221
22x
23t25
23
24
244
24x
25
26
27t28
27
28
29
30t33
30
31t32
31
313
31x
32
321
322
323
33
331t3
334t5
34t35
34
35
351
353
35x
36t37
36
37
E
40
40x
402
41
F
G
50
51
52
H

d esc
T OT AL IND USTR IES
 AGRICULTUR E, HUNT ING, F ORESTRY AND F ISH ING
   AGRICULTUR E, HUNT ING AND FORESTR Y
    Agriculture
    Forestr y
   FISH ING
 MININ G AND QUARRYING
   MINING AND QUARRYING OF ENERGY PRODU CING MATER IAL S
    Mining of  coal and lignite; extraction o f peat
    Extraction of crude petroleum  and natural gas and services
    Mining of  uranium and thorium o res
   MINING AND QUARRYING E XCEPT E NERGY PRODUCING MATERIALS
    Mining of  metal ores
    Other mining and quar rying
 T OT AL MANUFACTU RING
   FOOD , BEVERAGES AND T OBAC CO
    Food and  bever ages
    Tobacco
   TEXT ILES, TEXT ILE , LEAT HER AND FOOTWEAR
    Textiles and apparel
     Textiles
     Wearing Appar el, Dressing And  Dying Of Fur
    Leather,  leather  and footwear
   WOOD AN D  PR ODUCTS OF WOOD AND CORK
   PUL P, PAPER, PAPER , PR INTING AN D PU BLISHING
    Pulp, pap er and pa per
    Printing,  publishing and reproduction
     Publishing
     Printing  and reproduction
   CH EMICAL, RUBBER, PLASTIC S AND F UEL
    Coke, refined petroleum and nuclear fuel
    Chem ica ls and chemical
     Pharm aceuticals
     Chem ica ls e xcluding pha rmaceuticals
    Rubbe r and plastics
   OTHER NON-METALL IC MIN ERAL
   BASIC METALS AN D FABRICA TED MET AL
    Basic metals
    Fabricated metal
   MACHINERY, NEC
   ELECTRIC AL AND OP TIC AL EQUI PMENT
    Office, accounting and computing machin ery
    Electrical engineering
     Electrical machinery and apparatus, nec
      Insulated wire
      Other electrical machinery and apparatus nec
     Radio, television a nd communication equipment
      Electron ic valves and tu bes
      Telecommunication equipment
      Radio and television receivers
    Medical, precision and optical instr uments
     Scientific instr uments
     Other instrume nts
   TRANSPORT  EQUIPMENT
    Motor vehicles,  trailers and semi-tr ailers
    Other transpor t equipmen t
     Building and  repairing of ships and boats
     Aircraft and spacecraft
     Railroad equipment and tr ansport equipment nec
   MANUF AC TU RING N EC; R ECYCLING
    Manufacturing nec
    Recycling
 ELECTRIC ITY, GAS AND WATER SUPPLY
   ELECTRIC ITY AND GAS
    Electricity supply
    Gas supply
   WA TER SUPPL Y
 CONSTRU CT ION
 WH OLESALE AND RETAIL TRADE
   Sale, maintenance and repair of motor  vehicles and mo torcycles; retail sale of fuel
   Wholesale trade and commission trade , except of motor vehicles and motorcycles
   Retail tr ade, except of motor veh icles a nd motorcycles; repair  of house hold goods
 HOTELS AND R ESTAURANTS

5-scale: 1. High – 2. Med-high – 3. Med –  4. Med-low – 5. Low. 

7-scale: 1. Very high - 2. High - 3. Med-high - 4. Intermediate - 5. Med-low - 6. Low - 7. Very low.

221 

 
 
 
TABLE C:  List  of  service  sectors  and  their  respective  identification  within  the  two taxonomies 
innovation and education intensity for trade in services data 

Taxonomy
Innovation

Education

S ector name
Computer and information services
Royalties and license fees
Research and development
Communication services
Financial services

EBOP
262
266
279
245
260
210+2181 Air transport (including space transport)
273-279
253
206
214-2181 Other transport (without space transport)

Other business services (273-279)
Insurance services
Sea transport, freight

Computer and information services
Royalties and license fees
Research and development
Financial services
Other business services

262
266
279
260
273-279
210+2181 Air transport (including space transport)
253
287
291
245
272
206
214-2181 Other transport (without space transport)
249
236

Insurance services
Personal, cultural and recreational services
Government services, n.i.e.
Communication services
Operational leasing services
Sea transport, freight

Construction services
Travel

Classification
High
High
High
M ed-high
M ed
M ed
M ed
M ed-low
Low
Low

High 
High 
High 
High 
High 
M ed-high
M ed-high
M ed-high
M ed-high
M ed
M ed
M ed-low
M ed-low
Low
Low

222 

 
 
 
 
5.1.2  Calculation of indicators 

5.1.2.1  Domestic Economy Indicators 

Value added shares (VA) 

This indicator152 measures the share  of value  added of an industry or a sector in total value 
added of a country. 

For this indicator, two databases are used, OECD STAN and EU KLEMS. OECD STAN has 
no EU aggregate. Aggregates of value added are built by converting sectoral nominal value 
added of the countries into power purchasing parity-based value added with aggregate OECD 
PPPs for each year of the series, then summing up over the 21 EU countries available.  

As  regards  missing  values  in  the  databases  at  sectoral  level,  the  main  issue  is  that  in  some 
countries,  not  the  full  sectoral  detail  is  available  as  in  other  countries  and  as  necessary  for 
applying  our  sectoral  classifications.  These  gaps  are  filled  by  attributing  the  amount  of  the 
larger  aggregate  available  to  individual  sectors  according  to  the  shares  of  the  individual 
sectors in the same aggregate of the EU average. 

Groups are weighted by value added shares. 

Data for VA, summary 

Country coverage  

Time coverage 
Sector coverage 

EU 25 (EU KLEMS; EU 27 excl. Romania and Bulgaria); USA, Japan, South Korea 
EU 21 (OECD STAN; EU 27 excl. Bulgaria, Cyprus, Malta, Latvia, Lithuania and 
Romania), Switzerland 
1999-2007 
See annex on industrial classification, manufacturing and services sectors (NACE 2-digit 
level) 

Relative valued added (RVA) 

This  indicator  measures  the  share  of  value  added  of  an  industry  or  a  sector  in  total  value 
added of a country, relative to the share of the same industry or sector in total value added of 
the EU. 

Values above 1 indicate “industry specialisation”, i.e. a higher share of sector i in value added 
of country j than in the EU, values below 1 indicate a lower share. For the summary tables in 
the country annex, the logarithm is taken as for RCA to facilitate comparison between trade 
and industry specialisation. 

The  main  database  used  for  the  RVA  is  Eurostat  SBS,  which  includes  all  the  EU  Member 
States with the exception of Malta. To provide international comparison, the US was included 
using data from the Census Bureau (Annual Survey of Manufactures). Mapping of the North 
American Industry Classification System to the EU NACE grouping was not possible at the 
detailed industry level. For this reason the larger aggregate was split into individual industries 
according to the shares of the individual industries in the same aggregate of the EU average. 
Groups are weighted by value added shares. 

152 

The formulas used and more methodological details can be found in the study "Structural change and 
the competitiveness of EU Member States", WIFO, forthcoming. 

223 

 
 
 
                                                 
Data for RVA, summary 

Country coverage  

Time coverage 
Sector coverage 

EU 26 (EU 27 excluding Malta) (Eurostat SBS); USA (Census Bureau, Annual Survey of 
Manufactures) 
1999-2007; 2008 only for the USA 
See annex on industrial and sector classification, manufacturing and services sectors 
(NACE 2-digit level) as well as manufacturing industries (NACE 3-digit level). 

5.1.2.2  Foreign trade indicators 

Cost Competitiveness Index 

Cost competitiveness is measured as the inverse ratio of annual unit labour costs in aggregate 
EU27 (labour compensation per unit of output) to annual unit labour costs in 36 main trading 
partner countries of EU 27.  

Unit labour costs are calculated with a common currency using the average annual exchange 
rate of the EURO against the currencies of the trading partners as measured by the nominal 
effective exchange rate (NEER). 

A nominal effective exchange rate is the exchange rate of a currency (here the Euro) vis-à-vis 
other  currencies  (here  those  of  the  36  partners153)  weighted  by  their  share  in  the  country’s 
international trade. 

ULC   and 
EU

If 
EU27 and for the set of trading partners, then the cost competitiveness index is defined as: 

WULC   are  respectively,  the  unit  labour  cost  values  for  a  given  year  for  the 

I

=

⎛
⎜⎜
⎝

ULC

NEER

*
EU
ULC
W

1
−

⎞
⎟⎟
⎠

Revealed comparative advantage 

The  revealed  comparative  advantage  (RCA)  indicator  measures  export  specialisation  by 
comparing  a  sector's  share  in  total  exports  for  a  given  country  with  that  for  the  EU27  as  a 
whole.  The  indicator  can  also  be  interpreted  as  a  "normalised"  export  market  share  of  the 
given  country  for  a  selected  sector,  as  it  compares  the  market  share  in  total  EU27  exports 
gained in a specific sector with the average export market share that the country reached in 
total exports, the sum over all sectors. 

For the final indicator the logarithm of this relation is taken, therefore values above 1 signal 
that relative to the EU27 average, the country specialises in exports in the selected sector. The 
change  in  RCA  is  defined  as  the  absolute  difference  of  the  value  of  the  RCA  indicator  in 
time 0  and  time  t.  The  indicator  is  calculated  for  three  partner  regions,  total  exports,  extra-
EU27 exports as well as intra-EU exports. RCA figures are considered separately for exports 

153   
The list of the 36 trading partners can be found on the Europa website at: 
http://ec.europa.eu/economy_finance/db_indicators/competitiveness/data_section_en.htm 

224 

 
 
 
 
 
 
 
 
 
 
 
                                                 
 
in manufacturing goods and exports in services. The data source for the former is the Eurostat 
Comext database, results are presented on 2- and 3-digit NACE 2003 level as well as for the 
factor input taxonomy, the time period covers 1999 to 2010. The data source for the analysis 
of  RCA  indicators  in  service  exports  is  the  Balance  of  Payment  (BOP)  database  from 
Eurostat. Trade in services data are much more limited referring to the disaggregation level as 
well as the time horizon. Results can therefore be presented just for 11 service sectors, and for 
the  time  period  2004  to  2009.  Additionally  the  RCA  indicator  is  computed  for  two  new 
taxonomies  (innovation  and  education  type)  which  combine  trade  in  goods  and  trade  in 
services. However, as these two new taxonomies, rely on detailed sector information for trade 
in services, availability is even more restricted, therefore the results are not available for all 27 
EU member states and/or all years between 2004 and 2009. 

Export shares in total manufacturing as percent 

This indicator refers to the share of exports by one selected sector in relation to total country 
exports.  The  indicator  is  again  calculated  for  total  exports,  extra-EU27  exports  as  well  as 
intra-EU exports; for trade in manufacturing goods (both on 2- and 3 digit NACE 2003 level 
as well as for the factor input taxonomy) and trade in 11 services sectors and additionally for 
the two new taxonomies (innovation and education type). The data source and time coverage 
is the same as above for the calculation of RCA indicators. 

Price segments 

The  aim  of  the  analysis  of  price  segments  is  to  identify  whether  individual  countries  focus 
more on high, medium or low price segments within given industries and whether this relation 
has  changed  over  time.  Changes  in  the  strategies  to  move  into  the  highest  price  segments 
within  industries  are  signalling  an  "intra-industry"  upgrading.  The  price  segments  for 
manufacturing  exports  are  defined  at  the  6-digit  NACE  2003  level  for  three  selected  time 
points  (1999,  2007,  2009).  Manufacturing  exports  data  are  taken  from  the  Eurostat  Comext 
database. All 27 individual EU member states are covered, for each member state all reported 
bilateral exports values and quantities are used. Whenever both information on export values 
as well as quantities were available and above a certain threshold (EUR 10 000 for values and 
2 tons for quantities) export unit values are calculated as the ratio of values to quantities and 
expressed in kg/€. Afterwards for each 6-digit NACE level the 33.3 and 66.7 percentile154 of 
the distribution of all bilateral export unit values of all 27 individual  EU  member  states  are 
defined as cutting points for the three price segments (high, medium or low). The boundaries 
are  identical  for  all  countries  at  the  6-digit  level,  but  different  for  the  three  selected  time 
periods (1999, 2007, 2009). These boundaries are then used to classify each bilateral export 
value at the d 6-digit level into one of the three price segments, for example trade values with 
a  unit  values  below  the  33.3  percentile  threshold  form  therefore  the  low  price  segment 
category. In the end, exports values are summed up to different aggregation levels (the two 
taxonomies  factor  input  and  revealed  quality  elasticity  type  as  well  as  for  total  country 
exports) for each price segment category. The resulting aggregated export values for the low, 
medium and high price segment are than expressed as the respective share in total exports of 
the  analysed  country.  For  Malta  and  Luxemburg  a  smaller  set  of  unit  values  was  available, 
therefore the result for these countries should be interpreted with caution. 

World export market share 

154  

These results give the value below which 33.3/66.7 % of the export unit value observations are found. 

225 

 
 
 
 
                                                 
The  figures  exclude  intra-EU  trade  values.  The  indicator  measures  for  each  analysed 
sector/taxonomy the market share of exports of the examined country/country group relative 
to a proxy for total worldwide exports in this sector/taxonomy. The proxy for "world export" 
differs  for  trade  in  goods  and  services.  For  services  exports  the  aggregate  of  the  following 
regions  and  countries  are  taken  as  proxy  for  "world  export",  besides  all  individual  EU27, 
EFTA,  NAFTA  and  BRIC  countries,  Croatia,  other  OECD155  as  well  as  selected  Asian156), 
and  African157)  and  Central  and  South  American158)  countries.  This  definition  comprises 
approximately  64.5 %  of  total  world  exports  in  services  in  2004  and  65.6 %  in  2009.  Data 
source for export of services is Eurostat Balance of Payments statistics, the time period 2004 
to 2009 and 11 service sectors are covered. The applied proxy for worldwide manufactured 
goods exports comprises approximately 90 % of total world goods exports in 1999 and 80 % 
in 2009. Data for goods exports are taken from the UNO Comtrade database, the years 1999 
to  2009  are  covered  in  the  analysis,  the  indicator  is  calculated  for  trade  in  manufacturing 
goods on the 2 and 3-digit NACE 2003 level as well as for the factor input taxonomy. 

5.2 

Indicators used in section 3 and the introductory graph of country chapters 

5.2.1  R&D decomposition 

Comparison of structural and country effects of R&D intensities across countries159 

Direct  comparisons  of  R&D  expenditures  relative  to  GDP  are  flawed  as  especially  the 
business R&D expenditures (BERD) are heavily influenced by the industrial structure of each 
country.  Smith  and  Sandven  (1998)  have  proposed  a  decomposition  that  identifies  country 
and  sector  effects  in  BERD,  thus  making  it  possible  to  compare  R&D  intensities  in  the 
business  sector  across  countries.  Additional  manipulations  permit  to  take  into  account  the 
effect of structural change on R&D intensities.  

The aim of this analysis is to present a comprehensive picture of the influence of structural 
change on the development of R&D intensities in the business sector in the EU 27 countries 
and  important  non-EU  countries.  In  order  to  carry  out  this  comparison  data  from  different 
sources have been consolidated into one data set.  

Data for R&D decomposition, summary 

Country coverage  
(ISO 3166 country 
codes) 

OECD STAN 
Value added 

AT BE CZ DE DK 
ES FI FR GR IE IS IT 
LU NL NO PL PT SE 
SI  
AU CA IL JP KR MX 
NZ US 

Data source 

Eurostat 
Value added 

BG CY EE HU LT 
LV MT RO SK TR  

OECD 
ANBERD 

AU CA IL NZ SE 

Eurostat 
BERD 
BE BG EE GR JP KR 
LU MT LT LV PL SK 
CZ CY 

Time coverage in 
consolidated data set 

1998-2005: GR 
1998-2006: AU BG* CA ES JP* PT* UK 

155   
156   
157   
158   
159  

OECD34 without Australia. 
Indonesia, Hong Kong, Kuwait, Malaysia, Singapore, Thailand. 
Egypt, Morocco, South Africa and Tunisia. 
Argentina, Colombia, Costa Rica, Panama and Peru. 
Details  on  the  decomposition  methodology  and  on  data  manipulations  can  be  found  in  the  study 
"Structural change and the competitiveness of EU Member States", WIFO, forthcoming. 

226 

 
 
 
 
                                                 
1998-2007: AT BE DK FR KR NL NO SE TR* US 
1998-2008: CY CZ EE FI HU IE IS LT LV PL RO SI 
1998-2009: IT SK DE 
1999-2005: NZ 
2000-2006: IL 
2002-2008: MT 

Sector coverage in 
consolidated data set  
(NACE rev. 1.1 

Larger aggregates: 
01-99, 15-37, 50-74, 75-99, 50-99 

Breakdown: 
01-05, 10-14, 15-16, 17-19, 20-22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36-37, 40-41, 
45, 50-52, 55, 60-64, 65-67, 70+71+74, 72, 73  

5.2.2  Definitions of the indicators 

Table E: Indicators 

Name of Indicator 

Definition 

Towards a modern and competitive industry 

Labour productivity per 
hour worked 

Gross  Domestic  Product  in  Purchasing  Power  Standards 
per hour worked relative to EU-27 (EU-27=100) 

Source: Eurostat  

Labour productivity per 
person employed  

Gross  Domestic  Product  in  Purchasing  Power  Standards 
per person employed relative to EU-27 (EU-27=100) 

Labour productivity in 
manufacturing per person 
employed 

Unit labour costs in 
manufacturing  

Share of science and 
technology graduates 

Source: Eurostat 

Gross value added in Purchasing Power Standards per 
person employed 

Source: Eurostat 

Development  (2000=100)  of  the  following  ratio:  Total 
compensation  of  employees  in  manufacturing  (in  nominal 
values) divided by total valued added in manufacturing (in 
constant prices). 

Source:  European  Commission  (AMECO-Database  2000-
2005) and OECD (2005-2009) 

Number of new science and technology graduates (levels 5 
and  6  of  the  “International  Standard  Classification  of 
Education  ISCED  5-6”)  divided  by  20-29  years  old 
population. 

The  term  “science”  includes  the  following  fields  of 
education  (ISCED): 
life  sciences,  physical  sciences, 
mathematics,  statistics  and  computing,  while  technology 
refers  to  graduates  in  engineering,  manufacturing  and 
construction. 

The indicator includes new tertiary graduates in a calendar 
year  from  both  public  and  private  institutions  completing 
graduate  and  post  graduate  studies  compared  to  the  age 
group of 20-29 years old population that corresponds to the 

227 

 
 
 
 
 
 
 
 
R&D performed by 
businesses 

typical graduation age in most countries.  

Source: Eurostat 

The  indicator  covers  all  expenditures  for  R&D  performed 
within  the  business  enterprise  sector  (BERD)  on  the 
national  territory  during  a  given  period,  regardless  of  the 
source of funds.  

The  data  on  this  indicator  are  gathered  by  Eurostat  which 
applies  the  guidelines  laid  out  in  the  Frascati  Manual,  the 
"Proposed  standard  practice  for  surveys  of  research  and 
experimental development" (OECD, 2002).  

Note: Gross domestic expenditure on R&D is composed of 
Business enterprise expenditure on R&D, Higher education 
expenditure  on  R&D,  Government  expenditure  on  R&D 
and Private non-profit expenditure on R&D. 

Source: Eurostat 

Share of high-tech exports   Share  (in  %)  of  intra-  and  extra-EU27  exports  of  all  high 
technology products in total intra- and extra-EU27 exports. 

High technology products cover the following: Aerospace, 
Electronics-
Computers-office 
instruments, 
telecommunications,  Pharmacy,  Scientific 
Electrical 
Non-electrical 
machinery, Armament. 

machinery, 

Chemistry, 

machines, 

Share of innovating 
companies  

Source: Eurostat. 

Enterprises  which  have  introduced  during  an  observation 
period of three years new or significantly improved goods, 
services  and/or  processes,  marketing  or  organisational 
innovation or a combination of those, divided by the total 
number  of  active  enterprises  at  the  end  of  the  observation 
period. 

Source:  Community  innovation  surveys  (CIS).  Enterprises 
with  less  than  10  employees  do  not  belong  to  the  total 
population covered by CIS. 

Trade balance of goods (% 
of total exports of goods) 

Net  exports  (exports  minus  imports)  of  goods  divided  by 
total exports of goods (all in current prices). The aggregate 
EU trade balance includes trade with third countries only. 

Source: Eurostat. 

Trade balance of services 
(% of total exports of 
services) 

Net exports (exports minus imports) of services divided by 
total  exports  of  services  (all  in  current  prices).  The 
aggregate  EU  trade  balance  includes  trade  with  third 
countries only. 

Source: Eurostat. 

Real effective exchange 
rate 

Nominal  effective  exchange  rate  deflated  by  nominal  unit 
labour  costs  (total  economy)  relative  to  a  panel  of  36 
countries  (EU-27  +  9  other  industrial  countries:  Australia, 

228 

 
 
 
 
 
 
 
Revealed Comparative 
Advantage (RCA) 

Energy intensity in 
industry (including 
construction) and the 
energy sector 

Canada,  United  States,  Japan,  Norway,  New  Zealand, 
Mexico,  Switzerland,  and  Turkey).  1999=100  for  all 
countries.  A  rise  in  the  index  suggests  deterioration  in 
competitiveness.  The  figure  for  each  country  is  calculated 
against the rest of the countries belonging to the panel. The 
EU  aggregate  figure  is  calculated  against  the  non-EU-27 
countries belonging to the panel. 

Source: European Commission (DG ECFIN)  

the  share  of  a  given  sector 

The  RCA  gives 
in 
manufacturing exports for a given Member State relative to 
the share of the sector in manufacturing exports of 21 EU 
Member  States;  due  to  the  lack  of  data  Bulgaria,  Cyprus, 
Latvia,  Lithuania,  Malta  and  Romania  are  not  covered 
here. 

Towards a sustainable industry 

Energy  consumption  in  kg  of  oil  equivalent  per  euro  of 
gross  value-added  (chain-linked  volumes,  reference  year 
2000, at 2000 exchange rates).  

in 

Source: Eurostat (“environment and energy” and “national 
accounts”) 
Energy  consumption  refers  to:  B_101800  -  Final  energy 
consumption 
(including  construction)  + 
B_101600 - Final Non-energy consumption + B_101300 - 
Consumption in Energy Sector. 
GVA  refers  to  NACE  sections  C:  Mining  and  Quarrying, 
D:  Manufacturing,  E:  Electricity,  Gas  and  Water  Supply 
and F: Construction. 

industry 

CO2 intensity in industry 
(including construction) 
and the energy sector 

CO2 emissions in kg per euro of gross value-added (chain-
linked  volumes,  reference  year  2000,  at  2000  exchange 
rates). 

Sources:  

European  Environment  Agency  for  the  figures  on  the  CO2 
emissions.  The  relevant  categories  are  1.A.1.  (Energy 
Industries)  +  1.A.2. 
Industries  and 
Construction)  +  2.  (Industrial  Processes)  +  3.  (Solvent  and 
Other Product Use).Eurostat for the figures regarding GVA. 
GVA refers to NACE sections C: Mining and Quarrying, D: 
Manufacturing, E: Electricity, Gas and Water Supply and F: 
Construction. 

(Manufacturing 

The  amount  of  hazardous  and  non-hazardous  waste  of  all 
enterprises  (all  NACE  sectors)  divided  by  the  number  of 
inhabitants.  

Source: Eurostat  

Waste generated by 
enterprises 

Exports of environmental 
goods 

Intra-  and  extra-EU27  exports  of  goods  from  "eco-
industries" divided by total intra- and extra-EU27 exports of 

229 

 
 
 
 
 
 
 
goods (in nominal values).  

The  notion  of  "eco-industry"  refers  to  sectors  whose 
products  measure,  prevent,  limit,  minimise  or  correct 
environmental damage. The trade codes considered to cover 
eco-industry  goods  are  those  identified  in  the  Ecorys  study 
on  the  “Competitiveness  of  the  EU  eco-industry”  (pages 
190/191) of 22 October 2009, carried out for DG ENTR. 

Source: European Commission (DG ENTR) calculations on 
the basis of Eurostat/COMEXT data.  

Business Environment 

Average  mark  given  by  business  executives  in  a  World 
Economic Forum survey to the question "How burdensome 
is  it  for  businesses  in  your  country  to  comply  with 
governmental  administrative  requirements  (e.g.,  permits, 
regulations,  reporting)?"  (1  =  extremely  burdensome;  7  = 
not burdensome at all) 

Source:  Global  Competitiveness  Report  2008-2009  of  the 
World Economic Forum 

Average  evaluation  (0  =  negative;  10  =  positive)  of  the 
statement "The legal and regulatory framework encourages 
the  competitiveness  of  enterprises"  in  an  IMD  survey  of 
businesspeople. 

Source:  World  Competitiveness  Yearbook  2009,  IMD 
(International Institute for Management Development).  

Share of enterprises using the internet to interact with public 
authorities (i.e. having used the Internet for one or more of 
the following activities: obtaining information, downloading 
forms,  filling-in  web-forms,  full  electronic  case  handling). 
Data  are  expressed  in  %  of  enterprises  with  10  or  more 
persons employed and belonging to the NACE categories D, 
F, G, H, I, K, O. 

Source:  Eurostat  publishing  data  validated  by  Cap  Gemini 
in association with the Member States. 

Burden of government 
regulation 

Legal and regulatory 
framework  

E-government usage by 
enterprises  

Infrastructure 
expenditures per 
inhabitant 

Sum  of  investment  and  maintenance  expenditures  on  rail, 
road, 
inland  waterways,  maritime  ports  and  airports 
infrastructure.  

Satisfaction with the 
quality of infrastructure 

Source: OECD International Transport Forum Statistics. 

Average  mark  given  by  business  executives  in  a  World 
Economic  Forum  survey  to  the  quality  of  rail,  roads,  ports 
and  airports  (1  =  underdeveloped;  7  =  extensive  and 
efficient by international standards). 

Source: Global Competitiveness Report 2008-2009 of the 
World Economic Forum. 

230 

 
 
 
 
 
 
 
Availability of high-
speed broadband 
infrastructure 

Electricity prices for 
medium-sized enterprises 

State aid for industry and 
services  

Percentage of broadband lines with speed above 10 MBps 

Source: European Commission, DG INFSO 
Communications Committee Working Document 

Average  national  price  in  Euro  per  kWh  excluding  taxes, 
applicable  for  the  first  semester  of  each  year  for  medium-
sized  industrial  consumers  (annual  consumption  between 
500  and  2000  MWh).  The  indicator  does  not  cover  small 
enterprises  for  reasons  of  data  availability,  nor  large 
enterprises,  since  the  latter  often  have  individual  contracts 
with  energy  providers.  Until  2007  the  prices  refer  to  the 
situation on 1 January. 

Source: Eurostat 

The indicator measures state aid for industry and services as 
% of GDP. State aid as defined under article 107 TFEU that 
has  been  granted  by  the  Member  States  and  has  been  the 
subject of a final Commission decision, or has been granted 
on  the  basis  of  a  block  exemption  regulation.  Accordingly, 
general measures (e.g. a general tax break for expenditure on 
research  and  development),  and  public  subsidies  that  have 
no  effect  on  trade  and  do  not  distort  or  threaten  to  distort 
competition, are not covered, neither is aid compensating for 
services of general economic interest.  

Source: European Commission, DG COMP State aid 
scoreboard 

Entrepreneurship and SMEs 

Starting a business (days)  Time needed to start a business, recorded in calendar days. It 
is the median duration that incorporation lawyers indicate as 
necessary. It is assumed that the minimum time required for 
each procedure is one day.  

Source: World Bank Doing Business. 

Enterprise survival rate 
after 2 years 

Number  of  enterprises  started  in  year  t  and  which  still 
existed  in  year  (t+2),  divided  by  the  total  number  of 
enterprises that started in year t 

Business churn 

Access to loans: rejected 
applications  

Source: Eurostat 

Sum  of  the  number  of  enterprise  starts  and  exits  (“births” 
plus “deaths”) in the reference period (year t), divided by the 
total number of enterprises active in year t. 

Source: Business Demography (Eurostat).  

Survey  response  on  rejected  loan  applications  and  loan 
offers  whose 
terms  and  conditions  were  deemed 
unacceptable  by  the  enterprise,  as  %  of  all  applications  for 
bank loans of SMEs that applied in the past six months  

Source: Flash Eurobarometer 

231 

 
 
 
 
 
 
 
 
Early stage financing  

Duration of payments by 
public authorities 

Share of high-growth 
enterprises 

Sectoral specialisation  
of manufacturing  
(GVA based) 

The indicator measures early stage financing as % of GDP. 
Venture capital investment data are broken down into “early 
stage” (seed and start-up) and “expansion and replacement” 
capital.  Seed  capital  is  defined  as  financing  provided  to 
research,  assess  and  develop  an  initial  concept  before  a 
business  has  reached  the  start-up  phase.  Start-up  is  defined 
as  financing  provided  for  product  development  and  initial 
marketing, manufacturing and sales.  

Source:  Eurostat,  using  data  from  the  European  Private 
Equity and Venture Capital Association (EVCA). 

Effective payment duration in days. 

Source: European payment Index by Intrum Justitia. 

Enterprises  with  average  annualised  growth  greater  than 
20 % in the number of employees, over a three-year period, 
and  with  ten  or  more  employees  at  the  beginning  of  the 
observation  period,  divided  by  the  total  number  of  active 
enterprises at the beginning of the three year period. 

Source : Eurostat 

Gross  Value  Added  (GVA)  (ESA95,  8.11)  is  the  net  result 
intermediate 
of  output  valued  at  basic  prices 
consumption  valued  at  purchasers'  prices.  GVA  is  also 
available  broken  down  by  industries  according  to  NACE 
Rev.  1.1  in  the  breakdowns  collection.  GVA  is  calculated 
before consumption of fixed capital. 

less 

Source: Eurostat (National Accounts) 

5.2.3  Methodological note on the introductory graph in the country chapters 

The graphs present, for each indicator, the distance of the respective Member State from the 
EU average. This distance is expressed in terms of standard deviations, which is a common 
measure of the spread of observations in a distribution (in this case, a measure of the variation 
of  Member  State  performance  around  the  EU  average).  This  enhances  the  comparability  of 
the  presentation  of  indicators  with  different  measurement  units  and  distributions  across 
Member States. 

The  data  are  presented  in  the  country  graphs  in  such  a  way  that  a  bar  pointing  to  the  right 
always indicates a positive performance. Likewise, a bar pointing to the left always indicates 
a performance below average. This is straightforward for indicators, e.g. labour productivity, 
where  high  values  are  strived  for.  However,  for  those  indicators  where  low  values  are  the 
objective, e.g. generation of waste, the data bars in the graph have been converted so that a 
positive deviation from the average (bar pointing to the right) represents a lower generation of 
waste  than  the  average.  These  conversions  enable  an  easy  reading  of  the  country  profiles, 
since all bars presenting positive values in the country profile suggest a level of performance 
of the respective Member State which is better than the EU average and all bars presenting 
negative values suggest a level of performance of the respective Member State which is below 
EU average.  

232 

 
 
 
 
 
 
The indicators for which such conversions have been carried out are: (1) energy intensity in 
industry in kg of oil equivalent per euro of gross value-added at constant prices; (2) carbon 
intensity per ton of oil equivalent of energy consumption; (3) waste generated by enterprises; 
(4) state aid for industry and services as percent of GDP; (5) electricity prices for medium-
sized enterprises, (6) time required to start a business; (7) rejected loan applications, and loan 
offers  whose  conditions  were  deemed  unacceptable,  as  percent  of  all  loan  applications;  (8) 
duration of payments by public authorities. 

The  indicators  presented  in  the  above  table  (under  1.2)  for  which  the  distance  from  the  EU 
average would not be meaningful (exchange rates and trade balances) are quoted in the text. 

The EU averages used to show the respective standard deviations in the country profiles are 
the  values  for  the  EU  as  a  whole  and,  hence,  weighted  averages  of  Member  States 
performance.  For  the  following  nine  indicators,  however,  unweighted  arithmetic  averages 
have  been  used  due  to  missing  EU  totals:  share  of  science  and  technology  graduates, 
satisfaction  with  quality  of  infrastructure,  legal  and  regulatory  framework,  time  required  to 
start  a  business,  enterprise  survival  rate,  business  churn,  early  stage  financing,  duration  of 
payments  by  public  authorities,  and  share  of  high-growth  enterprises  as  percent  of  all 
enterprises. 

Data setserages used to show the respective standard deviations in the country profiles are the 
values for the EU as a whole and, hence, weighted averages of Member States performance. 
For the following nine indicators, however, unweighted arithmetic averages have been used 
due to missing EU totals: share of science and technology graduates, satisfaction with quality 
of infrastructure, legal and regulatory framework, time required to start a business, enterprise 
survival  rate,  business  churn,  early  stage  financing,  duration  of  payments  by  public 
authorities, and share of high-growth enterprises as percent of all enterprises. 

5.3  Data sets 

5.3.1  Data tables referenced to in section 2 on Structural Change 

233 

 
 
 
 
TABLE F: Sector specialisation of manufacturing based on Gross Value Added (2005-2009) 

Code  Sector 

DA 
DB 
DC 
DD 
DE 
DF 
DG 
DH 
DI 
DJ 
DK 
DL 
DM 
DN 

Food products; beverages and tobacco 
Textiles and textile products 
Leather and leather products 
Wood and wood products 
Paper products; publishing and printing 
Refined petroleum products 
Chemicals, chemical products 
Rubber and plastic products 
Other non-metallic mineral products 
Basic metals and fabricated metal products 
Machinery and equipment n.e.c. 
Electrical and optical equipment 
Transport equipment 
Manufacturing n.e.c. 

Code   Sector  

DA 
DB 
DC 
DD 
DE 
DF 
DG 
DH 
DI 
DJ 
DK 
DL 
DM 
DN 

Food products; beverages and tobacco 
Textiles and textile products 
Leather and leather products 
Wood and wood products 
Paper products; publishing and printing 
Refined petroleum products 
Chemicals, chemical products 
Rubber and plastic products 
Other non-metallic mineral products 
Basic metals and fabricated metal products 
Machinery and equipment n.e.c. 
Electrical and optical equipment 
Transport equipment 
Manufacturing n.e.c. 

Source: Eurostat (National Accounts) 

CY 
2009 

BE 
2009 

GR 
2009 

CZ 
2009 

FR 
2009 

EE 
2009 

IE 
2009 

IT 
2009 

EU27 
2009 

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

3,8%  14,9% 
1,3% 
0,2% 
2,0% 
1,6% 
4,4% 
7,7% 
6,3% 
4,3% 
6,4% 
10,9%  19,8% 
2,9% 
3,9% 
7,8% 
6,0% 

DE 
ES 
LV 
BG 
DK 
2008 
2009 
2009 
2006 
2009 
7,2%  15,5%  17,2%  34,1%  16,9%  14,1%  11,7%  30,0%  23,8% 
13,0%  14,5%  15,9%  12,2%  17,6% 
0,6% 
2,9% 
6,9% 
5,2% 
3,2% 
1,4% 
2,5% 
1,2% 
2,7% 
8,7% 
8,5% 
0,1% 
0,8% 
0,4% 
1,0% 
0,2% 
0,2% 
0,6% 
0,0% 
0,3% 
0,7% 
3,0% 
0,8% 
1,7% 
7,5%  19,0% 
1,9% 
1,3%  12,4% 
2,1% 
3,5% 
1,4% 
2,1% 
8,3%  12,3% 
9,1% 
9,8% 
8,0% 
9,2% 
6,3% 
7,4% 
5,5% 
7,6% 
6,1% 
0,1% 
3,5% 
0,0% 
0,1% 
1,4% 
1,8% 
0,5% 
1,0% 
0,2% 
7,4% 
0,7% 
5,2%  40,3% 
6,4% 
6,3% 
5,8%  11,1%  11,0% 
4,7%  14,0%  10,6% 
7,6% 
2,9% 
3,7% 
4,9% 
4,4% 
3,3% 
1,6% 
3,0% 
4,6% 
4,4% 
7,1% 
3,8% 
4,8% 
1,9% 
3,5% 
4,8%  15,1% 
4,7% 
7,0% 
5,2% 
5,6% 
3,0% 
5,6% 
9,9% 
2,7%  11,5%  16,2%  15,1%  16,3%  12,4% 
9,8%  14,4%  10,6% 
13,9%  15,0%  17,4%  14,3% 
2,8% 
2,9% 
2,0% 
5,1% 
11,8% 
8,2%  11,7%  14,3%  17,2% 
6,5% 
2,3% 
6,1%  12,7%  18,3%  15,1%  13,4%  17,4% 
11,1% 
3,8% 
1,3% 
1,4% 
1,3%  15,3% 
2,3%  15,1% 
10,1% 
5,9% 
5,8% 
1,5% 
2,8% 
4,9% 
4,4% 
4,1% 
4,2% 

7,5%  10,0%  14,2% 
9,8% 
5,7% 
8,8% 
5,8% 
9,1%  12,5% 
5,7% 
4,1% 
4,9% 

6,8% 
7,2% 
6,4% 
2,8% 

3,1% 
3,0% 
3,6% 
4,6% 

4,5% 
4,4% 

3,6% 
6,5% 

LT 

LU 

HU 

MT 

NL 

AT 

PL 

PT 

RO 

SI 

SK 

FI 

SE 

UK 

2005 

2007 

2009 

2009 

2009 

11,4% 

7,9% 
0,3% 
7,9% 
6,9% 

2009 
2005 
2009 
2009 
2007 
2008 
2009 
2009 
8,8%  15,2% 
9,1% 
8,4% 
9,7%  18,2%  13,1%  26,6% 
26,3%  10,6%  10,3%  14,0%  23,2% 
4,7% 
2,5% 
0,9% 
3,3% 
3,5% 
6,7% 
4,4%  12,2% 
2,2% 
3,9% 
1,4% 
1,7% 
0,0% 
0,2% 
1,1% 
1,1% 
1,7% 
3,5% 
0,6% 
0,4% 
0,2% 
0,1% 
0,6% 
1,6% 
6,4% 
2,1% 
3,3% 
3,9% 
5,0% 
3,8% 
4,7% 
1,3% 
1,7% 
0,5% 
7,4% 
6,2%  15,7%  12,4%  13,1% 
7,4% 
4,7% 
8,8% 
7,6% 
7,4% 
4,8%  10,7%  11,0% 
0,0% 
1,9% 
1,6% 
1,5% 
2,2% 
0,0% 
4,6% 
2,8% 
3,8% 
1,3% 
2,3% 
0,0% 
8,8% 
4,0% 
8,5%  14,3%  11,4% 
3,8% 
4,1%  15,3% 
5,9% 
7,2% 
7,5% 
9,5%  13,2%  14,0% 
5,3%  11,2% 
5,5% 
3,0% 
3,5% 
5,6% 
6,8% 
4,0% 
4,0% 
6,2% 
4,1% 
3,3% 
4,5% 
5,1% 
3,6% 
8,0% 
5,4% 
4,3% 
3,6% 
4,0% 
2,6% 
3,3% 
5,7% 
3,9% 
8,3% 
6,3% 
5,7% 
3,7% 
9,9%  16,7%  19,9%  12,8%  13,2%  10,7% 
3,6%  11,7%  18,4%  12,1%  10,9% 
5,0%  36,1% 
8,8% 
8,6% 
6,9%  15,2%  12,6% 
4,8%  11,6% 
6,2% 
1,3% 
7,7% 
7,9% 
3,4% 
8,4% 
5,8%  22,1%  24,3% 
5,4% 
9,6% 
6,9%  10,7%  13,8%  18,2%  15,0% 
8,8%  10,7% 
5,8%  12,3% 
7,9% 
1,4%  13,6% 
5,8% 
4,4% 
2,8% 
4,4% 
5,0% 
2,0%  11,6% 
1,4% 
10,9% 

9,5%  14,4% 
5,8%  11,7% 
8,0% 
4,1% 
4,5% 
8,1% 

2009 
9,7% 
1,3% 
0,3% 
3,7% 

6,6%  12,2% 
4,5% 
4,6% 

7,9% 
7,5% 
9,0% 
5,4% 

3,3% 
2,4% 

4,0% 

: 

234 

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
TABLE G: Value added share, 2007  

Agriculture

Manufacturing

Mining&Energy

Construction

Market Services

Other services

Country

2007

1.76
Austria
0.89
Belgium 1)
6.33
Bulgaria 2)
2.20
Cyprus 1)
Czech Republic 1) 2.46
1.18
Denmark
3.17
Estonia
3.01
Finland
2.22
France 1)
0.96
Germany
3.47
Greece
3.97
Hungary
1.43
Ireland 1)
2.08
Italy
3.58
Latvia 1)
3.94
Lithuania 1)
0.40
Luxembourg
2.40
Malta
2.09
Netherlands
4.35
Poland
2.48
Portugal
6.51
Romania 2)
4.06
Slovakia
2.51
Slovenia
2.90
Spain 1)
1.72
Sweden 1)
0.69
United Kingdom

EU 27 1)
USA 1)
Korea 1)
Japan 2)
Switzerland 2)

Group 1
Group 2
Group 3
Group 4

1.83
1.13
2.88
1.38
1.21

1.36
2.50
3.82
5.83

Change
2007-
1999

Change
2010*-
2007

-0.36
-0.41
-9.97
-1.79
-1.39
-1.19
-1.26
-0.47
-0.83
-0.27
-3.16
-1.80
-2.18
-0.97
-0.36
-3.33
-0.41
-0.29
-0.59
-0.91
-1.54
-7.87
-0.69
-0.85
-1.62
-0.56
-0.43

-0.66
-0.09
-2.16
-0.40
-0.37

-0.53
-1.41
-1.10
-6.95

-0.22
-0.21
0.96
0.10
-0.20
0.07
0.30
-0.12
-0.47
-0.09
-0.21
-0.48
-0.45
-0.18
-0.29
-0.58
-0.10
-0.50
-0.14
-2.82
1.05
0.93
-0.21
-0.10
-0.23
0.06
0.05

-0.17
-0.09
-0.28
0.05
0.06

-0.15
-0.12
-1.63
0.66

Change
2007-
1999

Change
2010*-
2007

2007

Change
2007-
1999

Change
2010*-
2007

0.41
-2.92
1.62
-2.84
0.00
-2.45
0.00
-1.35
-3.64
1.42
-1.92
-0.36
-12.51
-2.10
-2.64
0.77
-2.33
-4.28
-1.55
-0.09
-3.42
1.95
-0.53
-2.27
-3.87
-2.15
-6.03

-2.44
-3.00
0.12
-0.63
0.46

-2.35
-2.83
-0.27
1.35

-1.26
-2.34
-0.79
-0.56
-3.01
-1.64
0.02
-5.44
-1.87
-3.15
1.50
0.78
2.34
-2.41
-1.45
-2.23
-2.36
-2.46
-0.97
0.16
3.89
-1.18
-3.23
-2.82
-2.30
-4.11
-0.85

-2.31
-1.04
0.46
-1.13
0.09

-2.04
-1.65
-0.80
-1.17

2.72
2.21
6.78
2.46
5.47
5.89
3.97
2.62
1.79
2.65
3.10
2.97
2.13
2.45
2.85
3.77
1.49
1.97
5.05
5.61
3.53
3.85
6.37
3.26
2.39
3.27
4.21

3.06
3.20
2.42
2.00
2.15

3.05
2.54
5.16
4.36

-0.28
-0.65
-0.16
0.30
0.22
2.01
-0.65
0.23
-0.13
0.22
0.29
-1.15
0.71
-0.24
-1.45
-0.94
0.06
-0.30
1.69
0.00
0.41
-2.43
1.04
-0.02
-0.24
0.54
0.24

0.19
0.77
-0.41
-0.83
-0.77

0.26
-0.15
-0.03
-1.67

0.37
0.11
-0.78
-0.09
1.32
-0.55
1.96
0.92
0.02
0.40
-0.03
0.79
-0.04
0.12
1.23
0.41
-0.22
0.94
0.19
-2.52
2.60
-0.44
-1.21
0.33
0.29
0.65
-0.04

0.10
0.01
-0.37
-0.18
-0.02

0.18
0.33
-1.06
-0.18

Change
2007-
1999

Change
2010*-
2007

-0.87
0.22
2.19
1.84
-0.55
0.04
3.90
0.83
1.21
-1.47
-0.52
0.06
3.08
1.19
2.59
2.66
-0.51
0.17
0.01
-1.03
-0.51
4.91
2.59
0.73
4.02
1.01
1.30

0.80
0.10
-0.30
-1.41
-0.05

0.20
1.97
-0.38
3.93

-0.06
0.15
1.20
-0.81
0.94
-1.40
-3.77
-0.32
0.17
0.11
-2.50
-0.66
-4.12
-0.19
-2.39
-3.83
-0.68
-0.40
-0.27
-0.28
0.10
1.62
0.81
-1.18
-1.10
-0.10
-0.30

-0.08
-0.94
-0.49
0.07
0.02

-0.12
-0.69
-0.04
0.41

Change
2007-
1999

Change
2010*-
2007

2.23
3.32
6.18
1.27
1.40
2.76
-0.13
0.88
3.32
0.82
3.42
3.03
8.37
1.86
4.77
7.48
4.50
-1.45
-0.65
1.55
4.08
1.07
-1.94
3.59
1.64
0.54
2.90

2.05
1.29
-0.54
1.61
0.95

2.07
2.07
1.48
2.94

-0.41
-0.03
-0.89
-0.54
0.08
0.53
-1.49
2.01
0.75
0.90
-0.70
-0.10
-1.74
0.27
-0.03
1.48
2.10
-0.08
-1.84
1.57
-3.42
-1.10
1.70
1.11
1.14
1.41
0.98

0.73
0.05
-0.36
0.38
-0.26

0.60
0.29
1.03
-0.73

2007

20.37
23.06
14.95
22.90
16.69
26.28
16.13
21.30
24.87
21.76
23.15
22.41
18.68
19.84
19.07
16.28
14.97
27.31
23.07
18.06
23.56
14.64
15.88
18.58
20.21
24.78
23.03

21.97
24.82
20.18
23.51
18.98

22.98
20.44
18.31
15.25

2007

47.75
52.26
46.20
55.86
42.38
46.91
50.53
41.88
52.28
46.74
54.46
43.84
46.16
50.29
54.09
47.14
68.39
48.45
50.06
45.78
48.88
41.10
41.66
44.30
47.46
45.28
53.26

49.48
52.13
39.81
46.61
52.12

49.81
49.71
44.45
44.09

2007

6.96
5.24
7.23
9.10
6.42
5.66
9.46
6.94
6.31
4.03
6.56
4.61
9.73
6.16
9.01
10.24
5.59
3.99
5.57
7.18
6.85
10.30
8.19
7.89
11.96
5.33
6.45

6.42
4.99
7.43
5.93
5.42

5.58
8.37
6.77
9.56

2007

20.44
16.34
18.51
7.48
26.56
14.09
16.73
24.25
12.53
23.85
9.27
22.20
21.87
19.19
11.39
18.61
9.16
15.87
14.16
19.02
14.69
23.61
23.84
23.46
15.08
19.64
12.36

17.24
13.74
27.28
20.57
20.13

17.21
16.45
21.49
20.91

Change
2007-
1999

Change
2010*-
2007

-1.13
0.45
0.15
1.22
0.32
-1.17
-1.85
-0.13
0.07
-0.72
1.90
0.23
2.54
0.25
-2.91
-6.64
-1.31
6.16
1.08
0.47
0.98
2.37
-0.47
-1.18
0.07
0.63
2.02

0.08
0.92
3.28
1.66
-0.22

0.36
0.35
0.30
0.40

1.57
2.33
0.30
1.91
0.87
2.98
2.97
2.95
1.39
1.84
1.94
-0.34
4.01
2.39
2.92
4.75
1.26
2.51
3.02
3.89
-4.23
0.17
2.15
2.66
2.20
2.09
0.16

1.72
2.00
1.05
0.82
0.11

1.54
1.84
2.50
1.02

Group 1: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Netherlands, Sweden, United Kingdom. - Group 2: Cyprus, Greece, Italy, Luxembourg, Portugal, Spain.- Group 3: Czech Republic, Hungary, 
Malta, Poland, Slovakia, Slovenia. - Group 4: Bulgaria, Estonia, Latvia, Lithuania, Romania. - * 2010 or latest available. - 1) 2009 against 2007.  2) 2008 against 2007. Source: Eurostat, OECD. 

235 

 
 
 
TABLE H: World export market share as percent 2009, and change 2007/2009 and 1999 (2004)/2009 in percentage points  

EU27

USA

Japan

Brasilien

Russland

Indien

China

Change 
2007

Change 
1999

2009

Change 
2007

Change 
1999

2009

Change 
2007

Change 
1999

2009

Change 
2007

Change 
1999

2009

Change 
2007

Change 
1999

2009

Change 
2007

Change 
1999

2009

Change 
2007

Change 
1999

2009

Total industry

Mainstream industries

Labour-intensive industries

Capital-intensive industries

Marketing-driven industries

Technology-driven industries

High RQE

Medium RQE

Low RQE

Total services

Transportation

Travel

Communications services

Construction services

Insurance services

Financial services

Computer and information services

Royalties and license fees

Other business services

Personal, cultural, recreational services

Government services. n.i.e.

22.1

26.0

16.1

21.1

19.2

23.7

27.5

20.0

16.5

0.4

-0.3

-1.7

1.0

-1.2

1.9

1.1

-0.4

0.4

2.5

1.8

-2.2

3.2

-0.9

5.3

3.0

4.7

-0.3

12.2

13.6

6.6

13.5

11.3

13.1

13.4

10.6

12.0

-0.9

-0.2

-0.8

0.4

0.3

-2.4

-2.5

0.1

0.4

-6.6

-5.9

-4.4

-5.7

-3.0

-9.2

-7.5

-7.5

-4.1

7.6

9.4

5.5

8.5

2.0

8.7

8.7

6.3

7.3

-0.8

-1.0

0.1

0.5

-0.3

-1.6

-1.8

0.1

-0.1

-4.3

-4.1

-2.3

-1.3

-1.9

-6.8

-4.5

-5.0

-3.0

1.5

1.0

0.7

2.0

4.8

0.8

1.1

1.8

1.9

0.0

-0.1

-0.4

0.0

0.3

-0.1

-0.2

0.2

0.0

0.4

0.2

-0.1

0.0

1.9

0.2

0.2

0.9

0.1

1.1

0.6

0.7

3.3

0.9

0.3

0.3

0.8

2.4

-0.2

0.0

-0.2

-0.8

0.2

0.0

0.0

0.0

-0.6

0.3

0.1

0.0

0.3

0.4

0.1

0.1

0.3

0.3

2.1

1.3

6.3

1.8

2.0

1.0

2.7

1.4

1.8

0.6

0.2

2.3

0.2

-0.1

0.5

1.1

0.2

0.2

1.1

0.7

2.8

0.9

0.5

0.8

1.5

0.7

0.9

16.7

18.7

28.2

1.8

2.1

2.9

6.9

-1.3

16.2

17.0

13.9

22.1

15.7

0.6

2.9

1.9

2.7

0.4

11.2

12.6

16.6

3.9

6.4

13.9

8.7

16.6

9.4

Change 
2007

Change 
2004

2009

Change 
2007

Change 
2004

2009

Change 
2007

Change 
2004

2009

Change 
2007

Change 
2004

2009

Change 
2007

Change 
2004

2009

Change 
2007

Change 
2004

2009

Change 
2007

Change 
2004

2009

29.3

32.2

19.6

30.1

37.5

36.0

34.2

31.4

22.0

34.1

23.8

22.7

-1.6

-0.4

-1.9

-0.4

-2.9

-2.8

-2.9

-1.6

-2.0

-1.8

1.3

-1.5

-1.8

-1.5

-1.9

-1.6

-1.7

-2.1

-4.7

-4.4

-1.8

-2.0

-7.3

-7.8

22.2

13.3

25.0

18.8

10.4

25.6

33.4

10.2

56.5

15.2

50.3

45.8

0.6

0.5

0.2

-0.1

-0.4

4.5

2.8

-0.9

2.0

0.8

0.9

0.0

-0.7

-0.8

-1.1

-0.1

-0.4

4.5

3.9

-1.7

2.7

-3.2

15.0

11.2

5.7

6.8

2.1

1.3

19.1

1.5

2.9

0.7

13.6

7.2

0.6

5.1

0.0

-1.3

0.2

0.1

0.5

-1.1

-0.2

-0.2

-1.3

1.2

0.1

0.7

-0.9

-2.6

-1.0

-0.4

-3.5

-1.6

-1.8

-1.2

-1.2

1.1

0.3

-2.3

1.2

0.9

1.1

0.7

0.0

0.7

0.9

0.2

0.3

2.4

0.3

3.1

0.2

0.8

1.0

0.6

0.0

1.1

0.5

0.1

0.2

2.0

0.3

2.8

0.4

0.7

0.9

0.9

0.0

0.3

0.4

0.1

0.1

1.4

0.2

2.7

1.9

2.7

1.9

2.6

5.0

0.8

0.6

1.0

0.3

1.9

1.3

1.0

0.1

0.4

0.0

-0.2

-1.2

0.0

0.0

0.0

0.1

0.2

0.3

0.4

0.4

0.4

0.4

0.8

-0.2

0.1

0.3

0.5

0.1

0.8

0.5

0.7

4.0

2.4

2.3

2.8

1.3

2.7

2.1

35.5

0.1

2.3

1.8

0.8

0.2

0.6

0.1

-2.4

-0.1

-0.3

0.4

0.8

0.0

-1.5

0.1

0.2

1.4

1.1

0.6

-1.4

-0.4

0.2

1.7

6.5

0.1

0.0

1.6

-0.1

5.8

5.1

8.2

2.4

14.5

2.8

0.3

5.0

0.3

7.7

0.4

2.0

0.3

-1.0

0.5

-0.2

4.8

1.0

0.1

0.9

0.0

0.4

-0.7

0.8

1.5

1.6

1.0

0.7

9.7

1.7

0.2

2.0

0.0

2.2

0.2

0.9

Source: UNO (Comtrade), Eurostat (Comext, EBOP). – Excluding intra-EU exports, for world definition see technical appendix. 

236 

 
 
 
TABLE I: RVA 2007 and absolute change 2007 against 1999, NACE 3-digit 
manufacturing 

Mainstream
industries

Labour
intensive industries

Capital 
 intensive industries

Marketing 
driven industries

Technology 
driven industries

Country

2007

Change

2007

Change

2007

Change

2007

Change

2007

Change

Austria
Belgium
Bulgaria
Cyprus1)
Czech Republic
Denmark
Estonia1)
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia1)
Lithuania1)
Luxembourg1)
Malta
Netherlands
Poland
Portugal
Romania
Slovakia
Slovenia
Spain
Sweden
United Kingdom

EU 25
USA2)
Korea
Japan
Switzerland

Group 1
Group 2
Group 3
Group 4

1.23
0.86
0.95
0.75
1.16
1.37
0.96
0.93
0.92
1.08
0.69
0.95
0.35
1.18
0.70
0.77
1.52
.
0.96
1.04
0.85
0.78
1.19
1.17
0.92
0.93
0.87

0.14
-0.03
0.09
.
0.06
0.11
.
0.07
0.05
-0.04
-0.10
0.14
-0.03
-0.02
.
.
.
.
0.04
0.21
-0.05
-0.03
0.15
0.05
-0.01
-0.01
-0.02

1.13
0.76
1.27
1.35
1.06
0.90
2.20
0.88
0.92
0.84
1.18
0.78
0.28
1.45
2.22
1.67
0.72
.
0.86
1.15
1.40
1.57
0.92
1.32
1.19
0.91
0.88

0.02
-0.04
0.05
.
-0.11
-0.08
.
0.05
0.03
-0.11
0.37
-0.05
0.02
0.04
.
.
.
.
-0.02
0.09
-0.21
-0.02
0.03
-0.08
-0.03
0.11
-0.04

1.12
1.71
1.49
0.81
1.37
0.28
0.51
1.34
0.69
1.03
1.18
1.44
1.87
0.74
0.27
1.00
1.63
.
1.24
1.17
1.29
1.35
1.70
0.68
1.21
1.18
0.74

-0.13
0.10
0.05
.
0.08
-0.01
.
-0.54
-0.27
0.06
-0.73
-0.10
-0.14
-0.13
.
.
.
.
0.19
-0.15
0.25
0.02
-0.16
0.07
0.04
-0.01
-0.01

0.83
0.94
1.16
1.83
0.79
1.22
0.96
0.64
1.13
0.70
1.77
0.84
1.39
0.92
1.47
1.42
0.88
.
1.38
1.21
1.17
1.18
0.64
0.83
1.22
0.67
1.33

-0.07
0.01
-0.18
.
-0.14
-0.16
.
-0.06
0.07
-0.12
0.31
-0.04
0.17
0.02
.
.
.
.
-0.04
-0.26
0.06
-0.04
-0.28
-0.19
0.06
-0.02
0.10

0.68
0.97
0.32
0.27
0.70
0.90
0.37
1.32
1.26
1.33
0.32
1.13
1.47
0.62
0.32
0.24
0.30
.
0.63
0.49
0.45
0.32
0.71
0.88
0.56
1.38
1.12

-0.06
-0.03
-0.04
.
0.07
0.14
.
0.23
0.05
0.21
-0.06
-0.04
-0.03
0.03
.
.
.
.
-0.10
0.03
-0.01
0.04
0.11
0.15
-0.07
-0.07
0.00

0.79

.

0.60

.

1.15

.

1.23

.

1.29

.

0.98
1.06
1.07
0.82

0.00
-0.02
0.15
0.00

0.86
1.35
1.06
1.60

-0.04
0.02
0.01
0.00

0.98
0.95
1.27
1.26

-0.04
-0.08
-0.08
0.03

0.97
1.06
0.99
1.27

-0.02
0.05
-0.19
-0.08

1.20
0.58
0.68
0.33

0.09
-0.01
0.04
0.02

Group 1: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Netherlands, Sweden, United Kingdom. - Group 2: Cyprus, 
Greece, Italy, Luxembourg, Portugal, Spain. - Group 3: Czech Republic, Hungary, Poland, Slovakia, Slovenia. – Group 4: Bulgaria, Estonia, 
Latvia, Lithuania, Romania. - 1) 2006. - 2) 2008. 

Source: Eurostat (SBS). 

237 

 
 
 
TABLE J: RVA 2007 and absolute change 2007 against 1999, NACE 2-digit manufacturing and services 

High

Med-high

INNO
Med

Med-low

Low

High

Med-high

EDU
Med

Med-low

Low

Country

2007 Change

2007 Change

2007 Change

2007 Change

2007 Change

2007 Change

2007 Change

2007 Change

2007 Change

2007 Change

Austria
Belgium
Bulgaria
Cyprus1)
Czech Republic
Denmark
Estonia1)
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia1)
Lithuania1)
Luxembourg1)
Malta 2)
Netherlands
Poland
Portugal
Romania
Slovakia
Slovenia
Spain
Sweden
United Kingdom

EU 25
USA
Korea
Japan
Switzerland

Group 1
Group 2
Group 3
Group 4

1.05
0.70
0.63
0.18
1.14
1.08
0.57
1.89
0.86
1.45
0.35
1.23
1.22
1.07
0.33
0.33
0.74
0.73
0.81
0.65
0.51
0.66
1.12
1.06
0.51
1.33
0.94

-
-
-
-
-

0.10
-0.02
-0.04
0.05
0.12
0.13
0.18
0.25
-0.07
0.32
0.24
0.01
-0.33
-0.02
0.06
-0.06
0.09
-0.16
-0.01
-0.04
0.02
0.01
0.26
0.02
-0.03
-0.01
-0.09

-
-
-
-
-

0.96
1.37
1.21
0.58
1.38
0.67
0.74
0.84
0.97
1.26
0.87
1.45
1.23
1.02
0.58
0.75
1.34
1.88
0.79
1.19
0.88
1.22
1.46
1.22
0.86
0.96
0.77

-
-
-
-
-

-0.03
-0.07
-0.17
-0.06
-0.16
-0.07
-0.14
-0.02
-0.17
0.31
0.25
-0.37
-0.48
-0.09
-0.14
-0.26
-0.07
0.52
0.05
-0.06
-0.20
-0.19
-0.11
0.13
-0.12
-0.10
-0.14

-
-
-
-
-

0.94
1.01
0.55
0.63
0.86
0.86
0.93
0.95
1.13
0.94
0.81
0.68
0.73
1.04
0.73
0.63
1.38
0.58
1.07
0.75
0.90
0.64
0.66
0.92
0.83
0.99
1.20

-
-
-
-
-

0.09
0.15
0.16
-0.03
0.08
0.01
0.16
-0.19
0.18
-0.11
0.18
0.18
0.12
0.06
0.07
0.15
0.37
0.00
0.06
0.07
0.03
0.20
0.18
-0.10
0.01
0.00
0.07

-
-
-
-
-

0.92
1.04
1.57
1.03
1.37
0.89
1.07
0.96
0.92
0.94
1.25
1.24
1.49
0.87
1.15
1.36
0.47
0.74
1.00
1.56
1.15
1.35
1.81
0.96
0.91
0.85
0.95

-
-
-
-
-

-0.15
-0.16
-0.59
-0.05
-0.08
-0.27
-0.47
-0.06
-0.25
0.11
0.33
-0.50
-0.22
-0.11
-0.46
-0.76
-0.18
-0.43
-0.11
-0.26
-0.03
-0.55
-1.09
-0.09
-0.18
-0.06
-0.06

-
-
-
-
-

1.09
1.13
1.34
1.09
1.00
1.26
1.32
0.91
0.96
0.88
1.49
1.14
0.87
1.07
1.53
1.51
0.81
1.27
1.32
1.18
1.25
1.32
1.15
1.06
0.99
0.96
0.92

-
-
-
-
-

-0.12
-0.16
-0.13
-0.14
-0.07
-0.25
-0.67
-0.14
-0.09
0.21
-0.29
0.01
0.25
-0.14
-0.45
-0.01
-0.35
-0.12
-0.10
-0.11
-0.03
-0.35
0.11
-0.20
-0.15
-0.05
-0.12

-
-
-
-
-

0.72
1.01
0.46
0.50
0.66
0.88
0.61
0.73
1.18
0.88
0.77
0.67
0.89
0.85
0.50
0.43
1.56
0.65
1.15
0.49
0.71
0.56
0.59
0.64
0.74
0.95
1.46

-
-
-
-
-

0.13
0.18
0.22
0.11
0.15
0.10
0.17
0.10
0.21
-0.17
0.10
0.18
-0.03
0.06
0.09
0.08
0.58
0.20
0.03
-0.06
0.06
0.33
0.24
-0.03
0.07
0.04
0.11

-
-
-
-
-

0.87
1.47
0.71
0.35
0.71
0.82
0.54
2.06
1.11
1.25
0.65
1.42
3.09
0.82
0.37
0.68
0.58
2.04
1.00
0.77
0.72
0.65
0.71
1.10
0.65
1.22
0.88

-
-
-
-
-

-0.02
0.12
-0.52
-0.16
-0.15
-0.02
0.21
0.29
-0.12
0.42
0.26
-0.20
-0.61
-0.04
0.14
-0.10
-0.19
0.38
0.07
-0.27
0.08
-0.23
-0.21
0.05
-0.08
0.04
-0.22

-
-
-
-
-

1.08
0.96
1.06
0.92
1.14
1.10
1.03
0.93
0.90
1.20
0.94
1.20
0.79
0.91
1.07
0.94
0.72
0.71
1.02
1.14
0.96
1.01
1.32
0.95
0.90
1.12
0.89

-
-
-
-
-

0.14
0.03
0.10
0.11
0.10
0.09
-0.09
-0.06
0.01
-0.03
0.06
0.09
0.11
0.04
-0.08
-0.04
-0.08
-0.03
0.04
0.18
0.05
-0.01
-0.06
0.17
0.03
-0.01
0.02

-
-
-
-
-

1.02
0.93
0.93
1.08
1.10
1.14
1.04
1.01
1.09
0.90
1.39
1.00
0.77
1.04
1.35
1.53
1.05
1.77
0.95
1.20
1.05
1.06
1.00
1.12
1.02
0.89
0.96

-
-
-
-
-

-0.20
-0.15
-0.22
0.00
0.13
-0.13
-0.28
-0.05
-0.05
0.14
-0.80
0.02
0.08
-0.10
0.10
0.17
-0.09
-0.15
-0.04
0.20
0.09
-0.18
0.28
-0.10
-0.14
0.03
-0.07

-
-
-
-
-

1.11
0.96
1.38
1.56
1.04
0.91
1.30
0.99
0.94
0.79
1.12
0.83
0.92
1.25
1.21
1.26
1.10
1.03
0.89
1.10
1.29
1.34
0.91
1.22
1.39
0.86
0.90

-
-
-
-
-

-0.15
-0.09
0.03
-0.18
-0.23
-0.11
0.14
0.02
-0.10
-0.01
0.20
-0.13
0.06
-0.03
-0.01
-0.03
-0.19
-0.12
-0.09
-0.21
-0.18
0.00
-0.09
-0.18
0.00
-0.01
-0.04

-
-
-
-
-

1.17
0.82
0.92
0.59

0.10
-0.01
0.03
0.01

1.05
0.96
1.30
1.10

0.04
-0.10
-0.13
-0.19

1.03
0.96
0.77
0.65

0.01
0.05
0.09
0.18

0.96
0.91
1.44
1.37

-0.05
-0.12
-0.31
-0.57

0.95
1.07
1.12
1.36

0.02
-0.15
-0.07
-0.29

1.05
0.81
0.58
0.52

0.01
0.07
0.05
0.26

1.21
0.74
0.88
0.64

0.10
-0.03
-0.21
-0.22

1.04
0.91
1.15
1.02

0.01
0.03
0.13
0.00

0.96
1.05
1.12
1.10

0.02
-0.14
0.14
-0.14

0.88
1.29
1.04
1.33

-0.04
-0.02
-0.19
0.01

Group 1: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Netherlands, Sweden, United Kingdom. - Group 2: Cyprus, Greece, Italy, Luxembourg, Portugal, Spain. - Group 3: Czech Republic, Hungary, 
Malta, Poland, Slovakia, Slovenia. - Group 4: Bulgaria, Estonia, Latvia, Lithuania, Romania. - 1) 2006. - 2) EUKLEMS.  

Source: Eurostat (SBS).

238 

 
 
TABLE K: Value added (VA) share, 2007, absolute change 2007 against 1999, NACE 2-digit manufacturing and services 

Country

2007 Change 2007 Change 2007 Change 2007 Change 2007 Change 2007 Change 2007 Change 2007 Change 2007 Change 2007 Change

High

Med-high

Med

Med-low

Low

High

Med-high

Med

Med-low

Low

Inno type

Edu type

Austria
Belgium
Bulgaria
Cyprus
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Luxembourg
Malta
Netherlands
Poland 1)
Portugal
Romania
Slovakia
Slovenia 1)
Spain
Sweden
United Kingdom

EU 25
USA
Korea
Japan 1)
Switzerland

Group 1
Group 2
Group 3
Group 4

8.22
5.32

0.11
-0.20

11.89
14.58

0.30 19.31
-1.66 22.86

0.99
0.99

8.12
8.09

-1.80
-1.72

15.00
18.26

0.21
1.47

14.87
21.59

0.50
10.36
9.65
5.22
15.06
8.33
12.09
2.08
11.04
15.37
8.78
1.35
2.09
1.44
6.60
6.80
5.51
4.22

8.02
9.33
4.80
13.36
7.64

9.08
4.06
15.20
11.08
12.13

9.81
6.48
7.99
2.56

-0.09
1.28
1.14
0.93
1.10
-1.38
1.37
0.73
2.27
-4.89
0.14
0.01
-0.83
0.00
-0.99
0.12
-0.26
-0.36

2.14
0.29
-0.27
1.10
-1.58

0.54
-1.33
2.23
0.58
0.60

-0.36
0.00
1.79
-0.20

14.06
17.88
8.82
9.60
11.23
9.34
15.16
10.25
17.88
13.85
10.72
20.48
16.23
20.33
23.58
10.58
13.35
11.80

15.37
15.55
11.05
12.32
9.85

12.52
26.86
20.49
13.74
11.50

11.99
10.99
15.38
16.05

0.19 15.12
1.20 18.37
-1.51 19.84
-0.78 19.18
-0.21 18.58
-2.29 21.34
1.02 20.97
-0.32 12.63
-0.79 17.82
-3.79 14.60
-1.55 19.21
1.55 15.13
3.26 11.31
0.63 37.78
5.76 12.20
0.32 23.07
1.82 16.85
-1.37 20.24

-1.96 16.54
1.08 22.41
-3.34 17.59
-1.38 19.80
-2.95 26.38

-0.58 20.88
0.60 17.19
0.20 15.73
0.40 16.01
1.88 24.92

1.26
5.47
1.53 10.06
9.30
1.71
8.15
1.94
7.45
-1.00
7.05
0.48
7.33
-0.40
6.93
-0.12
8.90
2.80
4.24 19.60
6.85
0.07
1.22
6.97
2.63 11.24
3.24
2.69
6.07
0.44
0.30 10.63
1.01 11.65
1.00 10.42

4.20 13.11
8.80
1.65
7.24
1.09
8.48
-1.10
8.15
5.39

0.85
-0.24
1.48
1.95
-0.78

8.22
5.12
8.41
8.95
8.99

-1.10 21.94
-2.09 18.39
-1.25 16.79
1.87 14.17

8.40
1.40
0.53
7.14
3.58 12.55
9.29
2.06

-2.67
-1.50
-1.66
-2.32
-0.83
-1.04
-1.11
-1.00
-2.75
-0.85
0.02
-6.52
-6.82
-1.16
-4.16
0.21
0.85
0.90

0.10
-1.64
-1.27
-0.51
-1.66

-0.54
-0.71
-0.52
-1.00
-0.94

-1.14
-0.50
-0.04
-5.75

14.11
18.75
18.14
20.42
16.14
13.21
11.63
15.64
15.00
9.46
16.39
22.69
22.44
11.62
17.06
18.49
17.19
15.20

16.69
14.93
12.60
15.64
12.27

13.44
10.27
11.06
16.54
15.09

13.17
14.81
16.78
22.07

-1.06
-0.23
-0.63
-3.31
-0.46
0.19
0.19
0.17
-0.18
1.93
-0.64
-2.24
1.85
-0.37
-2.39
0.22
-1.67
-1.08

-6.10
-0.14
-1.18
0.51
-1.61

-0.52
-0.02
-0.96
-0.21
0.81

-0.07
-0.81
-4.94
-0.50

7.71
13.49
18.39
13.67
12.84
22.30
18.68
10.77
17.69
20.30
15.90
12.64
6.70
13.04
12.50
22.58
13.02
17.48

11.12
17.63
14.73
19.04
27.24

19.10
15.94
15.16
15.92
23.40

21.49
15.13
11.80
10.00

1.66
1.95

1.17
1.44
3.15
1.46
1.48
1.06
0.19
0.74
4.07
1.77
0.51
1.96
2.43
3.53
4.56
1.75
0.66
2.06

2.23
3.23
1.87
1.28
6.91

1.62
1.35
1.55
2.55
-0.01

2.22
1.15
2.08
2.07

6.61
9.08

-0.75
-0.49

38.43
38.64

2.05
-0.51

11.19
10.45

-2.37
-0.18

28.90
20.25

-0.60
-0.77

12.46
5.64
6.89
4.18
12.04
7.22
8.37
5.27
9.37
21.16
6.29
9.15
7.70
33.68
16.24
9.68
5.72
5.27

7.17
8.06
4.99
8.54
7.88

7.98
18.19
19.35
9.36
15.36

8.75
6.01
7.01
7.36

1.89
-0.09
-0.51
0.05
0.26
-0.59
0.57
0.67
-0.07
-0.90
0.43
1.76
1.05
3.31
3.05
-0.17
0.31
0.63

1.01
0.00
-0.79
-1.30
-1.33

0.02
0.81
1.40
-0.10
2.82

-0.38
0.05
0.81
1.04

33.13
40.01
38.99
40.71
41.14
38.99
45.28
32.34
40.42
25.52
39.23
33.83
30.33
24.58
27.77
37.75
36.03
34.39

37.75
34.91
31.97
41.58
31.17

38.84
35.33
28.33
41.83
31.63

38.65
35.62
37.74
33.64

1.42
0.88
-2.65
-2.62
-2.15
0.49
2.35
-2.06
0.32
0.80
1.49
-0.88
-4.88
-2.42
-1.80
1.47
1.18
-0.70

-3.60
0.55
-1.45
-1.78
-3.98

-0.65
-0.44
-0.40
0.92
-0.83

0.02
-0.01
-2.57
-3.19

15.64
14.54
14.07
13.33
11.70
10.52
9.53
16.76
13.10
6.20
11.83
18.07
25.41
10.93
19.92
10.24
18.31
10.71

15.66
13.65
11.15
10.90
11.71

11.25
12.28
11.76
11.92
10.55

10.35
11.87
15.79
20.58

-1.08
1.27
0.49
-1.87
-0.69
-0.65
-0.74
-0.30
-0.85
-1.20
-2.32
-3.09
2.92
-1.80
-2.54
-2.11
0.54
0.78

-2.15
-0.02
-2.09
0.03
-1.47

-0.44
-0.33
-0.32
-1.29
-0.77

-0.97
-1.91
-1.56
0.08

31.07
26.32
21.66
28.10
22.28
20.97
18.15
34.86
19.41
26.82
26.75
26.31
29.87
17.76
23.57
19.75
26.92
32.15

28.30
25.75
37.15
19.95
22.01

22.83
18.26
25.40
20.98
19.06

20.76
31.38
27.65
28.42

-3.40
-3.50
-0.49
2.98
1.09
-0.30
-2.36
0.96
-3.46
-0.48
-0.12
0.26
-1.52
-2.62
-3.26
-0.94
-2.69
-2.76

2.51
-3.75
2.45
1.78
-0.13

-0.55
-1.38
-2.23
-2.07
-1.21

-0.89
0.73
1.24
0.00

Group 1: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Netherlands, Sweden, United Kingdom. - Group 2: Cyprus, Greece, Italy, Luxembourg, Portugal, Spain.- Group 3: Czech Republic, Hungary, 
Malta, Poland, Slovakia, Slovenia. - Group 4: Estonia, Latvia, Lithuania. - 1) 2006. 

Source: OECD (STAN), EU KLEMS.

239 

 
 
 
 
TABLE  L:  RCA  2010  and  absolute  change  2010  against  1999  and  2007,  NACE  3-digit 
manufacturing 

Mainstream

industries

Labour

Capital 

Marketing 

Technology 

intensiv e industries

 intensiv e industries

driv en industries

driv en industries

2010 Change

Change

2010 Change

Change

2010 Change

Change

2010 Change

Change

2010 Change

Change

99/10

07/10

0.260

-0.005

-0.004

0.397

99/10

0.075

07/10

99/10

07/10

99/10

07/10

99/10

07/10

0.060

-0.172

-0.144

0.043

0.112

-0.004

-0.265

0.033

0.266

0.166

0.022

0.000

0.110

0.017

-0.002

0.096

0.042

0.026

0.026

-0.460

-0.054

-0.090

-0.006

-0.655

-0.221

-0.002

-0.670

-0.443

-0.450

0.059

0.126

0.665

1.126

0.582

-0.015

-0.022

0.416

-0.081

0.087

-0.043

0.021

0.019

0.513

0.109

0.112

0.015

1.140

0.292

0.491

-0.025

0.059

-0.049

0.067

0.012

0.169

-0.200

-0.022

-0.027

-0.160

-0.055

-0.024

-0.070

-1.045

0.441

0.064

0.144

0.118

-0.806

0.409

0.626

-0.708

-0.590

0.177

0.583

0.068

0.037

0.009

-0.367

-0.184

-0.002

-0.186

-0.259

-0.051

-0.200

0.204

0.100

0.538

-0.271

-0.110

0.385

0.581

-0.002

-0.075

-0.130

-0.917

-0.868

-0.461

-0.718

-1.065

0.013

-0.432

-0.460

0.358

-0.021

-0.073

0.091

0.444

-0.259

-0.261

0.174

0.283

-0.105

0.180

-0.144

-0.061

0.093

0.398

0.251

0.034

0.047

0.170

0.145

0.400

1.005

0.114

-0.171

-0.001

-0.050

-0.287

0.161

-0.212

-0.104

0.002

0.284

0.077

0.037

0.040

0.009

-0.103

-0.358

-0.062

-0.236

-0.312

-0.005

-0.265

-0.004

0.132

-0.256

0.123

0.008

-0.006

-0.032

0.090

0.056

0.028

0.016

-0.679

0.107

0.620

0.128

0.606

-0.025

-0.034

0.038

0.168

0.671

0.004

-1.150

-0.173

-0.051

-0.058

0.279

-0.198

-0.065

0.002

-0.273

-0.045

0.057

0.039

0.145

0.055

0.200

-0.541

-0.094

0.359

-0.086

-0.076

0.617

-0.035

-0.235

-0.355

0.007

-0.431

0.113

0.101

-0.489

-0.265

Austria

Belgium

Bulgaria

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latv ia

Lithuania

0.006

0.051

-0.006

0.204

0.119

-1.633

-0.353

-0.046

-1.879

-0.451

-0.135

-0.121

-0.198

-0.188

-0.123

-0.094

-0.168

0.441

-0.261

-0.331

0.015

0.417

0.229

0.482

1.090

0.629

-0.063

0.002

-0.139

0.118

-0.452

-0.101

-0.152

-0.147

-0.556

-0.157

0.156

0.042

0.038

0.245

0.171

0.350

0.212

0.019

0.511

0.163

-0.084

-0.922

-0.780

-0.066

-0.127

-0.426

-0.148

-0.524

-0.160

0.112

Luxembourg

0.057

-0.218

Malta

-0.615

0.239

Netherlands

-0.435

-0.017

-0.014

-0.665

-0.011

-1.089

-1.020

0.152

0.028

Poland

Portugal

Romania

Slov enia

Slov akia

Spain

Sweden

0.054

-0.010

-0.049

0.051

0.180

0.354

-0.054

0.058

0.025

0.243

-0.060

-0.004

-0.073

-0.100

-0.140

0.033

0.050

0.069

0.044

0.039

0.021

0.560

0.692

0.921

0.405

0.196

0.046

0.000

United Kingdom -0.226

-0.094

-0.098

-0.329

-0.445

-0.096

-0.116

-0.135

-0.033

-0.206

-0.034

-0.413

-0.170

0.168

0.068

-0.265

-0.036

-0.151

-0.086

0.049

-0.281

-0.251

-0.072

-0.075

-0.590

-0.042

-0.421

0.144

0.072

0.020

0.078

-0.008

0.010

0.162

0.293

0.005

-0.025

-0.007

0.008

0.042

0.247

-0.609

-0.286

0.627

0.172

-0.726

-0.315

-0.253

1.700

0.392

0.658

0.861

0.037

0.029

0.008

0.081

0.016

0.275

-0.017

-0.133

0.154

0.012

0.031

0.082

-0.168

-0.105

-0.085

-0.084

-0.165

-0.055

0.120

-0.029

-0.113

-0.033

-0.069

0.218

-0.011

0.065

0.750

0.124

1.294

0.015

0.417

0.194

0.095

0.212

0.203

0.293

0.286

-0.132

-0.164

-0.049

0.136

0.083

0.055

0.021

-0.249

-0.230

-0.284

-0.258

-0.020

-0.403

0.515

0.096

-0.732

0.256

Group 1

Group 2

Group 3

Group 4

-0.068

-0.004

-0.194

0.021

0.001

0.013

0.007

-0.074

0.009

0.008

0.016

0.002

0.002

0.078

-0.037

-0.032

-0.339

-0.064

-0.199

-0.188

0.248

0.058

-0.004

-0.032

0.033

0.001

0.203

-0.135

0.005

0.019

0.038

-0.159

0.324

0.041

-0.349

-0.119

0.240

0.026

-0.057

-0.010

-0.057

0.358

0.272

0.810

-0.010

0.087

-0.015

-0.006

0.032

0.042

0.016

-0.485

0.047

-0.550

0.000

0.365

0.384

-0.037

0.050

0.313

Group 1: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Netherlands, Sweden, United Kingdom. - Group 2: Greece, Italy, 
Luxembourg, Portugal, Spain. - Group 3: Czech Republic, Hungary, Poland, Slovakia, Slovenia. - Group 4: Bulgaria, Cyprus, Estonia, 
Latvia, Lithuania, Malta, Romania.  

Source: Eurostat (Comext). – Including intra-EU exports. 

240 

 
 
TABLE M: Share of exports to BRIC in total exports as percent 2010 and index 2010 (1999=100, 
2007=100), NACE 3-digit manufacturing 

Mainstream

industries

Labour

Capital 

Marketing 

Technology 

To

intensiv e industries

 intensiv e industries

driv en industries

driv en industries

2010 1999=100 2007=100

2010 1999=100 2007=100

2010 1999=100 2007=100

2010 1999=100 2007=100

2010 1999=100 2007=100

2.26

0.83

1.02

0.73

1.53

2.09

249.1

308.4

88.0

59.5

221.7

321.7

4.08

1,118.9

6.68

1.21

3.63

0.44

1.06

0.12

3.27

5.10

5.11

1.15

280.3

219.9

299.1

258.1

354.7

192.9

250.6

278.4

397.6

127.0

0.45

1,235.7

0.93

1.68

0.44

0.85

1.57

0.95

0.99

2.32

1.32

2.16

2.28

1.41

2.29

325.7

191.1

225.8

518.3

271.7

245.0

183.4

269.7

222.4

285.4

229.4

233.7

362.0

116.4

131.7

108.6

263.2

111.2

129.5

127.3

136.7

111.8

130.2

72.1

151.5

126.3

121.4

114.5

123.2

108.6

236.7

111.9

75.5

158.4

103.6

72.8

122.8

114.7

114.8

111.6

123.9

118.9

94.8

118.9

0.85

0.42

0.33

0.23

0.57

0.28

1.54

0.90

0.43

0.88

1.06

0.48

0.03

1.32

2.84

2.59

0.04

0.06

0.11

0.60

0.30

0.30

0.63

0.98

0.58

0.37

0.28

0.53

0.99

0.63

1.03

385.9

358.1

94.0

140.8

230.5

261.0

407.6

173.9

229.1

233.0

90.7

722.8

147.5

220.2

223.8

351.6

231.3

143.9

124.6

165.3

183.9

69.0

459.5

357.9

144.2

233.4

188.9

241.2

190.8

273.7

217.8

153.5

118.9

112.8

106.9

118.1

90.9

124.8

98.2

110.2

124.1

99.6

296.9

80.5

104.8

95.9

125.5

38.4

96.5

78.8

81.6

143.1

105.4

108.7

384.6

178.1

142.8

113.1

118.9

111.9

130.8

115.6

0.69

1.60

1.64

435.1

347.4

366.4

1.74

1,411.3

0.85

0.42

2.52

4.16

0.94

1.77

0.87

0.52

0.30

1.00

2.10

1.77

0.80

261.1

362.9

156.0

306.9

330.3

390.8

131.9

341.7

235.4

245.4

218.5

160.0

233.1

0.23 11,399.6

1.15

1.32

0.37

1.22

0.45

0.52

1.33

1.96

1.66

1.47

1.05

0.87

1.57

420.7

206.7

358.6

281.9

293.6

190.2

379.4

421.7

416.7

378.8

279.0

250.1

243.0

133.3

155.4

138.6

174.8

205.9

91.3

108.5

140.9

133.5

160.4

127.8

143.7

123.2

132.7

115.8

160.7

88.6

423.1

128.4

133.0

169.7

65.1

170.1

157.5

138.3

141.8

137.9

145.4

134.4

153.7

98.6

0.45

0.24

0.41

0.21

0.33

1.23

2.85

1.05

0.75

0.55

0.57

0.24

0.24

0.74

5.87

3.62

0.06

0.02

0.50

1.21

0.74

0.07

0.34

0.17

0.67

0.19

0.40

0.52

0.70

0.58

1.49

263.6

157.8

21.4

77.4

98.8

230.4

358.6

136.9

276.0

188.5

159.1

46.0

84.4

245.9

284.3

195.4

198.4

313.9

139.8

98.6

265.5

50.5

233.3

88.4

187.0

191.9

201.5

189.5

224.9

97.8

172.2

102.2

134.4

60.9

79.8

136.1

117.4

101.1

123.3

134.8

129.2

115.4

78.6

127.0

112.6

175.5

122.0

285.4

12.9

130.2

109.7

135.5

88.0

91.2

94.1

144.4

140.9

116.6

126.3

121.7

109.5

120.8

1.91

1.16

1.72

2.33

1.37

1.23

1.67

4.00

3.01

3.94

0.26

3.93

1.98

0.88

2.92

2.17

310.3

366.4

96.6

546.0

324.7

364.0

390.0

150.7

244.7

384.2

42.7

585.0

417.1

183.5

273.7

197.2

0.68

1,741.8

3.25

8,227.9

1.41

0.93

0.31

1.29

1.67

286.1

246.9

508.5

663.9

195.0

145.1

164.1

261.8

180.7

121.4

167.7

123.2

70.0

111.6

154.5

206.2

114.3

117.2

128.1

137.1

53.9

175.9

261.1

97.2

133.1

104.1

403.9

96.1

3.88

2,050.5

224.2

0.74

2.51

2.85

2.77

0.78

2.08

1.74

137.1

115.5

377.3

294.6

169.5

427.6

264.0

93.7

123.8

154.2

133.3

116.7

132.6

133.5

2010

6.16

4.25

5.12

5.23

4.65

5.27

12.66

16.80

6.33

10.77

3.20

6.24

2.67

7.20

18.82

15.26

2.73

4.02

4.10

5.74

2.15

3.73

4.66

6.51

4.31

7.35

6.50

7.45

5.80

5.57

8.13

Austria

Belgium

Bulgaria

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latv ia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slov enia

Slov akia

Spain

Sweden

United Kingdom

Group 1

Group 2

Group 3

Group 4

EU 27

2.11

266.9

120.2

0.63

227.7

117.7

1.34

348.2

142.5

0.57

192.1

124.0

2.37

282.9

132.4

7.02

Group 1: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Netherlands, Sweden, United Kingdom. - Group 2: Greece, Italy, 
Luxembourg, Portugal, Spain. - Group 3: Czech Republic, Hungary, Poland, Slovakia, Slovenia. - Group 4: Bulgaria, Cyprus, Estonia, 
Latvia, Lithuania, Malta, Romania.  
Source: Eurostat (Comext). – Including intra-EU exports.

241 

 
TABLE N: RCA 2009 and absolute change 2009 against 2004 and 2007, NACE 2-digit manufacturing and services 

High

Med-high

INNO

Med

Med -low

Low

High

Med-high

2009 Change

Change

2009 Change

Change

2009 Change

Change

2009 Change

Change

2009 Change

Change

2009 Change

Change

2009 Change

Change

2009

0.007

-0.584

-0.457

-1.251

0.254

-0.127

-0.323

0.454

-0.205

04/09

0.017

0.003

0.423

-0.482

0.054

-0.015

-0.206

.

.

0.146

-0.032

07/09

0.002

0.043

0.153

-0.362

-0.044

0.019

-0.035

0.093

-0.033

-0.021

04/09

07/09

-0.131

-0.048

0.324

0.120

-1.681

-0.054

-0.601

-0.224

-0.404

0.188

0.075

0.007

0.077

-0.295

-0.036

0.015

0.314

.

.

-0.002

-0.029

-0.020

-0.080

-0.267

0.012

0.065

0.029

-0.101

0.023

0.003

0.203

-0.324

-0.310

1.133

-0.034

-0.223

0.300

0.356

-0.309

-0.188

.

.

.

.

.

.

.

04/09

-0.036

-0.087

0.003

0.176

-0.037

0.040

-0.070

.

.

0.071

.

07/09

0.003

0.101

0.064

0.074

0.049

0.025

-0.034

-0.038

0.040

0.050

-0.066

0.041

0.158

-0.761

-0.544

04/09

0.098

-0.012

0.307

07/09

-0.021

-0.003

0.325

-0.351

-0.302

0.199

0.105

0.778

1.401

0.057

0.027

-0.307

0.545

-0.168

-0.003

-1.182

0.187

-0.292

.

.

0.061

.

.

0.070

.

-0.068

-0.094

-0.016

-0.050

0.019

1.355

0.891

-0.826

-0.078

-0.458

.

.

04/09

0.150

0.166

-0.606

-0.090

0.107

-0.009

-0.235

.

.

0.109

.

07/09

0.112

0.030

-0.088

0.054

0.115

-0.122

0.036

0.080

-0.035

0.062

-0.391

-0.398

-1.126

1.014

-0.116

-0.332

-0.565

.

-0.665

-0.300

.

.

04/09

0.050

0.013

-0.032

0.367

0.305

0.225

0.532

.

.

0.053

.

07/09

0.052

0.370

0.162

0.260

0.076

0.193

0.077

.

0.006

0.086

.

04/09

-0.461

-0.078

0.319

-0.254

-0.754

-0.488

-0.315

-0.289

.

0.214

0.077

0.290

-0.265

-0.022

-0.101

-0.091

.

.

-0.040

-0.003

07/09

0.020

-0.019

-0.111

-0.430

0.034

-0.040

-0.023

.

0.022

0.009

0.129

-0.267

-0.742

-2.160

0.388

-0.407

-0.245

.

-0.113

0.352

.

.

.

.

0.564

0.093

0.028

-0.222

-0.059

-0.054

-0.476

-0.001

0.078

-0.495

-0.080

0.001

-0.526

-0.171

-0.035

-0.299

-0.145

-0.162

0.187

0.106

0.081

0.214

.

.

0.012

0.201

-0.211

-0.073

-0.390

0.146

.

0.030

0.073

0.053

0.196

-0.987

-0.172

.

.

.

.

.

0.001

-0.064

-0.026

0.117

0.014

0.458

-0.216

1.241

-0.097

-0.299

-0.030

0.036

-0.060

-0.107

-0.027

-0.093

-0.082

0.285

0.472

.

0.070

0.252

0.283

.

0.097

-0.062

-0.060

.

0.351

1.075

0.774

-0.292

-0.026

0.111

-1.140

-0.128

-0.179

-0.273

0.426

-0.007

0.023

-0.138

0.226

-0.928

-0.336

-1.808

1.502

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

0.451

-0.144

-0.165

0.001

-0.095

-0.028

0.033

0.135

0.130

-0.203

-0.132

0.025

-0.055

-0.039

-0.071

0.026

-0.078

-0.083

0.071

-0.104

0.120

.

-0.083

0.057

.

.

-0.035

0.077

-0.054

-0.011

-0.005

-0.036

-0.097

0.020

-0.027

-0.092

0.044

-0.001

-0.009

-0.021

-0.025

-0.273

0.119

0.365

-0.068

-0.282

0.058

0.215

0.278

0.504

-0.044

0.253

-0.068

0.116

-0.131

-0.132

0.140

0.017

-0.076

-0.162

.

-0.022

0.048

-0.045

0.076

-0.091

0.004

-0.011

0.026

0.055

0.077

-0.052

0.390

0.183

0.175

-0.932

-0.762

-0.446

0.226

-0.722

-0.007

-0.049

0.120

0.134

0.621

-0.009

-0.020

0.053

0.365

-0.250

-0.037

0.346

0.143

.

-0.003

0.076

0.010

0.032

0.088

.

.

-0.074

-0.008

0.008

-0.003

-0.016

0.010

-0.013

0.030

-0.240

-0.151

.

.

-0.050

0.260

0.007

0.061

0.010

0.047

-0.201

0.094

0.655

0.761

-0.118

-0.079

0.009

-0.172

-0.343

-0.100

0.202

-0.146

0.865

0.084

-0.080

-0.058

-0.692

-0.369

-0.297

.

0.061

-0.065

.

.

-0.095

-0.471

0.031

-0.013

0.041

-0.190

-0.006

-0.124

0.092

0.068

0.017

0.016

0.015

0.011

-0.090

-0.614

-0.740

-0.387

-1.300

-1.143

-0.104

0.180

0.719

0.011

-0.091

-0.469

-0.364

-0.088

-0.109

0.239

-0.098

-0.075

0.831

0.016

0.870

0.045

-0.132

-0.157

.

0.012

0.473

0.037

0.002

-0.395

-0.034

0.255

.

0.203

0.273

0.056

0.079

-0.075

-0.145

.

.

0.161

0.423

-0.006

-0.035

0.106

0.121

-0.374

-0.555

.

0.025

0.222

0.201

-0.014

-0.675

0.197

.

.

-0.039

0.116

0.160

0.295

0.206

-0.561

-0.590

-1.094

.

.

.

.

0.205

-0.024

-0.102

-0.604

-0.445

-0.401

-0.296

-0.010

-0.365

-0.307

-0.083

0.101

0.076

-0.373

-0.235

-0.239

0.011

0.021

0.187

-0.033

-0.167

-0.249

0.115

0.416

0.117

0.125

0.110

0.125

0.156

0.333

0.376

.

-0.071

-0.041

-0.040

0.029

0.039

0.085

0.173

-0.363

.

.

0.137

0.066

0.002

-0.001

-0.044

0.057

0.035

0.032

0.282

-0.253

Austria

Belgium

Bulgaria

Cyprus

Czech Republic

Denmark 1)

Estonia

Finland

France

Germany

Greece

Hungary 1)

Ireland

Italy

Latv ia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal 1)

Romania

Slov akia 1)

Slov enia

Spain

Sweden

.

0.062

-0.611

-0.872

-0.458

.

0.253

-0.181

-0.561

-0.025

0.253

-0.141

-0.576

0.234

.

0.043

0.615

-0.087

-0.136

.

0.022

0.260

.

0.016

0.063

-0.075

-0.181

0.465

0.340

-0.054

.

0.088

0.247

0.166

0.006

0.015

0.054

United Kingdom

-0.168

-0.179

-0.048

Group 1 2)

Group 2 3)

Group 3 1)

Group 4 4)

0.014

-0.183

0.179

-0.324

.

.

0.124

0.273

-0.006

-0.001

0.024

0.128

Group 1: Austria, Belgium, Denmark, Finland, France, German, Ireland, Netherlands, Sweden, United Kingdom. - Group 2: Greece, Italy, 
Luxembourg, Portugal, Spain. - Group 3: Czech Republic, Hungary, Poland, Slovakia, Slovenia. - Group 4: Bulgaria, Cyprus, Estonia, 
Latvia, Lithuania, Malta, Romania. - 1) Changes against 2005. - 2) Innovation without Ireland; Education without Finland and Ireland. - 3) 
Without Greece. - 4)Without Malta. 

Source: Eurostat (Comext). – Including intra-EU exports. 

242 

 
 
TABLE O: Shares of exports in low price segment as percent and change in percentage points, NACE 3-digit manufacturing 

Mainstream

industries

Labour

Capital 

Marketing 

Technology 

Total industry

intensiv e industries

 intensiv e industries

driv en industries

driv en industries

2009 Change

Change

2009 Change

Change

2009 Change

Change

2009 Change

Change

2009 Change

Change

2009 Change

Change

99/09

07/09

99/09

07/09

99/09

07/09

99/09

07/09

99/09

07/09

99/09

07/09

23.0

28.0

73.7

62.4

51.0

15.5

47.6

14.8

18.2

12.2

60.0

38.6

18.7

35.5

45.5

49.8

28.8

32.0

25.3

62.9

50.4

56.9

59.5

49.3

51.9

19.4

18.9

17.1

40.4

53.5

56.5

3.9

0.1

-1.2

-2.0

-16.4

-4.2

-5.9

-7.3

-1.8

2.6

9.3

-11.8

5.1

2.8

-12.1

-20.6

-11.3

9.1

3.0

-10.9

2.2

-20.2

-9.1

-28.4

10.1

4.0

5.6

1.4

5.2

-13.5

-14.8

0.1

-1.3

-7.3

31.1

-5.5

-5.6

-3.3

-1.5

-2.7

-1.1

-4.5

-1.5

0.5

-0.6

-8.2

-9.5

-11.0

7.8

0.8

1.6

-2.5

-6.6

0.8

-7.0

0.8

2.5

0.5

-0.8

0.0

-2.1

-6.3

20.3

28.5

58.5

62.1

43.5

20.1

46.6

42.4

18.2

14.1

36.9

32.5

13.9

16.3

70.6

59.7

34.2

29.5

25.6

63.1

34.2

46.5

37.2

38.5

35.6

35.9

21.8

20.1

24.2

50.1

52.1

4.5

-6.9

-29.7

16.9

-14.5

7.0

-26.1

15.9

3.8

5.7

10.5

-6.3

-6.0

4.8

-15.8

-15.5

-25.6

27.4

-1.7

1.7

8.6

-31.3

6.3

-18.1

5.8

16.7

4.3

3.7

7.8

-3.7

-26.9

-4.3

-0.2

-11.6

34.2

-4.5

-1.0

-1.1

18.7

1.9

0.5

-0.7

-2.9

7.3

-0.4

0.8

-1.3

-7.3

-19.9

5.6

6.1

-2.2

-6.7

0.1

-6.5

3.4

20.9

4.1

3.0

1.6

0.7

-5.0

30.2

42.3

47.1

56.4

41.0

31.5

36.7

47.9

42.8

28.0

60.8

44.6

5.2

51.8

66.4

72.6

30.0

33.4

55.7

46.8

54.6

57.2

50.8

45.9

56.5

32.4

42.8

38.0

53.3

45.0

57.1

-4.4

7.9

-20.9

-15.1

-39.7

-8.9

-22.7

-4.9

15.1

0.4

-5.5

-15.8

-0.2

8.2

8.7

-6.9

-0.5

-3.2

6.8

-28.0

3.8

-21.2

-6.7

-18.3

-2.4

11.6

9.1

6.1

3.8

-26.1

-16.1

-1.8

0.9

-3.0

-8.8

-19.3

-5.1

-22.1

-2.7

-1.3

-2.3

-6.8

-0.8

-0.2

0.8

-4.1

-7.4

-37.8

17.9

9.6

-9.9

-3.9

-8.9

8.4

-1.1

2.7

4.6

0.9

0.8

-0.4

-8.5

-6.3

27.4

36.1

56.3

32.6

58.7

28.1

51.0

33.5

19.4

30.6

40.7

47.5

27.1

27.3

57.3

54.1

17.3

22.1

32.2

58.8

29.2

46.6

37.9

38.4

41.0

21.9

25.2

28.5

32.9

54.1

50.7

-3.7

3.0

-11.5

2.4

-12.9

11.4

-8.9

-2.5

-1.0

4.6

3.8

4.0

12.2

0.5

-8.2

-21.1

-11.6

-5.8

1.1

-1.3

-8.1

-12.6

-7.7

-27.2

10.7

4.3

7.2

4.2

4.3

-4.3

-11.4

-2.4

-4.2

-1.0

11.6

0.1

3.8

7.0

-2.7

-1.3

1.9

0.9

2.6

11.2

-0.1

-2.6

9.0

-10.2

5.7

-1.6

5.6

-9.6

-7.5

-1.4

-8.4

5.5

1.8

3.3

0.8

1.6

2.4

0.8

11.1

10.3

36.6

31.6

41.9

10.6

25.0

5.6

9.8

4.6

18.4

25.1

6.6

24.5

16.1

46.1

2.0

4.5

15.9

39.8

40.3

62.4

55.5

42.3

42.9

8.9

15.7

9.1

32.2

37.5

45.1

3.2

-6.5

-36.0

9.8

-13.0

2.0

11.5

0.5

-6.0

-2.9

-4.5

-0.5

-11.6

3.4

-10.8

-29.6

-19.5

-0.7

-8.6

-21.1

6.3

17.2

28.1

29.5

1.4

2.1

0.3

-4.2

2.0

1.0

5.1

2.4

1.1

-11.1

10.4

1.5

-1.1

-2.9

-1.8

-0.9

0.0

5.6

-8.8

-0.4

0.1

-23.5

-12.5

-4.8

-0.3

2.3

3.8

10.4

5.3

4.2

21.9

25.4

0.5

6.9

1.6

11.6

3.5

3.9

21.6

28.4

54.4

38.9

46.2

20.1

41.8

28.2

20.9

14.4

46.1

32.4

9.3

33.0

52.7

60.1

15.3

11.6

31.2

53.5

42.1

54.3

51.4

43.5

46.7

21.9

23.8

20.7

38.0

46.1

52.8

1.8

0.7

-20.1

-5.9

-19.8

2.9

-12.1

-0.1

1.8

1.4

2.7

-5.0

-5.7

5.9

-20.0

-15.7

-17.2

-13.2

0.2

-12.9

4.7

-19.9

3.9

-11.6

4.6

7.9

5.4

1.8

5.9

-10.1

-18.3

-0.6

-1.2

-5.4

9.6

-7.5

-2.1

-5.7

0.7

-2.5

-0.4

-3.8

-5.2

1.0

-0.8

-8.9

-3.5

-19.1

1.7

0.3

0.3

-2.1

-5.5

2.9

4.7

7.5

4.4

3.3

0.3

1.5

-1.5

-4.6

Austria

Belgium

Bulgaria

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latv ia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slov enia

Slov akia

Spain

Sweden

United Kingdom

Group 1

Group 2

Group 3

Group 4

EU 27

25.9

3.1

-0.6

26.8

5.3

2.5

41.4

4.4

-0.3

31.9

5.1

1.2

15.0

-1.0

3.6

26.6

3.3

0.5

Group 1: Austria, Belgium, Denmark, Finland, France, German, Ireland, Netherlands, Sweden, United Kingdom. - Group 2: Greece, Italy, Luxembourg, Portugal, Spain. - Group 3: Czech Republic, Hungary, Poland, 
Slovakia, Slovenia. -  Group 4: Bulgaria, Cyprus, Estonia, Latvia, Lithuania, Malta, Romania.  

Source: Eurostat (Comext). - Including intra-EU exports. 

243 

 
 
TABLE P: Shares of exports in high price segment as percent and change in percentage points, NACE 3-digit manufacturing 

Mainstream

industries

Labour

Capital 

Marketing 

Technology 

Total industry

intensiv e industries

 intensiv e industries

driv en industries

driv en industries

2009 Change

Change

2009 Change

Change

2009 Change

Change

2009 Change

Change

2009 Change

Change

2009 Change

Change

99/09

07/09

99/09

07/09

99/09

07/09

99/09

07/09

99/09

07/09

99/09

07/09

36.5

30.4

10.4

26.1

18.9

37.6

18.3

40.9

35.7

41.2

13.9

24.8

58.4

16.5

24.4

17.2

35.4

54.7

38.1

7.9

11.9

18.0

13.3

18.2

13.5

38.9

41.8

39.2

15.9

15.6

17.7

-2.1

-0.5

4.1

-0.7

1.1

4.0

11.5

-29.5

5.7

-0.2

-2.6

2.5

3.2

-1.9

-2.7

-1.8

-8.5

1.7

15.0

8.7

0.5

-16.3

4.6

1.6

-10.1

8.2

7.2

8.4

-3.2

-2.3

-3.0

-0.4

0.0

2.9

7.1

3.3

2.0

-0.4

5.5

4.6

5.7

3.7

-6.9

-3.1

4.1

4.0

3.4

1.0

-7.6

-7.2

-1.1

-0.2

7.0

3.2

0.7

-2.0

-0.7

-0.7

2.5

2.5

0.0

4.3

39.4

38.4

7.8

20.5

16.8

30.9

12.0

18.5

52.5

43.0

30.8

18.9

77.4

49.4

9.4

14.0

34.0

50.4

40.3

10.3

20.5

11.9

30.6

21.6

22.6

29.5

49.0

42.3

38.4

15.6

11.6

-3.3

14.6

5.9

-5.4

9.0

-1.9

8.6

-1.2

13.8

-5.6

13.7

-2.3

28.2

-0.6

7.0

11.3

14.4

-27.5

14.6

-0.6

3.8

9.9

1.4

16.5

-7.1

-3.1

2.4

2.5

-4.1

2.7

9.2

7.0

-2.3

0.8

-25.0

-1.7

2.2

-1.3

-0.8

-0.3

2.5

-0.7

7.8

-1.5

1.2

0.9

3.7

-4.5

35.8

-7.0

0.5

-1.6

1.8

1.5

5.1

-4.7

-4.2

0.0

0.5

-2.6

1.5

1.5

18.4

16.7

6.7

28.9

9.4

19.0

9.1

10.0

16.4

20.1

5.3

14.4

91.7

15.8

14.4

1.6

26.1

56.6

10.9

7.0

6.1

13.2

11.5

8.4

12.2

21.1

30.6

21.0

13.8

9.2

8.8

-0.9

3.9

-1.1

21.6

4.2

-3.5

-2.3

-1.0

-2.1

2.4

2.3

5.5

0.6

0.3

-18.6

-0.7

9.4

46.9

0.0

1.4

1.1

6.9

0.0

4.2

0.8

3.3

1.1

0.2

0.7

3.0

0.7

1.6

1.7

1.4

10.5

3.7

1.9

4.0

-0.2

2.7

6.2

-2.1

2.0

-0.2

3.4

3.6

-2.0

19.2

12.1

0.3

1.4

0.1

0.0

0.0

-1.0

2.8

-2.8

4.1

2.8

3.2

1.6

0.0

37.9

18.5

20.2

55.9

11.6

29.1

25.4

33.3

42.1

23.7

25.5

26.5

42.3

33.9

20.3

14.7

58.0

46.8

24.4

15.0

16.6

32.2

15.6

31.5

18.2

34.6

34.4

29.2

26.8

17.3

24.9

-3.6

-10.6

4.4

22.5

4.1

-10.4

11.1

2.7

0.4

-6.6

9.2

-3.2

-13.6

4.4

1.0

2.5

19.9

-17.5

-6.2

-1.6

-12.9

2.9

-2.3

20.2

-13.4

-12.8

-8.7

-7.6

-2.9

0.2

2.0

0.2

-3.3

-6.9

3.3

1.9

-4.1

-6.4

4.1

2.1

-2.1

1.4

-1.9

-5.1

-1.4

0.1

-0.6

16.2

-6.7

1.2

-2.3

-8.5

8.8

-2.3

1.3

-2.0

-4.6

-2.8

-1.6

-2.6

-1.2

0.5

54.9

63.7

29.3

40.9

11.2

59.5

25.9

74.5

44.7

51.5

37.2

21.8

80.2

42.9

31.7

24.6

75.2

73.6

39.8

16.8

15.6

17.3

10.5

23.8

17.0

56.6

51.0

52.8

31.6

17.4

27.1

1.4

20.7

18.3

23.9

-0.1

-0.1

-6.2

3.1

-1.0

-3.0

-11.8

-20.3

14.0

8.0

26.1

21.6

14.5

10.7

1.2

-6.6

3.3

-22.3

0.9

6.5

-3.2

-6.8

3.9

2.2

3.3

-10.3

2.5

3.0

-2.6

-2.5

3.8

-9.5

-0.7

-10.9

-2.4

-3.5

-9.2

0.9

-6.1

8.8

-2.2

8.4

7.6

21.7

-6.8

-12.2

-8.3

-18.2

-1.2

-3.1

16.4

-43.5

2.1

-3.9

-5.9

-19.2

-4.1

-6.8

38.4

35.0

45.6

40.1

13.7

36.6

16.4

34.7

37.0

39.5

20.1

21.6

77.4

27.5

19.1

11.5

54.5

66.2

29.4

11.5

14.1

16.5

14.8

20.1

16.0

37.7

42.6

38.8

23.4

15.4

16.6

-1.7

6.2

20.1

20.7

4.1

-4.1

2.0

-1.6

-0.8

-3.6

4.5

-10.2

8.0

0.0

8.6

6.9

2.1

1.1

5.4

-0.9

-0.1

0.4

-1.9

-0.6

2.1

-0.7

1.6

-3.6

4.1

2.6

3.8

0.8

19.2

20.1

8.4

-0.2

0.2

-1.9

7.3

0.8

11.2

-4.6

-5.7

-0.8

-1.4

-1.5

-0.5

7.0

-5.8

-1.6

-1.3

-4.9

3.3

-0.1

7.4

-11.0

-1.2

-0.8

-0.2

-1.8

-0.4

1.6

Austria

Belgium

Bulgaria

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latv ia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slov enia

Slov akia

Spain

Sweden

United Kingdom

Group 1

Group 2

Group 3

Group 4

EU 27

32.0

-0.9

2.1

36.2

-1.0

-0.3

18.7

-0.1

2.7

27.7

-6.8

-1.8

46.5

-1.0

-8.0

33.6

-2.5

-0.7

Group 1: Austria, Belgium, Denmark, Finland, France, German, Ireland, Netherlands, Sweden, United Kingdom. - Group 2: Greece, Italy, Luxembourg, Portugal, Spain. - Group 3: Czech Republic, Hungary, Poland, 
Slovakia, Slovenia. - Group 4: Bulgaria, Cyprus, Estonia, Latvia, Lithuania, Malta, Romania. 

Source: Eurostat (Comext). - Including intra-EU exports. 

244 

 
 
Structural 
change 
effect
-0.05
-0.05
0.00
0.00
0.07
0.16
0.00
0.04
-0.02
0.16
-0.12
0.00
0.02
0.14
0.01
0.03
-0.02
 -
0.15
-0.02
0.02
-0.01
0.00
-0.16
-0.03
-0.06
0.00

0.00
-0.06
0.73
-0.33
0.04
-0.07
0.05
0.00
-0.01
0.02

0.01
-0.01
0.02
0.01

Change in 
sectoral 
R&D 
intensity
0.25
0.10
0.02
0.03
0.12
-0.09
0.37
0.18
0.13
-0.05
0.02
0.01
0.13
0.11
0.09
0.06
0.02
 -
0.12
0.08
-0.01
0.23
0.01
0.20
-0.05
0.02
0.04

0.05
-0.03
-0.15
1.04
0.20
0.55
0.03
0.01
0.19
0.08

0.09
0.05
0.03
0.04

Dynamic 
interaction 
effect

0.07
-0.01
0.00
0.00
0.00
-0.02
-0.08
0.02
-0.01
-0.03
0.02
-0.01
0.00
-0.24
0.00
0.00
0.00
 -
-0.01
-0.15
0.00
0.00
-0.02
-0.05
0.00
-0.04
-0.01

-0.01
-0.01
-0.17
-0.58
-0.03
-0.04
-0.01
0.00
0.00
-0.01

-0.01
0.00
0.00
0.00

TABLE Q: R&D decomposition 

RD intensity

Sector effect

Country effect 

Country

Year

2007

Change 
2004

2007

Change 
2004

2007

Change 
2004

Austria
Belgium
Bulgaria
Cyprus
Czech Republic
Germany
Denmark
Estonia
Spain
Finland
France
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Luxembourg
Malta
Netherlands
Poland 
Portugal
Romania
Sweden
Slovakia
Slovenia 
United Kingdom

Australia
Canada
Israel
Island
Japan
Kroatia
Norway
New Zealand
Turkey
USA

Group 1
Group 2
Group 3
Group 4

2007
2007
2006
2007
2007
2007
2007
2007
2006
2007
2007
2005
2007
2007
2007
2007
2007
2007
2007
2007
2007
2006
2007
2007
2007
2007
2006

2006
2006
2006
2007
2006
2007
2007
2005
2007
2007

2006
2005
2007
2006

1.97
1.48
0.14
0.11
1.06
1.97
2.26
0.63
0.74
3.08
1.50
0.20
0.57
0.92
0.68
0.27
0.21
 -
0.53
1.07
0.20
0.54
0.23
2.97
0.21
0.99
1.22

0.97
1.15
4.33
1.75
2.66
2.73
1.09
0.47
0.33
1.86

1.77
0.59
0.43
0.27

0.27
0.04
0.02
0.03
0.19
0.05
0.29
0.23
0.11
0.09
-0.07
0.00
0.15
0.00
0.10
0.08
0.00
 -
0.26
-0.09
0.01
0.22
0.00
-0.01
-0.08
-0.08
0.03

0.04
-0.10
0.40
0.13
0.21
0.43
0.07
0.01
0.19
0.08

0.08
0.04
0.05
0.05

Source: OECD (STAN), Eurostat. 

1.55
1.39
1.14
0.47
1.96
2.19
1.26
1.09
1.06
2.78
1.24
0.63
2.13
2.72
1.40
1.12
0.68
 -
2.02
1.19
1.24
0.87
1.38
1.95
1.63
1.83
1.27

0.97
1.11
2.33
0.68
2.13
3.33
1.09
0.97
1.45
1.34

1.63
1.17
1.59
1.23

0.42
0.09
-1.00
-0.36
-0.90
-0.21
1.00
-0.46
-0.32
0.30
0.26
-0.42
-1.56
-1.80
-0.72
-0.86
-0.46
 -
-1.49
-0.11
-1.05
-0.33
-1.15
1.03
-1.42
-0.85
-0.05

0.00
0.04
2.00
1.07
0.53
-0.60
0.00
-0.50
-1.13
0.52

0.14
-0.57
-1.16
-0.96

0.25
0.13
0.01
0.06
0.12
-0.09
0.28
0.26
0.15
-0.08
0.03
0.01
0.23
0.39
0.09
0.14
0.07
 -
0.03
-0.05
-0.01
0.26
-0.11
0.09
-0.22
0.04
0.05

0.04
0.00
0.19
0.30
0.17
0.56
0.00
0.01
0.24
0.09

0.08
0.07
0.04
0.01

0.03
-0.08
0.01
-0.03
0.07
0.14
0.01
-0.03
-0.04
0.17
-0.10
-0.01
-0.08
-0.39
0.01
-0.06
-0.07
 -
0.23
-0.04
0.02
-0.04
0.10
-0.10
0.14
-0.12
-0.01

0.00
-0.10
0.21
-0.17
0.04
-0.13
0.07
0.00
-0.05
0.00

0.00
-0.03
0.01
0.04

245 

 
 
 
5.3.2  Data tables underlying graphs in section 3 and introduction of country chapters 

The country codes used in the tables are: 

Country 

Belgium 

Bulgaria 

Code 

BE 

BG 

Czech Republic  CZ 

Denmark 

Germany 

Estonia 

Ireland 

Greece 

Spain 

France 

Italy 

Cyprus 

Latvia 

Lithuania 

Luxembourg 

Hungary 

Malta 

Netherlands 

Austria 

Poland 

Portugal 

Romania 

Slovenia 

Slovakia 

Finland 

Sweden 

DK 

DE 

EE 

IE 

EL 

ES 

FR 

IT 

CY 

LV 

LT 

LU 

HU 

MT 

NL 

AT 

PL 

PT 

RO 

SI 

SK 

FI 

SE 

United Kingdom  UK 

246 

 
 
 
Table R: Towards a modern and competitive industry 

d
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k
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w
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9
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9
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6
3

N
I
F
C
E
G
D

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S

l
a
t
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t

f
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s
a

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d
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f
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e
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0
1
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2
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:
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l
a
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f
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s
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f
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0
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135 * 
42 
63 
119 
125 
62 
124 
76 
111 * 
128 * 
102 
81 
47 
56 
190 * 
60 
83 * 
139 
115 
54 
66 
42 
83 
79 
111 
116 
108 * 

100 

93 

128 
42 
72 
109 
106 
70 
135 
96 
110 
120 
108 
89 
55 
63 
178 
71 
92 
115 
113 
67 
77 
47 
82 
83 
112 
113 
108 

100 

95 

65 * 
18 
34 
54 
60 
29 
125 * 
49 
51 * 
57 * 
48 
30 
23 
27 * 
63 
36 
45 
73 
71 
32 
31 * 
26 * 
39 
39 
66 
62 
58 * 

50 

49 

103 
137 * 
86 
98 
108 
118 
73 
118 
112 
111 
109 
121 * 
182 * 
127 * 
107 
101 
103 * 
106 
101 
91 
101 * 
134 * 
106 
83 
99 
107 
117 

12.0 
10.1 
15.3 
15.2 
13.5 
10.8 
17.2 
11.2 * 
12.5 
20.2 
11.3 * 
4.6 
9.8 
18.5 
1.8 * 
7.5 
7.0 
8.9 
14.0 
14.3 
14.6 
20.0 
11.3 
17.5 
19.0 
13.0 
17.5 

14.3 

13.0 

190 

178 

125 

182 

20.2 

42 

36 

42 

30 

18 

22 

73 

1.8 

4.5 

1.3 
0.2 
0.9 
2.0 
1.9 
0.6 
1.2 
0.2 * 
0.7 
1.4 
0.7 
0.1 
0.2 
0.2 
1.2 
0.7 
0.3 
0.9 
1.9 
0.2 
0.8 
0.2 
1.2 
0.2 
2.8 
2.6 
1.2 

1.3 

1.0 

2.8 

0.1 

0.8 

58.1 
30.8 
56.0 
51.9 
79.9 
56.4 
56.5 
54.7 * 
43.5 
50.2 
53.2 
56.1 
24.3 
30.3 
64.7 
28.9 
37.4 
44.9 
56.2 
27.9 
57.8 
33.3 
50.3 
36.1 
52.2 
53.7 
45.6 

51.6 

8.8 
4.6 
15.2 
12.3 
14.0 
6.9 
22.1 
6.7 
4.7 
19.7 
6.8 
20.1 
5.3 
5.8 
42.1 
22.3 
43.8 
18.4 
11.7 
5.7 
3.6 
8.2 
5.5 
5.9 
13.9 
14.8 
18.2 

13.7 

107 * 
150 
172 
118 
89 
141 
117 
111 
114 
106 
115 
117 
132 
120 
: * 
135 
111 
110 
96 
103 
110 
203 
108 
172 
107 
99 
90 

110 

5 
-23 
5 
13 
16 
-6 
49 
-195 
-28 
-16 
-8 
-502 
-22 
-12 
-22 
8 
-66 
10 
-4 
-11 
-55 
-25 
-2 
-2 
2 
6 
-38 

9 
56 
19 
18 
-10 
63 
-10 
87 
43 
11 
-11 
177 
67 
46 
81 
20 
55 
12 
48 
12 
62 
-9 
32 
-14 
13 
33 
41 

11 

47.8 

13.6 

79.9 

43.8 

203 

49 

177 

24.3 

3.6 

89 

-502 

-14 

13.0 

10.3 

s
r
o
t
a
c
i
d
n
i

/

e
v
i
t
c
e
j
b
o
y
c
i
l
o
P

BE 
BG 
CZ 
DK 
DE 
EE 
IE 
EL 
ES 
FR 
IT 
CY 
LV 
LT 
LU 
HU 
MT 
NL 
AT 
PL 
PT 
RO 
SI 
SK 
FI 
SE 
UK 

weighted 
EU27 
EU 
unweighted 

max 

min 

Standard 
deviation 

Note: Labour productivity per hour worked - BE, ES ,FR, LU, MT & UK (2009) 
Labour productivity per person employed in manufacturing - BE, IE, ES, LT & UK (2009); FR & RO (2008); PT (2007) 
Unit labour costs, level in manufacturing - BG, CY, LV & LT (2009); MT & RO (2008); PT (2007) 
Share of science and technology graduates - EL, IT & LU (2008) 
R&D performed by businesses - EL (2007) 
Share of innovating enterprises as % of all enterprises - EL (2006) 
Real effective exchanges rates - BE & LU values together 

247 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
Table S: Towards a sustainable industry 

s
r
o
t
a
c
i
d
n
i

/

e
v
i
t
c
e
j
b
o
y
c
i
l
o
P

BE 

BG 

CZ 

DK 

DE 

EE 

IE 

EL 

ES 

FR 

IT 

CY 

LV 

LT 

LU 

HU 

MT 

NL 

AT 

PL 

PT 

RO 

SI 

SK 

FI 

SE 

UK 

weighted 
EU27 
EU 
unweighted 

max 

min 

Standard 
deviation 

y
r
t
s
u
d
n
i
n
i
y
t
i
s
n
e
t
n
i
y
g
r
e
n
E

r
o
t
c
e
s
y
g
r
e
n
e

e
h
t
d
n
a

;

A
V
G
o
r
u
e

/

.

q
e

l
i
o
g
k
(

)
9
0
0
2
;
0
0
0
2
r
a
e
y
e
c
n
e
r
e
f
e
r

t
a
t
s
o
r
u
E

:
e
c
r
u
o
S

d
n
a
y
r
t
s
u
d
n
i
n
i
y
t
i
s
n
e
t
n
i
2
O
C

r
o
t
c
e
s
y
g
r
e
n
e

e
h
t

;

A
V
G
o
r
u
e

/

2
O
C
g
k
(

)
9
0
0
2
;
0
0
0
2
r
a
e
y
e
c
n
e
r
e
f
e
r

t
a
t
s
o
r
u
E

,

A
E
E

:
s
e
c
r
u
o
S

s
e
s
i
r
p
r
e
t
n
e
y
b
d
e
t
a
r
e
n
e
g
e
t
s
a
W

;
s
r
o
t
c
e
s
E
C
A
N

l
l
a
(

)
8
0
0
2

;
a
t
i
p
a
c

r
e
p
s
e
n
n
o
t

t
a
t
s
o
r
u
E

:
e
c
r
u
o
S

4.1 

37.1 

2.1 

2.3 

4.1 

14.3 

5.0 

5.8 

2.8 

4.9 

2.5 

1.8 

0.4 

1.6 

19.3 

1.7 

3.2 

5.5 

6.3 

3.5 

3.0 

8.4 

2.2 

1.8 

15.1 

8.9 

4.9 

4.8 

6.4 

37.1 

0.4 

7.6 

0.32 

0.88 

0.42 

0.11 

0.18 

0.37 

0.05 

0.22 

0.22 

0.18 

0.18 

0.17 

0.34 

0.47 

0.18 

0.37 

: 

0.34 

0.18 

0.32 

0.28 

0.55 

0.19 

0.50 

0.27 

0.19 

0.14 

0.20 

0.29 

0.88 

0.05 

0.17 

0.9 

7.4 

2.8 

0.8 

1.0 

5.7 

0.4 

2.4 

0.9 

0.5 

0.8 

2.6 

1.3 

1.5 

0.8 

1.6 

: 

1.0 

0.5 

2.8 

1.1 

3.0 

1.0 

1.9 

0.8 

0.3 

0.8 

0.9 

1.7 

7.4 

0.3 

1.7 

248 

f
o
%

s
a
s
d
o
o
g
l
a
t
n
e
m
n
o
r
i
v
n
e

f
o
s
t
r
o
p
x
E

)
0
1
0
2
(

s
d
o
o
g
f
o

s
t
r
o
p
x
e

l
l
a

)
T
X
E
M
O
C

(

t
a
t
s
o
r
u
E

:
e
c
r
u
o
S

0.49 

0.09 

1.09 

0.36 

1.25 

0.15 

0.27 

0.25 

0.83 

0.46 

0.38 

8.17 

0.15 

0.13 

1.60 

0.79 

0.08 

0.96 

0.76 

0.26 

0.50 

0.16 

0.90 

0.35 

0.53 

0.73 

0.61 

0.76 

0.83 

8.17 

0.08 

1.52 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
s
r
o
t
a
c
i
d
n
i

/

e
v
i
t
c
e
j
b
o
y
c
i
l
o
P

BE 

BG 

CZ 

DK 

DE 

EE 

IE 

EL 

ES 

FR 

IT 

CY 

LV 

LT 

LU 

HU 

MT 

NL 

AT 

PL 

PT 

RO 

SI 

SK 

FI 

SE 

UK 

weighted 
EU27 
EU 
unweighted 

max 

min 

Standard 
deviation 

s
e
c
i
v
r
e
s
d
n
a
y
r
t
s
u
d
n
i

r
o
f
d
i
a
e
t
a
t
S

)
9
0
0
2
(
P
D
G

f
o
%

s
a

0
1
0
2

d
r
a
o
b
e
r
o
c
S
d
i
A
e
t
a
t
S
:
e
c
r
u
o
S

0.5 

0.1 

0.5 

0.9 

0.6 

0.1 

0.5 

0.7 

0.5 

0.6 

0.3 

0.4 

0.1 

0.3 

0.2 

1.0 

1.7 

0.3 

0.4 

0.7 

0.9 

0.1 

0.7 

0.4 

0.5 

0.8 

0.2 

0.5 

0.5 

1.7 

0.1 

0.4 

e
z
i
s

m
u
i
d
e
m
r
o
f

s
e
c
i
r
p
y
t
i
c
i
r
t
c
e
l
E

)
0
1
0
2
;
h
W
k
r
e
p
o
r
u
e
(

s
e
s
i
r
p
r
e
t
n
e

t
a
t
s
o
r
u
E

:
e
c
r
u
o
S

0.0943 

0.0639 

0.1022 

0.0848 

0.0921 

0.0573 

0.1118 

0.0855 

0.1110 

0.0687 

0.1027 * 

0.1483 

0.0890 

0.0991 

0.0956 

0.1221 * 

0.1506 * 

0.0853 

0.0897 * 

0.0929 

0.0896 

0.0850 

0.0917 

0.1161 

0.0667 

0.0800 

0.0947 

0.0918 

0.0952 

0.1506 

0.0573 

0.0218 

Table T: Business Environment 

s
e
r
u
t
i
d
n
e
p
x
e

e
r
u
t
c
u
r
t
s
a
r
f
n
I

)
9
0
0
2
;
t
n
a
t
i
b
a
h
n
i

r
e
p
o
r
u
e
(

n
o
i
t
a
l
u
c
l
a
c

t
a
t
s
o
r
u
E

,

D
C
E
O

:
e
c
r
u
o
S

f
o

y
t
i
l
a
u
q
h
t
i

w
n
o
i
t
c
a
f
s
i
t
a
S

e
r
u
t
c
u
r
t
s
a
r
f
n
i

)
t
r
o
p
r
i
a
d
n
a
t
r
o
p

,

d
a
o
r

,
l
i
a
r
(

d
n
a
e
v
i
s
n
e
t
x
e
=
7
/
d
e
p
o
l
e
v
e
d
r
e
d
n
u
=
1
(

)
0
1
0
2
;
s
d
r
a
d
n
a
t
s

l
'
t
n
i

y
b
t
n
e
i
c
i
c
i
f
f
e

s
s
e
n
e
v
i
t
i
t
e
p
m
o
C

l
a
b
o
l
G
e
h
T

:
e
c
r
u
o
S

1
1
0
2
-
0
1
0
2

t
r
o
p
e
R

d
e
e
p
s
h
t
i

w
s
e
n
i
l
d
n
a
b
d
a
o
r
b
f
o
%

)
1
1
0
2
(

s
p
B
M
0
1

e
v
o
b
a

O
S
F
N

I

G
D

:
e
c
r
u
o
S

k
r
o
w
e
m
a
r
f
y
r
o
t
a
l
u
g
e
r
d
n
a
l
a
g
e
L

)
1
1
0
2
;
.
s
o
p
=
0
1

/

.
g
e
n
=
0
(

s
s
e
n
e
v
i
t
i
t
e
p
m
o
C
d
l
r
o
W
D
M

I

:
e
c
r
u
o
S

r
e
t
n
e
C

n
o
i
t
a
l
u
g
e
r

t
n
e
m
n
r
e
v
o
g
f
o
n
e
d
r
u
B

;
e
m
o
s
n
e
d
r
u
b
t
o
n
=
7

e
m
o
s
n
e
d
r
u
b
=
1
(

)
0
1
/
9
0
0
2

s
s
e
n
e
v
i
t
i
t
e
p
m
o
C

l
a
b
o
l
G
e
h
T

:
e
c
r
u
o
S

1
1
0
2
-
0
1
0
2

t
r
o
p
e
R

e
g
a
s
u
t
n
e
m
n
r
e
v
o
g
-
e

f
o
%

)
0
1
0
2
(

s
e
s
i
r
p
r
e
t
n
e
y
b

t
a
t
s
o
r
u
E

:
e
c
r
u
o
S

296 

21 

279 

192 

243 

168 

378 

: 

311 

295 

: 

: 

90 

110 

: 

189 

: 

: 

: 

159 

63 

178 

280 

165 

270 

317 

201 

187 

210 

378 

21 

94 

5.9 

3.3 

4.7 

6.0 

6.4 

4.6 

4.5 

4.1 

5.6 

6.3 

4.0 

5.4 

4.3 

4.5 

5.6 

4.1 

4.8 

6.0 

5.6 

3.0 

5.2 

2.9 

4.5 

4.0 

6.1 

5.9 

5.3 

4.9 

6.4 

2.9 

1.0 

57 

74 

28 

48 

31 

10 

13 

54 

34 

55 

9 

5 

41 

42 

27 

41 

12 

57 

13 * 

12 

73 

60 

26 

25 

33 

48 

45 

39 

36 

74 

5 

20 

3.9 

3.7 

3.8 

6.5 

5.7 

5.9 

5.8 

2.9 

4.1 

3.8 

2.9 

: 

: 

4.0 

6.2 

3.9 

: 

6.0 

5.4 

4.1 

3.5 

4.3 

3.1 

3.3 

6.7 

6.6 

5.0 

4.6 

6.7 

2.9 

1.3 

2.6 

3.2 

2.7 

3.8 

3.0 

4.4 

3.1 

2.4 

2.8 

2.6 

2.2 

4.0 

3.1 

2.7 

4.0 

2.2 

3.0 

3.1 

3.6 

2.7 

2.5 

2.9 

3.5 

2.8 

4.3 

4.0 

3.1 

3.1 

4.4 

2.2 

0.6 

77 

64 

89 

92 

67 

80 

87 

77 

67 

78 

84 

74 

72 

95 

90 

71 

77 

95 

75 

89 

75 

50 

88 

88 

96 

90 

67 

76 

80 

96 

50 

11 

Note: Electricity prices for medium size enterprises - HU & MT (2009); AT (2008); IT (2007) 
% of broadband lines with speed above 10 MBps - AT (2010) 

249 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
Table U: Entrepreneurship and SMEs 

s
r
o
t
a
c
i
d
n
i

/

e
v
i
t
c
e
j
b
o
y
c
i
l
o
P

BE 

BG 

CZ 

DK 

DE 

EE 

IE 

EL 

ES 

FR 

IT 

CY 

LV 

LT 

LU 

HU 

MT 

NL 

AT 

PL 

PT 

RO 

SI 

SK 

FI 

SE 

UK 

weighted 
EU27 
EU 
unweighted 

max 

min 

Standard 
deviation 

s
s
e
n
i
s
u
b
a
t
r
a
t
s

o
t
d
e
r
i
u
q
e
r

e
m
T

i

)
0
1
0
2
;
s
y
a
d
(

4 

18 

20 

6 

15 

7 

13 

19 

47 

7 

6 

8 

16 

22 

19 

4 

: 

8 

28 

32 

6 

10 

6 

16 

14 

15 

13 

15 

47 

4 

10 

1
1
0
2
s
s
e
n
i
s
u
B
g
n
i
o
D
k
n
a
B
d
l
r
o
W

:
e
c
r
u
o
S

s
r
a
e
y
o
w

t

r
e
t
f
a
e
t
a
r

l
a
v
i
v
r
u
s

e
s
i
r
p
r
e
t
n
E

)
8
0
0
2
(

t
a
t
s
o
r
u
E

:
e
c
r
u
o
S

n
r
u
h
c

s
s
e
n
i
s
u
B

s
t
i
x
e
d
n
a
s
e
i
r
t
n
e

e
s
i
r
p
r
e
t
n
e
(

)
8
0
0
2
;
k
c
o
t
s

g
n
i
t
s
i
x
e

f
o
%

s
a

t
a
t
s
o
r
u
E

:
e
c
r
u
o
S

: 

63 

66 

: 

: 

: 

: 

: 

67 

: 

74 

: 

61 

: 

79 

64 

: 

62 

78 

: 

54 

77 

: 

62 

70 

87 

: 

69 

87 

54 

9 

: 

31 

15 

: 

19 

: 

: 

: 

17 

: 

: 

5 

43 

: 

: 

21 

: 

: 

13 

: 

33 

27 

: 

28 

17 

13 

: 

22 

43 

5 

10 

t
a
t
s
o
r
u
E

:
e
c
r
u
o
S

s
e
s
i
r
p
r
e
t
n
e
h
t
w
o
r
g
-
h
g
i
h
f
o
e
r
a
h
S

)
7
0
0
2
(

s
e
s
i
r
p
r
e
t
n
e

l
l
a
f
o
%

s
a

: 

8.8 * 

5.0 

4.6 

: 

6.0 

: 

: 

4.3 

: 

3.0 

: 

13.7 

8.2 * 

4.6 

5.0 

: 

3.6 

: 

: 

3.4 

1.3 

5.0 

10.5 

2.9 * 

4.8 

: 

5.6 

13.7 

1.3 

3.1 

g
n
i
c
n
a
n
i
f

e
g
a
t
s

y
l
r
a
E

)
9
0
0
2
;
P
D
G

f
o
%

(

t
a
t
s
o
r
u
E

:
e
c
r
u
o
S

0.039 

0.012 

0.000 

0.036 

0.018 

: 

0.018 

0.002 

0.004 

0.019 

0.003 

: 

: 

: 

0.102 

0.001 

: 

0.019 

0.007 

0.000 

0.018 

0.000 

: 

: 

0.033 

0.038 

0.026 

0.020 

0.102 

0.000 

0.024 

n
a
o
l
d
n
a
,
s
n
o
i
t
a
c
i
l
p
p
a
n
a
o
l
d
e
t
c
e
j
e
R

d
e
m
e
e
d
e
r
e
w
s
n
o
i
t
i
d
n
o
c

e
s
o
h
w
s
r
e
f
f
o

n
a
o
l

l
l
a
f
o
%

s
a

,
e
l
b
a
t
p
e
c
c
a
n
u

)
9
0
0
2
(

s
E
M
S
y
b
s
n
o
i
t
a
c
i
l
p
p
a

n
o

y
e
v
r
u
s

r
e
t
e
m
o
r
a
b
o
r
u
E
h
s
a
l
F
:
e
c
r
u
o
S

e
c
n
a
n
i
f

o
t

s
s
e
c
c
a

'

s
E
M
S

c
i
l
b
u
p
y
b
s
t
n
e
m
y
a
p
f
o
n
o
i
t
a
r
u
D

s
e
i
t
i
r
o
h
t
u
a

)
1
1
0
2
;
s
y
a
d
(

x
e
d
n
I

t
n
e
m
y
a
P
n
a
e
p
o
r
u
E

:
e
c
r
u
o
S

a
i
t
i
t
s
u
J
m
u
r
t
n
I
y
b

5 

14 

22 

29 

26 

45 

28 

36 

31 

19 

17 

20 

38 

14 

12 

12 

37 

54 

16 

25 

19 

48 

19 

19 

0 

14 

20 

23 

24 

54 

0 

13 

72 

: 

43 

37 

35 

24 

49 

168 

153 

64 

180 

83 

32 

56 

: 

56 

: 

47 

49 

38 

139 

: 

: 

55 

24 

35 

47 

68 

180 

24 

47 

Note: Share of high-growth enterprises as % of all enterprises - BG (2006), LT & FI (2005) 

250